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Table of Contents

R7

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission File Number: 001-38821

Lordstown Motors Corp.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

83-2533239
(I.R.S. Employer
Identification Number.)

2300 Hallock Young Road
Lordstown, Ohio 44481
(Address of principal executive offices)

Registrant’s telephone number: (234285-4001

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbol

    

Name of each exchange on which registered

Class A Common Stock, $0.0001 Par Value

RIDEQ

*

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Class A common stock outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing sales price for the Class A common stock on June 30, 2023, as reported on the Nasdaq Capital Market, was approximately $34.0 million.

As of February 26, 2024, there were 15,953,212 shares of Class A common stock, $0.0001 par value, issued and outstanding.

* The registrant’s Class A common stock began trading exclusively on the over-the-counter market on July 7, 2023, under the symbol “RIDEQ.” The NASDAQ Global Select Market filed a Form 25 with the Securities and Exchange Commission on July 27, 2023, to remove the registrant’s Class A common stock from listing and registration on the NASDAQ Global Select Market. Delisting became effective ten days thereafter and deregistration under Section 12(b) of the Act became effective 90 days later.

DOCUMENTS INCORPORATED BY REFERENCE

Table of Contents

INDEX

PART I

Item 1. Business

6

Item 1A. Risk Factors

21

Item 1B. Unresolved Staff Comments

40

Item 1C. Cybersecurity

40

Item 2. Properties

40

Item 3. Legal Proceedings

41

Item 4. Mine Safety Disclosures

41

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

41

Item 6. Reserved

41

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

55

Item 8. Financial Statements and Supplementary Data

56

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

110

Item 9A. Controls and Procedures

110

Item 9B. Other Information

111

PART III

Item 10. Directors, Executive Officers and Corporate Governance

112

Item 11. Executive Compensation

118

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

127

Item 13. Certain Relationships and Related Transactions, and Director Independence

131

Item 14. Principal Accounting Fees and Services

132

PART IV

Item 15. Exhibits and Financial Statement Schedules

133

Item 16. Form 10-K Summary

135

2

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” “could” or “should,” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, the Chapter 11 Cases (as defined below), the Proposed Plan (as defined below), financial condition, liquidity, financial or operational prospects, growth, strategies, and possible business combinations and the financing thereof, and related matters, and any other statements that are not statements of current or historical facts.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, business developments and available financing may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, business developments and available financing, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. In addition, upon confirmation by the Bankruptcy Court (as defined below) in the Chapter 11 Cases (as defined below) and effectiveness of the Proposed Plan (as defined below) or any alternative plan of reorganization, the New Board (as defined below) and entirely new management appointed by the New Board will oversee and manage the affairs of the Company, and the Ombudsman (as defined below) will have significant influence on the outcome of the claims asserted by creditors. The current management and board of directors can provide no assurances as to what actions the New Board and management will take. Actual results may differ materially from those contained in forward-looking statements due to various factors, including, but not limited to those described in the “Business” and “Risk Factors” section of this report and the following:

our ability to have the Proposed Plan confirmed by the Bankruptcy Court in the Chapter 11 Cases and, if confirmed, to become effective and successfully complete the Chapter 11 Cases by consummating the Proposed Plan, which gives effect to proposed settlements with various parties, including the Securities and Exchange Commission (“SEC”), the Ohio Securities Litigation Lead Plaintiff and the Committees (each as defined below) and is subject to the satisfaction of certain conditions precedent (some of which are beyond our control), appeal by certain parties that could file notices of appeal with respect to the Confirmation Order (as defined below), if entered, and is otherwise subject to the risks and uncertainties set forth in the Disclosure Statement, which stakeholders are encouraged to read in its entirety;
our ability to continue as a going concern and the adequacy of our liquidity and capital resources to maintain our expected operations upon our emergence from the Chapter 11 Cases, which includes administering the claims process under the Proposed Plan, pursuing the Foxconn Litigation (as defined below) and other potential claims, identify and consummate a business combination and seeking to realize value, if any, from our tax attributes, including by investigating, evaluating, and pursuing one or more potential merger or acquisition transactions, whether our cash on hand and other resources will be sufficient to allow us to conclude the terms of the Proposed Plan, satisfy any remaining or future obligations related to the Chapter 11 Cases or other current or future litigation, claims and liabilities, and our unlikely access to financing;
uncertainty as to whether our Claims Reserve (as defined below), cash on hand, or proceeds generated from other assets (including any acquired after the Effective Date (as defined below), if the

3

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Proposed Plan is confirmed) will be sufficient to pay all allowed claims and uncertainties regarding the amount of claims allowed for distributions under the Proposed Plan and that such claims will not be significantly greater than may be anticipated, as such estimated amounts are subject to significant risks, uncertainties and assumptions;
additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims, as to each of which the deadlines to file proofs of claim have not yet passed as of the date of this report; such claims may be substantial and may result in a greater amount of allowed claims than estimated;
our ability to pursue, and the potential outcome of, the Foxconn Litigation or other retained causes of action and our ability to recover any damages as a result thereof or defend any counterclaims that may be brought;
the impact of any contingent liabilities including, including indemnification obligations (including the fact that there are claims asserted for unliquidated damages or claims in respect of certain indemnification obligations or otherwise that we may not be able to estimate, or may be materially more than we estimate), any pending or future litigation or claims, as well as any regulatory action, not discharged in the Chapter 11 Cases, and any additional claims that may be filed in the Chapter 11 Cases, and the potential unavailability of insurance coverage with respect to such litigation or claims, adverse publicity with respect to these matters, as well as the significant ongoing costs associated with such litigation (See Note 9 – Commitments and Contingencies);
the impact of the Bankruptcy Court’s ruling on the United States Trustee’s objection to the Debtors’ entitlement to a discharge under the Bankruptcy Code from substantially all debts arising prior to consummation of the Proposed Plan, which could, if sustained by the Bankruptcy Court, result in the Proposed Plan not being confirmed or additional material costs, penalties, fines, sanctions, or injunctive relief against the Debtors for claims that are not ultimately discharged;
uncertainty as to any remaining or future value of our Class A common stock or Preferred Stock (as defined below), which may have little or no value;
the impact of the trading restrictions designed to enable the Company to optimize its NOLs following the Effective Date (the “NOL Trading Restrictions”), the rights, preferences and privileges of the Preferred Stock (as defined below) that are preferential to the rights of Class A common stockholders, the delisting of our Class A common stock, potential issuances of additional shares of Class A common stock on the liquidity and trading price of our Class A common stock and the potential incurrence of debt or issuance of securities that are senior to outstanding equity securities;
uncertainty as to whether the Preferred Stock will retain its liquidation preference, which, if due and payable, would entitle it to receive proceeds ahead of holders of Class A common stock until such liquidation preference is satisfied and, if such preference is not subordinated or otherwise set aside, whether Foxconn (as defined below) will successfully assert a claim that such preference is due and payable, which would likely exhaust the Company’s remaining resources and cause it to cease operations;
our actual financial results following our emergence from the Chapter 11 Cases will not be comparable to our historical financial information due to the change in the nature of our business activities upon emergence, and we expect our operating losses to continue to be significant, as restructuring activities, operating expenses, the claims administration process, the Foxconn Litigation and other retained causes of action, among other activities, significantly impact our consolidated financial results;
the periodic financial information that we have reported and continue to report to the Bankruptcy Court is not presented in accordance with GAAP, and may differ materially from information that has been or may in the future be provided in our periodic SEC filings and may reflect estimates based on assumptions that have changed or may change significantly during the course of the Chapter 11 Cases, following emergence, or due to other contingencies;
we ceased development activities with respect to future vehicles and sold material assets related to those activities, and we have no revenue-generating operations or assets other than cash on hand, the claims asserted in the Foxconn Litigation, other potential claims that the Company may have against other parties and NOLs, which may have little or no value;

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uncertainty with respect to the operations of the Company upon emergence from bankruptcy that will be overseen by the New Board (as defined below) and an entirely new management appointed by the New Board, as contemplated by the Proposed Plan, for which there will be limited resources, new and continuing liabilities (including indemnification obligations to directors and officers), and significant costs that may require additional capital to be raised (including through indebtedness obligations or securities, which could be senior in priority to our Class A common stock or Preferred Stock);
we will depend on the New Board and management upon our emergence from the Chapter 11 Cases, and our ability to attract and retain new officers and New Board, and the costs associated therewith, is uncertain;
as a result of the reduction of, or inability to maintain, insurance coverage we could be subject to potential losses and unexpected liabilities that could have a material adverse effect on the Company; insurance we historically had, including product liability coverage, has expired or may expire and we may not be able to obtain replacement policies or any such replacement policies may only be available at a substantially higher cost or have materially lower coverage amounts, or both;
our ability to maintain adequate financial, information technology and management processes, controls and procedures, particularly in light of the necessary substantial cost-cutting actions, including reduction in personnel, limited resources and anticipated limited support that current management will provide after they are terminated upon effectiveness of the Proposed Plan;
our ability to identify any strategic alternative or business combination, with acceptable terms, that would result in profitable operations, generation of cash flow or the realization of any value from our NOLs, and our ability to obtain and comply with the terms and conditions of any financing that may be needed to consummate any such transaction;
our ability to use, and any benefit to us from, our NOLs, may be materially limited or have no value;
our ability to maintain our relationships, or develop new relationships, with the vendors and other third parties providing services that are integral to maintaining our financial, information technology, business data, and other systems used to maintain the limited operations and existence of the Company; and
the other risks and uncertainties described under “Risk Factors” and elsewhere in this report and in future filings.

The Company’s stockholders are cautioned that trading in shares of the Company’s Class A common stock during the pendency of the Chapter 11 Cases and after the Effective Date remains highly speculative and will pose substantial risks. Trading prices for the Company’s Class A common stock may bear little or no relation to actual value, if any, remaining for holders thereof following the Chapter 11 Cases and the trading market (if any) may be very limited. In addition, the Proposed Plan includes the NOL Trading Restrictions, which are designed to enable the Company to optimize its NOLs following the Effective Date and generally restrict transactions involving any person or group of persons that is or as a result of such a transaction would become a substantial stockholder (i.e., would beneficially own, directly or indirectly, 4.5% or more of all issued and outstanding shares of Class A common stock). Accordingly, the Company urges extreme caution with respect to existing and future investments in its Class A common stock.

In light of these risks and uncertainties, we caution you not to place undue reliance on any forward-looking statements and the periodic financial information reported to the Bankruptcy Court which is not presented in accordance with GAAP and may differ materially from information that has been or may in the future be provided in our periodic SEC filings and may reflect estimates based on assumptions that may change significantly during the course of or following the Chapter 11 Cases or due to other contingencies (and which is also subject to the further qualifications provided therein with respect thereto). Any forward-looking statement that we make in this report speaks only as of the date of such statement, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, particularly due to the fact that the Chapter 11 Cases and closing of the transactions contemplated by the LandX Asset Purchase Agreement (as defined below) have resulted in material changes

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in the nature of the Company’s operations and cost structure after the reporting period discussed herein, and, unless specifically expressed as such, and should only be viewed as historical data.

Unless the context indicates otherwise, references in this report to the “Company,” “Lordstown,” “Debtors,” “we,” “us,” “our” and similar terms refer to Lordstown Motors Corp. (f/k/a DiamondPeak Holdings Corp.) and its consolidated subsidiaries (including Legacy Lordstown (as defined below)). References to “DiamondPeak” refer to our predecessor company prior to the consummation of merger completed on October 23, 2020 pursuant to the Agreement and Plan of Merger, dated as of August 1, 2020 (the “Business Combination Agreement”), by and among DiamondPeak, DPL Merger Sub Corp. (“Merger Sub”) and Lordstown Motors Corp. (“Legacy Lordstown” and now known as Lordstown EV Corporation), pursuant to which Merger Sub merged with and into Legacy Lordstown, with Legacy Lordstown surviving the merger as a wholly-owned subsidiary of DiamondPeak (the “Merger” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”).

Upon the occurrence of the Effective Date, the Company is expected to change its name to Nu Ride Inc. However, no assurances can be given that the Proposed Plan will be confirmed and become effective.

Unless the context indicates otherwise, all shares of the Company’s Class A common stock are presented after giving effect to the 1:15 reverse stock split of the outstanding Class A common stock, which became effective as of 12:01 a.m. Eastern Time on May 24, 2023.

PART I

ITEM 1: Business.

Overview

On June 27, 2023, Lordstown Motors Corp., a Delaware corporation, together with its subsidiaries, filed voluntary petitions for relief (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

In connection with the Chapter 11 Cases, we ceased production and sales of our flagship vehicle, the Endurance, and new program development and began a comprehensive marketing and sale process for some, all, or substantially all of the Company’s operating assets in an effort to maximize the value of those assets. Furthermore, we continued our aggressive cost-cutting actions that included significant personnel reductions. On September 29, 2023, we entered into the LandX Asset Purchase Agreement to sell specified assets, specifically certain assets 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 the purchaser assumed certain specified liabilities of the Company for a total purchase price of $10.2 million in cash in a transaction that closed on October 27, 2023 (discussed below under “Sale of Certain Assets to LandX). As a result of these actions, the Company has no revenue-producing operations. Our primary operations during the fourth quarter of 2023 and to date in the first quarter of 2024 have consisted of expenses associated with completing the Chapter 11 Cases, resolving substantial litigation and the SEC Claim (subject to formal approvals),claims reconciliation, financial reporting, and preparing for emergence from bankruptcy as contemplated in the Proposed Plan described below. Our remaining assets following the closing of the LandX Asset Purchase Agreement consist largely of cash on hand, the claims asserted in the Foxconn Litigation and that the Company may have against other parties, as well as NOLs.

Upon the date that the Proposed Plan, which remains subject to Bankruptcy Court approval, becomes effective (the “Effective Date”), and subject to the effectiveness of the Proposed Plan, it is contemplated that the near term operations of the Company (also referred to as the “Post-Effective Date Debtors”) will consist of (a) claims administration under the Proposed Plan, (b) addressing the Foxconn Litigation, (c) prosecuting, pursuing, compromising, settling, or otherwise disposing of other retained causes of action, (d) defending the

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Company against any counterclaims, (e) attempting to realize value, if any, from our NOLs and (f) filing Exchange Act reports and satisfying other regulatory requirements. In the future, the Post-Effective Date Debtors expect to explore potential business opportunities, including strategic alternatives or business combinations, including those designed to maximize the Company’s tax attributes, including maximizing realization of its NOLs. No assurance can be made that the Proposed Plan will become effective or that we will be successful in prosecuting any claim or cause of action or that any strategic alternative or business combination will be identified and/or would result in profitable operations or the ability to realize any value from the NOLs. See – “Expected Operations Following the Effective Date” and “Risk Factors.”

Prior Operations and Cessation of Production and Development

Prior to the consummation of the Chapter 11 Cases, the Company was an original equipment manufacturer (“OEM”) of electric light duty vehicles (“EVs”) focused on the commercial fleet market. This included working on its own vehicle programs as well as partnering with third parties, including Foxconn and its affiliates, as the Company sought to leverage its capabilities, assets and resources to more efficiently develop and launch EVs, to enhance capital efficiency and achieve profitability.

In the third quarter of 2022, the Company started commercial production of the Endurance and began to record sales in the fourth quarter of 2022. Engineering readiness, quality and part availability governed the initial timing and speed of the Endurance launch. The rate of Endurance production remained very low in 2023 until June 2023, when management made the decision to file the Chapter 11 Cases and cease production. We sold 38 Endurance trucks to customers, of which 35 have been repurchased from customers as of the date hereof.

Leading up to filing the Chapter 11 Cases and the Foxconn Litigation (each as further discussed below), it became apparent that we would be unable to effectively implement and realize the anticipated benefits of the Foxconn Transactions (as defined below) as Foxconn failed to meet funding commitments and refused to engage with the Company on various initiatives contemplated by the Foxconn Transactions that were essential to sustain ongoing operations. Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail below), continuing costs of outstanding litigation and extremely limited ability to raise sufficient capital in the then current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs, preserve cash, file the Chapter 11 Cases and Foxconn Litigation and cease production of the Endurance and new program development. As part of these initial actions, notices were provided to a substantial number of employees under the Worker Adjustment and Retraining Notification Act (“WARN Act”) in May 2023, for job eliminations beginning in the third quarter of 2023. After the filing of the Chapter 11 Cases, we provided additional notices under the WARN Act for job eliminations. As of December 31, 2023, we had 9 employees, all of whom have been terminated or are expected to be terminated on the Effective Date.

The Chapter 11 Cases

On June 27, 2023, (“Petition Date”) the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Additional information about the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://www.kccllc.net/lordstown/document/list, a website administered by Kurtzman Carson Consultants LLC ("KCC"), a third-party bankruptcy claims and noticing agent. The information on this website is not incorporated by reference and does not constitute part of this Form 10-K.

The Bankruptcy Court has approved certain motions filed by the Debtors under which they were authorized to conduct their business activities in the ordinary course, including to, among other things and subject to the terms and conditions of such orders: (i) pay employees’ wages and related obligations; (ii) pay certain taxes; (iii) pay critical vendors; (iv) continue to honor certain customer obligations; (v) maintain their insurance

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program; (vi) continue their cash management system; and (v) establish certain procedures to protect any potential value of the Company’s NOLs.

The Company has also been seeking to use the tools of Chapter 11 to fully, finally, and efficiently resolve its contingent and other liabilities before the Bankruptcy Court and to pursue the Foxconn Litigation, as further discussed below.

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, pursuant to the Proposed Plan, the deadline for parties to file administrative claims against the Debtors (i.e., claims for costs and expenses of administration of the Debtors’ estates, including (i) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the estates and operating the businesses of the Debtors; (ii) professional fee claims; and (iii) fees and charges payable to the United States Trustee for the District of Delaware (the “U.S. Trustee”)) is 30 days following the Effective Date. 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 indemnification obligations or otherwise, that we may not be able to estimate, or may be materially more than we estimate.

Pursuant to the terms of the Proposed Plan, and subject to its confirmation and effectiveness, a significant amount of the cash on hand as of the Effective Date will be used to settle outstanding claims against the Company, including litigation claims. Pursuant to the Bankruptcy Code, the Company is first required to pay all administrative claims in full. The Proposed Plan also requires that the Company establish a reserve (the “Claims Reserve”) for allowed and disputed claims of general unsecured creditors, inclusive of $3 million the Company would be required to pay into escrow on the Effective Date for the cash portion of the Ohio Securities Litigation Settlement (as defined and discussed below). The aim of the Claims Reserve is to facilitate payment in full, with interest, of such creditors’ allowed claims as contemplated by the Proposed Plan (although there can be no assurance the Company will be able to pay such claims in full with interest). The initial amount of the Claims Reserve is currently anticipated to be approximately $45 million, as agreed upon by the official committee of equity security holders (the “Equity Committee”) and the official unsecured creditors’ committee (the “UCC” and together with the Equity Committee, the “Committees”) and approved by the Bankruptcy Court. The amount of the Claims Reserve is subject to change and could increase materially. The Claims Reserve could also be adjusted downward as claims are resolved or otherwise as a result of the claims resolution process, or as the Claims Ombudsman (as defined below) and the Post-Effective Date Debtors deem appropriate. Furthermore, the amount of the Claims Reserve will be limited to amounts payable for allowed claims of general unsecured creditors but to the extent that the Claims Reserve is insufficient to pay general unsecured creditors in full with interest, such deficiency will be payable from all assets of the Post-Effective Date Debtors, as set forth in the Proposed Plan. There are additional liabilities, including but not limited to administrative claims and claims by holders of our Class A common stock and Preferred Stock among other potential classes of claimants whose claims, if allowed, will not be included in the Claims Reserve.

There can be no assurance regarding the amount of claims that may be allowed for distributions under the Proposed Plan or that such claims will not be significantly greater than may be anticipated which could, in turn, result in the value of distributions to stakeholders being delayed, reduced, or eliminated entirely. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate results and total amount of claims against us. Moreover, additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims, for each of which the deadlines to file proofs of

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claim have not yet passed as of the date of this report. Such claims may be substantial and may result in a greater amount of allowed claims than estimated.

No assurance can be made regarding the confirmation or effectiveness of the Proposed Plan, the sufficiency of the Debtors’ assets to provide estimated recoveries to claimants and fund anticipated post-emergence activities. The Post-Effective Date Debtors and the Claims Ombudsman, as applicable, will review and analyze all claims. Pursuant to the terms of the Proposed Plan, which includes certain exceptions, the Claims Ombudsman will have the authority to settle, litigate or otherwise resolve general unsecured Claims against the Debtors. We cannot provide any assurances regarding what our total actual liabilities based on such claims will be. Further, the assets included in this report or in any filing we have made or may make with the Bankruptcy Court may not reflect the fair values thereof during the pendency of or following the Chapter 11 Cases. There remains uncertainty regarding the estimates and assumptions used in the applicable reporting periods, and such values may be higher or lower as a result.

Sale of Certain Assets to LandX

As part of the Chapter 11 Cases, on August 8, 2023, the Bankruptcy Court approved procedures (the “Bidding Procedures Order”) for the Debtors to conduct a comprehensive marketing and sale process for some, all, or substantially all of the Company’s operating assets in order to maximize the value of those assets.

The Debtors’ investment banker, Jefferies LLC (“Jefferies”), and other professionals conducted a comprehensive marketing process for the sale of assets consistent with the Bidding Procedures Order. In connection with that marketing and sale process, the Debtors received a “Qualified Bid” (as defined in the Bidding Procedures Order) from LAS Capital LLC, a Delaware limited liability company (“LAS Capital”) to purchase certain specified assets of the Debtors.

Although the Debtors received several non-binding proposals for the purchase of specified assets, the Debtors through their Boards of Directors, determined that none of these other proposals was a Qualified Bid in accordance with the Bidding Procedures and determined LAS Capital to be the successful bidder under the Bidding Procedures. As a result, the Debtors cancelled the auction in accordance with the Bidding Procedures and proceeded to seek Bankruptcy Court approval of the sale.

On September 29, 2023, the Debtors entered into an Asset Purchase Agreement (the “LandX Asset Purchase Agreement”) with LAS Capital LLC and Mr. Stephen S. Burns, an individual, as guarantor of certain obligations of LAS Capital under the LandX Asset Purchase Agreement. The LandX Asset Purchase Agreement was assigned to LAS Capital’s affiliate, LandX Motors Inc., a Delaware corporation (the assignee 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 substantially all of the assets held for sale of the Debtors related to the design, production and sale of EVs focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assumed certain specified liabilities of the Debtors for a total purchase price of $10.2 million in cash. Upon consummation of the sale, Jefferies became entitled to a Transaction Fee (as defined below) of $2.0 million after crediting the Monthly Fees (as defined below) paid to Jefferies since entering into the Engagement Letter. The Transaction Fee was paid to Jefferies in January 2024 and no further amounts are payable to Jefferies under the Engagement Letter.

The Debtors’ remaining assets following the closing of the LandX Asset Purchase Agreement consist largely of cash on hand, the claims and causes of action asserted in the Foxconn Litigation and that the Company may have against other parties, and the NOLs.

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Confirmation of the Chapter 11 Plan and Effective Date

On September 1, 2023, the Debtors filed a Joint Plan of Lordstown Motors Corp. and Its Affiliated Debtors and a related proposed disclosure statement (the “Disclosure Statement”), which were amended and modified on each of October 24, 2023, October 29, 2023, and October 30, 2023. On October 31, 2023, the Bankruptcy Court held a hearing on the approval of the Disclosure Statement and the procedures to solicit votes to accept or reject the Proposed Plan. The Bankruptcy Court announced, among other things, that it would approve the Debtors’ Disclosure Statement and the procedures to be used in connection with the solicitation of votes on the Proposed Plan (the “Solicitation and Voting Procedures”). On November 1, 2023, the Bankruptcy Court entered an order approving the Disclosure Statement and the Solicitation and Voting Procedures (the “Disclosure Statement Order”). After obtaining Bankruptcy Court approval, the Debtors promptly began soliciting votes from their creditors and shareholders for approval of the Proposed Plan pursuant to the Solicitation and Voting Procedures.

After the solicitation process was complete, the Debtors’ court-authorized claims and noticing agent (Kurtzman Carson Consultants LLC) submitted a declaration with the Bankruptcy Court reporting the outcome of voting on the Proposed Plan. The voting results reflected that Classes 3, 7, and 10 accepted the Proposed Plan and Class 8 (holders of 510(b) Claims, described below) rejected the Proposed Plan. No holders of claims in Class 9 voted on the Proposed Plan, and, accordingly, Class 9 was deemed eliminated from the Proposed Plan for purposes of voting and determining acceptance or rejection of the Proposed Plan by such class. Classes 1, 2, 4, 5, and 6 are unimpaired pursuant to the Proposed Plan and deemed to accept it.

On January 31, 2024, the Debtors filed the Second Modified First Amended Joint Plan of Lordstown Motors Corp. and Its Affiliated Debtors (as may be further modified, supplemented, or amended, the “Proposed Plan”). The modifications to the Proposed 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 (the “Ohio Released Directors and Officers”), 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, Case No. 4:21-cv-00616 (DAR) (the “Ohio Securities Litigation”). The Proposed Plan also included, as a condition to confirmation of the Proposed Plan, that the SEC approve an offer of settlement (the “Offer”) submitted by the Debtors to resolve the proof of claim filed by the SEC against the Debtors, which, as previously disclosed, was filed in the face amount of $45 million (the “SEC Claim”) as set forth in an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (the “OIP”). We expect the Offer to be considered by the SEC in the near future.

The Debtors have scheduled a hearing with the Bankruptcy Court on March 5, 2024, to consider confirmation of the Proposed Plan and will ask the Bankruptcy Court to enter an order confirming the Proposed Plan (the “Confirmation Order”), which among other things, would authorize the Debtors to effectuate the Proposed Plan, subject to satisfaction or waiver of the conditions precedent to the occurrence of Effective Date set forth in the Proposed Plan. If the Proposed Plan is confirmed, the Debtors will seek to have such conditions satisfied or waived in order for the Effective Date to occur promptly after entry of the Confirmation Order.

The Bankruptcy Code generally provides that the confirmation of a Chapter 11 plan discharges a debtor from substantially all debts arising prior to consummation of such plan.  Here, the United States Trustee has objected to the Debtors’ entitlement to a discharge.  The objection is expected to be heard at the hearing to consider the Confirmation Order.  If the United States Trustee’s objection is overruled, then, with few exceptions, all claims against the Debtors that arose prior to the consummation of the Proposed Plan (i) would be subject to compromise and/or treatment under the Proposed Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Proposed Plan. However, the outcome and timing of any claims not ultimately discharged is uncertain, and it is possible material costs, penalties, fines, sanctions, or injunctive relief could result from such a matter.

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The Proposed Plan, among other provisions:

provides an orderly structure for distributions to holders of claims of creditors and treatment of equity interests of shareholders (“Interests”),
incorporates the resolution of claims asserted in the Ohio Securities Litigation and, in connection with the Offer and OIP, by the SEC,
preserves retained causes of action, including against Foxconn, to be pursued by the Post-Effective Date Debtors,
seeks to preserve the value of the Company’s NOLs, by leaving preferred and common equity Interests in the Post-Effective Date Debtors in place, and instituting certain trading restrictions, and
provides that the Post-Effective Date Debtors may engage in such business operations as may be determined by the New Board.

Pursuant to, and subject to the confirmation and effectiveness of, the Proposed Plan, effective as of the Effective Date (i) an ombudsman (the “Claims Ombudsman”) will be appointed to oversee the administration of claims asserted against the Debtors by general unsecured creditors and (ii) a trustee (the “Litigation Trustee”) will be appointed to oversee a litigation trust (the “Litigation Trust”) formed pursuant to the Proposed Plan, which will be funded with certain retained causes of action of the Debtors, as will be determined by the Equity Committee.

We cannot provide any assurances that we will have sufficient cash on hand to provide for the required payments to be made on the Effective Date or to satisfy the Claims Reserve, Post-Effective Date Debtor Amount (as defined below) or other reserves as may be required.

Pursuant to, and subject to the confirmation and effectiveness of, the Proposed Plan, the Debtors will be allocated an amount (the “Post-Effective Date Debtor Amount”) which will be used to fund (a) the fees and expenses of the Post-Effective Date Debtors in performing their duties under the Proposed Plan, (b) expenses of the Claims Ombudsman appointed under the Proposed Plan and (c) future operational expenses of the Post-Effective Date Debtors, as permitted by the Proposed Plan. Pursuant to the Proposed Plan, the Post-Effective Date Amount may be increased from time to time after notice and an opportunity to object is provided to the Claims Ombudsman.

All distributions under the Proposed Plan would come from all assets of the Debtors (including, without limitation, cash generated by or that constitutes the proceeds of assets acquired by the Post-Effective Date Debtors after the Effective Date), which include, but are not limited to, (i) cash on hand as of the Effective Date, (ii) proceeds from the sale of the Debtors’ assets, (iii) proceeds from causes of action retained by the Debtors pursuant to the Proposed Plan, and (iv) insurance proceeds received by the Post-Effective Date Debtors. Subject to the terms of the Proposed Plan, any distributions to classes of claims and Interests will generally be made in order of their respective priorities under the Bankruptcy Code. Specifically, the Proposed Plan provides for the distributions for the claims and Interests in order of priority as follows (with capitalized terms not otherwise defined having the meaning set forth in the Proposed Plan):

Holders of Allowed Administrative Claims, Allowed Priority Tax Claims, and Allowed Other Priority Claims (each as defined in the Proposed Plan) are to be paid in full in cash before other payments can be made.
Holders of Allowed Secured Claims (as defined in the Proposed Plan) would either retain their lien on the collateral, be paid in full in cash, or receive the collateral securing such Allowed Secured Claim.
Holders of Allowed General Unsecured Claims would receive a pro rata share of the Debtors’ cash after all Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Other Priority Claims, and Allowed Secured Claims are satisfied and the Professional Fee Escrow Account (as defined in the Proposed Plan) is funded. If the Debtors have sufficient cash on hand to pay all Allowed General Unsecured Claims plus interest in full, then the holders of the Allowed General Unsecured Claims would also receive post-petition interest on their claim amount at the Federal Judgment Rate. If the

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Debtors do not have sufficient cash on hand to pay in full such post-petition interest, then the holders of the Allowed General Unsecured Claims would receive their pro rata share of any post-petition interest that can be paid.
Allowed Intercompany Claims would be reinstated under the Proposed Plan.
Allowed Foxconn Preferred Stock Interests would be reinstated, which includes that all outstanding shares of Preferred Stock will remain outstanding, subject to the terms of the New Organizational Documents (as defined below). In the event any distribution is to be made to holders of Allowed Foxconn Preferred Stock Interests, such distribution would be from cash remaining after the payment or reserving for the treatment under the Proposed Plan of Allowed Administrative Claims, Allowed Other Priority Claims, Allowed Secured Claims, Allowed General Unsecured Claims, and the Post-Effective Date Debtor Amount (“Post-Effective Date Debtor Cash”). In addition, any such distribution to Holders of the Allowed Foxconn Preferred Stock Interests would be subject to the backstop obligation under the Ohio Securities Litigation Settlement.
Allowed Common Stock Interests would be reinstated, which includes that all outstanding shares of Class A common stock remain outstanding, subject to the terms of the New Organizational Documents (as defined below).
Allowed claims relating to securities actions against the Debtors that are subordinated to General Unsecured Claims by section 510(b) of the Bankruptcy Code (other than section 510(b) Claims that are (i) subject to the Ohio Securities Litigation Settlement or (ii) are Claims filed against the Debtors on the same or similar basis as those set forth in the Post-Petition Securities Action (as defined below) (such Claims, the “RIDE Section 510(b) Claims”), would receive Class A common stock in an amount calculated pursuant to the formula set forth in the Proposed Plan, after accounting for any recoveries from applicable insurers or other third parties and subject to the Post-Effective Date Debtors’ election to cash out such Class A common stock Interests.
Allowed claims, if any, against the Debtors on the same or similar basis as those set forth in the putative securities class action filed against the Debtors’ current Chief Executive Officer (Edward Hightower), Chief Financial Officer (Adam Kroll), and Executive Chairman (Daniel Ninivaggi) in the Post-Petition Securities Action (defined below) may recover solely from available insurance coverage from applicable insurance policies until such insurance policies have been completely exhausted. The Debtors dispute the merits of any such claims.
Allowed claims of the Ohio Securities Litigation Lead Plaintiff (defined below) would receive treatment pursuant to the Ohio Securities Litigation Settlement incorporated in the Proposed Plan (as described below).

Pursuant to the Ohio Securities Litigation Settlement incorporated into the Proposed Plan, the Debtors would pay $3 million into escrow on the Effective Date for the benefit of the putative class members in the Ohio Securities Litigation. In addition, such putative class members would be entitled to receive a portion of any proceeds from litigation and other causes of action being retained by the Debtors following the Effective Date (net of actual reasonable costs incurred in prosecuting such retained causes of action) in an amount equal to the lesser of (a) 25% of such net proceeds, and (b)  $7 million. Pursuant to the Proposed Plan and Confirmation Order, if entered, the Confirmation Order would constitute a preliminary approval of the Ohio Securities Litigation Settlement. The Ohio Securities Litigation Settlement would be effective on the Effective Date, and the Ohio Securities Litigation Lead Plaintiff, through counsel, would be responsible for pursuing final approval of the proposed settlement thereafter. Members of the putative settlement class would be provided with the option to op-out of the settlement class pursuant to the provisions of the Confirmation Order. See Note 9 Commitments and Contingencies – Ohio Securities Litigation.

In addition, pursuant to the Proposed Plan, a portion of any recoveries from litigation or other causes of action retained by the Debtors that would be owed to putative class members in connection with the Ohio Securities Litigation Settlement would be backstopped by Foxconn through Foxconn’s agreement to permit 16% of any

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payments made on account of Foxconn’s Preferred Stock, up to $5 million, to be paid into a reserve for the benefit of such class members.

Further, the Proposed Plan contemplates, and includes as a condition to confirmation of the Proposed Plan, that the SEC approve the Offer submitted by the Debtors to resolve the SEC Claim as would be, if approved, set forth the OIP. We do not anticipate seeking confirmation of the Proposed Plan by the Bankruptcy Court until the Offer and OIP are mutually agreed with the SEC and binding. Subject to receipt of necessary approvals and satisfaction of each of the terms of the Offer and the OIP, the Proposed Plan provides that following confirmation and the effectiveness of the Proposed Plan incorporating the Ohio Securities Litigation Settlement, the SEC would withdraw the SEC Claim. Any potential settlement with the SEC or other parties for related securities claims or other matters is subject to significant uncertainty, there can be no assurance as to the timing or outcome of the resolution of these matters, and any settlement or claim amount remains subject to approval by the Bankruptcy Court and other regulatory approvals, as applicable. The Debtors cannot provide any assurances regarding what the Company’s total actual liabilities based on the SEC Claim, or other claims asserted in the Chapter 11 Cases, will be.

On the Effective Date, the Proposed Plan would provide certain releases to directors and officers of the Debtors that served in the capacity as a director or officer of any of the Debtors at any time from the Petition Date through the Effective Date. As approved by the Bankruptcy Court, the releases would be binding on holders of Claims and Interests (a) that affirmatively vote to accept the Proposed Plan or (b) are entitled to vote on the Proposed Plan, vote to reject the Proposed Plan, and check a box on their ballot opting into the releases. The releases are also binding on related parties to those described in (a) and (b) (e.g., affiliates, predecessors, successors, and related parties as set forth in the Proposed Plan), but only to the extent the parties in (a) and (b) have authority to bind such persons or entities to the releases.

In addition, pursuant to, and subject to the confirmation and effectiveness of, the Proposed Plan, the members of the settlement class in the Ohio Securities Litigation will also be releasing parties pursuant to the Proposed Plan and be bound by the release, discharge, and injunction provisions set forth in the Proposed Plan.

The Proposed Plan remains subject to the entry of the Confirmation Order and it could change as a result of amendments, supplements, or other modifications to the Proposed Plan. The Proposed Plan is available, and any amendments, supplements and modifications will be made available, online at https://www.kccllc.net/lordstown/document/list. The information on this website is not incorporated by reference and does not constitute part of this Form 10-K. Further, unless otherwise stated in the Proposed Plan and the Confirmation Order, the Proposed Plan is not binding on any party, including the Debtors, until it is consummated and the Effective Date has occurred. The Proposed Plan may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control), appeal by certain parties that could file notice of appeal with respect to the Confirmation Order, if entered, and is otherwise subject to the risks and uncertainties set forth in the Disclosure Statement, which stakeholders are encouraged to read in its entirety. There can be no assurance that the Confirmation Order will be entered, that such conditions will be satisfied or that such appeals will be dismissed and, therefore, that the Proposed Plan will become effective and that we will emerge from the Chapter 11 Cases as contemplated by the Proposed Plan. The failure of the Proposed Plan to be confirmed and become effective, or any delay thereof, will significantly and adversely affect the likelihood of a Chapter 11 reorganization and could lead to a liquidation.

Expected Operations Following the Effective Date

If the Proposed Plan becomes effective, at the Effective Date the Debtors would emerge from the Chapter 11 Cases and:

the Foxconn Litigation and other retained causes of action of the Debtors would be preserved and may be prosecuted,

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claims filed in the Chapter 11 Cases would continue to be resolved pursuant to the claims resolution process with allowed claims being treated in accordance with the Proposed Plan,
distributions to holders of allowed Claims and allowed Interests would be made subject to the provisions of the Proposed Plan, and
the Debtors expect to continue to conduct business and may enter into transactions, including business combinations, or otherwise, that could permit the Post-Effective Date Debtors to make use of the NOLs, if preserved.

At this time, however, the Debtors do not know what the post-Effective Date operations will include and no assurances can be provided that the Proposed Plan will generate any value for the Company’s post-Effective Date equity holders or that any distributions will be made to such equity holders. See “Risk Factors” below, including under the heading “Risks Related to Our Post-Effective Date Operations and Financial Condition.”

On and after the Effective Date, pursuant to applicable non-bankruptcy law and subject to confirmation of the Proposed Plan, the Company and its subsidiaries will maintain their pre-bankruptcy corporate existence, with the Company’s name expected to be changed to Nu Ride Inc., and will be permitted to conduct operations in its discretion, subject to available funding and other factors. Under the Proposed Plan, Class A common stock and Preferred Stock would remain outstanding as of the Effective Date and none of the outstanding equity interests of the Company, including outstanding warrants, would be cancelled in connection with the effectiveness of the Proposed Plan.

As of the Effective Date, the Proposed Plan provides that the Company’s second amended and restated certificate of incorporation and amended and restated bylaws would be further amended and restated (as amended and restated, collectively the “New Organizational Documents” and individually the “New Charter” and the “New Bylaws”) to reflect changes sought by the New Board, that include, but are not limited to, a new name for the Company, Nu Ride Inc. and, incorporate terms regarding post-Effective Date indemnification obligations consistent with the Proposed Plan.

At December 31, 2023, the Company had $993.2 million and $880.3 million of federal and state and local net operating losses, respectively, and the Company incurred and may also continue to incur in connection with the Proposed Plan significant NOLs. The Company’s ability to use some or all of these NOLs are subject to certain limitations. To reduce the risk of a potential adverse effect on our ability to use our NOLs for U.S. Federal income tax purposes, the New Charter is proposed to contain, subject to certain exceptions, certain transfer restrictions (the “NOL Restrictions”) with respect to our stock involving any person or group of persons that is or as a result of such a transaction would become a substantial stockholder (i.e., would beneficially own, directly or indirectly, 4.5% or more of all issued and outstanding shares of Class A common stock). Any transferee receiving shares of Class A common stock or Preferred Stock that would result in a violation of such proposed restrictions will not be recognized as a stockholder of the Company or entitled to any rights of shareholders, including, without limitation, the right to vote and to receive dividends or distributions, whether liquidating or otherwise, in each case, with respect to the shares of stock causing the violation.

At the Effective Time, the Company would remain subject to the periodic reporting requirements of the Exchange Act; however, the Company will be a “shell company” as defined under the Securities Act and subject to associated limitations under the securities laws. For example, the holders of our securities may not rely on Rule 144, a safe harbor on which holders of restricted securities may use to resell their securities, to sell such securities without registration or until we are no longer identified as a shell company. This will likely make it more difficult for certain investors to resell our Class A common stock. See – Risk Factors. Although the Company has indicated, by checking the applicable box on the cover page of this report, that it is a shell company (as defined in Rule 12b2 of the Exchange Act), the Company is engaged and contemplates that it will engage in the following business and operations following confirmation and effectiveness of Proposed Plan: (a) claims administration under the Proposed Plan, (b) addressing the Foxconn Litigation, (c) prosecuting, pursuing, compromising, settling, or otherwise disposing of other retained causes of action, (d) defending the Company against any counterclaims, (e) attempting to realize value, if any, from our tax

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attributes and (f) filing Exchange Act reports and satisfying other regulatory requirements. Moreover, in the future, the Company may explore and pursue potential business opportunities, including strategic alternatives or business combinations, including those designed to maximize the value of the Company’s assets, including maximizing the value of the Company’s tax attributes and realization of its net operating loss carryforwards and other tax attributes.  In checking the applicable box in this report for the purposes of Rule 12b-2 of the Exchange Act, the Company makes no admission and does not concede that it will have no business, no operations, or no or nominal assets following the effectiveness of the Plan. 

The Proposed Plan provides for the appointment of new members to serve on the Company’s board of directors (the “New Board”) as of the Effective Date and provides that the New Board is to be selected by the Equity Committee. Additional detail regarding each of the proposed members of the New Board and the new Chief Executive Officer and President to be appointed by the New Board, as identified to the Company by the Equity Committee as of the date hereof, is provided under “Executive Officer Expected to be Appointed as of the Effective Date” and Part II – Item 10. Directors, Executive Officers, and Corporate Governance. The New Board will, among other things, oversee and direct the administration of the Post-Effective Date Debtors’ operations in accordance with the Proposed Plan.

The operation of the Post-Effective Date Debtors, including the evaluation of any new business opportunities, if any, would be undertaken by or under the supervision of the Company’s then current officers and directors. The Post-Effective Date Debtors will be required to satisfy their operating costs from the Post-Effective Date Debtor Amount and any additional proceeds from assets or other amounts, if any, released from the Claims Reserve pursuant to the Proposed Plan. During the twelve months following the date of this report, the Company anticipates incurring costs relating to (a) claims administration under the Proposed Plan, (b) addressing the Foxconn Litigation, (c) prosecuting, pursuing, compromising, settling, or otherwise disposing of other retained causes of action, (d) defending the Company against any counterclaims, (e) attempting to realize value, if any, from our NOLs and (f) filing Exchange Act reports and satisfying other regulatory requirements. In the future, the Post-Effective Date Debtors expect to explore potential business opportunities, including strategic alternatives or business combinations, including those designed to maximize the Company’s NOLs, including maximizing realization of its NOLs. If the United States Trustee is successful in its objection to the Debtors’ entitlement to a discharge under the Bankruptcy Code from substantially all debts arising prior to consummation of the Proposed Plan, this could result in the Proposed Plan not being confirmed or additional material costs, penalties, fines, sanctions, or injunctive relief against the Debtors for claims that are not ultimately be discharged. There can be no assurance as to any additional funding available for the Post-Effective Date Debtors to conduct their post-Effective Date operations, including pursuing any post-Effective Date transaction, and the amount of funding available may be reduced, including in the event that allowed Claims against the Company prove to be greater than expected or in the event of an adverse ruling with respect to allowance of Foxconn’s preferred stock Interests. Our Preferred Stock terms include a liquidation preference. This preference amount is equal to $30 million, plus accrued dividends. Pursuant to the Proposed Plan, Foxconn’s Preferred Stock will remain outstanding and its rights with respect to its preferred equity, including with respect to any liquidation preference which has or may become due, are unimpaired. We would vigorously oppose any assertion of Foxconn’s entitlement to receive the liquidation preference, but if we would be unsuccessful, an obligation to pay this amount would likely exhaust our available resources and require us to cease operations entirely. There are no assurances that the Company will be able to secure any additional funding, as needed, or on terms acceptable to it, or that it will have sufficient funding to resolve the Foxconn Litigation, pursue and resolve the retained or other causes of action, or pursue any strategic alternatives.

As of the date of this report, the Company has neither entered into any definitive agreement with any party, nor has the Company engaged in any specific discussions with any potential business combination candidate regarding business opportunities for the Company.

We anticipate that the prosecution of claims and causes of action and the evaluation and pursuit of potential strategic alternatives will be costly, complex, and risky. No assurances can be made that we will be successful in prosecuting any claim or cause of action or that any strategic alternative or business

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combination would result in profitable operations or the ability to realize any value from the NOLs.

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, Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and significant damages. The Foxconn Litigation is Adversary Case No. 23-50414.

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 Debtors believe 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 Debtors and the Equity Committee filed a notice of completion of briefing, which provided that the briefing of the Foxconn Adversary Motion to Dismiss has been completed and such motion is ready for disposition. Oral argument on the Foxconn Adversary Motion to Dismiss has not been scheduled. The Company currently intends to continue to vigorously oppose that motion and pursue its claims against Foxconn. However, the ultimate determinations regarding the Foxconn Litigation will be made by the New Board and management if the Proposed Plan is confirmed and becomes effective.

If the Bankruptcy Court denies the Foxconn Adversary Motion to Dismiss, the Post-Effective Date Debtors will continue to prosecute the Foxconn Litigation. Any net proceeds from the Foxconn Litigation may enhance the recoveries for holders of Claims and Interests. However, while the Post-Effective Date Debtor Amount includes an estimate of the costs to prosecute the Foxconn Litigation, the actual costs may be significantly higher, which may impair the Company’s ability to pursue the matter. No assurances can be provided as to the outcome or recoveries, if any, of the Foxconn Litigation.

See Note 9 – Commitments and Contingencies – Foxconn Litigation for additional information.

Foxconn Transactions

The Company entered into a series of transactions with affiliates of Hon Hai Technology Group (“HHTG”, either HHTG or applicable affiliates of HHTG are referred to herein as “Foxconn”), beginning with the Agreement in Principal that was announced on September 30, 2021, pursuant to which we entered into definitive agreements to sell our manufacturing facility in Lordstown, Ohio under the Foxconn APA (as defined below) and outsource manufacturing of the Endurance to Foxconn under the CMA. On November 7, 2022, we 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.”

Investment Agreement

Under the Investment Agreement, Foxconn agreed to make additional equity investments in the Company through the purchase of $70 million of Class A common stock, $0.0001 par value per share (“Class A common stock”), and up to $100 million in Series A Convertible Preferred Stock, $0.0001 par value per share (the “Preferred Stock”), subject to certain conditions, including, without limitation, regulatory approvals and, with regard to the Preferred Stock, satisfaction of certain EV Program (as defined herein) budget and EV

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Program milestones established by the parties. The Preferred Stock funding could only be used in connection with planning, designing, developing, engineering, testing, industrializing, certifying, homologating and launching one or more EVs in collaboration with Foxconn (the “EV Program”). See Note 5 – Mezzanine Equity and Note 6 – Capital Stock and Earnings per Share for additional information regarding the terms of the Preferred Stock and terms of the Investment Agreement.

On November 22, 2022, the parties completed the initial closing under the Investment Agreement, pursuant to which Foxconn purchased approximately $22.7 million of Class A common stock and $30 million of Preferred Stock (the “Initial Closing”). The parties also entered in the Registration Rights Agreement on November 22, 2022, pursuant to which the Company agreed to use reasonable efforts to file and cause to be declared effective a registration statement with the SEC registering the resale of the Class A common stock acquired under the Investment Agreement, including any shares of Class A common stock issuable upon conversion of the Preferred Stock.

The Investment Agreement provided for the second closing of Class A common stock (the “Subsequent Common Closing”), at which time, the Company maintains that Foxconn was required to purchase approximately 10% of the Class A common stock for approximately $47.3 million. The Subsequent Common Closing was to occur within 10 business days following the parties’ receipt of a written communication from the U.S. government’s Committee on Foreign Investment in the United States (“CFIUS”) that CFIUS has concluded that there are no unresolved national security concerns with respect to the transactions (“CFIUS Clearance”) and subject to satisfaction of the other conditions set forth in the Investment Agreement (which the Company believes were or would have been satisfied). CFIUS Clearance was received on April 24, 2023, which means the Subsequent Common Closing was to occur on or before May 8, 2023. The Company was ready, willing and able to complete the Subsequent Common Closing on a timely basis.

In addition, following the parties’ agreement to the EV Program budget and the EV Program milestones and satisfaction of those EV Program milestones and other conditions set forth in the Investment Agreement, Foxconn was to purchase in two tranches, a total of 0.7 million additional shares of Preferred Stock at a purchase price of $100 per share for aggregate proceeds of $70 million (the “Subsequent Preferred Funding”). The parties agreed to use commercially reasonable efforts to agree upon the EV Program budget and EV Program milestones no later than May 7, 2023.

The completion of the Subsequent Common Closing and the Subsequent Preferred Funding would have provided critical liquidity for the Company’s operations. Since April 21, 2023, Foxconn has disputed its obligations under the Investment Agreement to consummate the Subsequent Common Closing and to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate the Subsequent Preferred Funding. Foxconn initially asserted that the Company was in breach of the Investment Agreement due to the Company’s previously disclosed receipt of a notice (the “Nasdaq Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”), which Nasdaq Notice indicated that the Company’s Class A common stock price dropped below the $1.00 per share threshold set forth in Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”) and that the Company had a 180-day period to remedy the drop in the stock price. As previously disclosed, Foxconn purported to terminate the Investment Agreement if that purported breach was not cured within 30 days.

The Company continues to believe that the breach allegations by Foxconn are without merit, and that Foxconn was obligated to complete the Subsequent Common Closing on or before May 8, 2023. Despite the Company taking action to satisfy the Bid Price Requirement as of June 7, 2023, and discussions between the parties to seek a resolution regarding the Investment Agreement, Foxconn did not proceed with the Subsequent Common Closing or any Subsequent Preferred Funding. As a result of Foxconn’s actions, the Company was deprived of critical funding necessary for its operations. To seek relief for Foxconn’s contractual breaches and other fraudulent and tortious conduct the Company believes were committed by Foxconn, the Company commenced the Foxconn Litigation.

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Closing of the Foxconn APA

On May 11, 2022, Lordstown EV Corporation, a Delaware corporation and wholly-owned subsidiary of the Company (“Lordstown EV”), closed the transactions contemplated by the asset purchase agreement with Foxconn EV Technology, Inc., an Ohio corporation, and an affiliate of HHTG, dated November 10, 2021 (the “Foxconn Asset Purchase Agreement” or “Foxconn APA” and the closing of the transactions contemplated thereby, the “Foxconn APA Closing”).

Pursuant to the Foxconn APA, Foxconn purchased Lordstown EV’s manufacturing facility located in Lordstown, Ohio. Lordstown EV had continued to own our hub motor assembly line, as well as our battery module and pack line assets, certain tooling, intellectual property rights and other excluded assets, and had outsourced all of the manufacturing of the Endurance to Foxconn under the Contract Manufacturing Agreement. Lordstown EV also entered into a lease pursuant to which Lordstown EV had leased space located at the Lordstown, Ohio facility from Foxconn for Lordstown EV’s Ohio-based employees for a term equal to the duration of the Contract Manufacturing Agreement plus 30 days (the “Lease Agreement”). The Lease Agreement was cancelled as of December 31, 2023.

We received $257 million in proceeds related to the sale, consisting of the $230 million initial purchase price for the assets, plus $8.9 million for expansion investments and an $18.4 million reimbursement payment for certain operating costs incurred by us from September 1, 2021 through the Foxconn APA Closing. Foxconn made down payments of the purchase price totaling $200 million through April 15, 2022, of which $100 million was received in both 2022 and 2021. The $30 million balance of the purchase price and a reimbursement payment of approximately $27.5 million were paid at the Foxconn APA Closing; $17.5 million was attributable to the reimbursement of certain operating expenses reported in research and development and $10 million was attributable to expansion costs. Under the terms of the Foxconn APA, the $17.5 million reimbursement costs were an estimate which upon final settlement was subsequently increased to $18.4 million.

Research and development costs are presented net of the $18.4 million reimbursement of costs under the Foxconn APA for the year ended December 31, 2022. Included in the $18.4 million reimbursement were approximately $7.7 million of research and development costs incurred in 2021. Also, in connection with the Foxconn APA Closing, the Company issued the Foxconn Warrants (as defined herein), which are exercisable until the third anniversary of the Foxconn APA Closing for 0.13 million shares of Class A common stock at an exercise price of $157.50 per share (the “Foxconn Warrants”). In October 2021, prior to entering into the Foxconn APA, Foxconn purchased 0.48 million shares of the Company’s Class A common stock for approximately $50.0 million.

Contract Manufacturing Agreement

On May 11, 2022, Lordstown EV and Foxconn entered into a manufacturing supply agreement (the “CMA” or “Contract Manufacturing Agreement”) in connection with the Foxconn APA Closing. Pursuant to the CMA, Foxconn was to (i) manufacture the Endurance at the Lordstown facility for a fee per vehicle, (ii) following a transition period, procure components for the manufacture and assembly of the Endurance, subject to sourcing specifications provided by Lordstown EV, and (iii) provide certain post-delivery services. Foxconn did not ultimately provide the aforementioned procurement and post delivery services. The CMA was intended to provide us with an almost entirely variable manufacturing cost structure and to alleviate the burden to invest in and maintain the Lordstown facility.

The CMA required Foxconn to use commercially reasonable efforts to assist with reducing component and logistics costs and reducing the overall bill of materials (“BOM”) cost of the Endurance, and otherwise improving the commercial terms of procurement with suppliers. However, we did not realize any material reduction of raw material or component costs or improvement in commercial terms based on Foxconn’s actions. Foxconn was required to conduct testing in accordance with procedures established by us and we were generally responsible for all motor vehicle regulatory compliance and reporting. The Contract Manufacturing Agreement also allocated responsibility between the parties for other matters, including

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component defects, quality assurance and warranties of manufacturing and design. Foxconn invoiced us for manufacturing costs on a fee per vehicle produced basis, for certain time and materials related to additional work, and to the extent purchased by Foxconn, component and other costs. Production volume and scheduling were based upon rolling weekly forecasts we provided that were generally binding only for a 12-week period, with some ability to vary the quantities of vehicle type.

The CMA became effective on May 11, 2022, and was to continue for an initial term of 18 months plus a 12-month notice period in the event either party seeks to terminate the agreement. In the event neither party terminated the Contract Manufacturing Agreement following the initial term, it would continue on a month-to-month basis unless terminated upon 12 months’ prior notice. The CMA could also be terminated by either party due to a material breach of the agreement and terminated immediately upon the occurrence of any bankruptcy event. The CMA was not part of the assets assigned under the LandX Asset Purchase Agreement.

Employees

As of February 1, 2024, the Company had 8 full-time employees, all of whose employment by the Company will terminate on the Effective Date. As of the Effective Date, the Proposed Plan provides that the Company’s remaining operations will be overseen by the New Board and the management it appoints. See “Executive Officer Expected to be Appointed as of the Effective Date”.

Corporate History and Information

Lordstown Motors Corp., originally known as DiamondPeak Holdings Corp. (“DiamondPeak”), was incorporated in Delaware on November 13, 2018, as a blank check company for the purpose of effecting a business combination and completed its initial public offering in March 2019. On October 23, 2020 (the “Closing Date”), DiamondPeak consummated the merger pursuant to the Agreement and Plan of Merger, dated as of August 1, 2020 (the “Business Combination Agreement”), by and among DiamondPeak, DPL Merger Sub Corp. (“Merger Sub”) and Lordstown Motors Corp. (“Legacy Lordstown” and now known as Lordstown EV Corporation), pursuant to which Merger Sub merged with and into Legacy Lordstown, with Legacy Lordstown surviving the merger as a wholly-owned subsidiary of DiamondPeak (the “Merger” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). On the Closing Date, and in connection with the closing of the Business Combination, DiamondPeak changed its name to Lordstown Motors Corp.

The Business Combination has been accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“GAAP”). Under this method of accounting, DiamondPeak was treated as the “acquired” company for financial reporting purposes. Operations prior to the Business Combination are those of Legacy Lordstown and the historical financial statements of Legacy Lordstown became the historical financial statements of the combined company, upon the consummation of the Business Combination.

Upon the occurrence of the Effective Date, the Company is expected to change its name to Nu Ride Inc.

The mailing address of our principal executive office is 2300 Hallock Young Road, Lordstown, Ohio 44481. Our telephone number is (234) 285-4001. Our website address is https://investor.lordstownmotors.com.

Our Class A common stock began trading exclusively on the over-the-counter market on July 7, 2023, under the symbol “RIDEQ.” The NASDAQ Global Select Market filed a Form 25 with the Securities and Exchange Commission on July 27, 2023, to remove the registrant’s Class A common stock from listing and registration on the NASDAQ Global Select Market. Delisting became effective ten days thereafter and deregistration under Section 12(b) of the Act became effective 90 days later. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this report. On and after the Effective Date, the Class A common stock and Preferred Stock will remain outstanding.

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Information about our Executive Officers

Below is a list of the names, ages, positions and a brief description of the business experience of each of our executive officers as of February 1, 2024, whose positions and employment will end on the Effective Date, as well as the executive officer that we have been advised by the Equity Committee is expected to be appointed on the Effective Date.

Current Executive Officers

Name

Age

Position

Daniel A. Ninivaggi

59

Executive Chairman

Edward T. Hightower

58

Chief Executive Officer and President (current PEO)

Adam B. Kroll

49

Executive Vice President, Chief Financial Officer, and Secretary

Daniel A. Ninivaggi. Mr. Ninivaggi has served as the Company’s Executive Chairman of the Board since May 2022, and served as the Company’s Chief Executive Officer from August 2021 to July 2022. He served as an independent consultant and board member from September 2019 to August 2021. Mr. Ninivaggi served as Chief Executive Officer of Icahn Automotive Group, LLC (“Icahn Automotive”) and Managing Director of Icahn Enterprises L.P. (“IEP”) - Automotive Segment from March 2017 through August 2019. IEP is a publicly traded diversified holding company and Icahn Automotive is a wholly-owned subsidiary of IEP. Prior to that, from February 2014 until March 2017, Mr. Ninivaggi served as Co-Chairman (from May 2015) and Co-CEO of Federal-Mogul Holdings Corp., an $8 billion automotive supplier (subsequently acquired by Tenneco) to automotive, commercial vehicle and industrial original equipment manufacturers and the independent automotive aftermarket. Mr. Ninivaggi was President and Chief Executive Officer of IEP between 2010 and 2014, at which time IEP operated through ten diverse operating segments. Mr. Ninivaggi has served as the Chairman of Garrett Motion Inc., a publicly traded manufacturer of turbochargers and electro-boosting technologies for transportation and industrial original equipment manufacturers, since April 2021 and has served as a director of numerous other public and private companies, including: Hertz Global Holdings, Inc., a publicly traded car rental company (from September 2014 to June 2021); Metalsa S.A., a privately held manufacturer of frames and other structural components for automotive and commercial vehicles (Advisory Board); Navistar International Corporation, a publicly traded manufacturer of trucks, buses and engines (from August 2017 to October 2018); Icahn Enterprises G.P. Inc., the general partner of IEP (from 2012 to 2015); CVR Energy, Inc., a publicly traded independent petroleum refiner and marketer of high value transportation fuels (from 2012 to 2014); CVR GP, LLC, the general partner of CVR Partners LP, a publicly traded nitrogen fertilizer company (from 2012 to 2014); XO Holdings, a privately held telecommunications company affiliated with IEP (from 2010 to 2014); Tropicana Entertainment Inc., a publicly traded company primarily engaged in the business of owning and operating casinos and resorts (from 2011 to 2015); Motorola Mobility Holdings Inc., a publicly traded mobile phone and electronics manufacturer (from 2010 to 2011); and CIT Group, Inc., a publicly traded bank holding company (from 2009 to 2011). Prior to joining IEP, Mr. Ninivaggi spent six years at Lear Corporation, a publicly traded Tier 1 automotive supplier specializing, at the time, in seating systems, interior components and systems as well as electrical and electronic distribution systems and components. Mr. Ninivaggi began his career at the law firm of Skadden, Arps, Slate, Meagher & Flom LLP before joining Winston & Strawn LLP, where he became partner. He holds a Bachelor of Arts degree from Columbia University, an MBA from the University of Chicago Graduate School of Business, and a Juris Doctor degree (with distinction) from Stanford Law School.

Edward T. Hightower. Mr. Hightower has served as our Chief Executive Officer, President and a director since July 2022, and served as our President from November 2021 to July 2022. Mr. Hightower served as the

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Managing director of Motoring Ventures LLC, a global investment and consulting firm for automotive and manufacturing businesses that Mr. Hightower founded, from 2016 to November 2021. At Motoring Ventures, Mr. Hightower advised vehicle and other manufacturing companies, including the Company, on operations, product launches, production, supply chain issues, mergers and acquisitions and a range of other matters. From 2013 to 2016, Mr. Hightower served as Vehicle Line Executive / Executive Chief Engineer – Global Crossovers for General Motors Company. Mr. Hightower has also served in related roles at Ford Motor Company and BMW of North America, Inc. and has more than 30 years of experience in his field. Mr. Hightower has served as a director and member of the audit and compensation committees of Tritium DCFC Limited since January 2022, HEVO Inc. since June 2020 and previously served as a board member of Tempel Steel, Inc. from May 2020 to December 2021 and the Michigan Council — Boy Scouts of America from December 2018 to November 2021.

Adam B. Kroll. Mr. Kroll has served as our Chief Financial Officer and Principal Accounting Officer since October 2021. Mr. Kroll served as the Chief Administrative Officer of Hyzon Motors Inc. from March through July 2021. From October 2020 through January 2021, Mr. Kroll was the interim Chief Financial Officer of UPG Enterprises, a family office operating diversified industrial companies (“UPG”). Prior to his tenure at UPG, Mr. Kroll spent five years at PSAV Holdings, a global event technology services provider, where he served in roles of increasing responsibility, including Treasurer, Head of Corporate Development and Senior Vice President – Finance. Prior to his time at PSAV Holdings, Mr. Kroll served as an investment banker at JP Morgan and elsewhere focusing on the automotive industry where, during his tenure, he advised companies on capital markets, loan and M&A transactions.

Executive Officer Designated under Proposed Plan as of the Effective Date

Name

Age

Position

William Gallagher

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Chief Executive Officer and President

William Gallagher. We have been advised by the Equity Committee that Mr. Gallagher is expected to be appointed as our Chief Executive Officer and President beginning on the Effective Date, subject to confirmation and effectiveness of the Proposed Plan. Since October 2018, Mr. Gallagher has served as a Managing Director of M3 Partners and has over 35 years of experience in finance, investment, and financial restructurings. Prior to joining M3, Mr. Gallagher was the Chief Executive Officer at WMIH Corp (NASDAQ:WMIH), a public acquisition corporation which was the successor to Washington Mutual, Inc., from May 2015 to July 2018. Prior to WMIH, Mr. Gallagher spent six years as CEO and Chief Risk Officer at Capmark Financial Group, formerly known as GMAC Commercial Mortgage, responsible for its financial restructuring following the global economic crisis and the management of the company’s day-to-day affairs, the restructuring of the company and its assets (including its $12 billion domestic loan portfolio), its bankruptcy process, and its winding down and distribution of assets to creditors and other stakeholders. Mr. Gallagher has a B.S. in business administration from Syracuse University and an MBA from New York University.

Item 1A. Risk Factors.

You should carefully consider all of the risks described below, together with the other information contained in this report, including the financial statements. If any of the following risks occur, our business, financial condition or results of operations may be materially and adversely affected. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.

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Summary Risk Factor

Investing in our Class A common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as described below. The principal factors and uncertainties that make investing in our Class A common stock risky include, among others:

our ability to have the Proposed Plan become effective and successfully complete the Chapter 11 Cases by consummating the Proposed Plan that gives effect to proposed settlements with various parties, including the SEC, the Ohio Securities Litigation Lead Plaintiff and the Committees, which is subject to the satisfaction of certain conditions precedent (some of which are beyond our control), appeal by certain parties that could file notices of appeal with respect to the Confirmation Order, if entered, and is otherwise subject to the risks and uncertainties set forth in the Disclosure Statement, which stakeholders are encouraged to read in its entirety;
our ability to continue as a going concern and the adequacy of our liquidity and capital resources to maintain our limited expected operations upon our emergence from the Chapter 11 Cases, which includes administering the claims process under the Proposed Plan, other bankruptcy-related costs, pursuing the Foxconn Litigation and other potential claims, identify and consummate a business combination, and seeking to realize value, if any, from our NOLs, including by investigating, evaluating, and pursuing one or more potential merger or acquisition transactions, whether our cash on hand and other resources will be sufficient to allow us to conclude the terms of the Proposed Plan, satisfy any remaining or future obligations related to the Chapter 11 Cases or other current or future litigation, claims and liabilities, and our unlikely access to financing;
uncertainty as to whether our Claims Reserve, cash on hand, or proceeds generated from other assets (including any acquired after the Effective Date, if the Proposed Plan is confirmed) will be sufficient to pay all allowed claims and uncertainties regarding the amount of claims allowed for distributions under the Proposed Plan and that such claims will not be significantly greater than may be anticipated, as such estimated amounts are subject to significant risks, uncertainties and assumptions;
additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims, for each of which the deadlines to file proofs of claim have not yet passed as of the date of this report; such claims may be substantial and may result in a greater amount of allowed claims than estimated;
our ability to pursue, and the potential outcome of, the Foxconn Litigation or other retained causes of action our ability to recover any damages as a result thereof or defend any counterclaims that may be brought;
the impact of any contingent liabilities, including indemnification obligations (including the fact that there are claims asserted for unliquidated damages or claims in respect of certain indemnification obligations or otherwise that that we may not be able to estimate, or may be materially more than we estimate), any pending or future litigation or claims, as well as any regulatory action, not discharged in the Chapter 11 Cases, and any additional claims that may be filed in the Chapter 11 Cases, and the potential unavailability of insurance coverage with respect to such litigation or claims, adverse publicity with respect to these matters, as well as the significant ongoing costs associated with such litigation (See Note 9 – Commitments and Contingencies);
the impact of the Bankruptcy Court’s ruling on the United States Trustee’s objection to the Debtors’ entitlement to a discharge under the Bankruptcy Code from substantially all debts arising prior to consummation of the Proposed Plan, which, if sustained by the Bankruptcy Court, could result in the Proposed Plan not being confirmed or additional material costs, penalties, fines, sanctions, or injunctive relief against the Debtors for claims that are not ultimately discharged;
uncertainty as to any remaining or future value of our Class A common stock or Preferred Stock, which may have little or no value;
the impact of the anticipated NOL Trading Restrictions following the Effective Date, the rights, preferences and privileges of the Preferred Stock that are preferential to the rights of Class A common stockholders, the delisting of our Class A common stock, potential issuances of additional shares of Class A common stock on the liquidity and trading price of our Class A common stock and

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the potential incurrence of debt or issuance of securities that are senior to outstanding equity securities;
uncertainty as to whether the Preferred Stock will retain its liquidation preference, which, if due and payable, would entitle it receive to proceeds from any distribution until such preference is satisfied prior to any payment to holders of Class A common stock in a liquidation and, if such preference is not subordinated or otherwise set aside, whether Foxconn will successfully assert a claim that such preference is due and payable, which would likely exhaust the Company’s remaining resources and cause it to cease operations;
our actual financial results following our emergence from the Chapter 11 Cases will not be comparable to our historical financial information due to the change in the nature of our business activities upon emergence, and we expect our operating losses to continue to be significant, as restructuring activities, operating expenses, the claims administration process, the Foxconn Litigation and other retained causes of action, among other activities, significantly impact our consolidated financial results;
the periodic financial information that we have reported and continue to the Bankruptcy Court is not presented in accordance with GAAP, and may differ materially from information that has been or may in the future be provided in our periodic SEC filings and may reflect estimates based on assumptions that have changed or may change significantly during the course of the Chapter 11 Cases, following emergence, or due to other contingencies;
we ceased development activities with respect to future vehicles and sold material assets related to those activities, and we have no revenue-generating operations or assets other than cash on hand, the claims asserted in the Foxconn Litigation, other potential claims that the Company may have against other parties and NOLs, which may have little or no value;
uncertainty with respect to the operations of the Company upon emergence from bankruptcy that will be overseen by the New Board and an entirely new management appointed by the New Board, as contemplated by the Proposed Plan, for which there will be limited resources, new and continuing liabilities (including indemnification obligations to directors and officers), and significant costs that may require additional capital to be raised (including through indebtedness obligations or securities, which could be senior in priority to our Class A common stock or Preferred Stock;
we will depend on the New Board and management upon our emergence from the Chapter 11 Cases, and our ability to attract and retain new officers and New Board, and the costs associated therewith, is uncertain;
as a result of the reduction of, or inability to maintain, insurance coverage, we could be subject to potential losses and unexpected liabilities that could have a material adverse effect on the Company; insurance we historically had, including product liability coverage, has expired or may expire and we may not be able to obtain replacement policies or any such replacement policies may only be available at a substantially higher cost or have materially lower coverage amounts, or both;
our ability to maintain adequate financial, information technology and management processes, controls and procedures, particularly in light of the necessary substantial cost-cutting actions, including reduction in personnel, limited resources and anticipated limited support that current management will provide after they are terminated upon effectiveness of the Proposed Plan;
our ability to identify any strategic alternative or business combination, with acceptable terms, that would result in profitable operations, generation of cash flow or the realization of any value from our NOLs, and our ability to obtain and comply with the terms and conditions of any financing that may be needed to consummate any such transaction;
our ability to use, and any benefit to us from, our NOLs, which may be materially limited or have no value; and
our ability to maintain our relationships, or develop new relationships, with the vendors and other third parties providing services that are integral to maintaining our financial, information technology, business data, and other systems used to maintain the limited operations and existence of the Company.

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Risks Related to Our Post-Effective Date Operations and Financial Condition

There is substantial doubt regarding our ability to continue as a going concern and the adequacy of our capital resources upon our emergence from the Chapter 11 Cases, and the capital resources we may need are difficult to predict at this time.

We have concluded that there is substantial doubt regarding our ability to continue as a going concern. We face uncertainty regarding the adequacy of our liquidity and capital resources to maintain our limited expected operations upon our emergence from the Chapter 11 Cases. Through the Chapter 11 Cases, we sold material assets used in our operations pursuant to the LandX Asset Purchase Agreement and have no remaining revenue-producing operations and very minimal tangible assets (other than cash on hand, the claims asserted in the Foxconn Litigation and other potential claims that the Company may have against other parties, and NOLs). As of February 1, 2024, we had cash and cash equivalents of approximately $82 million, most of which would be allocated to pay outstanding administrative claims, establish the Claims Reserve for general unsecured creditors (which is subject to increase or decrease as described above), fund the Post Effective Date Debtors’ operations (including prosecuting the Foxconn Litigation), pay the Ohio Securities Litigation Settlement, and make other payments pursuant to the Proposed Plan. The failure of the Proposed Plan to be confirmed and become effective, or any delay thereof, will significantly and adversely affect the likelihood of a Chapter 11 reorganization and could lead to a liquidation. We also may seek a transaction that would enable us to optimize the NOLs; however, we have not identified sources of revenue, earnings, operations or near-term actionable opportunities to acquire potential assets or businesses following the Chapter 11 Cases. We can give no assurances as to the outcome of any efforts to realize any value from our remaining assets.

Claims have been filed against or scheduled by the Debtors in the Chapter 11 Cases. Such Claims remain subject to the Chapter 11 Claims administration process, that pursuant to the terms of the Proposed Plan, which includes certain exceptions, the Claims Ombudsman will have the authority to settle, litigate or otherwise resolve general unsecured Claims against the Debtors. The ultimate amount that will be paid with respect to such Claims cannot be predicted. Subject to the terms of the Proposed Plan, distributions under the Proposed Plan will come from the Company’s assets (including, without limitation, cash generated by or that constitutes the proceeds of assets acquired by the Post-Effective Date Debtors after the Effective Date), which include, but are not limited to, (i) cash on hand as of the Effective Date, (ii) proceeds from the sale of the Debtors’ assets, (iii) proceeds from causes of action retained pursuant to the Proposed Plan (including the Foxconn Litigation) and (iv) insurance proceeds received by the Post-Effective Date Debtors. Distributions will be made to classes of Claims and Interests in order of their respective priorities under the Bankruptcy Code. Although we intend to pay all allowed general unsecured claims in full, with interest as provided by the Proposed Plan, there can be no assurance that the Claims Reserve or the Post-Effective Date Debtors’ other assets will be sufficient to do so given the uncertainties and risks of the claims dispute and settlement process, nor can there be any assurance that the Post-Effective Date Debtor Amount will be sufficient to fund even limited operations of the Post-Effective Date Debtors. Furthermore, we have incurred significant professional fees and other costs in connection with our contingent liabilities and preparation for the Chapter 11 Cases and have continued to incur significant professional fees and costs throughout our Chapter 11 Cases. In addition, we face uncertainty with respect to ongoing and potential future litigation and potential claims not discharged in the Chapter 11 Cases, as well as regulatory actions and government investigations and inquiries, for which we will continue to incur significant legal costs and may be subject to significant uninsured losses upon our emergence from the Chapter 11 Cases.

The Bankruptcy Code generally provides that the confirmation of a Chapter 11 discharges a debtor from substantially all debts arising prior to consummation of such plan.  Here, the United States Trustee has objected to the Debtors’ entitlement to a discharge.  The objection is expected to be heard at the hearing to consider the Confirmation Order.  If the United States Trustee’s objection is overruled, then, with few exceptions, all claims against the Debtors that arose prior to the consummation of the Proposed Plan (i) would be subject to compromise and/or treatment under the Proposed Plan and/or (ii) would be discharged in

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accordance with the Bankruptcy Code and the terms of the Proposed Plan. However, the outcome and timing of any claims not ultimately discharged is uncertain, and it is possible material costs, penalties, fines, sanctions, or injunctive relief could result from such a matter.

Moreover, notwithstanding the settlement of certain matters concurrent with or as a result of the Proposed Plan effectiveness, we may incur significant costs in connection with the undertakings by the Company as defined in the Offer, which include but are not limited to production of information, documents and personnel. Our Preferred Stock terms include a liquidation preference. This preference amount is equal to $30 million, plus accrued dividends. Pursuant to the Proposed Plan, Foxconn’s Preferred Stock will remain outstanding and its rights with respect to its preferred equity, including with respect to any liquidation preference which has or may become due, are unimpaired. We would vigorously oppose any assertion of Foxconn’s entitlement to receive the liquidation preference, but if we would be unsuccessful, an obligation to pay this amount would likely exhaust our available resources and require us to cease operations entirely. In light of these factors, among others, it is uncertain what value our Class A common stock will have, if any, following the Chapter 11 Cases. See “Management’s Discussion & Analysis – Liquidity” for additional information.

Our ability to obtain additional financing is expected to remain very limited after the Effective Date. There can be no assurance that cash on hand and other resources will be sufficient to allow us to conclude the terms of the Proposed Plan, satisfy any remaining obligations related to the Chapter 11 Cases or litigation, claims and investigations, future liabilities or continue to sustain our limited current operations or potential future plans for our operations.

Further, the Company may require additional capital to be raised (including indebtedness, obligations or securities senior in priority to the Class A common stock or Preferred Stock) in order to acquire any future business or assets as we seek to realize value from the NOLs. There can be no assurance of the terms on which such financing may be available or if such financing would be available at all. Our ability to raise certain forms of capital, particularly the issuance of equity securities, is significantly limited because of the ownership change restrictions required to preserve the NOLs and the limited trading activity and liquidity of our Class A common stock.

The amount of claims allowed could significantly exceed our estimates.

The Bankruptcy Court established October 10, 2023, as the general bar date for all creditors (except governmental entities) to file their proof 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, pursuant to the Proposed Plan, the deadline for parties to file administrative claims against the Debtors (i.e., claims for costs and expenses of administration of the Debtors’ Estates, including (i) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the Estates and operating the businesses of the Debtors, including wages, salaries, or commissions for services rendered after the Petition Date; (ii) professional fee claims; and (iii) fees and charges payable to the U.S. Trustee) is 30 days following the effective date of the Proposed Plan. 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 indemnification obligations or otherwise, that we may not be able to estimate, or may be materially more than we estimate.

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Although the Proposed Plan contemplates a Claim Reserve that is anticipated to be approximately $45 million, as of the date of this report, to pay allowed general unsecured claims under the Proposed Plan, it is subject to change. Although we intend to pay all allowed claims, including general unsecured claims, in full with interest as provided by the Proposed Plan (assuming the proposed Plan is confirmed and becomes effective), there can be no assurance that the Claims Reserve, the Post-Effective Date Debtors’ other assets, or our remaining Post-Effective Date Debtor Amount of cash will be sufficient to do so given the uncertainties and risks of the claims dispute and settlement process. There can be no assurance regarding the amount of claims that may be allowed for distributions under the Proposed Plan or that such claims will not be significantly greater than may be anticipated which, could in turn result in the value of distributions to stakeholders being delayed, reduced, or eliminated entirely. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate results and total amount of claims against us.

Moreover, additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims for each of which (as noted directly above) the deadlines to file proofs of claim have not yet passed as of the date of this report. Such Clams may be substantial and may result in a greater amount of allowed Claims than estimated. Further, if the United States Trustee is successful in its objection to the Debtors’ entitlement to a discharge under the Bankruptcy Code from substantially all debts arising prior to consummation of the Proposed Plan, this could result in the Proposed Plan not being confirmed or additional material costs, penalties, fines, sanctions, or injunctive relief for claims that are not ultimately discharged.

The Proposed Plan, or any amended or subsequent plan, may not be confirmed or become effective.

The Proposed Plan may not be confirmed by the Bankruptcy Court. Even if confirmed by the Bankruptcy Court, it may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control), appeal by certain parties that could file notices of appeal with respect to the Confirmation Order, if entered, and is otherwise subject to the risks and uncertainties set forth in the Disclosure Statement, which stakeholders are encouraged to read in its entirety. There can be no assurance that the Proposed Plan will be confirmed by the Bankruptcy Court, that such conditions will be satisfied or that any such appeals will be dismissed and, therefore, that the Proposed Plan will become effective and that we will emerge from the Chapter 11 Cases as contemplated by the Proposed Plan. Further, the Proposed Plan was developed based on various assumptions regarding the Debtor’s potential assets and liabilities and the involvement of numerous parties, which assumptions may prove to be incorrect and could render the Proposed Plan unsuccessful and any payments thereunder may differ from estimates. If emergence is delayed, we may not have sufficient cash available to operate and consummate the Proposed Plan. In that case, we may need new or additional financing, which would not likely be available or, if available, which may significantly increase the cost of consummating the Proposed Plan or any amended or alternative chapter 11 plan. There can be no assurance of the terms on which any such financing may be available or if such financing will be available. If the transactions contemplated by the Proposed Plan are not completed, it may become necessary to amend the Proposed Plan. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays to the Chapter 11 Cases. As a result, there can be no assurance as to whether we will successfully emerge from the Chapter 11 Cases or, if we do successfully emerge, as to when we would emerge from the Chapter 11 Cases. If we are unable to successfully emerge from the Chapter 11 Cases under the Proposed Plan in the near-term, we may not be able to conduct any business and be forced to liquidate.

Furthermore, if the Proposed Plan or an alternative plan under Chapter 11 does not become effective, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of Claims and Interests or upon the showing of cause, the Bankruptcy Court may convert our Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. Although the value, if any, that would be available to any of our various stakeholders (including creditors and stockholders) would be uncertain in any bankruptcy proceeding, we believe that liquidation under Chapter 7 would result in

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significantly smaller distributions being made to our stakeholders than those we might obtain under Chapter 11 primarily because of the potential that a Chapter 7 Trustee may not pursue certain causes of action as effectively as the Litigation Trust or the Post-Effective Date Debtors. We further believe that such a liquidation would likely eliminate the NOLs.

The Company’s actual financial results following our emergence from bankruptcy will not be comparable to the Company’s historical financial information.

Due to the Company’s aggressive actions to cut costs and preserve cash, the Chapter 11 Cases and consummation of the LandX Asset Purchase Agreement, the nature of our business activities upon emergence will be materially different than those prior to filing the Chapter 11 Cases on June 27, 2023. Furthermore, following emergence from the Chapter 11 Cases, we expect our operating losses to continue to be significant, as restructuring activities, operating expenses, the claims administration process, the Foxconn Litigation and other retained causes of action, among other activities, significantly impact our consolidated financial results. 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 (the SEC’s deadline to file its proof of claim was extended to January 5, 2024). The Proposed Plan provides that the Claims Ombudsman will be appointed on the Effective Date. The Post-Effective Date Debtors1 and the Claims Ombudsman, as applicable, will review and analyze all claims. Pursuant to the terms of the Proposed Plan, which includes certain exceptions, the Claims Ombudsman will have the authority to settle, litigate or otherwise resolve general unsecured Claims against the Debtors.

We cannot provide any assurances regarding what our total actual liabilities based on such claims will be. As a result, our historical financial performance, including information presented as of December 31, 2023, is likely not indicative of our financial performance after the Effective Date.

In particular, the amount and composition of our assets and liabilities will be significantly different as a result of the Chapter 11 Cases, and the description of our operations, assets, liabilities, contingencies, liquidity and capital resources included in our periodic reports or in any filing we have made or may make with the Bankruptcy Court may not accurately reflect such matters following the Chapter 11 Cases or the value of our remaining assets and liquidity in light of the uncertainty of the estimates and assumptions used in the applicable reporting principles, and such values may be higher or lower as a result. We are conducting an extensive claims reconciliation process to analyze the Claims asserted against the Company as of the date of this report. Additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claim, as to each of which the deadlines to file proofs of claim have not yet passed as of the date of this report, which may be substantial and may result in a greater amount of allowed Claims than estimated. 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 indemnification obligations or otherwise that we may not be able to estimate, or may be materially more than we estimate. In addition, we face uncertainty with respect to liabilities for ongoing and potential future litigation and claims, as well as regulatory actions and government investigations and inquiries, for which we will continue to incur significant legal costs and may be subject to significant uninsured losses that cannot yet be determined and may be significantly higher than any related accruals. The periodic financial information reported to the Bankruptcy Court is not presented in accordance with GAAP and may differ materially from information that has been or may in the future be provided as of quarter or year-end in our periodic reports that incorporate typical adjustments and accounting policies and may reflect estimates based on assumptions that may change significantly upon our emergence from the Chapter 11 Cases or due to other contingencies, and, as applicable, is subject to all of the disclaimers presented therewith.

1 We are reviewing the document for consistency between Ombudsman and Debtors vs either individual.

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Further, if the Proposed Plan does not become effective or is delayed, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of Claims and Interests or upon the showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Company’s assets for distribution in accordance with the priorities established by the Bankruptcy Code. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

We currently have no revenues and limited operations and assets, which makes it difficult for us to evaluate our future business prospects.

We are a company with a limited operating history and very limited revenue prior to commencing the Chapter 11 Cases. Shortly after the Petition Date, we ceased production of the Endurance and new program development. On August 8, 2023, the Bankruptcy Court approved our procedures for conducting a comprehensive marketing and sale process for some, all, or substantially all of our operating assets. On September 29, 2023, we entered into the LandX Asset Purchase Agreement, pursuant to which the Purchaser agreed to acquire specified assets of the Company related to the design, production and sale of EVs 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 $10.2 million in cash. As a result, we do not hold assets that are of the type that were previously used in our operations. We cannot provide assurances as to the value of our assets, including potential recovery in the Foxconn Litigation and other retained causes of action or our NOLs.

Further, upon emergence from bankruptcy, we may need to continue to maintain or develop new relationships with vendors and other third parties, including those providing services that are integral to maintaining our financial, information technology and other systems used to operate. We may face higher costs and limited opportunities to establish favorable terms and conditions for these relationships in light of our financial condition and business prospects. This may further hinder our ability to maintain adequate financial, information technology and management processes, controls and procedures and pursue possible future business opportunities.

As the Company currently has limited operations and assets whose value is uncertain, there is a risk that we will be unable to continue as a going concern. We have no significant income-generating assets and limited financial resources. We anticipate relying upon the Post-Effective Date Debtor Amount to sustain operating expenses, unless or until the consummation of a business combination or we are able to secure additional funding, if at all. We cannot provide any assurance that we will identify a suitable business opportunity, consummate a business combination or that our choice of business combination will result in profitable operations, the ability to generate cash or the effective utilization of our NOLs. Moreover, there can be no assurance that financing will be available to us on favorable terms and timing or at all. We and our auditors have identified conditions and events that raise substantial doubt about our ability to continue as a going concern. If we are not able to continue as a going concern, or if there is continued doubt about our ability to do so, the value of your investment would be materially and adversely affected. We cannot predict or quantify the ultimate impact that events that have occurred during or upon our emergence from the Chapter 11 Cases may have on ultimate recovery for stakeholders, including creditors and stockholders.

The Proposed Plan provides for the appointment of the New Board on the Effective Date. The New Board will control the Company’s activities from that point forward and there can be no assurance as to what, if any, operations the Company will conduct.

The Proposed Plan provides for the appointment of the New Board as of the Effective Date of the Proposed Plan. The New Board has been identified by the Equity Committee with the consent of the Debtors. The New Board will, among other things, oversee and direct the administration of the Post-Effective Date Debtors’ operations in accordance with the Proposed Plan. On the Effective Date, or as soon as is reasonably practicable thereafter, the New Board is expected to establish such procedures and protocols as it deems

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necessary to carry out its duties and appoint officers of the Post-Effective Date Debtors. The officers of the Post-Effective Date Debtors will have the rights and responsibilities set forth in the New Organizational Documents, which , under the Proposed Plan and subject to effectiveness, include provisions to facilitate the preservation of the Company’s NOLs. There can be no assurance regarding the activities that the Post-Effective Date Debtors may conduct or further plans that the New Board may develop for the Post-Effective Date Debtors.

We will depend on the New Board and a newly appointed management to navigate our emergence from the Chapter 11 Cases and contribute to our ability to realize future value of our remaining assets, and if we are unable to attract, retain, manage, and appropriately compensate our new officers and New Board, our ability to meet our financial reporting obligations, achieve our anticipated operating costs, and to realize value from our remaining assets and litigation claims could be adversely affected.

Our ability to successfully emerge from the Chapter 11 Cases and realize the value of our remaining assets is based on the service of the New Board and newly appointed management. We may not be able to attract, appropriately compensate, incentivize or retain our new officers and the New Board. As of the Effective Date, the employment by the Company of our remaining executive officers and employees will end and, under the Severance Agreements, they will provide limited further transitional consulting support. Some of our employees were, and others may be, subject to claims and risks of litigation for which indemnification may be uncertain. We may not be able to attract and retain the services of such individuals, who work for us on an at-will basis and will provide limited support after the Effective Date.

Attrition has caused, and may continue to cause, us to engage third parties to perform the work needed to sustain our operations and meet our financial reporting requirements as a public company as well as other regulatory requirements. Such third parties are likely to be more costly and less efficient than if we were to be able to use our own employees. If our key employees or consultants fail to work effectively and to execute our plans or our emergence from the Chapter 11 Cases, including our efforts to realize value from our remaining assets including through resolving and pursuing litigation and other claims, could adversely affect the Company.

Moreover, upon our emergence from the Chapter 11 Cases, we expect our operations to be limited. If, however, we increase our operations in the future, we may need to hire and train additional personnel. If we are unable to attract and retain sufficiently experienced and capable personnel, our business and financial results may suffer.

We expect to further streamline our operations in connection with and upon our emergence from the Chapter 11 Cases but legal expenses may remain high.

In connection with and upon our emergence from the Chapter 11 Cases, the Company Post-Effective Date Debtors expect to incur significant legal expenses to pursue retained causes of action. However, they may also take measures to further streamline its operations and seek to reduce its general and administrative expenses, which may include, among other things, reducing or no longer maintaining insurance coverage, scaling back our information technology systems and reducing our management infrastructure. Changes in our operations in connection with the Chapter 11 Cases has reduced our need to maintain insurance coverage at previous levels or to carry certain insurance policies. Insurance we presently have may expire and we may not be able to obtain replacement policies or such policies may require substantially higher cost or have materially lower coverage amounts, or both. In some cases, our insurance policies have expired or may expire in the very near term and if we are not able to obtain replacement coverage, could have a material adverse effect on the Company if there were to be a material loss. If we reduce or no longer maintain insurance coverage, though, we may be subject to potential losses and unexpected liabilities. Further, though we do not anticipate collecting or storing any significant confidential information related to customers, consumers, employees or vendors, we may be at increased risk of disruptions, cyberattacks or security breaches. We also anticipate all current employees to be terminated on the Effective Date and expect that

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New Board and management will rely upon outsourcing of certain skills or capabilities as necessary to manage our limited operations. It is impossible to predict what, if any, errors, delays, breaches or system disruptions might occur as the result of changes in controls or a reduced workforce. Implementing these measures may adversely impact the Company’s operations and increase liability exposure and our susceptibility to other risks inherent to operating the Company with significantly limited resources and personnel.

We are or may be subject to risks associated with business combinations, strategic alliances, joint ventures, or acquisitions.

In the future, the Company expects to investigate and, if such investigation warrants, enter into a business combination, acquire a target company or business or enter into strategic alliances, including joint ventures, minority equity investments or other transactions and arrangements with various third parties seeking the perceived advantages of being a publicly traded corporation and possible realization of the value of the NOLs. These business opportunities may be complex and could subject us to a number of risks. The time and costs required to select and evaluate a target business and to structure and complete a business combination cannot presently be ascertained. We may not have sufficient resources to consummate a business combination. It is also impossible to predict the manner in which the Company may participate in a business opportunity. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities difficult and complex. There can be no assurance that an attractive business opportunity will be identified, be available on acceptable terms, that financing will be available to consummate any transaction or that it would result in profitable operations, generation of cash flow, or the realization of any value from the NOLs.

The Company’s ability to use some or all of its NOLs to offset future income or realize any potential value may be limited.

At December 31, 2023 the Company had $993.2 million and $880.3 million of federal and state and local net operating losses, respectively, and the Company incurred and may also continue to incur in connection with the Proposed Plan significant NOLs. The Company’s ability to use some or all of these NOLs are subject to certain limitations. Under Section 382 of the Internal Revenue Code, if a corporation (or a consolidated group) undergoes an “ownership change,” such NOLs may be subject to certain limitations. In general, an ownership change occurs if the aggregate stock ownership of certain shareholders (generally five percent shareholders, applying certain look-through and aggregation rules) increases by more than 50% over such shareholders’ lowest percentage ownership during the testing period (generally three years). The New Charter, as provided in the Proposed Plan and subject to effectiveness, will contain the NOL Trading Restrictions, which seek to prevent an ownership change that would limit the availability of the NOLs.

The Company and its advisors conducted a preliminary analysis to determine if an ownership change has occurred since November 2020 and the substantial majority of its NOLs to determine if our other tax attributes are limited by Section 382 of the Internal Revenue Code, and believe an ownership change has not occurred. However, the Company has not completed a detailed analysis or received a formal opinion from any authority confirming the preliminary analysis. Whether the Company underwent or will undergo an ownership change as a result of the transactions in the Company’s equity that have occurred or will occur pursuant to the Proposed Plan (or otherwise) depends on several factors outside the Company’s control and the application of certain laws that are uncertain in several respects. Accordingly, there can be no assurance that the IRS would not successfully assert that the Company has undergone or will undergo an ownership change pursuant to the Proposed Plan or an alternative plan of reorganization, or otherwise. In addition, even if these transactions did not cause an ownership change, they may increase the likelihood that the Company may undergo an ownership change in the future. If the IRS successfully asserts that the Company did undergo, or the Company otherwise does undergo, an ownership change, the limitation on its NOLs under Section 382 of the Internal Revenue Code would likely have a material adverse effect on the value of the Company’s stock and its ability to consummate a business combination.

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Risks Relating to Claims, Regulation and External Events

We filed litigation against Foxconn with the Bankruptcy Court seeking substantial damages for fraudulent and tortious conduct and contractual breaches the Company believes were committed by Foxconn, which under the Proposed Plan will be preserved and continue upon the Company’s emergence from the bankruptcy proceedings, but no assurances can be provided that our claims against Foxconn will be successful or that we will recover any damages as a result thereof.

On June 27, 2023, the Company filed the Foxconn Litigation against Foxconn in the Bankruptcy Court seeking relief for contractual breaches 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.

The Foxconn Litigation involves allegations of wrongful conduct by Foxconn, which induced the Company to enter into a series of agreements, including the Agreement in Principle, the Foxconn APA, the CMA and the Investment Agreement. Pursuant to the Proposed Plan, the Company would emerge from the bankruptcy proceedings and the Foxconn Litigation and other causes of action of the Debtors would be preserved and continue. The Debtors are vigorously pursuing the Foxconn Litigation claims and seeking substantial damages from Foxconn. 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 Debtors believe 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 Debtors and the Equity Committee filed a notice of completion of briefing, which provided that the briefing of the Foxconn Adversary Motion to Dismiss has been completed and such motion is ready for disposition. The Bankruptcy Court has not yet scheduled the oral argument on the Foxconn Adversary Motion to Dismiss. The Company currently intends to continue to vigorously oppose that motion and pursue its claims against Foxconn. However, the ultimate determinations regarding the Foxconn Litigation will be made by the New Board and management if the Proposed Plan is confirmed and becomes effective.

No assurances can be provided that our claims against Foxconn will be successful or that the Debtors will recover any damages as a result thereof or that Foxconn will not assert counterclaims. Furthermore, the Company will incur significant costs to pursue the Foxconn Litigation.

We have significant contingent liabilities, the full scope of our liabilities is uncertain, and we may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition, results of operations and prospects.

The Company is subject to significant contingent liabilities, including, but not limited to, potential indemnification obligations to current and former directors and officers named in the actions described in this report. See Note 9 – Commitments and Contingencies. The full scope of the Company’s contingent liabilities is uncertain at this time. The Bankruptcy Code generally provides that the confirmation of a Chapter 11 plan discharges a debtor from substantially all debts arising prior to consummation of such plan.  Here, the United States Trustee has objected to the Debtors’ entitlement to a discharge.  The objection is expected to be heard at the hearing to consider the Confirmation Order.  If the United States Trustee’s objection is overruled, then, with few exceptions, all claims against the Debtors that arose prior to the consummation of the Proposed Plan (i) would be subject to compromise and/or treatment under the Proposed Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Proposed Plan. However, the outcome and timing of any claims not ultimately discharged is uncertain, and it is possible material costs, penalties, fines, sanctions, or injunctive relief could result from such a matter. As a result, an adverse ruling with respect to

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potential matters could have a material impact on our financial condition, results of operations, liquidity and cash flows and recoveries for creditors and stakeholders. We are conducting an extensive claims reconciliation process to analyze the Claims asserted against the Company that does not reflect potential material government claims. Additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims, for each of which the deadlines to file proofs of claim have not yet passed as of the date of this report, which may be substantial and may result in a greater amount of allowed Claims than estimated.

Further, the Company’s obligations under the Safety Act administered by NHTSA for the vehicles it has manufactured and sold and has not repurchased continue in force 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. If and when the Company completes its Chapter 11 Cases, NHTSA may argue that all applicable Safety Act obligations continue to apply to the remaining vehicles and the post-Effective Date Company would also be responsible for fulfilling any pre-existing Safety Act related responsibilities (e.g., remedying vehicles already under a safety recall). We have repurchased and destroyed all but two of the vehicles that we sold (other than the vehicles sold to LAS Capital or its affiliates, for which it assumed warranty, product liability and recall liabilities). We cannot predict the future costs associated with those two vehicles, if any.

We face risks and uncertainties related to ongoing and potential future litigation and claims, as well as regulatory actions and government investigations and inquiries, for which we will continue to incur significant legal costs and may be subject to significant uninsured losses.

We are and have been subject to extensive litigation, including securities class action litigation, shareholder derivative suits, a stockholder class action, an SEC investigation, among other disputes. We may in the future be subject to, or become a party to, additional litigation, claims, regulatory actions, and government investigations and inquiries, as we may be subject to claims by customers, suppliers, vendors, contractors, competitors, government agencies, stockholders or other parties regarding our products, development, accidents, advertising, securities, contract and corporate matter disputes, intellectual property infringement matters and employee claims against us based on, among other things, discrimination, harassment, wrongful termination, disability or violation of wage and labor laws. These proceedings and incidents include claims for which we have no or limited insurance coverage. The Company has potential indemnification obligations with respect to the current and former directors named in various lawsuits that have been or may be filed, which obligations may not be covered by the Company’s applicable directors and officers’ insurance. See Note 9 – Commitments and Contingencies.

These claims have diverted and may in the future divert our financial and management resources that would otherwise be used to benefit our operations, increased our insurance costs and caused reputational harm. We have already incurred, and expect to continue to incur, significant legal expenses in defending against any claims not discharged in the Chapter 11 Cases. Further, the ongoing expense of lawsuits, investigations and any substantial settlement payment by us or damages award enforceable against us could have a material adverse effect on the Company’s consolidated results of operations, financial condition or cash flows and adversely affect our ability to successfully execute the Proposed Plan under Chapter 11 and emerge from the Chapter 11 Cases, realize value for our remaining assets and make any distribution and, if so, the amount of such distribution, to our stockholders.

While we currently carry workers’ compensation, fiduciary liability and directors’ and officers’ insurance policies, coverage amounts are limited. In some cases, we may not maintain any insurance coverage at all or may reduce coverage due to lack of funding or insurers being unwilling to provide coverage at all, or at a substantially higher cost. In some cases, our insurance policies have expired or may expire in the very near term, which could have a material adverse effect on the Company if there were to be a material loss. Additionally, the policies that we do have may include significant deductibles and exclusions, and we cannot be certain that our insurance coverage will be applicable to or sufficient to cover all current and future

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claims against us. We have, and may continue to seek to reduce or eliminate our insurance coverage or certain policies in the future.

The insurers under the main tower of the director and officer insurance program that the Company bound in October 2020 (the “2020 D&O Program”) have asserted a denial of coverage with respect to numerous ongoing matters, including the Ohio Securities Litigation and various shareholder derivative actions, 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, and certain indemnification obligations, under an exclusion to the policy called the “retroactive date exclusion.” The primary 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. We are analyzing the insurer’s position and intend to pursue any available coverage under the 2020 D&O Program and other insurance. As a result of the denial of coverage, no or limited insurance may be available to us to reimburse our expenses or cover any potential losses for these matters, which have been significant. The insurers in the Side A D&O insurance portion of the 2020 D&O Program, providing coverage for individual directors and officers in derivative actions and certain other situations that are claimed during the coverage period of the 2020 D&O Program, have issued a denial of coverage, which may limit the availability of coverage for at least some individuals and/or claims.

In addition, as a result of the Chapter 11 Cases, we have been and may be subject to additional litigation or other claims related to the Foxconn dispute and bankruptcy, dissolution and liquidation. The resolution of outstanding claims will be subject to the bankruptcy process.

The filing of the Chapter 11 Cases established an automatic stay of proceedings against the Company and 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 was extended to January 5, 2024, for the SEC). In addition, additional claims will be filed on account of executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims. At this time, the Company cannot predict the results of the ongoing proceedings or the interim and ultimate determinations regarding the claims that have been filed (or that may be filed) in the Bankruptcy Court. Furthermore, proofs of claim have been filed asserting unliquidated damages or claims in respect of certain indemnification obligations or otherwise, that we may not be able to estimate, or may be materially more than we estimate. Although we have allocated a significant amount to pay outstanding administrative claims, establish the Claims Reserve for general unsecured creditors (which is subject to increase or decrease), fund the Post Effective Date Debtors’ operations (including prosecuting the Foxconn Litigation), pay the Ohio Securities Litigation Settlement, and make other payments pursuant to the Proposed Plan, future resolution of these matters and the outcome of the claims dispute and settlement process could result in changes in management’s estimates of losses, which could be material to our consolidated financial results.

Within Liabilities subject to compromise, as of December 31, 2023, the Company had accruals of $6.5 million for certain of its outstanding legal proceedings and potential related obligations, including the stockholder and securities actions, government claims and indemnification obligations described in more detail in Note 9 – Commitments and Contingencies and may or may not be offset by insurance. As of December 31, 2022, these amounts totaled $35.9 million, and were recorded within accrued and other liabilities. The accruals do not include potential legal fees and other costs or obligations that may be incurred by the Company in connection with such matters. for certain of its outstanding legal proceedings and potential related obligations, including the stockholder and securities actions, government claims and indemnification obligations and may or may not be offset by insurance. The amount accrued as of December 31, 2023, reflects the settlement terms contained in the Proposed Plan for the Ohio Securities Litigation and the Offer and OIP with the SEC, as well as the indemnification claims that are subject to proofs of claim filed by the defendants in the Delaware Class Action Litigation. The accrual does not include potential legal fees and other costs that may be incurred by the Company in connection with such matters. Upon effectiveness of the Proposed Plan, and the releases provided to the Company as part of the Proposed Plan and the SEC’s obligation to withdraw its

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proof of claim (for which the Company has been advised that the conditions thereto would be satisfied), the Company currently expects its obligations for these matters to be limited to the $3 million it will have contributed into escrow for the Ohio Securities Litigation Settlement and a potential indemnification obligation claim of $3.5 million (excluding potential legal fees); provided, however, (a) the Company does not concede that it is liable for, and has not determined whether it will object to some or all of the indemnification claims and these claims are subject to dispute as part of the Chapter 11 claims administration process and (b) the Company potentially could have indemnification obligations to individual defendants not released under the settlement (as the treatment of such claims and their amounts are not known, the Company has not recorded any reserve with respect to such obligations). Additional potential recovery by the plaintiffs in the Ohio Securities Litigation would occur if proceeds are received from litigation and other causes of action being retained by the Debtors following the Effective Date (net of actual reasonable costs incurred in prosecuting such retained causes of action) in an amount of up to $7 million; however, the potential outcome of such matters, and whether any proceeds will be received, cannot be predicted at this time.

With respect to other current and potential legal claims and obligations, the Company continues to evaluate the potential resolution and impact of these matters in light of the applicable provisions of the Bankruptcy Code, indemnification rights and the terms of the Proposed Plan, which in some cases may limit any recovery to available insurance coverage, 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. See Note 9 – Commitments and Contingencies.

Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments and potential actions by third parties. Legal fees and costs of litigation or an adverse judgment or settlement in any one or more of our ongoing legal matters that are not insured or that is in excess of insurance coverage could significantly exceed our current accrual and ability to pay. This would have a material adverse effect on our financial position and results of operations.

Changes in laws or regulations, or a failure to comply with any laws and regulations, or any litigation that we may be subject to or involved in may adversely affect our business, prospects and results of operations.

We are subject to laws, regulations and rules enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal and regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time-consuming and costly.

Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, prospects and results of operations. It is difficult to predict what impact, if any, changes in federal laws and policies will have on our business and industry or the economy as a whole. As a general matter, failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

We are subject to risks related to health epidemics and pandemics, and natural and man-made disasters, which have and may in the future adversely affect our business and financial condition.

We face various risks related to public health issues, including epidemics, pandemics and other outbreaks, including the ongoing effects of the COVID-19 pandemic, as well as natural disasters, such as earthquakes, floods, snowstorms, typhoon, or fires, and the occurrence of geopolitical events such as war, terrorism, civil unrest, political instability, environmental or climatic factors. The effects and potential effects of such events,

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including, but not limited to, their impacts on general economic conditions, trade and financing markets and continuity in business operations, create significant uncertainty.

Risks Related to Our Securities and Being a Public Company

Trading in our Class A common stock is highly speculative and poses substantial risks.

Our capital structure upon our emergence from bankruptcy is anticipated to remain the same as the capital structure upon filing the Chapter 11 Cases, with our shares Class A common stock, warrants to purchase Class A common stock and Preferred Stock remaining outstanding.  Existing holders of our Class A common stock may find that their shares have little or no value upon our emergence from bankruptcy and the exercise price of outstanding warrants is significantly above the current market price of our Class A common stock. Any trading in our Class A common stock may be very limited and during the pendency of the Chapter 11 Cases and after the Effective Date remains highly speculative and will pose substantial risks.

In addition, the Proposed Plan and proposed New Charter include the NOL Trading Restrictions, which are provisions designed to enable the Company to optimize its NOLs following the Effective Date of the Proposed Plan, which generally restrict transactions involving any person or group of persons that is or as a result of such a transaction would become a substantial stockholder (i.e., would beneficially own, directly or indirectly, 4.5% or more of all issued and outstanding shares of Class A common stock). 

Upon our emergence from the Chapter 11 Cases, the value that may be available to our various stakeholders, including our creditors and stockholders, is uncertain and our ability to generate value for stakeholders, if any, will be subject to the risks and uncertainties associated with bankruptcy proceedings, including, among others, those described elsewhere in this report and subsequent filings that we make with the SEC. Accordingly, the Company urges extreme caution with respect to existing and future investments in its Class A common stock.

In order to protect our ability to utilize our NOLs as of the Effective Date, our New Charter will include certain transfer restrictions with respect to our stock, which may limit the liquidity of our Class A common stock.

To reduce the risk of a potential adverse effect on our ability to use our NOLs for U.S. Federal income tax purposes, as of the Effective Date our Charter is anticipated to contain, subject to certain exceptions, the proposed NOL Restrictions with respect to our stock involving any person or group of persons that is or as a result of such a transaction would become a substantial stockholder (i.e., would beneficially own, directly or indirectly, 4.5% of all issued and outstanding shares of Class A common stock). Any transferee receiving shares of Class A common stock or Preferred Stock that would result in a violation of such restrictions would not be recognized as a stockholder of the Company or entitled to any rights of shareholders, including, without limitation, the right to vote and to receive dividends or distributions, whether liquidating or otherwise, in each case, with respect to the shares of stock causing the violation. The proposed NOL Restrictions may adversely affect the ability of certain holders of our Class A common stock to dispose of or acquire shares of our Class A common stock and may have an adverse impact on the liquidity of our stock generally.

We have issued shares of Preferred Stock that, subject to the outcome of the Foxconn Litigation, ranks senior to our Class A common stock in priority of distribution rights and rights upon our liquidation, dissolution or winding up, accrues dividends and is convertible into Class A common stock and provides associated corporate governance rights and rights with respect to subsequent transactions, which may adversely affect and/or limit the influence of holders of our Class A common stock.

On November 7, 2022, the Company and Foxconn entered into the Investment Agreement, pursuant to which Foxconn invested $52.7 million to purchase 0.48 million shares of Class A common stock (such amount

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giving effect to the Reverse Stock Split), and 0.3 million shares of Preferred Stock, and agreed to purchase (a) an additional 10% of our Class A common stock for $47 million subject to the receipt of CFIUS Clearance and satisfaction of other conditions set forth in the Investment Agreement and (b) up to an additional $70 million of Preferred Stock in two tranches subject to the parties agreeing to an EV Program budget and attaining certain EV Program milestones to be established by the parties, and the other conditions. The first tranche would have been in an amount up to 0.3 million shares for an aggregate purchase price of $30 million; and the second tranche would have been in an amount up to 0.4 million shares for an aggregate purchase price of $40 million.

Foxconn has failed to proceed with the Subsequent Common Closing or any Subsequent Preferred Funding. As a result of Foxconn’s actions, the Company was deprived of critical funding necessary for its operations. The Company commenced the Foxconn Litigation in the Bankruptcy Court seeking relief for fraudulent and tortious conduct, as well as breaches of the Investment Agreement and other agreements, the parties’ joint venture agreement, the Foxconn APA, and the CMA that the Company believes were committed by Foxconn. As set forth in the complaint relating to the adversary proceeding, Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and significant damages. See Part I – Item 1 Business and Note 9 – Commitments and Contingencies for additional information.

Even though the Subsequent Common Closing and any Subsequent Preferred Funding never occurred, Foxconn has, subject to the outcome of the Foxconn Litigation, significant ownership, rights and preferences with respect to our equity securities which may adversely affect and/or limit the influence of holders of our Class A common stock.

The Preferred Stock ranks senior to our Class A common stock with respect to dividend rights, rights on the distribution of assets on any liquidation or winding up of the affairs of the Company and redemption rights. Upon any dissolution, liquidation or winding up, holders of the Preferred Stock will be entitled to receive distributions in cash in an amount per share equal to the greater of (1) the sum of $100 per share plus the accrued unpaid dividends with respect to such share and (2) the amount the holder would have received had it converted such share into Class A common stock immediately prior to the date of such event, before any distributions shall be made on any shares of our Class A common stock. This preference amount is equal to $30 million, plus accrued dividends. Pursuant to the Proposed Plan, Foxconn’s rights with respect to its preferred equity, including with respect to any liquidation preference which has or may become due, is unimpaired. We intend to vigorously oppose Foxconn’s entitlement to receive the liquidation preference, but if we are unsuccessful, an obligation to pay this amount could exhaust our available resources and require us to cease operations entirely. In addition, holders of the Preferred Stock are entitled to receive dividends at a rate equal to 8% per annum, which accrue and accumulate whether or not declared. The holders of the Preferred Stock also participate with any dividends payable in respect of any junior or parity stock. Such dividend obligations could limit our ability to obtain additional financing, which could have an adverse effect on our financial condition. The preferential rights described above could also result in divergent interests between the holders of shares of Preferred Stock and the holders of our Class A common stock.

Pursuant to the Certificate of Designation, Preferences and Rights of the Series A Convertible Preferred Stock filed by the Company with the Secretary of State of the State of Delaware (the “Certificate of Designations”), and subject to the Ownership Limitations (defined below), commencing on November 7, 2023, the Preferred Stock became convertible at the option of the holder into a number of shares of Class A common stock obtained by dividing the sum of the liquidation preference (i.e., $100 per share) and all accrued but unpaid dividends with respect to such share as of the applicable conversion date by the conversion price as of the applicable conversion date. The conversion price currently is $29.04 per share and it is subject to customary adjustments. At any time following the third anniversary of the date of issuance, the Company can cause the Preferred Stock to be converted if the volume-weighted average price of the Class A common stock exceeds 200% of the Conversion Price for a period of at least twenty trading days in any period of thirty consecutive trading days. Foxconn’s ability to convert is limited by clauses (i) and (ii) of the definition of the Ownership Limitations.

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In addition, all holders of shares of Preferred Stock are entitled to vote with the holders of Class A common stock on all matters submitted to a vote of stockholders of the Company as a single class on an as-converted basis; provided, that no holder of shares of Preferred Stock will be entitled to vote to the extent that such holder would have the right to a number of votes in respect of such holder’s shares of Class A common stock, Preferred Stock or other capital stock would exceed the limitations set forth in clauses (i) and (ii) of the definition of Ownership Limitations. The “Ownership Limitations” are (i) prior to the CFUIS Clearance, 9.99% of the capital stock of the Company that is entitled to vote generally in any election of directors of the Company (“Voting Power”), (ii) prior to the time the Company obtains the approval of stockholders contemplated by Rule 5635 of the Nasdaq listing rules as in effect on November 7, 2022, with respect to certain equity issuances (the “Requisite Stockholder Approval”), 19.99% of the Voting Power, and (iii) at all times following the Subsequent Common Closing and the Requisite Stockholder Approval, 24% of the Voting Power.

Pursuant to the Investment Agreement, Foxconn would have the right to appoint two designees to the Board subject to the resolution of our dispute with Foxconn and the consummation of the Subsequent Common Closing. Foxconn would relinquish one Board seat if it did not continue to beneficially own shares of Class A common stock, Preferred Stock and shares of Class A common stock issued upon conversion of shares of Preferred Stock that represent (on an as-converted basis) at least 50% of the number of shares of Class A common stock (on an as-converted basis) acquired by Foxconn in connection with the Investment Transactions and will relinquish its other Board seat if it does not continue to beneficially own at least 25% of the number of shares of Class A common stock (on an as-converted basis) acquired by Foxconn in connection with the Investment Transactions.

Further, if Foxconn were to complete the Subsequent Common Closing, then after such closing and until Foxconn no longer has the right to appoint a director to sit on the Board, other than with respect to certain excluded issuances, Foxconn would have the right to purchase its pro rata portion of equity securities proposed to be sold by the Company, with some exceptions; provided, that the Company is not required to sell Foxconn securities if the Company would be required to obtain stockholder approval under any applicable law or regulation. Foxconn agreed to a standstill until the later of (i) December 31, 2024 and (ii) 90 days after the first day on which no Foxconn-appointed director serves on the Board and Foxconn no longer has a right to appoint any directors. Pursuant to such standstill, and without the approval of the Board, Foxconn would not (A) acquire any equity securities of the Company if after the acquisition Foxconn and its affiliates would cross an ownership threshold of 19.99% of the Voting Power and if the Requisite Stockholder Approval were received, 24% of the Voting Power, or (B) make any public announcement with respect to, or offer, seek, propose or indicate an interest in, any merger, consolidation, business combination, tender or exchange offer, recapitalization, reorganization or purchase of more than 50% of the assets, properties or securities of the Company, or enter into discussions, negotiations, arrangements, understandings, or agreements regarding the foregoing. Prior to the Subsequent Common Closing, we agreed that, without Foxconn’s consent, we would not encourage, initiate, facilitate or negotiate any Acquisition Proposal (as defined below) or enter into any agreement with respect to any Acquisition Proposal or that would cause us not to consummate any of the Investment Transactions, and would inform Foxconn of any Acquisition Proposal that we received. We also agreed that, while the Preferred Stock is outstanding, we would not put in place a poison pill arrangement that applies to Foxconn to the extent of its ownership of shares of Preferred Stock or Class A common stock that it acquired from the Company as of the date such arrangement is adopted by the Company.

Until the later of (i) December 31, 2024 and (ii) 90 days after the first day on which no Foxconn-appointed director serves on the Board and Foxconn no longer has a right to appoint any directors, Foxconn agreed to vote in favor of each director recommended by the Board and in accordance with any recommendation of the Board on all other proposals that are the subject of stockholder action (other than any action related to any merger or other change of control transaction or sale of assets). So long as the 25% Ownership Requirement is satisfied, we agreed not to take any of the following actions without the consent of the holders of at least a majority of the then-issued and outstanding Preferred Stock (voting as a separate class) (i) amend any provision of the Charter or By-Laws in a manner that would adversely affect the Preferred Stock or increase or decrease the number of shares of Preferred Stock, (ii) authorize or create, or increase the number of

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shares of any parity or senior securities other than securities on parity with the Preferred Stock with an aggregate liquidation preference of not more than $30 million, (iii) increase the size of the Board, or (iv) sell, license or lease or encumber any material portion of our hub motor technology and production line other than in the ordinary course of business.

As long as Foxconn, subject to the outcome of the Foxconn Litigation, or another party or concentrated group owns or controls a significant percentage of our Preferred Stock or outstanding voting power, they have the ability to have a significant influence on our actions and operation of the Board and to influence certain corporate actions requiring stockholder approval, including the election of directors, any amendment of our Charter and the approval of significant corporate transactions. On a pro forma basis, after giving effect to the conversion of its Preferred Stock and accrued dividends (but not the exercise of the Foxconn Warrants as they are currently substantially out of the money), Foxconn would hold shares of Class A common stock representing approximately 14% of our outstanding Class A common stock as of February 1, 2024. This concentration of voting power and other rights could have the effect of delaying or preventing a change of control or changes in management and would make the approval of certain transactions difficult or impossible without the support of these significant stockholders. Any of the foregoing could impact our ability to run our business, and may adversely affect the influence of the holders and market price of our Class A common stock.

We may issue additional shares of preferred stock or additional shares of Class A common stock, and sales of a substantial number of additional shares of our securities would dilute the interest of our stockholders and could cause the price of our Class A common stock to decline.

Our Charter provides for 462 million authorized shares of capital stock, consisting of (i) 450 million shares of Class A common stock and (ii) 12 million shares of preferred stock, of which 1 million shares has been designated as Series A Convertible Preferred Stock.

To raise capital, we may seek to sell additional shares of Class A common stock, preferred stock, convertible securities or other equity or equity-linked securities in one or more transactions. Such securities may be offered at a price per share that is less than the price per share paid by our current stockholders, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. Any such issuance:

may significantly dilute the equity interest of our then-current stockholders;
may subordinate the rights of holders of shares of Class A common stock if one or more classes of preferred stock are created, and such preferred shares are issued, with rights senior to those afforded to our Class A common stock;
may have covenants that restrict our financial and operating flexibility;
could cause a change of control if a substantial number of shares of Class A common stock are issued, which may affect, among other things, our ability to use our NOLs, if any, and could result in the resignation or removal of our present officers and directors; and
may adversely affect the prevailing market price for our Class A common stock.

Our Class A common stock has been delisted from Nasdaq and experiences the risks of trading in an over-the-counter market.

On June 28, 2023, we received notification from Nasdaq that our Class A common stock was no longer suitable for listing on Nasdaq. Trading of our Class A common stock was suspended at the opening of business on July 7, 2023, and a Form 25 was filed with the SEC on July 27, 2023, to delist the Class A common stock from Nasdaq. The delisting became effective August 6, 2023. We will remain subject to SEC reporting obligations. However, with the severely limited personnel and resources, remaining in compliance with such reporting obligations may be difficult and costly. No assurances can be made that the Company will remain in compliance with its reporting obligations, including as it relates to the required timelines for financial statements or other disclosures.

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As a result of the suspension and expected delisting, our Class A common stock began trading on the OTC Pink Marketplace under the symbol “RIDEQ” on July 7, 2023, and such market is currently the only trading market for our Class A common stock, which subjects the Company and our stockholders to certain significant risks including:

a limited availability of market quotations for our securities;
reduced liquidity for our securities;
a determination that our Class A common stock is a “penny stock,” which requires brokers trading in our Class A common stock to adhere to more stringent rules resulting in a reduced level of trading activity in the secondary trading market for our securities;
a limited amount of news and analyst coverage or no coverage at all;
a decreased ability to issue additional securities or obtain additional financing in the future; and
the fact that our securities are no longer “covered securities” under the National Securities Markets Improvement Act of 1996, and therefore subject to regulation in each state in which we offer securities.

We can provide no assurance that our Class A common stock will continue to trade on this market or any other market, whether broker-dealers will continue to provide public quotes of our Class A common stock on this market, whether the trading volume of our Class A common stock will be sufficient to provide for an efficient trading market or whether quotes for our Class A common stock will continue on this market in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our Class A common stock. The ability of our investors to access the capital markets may be severely limited or eliminated. Furthermore, because of the limited market and generally low volume of trading in our Class A common stock, the price of our Class A common stock is likely to be volatile and more likely to be affected by broad market fluctuations, general market conditions, changes in the markets’ perception of our securities, and announcements made by us or third parties with interests in the Chapter 11 Cases.

Distributions under the Proposed Plan may be impacted as a result of the treatment of Foxconn’s Preferred Stock Interests.

Under the Proposed Plan, Foxconn’s Preferred Stock Interests are unimpaired and Foxconn is deemed to accept the Proposed Plan with respect to its Preferred Stock Interests. In connection with such Proposed Plan treatment, the Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock Par Value $0.0001 of Lordstown Motors Corp. (the “Preferred Stock Certificate of Designation) which governs Foxconn’s Preferred Stock Interests will be reinstated on the Effective Date.

Pursuant to the Proposed Plan, Foxconn is not entitled to any distribution on account of its Foxconn Preferred Stock Interests until such Interests, which the Company disputes, are Allowed (if at all). There can be no assurances that the Debtors will be successful in disputing Foxconn’s Preferred Stock Interests or any claims that may be asserted by Foxconn, and the Bankruptcy Court or another court may find that Foxconn’s entitlement to the liquidation preference described in the Preferred Stock Certificate of Designation, or other amounts with respect to its Foxconn’s Preferred Stock Interests has been triggered, in which case, absent waiver, relinquishment, or subordination of the Foxconn’s Preferred Stock Interests, or other relief, Foxconn’s Preferred Stock Interests may be allowed and holders of our Class A common stock and holders of Claims with the priority of Class A common stock would likely not receive a distribution under the Proposed Plan unless and until the liquidation preference and other amounts with respect to Foxconn’s Preferred Stock Interests is paid in full.

In the event that Foxconn’s Preferred Stock Interests are allowed and that the Post-Effective Date Debtors are determined to be required to make distributions on account of such interests pursuant to the Proposed Plan, the Post-Effective Date Debtors may not have sufficient cash remaining to complete a Post-Effective Date transaction and any remaining operations of the Post-Effective Date Debtors, as described herein, may cease, which would likely exhaust the Company’s remaining resources and cause it to cease operations.

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We remain obligated to continue our SEC reporting upon our emergence from Chapter 11; however, our ability to meet these obligations timely or at all may be limited.

We remain required to file periodic reports with the SEC upon our emergence from Chapter 11. Further, continuing such filings facilitate trading of our Class A common stock, which currently trades on the OTC Pink Marketplace under the symbol “RIDEQ.” If we are unable to meet these obligations timely or at all, the amount of publicly available information concerning us and our Class A common stock may decrease substantially, which may limit the ability of our stockholders to sell their shares of Class A common stock, and the liquidity and trading prices of our Class A common stock could be further negatively impacted.

Rule 144 will not be available for the resale of our Class A common stock.

Rule 144(i) provides that Rule 144 is not available for the resale of securities initially issued by an issuer that is a shell company. We have identified that our company is a shell company and, therefore, the holders of our securities may not rely on Rule 144, a safe harbor on which holders of restricted securities may rely to resell securities, to resell their securities without registration or until we are no longer identified as a shell company. This will likely make it more difficult for investors to resell our Class A common stock.

Securities or industry analysts will likely not publish research or reports about us, and the price and trading volume of our Class A common stock could decline as a result.

The trading market for our Class A common stock is influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not anticipate any analyst coverage, which will limit our visibility in the financial markets and could cause our stock price or trading volume to decline.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Since filing the Chapter 11 Cases, our operations have been limited to completing the Chapter 11 Cases, resolving substantial litigation and the SEC Claim (subject to formal approvals), claims reconciliation, financial reporting, and preparing for emergence from bankruptcy as contemplated in the Proposed Plan described herein. Therefore, we have not adopted any cybersecurity risk management program or formal processes for assessing risk, which may make us susceptible to heightened cybersecurity risks. We also depend on third parties to provide certain services, and any sophisticated and deliberate attacks on, or security breaches in, systems or infrastructure that we utilize, including those of third parties, could lead to the corruption or misappropriation of our information, though we do not anticipate collecting or storing any significant confidential information related to customers, consumers, employees, or vendors. Because we expect to further rely on third parties, we will also depend upon the personnel and the processes of third parties to protect against cybersecurity threats, and we will have no personnel or processes of our own for this purpose. Our Board is generally responsible for the oversight of risks from cybersecurity threats. See “Risk Factors” for additional information.

Item 2. Properties

The Company does not own any properties. The Company leased space in Lordstown, Ohio from Foxconn under the Lease Agreement, under two leases in Farmington Hills, Michigan and one lease in Irvine, California. The Lease Agreement, one of the Farmington Hills leases, and the Irvine lease were terminated on

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December 31, 2023, as part of the Chapter 11 Cases.  The other lease in Farmington Hills was cancelled by its terms on October 31, 2023.

Item 3. Legal Proceedings

For a description of our legal proceedings, see Note 9 – Commitments and Contingencies of the notes to the Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The registrant’s Class A common stock began trading exclusively on the over-the-counter market on July 7, 2023, under the symbol “RIDEQ.” The NASDAQ Global Select Market filed a Form 25 with the Securities and Exchange Commission on July 27, 2023, to remove the registrant’s Class A common stock from listing and registration on the NASDAQ Global Select Market. Delisting became effective ten days thereafter and deregistration under Section 12(b) of the Act became effective 90 days later.

Holders

As of February 1, 2024, the shares of Class A common stock issued and outstanding were held of record by approximately 34 holders, which number does not include beneficial owners holding our Class A common stock through nominee names.

Dividend Policy

We have not paid any cash dividends on the Class A common stock to date and are prohibited from paying cash dividends with respect to the Class A common stock until we have paid in full any dividends that have accrued with respect to the Preferred Stock. We may retain future earnings, if any, for future operations and expansion and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the New Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any future outstanding indebtedness we or our subsidiaries incur or securities that we issue.

Item 6. Reserved

None

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Item 7. Management's Discussion & 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 audited 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 I Item 1A. Risk Factors for a discussion of these risks and uncertainties, including without limitation, with respect to the Chapter 11 Cases, our ability to confirm and consummate the Proposed Plan and our liquidity, capital resources and financial condition.

On June 27, 2023, we filed the Chapter 11 Cases and, in connection with the Chapter 11 Cases, we ceased production and sales of the Endurance and new program development, continued our aggressive cost-cutting actions that included significant personnel reductions and undertook a comprehensive marketing and sale process for some, all, or substantially all of the Company’s operating assets in an effort to maximize the value of those assets. On October 27, 2023, we closed the transactions contemplated by the LandX Asset Purchase Agreement under which we sold specified assets 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 the purchaser assumed certain specified liabilities of the Company for a total purchase price of $10.2 million in cash. Upon consummation of the transactions under the LandX Asset Purchase Agreement, Jefferies, our investment banker, became entitled to a Transaction Fee of $2.0 million that was paid in January 2024.

On June 27, 2023, the Company also commenced the Foxconn Litigation in the Bankruptcy Court seeking relief for fraudulent and tortious conduct, as well as breaches of the Investment Agreement and other agreements, the parties’ joint venture agreement, the Foxconn APA, and the CMA that the Company believes were committed by Foxconn. As set forth in the complaint relating to the adversary proceeding, Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and significant damages. The Foxconn Litigation is Adversary Case No. 23-50414.

As a result of these actions, the Company has no revenue-producing operations. Our primary operations during the fourth quarter of 2023 and to date in the first quarter of 2024 have consisted of expenses associated with completing the Chapter 11 Cases, resolving substantial litigation and the SEC Claim (subject to formal approvals), claims reconciliation, financial reporting, and preparing for emergence from bankruptcy as contemplated in the Proposed Plan. Our remaining assets following the closing of the LandX Asset Purchase Agreement consist largely of cash on hand, the claims asserted in the Foxconn Litigation and that the Company may have against other parties, as well as NOLs.

The Bankruptcy Court approved certain motions filed by the Debtors under which they were authorized to conduct their 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 (v) establish certain procedures to protect any potential value of the NOLs. The Company has also been seeking to use the tools of Chapter 11 to fully, finally, and efficiently resolve its contingent and other liabilities before the Bankruptcy Court and to pursue the Foxconn Litigation. See Note 9 – Commitments and Contingencies to our consolidated financial statements.

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, pursuant to the Proposed Plan, the deadline for parties to file administrative claims against the Debtors is 30 days following

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the Effective Date. 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.

As further described further in Item 1 – Business - Confirmation of the Chapter 11 Plan and Effective Date, on September 1, 2023, the Debtors 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. On November 1, 2023, the Bankruptcy Court entered the Disclosure Statement Order and, thereafter, the Debtors solicited votes from their creditors and shareholders for approval of the Proposed Plan. On January 31, 2024, the Debtors filed the Proposed Plan and have scheduled a hearing with the Bankruptcy Court on March 5, 2024, to consider confirmation of the Proposed Plan and entry of the Confirmation Order, which among other things, would authorize the Debtors to effectuate the Proposed Plan, subject to satisfaction or waiver of the conditions precedent to the occurrence of Effective Date set forth in the Proposed Plan. If the Proposed Plan is confirmed, the Debtors will seek to have such conditions satisfied or waived in order for the Effective Date to occur promptly after entry of the Confirmation Order.

The Proposed Plan, and the summary of the terms thereof that follows, remains subject to the entry of the Confirmation Order and it could change as a result of amendments, supplements, or other modifications to the Proposed Plan. Further, unless otherwise stated in the Proposed Plan and the Confirmation Order, the Proposed Plan is not binding on any party, including the Debtors, until it is consummated and the Effective Date has occurred. The Proposed Plan may not become effective because it is subject to the satisfaction of certain conditions precedent (some of which are beyond our control), appeal by certain parties that could file notice of appeal with respect to the Confirmation Order, if entered, and is otherwise subject to the risks and uncertainties set forth in the Disclosure Statement, which stakeholders are encouraged to read in its entirety. There can be no assurance that the Confirmation Order will be entered, that such conditions will be satisfied or that such appeals will be dismissed and, therefore, that the Proposed Plan will become effective and that we will emerge from the Chapter 11 Cases as contemplated by the Proposed Plan. The failure of the Proposed Plan to be confirmed and become effective, or any delay thereof, will significantly and adversely affect the likelihood of a Chapter 11 reorganization and could lead to a liquidation. See Part I – Item 1A. Risk Factors.

The Proposed Plan, among other provisions:

provides an orderly structure for distributions to holders of Claims and treatment of Interests,
incorporates the resolution of claims asserted in the Ohio Securities Litigation and, in connection with the Offer and OIP, by the SEC,
preserves retained causes of action, including against Foxconn, to be pursued by the Post-Effective Date Debtors,
seeks to preserve the value of the Company’s NOLs, by leaving preferred and common equity Interests in the Post-Effective Date Debtors in place , and instituting certain trading restrictions, and
provides that the Post-Effective Date Debtors may engage in such business operations as may be determined by the New Board.

Pursuant to, and subject to the confirmation and effectiveness of, the Proposed Plan, effective as of the Effective Date (i) the Claims Ombudsman will be appointed to oversee the administration of Claims asserted against the Debtors by general unsecured creditors and (ii) the Litigation Trustee will be appointed to oversee the Litigation Trust formed pursuant to the Proposed Plan, which will be funded with certain retained causes of action of the Debtors, as will be determined by the Equity Committee.

Pursuant to, and subject to the confirmation and effectiveness of, the Proposed Plan, the Debtors will be allocated the Post-Effective Date Debtor Amount, which will be used to fund (a) the fees and expenses of the

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Post-Effective Date Debtors in performing their duties under the Proposed Plan, (b) expenses of the Claims Ombudsman appointed under the Proposed Plan and (c) future operational expenses of the Post-Effective Date Debtors, as permitted by the Proposed Plan. Pursuant to the Proposed Plan, the Post-Effective Date Amount may be increased from time to time after notice and an opportunity to object is provided to the Claims Ombudsman.

All distributions under the Proposed Plan would come from all assets of the Debtors (including, without limitation, cash generated by or that constitutes the proceeds of assets acquired by the Post-Effective Date Debtors after the Effective Date), which include, but are not limited to, (i) cash on hand as of the Effective Date, (ii) proceeds from the sale of the Debtors’ assets, (iii) proceeds from causes of action retained by the Debtors pursuant to the Proposed Plan, and (iv) insurance proceeds received by the Post-Effective Date Debtors. Subject to the terms of the Proposed Plan, any distributions to classes of Claims and Interests will generally be made in order of their respective priorities under the Bankruptcy Code.

Pursuant to the terms of the Proposed Plan, and subject to its confirmation and effectiveness, a significant amount of the cash on hand as of the Effective Date will be used to settle outstanding claims against the Company, including litigation claims, in order of priority under the Bankruptcy Code. There can be no assurance regarding the amount of claims that may be allowed for distributions under the Proposed Plan or that such claims will not be significantly greater than may be anticipated which could, in turn, result in the value of distributions to stakeholders being delayed, reduced, or eliminated entirely. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate results and total amount of claims against us. Moreover, additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims, for each of which the deadlines to file proofs of claim have not yet passed as of the date of this report. Such claims may be substantial and may result in a greater amount of allowed claims than estimated. No assurance can be made regarding the confirmation or effectiveness of the Proposed Plan, the sufficiency of the Debtors’ assets to provide estimated recoveries to claimants and fund anticipated post-emergence activities. See “Liquidity and Capital Resources” below.

If the Proposed Plan becomes effective, at the Effective Date the Debtors would emerge from the Chapter 11 Cases and:

the Foxconn Litigation and other retained causes of action of the Debtors would be preserved and may be prosecuted;
Claims filed in the Chapter 11 Cases would continue to be resolved pursuant to the claims resolution process with allowed claims being treated in accordance with the Proposed Plan;
distributions to holders of allowed Claims and allowed Interests would be made subject to the provisions of the Proposed Plan, and
the Debtors will continue to conduct business and may enter into transactions, including business combinations, or otherwise, that could permit the Post-Effective Date Debtors to make use of the NOLs, if preserved.

The Proposed Plan provides for the appointment of the New Board as of the Effective Date and provides that the New Board is to be selected by the Equity Committee. The New Board will, among other things, oversee and direct the administration of the Post-Effective Date Debtors’ operations in accordance with the Proposed Plan. At this time, however, the Debtors do not know what the post-Effective Date operations will include and no assurances can be provided that the Proposed Plan will generate any value for the Company’s post-Effective Date equity holders or that any distributions will be made to such equity holders.

In light of the Chapter 11 Cases and terms of the Proposed Plan, the Company’s results for the year ended December 31, 2023, reflect the accounting assumptions and treatment caused thereby and are not representative of the Company’s operations going forward. See Part I – Item 1A. Risk Factors for further discussion of the risks associated with the Chapter 11 Cases, our ability to confirm and consummate the

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Proposed Plan, 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

Comparison of the year ended December 31, 2023 to December 31, 2022

(in thousands)

Year ended

Year ended

December 31, 2023

    

December 31, 2022

Net sales

$

2,340

$

194

Cost of sales

91,550

30,023

Operating Expenses

Selling, general and administrative expenses

 

54,413

 

138,270

Research and development expenses (1)

 

33,343

 

107,816

Reorganization items

31,206

 

Impairment of property plant & equipment, prepaids and intangibles

140,726

111,389

Total operating expenses

$

259,688

$

357,475

Loss from operations

 

(348,898)

 

(387,304)

(Loss) gain on sale of assets

(916)

100,906

Other income

 

123

 

788

Interest income

 

6,625

 

3,206

Loss before income taxes

$

(343,066)

$

(282,404)

Income tax expense

 

 

Net loss

$

(343,066)

$

(282,404)

Less accrued preferred stock dividend

(2,494)

261

Net loss attributable to common shareholders

$

(340,572)

$

(282,665)

1 Research and development expenses for the year ended December 31, 2022, are net of $18.4 million in operating expense reimbursements as described in Note 1 — Description of Organization and Business Operations

Net Sales and Cost of Sales

The Company completed homologation and testing and received required certifications enabling sales of the Endurance to begin in the fourth quarter of 2022. Production of the Endurance ended in June 2023. A total of 35 vehicles were sold in 2023, compared to 3 vehicles in 2022.

Cost of sales totaled $91.6 million for the year ended 2023, compared to $30.0 million for the year ended 2022. Cost of sales for 2023 consisted of $7.6 million in costs associated with producing the Endurance, including direct materials net of an adjustment to inventory to reflect its net realizable value (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 as a result of the bankruptcy claim reconciliation process.

Cost of sales for 2022 consisted of $0.6 million in costs associated with producing the Endurance, including direct materials net of an adjustment of inventory to net realizable value NRV, product warranty accruals, $8.3 million of depreciation, and $21.1 million of inventory charges in connection with an NRV adjustment, and for excess on hand inventory beyond what we anticipated will be used for production, sales and service as of December 31, 2022.

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See Note 2 — Summary of Significant Accounting Policies and Note 4 — Property, Plant and Equipment and Assets Held for Sale.

Selling, General and Administrative Expense

Selling, general and administration expenses (“SG&A”) totaled $54.4 million for the year ended 2023 compared to $138.3 million for the year ended December 31, 2022. With the ramp up to the start of commercial production in the third quarter of 2022 followed by the filing for Chapter 11 bankruptcy protection in June 2023, the composition of the Company’s SG&A expense is not comparable on a year-over-year basis.

SG&A for 2023 consisted primarily of $23.6 million in personnel and professional fees, $8.1 million in non-reorganization related legal fees and expenses, net litigation settlement related expense of $11.8 million, insurance premium amortization of $5.9 million and sales, marketing and overhead costs of $5.0 million. As part of the bankruptcy proceedings, the Debtors received authorization from the Bankruptcy Court to repurchase all vehicles that were in the possession of our customers. We have repurchased and destroyed all but two of the vehicles that we sold. The repurchase of the vehicles and related reversal of the accrued warranty accrual was recognized in SG&A, as a net bankruptcy claim settlement credit of approximately $0.5 million.

SG&A expenses for 2022 consisted of $33.9 million in accruals with respect to legal proceedings, $25.6 million in NRV charges to reflect the adjustment of inventory for the period prior to being reported in cost of sales, a $4.7 million charge related to the write-off of a prepaid royalty, and a $2.9 million charge for accelerated stock compensation. The remaining SG&A expenses for 2022 totaled $71.1 million, which consisted primarily of $40.5 million of personnel and professional fees, $11.5 million of legal costs, $11.8 million of insurance premiums and $7.3 million in other services, software, marketing and overhead costs.

See Note 2 — Summary of Significant Accounting Policies, Note 9 — Commitments and Contingencies, and See Note 10 — Related Party Transactions.

Research and Development Expense

Research and development (“R&D”) expenses consist of the costs associated with the ongoing development and engineering work related to the Endurance. Additionally, until we commenced commercial release production of the Endurance, late in the third quarter of 2022, the costs associated with operating the Lordstown, Ohio manufacturing facility were included in R&D as they related to the design and construction of beta and pre-production vehicles, along with manufacturing readiness activities. For the year ended 2023, R&D activities also included R&D employee expenses incurred to support the sale of manufacturing assets and related technology during our bankruptcy process. Accordingly, the composition of the Company’s R&D expense is not comparable on a year-over-year basis.

For the year ended December 31, 2023, R&D costs totaled $33.3 million, compared to $107.8 million for the year ended December 31, 2022. R&D for 2023 consisted primarily of $24.4 million in personnel costs, $3.2 million in outside engineering and consulting services, and $4.5 million in prototype components and other engineering costs incurred prior to our filing for Chapter 11 bankruptcy protection.

For the year ended December 31, 2022, we incurred $107.8 million in R&D related manufacturing costs, net of an $18.4 million reimbursement of certain manufacturing expenses under the Foxconn APA. With the commencement of commercial release production, manufacturing related costs are reported in cost of sales starting in the fourth quarter of 2022.The remaining R&D expenses for 2022 primarily consisted of $55.2 million of personnel and consulting, $22.8 million of prototype component costs, and $13.9 million of other services, software, facilities, and general operations.

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Reorganization Items

Reorganization items represent the expenses directly and incrementally resulting from the Chapter 11 cases. For the year ended December 31, 2023, reorganization items consisted of $16.2 million in legal fees, $7.3 million in consulting fees and $7.7 million in potential bankruptcy claims and settlements. Our reorganization costs are significant and currently represent the substantial majority of our ongoing total operating expenses. These costs are subject to uncertainties inherent in the bankruptcy process and we cannot predict the duration of the Chapter 11 Cases or the extent of the associated costs.

Impairment of property, plant, and equipment, prepaids and other intangibles

The Company regularly reviews its property, plant and equipment, prepaids and other intangibles for potential impairment for recoverability. 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 $134.7 million for the year ending December 31, 2023, compared to an impairment charge of $95.6 million for the same period of 2022.

For the year ended December 31, 2023, the Company recognized an impairment charge related to prepaids and other intangible assets of $6.0 million compared to a $14.8 million impairment charge in 2022, principally related to the write down of prepaid component purchases and royalties to General Motors.

See Note 4 — Property, Plant and Equipment and Assets Held For Sale for additional details regarding our impairment.

(Loss) Gain on Sale of Assets

For the year ended December 31, 2023, the Company recognized a net loss of $0.9 million on the sale of assets. The net loss consisted of a gain of $1.7 million related to the sale of specified assets related to the design, production, and sale of our Endurance trucks during the Chapter 11 Cases, and a loss of $2.6 million on the sale of certain manufacturing assets prior to bankruptcy.

For the year ended December 31, 2022, the Company recognized $100.9 million in gains which was primarily attributable to the sale of the Lordstown facility to Foxconn. See Note 1 — Description of Organization and Business Operations for additional details regarding the Foxconn Transactions.

Other Income

Other income for the years ended December 31, 2023, and 2022 consisted of changes in fair value of Warrants and foreign currency gains and losses.

Liquidity and Capital Resources

On June 27, 2023, the Company and its subsidiaries commenced the Chapter 11 Cases and filed the Foxconn Litigation in the Bankruptcy Court. In connection with the filing of the Chapter 11 Cases, the Company ceased production of the Endurance and new program development. The Company received the Bankruptcy Court’s approval to (a) conduct business activities in the ordinary course, including among other things and subject to the terms and conditions of the Bankruptcy Court’s 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, and (b) to undertake a comprehensive marketing and sale process for some, all, or substantially all of the Company’s operating assets in an effort to maximize the value of those assets.

On October 27, 2023, we closed the transactions contemplated by the LandX Asset Purchase Agreement under which we sold material assets related to the design, production and sale of electric light duty vehicles

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focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and the purchaser assumed certain specified liabilities of the Company for a total purchase price of $10.2 million in cash. Upon consummation of the transactions under the LandX Asset Purchase Agreement, Jefferies became entitled to a Transaction Fee of $2.0 million that was paid in January 2024.

As a result of these actions, the Company has no revenue-producing operations. Our primary operations during the fourth quarter of 2023 and to date in the first quarter of 2024 have consisted of expenses associated with completing the Chapter 11 Cases, resolving substantial litigation and the SEC Claim (subject to formal approvals), claims reconciliation, financial reporting, and preparing for emergence from bankruptcy as contemplated in the Proposed Plan. Our remaining assets following the closing of the LandX Asset Purchase Agreement consist largely of cash on hand, the claims asserted in the Foxconn Litigation and that the Company may have against other parties, as well as NOLs.

The Company had cash, cash equivalents, and short-term investments of approximately $87.1 million, an accumulated deficit of $1.2 billion as of December 31, 2023, and a net loss of $343.1 million for the year ended December 31, 2023.

The Company has been subject to extensive pending and threatened legal proceedings and has already incurred, and may to continue to incur, significant legal expenses in defending against these claims. See Note 9 – Commitments and Contingencies to our consolidated financial statements. The Company has also been seeking to use the tools of Chapter 11 to fully, finally, and efficiently resolve its contingent and other liabilities before the Bankruptcy Court and to pursue the Foxconn Litigation and has entered 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 Bankruptcy Court established October 10, 2023, as the general bar date for all creditors (except

governmental entities) to file their proof 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. On January 4,

2024, the SEC filed the SEC Claim. 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, pursuant to the Proposed Plan, the deadline for parties to file administrative claims against the Debtors (i.e., claims for costs and expenses of administration of the Debtors’ estates, including (i) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the estates and operating the businesses of the Debtors; (ii) professional fee claims; and (iii) fees and charges payable to the United States Trustee) is 30 days following the Effective Date. 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 indemnification obligations or otherwise, that may be materially more than we estimate. 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 does 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.

Pursuant to the terms of the Proposed Plan, and subject to its confirmation and effectiveness, a significant amount of the cash on hand as of the Effective Date will be used to settle outstanding claims against the Company, including litigation claims. Pursuant to the Bankruptcy Code, the Company is first required to pay all administrative claims in full. The Proposed Plan also requires that the Company establish the Claims Reserve for allowed and disputed claims of general unsecured creditors, inclusive of $3 million the Company would be required to pay into escrow on the Effective Date for the cash portion of the Ohio Securities Litigation Settlement. The aim of the Claims Reserve is to facilitate payment in full, with interest, of such creditors’ allowed claims as contemplated by the Proposed Plan (although there can be no assurance the

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Company will be able to pay such claims in full with interest). The initial amount of the Claims Reserve is currently anticipated to be approximately $45 million, as agreed upon by the Committees and approved by the Bankruptcy Court. The amount of the Claims Reserve is subject to change and could increase materially. The Claims Reserve could also be adjusted downward as claims are resolved or otherwise as a result of the claims resolution process, or as the Claims Ombudsman and the Post-Effective Date Debtors deem appropriate. Furthermore, the amount of the Claims Reserve will be limited to the amounts payable for allowed claims of general unsecured creditors but to the extent that the Claims Reserve is insufficient to pay general unsecured creditors in full with interest, such deficiency will be payable from all assets of the Post-Effective Date Debtors, as set forth in the Proposed Plan. There are additional liabilities, including but not limited to administrative claims and claims by holders of our Class A common stock and Preferred Stock among other potential classes of claimants whose claims, if allowed, will not be included in the Claims Reserve.

The Bankruptcy Code generally provides that the confirmation of a Chapter 11 plan discharges a debtor from substantially all debts arising prior to consummation of such plan.  Here, the United States Trustee has objected to the Debtors’ entitlement to a discharge.  The objection is expected to be heard at the hearing to consider the Confirmation Order.  If the United States Trustee’s objection is overruled, then, with few exceptions, all claims against the Debtors that arose prior to the consummation of the Proposed Plan (i) would be subject to compromise and/or treatment under the Proposed Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Proposed Plan. However, the outcome and timing of any claims not ultimately discharged is uncertain, and it is possible material costs, penalties, fines, sanctions, or injunctive relief could result from such a matter.

Pursuant to the Proposed Plan (which includes certain exceptions), effective as of the Effective Date (i) the Claims Ombudsman will be appointed to oversee the administration of Claims asserted against the Debtors by general unsecured creditors and (ii) the Litigation Trustee will be appointed to oversee the Litigation Trust, which will be funded with certain retained causes of action of the Debtors, as will be determined by the Equity Committee.

All distributions under the Proposed Plan would come from the Debtors’ cash on hand and other assets, which would generally be distributed, subject to the terms of the Proposed Plan, to classes of Claims and Interests in order of their respective priorities under the Bankruptcy Code. Specifically, the Proposed Plan provides for the distributions for the Claims and Interests in order of priority as follows:

Holders of Allowed Administrative Claims, Allowed Priority Tax Claims, and Allowed Other Priority Claims are to be paid in full in cash before other payments can be made.
Holders of Allowed Secured Claims would either retain their lien on the collateral, be paid in full in cash, or receive the collateral securing such Allowed Secured Claim.
Holders of Allowed General Unsecured Claims would receive a pro rata share of the Debtors’ cash after all Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Other Priority Claims, and Allowed Secured Claims are satisfied and the Professional Fee Escrow Account is funded. If the Debtors have sufficient cash on hand to pay all Allowed General Unsecured Claims plus interest in full, then the holders of the Allowed General Unsecured Claims would also receive post-petition interest on their claim amount at the Federal Judgment Rate. If the Debtors do not have sufficient cash on hand to pay in full such post-petition interest, then the holders of the Allowed General Unsecured Claims would receive their pro rata share of any post-petition interest that can be paid.
Allowed Intercompany Claims would be reinstated under the Proposed Plan.
Allowed Foxconn Preferred Stock Interests would be reinstated, which includes that all outstanding shares of Preferred Stock will remain outstanding, subject to the terms of the New Organizational Documents. In the event any distribution is to be made to holders of Allowed Foxconn Preferred Stock Interests, such distribution would be from the Post-Effective Date Debtor Cash. In addition, any

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such distribution to Holders of the Allowed Foxconn Preferred Stock Interests would be subject to the backstop obligation under the Ohio Securities Litigation Settlement.
Allowed Common Stock Interests would be reinstated, which includes that all outstanding shares of Class A common stock remain outstanding, subject to the terms of the New Organizational Documents.
Allowed claims relating to securities actions against the Debtors that are subordinated to General Unsecured Claims by Section 510(b) of the Bankruptcy Code (other than Section 510(b) Claims that are (i) subject to the Ohio Securities Litigation Settlement or (ii) are RIDE Section 510(b) Claims), would receive Class A common stock in an amount calculated pursuant to the formula set forth in the Proposed Plan, after accounting for any recoveries from applicable insurers or other third parties and subject to the Post-Effective Date Debtors’ election to cash out such Class A common stock Interests.
Allowed claims, if any, against the Debtors on the same or similar basis as those set forth in the Post-Petition Securities Action may recover solely from available insurance coverage from applicable insurance policies until such insurance policies have been completely exhausted. The Debtors dispute the merits of any such claims.
Allowed claims of the Ohio Securities Litigation Lead Plaintiff would receive treatment pursuant to the Ohio Securities Litigation Settlement incorporated in the Proposed Plan.

As of December 31, 2023, we had recorded $30.5 million as Liabilities subject to compromise, in the accompanying December 31, 2023, Consolidated Balance Sheet, which reflects, in accordance with ASC 852, our current estimate of the potential allowed asserted pre-petition claims that are not fully secured and that have at least a possibility of not being repaid at the full claim amount. Under the Proposed Plan, the Company and the Committees have agreed to establish an initial $45 million Claims Reserve for the settlement of General Unsecured Claims. The Claims Reserve may be increased or decreased during the claims resolution process. The ultimate settlement of these liabilities remains subject to further analysis and is subject to the claims resolution process included in the Proposed Plan. The actual amount of allowed General Unsecured Claims may be materially different than the amount recorded by the Company as of December 31, 2023, or the initial Claim Reserve. The amount recorded is 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.

Within Liabilities subject to compromise, as of December 31, 2023, the Company had accruals of $6.5 million, for certain of its outstanding legal proceedings and potential related obligations, including the stockholder and securities actions, government claims and indemnification obligations described in more detail in Note 9 – Commitments and Contingencies and may or may not be offset by insurance. As of December 31, 2022, these amounts totaled $35.9 million, and were recorded within accrued legal and professional. The accruals do not include potential legal fees and other costs or obligations that may be incurred by the Company in connection with such matters. The amount accrued as of December 31, 2023, reflects the settlement terms contained in the Proposed Plan for the Ohio Securities Litigation and the Offer and OIP with the SEC, as well as the indemnification claims that are subject to proofs of claim filed by the defendants in the Delaware Class Action Litigation. Upon effectiveness of the Proposed Plan, and the releases provided to the Company as part of the Proposed Plan and the SEC’s obligation to withdraw its proof of claim (for which the Company has been advised that the conditions thereto would be satisfied), the Company currently expects its obligations for these matters to be limited to the $3 million it will have contributed into escrow for the Ohio Securities Litigation and a potential indemnification obligation claim of $3.5 million (excluding potential legal fees); provided, however, (a) the Company does not concede that it is liable for, and has not determined whether it will object to some or all of the indemnification claims and these claims are subject to dispute as part of the Chapter 11 claims administration process, (b) the Company potentially could have indemnification obligations to individual defendants not released under the settlement (as the treatment of such claims and their amounts

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are not known, the Company has not recorded any reserve with respect to such obligations), and (c) the failure to obtain the SEC and Bankruptcy Court approvals in a timely manner would have a material adverse effect on the Company and its ability to reorganize under Chapter 11 of the Bankruptcy Code. Additional potential recovery by the plaintiffs in the Ohio Securities Litigation would occur if proceeds are received from litigation and other causes of action being retained by the Debtors following the Effective Date (net of actual reasonable costs incurred in prosecuting such retained causes of action) in an amount of up to $7 million; however, the potential outcome of such matters, and whether any proceeds will be received, cannot be predicted at this time.

With respect to the Ohio Securities Litigation, 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) of 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. Estimated amounts accrued as of December 31, 2023, by the Company with respect to these securities class action matters do not reflect this impact of the Bankruptcy Code. The plaintiffs in the Ohio Securities Litigation have reached a settlement with the Debtors, which is documented through the treatment of Ohio Securities Litigation Claims under the Proposed Plan, which settlement remains subject to Bankruptcy Court approval and effectiveness of the Proposed Plan.

With respect to other current and potential legal claims and obligations, the Company continues to

evaluate the potential resolution and impact of these matters in light of the applicable provisions of the

Bankruptcy Code, indemnification rights and the terms of the Proposed Plan, which in some cases may

limit any recovery to available insurance coverage, ongoing discussions with the parties to such matters and other stakeholders, or the 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.

Although we have established the reserves described above to pay allowed claims under the Proposed

Plan, and although we intend to pay all allowed claims in full with interest as provided by the Proposed

Plan, there can be no assurance that the Claims Reserve, the Post-Effective Date Debtors’ other assets or the Post-Effective Date Debtor Amount will be sufficient to do so given the uncertainties and risks of the claims dispute and settlement process. There can be no assurance regarding the amount of claims allowed for distributions under the Proposed Plan or that such claims will not be significantly greater than may be anticipated which, could, in turn, result in the value of distributions to stakeholders being delayed, reduced, or eliminated entirely. The Claims Reserve could also be adjusted downward as claims are resolved or otherwise as a result of the claims resolution process. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate results and total amount of claims against us. Moreover, additional claims will be filed in the Chapter 11 Cases, including on account of rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and administrative claims for each of which the deadlines to file proofs of claim have not yet passed as of the date of this report. Such Clams may be substantial and may result in a greater amount of allowed Claims than estimated; however, the Company cannot presently estimate a possible loss contingency or range of reasonably possible loss contingencies beyond current accruals. Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments and potential actions by third parties.

If the Proposed Plan becomes effective, at the Effective Date the Debtors would emerge from the Chapter 11 Cases and:

the Foxconn Litigation and other retained causes of action of the Debtors would be preserved and may be prosecuted,
claims filed in the Chapter 11 Cases would continue to be resolved pursuant to the claims resolution process with allowed claims being treated in accordance with the Proposed Plan,

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distributions to holders of allowed Claims and allowed Interests would be made subject to the provisions of the Proposed Plan, and
the Debtors will continue to conduct business and may enter into transactions, including business combinations, or otherwise, that could permit the Post-Effective Date Debtors to make use of the NOLs, if preserved.

Pursuant to, and subject to the confirmation and effectiveness of, the Proposed Plan, the Debtors will be allocated the Post-Effective Date Debtor Amount, which will be used to fund (a) the fees and expenses of the Post-Effective Date Debtors in performing their duties under the Proposed Plan, (b) expenses of the Claims Ombudsman appointed under the Proposed Plan and (c) future operational expenses of the Post-Effective Date Debtors, as permitted by the Proposed Plan. Pursuant to the Proposed Plan, the Post-Effective Date Amount may be increased from time to time after notice and an opportunity to object is provided to the Claims Ombudsman.

During the twelve months following the date of this report, the Company anticipates incurring costs relating to (a) claims administration under the Proposed Plan, (b) addressing the Foxconn Litigation, (c) prosecuting, pursuing, compromising, settling, or otherwise disposing of other retained causes of action, (d) defending the Company against any counterclaims, (e) attempting to realize value, if any, from our NOLs and (f) filing Exchange Act reports and satisfying other regulatory requirements.

In the future, the Post-Effective Date Debtors expect to explore potential business opportunities, including strategic alternatives or business combinations, including those designed to maximize the Company’s tax attributes, including maximizing realization of its net operating loss carryforwards and other tax attributes (“NOLs”). At this time, however, the Debtors do not know what the post-Effective Date operations will include and no assurances can be provided that the Proposed Plan will generate any value for the Company’s post-Effective Date equity holders or that any distributions will be made to such equity holders.

Further, there can be no assurance that cash on hand and other resources will be sufficient to allow us to conclude the terms of the Proposed Plan, satisfy any remaining obligations related to the Chapter 11 Cases or litigation, claims and investigations, future liabilities or continue to sustain our limited current operations or potential future plans for our operations.

Further, there can be no assurance as to any additional funding available for the Post-Effective Date Debtors to conduct their post-Effective Date operations, including pursuing any post-Effective Date transaction, and the amount of funding available may be reduced, including in the event that allowed Claims against the Company prove to be greater than expected or in the event of an adverse ruling with respect to allowance of Foxconn’s Preferred Stock Interests. Our Preferred Stock terms include a liquidation preference. This preference amount is equal to $30 million, plus accrued dividends. Pursuant to the Proposed Plan, Foxconn’s Preferred Stock will remain outstanding and its rights with respect to its preferred equity, including with respect to any liquidation preference which has or may become due, are unimpaired. We would vigorously oppose any assertion of Foxconn’s entitlement to receive the liquidation preference, but if we would be unsuccessful, an obligation to pay this amount would likely exhaust our available resources and require us to cease operations entirely. There are no assurances that the Company would be able to secure any additional funding, as needed, or on terms acceptable to it, or that it will have sufficient funding to resolve the Foxconn Litigation, pursue and resolve the retained or other causes of action, or pursue any strategic alternatives. Our ability to raise certain forms of capital, particularly the issuance of equity securities, is significantly limited because of the ownership change restrictions required to preserve the NOLs.

Pursuant to the requirements of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements included in this report are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully

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implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

As a result of the factors described above, we have concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements.

Summary of Cash Flows

(in thousands)

    

Year ended

    

Year ended

    

December 31, 2023

    

December 31, 2022

Net Cash used in operating activities

$

(137,164)

$

(213,764)

Net Cash provided by (used in) investing activities

$

102,904

$

(114,904)

Net Cash provided by financing activities

$

$

206,010

Cash Flows from Operating Activities

For the year ended December 31, 2023, net cash used by operating activities was $137.2 million compared to $213.8 million for the year ended December 31, 2022. The decrease from 2022 to 2023 was primarily due to reduced operating expenses as a result of the filing of the Chapter 11 Cases and the cessation of operating activities.

Cash Flows from Investing Activities

For the year ended December 31, 2023, cash provided by investing activities was $102.9 million, compared to a use of $114.9 million in the same period in 2022. The period over period change was due primarily to maturities of short-term investments that provided $102.1 million in net cash provided by operating activities for the year ended December 31, 2023, compared to purchases of short-term investments which used $100.3 in investing activities. Due to the cessation of operating activities during 2023, cash used for the purchase of property, plant and equipment was $44.4 million lower in 2023 compared to 2022. Proceeds from the sale of fixed assets provided $11.0 million during 2022 compared to $40.0 million during 2023.

Cash Flows from Financing Activities

The Company did not engage in any financing activities during the year ended December 31, 2023. Financing cash flows in 2022 were primarily related to the $100 million down payment received from Foxconn under the Foxconn APA, $52.0 million from Foxconn under the Investment Agreement and $40.4 million in sales under the Equity Purchase Agreement and ATM, as defined and discussed in Note 6 — Capital Stock and Earnings Per Share net of issuance costs.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2023. As of December 31, 2023, material cash requirements for contractual and other obligations are recognized as liabilities subject to compromise. We do not participate in transactions that

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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 Policies and Estimates

Going Concern

The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. In connection with the preparation of the consolidated financial statements for the years ended December 31, 2023 and 2022, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such financial statements, and concluded that substantial doubt existed as to our ability to continue as a going concern as further discussed in Note 1 to the Consolidated Financial Statements. In addition, our independent auditors, in their report on the audited financial statements for the years ended December 31, 2023 and 2022, expressed substantial doubt about our ability to continue as a going concern.

Liabilities Subject to Compromise

As noted above, 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 9 – Commitments and Contingencies for further detail.

Property, Plant and Equipment

During the year ended December 31, 2023, the Company reclassified its property, plant, and equipment to assets held for sale in connection with the Chapter 11 Cases. Historically, property, plant and equipment were stated at cost less accumulated depreciation. Depreciation was computed using the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale, the cost and related accumulated depreciation were removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repair expenditures were expensed as incurred, while major improvements that increased functionality of the asset were capitalized and depreciated ratably to expense over the identified useful life.

Long-lived assets, such as property, plant, and equipment 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. Recoverability of assets to be held and used was measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group.

Warrants

The Company accounted for its warrants in accordance with the guidance contained in ASC Topic 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

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operations. As a result of the Chapter 11 Cases, the fair value of the Company’s warrants was deemed to be zero and adjusted accordingly as of June 30, 2023.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

On December 31, 2023, we had cash, cash equivalents and short-term investments of approximately $87.1 million. We believe that a 10 basis point change in interest rates is reasonably possible in the near term. Based on our current level of investment, an increase or decrease of 10 basis points in interest rates would not have a material impact to our cash balances.

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Item 8. Financial Statements and Supplementary Data

LORDSTOWN MOTORS CORP.

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 185*)

57

Financial Statements

Consolidated Balance Sheets as of December 31, 2023 and 2022

59

Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

60

Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2023 and 2022

61

Consolidated Statements of Cash Flows for the year ended December 31, 2023 and 2022

62

Notes to Consolidated Financial Statements

63

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Lordstown Motors Corp.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Lordstown Motors Corp. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, on June 27, 2023 the Company filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code and the Company has no revenue-producing operations. These matters raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2020.

Cleveland, Ohio
February 28, 2024

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Lordstown Motors Corp.

Debtor-in-Possession

Consolidated Balance Sheets
(in thousands except share data)

December 31, 2023

December 31, 2022

ASSETS:

  

  

Current Assets

 

  

 

  

Cash and cash equivalents

$

87,096

$

121,358

Short-term investments

100,297

Inventory, net

13,672

Prepaid expenses

4,027

19,510

Other current assets

 

1,016

 

1,038

Total current assets

$

92,139

$

255,875

Property, plant and equipment, net

 

 

193,780

Other non-current assets

30

2,657

Total Assets

$

92,169

$

452,312

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

  

Current Liabilities

 

  

 

  

Accounts payable

$

933

$

12,801

Accrued legal and professional

12,815

38,398

Accrued expenses and other current liabilities

 

1,650

 

17,635

Total current liabilities

$

15,398

$

68,834

Liabilities subject to compromise

30,467

Warrant and other non-current liabilities

1,446

Total liabilities

$

45,865

$

70,280

Mezzanine equity

Series A Convertible Preferred stock, $0.0001 par value, 12,000,000 shares authorized; 300,000 shares issued and outstanding as of December 31, 2023 and December 31, 2022

$

32,755

$

30,261

Stockholders’ equity

 

  

 

  

Class A common stock, $0.0001 par value, 450,000,000 shares authorized;,15,953,212 and 15,928,299 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

$

24

$

24

Additional paid in capital

 

1,183,804

 

1,178,960

Accumulated deficit

 

(1,170,279)

 

(827,213)

Total stockholders’ equity

$

13,549

$

351,771

Total liabilities and stockholders’ equity

$

92,169

$

452,312

The accompanying notes are an integral part of these consolidated financial statements.

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Lordstown Motors Corp.

Debtor-in-Possession

Consolidated Statements of Operations

(in thousands except for per share information)

    

   

Year ended

   

Year ended

December 31, 2023

December 31, 2022

Net sales

$

2,340

$

194

Cost of sales

 

91,550

30,023

Operating Expenses

Selling, general and administrative expenses

 

54,413

 

138,270

Research and development expenses

 

33,343

 

107,816

Reorganization items

31,206

Impairment of property plant & equipment and intangibles

140,726

111,389

Total operating expenses

$

259,688

$

357,475

Loss from operations

$

(348,898)

$

(387,304)

Other income (expense)

 

  

 

(Loss) gain on sale of assets

(916)

100,906

Other income

 

123

 

788

Investment and interest income

 

6,625

 

3,206

Loss before income taxes

$

(343,066)

$

(282,404)

Income tax expense

 

 

Net loss

(343,066)

(282,404)

Less accrued preferred stock dividend

2,494

261

Net loss attributable to common shareholders

$

(345,560)

$

(282,665)

Net loss per share attributable to common shareholders

 

  

 

  

Basic & Diluted

$

(21.67)

$

(20.32)

Weighted-average number of common shares outstanding

 

  

    

 

  

Basic & Diluted

 

15,945

    

 

13,912

The accompanying notes are an integral part of these consolidated financial statements.

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Lordstown Motors Corp.

Debtor-in-Possession

Consolidated Statements of Stockholders’ Equity
(in thousands)

Additional

Total

Preferred Stock

Common Stock

Paid-In

Accumulated

Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

Equity

Balance at December 31, 2021

$

13,092

$

19

$

1,084,390

$

(544,809)

$

539,600

Issuance of common stock

 

74

1

2,113

2,114

Restricted stock vesting

219

(684)

(684)

Class A Common stock issued under the Equity Purchase Agreement

1,164

2

40,436

40,438

Class A Common stock issued under the Sales Agreement

518

12,418

12,418

Class A Stock issued under Foxconn Investment Transactions

861

2

21,722

21,724

Preferred Stock issued under Foxconn Investment Transactions

300

30,000

Accrual of convertible preferred stock paid-in-kind dividends

261

(261)

(261)

Stock compensation

 

18,826

18,826

Net loss

 

(282,404)

(282,404)

Balance at December 31, 2022

300

30,261

15,928

24

1,178,960

(827,213)

351,771

Issuance of common stock

 

Restricted stock vesting

25

(65)

(65)

Class A Common stock issued under the Equity Purchase Agreement

Class A Common stock issued under the Sales Agreement

Class A Stock issued under Foxconn Investment Transactions

Preferred Stock issued under Foxconn Investment Transactions

Accrual of convertible preferred stock paid-in-kind dividends

2,494

(2,494)

(2,494)

Stock compensation

 

7,403

7,403

Net loss

 

(343,066)

(343,066)

Balance at December 31, 2023

300

$

32,755

15,953

$

24

$

1,183,804

$

(1,170,279)

$

13,549

The accompanying notes are an integral part of these consolidated financial statements.

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Lordstown Motors Corp

Debtor-in-Possession

Consolidated Statements of Cash Flows

(in thousands)

Year ended

Year ended

December 31, 2023

December 31, 2022

  

Cash flows from operating activities

 

 

 

Net loss

$

(343,066)

$

(282,404)

Adjustments to reconcile net loss to cash used by operating activities:

 

 

Stock-based compensation

 

7,403

 

18,826

Loss (gain) on disposal of fixed assets

 

916

 

(100,906)

Impairment of property plant and equipment and intangible assets

140,726

111,389

Write-off of prepaid royalty

4,728

Depreciation of property plant and equipment

54,407

8,476

Write down of inventory and prepaid inventory

24,105

48,529

Other non-cash changes

(2,183)

(384)

Changes in assets and liabilities:

Accounts receivables

 

204

 

(203)

Inventory

(10,537)

(54,646)

Prepaid expenses and other assets

15,742

10,648

Accounts payable

(11,940)

2,527

Accrued expenses and other liabilities

 

(12,940)

 

19,657

Net Cash used in operating activities

$

(137,163)

$

(213,764)

Cash flows from investing activities

  

  

Purchases of property plant and equipment

$

(10,152)

$

(54,567)

Purchases of short-term investments

(32,147)

(100,297)

Maturities of short-term investments

134,203

Investment in Foxconn Joint Venture

(13,500)

Return of investment in Foxconn Joint Venture

13,500

Proceeds from the sale of fixed assets

11,000

39,960

Net Cash provided by (used in) investing activities

$

102,904

$

(114,904)

Cash flows from financing activities

  

  

Proceeds from notes payable for Foxconn Joint Venture

$

$

13,500

Settlement of notes payable for Foxconn Joint Venture

(13,500)

Down payments received from Foxconn

100,000

Issuance of Class A common stock

2,114

Tax withholding payments related to net settled restricted stock compensation

(684)

Cash received from Foxconn Investment Transactions Class A stock, net

21,724

Cash received from Foxconn Investment Transactions Preferred stock

30,000

Proceeds from Equity Purchase Agreement, net of issuance costs

40,438

Proceeds from ATM Offering, net of issuance costs

12,418