# Stark Novus Financial Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Stark Novus Financial Inc.](/companies/snfi.md) (CIK 1759546)
- Form: 10-Q
- Filed: 2023-11-14
- Accepted by EDGAR: Nov 14, 2023, 21:19 ET
- Period: 2023-09-30
- Accession: 0001558370-23-019031
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1759546/000155837023019031/ride-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1759546/000155837023019031/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $91.5m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $5.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $32.4m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$17.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$345.3m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$16.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$342.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$21.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$21.38 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 15,953,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 15,942,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$120.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $10.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $93.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $100.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $108.0m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $22.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $62.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $13.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,997 characters.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and related 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 in our Form 10-K, Forms 10-Q and under Part II – Item 1A. Risk Factors below 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.

The Company’s strategy was designed to accelerate the launch of new commercial EVs. This included working on its own vehicle programs as well as partnering with third parties, and included its intended development program with Foxconn and its affiliates, as the Company sought to leverage its vehicle development experience, its proprietary and open-source and other non-proprietary technologies, its existing Endurance vehicle platform, and potential new vehicle platforms to drive commonality and scale, and more efficiently develop and launch EVs, to enhance capital efficiency and achieve profitability.

On June 27, 2023, the Company filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. 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 Company’s NOLs.

As part of the Chapter 11 Cases, on August 8, 2023, the Bankruptcy Court approved procedures for the Debtors to conduct a comprehensive marketing and sale process for all, substantially all or some of their assets in order to maximize the value of those assets. On September 29, 2023, the Debtors 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 electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assume certain specified liabilities of the Company for a total purchase price of $10.2 million in cash. The Bankruptcy Court approved the sale and the closing occurred on October 27, 2023. Upon consummation of the transactions under the LandX Asset Purchase Agreement, Jefferies became entitled to a Transaction Fee of $2.0 million after crediting the Monthly Fees paid to Jefferies since entering into the Engagement Letter and, subject to payment of the $2.0 million Transaction Fee, no further amounts will be payable to Jefferies under the Engagement Letter. See Note 9 – Subsequent Events – LandX Asset Purchase Agreement Closing.

As a result of closing the transactions contemplated by the LandX Asset Purchase Agreement, the Company has no remaining revenue-producing operations, and its primary operations consist of expenses associated with completing the Chapter 11 Cases. The Debtors have a limited amount of assets remaining (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 tax attributes) following the closing under the LandX Asset Purchase Agreement. The sale of any remaining assets (whether in whole or in part) may not be consummated and would not result in any meaningful proceeds. No assurance can be made regarding the sufficiency of the Debtor’s assets to complete the Chapter 11 Cases, provide estimated recoveries to claimants and fund anticipated post-emergence activities. Further, the assets included in this report are historical and are being reported prior to, and without regard to, the sale of assets to LandX and therefore, do not reflect the value ascribed by such sale. The assets in any filing we make with the Bankruptcy Court may not reflect the fair values thereof during the pendency of or following the Chapter 11 Cases or the value of our remaining assets in light of the uncertainty of the estimates and assumptions used in the applicable reporting principles, and such values may be higher or lower as a result.

The Company has also been seeking to use the Chapter 11 Cases to fully, finally and efficiently resolve its contingent and other liabilities and is pursuing the Foxconn Litigation before the Bankruptcy Court. However, the Company provides no assurance as to the timing or outcome of the resolution of these matters by the Bankruptcy Court or any other court in which these matters may be adjudicated, including as a result of the proceedings that will occur outside of the Bankruptcy Court prior to a final disposition by the Bankruptcy Court. 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. In addition, additional claims may be filed for executory contracts and unexpired leases rejected pursuant to the Proposed Plan. We are conducting an extensive claims reconciliation process to analyze approximately $25.6 million in claims asserted against the Company from its suppliers and vendors for amounts those parties believe the Company owes. We have accounts payable and accrued vendor claims of approximately $15.9 million as of September 30, 2023, that reflect both undisputed and partially disputed amounts we may owe, reported in Liabilities subject to compromise. The remainder are disputed for one or more reasons, including a lack of information provided by the claimant. However, the Company cannot provide any assurances regarding what the Company’s total actual liabilities based on such claims will be. A number of additional claims may be filed in the Chapter 11 Cases, including those for which the deadlines to file proofs of claim have not yet passed as of the date of this report. Such additional claims may be substantial and may result in a greater amount of allowed Claims than estimated in the Disclosure Statement. See Note 1 – Description of Organization and Business Operations – Description of Business – Voluntary Chapter 11 Petition. In addition, we remain subject to additional liabilities and the uncertainties related thereto for the legal matters discussed in Note 7 – Commitments and Contingencies.

On September 1, 2023, the Debtors filed a Joint Plan of Lordstown Motors Corp. and Its Affiliated Debtors and a related proposed disclosure statement. On October 24, 2023, the Debtors filed the First Amended Plan and the First Amended Disclosure Statement with the Bankruptcy Court. On October 29, 2023, the Debtors made certain modifications to the First Amended Plan and First Amended Disclosure statement based on negotiations with parties and filed with the Bankruptcy Court the Proposed Plan and the Disclosure Statement. On October 30, 2023, the Debtors further revised the Proposed Plan and Disclosure Statement.

The Proposed Plan and Disclosure Statement describe, among other things, the terms of the Proposed Plan; the events leading to the Chapter 11 Cases; the treatment of claims and Interests under the Proposed Plan; certain events that have occurred or are anticipated to occur during the Chapter 11 Cases, including the anticipated solicitation of votes to approve the Proposed Plan from certain of the Debtors’ creditors and Interest holders; and certain other aspects of the Proposed Plan. The Proposed Plan and Disclosure Statement also provide that the Company will emerge from bankruptcy proceedings to provide for the preservation and continuation of the Foxconn Litigation and other causes of action of the Debtors, the resolution of claims against the Debtors, the preservation of the Debtors’ NOLs, distributions to holders of allowed Claims and allowed Interests, the future generation of litigation proceeds, and the preservation of the Debtors’ ability to conduct business and enter into one or more transactions after the bankruptcy proceedings to maximize value, including transactions that could permit the post-bankruptcy Debtors to make use of substantial tax attributes. 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 would generate any value for the Company’s post-effective date equity holders.

The Proposed Plan provides for the appointment of the New Board as of the effective date of the Proposed Plan. The New Board will be identified by the Equity Committee with the consent of the Debtors (such consent not to be unreasonably withheld). 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 will establish such procedures and protocols as it deems necessary to carry out its duties and appoint officers of the Debtors. The officers of the post-effective date Debtors will have the rights and responsibilities set forth in the new organizational documents of the Post-Effective Date Debtors, which may include the NOL Trading Restrictions to facilitate the preservation of the Company’s NOLs.

The Bankruptcy Court entered the order approving the Disclosure Statement and solicitation procedures on November 1, 2023, and a hearing to approve the Proposed Plan is scheduled for December 19, 2023.

The foregoing description of the Proposed Plan and the Disclosure Statement is qualified in its entirety by reference to the full text of the solicitation versions of the Proposed Plan and Disclosure Statement, copies of which are filed with this Quarterly Report on Form 10-Q as Exhibit 10.2 and are incorporated herein by reference.

In light of the substantial uncertainty regarding the impact of the Chapter 11 Cases, the Company’s results for the quarter ended September 30, 2023 only reflect the accounting impact caused by the Chapter 11 Cases recorded as of such date and is not representative of the Company’s operations going forward. See Part I – Item 1A. Risk Factors of our Form 10-K and Part II – Item 1A. Risk Factors below for further discussion of the risks associated with the Chapter 11 Cases, our ability to confirm and consummate the 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 for the three months ended September 30, 2023 (1) and 2022

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ Three months ended September 30, 2023 | ​ ​ | ​ ​ Three months ended September 30, 2022 |
| --- | --- | --- | --- |
| Net sales | $— | ​ | $— |
| Cost of sales: | ​ — | ​ | ​ — |
| Operating expenses: | ​ ​ | ​ | ​ ​ |
| Selling, general and administrative expenses | ​ (2,600) | ​ | ​ 60,145 |
| Research and development expenses | ​ 5,716 | ​ | ​ 19,839 |
| Reorganization items | ​ 13,641 | ​ | ​ — |
| Impairment of property plant & equipment and intangibles | ​ 738 | ​ | ​ 74,865 |
| Total operating expenses | $17,495 | ​ | $154,849 |
| Loss from operations | ​ (17,495) | ​ | ​ (154,849) |
| Other income (expense) | ​ | ​ | ​ |
| (Loss) gain on sale of assets | ​ (175) | ​ | ​ — |
| Other income | ​ (240) | ​ | ​ (643) |
| Investment and interest income | ​ 1,404 | ​ | ​ 1,062 |
| Loss before income taxes | $(16,506) | ​ | $(154,430) |
| Income tax expense | ​ — | ​ | ​ — |
| Net loss | $(16,506) | ​ | $(154,430) |

1 Certain of our assets were sold pursuant to closing the LandX Asset Purchase Agreement in the fourth quarter of 2023, the effect of which is not reflected in these financial statements. See Note 4 — Property, Plant, and Equipment and Assets Held For Sale for additional details regarding our impairment.

### Revenue and Cost of Sales

The Company completed homologation and testing and received required certifications enabling sales to begin in the fourth quarter of 2022. As a result of filing for bankruptcy protection, there were no sales during the three months ended September 30, 2023.

### Selling, General and Administrative Expense

The credit to selling, general and administration expenses (“SG&A”) of $2.6 million for the three months ended September 30, 2023 reflects the reduction of $10.0 million in legal settlement accruals, partially offset by $6.3 million in personnel and professional fees, and $2.2 million in insurance premium amortization. SG&A expenses were $60.1 million during the three months ended September 30, 2022. Compared to the third quarter of 2022, SG&A was $62.7 million lower primarily due to decreased legal settlement accruals of $43.4 million, and insurance amortization of $1.2 million. As a result of the Chapter 11 Cases, the costs associated with certain legal matters that were previously reported in SG&A are being classified in reorganization costs for the three months ended September 30, 2023. Additionally, as discussed in Note 2 — Summary of Significant Accounting Policies, for the three months ended September 30, 2022 the Company recognized a charge to reflect NRV in SG&A prior to Endurance start of production of $16.2 million. Since the Company ceased production of the Endurance during the second quarter of 2023, no such NRV charge was recorded for the three months ended September 30, 2023.

### Research and Development Expense

Research and development (“R&D”) expenses during the three months ended September 30, 2023, principally represent personnel costs that have been consistently allocated to R&D, and our remaining personnel, most of whom were subject to separation notice periods. R&D expenses for the three months ended September 30, 2023, were $5.7 million during the three months ended September 30, 2023, consisting of $4.7 million in personnel costs, and $0.7 million in prototype and engineering costs, consisting principally of engineering software amortization. R&D expenses during the three months ended September 30, 2022 were $19.8 million. Compared to the third quarter of 2022, R&D was $14.1 million lower, principally due to decreased personnel costs of $5.0 million, outside engineering and consulting services of $5.0 million, and prototype and engineering costs of $2.9 million.

### Reorganization Items

Reorganization items represent the expenses directly and incrementally resulting from the Chapter 11 Cases. For the three months ended September 30, 2023, reorganization items consisted of $7.1 million in legal fees, $3.7 million in consulting fees and $2.8 million in potential bankruptcy claims and settlements. The reorganization items include costs incurred by the Company as well as those incurred by the official Unsecured Creditors Committee and official Equity Committee, for which the Company is responsible.

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

As of September 30, 2023, property, plant, and equipment and other intangibles were reviewed for potential impairment for recoverability. In light of the Chapter 11 Cases, the Company valued its property, plant and equipment and other intangibles based on its estimate of residual and salvage values. For the three months ended September 30, 2023, the Company recognized an impairment charge of $0.7 million to adjust the carrying value of its right of use assets. For the three months ended September 30, 2022, the Company recorded property, plant and equipment impairment of $74.9 million. See Note 4 — Property, Plant, and Equipment and Assets Held For Sale for additional details regarding our impairment.

### Gain (Loss) on Sale of Assets

For the three months ended September 30, 2023, the Company recognized a loss of $0.2 million on the sale of manufacturing equipment. There were no such gains or losses for the same period of 2022. See Note 1 — Description of Organization and Business Operations for additional details regarding the Foxconn Transactions.

### Results of Operations for the nine months ended September 30, 2023 (1), and 2022

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 | ​ ​ | ​ ​ Nine months ended September 30, 2022 |
| --- | ---: | --- | ---: |
| Net sales | $2,340 | ​ | $— |
| Cost of sales | ​ 91,550 | ​ | ​ — |
| Operating Expenses | ​ ​ | ​ | ​ ​ |
| Selling, general and administrative expenses | 69,775 | ​ | 116,105 |
| Research and development expenses (2) | 32,445 | ​ | 92,213 |
| Reorganization items | ​ 13,641 | ​ | — |
| Impairment of property plant & equipment, prepaids and intangibles | ​ 140,219 | ​ | ​ 74,865 |
| Total operating expenses | $256,080 | ​ | $283,183 |
| Loss from operations | (345,290) | ​ | (283,183) |
| (Loss) gain on sale of assets | ​ (2,784) | ​ | ​ 101,736 |
| Other (expense) income | (83) | ​ | (144) |
| Interest income | 5,440 | ​ | 1,187 |
| Loss before income taxes | $(342,717) | ​ | $(180,404) |
| Income tax expense | — | ​ | — |
| Net loss | $(342,717) | ​ | $(180,404) |

1 Certain of our assets were sold pursuant to closing the LandX Asset Purchase Agreement in the fourth quarter of 2023, the effect of which is not reflected in these financial statements. See Note 4 — Property, Plant, and Equipment and Assets Held For Sale for additional details regarding our impairment.

2 Research and development expenses for the nine months ended September 30, 2022 are net of $18.4 million in operating expense reimbursements and $1.8 million in other adjustments in connection with the APA (see Note 1 — Description of Organization and Business Operations).

### Revenue and Cost of Sales

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

Cost of sales totaled $91.6 million for the first nine months of 2023, consisting of $7.6 million in costs associated with producing the Endurance, including direct materials net of an adjustment to inventory to reflect its NRV, product warranty accruals and other costs related to selling and delivering the vehicles. The Company recorded $54.3 million in manufacturing depreciation, a $25.8 million charge to reduce the carrying value of inventory to NRV, and a $4.1 million reserve for potential claims from suppliers regarding costs incurred or otherwise that may be owed during the nine months ended September 30, 2023. See Note 2 — Summary of Significant Accounting Policies and Note 4 — Property, Plant and Equipment and Assets Held for Sale regarding depreciation and inventory charges.

### Selling, General and Administrative Expense

Selling, general and administration expenses (“SG&A”) of $69.8 million during the nine months ended September 30, 2023 consisted primarily of $37.8 million in non-reorganization related legal fees and expenses, including in net litigation settlement accruals of $30.3 million, $21.9 million in personnel and professional fees, and $5.2 million in insurance premium amortization. SG&A expense during the nine months ended September 30, 202, was $116.1 million. Compared to the first nine months of 2022, SG&A was $46.3 million lower, due primarily to $25.6 charges to reflect NRV being recorded in SG&A in the first nine months of 2022, prior to Endurance start of production, and decreases in personnel and professional fees of $10.4 million, and insurance premium amortization of $4.4 million. The overall decrease in year-over-year SG&A was partially offset by a decrease in litigation settlement accruals of $1.7 million. In addition, as a result of the Chapter 11 Cases, the costs associated with certain legal matters that were previously reported in SG&A are being classified in reorganization costs beginning in the third quarter of 2023.

### Research and Development Expense

Research and development (“R&D”) expenses consisted of the costs associated with the ongoing development and engineering work related to the Endurance and future programs. For the nine months ended September 30, 2023, the Company’s R&D costs were $32.4 million, including $23.4 million in personnel costs, $3.4 million in outside engineering and consulting services, and $4.5 million in prototype components and other engineering costs. The Company’s R&D costs for the nine months ended September 30, 2022, were $92.2 million, which was reduced by $18.2 million related to a reimbursement of costs associated with operating the Lordstown facility for periods back to September 1, 2021, and $1.8 million of adjustments related to the Foxconn APA. Compared to the nine months ended September 2022, R&D was $59.8 million lower, due to $8.4 million lower personnel costs, $17.6 million lower outside engineering and consulting services, and $27.5 million lower prototype components and other engineering costs.

### Reorganization Items

Reorganization items represent the expenses directly and incrementally resulting from the Chapter 11 cases. For the three months ended September 30, 2023, reorganization items consisted of $7.1 million in legal fees, $3.7 million in consulting fees and $2.8 million in potential bankruptcy claims and settlements.

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

As of September 30, 2023, property, plant and equipment and other intangibles were reviewed for potential impairment for recoverability. In prior periods, fair value of the Company’s property, plant, and equipment was derived from the Company’s enterprise value at the time of impairment as the Company believed it represented the most appropriate fair value of the asset group in accordance with accounting guidance. In light of the Chapter 11 Cases, the Company valued its property, plant and equipment based on its estimate of residual and salvage values, resulting in an impairment charge of $134.2 million, for the nine months ended September 30, 2023, compared to an impairment charge of $74.9 million for the same period of 2022. See Note 4 — Property, Plant and Equipment and Assets Held For Sale for additional details regarding our impairment. Additionally, during the nine months ended September 30, 2023, the Company recognized an impairment of $6.0 million related to other intangible assets. No such impairment charges related to other intangible assets were incurred for the same period of 2022.

### Gain (Loss) on Sale of Assets

For the nine months ended September 30, 2023, the Company recognized a loss of $2.8 million on the sale of manufacturing equipment, compared to a $101.7 million gain which was primarily attributable to the sale of the Lordstown facility to Foxconn for the same period of 2022. See Note 1 — Description of Organization and Business Operations for additional details regarding the Foxconn Transactions.

### Liquidity and Capital Resources

As a result of the Company’s recurring losses from operations, accumulated deficit, cessation of production of the Endurance, lack of any sources of revenue, as well as the risks and uncertainties related to (i) the Company’s ability to successfully complete the Chapter 11 Cases, including our ability to realize further value from our assets, to successfully resolve litigation and other claims that may be filed against us, and to develop, negotiate, confirm and consummate the Proposed Plan, after which our ongoing operations are expected to be limited, (ii) the effects of disruption from the Chapter 11 Cases, including the loss of a significant number of personnel, (iii) the costs of the Chapter 11 Cases and (iv) the costs of defending the Company in substantial litigation and claims, along with the risk of future litigation or claims that we have and may continue to experience, substantial doubt exists regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements.

Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the consolidated financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the consolidated financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The Company had cash, cash equivalents, and short-term investments of approximately $93.7 million and an accumulated deficit of $1.2 billion at September 30, 2023 and a net loss of $16.5 million and $342.7 million for the three and nine months ended September 30, 2023, respectively.

Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail above and elsewhere in this report) and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. On June 27, 2023, we voluntarily initiated the Chapter 11 Cases in the Bankruptcy Court. Since filing the Chapter 11 petitions, we have operated our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. After we filed our Chapter 11 petitions, the Bankruptcy Court granted certain relief enabling us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to pay employee wages and benefits, to pay taxes, to maintain our insurance policies, to honor certain of our customer obligations, to continue to operate our cash management system in the ordinary course, to pay the prepetition claims of certain of our vendors and to establish certain procedures to protect any potential value of the Company’s NOLs.

Our liquidity and ability to continue as a going concern is dependent upon, among other things: (i) our ability to develop, confirm and consummate the Proposed Plan or other alternative liquidating transaction, (ii) the resolution of contingent and other claims, liabilities and the Foxconn Litigation (see Note 7 – Commitments and Contingencies), (iii) the outcome of the Company’s efforts to realize value, of any, from its remaining assets, and (iv) the cost, duration and outcome of the Chapter 11 Cases.

We have incurred significant professional fees and other costs in connection with preparation for and prosecution of the Chapter 11 Cases and expect to continue to incur significant professional fees and costs throughout our Chapter 11 Cases. In addition, we are subject to significant contingent liabilities, the full scope of which is uncertain at this time (see Note 7 – Commitments and Contingencies). The Bankruptcy Court established October 10, 2023, as the deadline by which parties are 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. We cannot provide any assurances regarding what the Company’s total actual liabilities based on such claims will be.

The Bankruptcy Court approved procedures for the Debtors to conduct a comprehensive marketing and sale process with respect to all, substantially all or some of their assets in order to maximize the value of those assets. The marketing process culminated in the Debtors entering into the LandX Asset Purchase Agreement on September 29, 2023, providing for the sale of specified assets of the Company related to the design, production and sale of electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assume certain specified liabilities of the Company for a total purchase price of $10.2 million in cash. This transaction closed on October 27, 2023. Upon consummation of the sale in the fourth quarter of 2023, Jefferies became entitled to a Transaction Fee of $2.0 million after crediting the Monthly Fees paid to Jefferies since entering into the Engagement Letter and, subject to payment of the $2.0 million Transaction Fee, no further amounts will be payable to Jefferies under the Engagement Letter. See Note 9 – Subsequent Events.

As a result of closing the transactions contemplated by the LandX Asset Purchase Agreement, the Company has no remaining revenue-producing operations, and its primary operations consist of expenses associated with completing the Chapter 11 Cases. The Debtors have a limited amount of assets remaining (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 tax attributes) following the closing under the LandX Asset Purchase Agreement. The sale of any remaining assets (whether in whole or in part) may not be consummated and would not result in any meaningful proceeds. No assurance can be made regarding the sufficiency of the Debtor’s assets to complete the Chapter 11 Cases, provide estimated recoveries to claimants and fund anticipated post-emergence activities. Further, the assets included in this report are historical and are being reported prior to, and without regard, to the sale of assets to LandX and therefore, do not reflect the value ascribed by such sale. The assets in any filing we make with the Bankruptcy Court may not reflect the fair values thereof during the pendency of or following the Chapter 11 Cases or the value of our assets in light of the uncertainty of the estimates and assumptions used in the applicable reporting principles, and such values may be higher or lower as a result.

The Company has also been seeking to use the tools of Chapter 11 to fully, finally, and efficiently resolve its contingent and other liabilities and to pursue the Foxconn Litigation before the Bankruptcy Court. However, the Company provides no assurance as to the timing or outcome of the resolution of these matters by the Bankruptcy Court or any other court in which these matters may be adjudicated, including as a result of the proceedings that will occur outside of the Bankruptcy Court prior to a final disposition by the Bankruptcy Court. 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. In addition, additional claims may be filed for executory contracts and unexpired leases rejected pursuant to the Proposed Plan. We are conducting an extensive claims reconciliation process to analyze approximately $25.6 million in claims asserted against the Company from its suppliers and vendors for amounts those parties believe the Company owes. We have accounts payable and accrued vendor claims of approximately $15.9 million as of September 30, 2023, that reflect both undisputed and partially disputed amounts we may owe, reported in Liabilities subject to compromise. The remainder are disputed for one or more reasons, including a lack of information provided by the claimant. A number of additional claims may be filed in the Chapter 11 Cases, including those for which the deadlines to file proofs of claim have not yet passed as of the date of this report. Such additional claims may be substantial and may result in a materially greater amount of allowed Claims than estimated in the Disclosure Statement. See Note 1 – Description of Organization and Business Operations – Description of Business – Voluntary Chapter 11 Petition, and Note 9 – Subsequent Events. In addition, we remain subject to additional liabilities and the uncertainties related thereto for the legal matters discussed in Note 7 – Commitments and Contingencies.

If confirmation by the Bankruptcy Court of the Proposed Plan or alternative plan under Chapter 11 does not occur, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of Claims and Interests or upon the showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Company's assets for distribution in accordance with the priorities established by the Bankruptcy Code. As a result of these and other circumstances, there is substantial doubt regarding our ability to continue as a going concern. The value available to our various stakeholders, including our creditors and stockholders, is highly uncertain. The trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in the Chapter 11 Cases, if any.

See Risk Factors under Part I – Item 1A. of our Form 10-K and Part II – Item 1A. Risk Factors below for further discussion of the risks associated with our limited capital resources and loss exposures, among other risks

### Summary of Cash Flows

The following table provides a summary of Lordstown’s cash flow data for the period indicated:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ | ​ ​ ​ Nine months ended September 30, 2023 | ​ | ​ ​ Nine months ended September 30, 2022 |
| --- | --- | ---: | --- | ---: |
| Net Cash used in operating activities | ​ | $(120,006) | ​ | $(171,022) |
| Net Cash provided by (used in) investing activities | ​ | $92,301 | ​ | $(74,554) |
| Net Cash provided by financing activities | ​ | $— | ​ | $155,792 |

### Net Cash Used by Operating Activities

For the nine months ended September 30, 2023 compared to 2022, net cash used in operating activities decreased by $51.0 million. The net loss increased $162.3 million from the first nine months of 2022 to the first nine months of 2023, due to $104.5 million in gains, principally on the sale of the Lordstown plant, recognized in 2022 and impairment charges of $65.4 million and depreciation charges of $54.4 million recognized in the first nine months of 2023.

### Net Cash Provided by (Used in) Investing Activities

For the nine months ended September 30, 2023, compared to 2022, cash provided by investing activities increased $166.9 million primarily due to $134.2 million in maturities of short-term investments, decreased purchases of property, plant and equipment, and short-term investments of $40.4 million and $17.2 million, respectively, partially offset by a decrease in proceeds from the sale of capital assets to Foxconn under the Foxconn APA of $38.4 million in the nine months ended September 30, 2023.

### Net Cash Provided by Financing Activities

For the nine months ended September 30, 2023 compared to 2022, cash flows from financing activities decreased $155.8 million. There were no financing transactions during the nine months ended September 30, 2023. For the first nine months of 2022, we received a $100.0 million down payment related to the sale of the Lordstown facility to Foxconn, $40.4 million in proceeds from the Equity Purchase Agreement with YA, $13.5 million from proceeds from Foxconn notes payable.

### Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

### Recent Accounting Pronouncements

See Note 2 — Summary of Significant Accounting Policies to the Condensed Consolidated Financial Statements for more information about recent accounting pronouncements, the timing of their adoption, and management’s assessment, to the extent they have made one, of their potential impact on Lordstown’s financial condition and results of operations.

## Market risk

As filed, 355 characters.

On September 30, 2023, we had cash, cash equivalents and short-term investments of approximately $93.7 million. We believe that a 10 basis point change in interest rates is likely 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.

## Controls and procedures

As filed, 2,600 characters.

#### Management’s Evaluation of our Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, particularly the significant reduction in personnel, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2023.

#### Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Any future reduction in personnel may limit our ability to segregate responsibility for certain accounting and treasury related functions.

## Risk factors

As filed, 50,499 characters.

There are no material changes from the risk factors set forth in Part I, “Item 1A. Risk Factors” in our Form 10-K, except as set forth below. In addition to the risk factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K and Forms 10-Q and other filings, which could materially affect our business, financial condition or future operating results.

***We have 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, 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. The Debtors are vigorously pursuing the Foxconn Litigation claims and seeking substantial damages from Foxconn. However, 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.

***There is substantial doubt regarding our ability to continue as a going concern and our liquidity requirements during and following the pendency of the Chapter 11 Cases and the adequacy of our capital resources 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 be used during the Chapter 11 Cases and to settle known, unknown and contingent liabilities in connection therewith, as well as to maintain our limited expected operations if and when we emerge from bankruptcy. Through the Chapter 11 Cases, we sold certain of the assets used in our operations pursuant to the LandX Asset Purchase Agreement. Furthermore, 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.

We have incurred significant professional fees and other costs in connection with our contingent liabilities and preparation for the Chapter 11 Cases and expect to continue to incur significant professional fees and costs throughout our Chapter 11 Cases. In addition, we face uncertainty with respect 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 although we are seeking to resolve these contingencies through the Chapter 11 Cases. Due to cessation of production of the Endurance, we lack any sources of revenue, our ability to obtain additional financing is highly unlikely and our ongoing operations following the completion of the Chapter 11 Cases are expected to be limited. There can be no assurances that cash on hand and our current capital resources will be sufficient to allow us to satisfy our obligations related to the Chapter 11 Cases or the pending litigation, claims and investigations and may negatively impact our ability to make any distribution and, if so, the amount of such distribution, to our creditors and Interest holders. 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 Series A Convertible Preferred Stock) in order to acquire any future business or assets and 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.

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

Our post-bankruptcy capital structure has yet to be determined, and it is uncertain whether our Proposed Plan will allow for distributions or other residual value with respect to our Class A common stock. If the Preferred Stock (as defined below) retains its liquidation preference (and such preference is not subordinated or otherwise set aside), such shares will receive proceeds from any distribution until such preference is satisfied prior to any payment to holders of Class A common stock. Existing holders of our Class A common stock may find that their shares have little or no value and face highly uncertain or no recoveries under the Proposed Plan. There can be no assurance that any new shares of Class A common stock will maintain their value at the time of issuance.

Although we cannot predict how the claims and Interests of stakeholders in the Chapter 11 Cases, including holders of Class A common stock, will ultimately be resolved, any trading in our Class A common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our Class A common stock. Trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in bankruptcy proceedings.

In addition, the Proposed Plan includes the NOL Trading Restrictions, which are provisions designed to enable the Company to optimize its tax attributes 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% of all issued and outstanding shares of Class A common stock).

During the Chapter 11 Cases, the value that will 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 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.

***We are subject to the risks and uncertainties associated with the Chapter 11 Cases.***

Since filing the Chapter 11 Cases, we have operated our business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 of the Bankruptcy Code. As a consequence of filing the Chapter 11 Cases, we have been and will be subject to the risks and uncertainties associated with bankruptcy. These risks include, but are not limited to, the following:

- our ability to successfully develop, prosecute, confirm and consummate the Proposed Plan with respect to the Chapter 11 Cases, which we may seek to amend, waive, modify or withdraw at any time before confirmation;
- our ability to satisfy any conditions precedent to the Proposed Plan’s effectiveness;
- our ability to obtain the Bankruptcy Court’s approval with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases, including maintaining strategic control as debtors-in-possession;
- our ability to successfully resolve our outstanding contingent liabilities through the Chapter 11 Cases, which is highly uncertain;
- the possibility that actions and decisions of our creditors and other third parties with interests in the Chapter 11 Cases may be inconsistent with our plans;
- the high costs of bankruptcy proceedings and related fees, particularly if delays in the Chapter 11 Cases increase fees and costs;
- our long-term liquidity requirements and whether our capital resources will be sufficient to allow us to emerge from the Chapter 11 Cases and execute our limited activities upon emergence;
- our ability to motivate and retain key employees, and the costs associated therewith, throughout the Chapter 11 Cases, and the impact of the loss of employees on our prospects for realizing any value from the sale of our assets;
- we have no ongoing sources of revenue;
- our ability to realize any value with respect to our remaining assets;
- the ability of third parties to assert claims against the Company, which may be substantial or terminate the Company’s rights with respect to contracts, leases, agreements, or other assets;
- our ability to maintain our relationships with our vendors, customers and other third parties, including those providing services that are integral to maintaining our financial, information technology and other systems used to operate our business;
- our suppliers’ and vendors’ likely unwillingness or ability to fulfill any obligations they may have under supply terms or agreements for ongoing support, including their warranty obligations to us, as a result of the Chapter 11 Cases or other disputes, that could cause us to incur further costs and liabilities;
- our ability to maintain adequate financial, information technology and management processes, controls and procedures, particularly in light of the reduction in personnel due to the lack of support from Foxconn, the Chapter 11 Cases and risk of further attrition; and
- the ability of third parties to seek and obtain court approval to terminate or shorten the exclusivity period for us to propose and confirm a Plan, to appoint a Chapter 11 trustee, or to convert the Chapter 11 Cases to Chapter 7 cases.

Because of the risks and uncertainties associated with a voluntary filing for relief under Chapter 11 of the Bankruptcy Code and the related proceedings, we cannot accurately predict or quantify the ultimate impact that events that occur during the Chapter 11 Cases may have on ultimate recovery for stakeholders, including creditors and stockholders.

***We may not be able to obtain confirmation of the Proposed Plan, or any amended or subsequent plan.***

The Debtors may not receive the acceptances from holders of Claims and Interests entitled to vote on the Proposed Plan required to confirm the Proposed Plan. In the event, that votes with respect to Claims in the classes entitled to vote are received in number and amount sufficient to enable the Bankruptcy Court to confirm the Proposed Plan, the Debtors intend to seek Confirmation of the Proposed Plan by the Bankruptcy Court. However, if the requisite acceptances are not received, the Debtors may not be able to obtain confirmation of the Proposed Plan. Even if the requisite acceptances of the Proposed Plan are received, the Bankruptcy Court might not confirm the Proposed Plan if the Bankruptcy Court finds that any of the statutory requirements for confirmation under section 1129 of the Bankruptcy Code has not been met.

Moreover, certain holders of Claims or Interests may object to confirmation of the Proposed Plan, including on the basis that the Debtors’ proposed classification and treatment of Claims and Interests under the Proposed Plan does not comply with the Bankruptcy Code. There can be no assurance that such objections (if any) will be resolved or that the Bankruptcy Court will overrule such objections and confirm the Proposed Plan.

Even if the Proposed Plan or another plan of reorganization is 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) 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 such conditions will be satisfied and, therefore, that a plan of reorganization will become effective and that we will emerge from the Chapter 11 Cases as contemplated by a plan of reorganization. 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 our business. In that case, we may need new or additional post-petition financing, which may increase the cost of consummating a plan of reorganization. There can be no assurance of the terms on which 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 reorganize and emerge from the Chapter 11 Cases or, if we do successfully reorganize, as to when we would emerge from the Chapter 11 Cases. If we are unable to successfully reorganize, we may not be able to continue our operations.

***The Proposed Plan provides for the appointment of the New Board at the effective time of the Proposed Plan, the New Board will control the Debtors’ activities from that point forward and there can be no assurance as to what, if any, operations these entities 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 will be identified by the Equity Committee with the consent of the Debtors (such consent, not to be unreasonably withheld). 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 will establish such procedures and protocols as it deems necessary to carry out its duties and appoint officers of the Debtors. The officers of the post-effective date Debtors will have the rights and responsibilities set forth in the new organizational documents of the Debtors, which may include provisions to facilitate the preservation of the Company’s NOLs. There can be no assurance regarding the activities that the Debtors may conduct or further plans that the New Board may develop for the Debtors.

***As a result of the Chapter 11 Cases, our historical financial information will not be indicative of our future performance.***

Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. Therefore, the nature of our current business activities is materially different than those prior to filing the Chapter 11 Cases on June 27, 2023. Furthermore, during the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, new claims that may be significant, and claims assessments significantly impact our consolidated financial statements. 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. However, 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 September 30, 2023, is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases.

In particular, the amount and composition of our assets and liabilities could 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 make with the Bankruptcy Court may not accurately reflect our such matters during the pendency of or following the Chapter 11 Cases or the value of our remaining assets 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. A number of additional claims may be filed in the Chapter 11 Cases, including on account of (i) rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and (ii) claims of governmental units, 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 in the Disclosure Statement. 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 end in our periodic reports and may reflect estimates based on assumptions that may change significantly during the course of the Chapter 11 Cases or due to other contingencies, and, as applicable, is subject to all of the disclaimers presented therewith.

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

***We may not have sufficient cash to maintain our operations during the Chapter 11 Cases or fund our limited operations upon emergence from Chapter 11.***

We face uncertainty regarding the adequacy of our liquidity and capital resources to be used during the Chapter 11 Cases and to settle known, unknown and contingent liabilities in connection therewith. Our financial condition, and the substantial costs incurred in connection with the Chapter 11 Cases, may result in the need for substantial additional funding to maintain our operations during the Chapter 11 Cases or fund our limited operations upon emergence from Chapter 11. We may need new or additional post-petition financing, which may increase the cost of consummating a plan of reorganization. There can be no assurance of the terms on which such financing may be available or if such financing will be available at all. As a result, any value that may be available, if at all, to our various stakeholders (including creditors and stockholders) may be diminished upon our emergence from bankruptcy. 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 and seek to realize value from the NOLs. Further, the assets included in this report are historical and are being reported prior to, and without regard to, the sale of assets to LandX and therefore, do not reflect the value ascribed by such sale.

***We have significant contingent liabilities, the full scope of our liabilities is uncertain, and we may also 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 and results of operations.***

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 herein. See Note 7 – Commitments and Contingencies. The full scope of the Company’s contingent liabilities is uncertain at this time. 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. We cannot provide any assurances regarding what the Company’s total actual liabilities based on such claims will be. The Bankruptcy Code provides that the confirmation of a Chapter 11 plan discharges a debtor from substantially all debts arising prior to consummation of such plan. With few exceptions, all claims that arose prior to the consummation of a Chapter 11 plan (i) would be subject to compromise and/or treatment under such plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of such 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 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. A number of additional claims may be filed in the Chapter 11 Cases, including on account of (i) rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and (ii) claims of governmental units, 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 in the Disclosure Statement.

Further, the Company’s obligations under the Safety Act administered by NHTSA for the vehicles it has manufactured and sold continue in force during the pendency of and following the Chapter 11 Cases. During the Chapter 11 Cases, the Company’s obligations are 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 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 are seeking to repurchase all vehicles that remain in the possession of our customers (other than LAS Capital or its affiliates); however, such efforts to repurchase are subject to approval by the Bankruptcy Court, the final terms of the Proposed Plan and influence of various stakeholders in the Chapter 11 Cases and the willingness of customers to accept the price that we offer for the vehicle. Accordingly, we cannot predict the extent of the liability that may arise from the Safety Act obligations for vehicles the Company has already manufactured and sold.

***In the event we are not able to obtain confirmation of the Proposed Plan, it may be necessary to pursue bankruptcy protection under Chapter 7 of the Bankruptcy Code for all or a part of our business.***

If confirmation by the Bankruptcy Court of the Proposed Plan under Chapter 11 does not occur, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of Claims and Interests or upon the showing of cause, the Bankruptcy Court may convert 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 significantly smaller distributions being made to our stakeholders than those we might obtain under Chapter 11 primarily because of the likelihood that the remaining assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern.

***We depend on a few highly skilled key employees to navigate the Chapter 11 Cases and contribute to our ability to realize future value of our remaining assets, and if we are unable to retain, manage, and appropriately compensate them, the outcome of the Chapter 11 Cases and ability to realize value from our remaining assets and litigation claims could be adversely affected.***

Our ability to successfully consummate the Proposed Plan and realize the value of our remaining assets is based on continued service of our senior management team and other key employees, and on our ability to continue to motivate and appropriately compensate key employees. Some of our employees are, and others may be, subject to claims and risks of litigation for which indemnification may be uncertain. We may not be able to retain the services of our key employees, who work for us on an at-will basis, in the future.

We have experienced significant voluntary resignations among our employees following the lack of support from Foxconn and the Chapter 11 Cases. In addition, we have provided notices under the WARN Act in September 2023 to four of our five executive officers to meet statutory requirements for job eliminations that may occur on or before effectiveness of the Proposed Plan. One of the executive officer’s employment was terminated in November 2023 along with several other key employees. As discussed in more detail under Part II- Item 5. Other Information, given the circumstances of the Chapter 11 Cases, there is a significant likelihood that the Executives and certain other key employees will be terminated once the cases are completed (if not sooner) and that such employees may, in fact, assert that they already have “Good Reason”

to terminate their own employment under applicable Employment Agreements. The Company does not concede that “Good Reason” exists for the employees to terminate their own employment. Nonetheless, in order to resolve potential disputes with the Executives and the key employees and to incentivize their continued contributions to confirming, consummating, and supporting the implementation of a Chapter 11 plan, the Compensation Committee of the Board of Directors has approved the Severance Settlements (as defined below) with respect to the Executives and two key employees’ severance under the Employment Agreements. The Severance Settlements remain subject to Bankruptcy Court approval and acceptance by the Executives and key employees. No termination date for these Executives and key employees has been established as of the date of this report. As a result of our ongoing reductions in force, we will be operating with a severe shortage of personnel and may not be able to conduct even limited operations to implement the Proposed Plan.

The attrition we have already experienced, and expect to continue to experience, causes us to rely on fewer employees, and in some cases these employees are less experienced which puts at greater risk our ability to execute our plans. Attrition has caused, and may continue to cause, us to engage third parties to perform the work. 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 fail to work effectively and to execute our plans, the Chapter 11 Cases, including our efforts to realize value from our remaining assets including through resolving and pursuing litigation and other claims, could be prolonged or adversely affected.

***We expect to further reduce and streamline our operations in connection with the Chapter 11 Cases.***

In connection with the Chapter 11 Cases, the Company expects to take measures to further streamline its operations and reduce its general and administrative expenses during the course of the bankruptcy proceedings and upon emergence from Chapter 11, which may include, among other things, reducing or no longer maintaining insurance coverage, scaling back our information technology systems and restructuring 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, including product liability coverage, may expire and we may not be able to obtain replacement policies or such policies may require substantially higher cost. In some cases, our insurance policies 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 further reducing our workforce and restructuring, reducing, eliminating or outsourcing certain management services, as necessary to manage our limited operations. It is impossible to predict what, if any, errors or delays might occur as the result of changes in controls or a reduced workforce. While we expect our operations to remain limited, 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 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 and we are seeking to resolve these contingencies through the Chapter 11 Cases.***

We are currently 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 the above-referenced actions, which obligations may not be covered by the Company’s applicable directors and officers’ insurance.

These claims have diverted and may in the future divert our financial and management resources that would otherwise be used to benefit our operations, increase our insurance costs and cause reputational harm. We have already incurred, and expect to continue to incur, significant legal expenses in defending against these claims. 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 formulate and successfully execute the Proposed Plan under Chapter 11, 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 commercial general liability, commercial automobile liability, product liability, excess liability, workers’ compensation, cyber security 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 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. 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 claims against us. We may also seek to reduce or eliminate our insurance coverage or certain policies in the future.

Our insurers have asserted a denial of coverage under the main tower of our director and officer insurance program with respect to numerous ongoing matters, including the consolidated securities class action, various shareholder derivative actions, the consolidated stockholder class action, various demands for inspection of books and records, the SEC investigation, and the investigation by the United States Attorney’s Office for the Southern District of New York, and certain indemnification obligations, under an exclusion to the policy called the “retroactive date exclusion.” The insurer has identified other potential coverage issues as well. Excess coverage attaches only after the underlying insurance has been exhausted, and generally applies in conformance with the terms of the underlying insurance. We are analyzing the insurer’s position and intend to pursue any available coverage under this policy and other insurance. As a result of the denial of coverage, no or limited insurance may be available to us to reimburse our expenses or cover any potential losses for these matters, which could be significant. The insurers in our Side A D&O insurance program, providing coverage for individual directors and officers in derivative actions and certain other situations, have issued a reservation of rights letter which, while not denying coverage, has cast doubt on the availability of coverage for at least some individuals and/or claims.

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. At this time, the Company cannot predict the results of the ongoing proceedings or the interim and ultimate determinations regarding the claims to be made by the Bankruptcy Court. Future resolution of these matters could result in changes in management’s estimates of losses, which could be material to our consolidated financial statements.

The Company had accruals of $20.0 million and $35.9 million, for the periods ending September 30, 2023 and December 31, 2022, respectively, for certain of its outstanding legal proceedings and potential related obligations within Accrued and other current liabilities on its Condensed Consolidated Balance Sheet. Our liabilities for legal proceedings and potential related obligations may include amounts for the stockholder actions, government claims and indemnification obligations described in more detail in Note 7 – Commitments and Contingencies or other claims that may be asserted against us and may or may not be offset by insurance. The amount accrued as of September 30, 2023 was estimated based on available information and legal advice, the potential resolution of these matters in light of historical negotiations with the parties, and the potential impact of the outcome of one or more claims on related matters, but does not take into account the impact of the applicable provisions of the Bankruptcy Code, the terms of the Proposed Plan, ongoing discussions with the parties thereto and other stakeholders or actual amounts that may be asserted in Claims submitted in the Chapter 11 Cases or for indemnification as these factors cannot yet be determined and are subject to substantial uncertainty. Accordingly, the accrued amount may be adjusted in the future based on new developments and it does not reflect a full range of possible outcomes for these proceedings, or the full amount of any damages alleged, which are significantly higher.

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.

### We may not be able to realize value from our assets.

On August 8, 2023, the Bankruptcy Court approved our procedures for conducting a comprehensive marketing and sale process for all, substantially all or some of our 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 electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assume certain specified liabilities of the Company for a total purchase price of $10.2 million in cash. As a result, the assets that we hold that are of the type that were previously used in our operations are minimal. We cannot provide assurances as to the value of our other assets, including potential recovery in the Foxconn Litigation and other rights and potential claims and our NOL tax attributes. Given general economic and market conditions and uncertainties in our ability to pursue and the outcome of pursuing any claims and benefit of the NOLs, we can provide no assurance that we will be able to successfully complete any dispositions of our remaining assets, the timing or proceeds and other terms of any such transactions, the potential recovery from any claims and any ability to realize value from the NOLs. Further, the accounting principles and estimates applied to value our remaining assets for financial reporting purposes resulting in significant impairments and reserves may not bear any relationship to their actual market value, which may be higher or lower.

The failure to realize value from our remaining assets or to generate sufficient proceeds therefrom to sustain our Chapter 11 Cases and post-emergence activities may have a material impact on the ultimate recovery for stakeholders, including creditors. As mentioned above, it is uncertain whether holders of our equity securities will recover any portion of their investments.

### 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. 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 (if a governmental unit is the counterparty to the applicable executory contract or unexpired lease) 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. 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. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate results and total amount of claims against us.

Moreover, a number of additional claims may be filed in the Chapter 11 Cases, including on account of (i) rejection damages for executory contracts and unexpired leases rejected pursuant to the Proposed Plan and (ii) claims of governmental units, 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 in the Disclosure Statement.

In addition, the SEC has obtained and is seeking a further extension of its deadline in the Chapter 11 Cases to bring an action to determine whether certain of the Debtors obligations to governmental units are not dischargeable under section 1141(d)(6) of the Bankruptcy Code; if the SEC brings and prevails in such non-dischargeability action, obligations of the Debtors owed to the SEC would become obligations of the Debtors after the effective date of the Proposed Plan, which could impact recoveries to holders of Claims and Interests pursuant to the Proposed Plan.

***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 is 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.

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. We can provide no assurance that our Class A common stock will continue to trade on this 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. 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 our 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 deemed to accept the Proposed Plan. However, such Interests may be found to be impaired under the Proposed Plan. In such a case, the Debtors would be required to satisfy additional requirements under the Bankruptcy Code if Foxconn were to vote to reject the Proposed Plan.

In addition, the Bankruptcy Court or another court may find that Foxconn’s entitlement to the liquidation preference described in the *Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock Par Value $0.0001 of Lordstown Motors Corp.*, or other amounts with respect to its Foxconn’s Preferred Stock Interests has been triggered, in which case, absent subordination of the Foxconn’s Preferred Stock Interests, or other relief, 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.

***We expect our SEC reporting obligations to continue upon our emergence from Chapter 11 to facilitate trading of our Class A common stock, and our ability to meet these obligations timely or at all may be limited.***

Our Class A common stock currently trades on the OTC Pink Marketplace under the symbol “RIDEQ.” We may be required to maintain our SEC reporting obligations to facilitate trading of our Class A common stock upon our emergence from Chapter 11. 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 negatively impacted.

***Operating in bankruptcy for a long period of time may extinguish our available assets, and would otherwise harm or eliminate recoveries to creditors and stockholders.***

A long period of operations in the Chapter 11 Cases under Bankruptcy Court protection would likely have a material adverse effect on our financial condition, liquidity and ability to successfully complete the Chapter 11 Cases and Proposed Plan. A prolonged period of operating under Bankruptcy Court protection may make it more difficult to retain management and other key personnel necessary to the success of our bankruptcy process and ability to realize further value from our remaining assets. We have no ongoing source of revenue. Attrition has, and may also cause, us to engage third parties to perform the work. Such third parties are likely to be more costly and less efficient than if we were to be able to use our own employees.

So long as the Chapter 11 Cases continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 Cases, including potentially the cost of further litigation. In general, litigation can be expensive and time consuming to bring or defend against. Such litigation could result in settlements or damages that could significantly and adversely affect our financial results. It is also possible that certain parties will commence litigation with respect to the treatment of their claims under the Proposed Plan. It is not possible to predict the potential litigation that we may become party to, nor the final resolution of such litigation. The impact of any such litigation on our current plans to complete the bankruptcy process, however, could be material.

Any delays in our Chapter 11 Cases would increase the costs and risks associated with the bankruptcy process, and diminish the value, if any, that is available to our various stakeholders (including creditors and stockholders). Also, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business during the course of bankruptcy proceedings, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with bankruptcy proceedings, we cannot accurately predict or quantify the ultimate impact of events that could occur during any such proceedings. There can be no assurances that we will realize value from of our remaining assets in an orderly fashion, that we will otherwise realize any significant value for our remaining assets, or that our creditors or stockholders (including holders of our Class A common stock) will receive any recovery from the Chapter 11 Cases or any other bankruptcy proceedings.

Filed Nov 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-019031. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.