CAPITAL STOCK AND EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2023

CAPITAL STOCK AND EARNINGS PER SHARE

CAPITAL STOCK AND LOSS PER SHARE

NOTE 6 — CAPITAL STOCK AND EARNINGS PER SHARE

On August 17, 2022, the Company held a special meeting of stockholders whereby our stockholders voted to amend the Charter to increase our authorized shares of capital stock from 312 million to 462 million, consisting of (i) 450 million shares of Class A common stock and (ii) 12 million shares of preferred stock, each with a par value of $0.0001.

At the 2023 Annual Meeting, the stockholders of the Company approved a proposal to amend the Charter to effect a reverse split of the Company’s outstanding shares of Class A common stock at a ratio within a range of between 1:3 and 1:15, with the timing and the exact ratio of the reverse split to be determined by the Board in its sole discretion. The Board authorized the Reverse Stock Split at a 1:15 ratio, which became effective as of 12:01 a.m. Eastern Time on May 24, 2023, or the Effective Date.

The Company filed the Amendment to the Charter on May 22, 2023, which provided that, at the Effective Date, every 15 shares of the issued and outstanding Class A common stock would automatically be combined into one issued and outstanding share of Class A common stock.

We had approximately 16.0 million and 15.9 million shares of Class A common stock issued and outstanding as of December 31, 2023, and December 31, 2022, respectively, after giving effect to the Reverse Stock Split. As of December 31, 2023, there were 211,666 shares of Class A common stock issuable under equity awards that remain outstanding; however, the vesting and settlement of such awards has been suspended as a result of the Chapter 11 Cases, and if resumed, would result in the issuance of such number of shares (subject to potential withholding of shares for tax purposes that if withheld would not be deemed outstanding). Additional awards with vesting dates after December 31, 2023, and prior to the effective date of the Proposed Plan will also have vesting suspended until such effective date. All equity awards that remain outstanding and have not yet vested as of the effective date of the Proposed Plan will remain outstanding and vest in accordance with their terms and the terms of the Proposed Plan, provided that certain equity awards that were issued to named executive officers shall accelerate in accordance with the Severance Agreements (as defined below) that the Company has entered or is expected to enter into with such named executive officers. All vested options to purchase Class A common stock that remain outstanding as of the effective date of the Proposed Plan will also remain outstanding in accordance with their terms and the terms of the Proposed Plan and any options not exercised within three months of an officer’s or director’s termination of employment or board service with the Company will terminate. We had 0.3 million shares of Preferred Stock issued and outstanding as of December 31, 2023 and 2022. FASB ASC Topic 260, Earnings Per Share, requires the presentation of basic and diluted earnings per share (“EPS”). Basic EPS is calculated based on the weighted average number of shares outstanding during the period. Dilutive EPS is calculated to include any dilutive effect of our share equivalents.

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share and per share amounts):

		Year ended		Year ended
		December 31, 2023		December 31, 2022
Numerator
Net loss from continuing operations	$	(343,066)	$	(282,404)
Less: Accrual of convertible preferred stock paid-in-kind dividends		2,494		261
Net loss attributable to common stockholders		(345,560)		(282,665)
Denominator
Weighted average number of common shares outstanding		15,945		13,908
Weighted average number of vested shares not yet issued		—		4
Weighted average number of common shares - Basic		15,945		13,912
Dilutive common stock outstanding		—		—
Weighted average number of common shares -Diluted		15,945		13,912
Net loss per share
Net loss per share attributable to common stockholders, basic	$	(21.67)	$	(20.32)
Net loss per share attributable to common stockholders, diluted	$	(21.67)	$	(20.32)

The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share attributable to common shareholders for the periods presented due to their anti-dilutive effect.

	Year ended	Year ended
	December 31, 2023	December 31, 2022
Foxconn Preferred Stock	1,128	1,033
Share awards	—	24
Foxconn Warrants	113	113
BGL Warrants	—	110
Private Warrants	154	154
Total	1,395	1,434

Investment Transactions

On November 7, 2022, the Company entered into the Investment Agreement under which Foxconn agreed to make additional equity investments (collectively, the “Investment Transactions”) in the Company through the purchase of $70 million of Class A common stock and up to $100 million in Preferred Stock, subject to certain conditions, including, without limitation, regulatory approvals and, with regard to the Preferred Stock, satisfaction of certain EV Program budget and EV Program milestones established by the parties.

The Company could use any proceeds from the sale of the Class A common stock for general corporate purposes as determined by the Board and the proceeds from the sale of the Preferred Stock was to be limited to funding the EV Program or any substitute or replacement electric vehicle program as agreed to by Foxconn and the Company.

On November 22, 2022, the Company completed the Initial Closing under the Investment Agreement, at which Foxconn purchased (a) approximately 1.8 million shares of Class A common stock at a purchase price

of $26.40 per share (such amount giving effect to the Reverse Stock Split), and (b) 0.3 million shares of Preferred Stock at a purchase price of $100 per share, for an aggregate purchase price of approximately $52.7 million.

The Investment Agreement provided for the Subsequent Common Closing, at which time Foxconn was required, the Company maintains, to purchase approximately 10% of the Class A common stock for approximately $47.3 million. The Subsequent Common Closing was to occur on or before May 8, 2023. The Company was ready, willing and able to complete the Subsequent Common Closing on a timely basis.

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

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

As previously disclosed, the Investment Agreement also contains the following additional terms with respect to Foxconn’s ownership of the Company’s securities. However, as detailed herein, Foxconn has refused to fulfill its obligations under the Investment Agreement and other agreements, and those breaches and the effect of Foxconn’s actions on its rights and the Company’s obligations with respect to the Company’s securities are among several matters at issue in the Foxconn Litigation.

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

● Termination of Foxconn Joint Venture: The Company and Foxconn terminated the Joint Venture Agreement, the Note, dated June 24, 2022, issued by Lordstown EV and guaranteed by the Company and Lordstown EV Sales (the “Note”), and all liens on assets of Lordstown EV and the Company. All remaining funds held by the Foxconn Joint Venture were distributed to Foxconn EV Technology, Inc. as a distribution for amounts contributed by it and as a repayment in full of any loans advanced by it to Lordstown EV under the Note.

● Standstill: Until the date that is the later of December 31, 2024, and 90 days after the first day on which no Foxconn-appointed director serves on the Board and Foxconn no longer has a right to appoint any directors, without the approval of the Board, Foxconn would not (A) acquire any equity securities of the Company if after the acquisition Foxconn and its affiliates would own (i) prior to the Subsequent Common Closing, 9.99% of the capital stock of the Company that is entitled to vote generally in any election of directors of the Company (“Voting Power”), (ii) prior to the time the

Company obtains the approval of stockholders contemplated by Rule 5635 of the Nasdaq listing rules as in effect on November 7, 2022, with respect to certain equity issuances (the “Requisite Stockholder Approval”), 19.99% of the Voting Power, and (iii) at all times following the Subsequent Common Closing and the Requisite Stockholder Approval, 24% of the Voting Power (collectively, the “Ownership Limitations”), or (B) make any public announcement with respect to, or offer, seek, propose or indicate an interest in, any merger, consolidation, business combination, tender or exchange offer, recapitalization, reorganization or purchase of more than 50% of the assets, properties or securities of the Company, or enter into discussions, negotiations, arrangements, understandings, or agreements regarding the foregoing.

● Exclusivity: Prior to the Subsequent Common Closing, (i) without Foxconn’s consent, the Company had agreed not to (A) encourage, solicit, initiate or facilitate any Acquisition Proposal (as defined below), (B) enter into any agreement with respect to any Acquisition Proposal or that would cause it not to consummate any of the Investment Transactions or (C) participate in discussions or negotiations with, or furnish any information to, any person in connection with any Acquisition Proposal, and (ii) the Company had agreed to inform Foxconn of any Acquisition Proposal that it received. An “Acquisition Proposal” means any proposal for any (i) sale or other disposition by merger, joint venture or otherwise of assets of the Company representing 30% or more of the consolidated assets of the Company, (ii) issuance of securities representing 15% or more of any equity securities of the Company, (iii) tender offer, exchange offer or other transaction that would result in any person beneficially owning 15% or more of any equity securities of the Company, (iv) merger, dissolution or similar transaction involving the Company representing 30% or more of the consolidated assets of the Company, or (v) combination of the foregoing. As discussed herein, the Company sought and received approval from the Bankruptcy Court to pursue a sale of some, all, or substantially all of its operating assets, which resulted in the closing of the transactions contemplated by the LandX Purchase Agreement on October 27, 2023, of which Foxconn received notice and did not object, other than with respect to the cure amount owed to Foxconn in connection with potential assumption and assignment of the CMA. The Company had also agreed that, while the Preferred Stock is outstanding, it would not put in place a poison pill arrangement that applies to Foxconn to the extent of its ownership of shares of Preferred Stock or Class A common stock that it acquired from the Company as of the date such arrangement is adopted by the Company.

● Voting Agreement and Consent Rights: The terms of the Investment Agreement and Certificate of Designations provide that, until the later of (i) December 31, 2024 and (ii) 90 days after the first day on which no Foxconn-appointed director serves on the Board and Foxconn no longer has a right to appoint any directors, Foxconn agreed to vote all of its shares of Class A common stock and Preferred Stock (to the extent then entitled to vote) in favor of each director recommended by the Board and in accordance with any recommendation of the Board on all other proposals that are the subject of stockholder action (other than any action related to any merger or business combination or other change of control transaction or sale of assets). So long as the 25% Ownership Requirement is satisfied, without the consent of the holders of at least a majority of the then-issued and outstanding Preferred Stock (voting as a separate class), the Company agreed not to (i) amend any provision of the Charter or the Company’s amended and restated bylaws in a manner that would adversely affect the Preferred Stock or increase or decrease the number of shares of Preferred Stock, (ii) authorize or create, or increase the number of shares of any parity or senior securities other than securities on parity with the Preferred Stock with an aggregate liquidation preference of not more than $30 million, (iii) increase the size of the Board, or (iv) sell, license or lease or encumber any material portion of the Company’s hub motor technology and production line other than in the ordinary course of business.

● Participation Rights: If Foxconn were to complete the Subsequent Common Closing, then after such closing and until Foxconn no longer has the right to appoint a director to the Board, other than with respect to certain excluded issuances, Foxconn would have the right to purchase its pro rata portion of equity securities proposed to be sold by the Company; provided, that the Company is not required to sell Foxconn securities if the Company would be required to obtain stockholder approval under any applicable law or regulation.

The Investment Agreement also contains closing conditions. The Investment Agreement provides for termination by mutual agreement of the parties to amend the Investment Agreement to allow such a termination, and cannot otherwise be terminated by either party following the Initial Closing.

Registration Rights Agreement

On November 22, 2022, the Company and Foxconn entered into the Registration Rights Agreement pursuant to which the Company agreed to use reasonable efforts to file and cause to be declared effective a registration statement with the SEC registering the resale of the Class A common stock issued to Foxconn, including any shares of Class A common stock issuable upon conversion of the Preferred Stock under the Investment Agreement, which was to be filed promptly following May 7, 2023. Foxconn also has customary demand and piggyback registration rights with respect to the shares of Class A common stock issued or issuable under the Investment Agreement, and indemnification rights. The Company filed a registration statement on Form S-3 with the SEC on May 11, 2023; however, has not sought to have the filing declared effective by the SEC in light of the Chapter 11 Cases, the Foxconn Litigation, the delisting of the Class A common stock and other factors.

Sales Agreement and ATM Offering

On November 7, 2022, the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which the Company could offer and sell up to approximately 50.2 million shares of our Class A common stock, from time to time through Jefferies (the “ATM Offering”). During 2022, Jefferies sold approximately 7.8 million shares of Class A common stock, which resulted in net proceeds of $12.4 million. There were no shares sold in the year ending December 31, 2023. As a result of our delisting from Nasdaq, we do not anticipate any transactions under the ATM Offering in the future.

We entered into an equity purchase agreement (“Equity Purchase Agreement”) with YA II PN, LTD. (“YA”) on July 23, 2021, pursuant to which YA had committed to purchase up to $400 million of our Class A common stock, at our direction from time to time, subject to the satisfaction of certain conditions. The Equity Purchase Agreement was terminated on November 22, 2022. During the year ended December 31, 2022, we issued 17.5 million shares to YA and received $40.4 million cash, net of equity issuance costs.

During the year ended December 31, 2023, there were no shares issued to YA under the Equity Purchase Agreement. During the year ended December 31, 2022, we issued 17.5 million shares to YA and received $40.4 million cash, net of equity issuance costs. During the year ended December 31, 2021, inclusive of the 0.4 million Commitment Shares, we issued 9.6 million shares to YA and received $49.4 million cash, net of equity issuance costs.