Lordstown Motors Remains Concerned About Ability to Stay in Business, CFO Says

Lordstown Motors Of Corp.

Their CFO said their ability to stay in business for at least another year remains in doubt until more funding is secured and market value increases, their CFO said. know after the electric truck maker sold its factory to raise cash.

Lordstown, which plans to launch its first car this year and has not yet generated any revenue, issued a warning of concern in June 2021, stoking worries about financial health their.

“It will stay there until we raise enough capital and achieve a higher market cap,” Chief Financial Officer Adam Kroll said Monday, referring to the warning of concern. An enterprise is considered going concern unless management intends to liquidate or cease operations.

Last week, the company said it closed a sale of its factory in Lordstown, Ohio, to affiliates of contract assembler Foxconn Technology Group..

Lordstown received $230 million for the plant, formerly the manufacturing site of General Motors Co., and was reimbursed approximately $27 million in operating and expansion costs by Taipei-based Foxconn, which had previously paid bought about $50 million of shares in Lordstown.

Lordstown, which will go public in 2020 through a merger with a special purpose acquisition company, is in the midst of crash testing for the Endurance, its first vehicle and intended for launch. commercial production in the third quarter.

Foxconn, formally known as Hon Hai Precision Industry Co., will build Endurance for Lordstown and has committed $100 million to a new joint venture between the two companies. The pledge includes a $45 million loan to Lordstown.

“We are no longer a horse or a trick,” said Mr. Kroll, and indicated plans to develop more vehicles with Foxconn.

Lordstown needs to raise an additional $150 million in capital before the end of the year to execute on its 2022 plans, which include building about 500 vehicles, Kroll said. The company aims to have at least $75 million to $100 million in cash on its balance sheet by the end of the year, he said.

The company held cash and cash equivalents of $203.6 million at the end of the first quarter, down from $587 million a year earlier. Lordstown recorded a loss of $89.6 million for the quarter, compared with a loss of $125.2 million in the same period a year earlier.

Lordstown can raise capital through a public or private offering to institutional investors, Kroll said, adding that could involve a sale of debt or equity. “There may be other things that could involve more strategic partners,” he said.

Management is working hard towards the commercial launch of Endurance, said Kroll, adding that it will be an important milestone for the company. “A big part of the cash fundraising is starting to roll out,” he said.

Lordstown could face challenges raising the capital it needs amid the recent market sell-off, which has hit tech and other stocks heavily. The company’s shares closed at $2.27 on Monday, down 7.4% on the day and down 39% since the start of the year. Its market capitalization stands at $448.1 million.

“We are definitely in a risk-free environment for EV startups,” said Mr. Kroll. “I can’t predict if or when that might change.”

Analysts remain skeptical of the company’s prospects, pointing to issues including fundraising and changing investor sentiment. “Finally, we see the way forward for [the company] increasingly complex,” said Emmanuel Rosner, analyst at Deutsche Bank,

wrote in a note to clients last week.

Lordstown last year disclosed investigations by the Securities and Exchange Commission and the Department of Justice related to its SPAC trading and its representation of a pre-order for Endurance.

Earlier this month, the company said it did not have enough cash to execute its business plan for the year. It said the situation raised significant concerns about its ability to continue as a regular concern.

Lordstown said in its quarterly report: “As we seek additional funding sources, there is no guarantee that such funding will be available for use on favorable terms or in any other way. what”. The company also cited higher raw material costs and uncertainty around regulatory approvals as risk factors, among other things.

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Edmund DeMarche

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