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OFFON

LORDSTOWN MOTORS CORP.

(RIDE)
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LORDSTOWN MOTORS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/13/2021 | 07:05am EDT

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 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" above and Item 1A. Risk Factors in our Form 10-K/A and this Form 10-Q for a discussion of these risks and uncertainties.

Our mission is to be a catalyst in the world's transition to sustainable energy. We design, develop, and intend to manufacture the Endurance, the first electric full-size pickup truck targeted for sale to fleet customers. In addition, we intend to leverage our technologies by investing in the development additional all-electric vehicles geared for the commercial market. Located in Lordstown, Ohio, the Lordstown Complex spans 6.2 million square feet and is in a near-production-ready state. We also intend to build company-owned service centers where we offer maintenance, repair, parts, and other services related to our products.

Since inception, we have been developing our flagship vehicle, the Endurance, an electric full-size pickup truck. We introduced the Endurance in June 2020 and have been building beta vehicles during the first half of 2021. We are on track to begin early production units in the late September 2021 and complete vehicle validation and regulatory approvals in December 2021 to January 2022. We expect this will be followed by deployments to selected early customers in the first quarter of 2022 in advance of commercial production and launch in the second quarter of 2022, with the ramp planned to accelerate in the second half of 2022, subject to receipt of adequate financing.

This responsible commercial plan is important for three reasons: 1) to ensure that we provide our fleet customers with the time necessary to experience and then build out the necessary charging infrastructure for larger deployments and for them to gain experience with the Endurance's performance in the real-world; 2) to manage our supply chain challenges prudently, particularly as shortages and COVID impacts persist through the next few quarters; and 3) to fortify our capital position to fully support our commercial launch.

Our goal is to achieve a leadership position as an OEM vehicle supplier to the commercial fleet industry. We intend to do so by focusing on the following strengths:

a highly experienced and proven senior management team with over 100 years of

? collective experience in the automotive and electric vehicle areas from

prominent OEMs, including Workhorse Group, Tesla, Karma, Toyota, GM, Hyundai

and Volkswagen;

the near-production-ready, strategically located manufacturing Lordstown

? Complex, that we believe offers significant advantages in terms of the time and

cost necessary to reach full-scale commercial production;

approximately 800,000 square feet within the plant complex allocated for

? in-wheel hub motor and lithium-ion battery pack production and assembly, which

together will account for our propulsion production;

the unique and efficient design of the Endurance incorporating advanced

? technology and engineering, including the use of in-wheel hub motors resulting

in what we believe will be the fewest moving parts of any comparable vehicle

currently available; and

a safe, reliable and efficient vehicle, designed for and targeted to the needs

? of the fleet market, that we believe will offer a significantly reduced total

cost of ownership and compelling value as compared to currently available

   alternatives.


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We are also evaluating whether there are opportunities to strategically leverage the value of our facility and technologies through potential relationships with third parties as a means to generate financing and revenues. Such relationships could include, but are not limited to, third parties building vehicles in our facility, us building vehicles for third parties or sales of our technologies, such as battery packs or hub motors, to third parties.

Results of Operations for the three months ended June 30, 2021 and 2020

                                 (in thousands)




                                     Three months ended     Three months ended
                                       June 30, 2021          June 30, 2020
Net sales                           $                  -   $                  -
Operating expenses
Selling and administrative expenses               33,793                  5,155
Research and development expenses                 76,544                  4,786
Total operating expenses                         110,337                  9,941
Loss from operations                           (110,337)                (9,941)
Other income (expense)
Other income                                       1,877                  2,346
Interest income (expense)                            260                  (363)
Loss before income taxes                       (108,200)                (7,958)
Income tax expense                                     -                      -
Net loss                            $          (108,200)   $            (7,958)



Selling and Administrative Expense

Selling and administration expenses increased $28.6 million during the three months ended June 30, 2021 compared to 2020 as Lordstown ramped up organizational activities in 2021.

Research and Development Expense

Research and development expenses increased $71.8 million during the three months ended June 30, 2021 compared to 2020 as Lordstown continued design and development work on the Endurance.

Results of Operations for the six months ended June 30, 2021 and 2020

                                 (in thousands)




                                     Six months ended      Six months ended
                                      June 30, 2021         June 30, 2020
Net sales                           $                -    $                -
Operating expenses
Selling and administrative expenses             48,187                 8,677
Research and development expenses              168,356                13,254
Total operating expenses                       216,543                21,931
Loss from operations                         (216,543)              (21,931)
Other (expense) income
Other (expense) income                        (17,255)                 2,472
Interest income (expense)                          387                 (364)
Loss before income taxes                     (233,411)              (19,823)
Income tax expense                                   -                     -
Net loss                            $        (233,411)    $         (19,823)


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Selling and Administrative Expense

Selling and administration expenses increased $39.5 million during the six months ended June 30, 2021 compared to 2020 as Lordstown ramped up organizational activities in 2021.

Research and Development Expense

Research and development expenses increased $155.1 million during the six months ended June 30, 2021 compared to 2020 as Lordstown continued design and development work on the Endurance.

Liquidity and Capital Resources

In 2021, our research and development expenses and capital expenditures have increased significantly over 2020 levels to build capacity and invest in additional products and technologies, and are higher than anticipated due to additional spending needed to (1) complete our beta program, (2) conduct vehicle validation tests, (3) secure necessary parts/equipment for production, and (4) utilize third-party engineering resources. This was due in part to the stress that the COVID-19 pandemic has put on the global automotive supply chain. As we have engaged potential third-party suppliers for certain components, the pricing and/or availability being offered was not consistent with our expectations and timing, so we made a strategic decision to bring development of certain components, such as the frame, in house. While this decision requires more upfront spending and the need for additional funding from future financing, we believe the return on our investments will allow us to control key components and the projected timelines that we establish.

In addition, in order to secure adequate supply of battery cells, we have agreements with certain suppliers which obligate us to purchase a minimum volume at approximately $16.3 million, $139.4 million and $273.6 million in 2021, 2022, and 2023, respectively, subject to change for increases in raw material pricing.

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

We had cash and cash equivalents of approximately $365.9 million and an accumulated deficit of $367.9 million at June 30, 2021 and a net loss of $233.4 million for the six months ended June 30, 2021. Our ability to continue as a going concern is dependent on our ability to complete the development of our electric vehicles, obtain regulatory approval, begin commercial scale production and launch the sale of such vehicles.

We believe that our current level of cash and cash equivalents are not sufficient to fund commercial scale production and the launch of sale of such vehicles. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of the unaudited condensed consolidated financial statements included in this report.


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In an effort to alleviate these conditions, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners or through obtaining credit from government or financial institutions. As part of our funding efforts, on July 23, 2021, the Company entered into an equity purchase agreement with YA II PN, LTD. ("YA"), pursuant to which YA has 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 actual amount that we raise under this facility will depend on market conditions and other financing alternatives that we are exploring, as well as limitations in the agreement. In particular, at current market prices of our shares of Class A common stock, without stockholder approval, the Exchange Cap provision would limit the amount of funds we are able to raise to significantly less than the $400 million commitment under the Purchase Agreement. See Note 9 to the to the condensed consolidated financial statements for more information

As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. As a result of these uncertainties, and notwithstanding management's plans and efforts to date, there continues to be substantial doubt about our ability to continue as a going concern.

We accepted an invitation from the U.S. Department of Energy to start the process toward securing an ATVM loan. If we are successful in completing this stage, we may receive a term sheet, but we cannot guarantee we will reach that stage or be approved for a loan or provide any assurance as to the amount or timing of any loan that we may receive. Broadly speaking, prior ATVM loans were offered at Treasury rates for interest expense, required that the proceeds be spent on plant retooling or R&D activities and have imposed initial cash collateral requirements. We are currently in the due diligence phase and there can be no assurance when or if we will receive an ATVM loan. We are also pursuing tax credits and grants across multiple jurisdictions.

Expected Endurance production in 2021 will be limited and we will need additional funding in the near term to ramp for 2022 production and to establish higher volume, sustained capacity and generally to reach full scale commercial production as contemplated by our business plan. In order to manage liquidity, expenditures will continue at a reduced pace and will relate primarily to retooling plans that will allow us to provide the limited capacity by the end of 2021 for testing and certifications and to demonstrate the capabilities of the Endurance to customers and financing sources.

If we are unable to raise additional capital in the near term, our operations and production plans will be scaled back or curtailed and, if any funds raised are insufficient to provide a bridge to full commercial production and generation of sufficient funds from operations, our successful operation and growth would be impeded.

Cash Flows


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



                                 (in thousands)


                                         Six months ended        Six months ended
                                          June 30, 2021            June 30, 2020
Cash used by operating activities       $        (171,374)    $              (11,388)
Cash (used by) provided by investing
activities                              $        (175,601)    $                 2,396
Cash provided by financing
activities                              $          365,900    $                   585




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Net Cash Used by Operating Activities

For the six months ended June 30, 2021 compared to 2020, net cash used by operating activities increased by $160.0 million. This increase was primarily due to a $213.6 million increase of net operating loss offset by changes in working capital, primarily a significant increase in accounts payable and accrued expenses as we have ramped up our research and development and other spending.

Net Cash Used by Investing Activities

For the six months ended June 30, 2021 compared to 2020, cash used by investing activities increased $178.0 million primarily due to capital spending in 2021.

Net Cash Provided by Financing Activities

For the six months ended June 30, 2021 compared to 2020, cash flows from financing activities increased $75.7 million primarily due to $82.0 million of cash proceeds from exercise of warrants net of a $5.3 million decrease in proceeds from the issuance of stock.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2021. 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 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.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 3,34 M - -
Net income 2021 -445 M - -
Net Debt 2021 26,1 M - -
P/E ratio 2021 -2,02x
Yield 2021 -
Capitalization 888 M 888 M -
EV / Sales 2021 274x
EV / Sales 2022 1,70x
Nbr of Employees 320
Free-Float 63,0%
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Number of Analysts 8
Last Close Price 5,02 $
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Managers and Directors
Daniel A. Ninivaggi Chief Executive Officer & Director
Rich Schmidt President
Rebecca A. Roof Chief Financial Officer
Angela Strand Boydston Non-Executive Chairman
Darren C. Post Vice President-Engineering
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