| Item 5.02 | Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
As previously disclosed, pursuant to the Investment
Agreement (the “Investment Agreement”) entered into by Lordstown Motors Corp. (the “Company”) on November 7,
2022 with Foxconn Ventures Pte. Ltd., an affiliate of global technology company Hon Hai Technology Group (“Foxconn”),
Foxconn has the right to appoint two designees to the Board of Directors of the Company (the “Board”) upon consummation of
a second closing of the sale of Class A common stock to Foxconn (the “Subsequent Common Closing”). The completion of
the Subsequent Common Closing and Series A Convertible Preferred Stock (“Preferred Stock”) funding (the “Subsequent
Preferred Funding”) contemplated by the Investment Agreement would provide critical liquidity for the Company’s operations.
At the Subsequent Common Closing, Foxconn is required
to purchase approximately 26.9 million shares of Class A common stock for approximately $47.3 million. The Subsequent Common Closing
is to occur within 10 business days following the parties’ receipt of a written communication from the U.S. government’s Committee
on Foreign Investment in the United States (“CFIUS”) that CFIUS has concluded that there are no unresolved national security
concerns with respect to the transactions (“CFIUS Clearance”) and subject to satisfaction of the other conditions set forth
in the Investment Agreement (which the Company believes have been or will be satisfied). CFIUS Clearance was received on April 24,
2023, which means the Subsequent Common Closing was to occur on or before May 8, 2023. The Company was, as of May 8, 2023, and
remains ready, willing and able to complete the Subsequent Common Closing.
As also previously disclosed, on April 21, 2023, the Company received
a letter from Foxconn (the “Foxconn Notice”) (1) asserting that the Company was in breach of the Investment Agreement
due to its previously disclosed receipt of a notice (the “Nasdaq Notice”) from the Listing Qualifications Department of The
Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was no longer in compliance with the $1.00 minimum bid price
requirement for continued listing on The Nasdaq Global Select Market (the “Bid Price Requirement”) and (2) purporting
to terminate the Investment Agreement if the breach is not cured within 30 days. In response, the Company notified Foxconn in writing
on April 25, 2023 that (1) it believes the breach allegations in the Foxconn Notice are without merit, (2) the Investment
Agreement, by its terms, does not permit Foxconn to terminate it following the initial closing that occurred in November 2022 (the
“Initial Closing”), and (3) in any event, Foxconn cannot exercise termination rights because Foxconn has breached the
Investment Agreement by failing to use necessary efforts to agree upon the EV program budget and EV program milestones to facilitate the
Subsequent Preferred Funding.
On May 1, 2023, after having publicly disclosed the Foxconn Notice,
the Company received correspondence from Foxconn’s counsel (the “Second Foxconn Notice” and, together with the Foxconn
Notice, the “Foxconn Notices”) (1) indicating that Foxconn agrees that it is unable to terminate the Investment Agreement
after the Initial Closing, (2) asserting that the Nasdaq Notice constitutes a breach of a representation that is a condition to the
Subsequent Common Closing and, therefore, Foxconn is not obligated to consummate the Subsequent Common Closing until such breach is cured,
and (3) asserting that the Company’s claims regarding Foxconn’s breach of the Investment Agreement with respect to the
EV program and Subsequent Preferred Funding are without merit.
The Company has proposed for stockholder approval at the Company’s
annual meeting to be held on May 22, 2023 an amendment to its second amended and restated certificate of incorporation, as amended,
that would provide the Board with the ability to effectuate a reverse stock split at a ratio ranging from 1:3 to 1:15, in order to satisfy
the Bid Price Requirement. As noted above, Foxconn has taken the position that the fact that the Company has received the Nasdaq Notice
is a failure of a condition to the Subsequent Common Closing. The Company rejects that position. The Company continues to believe that the breach allegations
by Foxconn are without merit, and Foxconn was obligated to complete the Subsequent Common Closing on or before May 8, 2023 and remains
obligated to complete such closing. The Company intends to enforce its contractual rights and remedies under the Investment Agreement,
including with respect to Foxconn’s breach regarding the EV Program budget and EV Program milestones, its funding obligations and
its knowing and intentional efforts to invalidly terminate the Investment Agreement without any basis and withhold critical funding to
the material detriment of the Company.
The Company is in discussions with Foxconn to seek a resolution regarding
these matters; however, to date, the parties are at an impasse and Foxconn did not close the Subsequent Common Closing on May 8,
2023 and Foxconn did not provide its approval of the EV Program budget and EV Program milestones by May 7, 2023. No assurances can
be given that the parties will reach a resolution of these matters or that any such resolution will allow the Subsequent Common Closing
or the Subsequent Preferred Funding to occur on a timely basis. If the Subsequent Common Closing is further delayed or such fundings do
not occur, the Company will be deprived of critical funding necessary for its operations. The Company is evaluating its legal and financial
alternatives in the event a resolution is not reached.
On May 7, 2023, in anticipation of and subject
to consummation of the Subsequent Common Closing, the Board increased the size of the Board from nine to 11 members and appointed the
following individuals designated by Foxconn: (1) Jerry Hsiao to serve as a Class I director with a term ending as of the annual
meeting of stockholders to be held in 2024 and (2) Liting Cai to serve as a Class II director with a term ending as of the annual
meeting of stockholders to be held in 2025, in each case until his successor is duly elected and qualified.
Mr. Hsiao, age 51, has served as Chief Product
Officer of Foxconn Technology Group, a global electronics manufacturer, since August 2019. From August 2018 to July 2019,
Mr. Hsiao served as Vice President & Chief Global Product Management of HMD Global, a mobile phone manufacturer. Prior to
that, Mr. Hsiao served as Vice President of Product Management & Product Portfolio of Motorola Mobility, a mobile phone
and electronics manufacturer, from April 2015 to May 2018. He is well qualified to serve as a director due to his experience
and strong knowledge base of mobile and electric vehicle products, technology trends, business strategy, supply chain and global operations.
Mr. Cai, age 48, currently serves as
Vice President and Division Head of the EV and Renewable Energy Division of Business Group D of Foxconn Technology Group, a global
electronics manufacturer, and has served in various other roles since 2003. Mr. Cai also currently serves as Vice President of
PCE Technology Inc., a distributor of computers and computer equipment and software, and a subsidiary of Foxconn, since
January 2018. Mr. Cai also served as an Officer of InFocus Corp., a developer of projectors, interactive displays and
software, until January 2020. He is well qualified to serve as a director due to his experience in the electronic,
manufacturing and information technology industries.
Foxconn will relinquish one Board seat if it does
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 Agreement and will relinquish its other
Board seat if it does not continue to beneficially own at least 25% of the number of shares of Class A common stock (on an as-converted
basis) acquired by Foxconn in connection with the Investment Agreement.
Except for the relationships between the Company
and Foxconn discussed above, in the Company’s definitive proxy statement for its 2023 annual meeting of stockholders filed with
the Securities and Exchange Commission (“SEC”) on April 11, 2023 and the Company’s subsequent filings with the
SEC, neither Mr. Hsiao nor Mr. Cai has any relationships with the Company.
Forward-Looking Statements
This report
includes forward looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These statements may be identified by words such as “feel,” “believes,” expects,”
“estimates,” “projects,” “intends,” “should,” “is to be,” or the negative
of such terms, or other comparable terminology. Forward-looking statements are statements that are not historical facts. Such forward-looking
statements are not guarantees of future performance and are subject to risks and uncertainties, which could cause actual results to differ
materially from the forward-looking statements contained herein due to many factors, including but not limited to those described in the
“Risk Factors” and other sections of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”),
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form 10-Q”) and in subsequent
reports filed with the SEC, as well as the following:
| · | our ability to continue as a going concern, which requires
us to manage costs and obtain significant additional funding; |
| · | our ability to timely resolve our dispute with Foxconn regarding
the matters asserted in the Foxconn Notices and to receive the proceeds we expected under the Investment Agreement, and risks related
to the substantial costs and diversion of personnel’s attention and resources due to these matters; |
| · | the impact of our non-compliance with Nasdaq’s minimum
bid price requirement and our ability to regain compliance as a result of the reverse stock split which we have proposed for approval
by our stockholders at our annual meeting; |
| · | our ability to timely obtain necessary funding to continue
our operations; |
| · | our ability to continue production of the Endurance; |
| · | the impact of the uncertainty with respect to our relationship
with Foxconn and our prospects for additional funding on our supplier arrangements and on our employees; |
| · | the cost and other impacts of contingent liabilities, such
as current and future litigation, claims, regulatory proceedings, investigations, complaints, product liability claims and stockholder
demand letters, and availability of insurance coverage and/or adverse publicity with respect to these matters, which may have a material
adverse effect, whether or not successful or valid, on our liquidity position, market price of our stock, cash projections, business
prospects and ability and timeframe to obtain financing; |
| · | our ability to effectively implement and realize the benefits
from our transactions and agreements with Foxconn, if pending disputes are resolved, which depend on many variables that include establishment
of the EV program budget and EV program milestones and satisfaction of such milestones and other conditions required to be met at the
time of funding, and our ability to utilize the designs, engineering data and other foundational work of Foxconn, its affiliates, and
other members of the Mobility-in-Harmony (MIH) consortium as well as other parties, and that all such parties adhere to timelines to
develop, commercialize, industrialize, homologate and certify a vehicle in North America, along with variables that are out of the parties’
control, such as technology, innovation, adequate funding, supply chain and other economic conditions, competitors, customer demand and
other factors; |
| · | our ability to successfully address known and unknown performance,
quality, supply chain and other launch-related issues, some of which are or may be material or may require additional recalls or retrofits
of the Endurance, and continue commercial production and sales of the Endurance; |
| · | the risk that additional elements of our technology, including
our hub motors, do not perform as expected in the near or longer-term; |
| · | our ability to maintain appropriate supplier relationships,
including for our critical components, and the risks with respect to the terms of such arrangements due to our limited production volumes
and any minimum quantity requirements, and our ability to establish our supply chain to support new vehicle programs; |
| · | our ability to facilitate cost-effective production of the
Endurance, which requires a strategic partner and significant additional capital, including to invest in the tooling to lower the bill
of materials (“BOM”) cost, continue design enhancements and enable scaled production; |
| · | our ability to execute our business plan, strategic alliances
and other opportunities, including development and market acceptance of our planned products; |
| · | risks related to our limited operating history, the execution
of our business plan and the timing of expected business milestones, including the ability to effectively utilize existing tooling, a
substantial portion of which is soft tooling not intended for long term production; |
| · | our ongoing ability to secure and receive vehicle components
from our supply chain in sufficient quantities to meet production volume plans and of acceptable quality to meet vehicle requirements; |
| · | the availability and cost of raw materials and components,
particularly in light of current supply chain disruptions and labor concerns, inflation, and the consequences of any shortages on our
ability to produce saleable vehicles; |
| · | our ability to successfully identify and implement actions
to significantly lower the Endurance BOM cost, including identifying a strategic partner to scale the Endurance; |
| · | our ability to obtain binding purchase orders and build customer
relationships, and the impact of the uncertainty regarding our relationship with Foxconn has on our ability to obtain binding purchase
orders; |
| · | our ability to deliver on the expectations of customers with
respect to the pricing, performance, quality, reliability, safety and efficiency of the Endurance and to provide the levels of after
sale service, support and warranty coverage that they will require, and the impact of performance issues, production pauses and delays
and recalls on consumer confidence and interest in our vehicles; |
| · | our ability to conduct business using a direct sales model,
rather than through a dealer network used by most other original equipment manufacturers; |
| · | the effects of competition on our ability to market and sell
vehicles; |
| · | our ability to attract and retain key personnel and hire
additional personnel particularly in light of the uncertainty regarding our Foxconn relationship; |
| · | the pace and depth of electric vehicle adoption generally; |
| · | our expectations regarding our ability to obtain and maintain
intellectual property protection and not infringe on the rights of others; |
| · | our ability to obtain required regulatory approvals and comply
with changes in laws, regulatory requirements, interpretations of existing laws and governmental incentives; |
| · | the impact of health epidemics, including the COVID-19 pandemic,
on our business, the other risks we face and the actions we may take in response thereto; |
| · | cybersecurity threats and breaches and compliance with privacy
and data protection laws; |
| · | failure to timely implement and maintain adequate financial,
information technology and management processes and controls and procedures; |
| · | the possibility that we may be adversely affected by other
economic, geopolitical, business and/or competitive factors, including rising interest rates, fuel and energy prices and the direct and
indirect effects of the war in Ukraine. |
As a result of these uncertainties, there is substantial doubt regarding
our ability to continue as a going concern. Our ability to obtain additional financing is extremely limited under current market conditions,
in particular for our industry, and also influenced by other factors including the significant amount of capital required, the Foxconn
dispute, the fact that the BOM cost of the Endurance is currently, and expected to continue to be, substantially higher than our selling
price, uncertainty surrounding the performance of any vehicle produced by us, meaningful exposure to material losses and costs related
to ongoing litigation and the SEC investigation, the Nasdaq Notice, the market price of our stock and potential dilution from the issuance
of any additional securities. If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue
operating as planned, identify other sources of substantial funding, identify a strategic partner and resolve our significant contingent
liabilities, we may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the
United States Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders,
is uncertain and 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, if any.
Additional information on potential
factors that could affect the Company and its forward-looking statements is included in the Form 10-K, Form 10-Q and subsequent
filings with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement. Any forward-looking
statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement
to reflect events or circumstances after the date of this report.