Lordstown received what appeared to be a lifeline from Foxconn last November, in which the Taiwanese tech giant would invest as much as $170 million through a purchase of preferred stock and common shares. That deal appears to be falling through according to a new filing with the U.S. Securities and Exchange Commission (SEC), and as a result Lordstown is on the brink of bankruptcy, again.
According to the 8-K filing with the SEC published on May 1, 2023, Lordstown says it received a letter from Foxconn on April 21 alleging it was in breach of its agreement after receiving a delisting notice from the NASDAQ stock exchange after its stock price dropped below the $1.00 minimum requirement. In its letter Foxconn said that it would move to terminate the agreement if the alleged breach was not corrected within 30 days.
Lordstown of course has a different view, saying in its filing that Foxconn’s allegations are without merit and that the company cannot terminate the agreement, in part because it has breached the agreement, not Lordstown.
“The Company has notified Foxconn 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, 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 funding of the additional Preferred Stock investment.”
Lordstown is not giving up, saying it is seeking a resolution for Foxconn to hold up its end of the agreement, however the damage may have been done and the company says there is “substantial doubt” about its ability to continue operating.
“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…”
Even if Lordstown is able to resolve this issue with Foxconn, or find additional funding from other investors, they still face an uphill battle. In February they announced they were halting production and deliveries of the Endurance pickup truck “to address quality issues,” in addition to a voluntary recall issued for Endurance “to address a specific electrical connection issue that could result in a loss of propulsion while driving.”