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As filed with the U.S. Securities and Exchange
Commission on August 4, 2023.
Registration No. 333-272793
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
Amendment
No. 3
to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_________________________________________
Nxu, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
3711 |
92-2819012 |
(State or other jurisdiction of incorporation
or organization) |
(Primary Standard Industrial Classification
Code Number) |
(I.R.S. Employer Identification No.) |
|
|
|
|
1828 N Higley Rd., Suite 116
Mesa, Arizona 85205
(760) 515-1133 |
|
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
|
|
Mark Hanchett
Chief Executive Officer
1828 N Higley Rd., Suite 116
Mesa, Arizona 85205
(760) 515-1133
|
|
(Name, address, including zip code, and telephone number, including area code, of agent for service) |
|
|
|
|
|
Copies to: |
|
Michael J. Blankenship
James R. Brown
Winston & Strawn LLP
800 Capitol St., Suite 2400
Houston, Texas 77002-2925
(713) 651-2600 |
|
M. Ali Panjwani
Pryor Cashman LLP
7 Times Square
New York, New York 10036
(212) 421-4100 |
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”)
check the following box: x
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Large accelerated filer |
o |
Accelerated filer |
o |
Non-accelerated filer |
x |
Smaller reporting company |
x |
|
|
Emerging growth company |
x |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 7(a)(2)(B) of the Securities Act.
The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until
the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
The information in this prospectus is not complete
and may be changed. The Company may not sell the securities until the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell the securities and is not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED
AUGUST 4, 2023
PRELIMINARY PROSPECTUS
Nxu, Inc.
Up to 22,108,843 Units
(each Unit consists of One Share of Class A Common Stock
or
One Pre-Funded Warrant to Purchase One Share of Class A Common
Stock and
One Warrant to Purchase Two Shares of Class
A Common Stock)
44,217,686 Shares of Class A Common Stock Underlying the Warrants
_____________________________
We
are offering on a best-efforts basis up to 22,108,843 units (the “Units”), each
unit consisting of (i) one share of our Class A common stock, $0.0001 par value per share
(the “Class A common stock”), and (ii) one warrant to purchase two shares of
our Class A common stock (the “Warrants”).
Each Warrant is exercisable at an exercise
price of $0.5880 per share (100% of the offering price per Unit). The Warrants will be immediately exercisable and will expire three
(3) years after the date of issuance. We are offering each Unit at an assumed public offering price of $0.5880 per Unit, which represents
the closing price of our Class A common stock on Nasdaq on June 16, 2023. The actual public offering price per Unit will be determined
at the time of pricing among us, the Placement Agents (as defined below) and the investors in this offering, and may be at a discount
to the current market price of our Class A common stock. Therefore, the assumed public offering price used throughout this prospectus
may not be indicative of the final offering price.
We are also offering to each investor of Units that would otherwise
result in the investor’s beneficial ownership exceeding 4.99% of our outstanding Class A common stock immediately following the
consummation of this offering the opportunity to invest in Units consisting of one pre-funded warrant to purchase one share of Class A
common stock (“Pre-Funded Warrant”) (in lieu of one share of Class A common stock) and one Warrant. Subject to limited exceptions,
a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrants if the holder, together with
its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%)
of the Class A common stock outstanding immediately after giving effect to such exercise. Each Pre-Funded Warrant will be exercisable
for one share of Class A common stock. The purchase price of each Unit including a Pre-Funded Warrant will be equal to the price per Unit
including one share of common stock, minus $0.0001, and the exercise price of each Pre-Funded Warrant will equal $0.0001 per share. The
Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time until all
of the Pre-Funded Warrants are exercised in full. For each Unit including a Pre-Funded Warrant purchased (without regard to any limitation
on exercise set forth therein), the number of Units including a share of Class A common stock we are offering will be decreased on a one-for-one
basis.
The Units will be offered at a fixed price and are expected
to be issued in a single closing. There is no minimum number of Units to be sold or minimum aggregate offering proceeds for this offering
to close. We expect this offering to be completed not later than two business days following the commencement of this offering and we
will deliver all securities issued in connection with this offering delivery versus payment (“DVP”)/receipt versus payment
(“RVP”) upon our receipt of investor funds. Accordingly, neither we nor the Placement Agents have made any arrangements to
place investor funds in an escrow account or trust account since the Placement Agents will not receive investor funds in connection with
the sale of securities offered hereunder.
We are also registering the Class A common stock issuable from
time to time upon exercise of the Warrants and Pre-Funded Warrants included in the Units offered hereby. See “Description of Securities”
in this prospectus for more information.
Our Class A common stock is listed on the Nasdaq Stock Market
LLC (“Nasdaq”) under the symbol “NXU.” On July 26, 2023, the last reported sales price of our Class A common stock
as reported on Nasdaq was $0.57 per share.
The Units have no stand-alone rights and will not be issued
or certificated. The shares of Class A common stock and the Warrants can only be purchased together in this offering but the securities
contained in the Units will be issued separately. There is no established public trading market for the Units, Pre-Funded Warrants or
Warrants and we do not expect markets to develop. Without an active trading market, the liquidity of these securities will be limited.
We are an “emerging growth company” as that term
is defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this
prospectus and may elect to do so in future filings.
Our Company has a dual class structure. Our Class A common stock,
which is the stock we are offering by means of this prospectus, has one vote per share and our Class B common stock, $0.0001 par value
per share (the “Class B common stock” and together with the Class A common stock, “common stock”), has no economic
rights and has 10 votes per share. See “Risk Factors – The dual class structure of our common stock has the effect of concentrating
voting power with members of our management team, which will limit your ability to influence the outcome of important transactions, including
a change in control” and “Risk Factors – We cannot predict the impact our dual class structure may have on our stock
price” for more information. For more information on our capital stock, see the section titled “Description of Securities.”
Our
Class B common stock is owned solely by our Chief Executive Officer, Mark Hanchett, and our
President, Annie Pratt, who own 25,003,676 and 9,271,696 shares of our Class B common stock,
respectively, representing approximately 66% and 25% of the voting power of our outstanding
capital stock, respectively, for an aggregate of approximately 90% of the voting power of
our outstanding capital stock. Upon the closing of this offering, assuming the sale of the
maximum number of Units offered hereby, our Chief Executive Officer and President will collectively
hold approximately 85% of the voting power of our outstanding capital stock.
As a result of our Chief Executive Officer’s ownership
of our Class B common stock, we are a “controlled company” within the meaning of the corporate governance standards of Nasdaq.
See “Management – Controlled Company” and “Risk Factors – We are a “controlled company”
within the meaning of the Nasdaq rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
As a result, our stockholders do not have the same protections afforded to stockholders of companies that cannot rely on such exemptions
and are subject to such requirements” for more information.
Our principal executive offices are located at
1828 N Higley Rd., Suite 116, Mesa, Arizona 85205, and our telephone number at that address is (760) 515-1133.
________________________
You should carefully read this prospectus and any prospectus
supplement or amendment before you invest. See the section entitled “Risk Factors” beginning on page 13. You also should
read the information included throughout this prospectus for information on our business and our financial statements, including information
related to our predecessor.
Neither the Securities and Exchange Commission (the “SEC”)
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
| |
Per Unit (including Class A common stock) | | |
Per Unit (including Pre- Funded Warrants) | | |
Total | |
Public offering price(1) | |
$ | | | |
$ | | | |
$ | | |
Placement agent fees(2) | |
$ | | | |
$ | | | |
$ | | |
Proceeds, before expenses, to us(3) | |
$ | | | |
$ | | | |
$ | | |
_____________________
| (1) | The combined public offering price is $ per share
of Class A common stock and accompanying Warrant and $ per Pre-Funded Warrant and
accompanying Warrant. |
|
(2) |
Represents a cash fee equal to eight percent (8.0%) of the
aggregate purchase price paid by investors in this offering. We have also agreed to reimburse the Placement Agents for their
accountable offering-related legal expenses in an amount up to $75,000, pay the Placement Agents a non-accountable expense allowance
of $10,000 and pay Maxim Group LLC a one-time advisory fee of $50,000. |
| (3) | The amount of offering proceeds to us presented in this table assumes no Pre-Funded Warrants are issued
in lieu of shares of Class A common stock and does not give effect to any exercise of the Warrants. |
We have engaged A.G.P./Alliance Global Partners to act as
our lead-placement agent and Maxim Group LLC to act as our as our co-placement agent (together, the “Placement Agents”) to
use their reasonable best efforts to solicit offers to purchase our securities in this offering. The Placement Agents have no obligation
to purchase any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities.
Because there is no minimum offering amount required as a condition to closing in this offering, the actual public amount, placement
agent fees, and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering
amounts set forth above and throughout this prospectus. We have agreed to pay the Placement Agents the placement agent fees set forth
in the table above and to provide certain other compensation to the Placement Agents. See “Plan
of Distribution” for more information regarding these arrangements.
We anticipate that delivery of the securities against payment
therefor will be made on or about , 2023.
A.G.P.
Lead-Placement Agent |
Maxim Group LLC
Co-Placement Agent |
TABLE OF CONTENTS
________________________
Please read this prospectus carefully. It
describes our business, our financial condition and our results of operations. We have prepared this prospectus so that you will have
the information necessary to make an informed investment decision. You should rely only on the information contained in this prospectus
or to which we have referred you. We and the Placement Agents have not authorized any person to provide you with additional information
or different information. We and the Placement Agents take no responsibility for, and can provide no assurance as to the reliability
of, any information that others may give you. This prospectus may only be used where it is legal to offer and sell the securities described
herein and only during the effectiveness of the registration statement of which this prospectus forms a part. You should assume the information
contained in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery
of this prospectus or of any sale of our Class A common stock. Neither the delivery of this prospectus nor any distribution of securities
in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date
of this prospectus.
This prospectus contains forward-looking statements
that are subject to a number of risks and uncertainties, many of which are beyond our control. See “Risk Factors” and “Cautionary
Note Regarding Forward-Looking Statements.”
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement
on Form S-1 that we filed with the SEC for this offering by us of Class A common stock.
Neither we nor the Placement Agents have authorized
anyone to provide you with different or additional information, other than that contained in this prospectus or in any free writing prospectus
prepared by or on behalf of us or to which we may have referred you, and neither we nor they take any responsibility for, or provide
any assurance as to the reliability of, any other information that others may give you. Neither we nor the Placement Agents are making
an offer to sell Class A common stock in any jurisdiction where the offer or sale thereof is not permitted. You should not assume
that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus,
regardless of the time of delivery of this prospectus or any sale of our Class A common stock. Our business, financial condition, results
of operations and prospects may have changed since that date.
We may also provide a prospectus supplement or
post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus.
You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement
together with the additional information to which we refer you in the sections of this prospectus titled “Where You Can Find More
Information.”
Unless otherwise indicated, information contained
in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position,
market opportunity and market share, is based on information from our own management estimates and research, as well as from industry
and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly
available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable.
Our management estimates have not been verified by any independent source, and we have not independently verified any third-party information.
In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of
uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could
cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking
Statements.”
For investors outside the United States: Neither
we nor the Placement Agent have taken any action to permit the possession or distribution of this prospectus in any jurisdiction other
than the United States where action for that purpose is required. Persons outside the United States who come into possession of
this prospectus must inform themselves about and observe any restrictions relating to the Class A common stock and the distribution
of this prospectus outside the United States.
Unless otherwise indicated or the context otherwise
requires, all references in this prospectus to the terms “NXU,” the “Company,” “we,” “our”
or “us” refer to Nxu, Inc., a Delaware corporation, and, immediately prior to the Reorganization Merger (as defined herein),
to its predecessor, Atlis Motor Vehicles Inc., a Delaware corporation, either individually or together with its consolidated subsidiaries,
as the context requires.
MARKET AND INDUSTRY DATA
Market and industry data and forecasts used in
this prospectus have been obtained from independent industry sources as well as from research reports prepared for other purposes. We
are responsible for all of the disclosure in this prospectus, and although we believe these third-party sources to be reliable, we have
not independently verified the data obtained from these sources, and we cannot assure you of the accuracy or completeness of the data.
Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as
the other forward-looking statements in this prospectus.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This document contains references to trademarks,
trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred
to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the
applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do
not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement
or sponsorship of us by, any other companies.
SUMMARY OF THE
PROSPECTUS
This summary highlights selected information
from this prospectus and does not contain all of the information that is important to you in making an investment decision. You should
read the entire prospectus carefully, including the information under the headings “Risk Factors,” “Cautionary Note
Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and the financial statements and the notes to those financial statements appearing elsewhere in this prospectus.
Overview
Nxu is a US-based technology company manufacturing innovative
battery cells and battery packs for use in advanced energy storage systems, megawatt charging stations, and mobility products. We believe
that widespread adoption of EVs by the commercial and industrial markets requires high performing battery and pack solutions that can
effectively compete with legacy diesel-based products. Nxu designs, engineers, and plans to build proprietary lithium-ion (“Li-ion”)
battery cells and packs, 1 megawatt plus charging stations, energy storage solutions and a suite of software and services designed to
allow an easy transition from diesel to electric for our target segment.
Our battery technology is expected to offer considerable
advantages in battery capacity, charging rate, safety, and lifespan while keeping costs low. We are confident that these advantages will
be highly beneficial to Original Equipment Manufacturers (“OEMs”) in the automotive and medium to heavy duty equipment segments
as it would encourage customers to transition to electrification. We are designing our Li-ion batteries to fully charge in about 15 minutes
or less, thereby allowing for a more competitive EV experience to match fossil fuel vehicles, something that current EVs using conventional
batteries are unable to achieve. We believe Nxu technology may be used to power medium and super-duty pick-up trucks, last mile delivery
vehicles, garbage trucks, cement trucks, vans, RVs, box trucks, light to heavy-duty equipment and more. In addition, our batteries could
be used for commercial and residential energy storage devices.
In 2023, we introduced our megawatt charging station
and demonstrated its ability to deliver up to 1.1 megawatts of electricity to fast charge compatible batteries. Currently, there are three
types of chargers prevalent in the market:
Level 1 chargers use a standard 120-volt household outlet
and can provide up to 5 miles of range per hour of charging. They are typically used for overnight charging at home and are the slowest
charging option.
Level 2 chargers require a 240-volt electrical
supply and can provide up to 25 miles of range per hour of charging. They are commonly found in public locations like parking garages,
workplaces, and retail spaces.
Level 3 chargers, also known as Direct Current (DC) fast
chargers, are the fastest charging option and can provide approximately 100 to 200+ miles of range in as little as 30 minutes.
Our megawatt chargers, being designed to provide
1,500kW of electricity, represent the next generation of charging solutions needed to expedite the mass adoption of electric vehicles
for individual drivers, commercial fleets, medium-to-heavy duty equipment customers and businesses. To take advantage of the expected
rapid growth in the number of EVs on the road in the United States, the Company plans to deploy and test its chargers for mass rollout
in the near future.
We also believe that energy storage solutions
are important for both consumer and commercial markets as grid stability and resiliency becomes critical to enabling the adoption of electric
vehicles. Stationary energy storage systems are technologically adjacent opportunities which can leverage the modular design of our battery
packs and advanced battery management systems to create solutions that address residential, commercial and utility-scale needs. Energy
storage can also provide backup power during grid outages or emergencies, helping to ensure that critical services like hospitals and
emergency responders remain operational.
Nxu is an early-stage company and has not yet scaled production
of its products or delivered any products to customers. Of the products we intend to bring to market, our proprietary battery technology
is the furthest along in development and closest to mass production. We intend to deliver battery cells and packs to customers in 2023.
Simultaneously, we plan to deploy our megawatt charging stations and energy storage solutions as soon as the next twelve months and the next twenty-four months respectively. Finally, we plan to
continue to develop our vehicle products in the future, both of which we believe will provide incremental value to our target market in
the long run. Scaling to reach high-volume battery production will require significant effort and capital. Based on our plans, we estimate
that the cost to build and completely tool multi-gigawatt hour facility will range from $200 million to $300 million per gigawatt hour
of capacity. Our ability to raise the significant capital required continues to be a challenge. Additionally, as of the date of this prospectus,
we have no actionable plan of operation to commence sales of our products. As such, Nxu will need to build out detailed go-to-market plans
as we get closer to customer deliveries and sales.
Our Target Market
Customers across the commercial and industrial segments
are progressively contemplating EVs for a range of reasons such as improved performance, expansion of the EV charging infrastructure,
significantly reduced environmental impact, and lower costs for maintenance and operation. However, the players in these market segments
face unique barriers to the adoption of EVs due to their high-demand usage patterns and operational requirements. In addition, the use
of conventional Li-ion batteries in heavy-duty vehicles and equipment poses several inherent challenges that limit their adoption. Some
of these challenges include:
| · | Limited energy density: Conventional batteries have a relatively low
energy density, which means that heavy-duty vehicles and equipment require a large number of batteries to achieve sufficient range. This
can add significant weight to the vehicle and reduce payload capacity. |
| · | Temperature sensitivity: Conventional Li-ion batteries are sensitive
to temperature changes, particularly at extreme temperatures. This can impact the performance and lifespan of the battery, particularly
in hot or cold environments. |
| · | Charging time: Charging time for Li-ion batteries can be significant,
particularly for larger batteries. This can impact the operational efficiency of heavy-duty vehicles and equipment, which may require
frequent charging throughout the day. |
| · | High upfront costs: Electric commercial vehicles can have a higher
upfront cost than their conventional counterparts, which can be a significant barrier for companies that operate on tight profit margins. |
| · | Limited range and charging infrastructure: Commercial vehicles often
need to travel longer distances than passenger cars and require more frequent stops for refueling. The limited range of electric commercial
vehicles and the lack of charging infrastructure can make it difficult for fleets to operate efficiently. |
| · | Payload capacity: Electric commercial vehicles often have lower payload
capacity than their conventional counterparts due to the weight of the battery, which can limit their utility for certain applications. |
| · | Vehicle
downtime: Commercial vehicles and equipment are often in use for long hours and may have
limited downtime for charging, which can be a challenge for EVs that require longer charging
times than refueling with gasoline or diesel. |
| · | Uncertainty about total cost of ownership: Companies may be hesitant
to invest in electric commercial vehicles due to uncertainty about the total cost of ownership, including maintenance, repair, and replacement
costs. |
We believe that effective adoption to electrification by the
commercial and industrial markets requires a unified solution that addresses all concerns simultaneously. A piecemeal solution where multiple
companies independently develop and build pieces of the electrification puzzle while leaving the customer to figure out the rest may not
adequately address all needs and may even drive greater execution risk for the customer. An effective Li-ion battery technology along
with megawatt level charging solution and energy storage solutions to support grid resiliency are critical and foundational components
of a unified solution. Nxu plans to develop these foundational components.
Production Development Phases
In producing
its various products and services, Nxu follows a phased development approach comprised of the stages noted below.
Stage 1: Concept Verification and
Test. This is the concept verification and test phase of development. Product ideas are evaluated to assess viability and whether or not
there is potential to further develop and invest.
Stage 2: Engineering Verification
and Test. This is the engineering verification and test phase of development. Validation of the technology within a product is completed.
Stage 3: Design Verification and Test.
This is the design verification phase of development. The product has reached a final design phase and engineering and production teams
are validating feasibility of the final product.
Stage 4: Production Verification and
Test. This is the production validation phase of development. The product design has been finalized, and the production process is developing
and undergoing verification before being sold to customers.
Principal Products and Services
Nxu plans to address the needs highlighted above by developing
a unified set of products and solutions to support a seamless transition to electrification by the commercial and industrial industry.
Our products start with the Nxu Qcell battery cells that are intended to go into our high-performing Qube battery packs, which in turn,
can be used by OEMs to power their electrified vehicles and equipment. Simultaneously, we plan to build megawatt charging stations that
will enable 15-minute charge time for our batteries. Finally, we plan to build energy storage systems, called Qube+, that will use our
battery packs to augment rising energy demand across residential, commercial and infrastructure customers. Eventually, we plan to introduce
a modular and scalable electric powered platform and an electric pickup truck purposely built to leverage our battery technology to deliver
high performing, all-electric vehicles for our target market.
Our Products
| · | Qcell Cell – Our proprietary battery technology is the foundation of the Nxu ecosystem. The
Qcell is designed to leverage an in-house developed NMC-811 chemistry, combined with a unique, proprietary mechanical construction,
to significantly improve thermal management and reduce electrical resistance. In addition, our battery cell structure eliminates
excess volume and space, thereby providing high energy density. The Qcell, when implemented utilizing our proprietary Qube battery
pack technology and our advanced charging station currently under development - will be capable of delivering consistent power from
0% to 100% battery pack usable capacity, while charging from 0% to 100% usable capacity in 15 minutes. This is the same amount of
time it normally takes to fill an Internal Combustion Engine (ICE) vehicle with fuel. Battery cells are currently being produced in
low volumes at our facility in Mesa, AZ and production is not dependent on any currently unknown advances in technology. We are in
small-batch, pilot production of our battery cells and expect to make customer deliveries in late 2023. To ensure we are capable of
scaling production output, Nxu will need to continue to make investments in capital expenses, additional facilities, and team growth
for the coming years. Nxu has earmarked capital investment to ramp cell production throughout 2023. As a byproduct of increased
production, Nxu will continue to make significant investments in equipment for the foreseeable future. |
| · | The Nxu Qube is a 30 Kilowatt hours (“kWh”) battery pack focused on serving customers within
mobility, equipment, and energy storage and infrastructure applications. The Qube will utilize our proprietary battery cell, pack design,
electronics, and software systems, all of which are currently in development. Legacy manufacturers of vehicle battery packs typically
utilize Li-ion battery cells in either cylindrical or pouch form factor which are inherently inefficient due to high thermal and electrical
resistance. Our Qube’s competitive advantage is our direct cell integration approach which minimizes thermal resistance while maximizing
electrical conductivity. Our Qcell is intended to directly integrate into our Qube. In addition, Nxu is developing the battery pack system
with a completely integrated power management, thermal management, and battery management system. The Qube is in Production Verification
and Test phase of development and completion of the engineering design and production line is not subject to any currently unknown advances
in technology. Our efforts are focused on target customers that are seeking to deploy packs in 2023. As of February 2023, Nxu announced
it had secured two gigawatt-hours’ worth of battery capacity demand in the form of non-binding Letters
of Intent (LOI), Memoranda of Understanding (MOU), and Purchase Orders (PO) from multiple customers in the automotive, heavy equipment,
and solar industries. Nxu plans to continue securing MOUs and LOIs for additional battery packs and will work to expand production
output in order to capitalize on that demand and deliver products as quickly as our facilities and production processes allow. Our ability
to deliver these battery packs to customers at a growing rate is dependent on our ability to raise capital and leverage that capital into
increased production, among other factors. |
| · | Megawatt charger – Our proprietary megawatt charger is intended to be capable of delivering up to
1.5 megawatts of continuous power, deployable in standalone charging station or as a drop-in direct-grid connection solution. The megawatt
charger is intended to be a proprietary charging solution to provide charging capabilities to the XT, the XP, and non-Nxu branded electric
vehicle that are compatible with Combined Charging System 2.0 (“CCS 2.0”). Recently, the Company successfully demonstrated
our one megawatt plus charging capability, The megawatt charger is still in the research and development phase and is not yet in production.
The charging system is expected to complete the Production Verification and Test phase of development as early as the end of 2023. Our
ability to execute this plan is dependent on our ability to raise the necessary capital and therefore, if the company is unable to secure
appropriate funding, these timelines are subject to change. Engineering design of the Megawatt charger is not yet complete. We expect
to encounter unforeseen engineering challenges and may be reliant on unknown advances in technology. |
Future Products for Commercial and Industrial Markets
| · | Nxu Platform– The Platform is designed to be a modular vehicle system, or electric skateboard, providing
all technology, software, and mobility technology required to develop a vehicle by third parties. Intended to be a universal, connected,
complete vehicle hardware and mechanical architecture system, the Platform will utilize our proprietary Qcell battery, electronics hardware,
mechanical, and software technologies to create a vehicle platform for sale to low-volume vehicle OEMs to develop new EV solutions for
niche- and mass-market opportunities. The Platform has completed the Concept Verification and Test phase of development and Nxu has produced
a functioning concept as demonstrated in 2021 on our social media channels. We expect that the production intent development of the Platform
will follow our successful commercialization of the Qcell, Qube, Qube+ and megawatt charger. We intend to commercialize and scale our
energy products first and expect the Platform to begin the Design Verification and Test phase of development as early as 2024. However,
our ability to execute is dependent on our ability to raise the necessary capital and therefore, if the Company is unable to secure appropriate
funding, these timelines are subject to change. |
| · | Nxu pickup truck – The pickup truck is intended to be our flagship vehicle and a 100% electric full-sized work truck. The pickup
truck is intended to be built on our platform. We intend to provide up to 500 miles of range, up to 35,000 pounds of towing capacity,
and a simplified operational approach that that utilizes our software and cloud service solutions to provide seamless fleet connectivity.
The pickup truck is still in the research and development phase. Given ongoing capital constraints and current market sentiment, the Company
has decided to focus its resources on commercializing and scaling energy products at this time. We expect that the production intent development
of the truck will follow the ramp of the Platform. The pickup truck has completed the Concept Verification and Test phase of development,
we expect to begin the Engineering Verification and Test phase of development as soon as 2024. We expect to encounter unforeseen engineering
challenges and may be reliant on unknown advances in technology. In addition, our ability to execute is dependent on our ability to raise
the necessary capital and therefore, if the Company is unable to secure appropriate funding, these timelines are subject to change. |
The execution of our vision is highly dependent on multiple
factors that include our ability to raise the necessary capital required to bring all products and services to market and, more specifically,
our ability to successfully deliver Qubes to customers. Our successful implementation of the Qcell and Qube would allow us to tackle a
key challenge that we face in the industry: the lack of available, adequate, and accessible battery technology. Thus, we have focused
our attention on developing our own battery technology in order to mitigate the external risk created from a lack of suitable and available
battery technology in the market.
We are currently producing Qcells sufficient to produce one Qube per
month. We will continue to incrementally increase yield via process improvement projects. To ensure we are capable of scaling production
output, we will need to continue to make investments in capital expenses, additional facilities, and team growth. Nxu has earmarked capital
investment to ramp cell production throughout 2023. As a byproduct of increased production, Nxu will continue to make significant investments
in equipment for the foreseeable future. Assuming the maximum number of Units are sold in this offering, we expect to invest approximately
$6 million of the proceeds of this offering into capital equipment and raw materials, which we expect will enable us to produce Qcells
sufficient to produce approximately ten Qubes per month. If we are unable to raise proceeds in this offering sufficient to invest $6 million
into capital equipment and raw materials, our planned production capacity may be less than anticipated and we will need to raise such
funds through other sources. See “Use of Proceeds.”
Additionally, our ability to scale high-volume
mobility and energy storage solutions is highly dependent on our success with the Qcell and Qube. As there is a limited supply of these
materials, Qcell and Qube production delays will likely delay high volume mobility and energy storage solutions. Any disruption from
competitors or any disruption to internal material and cell availability could impact the Company’s ability to succeed in any program
that relies on battery cells.
While we remain optimistic in our ability to bring Qcell and
Qube to market, these two programs carry high technical challenges due to the fact that the intellectual property required for the programs
to successfully scale must be developed, as it cannot be purchased nor is it readily available in the market. Nxu appreciates the importance
of overcoming this challenge and is accordingly focusing the majority of its efforts on bringing the Qcell and Qube products to market.
We signed an Amended Collaboration Agreement on July 28, 2022 with an
Australian company called Australian Manufactured Vehicles (“AUSEV”) to jointly develop a right-hand drive version of the
pickup truck. Under the terms of the AUSEV agreement, we agreed to supply pickup trucks in limited volume of prototype and test vehicles
in 2024, up to a total of 19,000 production intent pickup trucks beginning in 2026 through 2027, contingent upon production capacity,
funding, and raw material availability. The AUSEV agreement requires the parties to enter into binding definitive supply agreements. Given
our decision to focus our resources on commercializing and scaling energy products at this time, we do not expect to supply pickup trucks
in 2024. AUSEV is supportive of our strategy and we are working closely together and endeavor to deliver pickup trucks to AUSEV as soon
as practicable. The AUSEV agreement has an initial term of five (5) years from August 28, 2021. Upon expiration of the initial term, the
AUSEV agreement will automatically renew for an additional two-year term unless either party notifies the other party in writing of its
intent to terminate, at least 90 days prior to such expiration.
Our People
Beyond our products and solutions in development,
we believe the largest competitive advantage Nxu has is our culture. Our company culture embodies the idea that a transition to electrification
and a sustainable future should not require compromise. We are unwilling to bend in our belief that when a technology does not exist,
we find creative and innovative ways of developing solutions to solve these challenges. Our team is built of a diverse group of individuals
with a singular focus, to power the future of work through an ecosystem of technologies and solutions that provide incremental value to
those who build, dig, grow, and maintain.
Implications of Being an Emerging Growth Company
and Smaller Reporting Company
We qualify as an “emerging growth company”
under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). As a result, we are permitted to, and
intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required
to:
| · | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of
the Sarbanes-Oxley Act of 2022, as amended; |
| · | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding
mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial
statements (i.e., an auditor discussion and analysis); |
| · | submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,”
“say-on-frequency” and pay ratio; and |
| · | disclose certain executive compensation related items such as the correlation between executive compensation
and performance and comparisons of the chief executive officer’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. In other words, an
emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private
companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore
not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company”
for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues are
$1.07 billion or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our Class A common stock that
are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii)
the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We are also a “smaller reporting company”
as defined by Rule 12b-2 of the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging
growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to
take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Class A common stock held by non-affiliates
is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0
million during the most recently completed fiscal year and the market value of our voting and non-voting Class A common stock held by
non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Controlled Company Exemption
Our Chief Executive Officer, Mark Hanchett, beneficially
owns and controls a majority of the combined voting power of our common stock. As a result, we are a “controlled company”
within the meaning of the Nasdaq listing rules. Under these rules, a company of which more than 50% of the voting power is held by an
individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance
requirements of Nasdaq. Our stockholders do not have the same protections afforded to stockholders of companies that are subject to such
requirements. Mark Hanchett also serves as the Chairman of the Board of Nxu.
Corporate Information
We were originally incorporated under the laws
of the State of Delaware on November 9, 2016 under the name “Atlis Motor Vehicles Inc.” (the “Predecessor”). In
connection with the Reorganization Merger, Nxu was incorporated under the laws of the State of Delaware on March 10, 2023. Our principal
executive offices are located at 1828 North Higley Road, Mesa, AZ 85205. Our website address is www.nxu.com. The information provided
on or accessible through our website (or any other website referred to in the registration statement, of which this prospectus forms a
part, or the documents incorporated by reference herein) is not part of the registration statement, of which this prospectus forms a part,
and is not incorporated by reference as part of the registration statement, of which this prospectus forms a part.
Recent Developments
Initial Public Offering
On September 27, 2022, we completed our initial public offering
(the “IPO”) under Regulation A of the Securities Act and became listed on the Nasdaq Stock Market. In our IPO, we sold
1,015,802 shares of our Class A common stock at a weighted-average price of $14.28 per share. We used the proceeds from the IPO
to fund our production and marketing activities.
Following our IPO, trading in our Class A common
stock has been volatile and subject to wide fluctuations from a high price of $243.99 on September 28, 2022 to a low price of $0.4610
on May 25, 2023. These swings in our trading prices are unrelated and disproportionate to our operating performance. As a
startup company, we expect this volatility in our stock price to continue for the foreseeable future. As a result, we determine,
and advise potential investors to determine, the value of our Class A common stock based on the information contained in our public disclosures
and other industry information rather than by reference to its current trading price. See “Risk Factors – The market price
of our Class A common stock has fluctuated, and may continue to fluctuate, significantly, and our stockholders may lose all or part of
their investment.”
Convertible Notes
On November 3, 2022, we entered into a Securities Purchase Agreement
with certain investors (the “Investors”), as amended on January 5, 2023 (as amended, the “Securities Purchase Agreement”).
Pursuant to the Securities Purchase Agreement, we issued an aggregate of $20.0 million of Senior Secured Original Issue 10% Discount Convertible
Promissory Notes (the “convertible notes”) and 1,711,306 warrants to purchase shares of our Class A common stock. As of July
6, 2023, there was an aggregate of approximately $1.4 million of convertible notes outstanding, which are convertible into up to an aggregate
of 3,560,526 shares of Class A common stock (assuming conversion at a conversion price equal to the floor price of $0.38), and 1,711,306
outstanding warrants to purchase 1,711,306 shares of Class A common stock. The Company does not currently have any other indebtedness
outstanding.
On April 11, 2023, we received a notice of non-compliance from Nasdaq stating that
we no longer meet a requirement for continued listing of our Class A common stock on Nasdaq. We determined that the notice of non-compliance
constituted an event of default under our outstanding convertible notes. As a result of the event of default, unless waived by the Investors,
the convertible notes began accruing default interest at a rate of 10% per annum and we are obligated to pay to the Investors approximately
$3.3 million, which amount represents 100% of the sum of (x) the outstanding principal of the notes as of April 11, 2023 and (y) accrued
and unpaid interest thereon. The Investors have the option to instead convert the amount due and payable under the event of default, including
at an alternative conversion price as described in the convertible notes. We have discussed the event of default with the Investors and,
to date, one Investor has temporarily waived the event of default pending resolution of the non-compliance matter. The other Investor
has exercised its option to convert the amount due and payable under the event of default at the alternative conversion price.
Holding Company Reorganization
On May 12, 2023, the Predecessor completed its previously announced
reorganization merger pursuant to the Agreement and Plan of Merger, dated as of April 16, 2023 (the “Reorganization Agreement”),
by and among the Predecessor, Nxu and Atlis Merger Sub, Inc., a Delaware corporation and, as of immediately prior to the consummation
of such merger, a wholly-owned subsidiary of Nxu (“Merger Sub”). The Reorganization Agreement provided for the merger of the
Predecessor and Merger Sub, with the Predecessor surviving the merger as a wholly-owned subsidiary of Nxu (the “Reorganization Merger”).
Following the Reorganization Merger, on May 12, 2023, the Predecessor
(which, as a result of the Reorganization Merger, became a wholly-owned subsidiary of Nxu) converted from a Delaware corporation into
a Delaware limited liability company named “Atlis Motor Vehicles LLC” (such conversion, together with the Reorganization Merger,
the “Reorganization”). Following the Reorganization, substantially all of the assets of Atlis Motor Vehicles LLC were distributed,
assigned, transferred, conveyed and delivered to, and related liabilities of Atlis Motor Vehicles LLC were assumed by, Nxu. On May 25,
2023, Atlis Motor Vehicles LLC changed its name to Nxu Technologies, LLC.
The below chart depicts our capital structure
following the Reorganization:
The Offering
Issuer |
Nxu, Inc., a Delaware corporation. |
|
|
Securities Offered |
Up to 22,108,843 Units on a best-efforts
basis, at an assumed public offering price of $0.5880 per Unit, which represents the closing price of our Class A common stock
on Nasdaq on June 16, 2023. Each Unit consists of (i) one share of Class A common stock and (ii) one Warrant. Each Warrant is
exercisable for one share of Class A common stock.
We are also offering to each investor of Units
that would otherwise result in the investor’s beneficial ownership exceeding 4.99% of our outstanding Class A common stock immediately
following the consummation of this offering the opportunity to invest in Units consisting of one Pre-Funded Warrant (in lieu of one share
of Class A common stock) and one Warrant. Subject to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise
any portion of its Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at
the election of the holder, such limit may be increased to up to 9.99%) of the Class A common stock outstanding immediately after giving
effect to such exercise. Each Pre-Funded Warrant will be exercisable for one share of Class A common stock. The purchase price of each
Unit including a Pre-Funded Warrant will be equal to the price per Unit including one share of common stock, minus $0.0001, and the exercise
price of each Pre-Funded Warrant will equal $0.0001 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the
beneficial ownership cap) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. For each Unit including
a Pre-Funded Warrant purchased (without regard to any limitation on exercise set forth therein), the number of Units including a share
of Class A common stock we are offering will be decreased on a one-for-one basis. The Units have no stand-alone rights and will not be
certificated or issued as stand-alone securities. The shares of Class A common stock (or Pre-Funded Warrants) and the Warrants comprising
the Units are immediately separable and will be issued separately in this offering. |
|
|
Warrants |
Each Unit includes one Warrant
to purchase two shares of our Class A common stock. Each Warrant is exercisable at a price of $0.5880 per
share (100% of the offering price per Unit). The Warrants will be immediately exercisable and will
expire three (3) years after the date of issuance. This offering also relates to the shares of Class
A common stock issuable upon exercise of any Warrants sold in this offering. See “Description
of Securities – Warrants”. |
Class A Common Stock Outstanding Prior to this Offering |
38,154,853 shares. |
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|
Class A Common Stock Outstanding After this Offering |
60,263,696 shares, assuming the maximum number of Units are sold in this offering at an assumed
public offering price of $0.5880 per Unit, which represents the closing price of our Class A common stock on Nasdaq on June
16, 2023, and assuming no issuance of Pre-Funded Warrants and no exercise of Warrants issued in connection with this offering. |
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|
Reasonable Best Efforts |
We have agreed to issue and sell the securities offered hereby to the purchasers
through the Placement Agents. The Placement Agents are not required to buy or sell any specific number or dollar amount of the securities
offered hereby, but they will use their reasonable best efforts to solicit offers to purchase the securities offered by this prospectus.
See “Plan of Distribution” on page 86 of this prospectus. |
|
|
Use of Proceeds |
We intend to use the net proceeds of this offering primarily for general corporate purposes, which
may include, but is not limited to, investment in capital equipment, charging station deployment, raw materials and operating expenses.
These uses may support ramping up Nxu’s battery manufacturing capabilities, working capital, and the continued development
and deployment of the Nxu charging infrastructure. The amounts that we actually spend for any specific purpose may vary significantly,
and will depend on a number of factors including, but not limited to, the pace of progress of our research and development, market
conditions, and our ability to secure supply of goods and services for both equipment and raw material. See the section titled “Use
of Proceeds” appearing elsewhere in this prospectus for more information and see “Risk Factors” for a discussion
of certain risks that may affect our intended use of the net proceeds from this offering. |
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|
Dividend Policy |
We have never declared or paid any cash dividends on our shares, and we do not anticipate paying any cash dividends on our shares in the foreseeable future. It is presently intended that we will retain our earnings for future operations and expansion. |
Risk Factors |
See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our securities. |
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|
Market Symbol and Trading |
Our shares of Class A common stock are listed on Nasdaq under the symbol “NXU.” There is no established trading market for the Units, Warrants or Pre-Funded Warrants, and we do not expect a trading market for those securities to develop. We do not intend to list the Units, Warrants or Pre-Funded Warrants on any securities exchange or other trading market. Without a trading market, the liquidity of those securities will be extremely limited |
The above discussion is based on 38,154,853
shares of our Class A common stock outstanding as of July 6, 2023 and excludes, as of that date, the following: (a) 37,577,216 shares
of Class A common stock issuable upon the exercise of options outstanding prior to this offering at a weighted average exercise price
equal to approximately $7.00; (b) up to an aggregate of 3,560,526 shares of Class A common stock issuable upon the conversion of our
outstanding convertible notes (assuming conversion at a conversion price equal to the floor price of $0.38); and (c) up to an aggregate
of 7,961,806 shares of Class A common stock issuable upon the exercise of our outstanding warrants.
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
The information in this prospectus includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. All statements, other
than statements of present or historical fact included in this prospectus, regarding Nxu’, strategy, future operations, financial
position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking statements.
When used in this prospectus, including any oral statements made in connection therewith, the words “could,” “should,”
“will,” “may,” “believe,” “anticipate,” “intend,” “estimate,”
“expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on
management’s current expectations and assumptions about future events and are based on currently available information as to the
outcome and timing of future events. Except as otherwise required by applicable law, Nxu disclaims any duty to update any forward-looking
statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date
of this prospectus. Nxu cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of
which are difficult to predict and many of which are beyond the control of Nxu, incident to the development, production, gathering and
sale of oil, natural gas and natural gas liquids.
In addition, Nxu cautions you that the forward-looking
statements regarding Nxu, which are contained in this prospectus, are subject to the following factors:
| · | the length, scope and severity of the ongoing coronavirus pandemic (“COVID-19”), including
the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties
in response to the pandemic and its impact on commodity prices, supply and demand considerations and storage capacity; |
| · | U.S. and global economic conditions and political and economic developments; |
| · | economic and competitive conditions; |
| · | the availability of capital resources; |
| · | capital expenditures and other contractual obligations; |
| · | the availability of goods and services; |
| · | legislative, regulatory or policy changes; |
| · | the securities or capital markets and related risks such as general credit, liquidity, market and interest-rate
risks. |
Should one or more of the risks or uncertainties
described in this prospectus occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially
from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the
operations and projections discussed herein can be found in the section entitled “Risk Factors” herein and in Nxu’s
periodic filings with the SEC. Nxu’s SEC filings are available publicly on the SEC’s website at www.sec.gov.
SUMMARY RISK FACTORS
We are providing the following summary of the
risk factors contained in this prospectus to enhance the readability and accessibility of our risk factor disclosures. We encourage our
stockholders to carefully review the full risk factors contained under the section entitled “Risk Factors” in this prospectus
in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially
from recent results or from our anticipated future results.
Risks Related to Our Business
| · | We are an early-stage company with a limited operating history that has never turned a profit and there
are no assurances that the Company will ever be profitable. |
| · | Uncertainty exists as to whether we will be able to raise sufficient funds to continue scaling our battery
manufacturing capabilities or deploying our megawatt charging stations and our energy storage solutions. |
| · | Uncertainty also exists as to whether we will succeed in eventually developing the vehicle products. |
| · | We need to raise additional capital to meet our future business requirements and such capital raising
may be costly or difficult to obtain and could dilute current stockholders’ ownership interest. |
| · | We have losses which we expect to continue into the future. There is no assurance our future operations
will result in a profit. |
| · | We may not achieve our projected development goals in the time frames we announce and expect due to unforeseen
factors, including scarcity of natural resources and battery raw materials, increases in costs of raw materials, disruption of supply
chain or shortages of materials, rising interest rates and inflation increasing the cost to do business. |
| · | A significant interruption of our information technology systems or the loss of confidential or other
sensitive data, including cybersecurity risks, could have a material adverse impact on our operations and financial results. |
| · | We are in the development stages of many products and we may experience difficulty scaling up manufacturing
of our products, including cost, technical complexity and regulatory compliance. |
| · | Our products rely on software and hardware that is highly technical, and if these systems contain errors,
bugs, vulnerabilities, or design defects, or if we are unsuccessful in addressing or mitigating technical limitations in our systems,
our business could be adversely affected. |
| · | The cost and difficulty of protecting our intellectual property. |
| · | We may not be able to successfully manage growth. |
| · | Our growth rate may not meet our expectations. |
| · | We may face state and federal regulatory challenges, including environmental and safety regulations. |
| · | We may not be successful in developing an effective direct sales force. |
| · | If
we do not successfully establish and maintain our Company as a highly trusted and respected
name for electric vehicles (“EVs”), we may not achieve future revenue goals,
which could significantly affect our business, financial condition and results of operations. |
Risks Related to the Development and Commercialization
of Our Products
| · | If our battery cells fail to perform as expected, our ability to develop, market, and license our technology
could be harmed. |
| · | Our success depends on our ability to manufacture battery cells and packs at volume and with acceptable
performance, yield and costs. |
| · | Our reliance on complex machinery to scale operations and production involves a significant degree of
risk and uncertainty in terms of operational performance and costs. |
| · | We may not be able to build and scale our charging stations and energy storage solutions as expected. |
| · | The
future growth and success of our charging stations is highly correlated with and thus dependent
upon the continuing rapid adoption of EVs. |
| · | We currently face competition from a number of companies and expect to face significant competition in
the future as the market for EV battery, charging and energy storage solutions develops. |
| · | The automotive market is highly competitive, and we may not be successful in competing in this industry. |
| · | We are dependent on our own suppliers and suppliers to our third-party contract manufacturers who fabricate
our equipment to fulfill orders placed by us. Timely delivery of orders is needed to meet the requirements of our customers, and a shortage
of materials or components, such as microprocessors, can disrupt the production of our equipment. |
| · | If there is inadequate access to charging stations, our business will be materially and adversely affected. |
| · | Our products will make use of Li-ion battery cells, which, if not appropriately managed and controlled,
have been observed to catch fire or vent smoke and flame. |
| · | We have minimal experience servicing and repairing our vehicles. If we or our partners are unable to adequately
service our vehicles, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely
affected. |
| · | The automotive industry and its technology are rapidly evolving and may be subject to unforeseen changes
which could adversely affect the demand for our vehicles or increase our operating costs. |
| · | Product recall could hinder growth and product liability or other claims could have a material adverse
effect on our business. |
Risks Related to Our Management
| · | We are dependent upon our executives for their services and the loss of personnel may have a material
adverse effect on our business and operations. |
| · | Our management team does not have experience running a public company. |
| · | Limitations of director liability and director and officer indemnification. |
| · | Limitations on remedies; indemnification. |
Risks Related to this Offering, Our Capital
Structure and Ownership of Class A Common Stock
| · | You will incur immediate and substantial dilution. |
| · | This is a best-efforts offering and there can be no assurance that it will be consummated or result in
any proceeds. |
| · | There is no public market for the Units, the Warrants or the Pre-Funded Warrants. |
| · | The Warrants and the Pre-Funded Warrants are speculative in nature. |
| · | The Warrants may not have any value. |
| · | Holders of the Warrants and, if applicable, Pre-Funded Warrants have no rights as stockholders until they
acquire our Class A common stock. |
| · | Management will have broad discretion in the application of the net proceeds from this offering. |
| · | The dual class structure of our common stock has the effect of concentrating voting power with members
of our management team, which will limit your ability to influence the outcome of important transactions, including a change in control. |
| · | We cannot predict the impact our dual class structure may have on our stock price. |
| · | We are a “controlled company” within the meaning of the Nasdaq rules and,
as a result, qualify for and rely on exemptions from certain corporate governance requirements. As a result, our stockholders do not have
the same protections afforded to stockholders of companies that cannot rely on such exemptions and are subject to such requirements. |
| · | Our Chief Executive Officer and majority stockholder may significantly influence matters to be voted on
and their interest may differ from, or be adverse to, the interest of our other stockholders. |
| · | The market price of our Class A common stock has fluctuated, and may continue to fluctuate, significantly. |
| · | We do not anticipate dividends to be paid on our Class A common stock and investors may lose the entire
amount of their investment. |
| · | We are an emerging growth company and a smaller reporting company within the meaning of the Securities
Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies and smaller reporting
companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with
other public companies. |
| · | We will incur significant additional costs as a result of being a public company, and our management will
be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices. |
| · | Our Bylaws include forum selection provisions, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us. |
| · | Our Class A common stock may be delisted from Nasdaq if we do not maintain compliance with Nasdaq’s continued listing requirements.
Delisting could effect the market price and liquidity of our Class A common stock and our ability to issue additional securities and raise
additional capital would be adversely impacted |
RISK FACTORS
An investment in our securities involves a
high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects,
financial condition, or operating results could be harmed by any of these risks, as well as other risks not known to us or that we consider
immaterial as of the date of this prospectus. The trading price of our securities could decline due to any of these risks, and, as a result,
you may lose all or part of your investment. Our actual results may differ materially from any future results expressed or implied by
such forward-looking statements as a result of various factors, including, but not limited to, those discussed in the sections of this
prospectus entitled “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
RISKS RELATED TO OUR BUSINESS
We are an early-stage company that has never
turned a profit and there are no assurances that the Company will ever be profitable.
We are a relatively new company that was originally
incorporated on November 9, 2016 under the name “Atlis Motor Vehicles Inc.” On May 12, 2023, we completed the Reorganization
Merger, pursuant to which Nxu replaced Atlis Motor Vehicles Inc. as the publicly listed corporation. If you are investing in this company,
it is because you think our products are innovative and differentiated and that our business model is a good idea, and we will be able
to successfully grow our business and become profitable. We have yet to fully develop or sell any of our products. We are launching our
Energy business and have yet to start mass manufacturing of battery cells and pack solutions. Currently, our efforts are focused on scaling
our battery pilot production, on building and deploying our megawatt charging stations, primarily for testing our hardware and software,
and on building and deploying our energy storage solutions. In the meantime, other companies could develop successful alternatives. We
have never turned a profit and there is no assurance that we will ever be profitable.
We also have no history in the EV battery, charging,
energy storage or in the automotive industry. Although we have taken significant steps in developing brand awareness, we are a new company
and currently has no experience developing or selling battery technology. As such, it is possible that our lack of history in the industry
may impact our brand, business, financial goals, operation performance, and products.
We should be considered a “Development Stage
Company,” and our operations will be subject to all the risks inherent in the establishment of a new business enterprise, including,
but not limited to, hurdles or barriers to the implementation of our business plans. Further, because there is no history of operations
there is also no operating history from which to evaluate our executive management’s ability to manage our business and operations
and achieve our goals or the likely performance of the Company. Prospective investors should also consider the fact that our management
team has not previously developed or managed similar companies. No assurances can be given that we will be able to achieve or sustain
profitability.
Our limited operating history makes it difficult
for us to evaluate our future business prospects.
We are a company with an extremely limited operating
history and have not generated material revenue from sales of our products and services to date. As we continue to transition from research
and development activities to production and sales, it is difficult, if not impossible, to forecast our future results, and we have limited
insight into trends that may emerge and affect our business. The estimated costs and timelines that we have developed to reach full scale
commercial production are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research
and development activities to the large-scale manufacture and sale of battery products, charging stations or energy storage solutions.
There can be no assurance that our estimates related to the costs and timing necessary to complete the design and engineering of our products
will prove accurate. These are complex processes that may be subject to delays, cost overruns and other unforeseen issues. In addition,
we have engaged in limited marketing activities to date, so even if we are able to bring our other commercial products to market, on time
and on budget, there can be no assurance that customers will embrace our products in significant numbers at the prices we establish. Market
and geopolitical conditions, many of which are outside of our control and subject to change, including general economic conditions, the
availability and terms of financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, the conflict in the Ukraine,
fuel and energy prices, regulatory requirements and incentives, competition, and the pace and extent of transition to electrification
generally, will impact demand for our products, and ultimately our success.
Our ability to develop and manufacture battery
and pack technologies, charging stations and energy storage solutions of sufficient quality and appeal to customers on schedule and on
a large scale is unproven.
Our business depends largely on our ability to
develop, manufacture, market, and sell our technology and products. Our production ramp may take longer than originally expected due to
a number of reasons. The cascading impacts of the COVID-19 pandemic, and more recently the conflict in Ukraine, have impacted our business
and operations from facility construction to equipment installation to product component supply.
We have not launched a production-intent product and do not
anticipate making large scale deliveries in the near future. In conjunction with the launch of future products, we may need to manufacture
our batteries and packs in increasingly higher volumes than our present production capabilities. We have no experience as an organization
in high volume manufacturing. The continued development of and the ability to manufacture our products at scale will be subject to risks,
including with respect to:
| · | our ability to secure necessary funding; |
| · | our ability to negotiate and execute definitive agreements, and maintain arrangements on reasonable terms,
with our various suppliers for raw materials, hardware, software, or services necessary to engineer or manufacture parts or components; |
| · | securing necessary components, services, or licenses on acceptable terms and in a timely manner; |
| · | delays by us in delivering final component designs to our suppliers; |
| · | our ability to accurately manufacture our products within specified design tolerances; |
| · | quality controls, including within our manufacturing operations, that prove to be ineffective or inefficient; |
| · | defects in design and/or manufacture that cause our batteries not to perform as expected or that require repair, field actions, including
product recalls, and design changes; |
| · | delays, disruptions, or increased costs in our supply chain, including raw material supplies; |
| · | other delays, backlog in manufacturing and research and development of new models, and cost overruns; |
| · | obtaining required regulatory approvals and certifications; |
| · | compliance with environmental, safety, and similar regulations; and |
| · | our ability to attract, recruit, hire, retain, and train skilled employees. |
Our ability to develop, manufacture, and obtain
required regulatory approvals for products of sufficient quality and appeal to customers on schedule and on a large scale is unproven.
Our battery products, charging stations, and energy storage solutions may not meet customer expectations and may not be commercially viable.
To date, we have limited experience, as a company, designing, testing, manufacturing, marketing, and selling any of our products, including
vehicles, and therefore cannot assure you that we will be able to meet customer expectations. Any of the foregoing could have a material
adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
Our independent registered public accounting
firm has expressed substantial doubt about our ability to continue as a going concern.
Our independent registered public accounting firm
has expressed substantial doubt about our ability to continue as a going concern, as described in the notes to the financial
statements. We plan to continue considering all avenues available to us in order to obtain the necessary capital to be able to continue
as a going concern and to execute on our business objectives, including, but not limited to, debt financing, private placements and equity
lines of credit. Our success is dependent upon achieving our strategic and financial objectives, including acquiring capital through public
markets. At this time, we cannot assure investors that we will be able to obtain financing. If we fail to raise sufficient capital when
needed, we will not be able to complete our business plan. As a result, we may have to liquidate the business and you may lose your
investment.
Uncertainty exists as to whether our business
will have sufficient funds over the next 12 months, thereby making an investment in us speculative.
We require additional financing to complete development
and marketing of our NXU battery technology, megawatt charging stations, and energy storage solutions, and vehicle products until the
products are in production and sufficient revenue can be generated for us to be self-sustaining. Our management projects that in order
to effectively bring the products to market, it will require significant funding to cover costs required to get the battery assembly line
up and running, and to develop a supply chain. In the event we are unable to generate sufficient revenues, and before all of the funds
now held by us and obtained by us through this Offering are expended, an investment made in us may become worthless.
If we cannot continue to raise further rounds
of funding, we cannot succeed. We will require additional rounds of funding to complete development and begin mass shipments of our products.
If we are unable to secure funding, we will be unable to succeed in our goal of developing solutions to enable transition to electrification
by our target market. If we are unable to raise adequate financing, we will be unable to sustain operations for a prolonged period of
time.
We expect to significantly increase our spending
to advance the development of our products and services and launch and commercialize the products for commercial sale. We will require
additional capital for the further development and commercialization of our products, as well as to fund our operating expenses and capital
investments. We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise
additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the
development or commercialization of one or more of our products and services. We may also seek collaborators for the products at an earlier
stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. Any of these events could
significantly harm our business, financial condition, and prospects.
The expected proceeds from this offering may never
be realized. If only a small number of the shares of our Class A common stock offered hereby are sold, or if certain assumptions contained
in the business plans prove to be incorrect, we may have inadequate funds to fully develop our business. Although we believe that the
proceeds from this offering will help sustain our development process and business operations, there is no guarantee that the proceeds
from this offering will adequately fund our business plan.
We rely on proprietary technology currently
in development by us to meet product performance requirements.
We are developing proprietary technologies which
are needed to meet targeted product performance requirements. The development of this technology may be impacted by unforeseen supplier,
material, and technical risks which may delay product launches or change product performance expectations.
Even if we raise the maximum amount of proceeds
in this offering, we need to raise additional capital to meet our future business requirements and such capital raising may be costly
or difficult to obtain and could dilute current stockholders’ ownership interest.
We have relied upon cash from financing activities
and in the future, we expect to rely on the proceeds from this offering, future debt and/or equity financings, and we hope to rely on
revenues generated from operations to fund all or a portion of the cash requirements of our activities. However, there can be no assurance
that we will be able to generate any significant cash from our operating activities in the future. Future financing may not be available
on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Any debt financing or other financing of securities
senior to the Class A common stock will likely include financial and other covenants that will restrict our flexibility.
Any failure to comply with these covenants would
have a material adverse effect on our business, prospects, financial condition, and results of operations because we could lose our existing
sources of funding and impair our ability to secure new sources of funding. However, there can be no assurance that the Company will be
able to generate any investor interest in its securities. If we do not obtain additional financing, our goals may never be realized, in
which case you would likely lose the entirety of your investment in us.
At this time, we have not secured or identified
any additional financing. We do not have any firm commitments or other identified sources of additional capital from third parties
or from our officer and director or from other stockholders. There can be no assurance that additional capital will be available
to us, or that, if available, it will be on terms satisfactory to us. Any additional financing will involve dilution to our existing
stockholders. If we do not obtain additional capital on terms satisfactory to us, or at all, it may cause us to delay, curtail, scale
back or forgo some or all of our product development and/or business operations, which could have a material adverse effect on our business
and financial results. In such a scenario, investors would be at risk of losing all or a part of any investment in our Company.
We have losses which we expect to continue
into the future. There is no assurance our future operations will result in a profit. If we cannot generate sufficient revenues to operate
profitably or we are unable to raise enough additional funds for operations, the stockholders will experience a decrease in value, and
we may have to cease operations.
We are a development-stage technology company
that began operating in and commenced research and development activities in 2016. As a recently formed “Development Stage Company”,
we are subject to all of the risks and uncertainties of a new business, including the risk that we may never develop, complete development
or market any of our products or services and we may never generate product or services related revenues. Accordingly, we have only a
limited history upon which an evaluation of our prospects and future performance can be made. If we are unable to generate revenue, we
will not become profitable, and we may be unable to continue our operations. Furthermore, our proposed operations are subject to all business
risks associated with new enterprises. The likelihood of our success must be considered in light of the problems, expenses, difficulties,
complications, and delays frequently encountered in connection with the expansion of a business, operation in a competitive industry,
and the continued development of advertising, promotions and a corresponding customer base. There can be no assurances that we will operate
profitably.
We expect to incur operating losses in future
periods due to the high cost associated with developing electric vehicle battery technologies from the ground up. We cannot be sure
that we will be successful in generating revenues in the near future and in the event we are unable to generate sufficient revenues or
raise additional funds we will analyze all avenues of business opportunities. Management may consider a merger, acquisition, joint
venture, strategic alliance, a roll-up, or other business combination to increase business and potentially increase the liquidity of the
Company. Such a business combination may ultimately fail, decreasing the liquidity of the Company and stockholder value or cause
us to cease operations, and investors would be at risk of losing all or part of their investment in us.
Risks of operations.
Our future operating results may be volatile,
difficult to predict and may fluctuate significantly in the future due to a variety of factors, many of which may be outside of our control.
Due to the nature of our target market, we may be unable to accurately forecast our future revenues and operating results. Furthermore,
our failure to generate revenues would prevent us from achieving and maintaining profitability. There are no assurances that we can generate
significant revenue or achieve profitability. We anticipate having a sizeable amount of fixed expenses, and we expect to incur losses
due to the execution of our business strategy, continued development efforts and related expenses. As a result, we will need to generate
significant revenues while containing costs and operating expenses if we are to achieve profitability. We cannot be certain that we will
ever achieve sufficient revenue levels to achieve profitability.
Competition may crowd the market.
We face significant barriers in the development
of competitive products in a crowded market space. We face significant technical, resource, and financial barriers in development of a
battery technology intended to compete in a crowded battery, charging and energy storage space. Incumbents, also known as legacy manufacturers,
have substantially deeper pockets, larger pools of resources, and more significant manufacturing experience. We will need to contract
with development partners who may have existing relationships with incumbent manufacturers, these relationships may pose a significant
risk in our ability to successfully develop this program. We believe that our products are sufficiently differentiated from all currently
announced battery, charging and energy storage solutions. However, we have a lot of work to do before we reach production. There is a
chance that other competitors may release similar or better products before we exit the research and development phase. If that were to
happen, it will be exceedingly difficult to penetrate the market.
In order to be competitive, we must have the ability
to respond promptly and efficiently to the ever-changing marketplace. There are several potential competitors who are better positioned
than we are to take the market at an earlier time than us. We will compete with larger, established battery cell and pack manufacturers
who currently have products on the market and/or various respective product development programs. Similarly, there are many legacy companies
and new, better capitalized firms seeking to penetrate the charging infrastructure and energy storage solution space. These companies
have much better financial means and marketing/sales and human resources than us. They may succeed in developing and marketing competing
equivalent products earlier than us, or superior products than those developed by us. There can be no assurance that competitors will
not render our technology or products obsolete or that the products developed by us will be preferred to any existing or newly developed
technologies. It should further be assumed that that competition will intensify. Our success depends on our ability to continuously raise
funding, keep costs under control, and properly execute delivery of our products.
We are dependent on our existing suppliers,
a significant number of which are single or limited source suppliers and are also dependent on our ability to source suppliers, for our
critical components, and to complete the development of our supply chain, while effectively managing the risks due to such relationships.
Our success will be dependent upon our ability
to enter into supplier agreements and maintain our relationships with existing suppliers who are critical and necessary to the output
and production of our products. The supply agreements we have, and may enter into with suppliers in the future, may have provisions where
such agreements can be terminated in various circumstances, including potentially without cause. In the ordinary course of our business,
we currently have, and may in the future have, legal disputes with our suppliers, including litigation to enforce such supply agreements,
which would adversely affect our ability to source components from such suppliers. If our suppliers become unable or unwilling to provide,
or experience delays in providing, components, or if the supply agreements we have in place are terminated, or if any such litigation
to enforce our supply agreements is not resolved in our favor, it may be difficult to find replacement components. Additionally, our products
contain thousands of parts that we purchase from hundreds of mostly single- or limited-source suppliers, for which no immediate or readily
available alternative supplier exists. Due to scarce natural resources or other component availability constraints, we may not receive
the full allocation of parts we have requested from a particular supplier due to supplier allocation decisions which are outside our control.
While we believe that we would be able to establish alternate supply relationships and can obtain or engineer replacement components for
our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are acceptable
to us. Further, any such alternative suppliers may be located a long distance from our manufacturing facilities, which may lead to increased
costs or delays. In addition, as we evaluate opportunities and take steps to insource certain components and parts, supply arrangements
with current or future suppliers (with respect to other components and parts offered by such suppliers) may be available on less favorable
terms or not at all. Changes in business or macroeconomic conditions, governmental regulations, and other factors beyond our control or
that we do not presently anticipate could affect our ability to receive components from our suppliers. The unavailability of any component
or supplier has resulted, and could in the future result in production delays, idle manufacturing facilities, product design changes,
and loss of access to important technology and tools for producing and supporting our products and services.
In addition, if our suppliers experience substantial
financial difficulties, cease operations, or otherwise face business disruptions, we would be required to take measures to ensure components
and materials remain available. Any disruption could affect our ability to deliver products and could increase our costs and negatively
affect our liquidity and financial performance.
If a supplied product component becomes the subject
of a field action, including a product recall, we would be required to find an alternative component, which could increase our costs and
cause production delays. Additionally, we may become subject to costly litigation surrounding the component.
If we do not enter into long-term supply agreements
with guaranteed pricing for our parts or components, or if those long-term supply agreements are not honored by our suppliers, we may
be exposed to fluctuations in prices of components, materials, and equipment. Agreements for the purchase of battery cells contain or
are likely to contain pricing provisions that are subject to adjustments based on changes in market prices of key commodities. Substantial
increases in the prices for such components, materials, and equipment would increase our operating costs and could reduce our margins
if we cannot recoup the increased costs. Increasing the announced or expected prices of our products in response to increased costs has
previously been viewed negatively by our potential customers, and any future attempts to increase prices could have similar results, which
could adversely affect our business, prospects, financial condition, results of operations, and cash flows.
There are complex software and technology
systems that need to be developed by us and in coordination with vendors and suppliers to reach mass production for our products, and
there can be no assurance such systems will be successfully developed or integrated.
Our high-tech products and operations will use
a substantial amount of complex third-party and in-house software and hardware. The development and integration of such advanced technologies
are inherently complex, and we will need to coordinate with our vendors and suppliers to reach mass production for our products. Defects
and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. Thus, our
potential inability to develop and integrate the necessary software and technology systems may harm our competitive position.
We rely on third-party suppliers to develop a
number of emerging technologies for use in our products. Certain of these technologies are not today, and may not ever be, commercially
viable. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing, and volume
requirements to support our business plan. Furthermore, if we experience delays by our third-party suppliers, we could experience delays
in delivering on our timelines. In addition, the technology may not comply with the cost, performance useful life, and warranty characteristics
we anticipate in our business plan. As a result, our business plan could be significantly impacted and we may incur significant liabilities
under warranty claims which could materially and adversely affect our business, prospects, financial condition, results of operations,
and cash flows.
We are in the development stages of many
of our products, which face technical, significant cost, and regulatory challenges we may not be able to overcome.
Many of our products are in the development stages
and have not yet reached commercialization status. These products may face technical, significant costs, and regulatory challenges we
may be unable to overcome. Failure to meet these standards may interfere with our ability to commercialize our products and have a negative
and material impact on our business, prospects, financial condition, and results of our operation.
We may experience difficulty scaling up
manufacturing of our products.
Electric vehicle battery and charging infrastructure
technology is changing rapidly. Simultaneously, the large-scale focus on electric energy storage solutions has attracted both legacy and
new firms to enter the market. There is significant development and investment into electrification technology being made today. Such
rapidly changing technology conditions may adversely affect our ability to become a market leader, provide superior product performance,
and an outstanding customer experience. If we are unable to control the cost of development, cost of manufacturing, and cost of operations,
we may be substantially affected. If we are unable to maintain substantially lower cost of manufacturing, developing, design, distributing,
and maintaining our products, we may incur significant cost increases which can be material to the operation of our business. We have
made and will continue to make substantial investments into our development, such investments may have unforeseen costs that we have been
unable to accurately predict, which may significantly impact our ability to execute our business as planned. The supply chain impacting
the purchase of our product components and raw materials is subject to conditions outside our control and as such, these conditions may
substantially affect our business, product, brand, operational, and financial goals.
We will continuously and diligently work towards
obtaining multiple sources of materials and components to mitigate risk in our supply chain. However, it is possible that specific components
or solutions required to manufacture our products may be subject to intellectual property, material availability, or expertise owned solely
by a single supplier. A condition such as a single source supplier may hinder our ability to secure the cost, schedule, and long-term
viability of our products.
We may not achieve our projected development
goals in the time frames we announce and expect due to unforeseen factors.
Our business success, timeline, and milestones
are estimated. Our production projections, sales volume, and cost models are only estimates. We produced these estimates based on existing
business models of successful and unsuccessful efforts of other companies within the battery technology, charging infrastructure, energy
storage and automotive industries. All such projections and timeline estimations may change as we continue in the development and scaling
of our products.
We are currently in the development phase of our
products and have not yet started manufacturing and sales. Cost overruns, scheduling delays, and failure to meet product performance goals
may be caused by, but not limited to, unidentified technical hurdles, delays in material shipments, and regulatory hurdles. We may experience
delays in the design and manufacturing of our products. We may experience significant delays in bringing our products to market due to
design considerations, technical challenges, material availability, manufacturing complications, and regulatory considerations. Such delays
could materially damage our brand, business, financial goals, operation results, and product development and delivery.
A significant interruption of our information
technology systems or the loss of confidential or other sensitive data, including cybersecurity risks, could have a material
adverse impact on our operations and financial results.
Given our reliance on information technology (our
own and our third-party providers’), a significant interruption in the availability of information technology, regardless of the
cause, or the loss of confidential, personal, or proprietary information (whether our own, our employees’, our suppliers’,
or our customers’), regardless of the cause, could negatively impact our operations. While we have invested in the protection
of our data and information technology to reduce these risks and routinely test the security of our information systems network, we cannot
be assured that our efforts will prevent breakdowns or breaches in our systems that could adversely affect our business. Management is
not aware of a cybersecurity incident that has had a material adverse impact on our financial condition or results of operations;
however, we could suffer material financial or other losses in the future and we are not able to predict the severity of these attacks.
The occurrence of a cyber-attack, breach, unauthorized access, misuse, computer virus or other malicious code or other cybersecurity event
could jeopardize or result in the unauthorized disclosure, gathering, monitoring, misuse, corruption, loss or destruction of confidential
and other information that belongs to us, our customers, our counterparties, or third-party suppliers and providers that is processed
and stored in, and transmitted through, our computer systems and networks. The occurrence of such an event could also result in damage
to our software, computers or systems, or otherwise cause interruptions or malfunctions in our, our customers’, our counterparties’
or third parties’ operations. This could result in loss of customers and business opportunities, reputational damage, litigation,
regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect our business, financial
condition or results of operations. As part of our regular review of potential risks, we analyze emerging cybersecurity threats
to us and our third-party suppliers and providers as well as our plans and strategies to address them. The Board of Directors of the Company
(the “Board”), which has oversight responsibility for cybersecurity risks, is regularly briefed by management on such analyses.
Rising interest rates may adversely impact
our business.
Due to recent increases in inflation, the U.S.
Federal Reserve has significantly raised, and may continue to raise, its benchmark interest rates. An increase in the federal benchmark
rate has resulted in an increase in market interest rates, which may increase our interest expense under any future borrowings. Consequently,
rising interest rates may increase our cost of capital. We have incurred certain debt obligations in the ordinary course of our business
and may incur additional indebtedness in the future. Due to interest rate increases resulting from the current global economic environment,
our ability to issue new debt may be adversely impacted. As a result, we cannot be certain that additional funding will be available if
needed and, to the extent required, on acceptable terms, which could have an adverse effect on us. Increased borrowing costs may also
limit our customers’ ability to purchase our products in the future, which could have an adverse impact on our financial condition
and results of operations.
Inflation has resulted in increased costs
of operations, which could have a material adverse effect on our results of operations and the market price of our common stock.
Inflation has accelerated in the United States
and globally due in part to global supply chain issues, the Ukraine-Russia war, a rise in energy prices, and strong consumer demand as
economies continue to reopen from restrictions related to the COVID-19 pandemic. The inflationary environment has increased our cost of
labor, as well as our other operating costs, which may have a material adverse impact on our financial results. In addition, economic
conditions could impact and reduce the number of customers who purchase our products as credit becomes more expensive or unavailable.
Although interest rates have increased and are expected to increase further, inflation may continue. Further, increased interest rates could
have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the market price of our
common stock.
We may face regulatory challenges.
We are substantially at risk of unfavorable governmental regulations.
Li-ion batteries and derivative products are subject to substantial regulation under international, federal, state, local and foreign
laws regarding safety, performance, and import regulations. The Qcell, Qube, megawatt charging station and, eventually, the vehicle products
will need to comply with many governmental standards and regulations relating to safety, environmental, trade, performance and end-of
life regulations. Compliance with all of these requirements may delay our production launch, thereby adversely affecting our business
and financial condition.
Additionally, there is a chance that some economically
advantageous governmental incentives or subsidies will be removed or repealed before our product reaches production. Such changes to the
governmental regulatory structure could have an adverse effect on profitability.
We have no proven history of achieving the
necessary regulatory requirements.
We have not yet received regulatory approval for
our NXU Cell, NXU Battery, or vehicle products. We may face significant technical challenges in achieving regulatory approval that may
impact our ability to continue operations.
Many of the required regulatory approvals may
require significant cost and time. We may need to raise additional capital to achieve regulatory approvals for our products. Failure to
raise the needed capital required may have an impact on our ability to continue operations.
If we cannot continue to innovate, our projected
revenue growth rate and profits may be reduced.
To successfully develop and grow our business,
we must develop, distribute and commercialize our products, secure strategic partnerships with various businesses, and bring our products
to market on schedule and in a profitable manner, as well as spend time and resources on the development of future products, services
and business strategies that are complementary to our initial products and business plan. Delays or failures in the launch of our products
could hurt our ability to meet our growth objectives, which may affect our financial projections and may impact our stock price. Moreover,
if we are unable to continually develop and evolve our business strategy and launch additional products and services in the future, our
business will be entirely dependent on the success of the technology and solutions we are developing today and this could hinder our ability
to stay relevant and to pursue growth. We cannot guarantee that any of our planned products will be able to achieve our expansion goals
alone. Our ability to expand successfully will depend on a number of factors, many of which are beyond our control.
The success of our business depends on attracting
and retaining a large number of customers. If we are unable to do so, we will not be able to achieve profitability.
Our success depends on attracting a large number
of potential customers to purchase our products and the associated services we will provide to those customers. If our customers do not
perceive our products and services to be of sufficiently high value and quality, cost competitive and appealing in aesthetics or performance,
we may not be able to retain our customers or attract new customers, and our business, prospects, financial condition, results of operations,
and cash flows would suffer as a result. In addition, we may incur significantly higher and more sustained advertising and promotional
expenditures than we have previously incurred to attract customers. We may not be successful in attracting and retaining a large number
of consumer and commercial customers. If, for any of these reasons, we are not able to attract and maintain consumer and commercial customers,
our business, prospects, financial condition, results of operations, and cash flows would be materially harmed.
We may have difficulty protecting our intellectual
property.
Our pending patents and other intellectual property
could be unenforceable or ineffective once patent reviews are completed. We anticipate patent review completion and patents issued in
calendar years 2021, 2022, and 2023 based on the typical two-year process between filing and issuing. We have continued to file patent
applications during 2023 and plan to continue filing new patents over time. We have filed these patents privately and the scope of what
they cover remains confidential until they are issued. For any company creating brand new products, it is imperative to protect the proprietary
intellectual property to maintain a competitive advantage. There is no doubt that a significant portion of our current value depends on
the strength and imperviousness of these pending patents. We intend to continue to file additional patent applications and build our intellectual
property portfolio as we discover new technologies related to the development of advanced electric vehicle batteries, battery pack technologies,
megawatt charging, energy storage solutions and plug-in electric vehicles.
We believe that intellectual property will be
critical to our success, and that we will rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or
license agreements to protect our proprietary rights. If we are not successful in protecting our intellectual property, it could have
a material adverse effect on our business, results of operations and financial condition. While we believe that we will be issued trademarks,
patents and pending patent applications help to protect our business, there can be no assurance that our operations do not, or will not,
infringe valid, enforceable third-party patents of third parties or that competitors will not devise new methods of competing with us
that are not covered by our anticipated patent applications. There can also be no assurance that our patent applications will be approved,
that any patents issued will adequately protect our intellectual property, or that such patents will not be challenged by third parties
or found to be invalid or unenforceable or that our patents will be effective in preventing third parties from utilizing a copycat business
model to offer the same service in one or more categories. Moreover, it is intended that we will rely on intellectual property and technology
developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third
parties at all or on reasonable terms. Effective trademark, service mark, copyright and trade secret protection may not be available in
every country in which our intended services will be provided. The laws of certain countries do not protect proprietary rights to the
same extent as the laws of the U.S. and, therefore, in certain jurisdictions, we may be unable to protect our proprietary technology adequately
against unauthorized third party copying or use, which could adversely affect our competitive position. We expect to license in the future,
certain proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that might
diminish the value of our proprietary rights or harm our reputation, even if we have agreements prohibiting such activity. Also, to the
extent third parties are obligated to indemnify us for breaches of our intellectual property rights, these third parties may be unable
to meet these obligations. Any of these events could have a material adverse effect on our business, results of operations or financial
condition.
The U.S. Patent and Trademark Office and various
foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during
the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter
the market earlier than would otherwise have been the case, which could have a material adverse effect on our business, results of operations
and financial condition.
Intellectual property protection is costly.
Filing, prosecuting and defending patents related
to our products and software throughout the world is prohibitively expensive. Competitors may use our technologies in jurisdictions where
we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories
where we have patent protection, but where enforcement is not as strong as that in the United States. These products may compete with
our products in jurisdictions where we do not have any issued or licensed patents and our patent claims or other intellectual property
rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting
and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing
countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to technology,
which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary
rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts
and attention from other aspects of our business.
Confidentiality agreements may not adequately
prevent disclosure of trade secrets and other proprietary information.
We anticipate that a substantial amount of our
processes and technologies will be protected by trade secret laws. To protect these technologies and processes, we intend to rely in part
on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively
prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information,
and in such cases, we could not assert any trade secret rights against such parties. To the extent that our employees, contractors or
other third parties with which we do business use intellectual property owned by others in their work for us, disputes may arise as to
the rights in related or resulting know-how and inventions. Laws regarding trade secret rights in certain markets in which we operate
may afford little or no protection to our trade secrets. The loss of trade secret protection could make it easier for third parties to
compete with our products and related future products and services by copying functionality, among other things. In addition, any changes
in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate may compromise
our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce
and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our
business, revenue, reputation and competitive position.
Failure to comply with federal and state
privacy laws could adversely affect our business.
A variety of federal and state laws and regulations
govern the collection, use, retention, sharing and security of consumer data. The existing privacy-related laws and regulations are evolving
and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and regulatory bodies
may expand current or enact new laws regarding privacy matters. Several internet companies have recently incurred penalties for failing
to abide by the representations made in their privacy policies and practices. In addition, several states have adopted legislation that
requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and
to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy
policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international
privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or
actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a
failure or perceived failure to comply with industry standards or with our own privacy policies and practices could adversely affect our
business. Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party
web “cookies” for behavioral advertising. The regulation of these cookies and other current online advertising practices
could adversely affect our business.
Our business could be adversely affected
by a downturn in the economy and/or manufacturing.
We are dependent upon the continued demand for
electric vehicles, charging infrastructure, energy storage solutions and battery technology, making our business susceptible to a downturn
in the economy or in manufacturing. For example, a decrease in the number of individuals investing their money in the equity markets could
result in a decrease in the number of companies deciding to become or remain public. This downturn could have a material adverse effect
on our business, our ability to raise funds, our production, and ultimately our overall financial condition.
Our business would be adversely affected
if we are not able to create and develop an effective sales function, processes and build an effective sales force.
Because a significant component of our growth
strategy relates to increasing our revenues through sales to companies and individuals subject to the SEC disclosure and reporting requirements,
our business would be adversely affected if we were unable to develop and maintain an effective sales channels, processes and technologies
to market our products to consumers across all available channels. Additionally, we currently do not employ any sales staff to sell our
products, which could have a material adverse effect on our business, results of operations and financial condition, especially if we
are unable to grow our sales team effectively.
We may not be able to successfully manage
our growth.
We could experience growth over a short period
of time, which could put a significant strain on our managerial, operational and financial resources. We must implement and constantly
improve our certification processes and hire, train and manage qualified personnel to manage such growth. We have limited resources and
may be unable to manage our growth. Our business strategy is based on the assumption that our customer base, geographic coverage and service
offerings will increase. If this occurs it will place a significant strain on our managerial, operational, and financial resources. If
we are unable to manage our growth effectively, our business will be adversely affected. As part of this growth, we may have to implement
new operational, manufacturing, and financial systems and procedures and controls to expand, train and manage our employees, especially
in the areas of manufacturing and sales. If we fail to develop and maintain our people and processes as we experience our anticipated
growth, demand for our products and our revenues could decrease.
We may not be able to keep up with rapid
technological changes.
To remain competitive, we must continue to enhance
our products and software. The evolving nature of the electric vehicle industry, including products such as batteries, charging infrastructure,
energy storage solutions and vehicles, is characterized by rapid technological change, frequent new product and service introductions
and the emergence of new industry standards and practices. Rapid changes could render our existing systems, software, and services obsolete.
Our success will depend, in part, on our ability to develop, innovate, license or acquire leading technologies useful in our business,
enhance our existing solutions, develop new solutions and technology that address the increasingly sophisticated and varied needs of our
current and prospective customers, and respond to technological advances and emerging industry and regulatory standards and practices
in a cost-effective and timely manner. Future advances in technology may not be beneficial to, or compatible with, our business. Furthermore,
we may not successfully use new technologies effectively or adapt our proprietary technology and hardware to emerging industry standards
on a timely basis. Our ability to remain technologically competitive may require substantial expenditures and lead time. If we are unable
to adapt in a timely manner to changing market conditions or user requirements, our business, financial condition and results of operations
could be seriously harmed.
If we do not successfully establish and
maintain our Company as a highly trusted and respected name for our products, our projected revenues would be impacted, which could significantly
affect our business, financial condition and results of operations.
In order to attract and retain a client base and
increase business, we must establish, maintain and strengthen our name and the services we provide. In order to be successful in establishing
our reputation, clients must perceive us as a trusted source for quality services. If we are unable to attract and retain clients with
our current marketing plans, we may not be able to successfully establish our name and reputation, which could significantly affect our
business, financial condition and results of operations.
We are subject to risks of borrowing.
As of the date of this prospectus, we have incurred
certain debt obligations in the ordinary course of our business. Should we obtain secure bank debt in the future, possible risks could
arise. If we incur additional indebtedness, a portion of our future revenues will have to be dedicated to the payment of principal and
interest on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair our operating flexibility.
Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants.
A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of
such lender which would be senior to our rights. A judgment creditor would have the right to foreclose on any of our assets resulting
in a material adverse effect on our business, ability to generate revenue, operating results or financial condition.
We may encounter unanticipated obstacles.
Our business plan may change significantly. Many
of our potential business endeavors are capital intensive and may be subject to statutory or regulatory requirements. Our Board believes
that the chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background,
and knowledge of our principals and advisors. Our Board reserve the right to make significant modifications to our stated strategies depending
on future events.
We may be subject to unforeseen delays or
failures that are caused by force majeure events beyond our control.
Our business is uniquely susceptible to unforeseen
delays or failures that are caused by forces of nature and related circumstances. These factors are outside and beyond our control. The
delay or failure to complete the development and testing of our products and the commercial release of related services may be due to
any act of God, fire, war, terrorism, flood, strike, labor dispute, disaster, transportation or laboratory difficulties or any similar
or dissimilar event beyond our control. We will not be held liable to any stockholder in the event of any such failure. However, a court
of competent jurisdiction may determine that we are still liable to stockholders for catastrophic failures proximately caused by forces
of nature outside of our control. If such a court so decides, we may have significant stockholder liability exposure.
We have and may continue to be adversely
impacted by macroeconomic conditions resulting from the global COVID-19 pandemic.
Our business, results of operations, and financial
condition have been, and may continue to be, adversely impacted in material respects by COVID-19 and by related government actions (including
declared states of emergency and quarantine, “shelter in place” orders, or similar orders), non-governmental organization
recommendations, and public perceptions, all of which have led and may continue to lead to disruption in global economic and labor markets.
These effects have had a significant impact on our business, including reduced demand for our products and workforce solutions, early
terminations or reductions in projects, hiring freezes, and a shift of a portion of our workforce to remote operations, all of which have
contributed to a decline in revenues and other significant adverse impacts on our financial results. Other potential impacts of COVID-19
may include continued or expanded closures or reductions of operations with respect to our supplier partners’ and customer operations
or facilities, the possibility our customers will not order and will not be able to pay for our products, or that they will attempt to
defer payments owed to us, either of which could materially impact our liquidity, the possibility that the uncertain nature of the pandemic
may not yield the increase in certain of our workforce solutions that we have historically observed during periods of economic downturn,
and the possibility that various government-sponsored programs to provide economic relief may be inadequate. Further, we may continue
to experience adverse financial impacts, some of which may be material, if we cannot offset revenue declines with cost savings through
expense-related initiatives, human capital management initiatives, or otherwise.
Some of our suppliers and partners also experienced
temporary suspensions before resuming. Reduced operations or closures at government offices, motor vehicle departments and municipal and
utility company inspectors have resulted in challenges in or postponements for product manufacturing and sales. Global trade conditions
and consumer trends may further adversely impact us and our industries. For example, pandemic-related issues have exacerbated port congestion
and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts. Sustaining our
production will require the readiness and solvency of our suppliers and vendors, a stable and motivated production workforce and ongoing
government cooperation.
We cannot predict the duration or direction of
current global trends, the sustained impact of which is largely unknown, is rapidly evolving and has varied across geographic regions.
Ultimately, we continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate,
The preparation of our financial statements
requires estimates, judgments and assumptions that are inherently uncertain.
Financial statements prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”) typically require the use of estimates, judgments and
assumptions that affect the reported amounts. Often, different estimates, judgments and assumptions could reasonably be used that would
have a material effect on such financial statements, and changes in these estimates, judgments and assumptions may occur from period to
period over time. These estimates, judgments and assumptions are inherently uncertain and, if our estimates were to prove to be wrong,
we would face the risk that charges to income or other financial statement changes or adjustments would be required. Any such charges
or changes could harm our business, including our financial condition and results of operations and the price of our securities. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments
and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business.
We may be unable to meet our capital requirements.
Our capital requirements depend on numerous factors,
including but not limited to the rate and success of our research and development efforts, marketing efforts, market acceptance of our
products, our ability to establish and maintain our agreements with suppliers, our ability to ramp up production, product demand and other
factors. The capital requirements relating to development of our technology and the implementation of our business plan will be significant.
We cannot accurately predict the timing and amount of such capital requirements. However, we are dependent on the proceeds of this offering
as well as additional financing that will be required in order to develop our products and fully implement our proposed business plans.
However, in the event that our plans change, or
our assumptions change or prove to be inaccurate, or if the proceeds of from offering prove to be insufficient to implement our business
plan, we would be required to seek additional financing sooner than currently anticipated. There can be no assurance that any such financing
will be available to us on commercially reasonable terms, or at all. Furthermore, any additional equity financing may dilute the equity
interests of our existing stockholders (including those purchasing units pursuant to this offering), and debt financing, if available,
may involve restrictive covenants with respect to dividends, raising future capital and other financial and operational matters. If we
are unable to obtain additional financing as and when needed, we may be required to reduce the scope of our operations or our anticipated
business plans, which could have a material adverse effect on our business, future operating results and financial condition.
If we pursue strategic investments, they
may result in losses.
We may elect periodically to make strategic investments
in various public and private companies with businesses or technologies that may complement our business. The market values of these strategic
investments may fluctuate due to market conditions and other conditions over which we have no control. Other-than-temporary declines in
the market price and valuations of the securities that we hold in other companies would require us to record losses related to our investment.
This could result in future charges to our earnings. It is uncertain whether or not we will realize any long-term benefits associated
with these strategic investments.
Our ability to utilize loss carry forwards
may be limited.
Generally, a change of more than fifty percent
(50%) in the ownership of a company’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal
income tax purposes. An ownership change may limit our ability to use our net operating loss carryforwards attributable to the period
prior to the change. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to
offset U.S. federal taxable income may become subject to limitations.
An event of default has occurred under our
convertible notes and the outstanding principal balance of the convertible notes and accrued and unpaid interest thereon may become immediately
due and payable.
On April 11, 2023, we received a notice of non-compliance
from Nasdaq stating that we no longer meet a requirement for continued listing of our Class A common stock on Nasdaq. See “Our
Class A common stock may be delisted from Nasdaq if we do not maintain compliance with Nasdaq’s continued listing requirements.
If our Class A common stock is delisted, the market price and liquidity of our Class A common stock and our ability to issue additional
securities and raise additional capital would be adversely impacted.” We determined that the notice of non-compliance constituted
an event of default under our outstanding convertible notes. As a result of the event of default, unless waived by the holders, the convertible
notes began accruing default interest at a rate of 10% per annum and we are obligated to pay to the holders approximately $3.3 million,
which amount represents 100% of the sum of (x) the outstanding principal of the notes as of April 11, 2023 and (y) accrued and unpaid
interest thereon. The holders have the option to instead convert the amount due and payable under the event of default, including at an
alternative conversion price as described in the convertible notes. If we are required to pay the outstanding principal amount of the
convertible notes and accrued and unpaid interest thereon to the holders, we will be able to do so using available cash on hand, but our
financial condition will be adversely impacted and we may not have sufficient funds to operate our business and develop our products as
planned. We have discussed the event of default with the holders and, to date, one holder has temporarily waived the event of default pending resolution of the non-compliance matter. The other holder has exercised its option to convert the amount due and payable under the event of default at the alternative conversion price.
RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION
OF OUR PRODUCTS
If our battery cells fail to perform as
expected, our ability to develop, market, and license our technology could be harmed.
The performance of our battery cells are integral
to the success of our business. Our battery cell architecture is inherently complex and incorporates technology and components that have
not been used in commercial battery cell production. We anticipate that our research and development efforts will be an iterative process.
The continuous need to refine and optimize our products will require us to continue to perform extensive and costly research and development
efforts even after the initial delivery of our cells. For instance, we may learn that our cells contain defects or errors that cause the
cells not to perform as expected or otherwise does not meet the quality or performance requirements of our customers. Fixing any such
problems may require design changes or other research and development efforts, take significant time and can be costly. There can be no
assurance that we will be able to detect and fix any defects. If our battery cell design fails to perform as expected, we could lose contracts
and customers. In addition, because we have a limited frame of reference from which to evaluate the long-term performance of our battery
cell designs, it is possible that issues or problems will arise once our technology has been deployed for a longer period. If our customers
determine our technology does not perform as expected, they may delay deliveries, terminate further orders, or initiate product recalls,
each of which could adversely affect our business, prospects, and results of operations, and our ability to develop, market and license
our technology could be harmed.
Our success depends on our ability to manufacture
battery cells and packs at volume and with acceptable performance, yield and costs.
In order to be commercially viable, our battery
cells and packs will need to be capable of being produced at a high yield without compromising performance, and in a way that is scalable
and at an acceptable cost. We will also need to do in a manner that yields acceptable performance and at anticipated costs. We may encounter
challenges that slow down our ability to manufacture our battery cells and packs on our anticipated timeline. Any such challenges in our
ability to equip and construct manufacturing facilities and develop and increase production capacity timely, within budget, and in a cost-effective
manner may prohibit our ability to grow the business. If we are not able to overcome these manufacturing hurdles, we may not succeed as
needed to continue our business and it may result in damage to our business, prospects, financial condition, operating results and brand.
Our reliance on complex machinery to scale
operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We rely heavily on complex machinery for our operations,
and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Our manufacturing
facility consists of large-scale machinery combining many components. The manufacturing facility components are likely to suffer unexpected
malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed.
Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency. Operational
performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited
to, environmental hazards and remediation, costs associated with decommissioning of machines, difficulty or delays in obtaining governmental
permits, damages or defects in electronic systems, industrial accidents, fire, and seismic activity and natural disasters. Should operational
risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing
facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased
insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations,
financial condition or prospects.
We may not be able to build and scale our
charging stations and energy storage solutions as expected.
Our success depends on our ability to build and scale our charging
stations and energy storage solutions, as well as introduce a variety of new product offerings to address the changing needs of the EV
charging market. We cannot guarantee that our charging stations and energy storage solutions will be released in a timely manner, or at
all, or achieve market acceptance. As EV technologies change or governmental regulations impose new requirements on EV charging technology,
we may need to upgrade or adapt our charging station technology and energy storage solutions and introduce new products and services in
order to serve vehicles that have the latest technology, which could involve substantial costs. We may also incur additional costs and
expenses related to new product transitions such as adverse impacts due to supply chain failures to procure sufficient new product components,
purchase price variances, or inventory obsolescence costs related to new product transitions, including as the result of any failure on
our part to meet our own estimates and projections. In addition, new or changing state or federal regulations may result in delays related
to the development of new products or modifications to existing products in order to come into compliance and any such delays may result
in customer’s selecting alternative providers or result in delays related to our ability to install, sell or distribute our charging
station technology and energy storage solutions.
If we are unable to devote adequate resources to building and scaling
our charging stations and energy storage solutions as expected to meet customer and regulatory requirements on a timely basis or that
remain competitive with technological alternatives, our business and prospects may be adversely affected.
The future growth and success of our
charging stations is highly correlated with and thus dependent upon the continuing rapid adoption of EVs.
Our future growth is highly dependent upon
the adoption of EVs by businesses and consumers. The market for EVs is still rapidly evolving, characterized by rapidly changing technologies,
competitive pricing and competitive factors, evolving government regulation and industry standards and changing consumer demands and
behaviors, changing levels of concern related to environmental issues and governmental initiatives related to energy independence, climate
change and the environment generally. Although demand for EVs has grown in recent years, there is no guarantee of continuing future demand.
If the market for EVs develops more slowly than expected, or if demand for EVs decreases, our business, prospects, financial condition
and operating results would be harmed. The market for EVs could be affected by numerous factors, including perceptions about EV features,
quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; competition,
including from other types of alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy internal combustion engine
vehicles; volatility in the cost of oil and gasoline, including as a result of trade restrictions; concerns regarding the reliability
and stability of the electrical grid; the change in an EV battery’s ability to hold a charge over time; the availability and reliability
of a national electric vehicle charging network or infrastructure; availability of maintenance and repair services for EVs; consumers’
perception about the convenience and cost of charging EVs; increases in fuel efficiency of non-electric vehicles; government regulations
and economic incentives, including adverse changes in, or expiration of, favorable tax incentives related to EVs, EV charging stations
or decarbonization generally; relaxation of government mandates or quotas regarding the sale of EVs; and concerns about the future viability
of EV manufacturers.
In addition, sales of vehicles in the automotive
industry can be cyclical, which may affect growth in acceptance of EVs. It is uncertain how macroeconomic factors will impact demand
for EVs, particularly since EVs can be more expensive than traditional gasoline-powered vehicles, when the automotive industry globally
has been experiencing a recent decline in sales. Furthermore, because fleet operators often make large purchases of EVs, this cyclicality
and volatility in the automotive industry may be more pronounced with commercial purchasers, and any significant decline in demand from
these customers could reduce demand for EV charging and our products in particular.
Demand for EVs may also be affected by factors
directly impacting automobile prices or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices
of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other
taxes. Volatility in demand or delays in EV production due to global supply chain constraints may lead to lower vehicle unit sales, which
may result in reduced demand for EV charging solutions and therefore adversely affect our business, financial condition and operating
results.
We currently face competition from a number
of companies and expect to face significant competition in the future as the market for EV battery, charging and energy storage solutions
develops.
The EV market and battery segment are highly competitive and
rapidly evolving, with new technologies and potential new entrants emerging frequently. Several major manufacturers currently supply batteries
for the EV industry, including Panasonic Corporation, Samsung SDI, Contemporary Amperex Technology Co. Limited, LG Energy Solutions, and
BYD Co. Limited. These companies primarily supply conventional Li-ion batteries and are also working on developing new solid-state battery
technologies, including potentially lithium-metal batteries. In addition to these established players, many new entrants and automotive
OEMs are also investing in battery development and production, with some researching and developing solid-state battery technologies.
For example, Quantumscape and Solid Power are developing solid-state batteries while Tesla, Inc. is building multiple battery gigafactories
and has the potential to supply batteries to other automotive OEMs. Overall, the competitive landscape of the EV battery market is likely
to continue evolving, with new technologies and players emerging over time. We will need to be nimble and responsive to these changes
to remain competitive and successful.
Similarly, the competitive landscape for energy
storage products is rapidly evolving, with new technologies and players entering the market. Currently, major companies supplying batteries
for energy storage systems include Panasonic Corporation, LG Energy Solutions, Samsung SDI, and Tesla, Inc. In addition to established
players, there are many startups and smaller companies that are developing new energy storage technologies, such as flow batteries, solid-state
batteries, and hydrogen fuel cells. Large energy companies, such as Total, Shell, and Enel, are also entering the market and investing
in energy storage projects. The competitive landscape for energy storage products is expected to remain highly dynamic, with new technologies
and players emerging over time, driven by factors such as declining costs, increasing demand for renewable energy, and government incentives.
This competition may also materialize in the form
of costly intellectual property disputes or litigation involving our Company. If we fail to adapt to changing market conditions or compete
successfully with competitors, our growth will be limited, which would adversely affect our business and results of operations.
The automotive market is highly competitive,
and we may not be successful in competing in this industry.
Both the automobile industry generally, and the
electric vehicle segment in particular, are highly competitive, and we will be competing for sales with both electric vehicle manufacturers
and traditional automotive companies, including those who have announced consumer and commercial vehicles that may be directly competitive
to ours. Many of our current and potential competitors may have significantly greater financial, technical, manufacturing, marketing,
or other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion,
sale, and support of their products than we may devote to our products. We expect competition for electric vehicles to intensify due to
increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive
industry, as well as the recent significant increase in oil and gasoline prices. In addition, as fleet operators begin transitioning to
electric vehicles on a mass scale, we expect that more competitors will enter the commercial fleet electric vehicle market. Further, as
a result of new entrants in the commercial fleet electric vehicle market, we may experience increased competition for components and other
parts of our vehicles, which may have limited or single-source supply.
Factors affecting competition include product
performance and quality, technological innovation, customer experience, brand differentiation, product design, pricing and total cost
of ownership, and manufacturing scale and efficiency. Increased competition may lead to lower vehicle unit sales and increased inventory,
which may result in downward price pressure and adversely affect our business, prospects, financial condition, results of operations,
and cash flows.
Other vehicle manufacturers may beat us
to market.
As of May 2023, several competing electric pickup
trucks have entered production, or will enter production by the end of 2024. This includes but is not limited to the Ford F-150 Lightening,
Chevrolet electric Silverado, GMC Sierra EV, Rivian R1T, Tesla Cybertruck, Hummer EV pickup, Lordstown Endurance, and Ram Revolution.
Although we believe we are developing a superior product in terms of both design and performance, many other auto makers have much more
bargaining power and deeper pockets that enable them to quickly create economies of scale. There is a chance that consumers adopt competitor
electric trucks before we can bring its vehicle products to market. While other manufactures focus on mid-size and class 1 pickup trucks,
we will focus on Class 2 and 3 markets, while offering a vehicle option for Class 1 customers.
We rely on complex machinery for our operations,
and production involves a significant degree of risk and uncertainty in terms of operational performance, safety, security, and costs.
We rely heavily on complex machinery for our operations
and our production involves a significant degree of uncertainty and risk in terms of operational performance, safety, security, and costs.
Our manufacturing plant consists of large-scale machinery combining many components, including complex software to operate such machinery
and to coordinate operating activities across the manufacturing plant. The manufacturing plant components are likely to suffer unexpected
malfunctions from time to time, especially as we ramp up production on new products, and will depend on repairs, spare parts, and IT solutions
to resume operations, which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly
affect operational efficiency.
Operational performance and costs can be difficult
to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental
hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining
governmental permits, damages or defects in electronic systems including the software used to control or operate them, industrial accidents,
pandemics, fire, seismic activity, and natural disasters.
Should operational risks materialize, it may result
in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, products, supplies,
tools and materials, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines,
increased insurance costs, and potential legal liabilities, all which could have a material adverse effect on our business, prospects,
financial condition, results of operations, and cash flows. Although we generally carry insurance to cover such operational risks, we
cannot be certain that our insurance coverage will be sufficient to cover potential costs and liabilities arising therefrom. A loss that
is uninsured or exceeds policy limits may require us to pay substantial amounts, which could adversely affect our business, prospects,
financial condition, results of operations, and cash flows.
We are subject to substantial regulations
and unfavorable changes to, or failure by us to comply with, these regulations could substantially harm our business and operating results.
Our batteries, and the sale of electric vehicles
and motor vehicles in general, are subject to regulation under international, federal, state, and local laws, including export and import
control laws. We expect to incur significant costs in complying with these regulations. Regulations related to the battery and electric
vehicle industry are currently evolving and we face risks associated with these changing regulations.
To the extent that a law changes, our products
may not comply with applicable international, federal, state, and local laws, which would have an adverse effect on our business. Compliance
with changing regulations could be time consuming, burdensome, and expensive. To the extent compliance with new and existing regulations
is cost prohibitive, our business prospects, financial condition, and operating results would be adversely affected.
Internationally, there may be laws and jurisdictions
we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices.
These laws may be complex, difficult to interpret and may change over time. Continued regulatory limitations and obstacles that may interfere
with our ability to commercialize our products could have a negative and material impact on our business, prospects, financial condition,
and results of our operation.
We are subject to requirements relating
to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operation
and reputation.
We are subject to numerous federal, state and
local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal, and
remediation of releases of hazardous materials. There are significant capital, operating and other costs associated with compliance with
these environmental laws and regulations. Environmental laws and regulations may become more stringent in the future, which could increase
costs of compliance or require us to manufacture with alternative technologies and materials.
Federal, state and local authorities also regulate
a variety of matters, including, but not limited to, health, safety and permitting in addition to the environmental matters discussed
above. New legislation and regulations may require us to make material changes to our operations, resulting in significant increases in
the cost of production.
Our manufacturing process will have hazards such
as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical
of large manufacturing equipment and related safety incidents. There may be safety incidents that damage machinery or products, slow or
stop production, or harm employees. Consequences may include litigation, regulation, fines, increased insurance premiums, mandates to
temporarily halt production, workers’ compensation claims, or other actions that impact our company brand, finances, or ability
to operate.
Our vehicles rely on software and hardware
that is highly technical, and if these systems contain errors, bugs, vulnerabilities, or design defects, or if we are unsuccessful in
addressing or mitigating technical limitations in our systems, our business could be adversely affected.
Our vehicles rely on software and hardware that
is highly technical and complex and will require modification and updates over the life of the vehicles. In addition, our vehicles depend
on the ability of such software and hardware to store, retrieve, process and manage immense amounts of data. Our software and hardware
may contain errors, bugs, vulnerabilities or design defects, and our systems are subject to certain technical limitations that may compromise
our ability to meet our objectives. Some errors, bugs, vulnerabilities, or design defects inherently may be difficult to detect and may
only be discovered after the code has been released for external or internal use. Although we will attempt to remedy any issues we observe
in our vehicles effectively and rapidly, such efforts may not be timely, may hamper production or may not be to the satisfaction of our
customers.
Additionally, if we deploy updates to the software
(whether to address issues, deliver new features or make desired modifications) and our over-the-air update procedures fail to properly
update the software or otherwise have unintended consequences to the software, the software within our customers’ vehicles will
be subject to vulnerabilities or unintended consequences resulting from such failure of the over-the-air update until properly addressed.
If we are unable to prevent or effectively remedy
errors, bugs, vulnerabilities or defects in our software and hardware, or fail to deploy updates to our software properly, we would suffer
damage to our reputation, loss of customers, loss of revenue or liability for damages, any of which could adversely affect our business,
prospects, financial condition, results of operations, and cash flows.
We are dependent
on our own suppliers and suppliers to our third-party contract manufacturers who fabricate our equipment to fulfill orders placed by us.
Timely delivery of orders is needed to meet the requirements of our customers, and a shortage of materials or components, such as microprocessors,
can disrupt the production of our equipment.
As a vehicle manufacturer, we will be subject
to the same vagaries as the rest of the automotive industry. With a significant number of microprocessors
in each of our systems, we and our other parties who need microprocessors are experiencing various levels of disruption to production.
The microprocessor supply chain is complex, and a constrained capacity of certain components is occurring deep in the chain. There have
been significant disruptions to capacity and reallocations of supply capacity during the COVID-19 pandemic. Furthermore, prior to the
COVID-19 pandemic, microprocessor manufacturers were already seeing increasing demand and that demand has further increased based on labor
shortages and the need for greater automation. A shortage of microprocessors or other materials or components can cause a significant
disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.
Given our weaker relative bargaining power, there is a real risk that we will experience significant difficulties in obtaining supplies
of microchips. If this occurs, we may experience significant production delays and will not meet our production goals. Lack of production
will have a direct impact on sales and would likely cause us to miss our quarterly and annual earnings estimates.
Natural resource scarcity may cause delays
in the development and manufacturing of our products.
The development of our products in the timeframe
we anticipate is based on an ability to secure requisite levels of natural resources to produce the number of battery cells and battery
packs necessary to meet our production goals. Two of the main natural resources in battery chemistry are lithium and cobalt. Given that
these are scarce resources, there is a chance that we are unable to secure enough to meet our battery production goals. If this happens,
we will not meet our overall production or profitability estimates. To mitigate this risk, we will explore opportunities to purchase futures
to hedge against natural resource cost inflation and/or scarcity.
Additionally, global political and economic tensions
could contribute to natural resource scarcity. For example, Russia is a major exporter of natural resources. With the imposition of economic
sanctions and import restrictions, there will be a loss of supply in global markets. Restricted supply is likely to result in upward price
pressures. The automotive industry is subject to similar natural resource unpredictability in other countries. As such, our pricing and
profitability models may need to be adjusted in reaction to these outside pressures.
Company growth depends on avoiding battery
production bottlenecks.
Our Company’s success is highly dependent
upon our ability to produce battery cells and packs at high levels of volume and low cost. If the Company is unable to produce enough
battery cells and packs, for any reason, it would result in the Company missing its overall production and profitability estimates. To
avoid the risk of catastrophic battery bottlenecks, the Company intends to explore options for outsourcing some of the battery production
to diversify its battery sourcing.
If there is inadequate access to charging
stations, our business may be materially and adversely affected.
Demand for our vehicles will depend in part upon
the availability of a charging infrastructure. We market our ability to provide our customers with comprehensive charging solutions, including
our networks of charging stations, as well as the installation of home chargers for users where practicable, and provide other solutions
including charging through publicly accessible charging infrastructure. We have very limited experience in the actual provision of our
charging solutions to customers and providing these services is subject to challenges. While the prevalence of charging stations generally
has been increasing, charging station locations are significantly less widespread than gas stations. Some potential customers may choose
not to purchase our vehicles because of the lack of a more widespread charging infrastructure. Further, to provide our customers with
access to sufficient charging infrastructure, we will rely on the availability of, and successful integration of our vehicles with, third-party
charging networks. Any failure of third-party charging networks to meet customer expectations or needs, including quality of experience,
could impact the demand for electric vehicles, including ours. For example, where charging bays exist, the number of vehicles could oversaturate
the available charging bays, leading to increased wait times and dissatisfaction for customers. In addition, given our limited experience
in providing charging solutions, there could be unanticipated challenges, which may hinder our ability to provide our solutions or make
the provision of our solutions costlier than anticipated. To the extent we are unable to meet user expectations or experience difficulties
in providing our charging solutions, our reputation and business, prospects, financial condition, results of operations, and cash flows
could be materially and adversely affected.
Our products will make use of Li-ion battery cells, which,
if not appropriately managed and controlled, have been observed to catch fire or vent smoke and flame.
The battery packs within our vehicles will make use of Li-ion
cells. If not properly managed or subject to environmental stresses, Li-ion cells can rapidly release the energy they contain by venting
smoke and flames in a manner that can ignite nearby materials as well as other Li-ion cells. While the battery pack is designed to contain
any single cell’s release of energy without spreading to neighboring cells, a field or testing failure of battery packs in our vehicles
could occur, which could result in bodily injury or death and could subject us to lawsuits, field actions (including product recalls),
or redesign efforts, all of which would be time consuming and expensive and could harm our brand image. We have already experienced minor
thermal events in connection with battery cell testing failures. As the scale and intensity of testing increases, the likelihood of additional
thermal events will also increase. Also, negative public perceptions regarding the suitability of Li-ion cells for automotive applications,
the social and environmental impacts of mineral mining or procurement associated with the constituents of Li-ion cells, or any future
incident involving Li-ion cells, such as a vehicle or other fire, could materially and adversely affect our reputation and business, prospects,
financial condition, results of operations, and cash flows.
We have minimal experience servicing and
repairing our vehicles. If we or our partners are unable to adequately service our vehicles, our business, prospects, financial condition,
results of operations, and cash flows could be materially and adversely affected.
We have minimal experience servicing and repairing
our vehicles. Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized
skills, including high voltage training and servicing techniques. Although we are planning to internalize most aspects of vehicle service
over time, initially we plan to partner with third parties to enable nationwide coverage for roadside and off-road assistance and collision
repair needs. There can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party providers.
Although such servicing partners may have experience in servicing other vehicles, they will initially have limited experience in servicing
our vehicles. There can be no assurance that our service arrangements will adequately address the service requirements of our customers
to their satisfaction, or that we and our servicing partners will have sufficient resources, experience, or inventory to meet these service
requirements in a timely manner as the volume of electric vehicles we deliver increases.
In addition, a number of states currently impose
limitations on the ability of manufacturers to directly service vehicles. The application of these state laws to our operations would
hinder or impede our ability to provide services for our vehicles from a location in every state. As a result, if we are unable to roll
out and establish a widespread service network that complies with applicable laws, customer satisfaction could be adversely affected,
which in turn could materially and adversely affect our reputation and thus our business, prospects, financial condition, results of operations,
and cash flows.
As we continue to grow, additional pressure may
be placed on our customer support team or partners, and we may be unable to respond quickly enough to accommodate short-term increases
in customer demand for technical support. Customer behavior and usage may result in higher-than-expected maintenance and repair costs,
which may negatively affect our business, prospects, financial condition, results of operations, and cash flows. We also could be unable
to modify the future scope and delivery of our technical support to compete with changes in the technical support provided by our competitors.
Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our results of operations.
If we are unable to successfully address the service requirements of our customers or establish a market perception that we do not maintain
high-quality support, we may be subject to claims from our customers, including loss of revenue or damages, and our business, prospects,
financial condition, results of operations, and cash flows could be materially and adversely affected.
The automotive industry and its technology
are rapidly evolving and may be subject to unforeseen changes which could adversely affect the demand for our vehicles or increase our
operating costs.
We may be unable to keep up with changes in electric
vehicle technology or alternatives to electricity as a fuel source and, as a result, our competitiveness may suffer. Developments in alternative
technologies, such as advanced diesel, hydrogen, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of
the ICE or the cost of gasoline, may materially and adversely affect our business and prospects in ways we do not currently anticipate.
Existing and other battery cell technologies, fuels or sources of energy may emerge as customers’ preferred alternative to our vehicles.
Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially
delay our development and introduction of new and enhanced alternative fuel and electric vehicles, which could result in the loss of competitiveness
of our vehicles, decreased revenue, and a loss of market share to competitors. Our research and development efforts may not be sufficient
to adapt to changes in alternative fuel and electric vehicle technology. As technologies change, we plan to upgrade or adapt our vehicles
with the latest technology. However, we are a relatively late entrant to the electric vehicle space. Our vehicles may not compete effectively
with alternative systems if we are not able to source and integrate the latest technology into our vehicles. Additionally, the introduction
and integration of new technologies into our vehicles may increase our costs and capital expenditures required for the production and
manufacture of our vehicles and, if we are unable to cost efficiently implement such technologies or adjust our manufacturing operations,
our business, prospects, financial condition, results of operations, and cash flows would be materially and adversely affected.
Increases in costs, disruption of supply, or shortage
of materials, particularly Li-ion cells, could harm our business.
We may experience increases in the cost or a sustained
interruption in the supply or shortage of materials necessary for the production of our products. Any such increase in cost, including
due to inflation, supply interruption, materials shortage, or increase in freight and logistics costs, could adversely impact our business,
prospects, financial condition, and operating results. Our suppliers use various materials, including aluminum, carbon fiber, lithium,
cobalt, nickel, copper, etc. that are sourced globally. The prices and supply of these materials may fluctuate, depending on market conditions,
geopolitical risks, such as the war in Ukraine, fluctuations in currency exchange rates, and global supply and demand for these materials.
If we are not able to raise sufficient capital or our prices to our end customers, inflationary pressures and other material cost increases
could, in turn, negatively impact our operating results.
A product recall could hinder our growth.
If our products are unable to meet performance
and quality criteria, we may be required to perform product recalls to address said concerns. A product recall can have a substantial
cost related to performing such corrective actions. Although we will perform significant internal testing and qualifications, as well
as external qualifications through approved third-party vendors against industry standards and regulatory requirements, there will be
unperceived conditions which may negatively impact the customer or Company expected performance and safety of our vehicles. As such, we
may perform a corrective action such as a recall of products, mandatory repairs of defective components, or litigation settlements which
can materially affect our financial goals, operation results, brand, business, and products. If we are unable to provide significant charging
stations, our business success may be substantially affected.
A significant portion of our success is our ability
to deploy the appropriate number of charging stations, in strategic locations relative to our customers and customer behaviors. If we
are unable to deploy charging stations to specified locations, this may negatively affect our brand, business, financial goals, operational
results, and product success in the market. As such, to meet said availability requirements, we will require significant capital investments
to rapidly deploy said Advanced Charging Stations, as well as development of relationships with third party members who can assist in
deployment of said charging stations. If we are unable to address service requirements, we may negatively affect our customer experience.
As such, we will require service capabilities to be established in locations within close proximity to our vehicle product owners. Our
ability to engage with third party operating service stations, as well as our ability to establish company operated locations, will be
critical to the success of developing a positive customer experience.
Product liability or other claims could
have a material adverse effect on our business.
While we will work diligently to meet all company
and regulatory safety requirements, there is a chance that a component catastrophically fails. It is possible that through unknown circumstances
or conditions out of our control, some person is injured by our product. The risk of product liability claims, product
recalls and associated adverse publicity is inherent in the manufacturing, marketing and sale of all vehicles, including electric vehicles.
A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product
recall could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of other
future product candidates. We cannot provide assurance that such claims and/or recalls will not be made in the future.
Risks Related to Our Management
We are dependent upon our executives for
their services and any interruption in their ability to provide their services could cause us to cease operations.
The loss of the services of our CEO, CFO, or President,
Mr. Mark Hanchett, Mr. Apoorv Dwivedi, or Mrs. Annie Pratt respectively, could have a material adverse effect on us. We do not maintain
any key man life insurance on our executives. The loss of any of our executives’ services could cause investors to lose all
or a part of their investment. Our future success will also depend on our ability to attract, retain and motivate other highly skilled
employees. Competition for personnel in our industry is intense. We may not be able to retain our key employees or attract, assimilate
or retain other highly qualified employees in the future. If we do not succeed in attracting new personnel or retaining and motivating
our current personnel, our business will be adversely affected.
Our management team does not have any experience
in operating a publicly traded company.
While our management team has a wide breadth of business experience,
none of our executive officers have previously held an executive position at a publicly traded company. Given the onerous compliance requirements
to which public companies are subject, there is a chance our executive officers will fail to perform at a level expected of public company
officers. In such an event, the Company’s share price could be adversely effected. The management team’s limited experience
in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely
that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management
and growth of the company. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the
accounting policies, practices or internal control over financial reporting required of public companies in the United States We are in
the process of upgrading our systems to an enterprise resource management system, and a delay could impact our ability or prevent us from
timely reporting our operating results, timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”). The development and implementation of the standards and controls necessary for us
to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected.
We plan to expand our employee base and hire additional employees to support our operations as a public company which will increase our
operating costs in future periods.
We are significantly influenced by our officers
and directors.
The Company’s Chief Executive Officer and
majority stockholder, Mark Hanchett, controls approximately 66% of the voting power of our outstanding common stock prior to this offering.
Additionally, the Company’s President, Annie Pratt, controls approximately 25% of the voting power of our outstanding common stock
prior to this offering. These stockholders, if acting together, are able to significantly influence all matters requiring approval by
stockholders, including the election of directors and the approval of mergers or other business combinations transactions. Please see
“Security Ownership of Certain Beneficial Owners and Management” below for more information.
Our future performance is dependent on the ability
to retain key personnel. The Company’s performance is substantially dependent on the performance of senior management. The loss
of the services of any of its executive officers or other key employees could have a material adverse effect on the Company’s business,
results of operations and financial condition.
We rely on human resources, the loss of
services of any of such personnel may have a material adverse effect on our business and operations.
We rely on our management team, our advisors,
third-party consultants, third-party developers, service providers, technology partners, outside attorneys, advisors, accountants, auditors,
and other administrators. The loss of services of any of such personnel may have a material adverse effect on our business and operations.
We may be unable to attract and retain the
required talent.
The nature of our product development efforts
requires us to hire talent to complete highly technical and specialized work. Recruiting for these specialized roles may be challenging,
and we may be competing with top companies to attract and retain employees for these roles. If we cannot secure the right talent, our
product development and production schedules may be affected.
Limitations of director liability and director
and officer indemnification.
Our Charter limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except for liability for any:
·
breach of their duty of loyalty to us or our stockholders;
·
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
·
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation
Law; or
·
Transactions for which the directors derived an improper personal benefit.
These limitations of liability do not apply to
liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive
relief or rescission. Our Bylaws provide that we will indemnify our directors, officers and employees to the fullest extent permitted
by law. Our Bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition
of any action or proceeding. We believe that these Bylaw provisions are necessary to attract and retain qualified persons as directors
and officers. The limitation of liability in our Bylaws may discourage stockholders from bringing a lawsuit against directors for breach
of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an
action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed
to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Limitations on remedies; indemnification.
Our Certificate of Incorporation, as amended from
time to time, provide that officers, directors, employees and other agents and their affiliates shall only be liable to the Company and
its stockholders for losses, judgments, liabilities and expenses that result from the fraud or other breach of fiduciary obligations.
Additionally, we assumed certain corporate indemnification agreements that the Predecessor entered into with each of our officers and
directors consistent with industry practice. Thus, certain alleged errors or omissions might not be actionable by the Company. Our governing
instruments will also provide that, under the broadest circumstances allowed under law, we must indemnify its officers, directors, employees
and other agents and their affiliates for losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained
by them in connection with the Company, including liabilities under applicable securities laws.
RISKS RELATED TO THIS OFFERING, OUR CAPITAL
STRUCTURE AND OWNERSHIP OF OUR CLASS A COMMON STOCK
You will incur substantial and immediate
dilution of the price you pay for your Class A common stock included in the Units and may experience additional dilution of your investment
in the future.
The effective price of our Class A common stock
included in the Units is substantially higher than the net tangible book value per share of the outstanding Class A common stock issued
after this offering. Assuming the sale of the maximum number of Units offered hereby at an assumed public offering price of $0.5880 per
Unit, which represents the closing price of our Class A common stock on Nasdaq on June 16, 2023, you will suffer immediate and substantial
dilution. The conversion of outstanding convertible notes and the exercise of outstanding stock options and warrants, including the Warrants
issued in connection with this offering, may result in further dilution of your investment. See the
section titled “Dilution” below for a more detailed discussion of the dilution you will incur if you purchase Units in this
offering. Further, because we may need to raise additional capital to fund our anticipated level of operations, we may in the future sell
substantial amounts of Class A common stock or securities convertible into or exchangeable for Class A common stock. These future issuances
of equity or equity-linked securities, together with the conversion of outstanding convertible notes and the exercise of outstanding stock
options and warrants, will likely result in further dilution to investors.
Our outstanding convertible notes and our outstanding warrants
are convertible and exercisable into shares of our Class A common stock and when converted or exercised, the issuance of additional shares
of Class A common stock may result in downward pressure on the trading price of our Class A common stock.
As of July 6, 2023, there was an aggregate of approximately $1.4 million
of convertible notes outstanding, which are convertible into up to an aggregate of 3,560,526 shares of Class A common stock (assuming
conversion at a conversion price equal to the floor price of $0.38). We believe that as holders convert their convertible notes into Class
A common stock, they will immediately sell their shares of Class A common stock. The sale of such shares of Class A common stock may result
in downward pressure on the trading price of our Class A common stock resulting in a lower stock price. Additionally, as of July 6, 2023,
we have 7,961,806 outstanding warrants to purchase 7,961,806 shares of Class A common stock.
The best efforts structure of this offering
may have an adverse effect on our business plan.
The Placement Agents are offering the shares
in this offering on a best efforts basis. The Placement Agents are not required to purchase any securities, but will use their best efforts
to sell the securities offered. As a “best efforts” offering, there can be no assurance that the offering contemplated hereby
will ultimately be consummated or will result in any proceeds being made available to us. The success of this offering will impact our
ability to use the proceeds to execute our business plan. We may have insufficient capital to implement our business plan, potentially
resulting in greater operating losses unless we are able to raise the required capital from alternative sources. There is no assurance
that alternative capital, if needed, would be available on terms acceptable to us, or at all.
There is no public market for the Units,
Warrants or Pre-Funded Warrants.
There is no established public trading market
for the Units, Warrants or Pre-Funded Warrants offered hereby, and we do not expect a market to develop. In addition, we do not intend
to apply to list the Units, Warrants or Pre-Funded Warrants on any national securities exchange or other nationally recognized trading
system, including Nasdaq. Without an active market, the liquidity of those securities will be limited.
The Warrants and the Pre-Funded Warrants
are speculative in nature.
The
Warrants and the Pre-Funded Warrants offered in this offering do not confer any rights of
common stock ownership on their holders, such as voting rights or the right to receive dividends,
but rather merely represent the right to acquire shares of our Class A common stock at a
fixed price for a limited period of time. Specifically, commencing on the date of issuance,
holders of the Warrants may exercise their right to acquire the Class A common stock and
pay an assumed exercise price of $0.5880 per share (100% of the assumed public offering price
of a Unit), prior to three (3) years from the date of issuance, after which date any unexercised
warrants will expire and have no further value. In the case of Pre-Funded Warrants, holders
may exercise their right to acquire the Class A common stock and pay an exercise price of
$0.0001 per share. The Pre-Funded Warrants do not expire.
The Warrants may not have any
value.
Each
Warrant has an exercise price of $0.5880 per share (100% of the offering price per Unit)
and expires three (3) years after the date of issuance. In the event the market price per
share of our Class A common stock does not exceed the exercise price of the Warrants during
the period when the Warrants are exercisable, the Warrants may not have any value.
Holders of the Warrants and the Pre-Funded
Warrants will not have rights of holders of our shares of Class A common stock until such Warrants and Pre-Funded Warrants are exercised.
The Warrants and the Pre-Funded Warrants in this
offering do not confer any rights of share ownership on their holders, but rather merely represent the right to acquire shares of our
Class A common stock at a fixed price. Until holders of the Warrants and the Pre-Funded Warrants acquire shares of our Class A common
stock upon exercise of the Warrants and the Pre-Funded Warrants, respectively, such holders will have no rights with respect to our shares
of Class A common stock underlying such Warrants and Pre-Funded Warrants.
Management has ultimate discretion over
the actual use of proceeds derived from this offering.
The net proceeds from this offering will be used
for the purposes described under “Use of Proceeds.” However, we reserve the right to use the funds obtained from this
offering for other similar purposes not presently contemplated which we deem to be in the best interests of the Company and our stockholders
in order to address changed circumstances or opportunities. As a result of the foregoing, our success will be substantially dependent
upon the discretion and judgment of the Board with respect to application and allocation of the net proceeds of this offering. Investors
who purchase Units will be entrusting their funds to our Board, upon whose judgment and discretion the investors must depend. The failure
of our management to apply these funds effectively could harm our business. Pending their use, we may also invest the net proceeds from
this offering in a manner that does not produce income or that loses value.
The dual class structure of our common stock
has the effect of concentrating voting power with members of our management team, which will limit your ability to influence the outcome
of important transactions, including a change in control.
Our Class B common stock has 10 votes per share, and our Class A common
stock, which is the stock we are offering by means of this prospectus, has one vote per share. Members of our management team together
hold all of the issued and outstanding shares of our Class B common stock. Accordingly, upon the closing of this offering, assuming the
sale of the maximum number of Units offered hereby, Mark Hanchett, our Chief Executive Officer and a member of our Board will hold approximately
62% of the voting power of our outstanding capital stock; and Annie Pratt, our President and a member of our Board, will hold approximately
23% of the voting power of our outstanding capital stock. Therefore, our management team, individually or together, will be able to significantly
influence matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents
and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. These members of
our management team, individually or together, may have interests that differ from yours and may vote in a way with which you disagree
and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change
in control of our Company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a
sale of our Company and might ultimately affect the market price of our Class A common stock. In addition, future issuances of our Class
B common stock to Mark Hanchett, Annie Pratt or other members of our management team may be dilutive to holders of our Class A common
stock.
We cannot predict the impact our dual class
structure may have on our stock price.
We cannot predict whether our dual class structure
will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences.
For example, because of our dual class structure, we will likely be excluded from certain indexes, and we cannot assure you that other
stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain
indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class A common stock
less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.
We are a “controlled company”
within the meaning of the Nasdaq rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.
As a result, our stockholders do not have the same protections afforded to stockholders of companies that cannot rely on such exemptions
and are subject to such requirements.
The Company’s Chief Executive Officer beneficially
owns and controls a majority of the combined voting power of our common stock. As a result, we are a “controlled company”
within the meaning of the Nasdaq listing rules. Under these rules, a company of which more than 50% of the voting power is held by an
individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance
requirements of Nasdaq, including, but not limited to, the requirement that:
| · | a majority of the board of directors consist of directors who qualify as “independent” as
defined under the Nasdaq listing rules; |
| · | its board of directors have a nominating and corporate governance committee composed entirely of independent
directors with a written charter addressing the committee’s purpose and responsibilities, and |
| · | its board of directors have a compensation committee composed entirely of independent directors with a
written charter addressing the committee’s purpose and responsibilities; and |
| · | its board of directors conduct an annual performance evaluation of its compensation committee and the
nominating and corporate governance committee. |
We intend to rely on some or all of these exemptions
so long as we remain a “controlled company.” As a result, we do not have (i) a majority of independent directors, (ii) a nominating
and governance committee composed entirely of independent directors, and (iii) a compensation committee composed entirely of independent
directors. Accordingly, our stockholders do not have the same protections afforded to stockholders of companies subject to all of the
corporate governance requirements of Nasdaq.
Our Chief Executive Officer and majority
stockholder may significantly influence matters to be voted on and their interest may differ from, or be adverse to, the interest of our
other stockholders.
The Company’s Chief Executive Officer and
majority stockholder, Mark Hanchett, controls approximately 66% of the voting power of our outstanding common stock prior to this offering.
Additionally, the Company’s President, Annie Pratt, controls approximately 25% of the voting power of our outstanding common stock
prior to this offering.
Accordingly, Mr. Hanchett possesses significant
influence over the Company on matters submitted to the stockholders for approval, including the election of directors, mergers, consolidations,
the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. This amount of control
gives him substantial ability to determine the future of our Company, and as such, he may elect to close the business, change the business
plan or make any number of other major business decisions without the approval of the remaining stockholders. The interest of Mr. Hanchett
may differ from the interests of our other stockholders and could therefore result in corporate decisions that are adverse to other stockholders.
We do not anticipate dividends to be paid
on our Class A common stock and our stockholders may lose the entire amount of their investment.
A dividend has never been declared or paid in
cash on our Class A common stock and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future
earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their Class A common stock.
We cannot assure stockholders of a positive return on their investment when they sell their Class A common stock, nor can we assure that
stockholders will not lose the entire amount of their investment. Any payment of dividends on our capital stock will depend on our earnings,
financial condition and other business and economic factors affecting us at such a time as the Board may consider it relevant. If we do
not pay dividends, our Class A common stock may be less valuable because a return on our stockholders’ investment will only occur
if the common stock price appreciates.
Our lack of business diversification could
cause our stockholders to lose all or some of their investment if we are unable to generate revenues from our primary products.
Our business consists of developing and manufacturing
battery cells, battery packs, charging infrastructure, energy storage solutions and ultimately, electric vehicles. We are dependent on
the growth of the electric vehicle markets and do not have any other lines of business or other sources of revenue if we are unable to
compete effectively in the marketplace. This lack of business diversification could cause you to lose all or some of your investment if
we are unable to generate revenues since we do not expect to have any other lines of business or alternative revenue sources.
We are an emerging growth company and a
smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements
available to emerging growth companies and smaller reporting companies, this could make our securities less attractive to investors and
may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company”
within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result,
our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to
five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common
stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer
be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less
attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance
on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading
market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that
a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which
means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards
used.
Additionally, we are a “smaller reporting
company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain
reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will
remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held
by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million
during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of
the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make the comparison of our
financial statements with other public companies difficult or impossible.
We will incur significant additional costs
as a result of being a public company, and our management will be required to devote substantial time to compliance with our public company
responsibilities and corporate governance practices.
We expect to incur increased costs associated
with corporate governance requirements that are now applicable to us as a public company, including rules and regulations of the SEC,
under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010, and the Exchange Act, as well as
the rules of Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance
costs and make some activities more time consuming, including due to increased training of our current employees, additional hiring of
new employees, and increased assistance from consultants. We expect such expenses to further increase after we are no longer an “emerging
growth company.” We also expect these rules and regulations to make it more expensive for us to maintain directors’ and officers’
liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors
or as executive officers. Furthermore, these rules and regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public
company or the timing of such costs. In addition, our management team will need to devote substantial attention to transitioning to interacting
with public company analysts and investors and complying with the increasingly complex laws pertaining to public companies, which may
divert attention away from the day-to-day management of our business, including operational, research and development and sales and marketing
activities. Increases in costs incurred or diversion of management’s attention as a result of becoming a publicly traded company
may adversely affect our business, prospects, financial condition, results of operations, and cash flows.
Small public companies are inherently risky
and we may be exposed to market factors beyond our control. If such events were to occur it may impact out operating results.
Managing a small public company involves a high
degree of risk. Few small public companies ever reach market stability and we will be subject to oversight from governing bodies and regulations
that will be costly to meet. Our present officer has limited experience in managing a fully reporting public company, so we may be
forced to obtain outside consultants to assist us with meeting these requirements. These outside consultants are expensive and can
have a direct impact on our ability to be profitable. This will make an investment in our Company a highly speculative and risky
investment.
Failure to maintain internal controls over
financial reporting would have an adverse impact on us.
We are required to establish and maintain appropriate
internal controls over financial reporting. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act
are significantly more stringent than the standards that were required of us when we were a privately held company. Management may not be able to effectively and
timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements. If
we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, our internal
controls over financial reporting may not be effective, which may subject us to adverse regulatory consequences and could harm investor
confidence. Failure to establish those controls, or any failure of those controls once established, could also adversely impact our public
disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal
controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial
reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed
in our internal control over financial reporting, or disclosure of management’s assessment of our internal controls over financial
reporting may have an adverse impact on the price of our Class A common stock.
We may use equity incentives for employees,
advisors, directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options and/or incentive rights
will result in the dilution of the ownership interests of our existing stockholders.
We may use equity incentives for employees, advisors,
directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options and/or incentive rights will result
in the dilution of the ownership interests of our existing stockholders.
We are subject to general securities investment
risks.
All investments in securities involve the risk
of loss of capital. No guarantee or representation is made that an investor will receive a return of its capital. The value of our Class
A common stock can be adversely affected by a variety of factors, including development problems, regulatory issues, technical issues,
commercial challenges, competition, legislation, government intervention, industry developments and trends, and general business and economic
conditions.
The market price of our Class A common stock
has fluctuated, and may continue to fluctuate, significantly and our stockholders may lose all or part of their investment.
The market prices for securities of startup companies
have historically been highly volatile, and the market has from time-to-time experienced significant price and volume fluctuations that
are unrelated to the operating performance of particular companies. The market price of our Class A common stock has fluctuated, and may
continue to fluctuate, significantly in response to numerous factors, some of which are beyond our control, such as:
| · | actual or anticipated adverse results or delays in our research and development efforts; |
| · | our failure to fully develop, scale manufacturing and commercialize our battery and charging technologies; |
| · | our failure to commercialize our XP Platform and XT pickup truck; |
| · | unanticipated serious safety concerns related to the use of our products; |
| · | adverse regulatory decisions; |
| · | legal disputes or other developments relating to proprietary rights, including patents, litigation matters
and our ability to obtain patent protection for our intellectual property, government investigations and the results of any proceedings
or lawsuits, including patent or stockholder litigation; |
| · | changes in laws or regulations applicable to the Li-ion battery or to the electric vehicle industry; |
| · | our dependence on third party suppliers; |
| · | announcements of the introduction of new products by our competitors; |
| · | market conditions in the Li-ion battery, charging infrastructure, energy storage solutions or to the electric
vehicle industry; |
| · | announcements concerning product development results or intellectual property rights of others; |
| · | future issuances of our common stock or other securities; |
| · | the addition or departure of key personnel; |
| · | actual or anticipated variations in quarterly operating results; |
| · | announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; |
| · | our failure to meet or exceed the estimates and projections of the investment community; |
| · | issuances of debt or equity securities; |
| · | trading volume of our common stock; |
| · | sales of our Class A common stock by us or our stockholders in the future; |
| · | overall performance of the equity markets and other factors that may be unrelated to our operating performance or the operating performance
of our competitors, including changes in market valuations of similar companies; |
| · | failure to meet or exceed any financial guidance or expectations regarding development milestones that we may provide to the public; |
| · | ineffectiveness of our internal controls; |
| · | general political and economic conditions; |
| · | effects of natural or man-made catastrophic events; |
| · | scarcity of raw materials necessary for battery production; and |
| · | other events or factors, many of which are beyond our control. |
Further, price and volume fluctuations may result
in volatility in the price of our Class A common stock, which could cause a decline in the value of our common stock. Price volatility
of our Class A common stock might worsen if the trading volume of our shares is low. The realization of any of the above risks or any
of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material
adverse impact on the market price of our Class A common stock.
A sale, or the perception of future sales,
of a substantial number of shares of Class A common stock may cause the share prices to decline.
If our stockholders sell, or the market perceives
that our stockholders intend to sell for various reasons, substantial amounts of our Class A common stock in the public market, including
shares issued in connection with the exercise of outstanding options, the market price of our shares could fall. Sales of a substantial
number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem reasonable or appropriate. We may become involved in securities class action litigation that could divert
management’s attention and harm our business. The stock markets have from time-to-time experienced significant price and volume
fluctuations that have affected the market prices for the common stock of automotive companies. These broad market fluctuations may cause
the market price of our common stock to decline. In the past, securities class action litigation has often been brought against a company
following a decline in the market price of a company’s securities. We may become involved in this type of litigation in the future.
Litigation often is expensive and diverts management’s attention and resources, which could adversely affect our business.
Our quarterly operating results may fluctuate.
We expect our operating results to be subject
to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
| · | variations in the level of expenses related to our development programs; |
| · | any intellectual property infringement lawsuit in which we may become involved; |
| · | regulatory developments affecting our products and related services; and |
| · | our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may
make or receive under these arrangements. |
If our quarterly operating results fall below
the expectations of investors or securities analysts, the price of our Class A common stock could decline substantially. Furthermore,
any quarterly fluctuations in our operating results may, in turn, cause the price of our Class A common stock to fluctuate substantially.
Unfavorable securities industry reports
could have a negative effect on our share price.
Any trading market for our Class A common stock
will be influenced in part by any research reports that securities industry analysts publish about us. Should one or more of such analysts
downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage, the market price and market trading volume
of our Class A common stock could be negatively affected.
Our Certificate of Incorporation includes
forum selection provisions, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our Certificate of Incorporation requires that,
unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that court
lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) will be the sole and exclusive forum for
(i) any derivative action or proceeding brought on behalf of our business, (ii) any action asserting a claim of breach of a duty owed
by any director, officer, employee, agent or stockholder of ours to us or our stockholders, (iii) any action asserting a claim arising
pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”) or (iv) any action asserting
a claim governed by the internal affairs doctrine. In addition, our Bylaws require that, unless we consent in writing to the selection
of an alternative forum, the federal district courts of the United States will be the exclusive forum for the resolution of any action,
suit or proceeding asserting a cause of action arising under the Securities Act. These forum selection provisions will not apply to claims
arising under the Exchange Act or other federal securities laws for which there is exclusive federal jurisdiction. Any person or entity
purchasing or otherwise acquiring or holding any interest in shares of our capital stock is deemed to have notice of and consented to
the foregoing provisions.
These forum selection provisions in our Certificate
of Incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us, which may discourage
such lawsuits against us. We cannot be certain as to whether a court would enforce these provisions, and if a court were to find the forum
selection provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional
costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Furthermore, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Our Class A common stock may be delisted
from Nasdaq if we do not maintain compliance with Nasdaq’s continued listing requirements. If our Class A common stock
is delisted, it could negatively impact the Company.
Continued listing of a security on Nasdaq is conditioned
upon compliance with various continued listing standards. On April 11, 2023, we received a notice from Nasdaq stating that the Company
is not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on
Nasdaq (the “Bid Price Requirement”).
The notice has no immediate effect on the listing
of the Company’s Class A common stock on Nasdaq and the Company has 180 calendar days from the date of the notice in which to regain
compliance with the Bid Price Requirement. As a result, the date by which we have to regain compliance with the Bid Price Requirement
is October 8, 2023. If at any time prior to October 8, 2023, the bid price of our Class A common stock closes at or above $1.00 per share
for a minimum of ten consecutive business days, Nasdaq will provide us with a written confirmation of compliance and the matter will be
closed.
Alternatively, if we fail to regain compliance with the Bid Price Requirement
prior to the expiration of the initial period, the Company may be eligible for an additional 180 calendar day compliance period, provided
(i) it meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial
listing on Nasdaq (except for the Bid Price Requirement), and (ii) it provides written notice to Nasdaq of its intention to cure this
deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event we do not regain compliance
with the Bid Price Requirement prior to the expiration of the initial period, and if it appears to Nasdaq that the Company will not be
able to cure the deficiency, or if the Company is not otherwise eligible, Nasdaq will provide us with written notification that our securities
are subject to delisting from Nasdaq. At that time, we may appeal the delisting determination to a hearings panel.
If the Company’s Class A common stock ultimately
were to be delisted for any reason, it could negatively impact the Company by (i) reducing the liquidity and market price of the Company’s
Class A common stock; (ii) reducing the number of investors willing to hold or acquire the Company’s Class A common stock, which
could negatively impact the Company’s ability to raise equity financing; (iii) limiting the Company’s ability to use a registration
statement to offer and sell freely tradable securities, thereby preventing the Company from accessing the public capital markets; and
(iv) impairing the Company’s ability to provide equity incentives to its employees.
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$11.5 million (assuming the sale of all Units offered hereby at the assumed public offering price of $0.5880 per Unit, which
represents the closing sale price of our Class A common stock on Nasdaq on June 16, 2023, and assuming no issuance of Pre-Funded Warrants
and no exercise of the Warrants issued in connection with this offering), after deducting the estimated placement agent fees and estimated
offering expenses payable by us. However, this is a best efforts offering with no minimum number of securities or amount of proceeds as
a condition to closing, and we may not sell all or any of these securities offered pursuant to this prospectus; as a result, we may receive
significantly less in net proceeds.
We intend to use the net proceeds of this
offering primarily for general corporate purposes, which may include, but is not limited to, investment in capital equipment, charging
station deployment, raw materials and operating expenses. These uses may support ramping up Nxu’s battery manufacturing capabilities,
working capital, and the continued development and deployment of the Nxu charging infrastructure. The amounts that we actually spend
for any specific purpose may vary significantly, and will depend on a number of factors including, but not limited to, the pace of progress
of our research and development, market conditions, and our ability to secure supply of goods and services for both equipment and raw
material.
In addition, pursuant to the Securities Purchase Agreement,
we may be required to use up to 40% of the gross proceeds from this offering to prepay the convertible notes at the option of the Investors.
The table below depicts how we plan to utilize
the proceeds in the event that 100%, 50% and 25% of the Units in this offering are sold, before deducting the estimated placement agent
fees and estimated offering expenses payable by us:
|
|
100% of
Units
Sold |
|
|
% of Total |
|
|
50% of
Units
Sold |
|
|
% of Total |
|
|
25% of
Units
Sold |
|
|
% of Total |
|
Gross Proceeds from Offering |
|
$ |
13,000,000 |
|
|
|
|
|
|
$ |
6,500,000 |
|
|
|
|
|
|
$ |
3,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital equipment |
|
$ |
4,000,000 |
|
|
|
30.8 |
% |
|
$ |
- |
|
|
|
- |
% |
|
$ |
- |
|
|
|
- |
% |
Charging station deployment |
|
$ |
3,000,000 |
|
|
|
23.1 |
% |
|
$ |
1,500,000 |
|
|
|
23.1 |
% |
|
$ |
- |
|
|
|
- |
% |
Raw materials |
|
$ |
2,000,000 |
|
|
|
15.4 |
% |
|
$ |
1,000,000 |
|
|
|
15.4 |
% |
|
$ |
- |
|
|
|
- |
% |
Operating expenses |
|
$ |
4,000,000 |
|
|
|
30.8 |
% |
|
$ |
4,000,000 |
|
|
|
61.5 |
% |
|
$ |
3,250,000 |
|
|
|
100.0 |
% |
Total Use of Proceeds |
|
$ |
13,000,000 |
|
|
|
100.0 |
% |
|
$ |
6,500,000 |
|
|
|
100.0 |
% |
|
$ |
3,250,000 |
|
|
|
100.0 |
% |
We cannot specify with certainty the amount or
particular uses of the net proceeds that we will receive from this offering. However, our business is particularly capital intensive,
both with respect to our core business activities and potential acquisition opportunities. We may find it necessary or advisable to use
the net proceeds for other purposes, and accordingly, we will have broad discretion in using these proceeds, and investors will be relying
on our judgment regarding the application of the net proceeds from this offering. See “Risk Factors” for a discussion of certain
risks that may affect our intended use of the net proceeds from this offering. Pending the use of proceeds from this offering as described
above, we may invest the net proceeds that we receive in this offering in short-term, investment grade, interest-bearing instruments.
CAPITALIZATION
The following table sets forth our cash and capitalization
as of March 31, 2023 on:
| · | as adjusted to give effect to (i) this offering (assuming the sale of
all Units offered hereby at the assumed public offering price of $0.5880 per Unit, which represents the closing sale price of our
Class A common stock on Nasdaq on June 16, 2023, and assuming no issuance of Pre-Funded Warrants and no exercise of the Warrants issued
in connection with this offering) for net proceeds of approximately $11.5 million, after deducting estimated placement agent fees and
estimated offering expenses payable by us and (ii) the Reorganization. |
|
|
March 31, 2023 |
|
($ in thousands) |
|
Actual |
|
|
As Adjusted |
|
CASH & CASH EQUIVALENTS: |
|
$ |
12,899 |
|
|
$ |
24,599 |
|
|
|
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
Class A Common Stock, par value $0.0001;
54,307,968 shares
authorized, 32,856,370 shares issued and outstanding (actual)
and 4,000,000,000 shares authorized, 54,965,213 shares issued and outstanding
(as adjusted) |
|
|
3 |
|
|
|
6 |
|
Class B Common Stock, par value $0.0001; 0 shares
authorized, issued and
outstanding (actual) and 1,000,000,000 shares authorized, 35,175,372
issued and outstanding (as adjusted) |
|
|
0 |
|
|
|
3 |
|
Class D Common Stock, par value $0.0001; 41,925,572
shares authorized,
32,475,370 shares issued and outstanding (actual) and 0 shares authorized, issued
and outstanding (as adjusted) |
|
|
3 |
|
|
|
0 |
|
Additional Paid-in Capital |
|
$ |
238,846 |
|
|
$ |
250,504 |
|
Accumulated Deficit |
|
$ |
(230,925 |
) |
|
$ |
(230,925 |
) |
|
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
|
7,927 |
|
|
|
19,588 |
|
|
|
|
|
|
|
|
|
|
TOTAL CAPITALIZATION |
|
$ |
7,927 |
|
|
$ |
19,588 |
|
DIVIDEND POLICY
We have never declared or paid any cash dividend
and do not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance
operations and expand our business. Our Board has sole discretion whether to pay dividends. If our Board decides to pay dividends, the
form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition,
contractual restrictions and other factors that our directors may deem relevant.
SECURITIES MARKET
INFORMATION
Market Information
Nxu’s Class A common stock is listed for trading on
Nasdaq under the symbol “NXU.” As of July 26, 2023, the closing price of our Class A common stock as reported on Nasdaq was
$0.57. We do not intend to apply for the listing of the Pre-Funded Warrants or the Warrants that are part of this offering on any national
securities exchange.
Holders
As of July 6, 2023, there were 17,111 holders of record of our
Class A common stock.
DILUTION
If you invest in this offering, your interest
will be diluted to the extent of the difference between the public offering price per Unit and the net tangible book value per share of
Class A common stock after the offering. Dilution results from the fact that the per Unit offering price is substantially in excess of
the book value per share attributable to the existing shareholders for our presently outstanding shares of Class A common stock.
Our historical net tangible book value attributable
to shareholders on March 31, 2023 was $7.9 million or approximately $0.24 per share of Class A common stock. Net tangible book value per
outstanding share represents the total assets less intangible assets and total liabilities, divided by the number of shares of Class A
common stock outstanding.
The following table sets forth the difference
between the offering price of the Units being offered by us, the net tangible book value per share before this offering, and the net
tangible book value per share after giving effect to this offering, assuming that 100%, 50% and 25% of the offered Units are sold at
the assumed public offering price of $0.5880 per Unit (which represents the closing sale price of our Class A common stock on Nasdaq
on June 16, 2023, and assuming no issuance of Pre-Funded Warrants and no exercise of the Warrants issued in connection with this offering),
after deducting estimated placement agent fees and estimated offering expenses payable by us.
|
|
|
100% of
Units are sold |
|
|
|
50% of
Units are sold |
|
|
|
25% of
Units are sold |
|
Assumed offering price per Unit |
|
|
$0.5880 |
|
|
|
$0.5880 |
|
|
|
$0.5880 |
|
Net tangible book value per share of Class A common stock
before this offering |
|
|
$0.2410 |
|
|
|
$0.2410 |
|
|
|
$0.2410 |
|
Increase per share of Class A common stock attributable to
payment by investors in this offering |
|
|
$0.0809 |
|
|
|
$0.0365 |
|
|
|
$0.0160 |
|
Pro forma net tangible book value per share of Class A
common stock after this offering |
|
|
$0.3218 |
|
|
|
$0.2775 |
|
|
|
$0.2469 |
|
Dilution per share of Class A common stock to investors in this
offering |
|
|
$0.2662 |
|
|
|
$0.3105 |
|
|
|
$0.3411 |
|
A $1.00 increase in the assumed public offering price per Unit would
increase our pro forma net tangible book value after giving effect to this offering by $22.1 million, the pro forma net tangible book
value per share of Class A common stock by $0.37 per share and the dilution in pro forma net tangible book value per share of Class A
common stock to new investors in this offering by $0.63 per share, assuming no change to the number of shares offered by us as set
forth on the cover page of this prospectus, and after deducting the estimated placement agent fees and estimated offering expenses payable
by us.
The above discussion is based on 38,154,853
shares of our Class A common stock outstanding as of July 6, 2023 and excludes, as of that date, the following: (a) 37,577,216 shares
of Class A common stock issuable upon the exercise of options outstanding prior to this offering at a weighted average exercise price
equal to approximately $7.00; (b) up to an aggregate of 3,560,526 shares of Class A common stock issuable upon the conversion of our
outstanding convertible notes (assuming conversion at a conversion price equal to the floor price of $0.38); and (c) up to an aggregate
of 7,961,806 shares of Class A common stock issuable upon the exercise of our outstanding warrants.
To the extent that our outstanding options, convertible
notes or warrants are exercised or converted, as applicable, you could experience further dilution. To the extent that we raise additional
capital through the sale of additional equity, the issuance of any of our shares of Class A common stock could result in further dilution
to our stockholders.
BUSINESS
The following discussion of our business should
be read in conjunction with the financial statements and related notes included elsewhere in this prospectus. Unless the context
otherwise requires, with respect to descriptions of the financials and operations of the Company’s assets, references herein
to the “Company,” “we,” “us” or “our” relate to our business
as Nxu, Inc.
Overview
Nxu is a US-based technology company manufacturing innovative
battery cells and battery packs for use in advanced energy storage systems, megawatt charging stations, and mobility products. We believe
that widespread adoption of EVs by the commercial and industrial markets requires high performing battery and pack solutions that can
effectively compete with legacy diesel-based products. Nxu designs, engineers, and plans to build proprietary lithium-ion (“Li-ion”)
battery cells and packs, 1 megawatt plus charging stations, energy storage solutions and a suite of software and services designed to
allow an easy transition from diesel to electric for our target segment.
Our battery technology is expected to offer considerable
advantages in battery capacity, charging rate, safety, and lifespan while keeping costs low. We are confident that these advantages will
be highly beneficial to Original Equipment Manufacturers (“OEMs”) in the automotive and medium to heavy duty equipment segments
as it would encourage customers to transition to electrification. We are designing our Li-ion batteries to fully charge in about 15 minutes
or less, thereby allowing for a more competitive EV experience to match fossil fuel vehicles, something that current EVs using conventional
batteries are unable to achieve. We believe Nxu technology may be used to power medium and super-duty pick-up trucks, last mile delivery
vehicles, garbage trucks, cement trucks, vans, RVs, box trucks, light to heavy-duty equipment and more. In addition, our batteries could
be used for commercial and residential energy storage devices.
In 2023, we introduced our megawatt charging station
and demonstrated its ability to deliver up to 1.1 megawatts of electricity to fast charge compatible batteries. Currently, there are three
types of chargers prevalent in the market:
Level 1 chargers use a standard 120-volt
household outlet and can provide up to 5 miles of range per hour of charging. They are typically used for overnight charging at home and
are the slowest charging option.
Level 2 chargers require a 240-volt electrical
supply and can provide up to 25 miles of range per hour of charging. They are commonly found in public locations like parking garages,
workplaces, and retail spaces.
Level 3 chargers, also known as Direct Current (DC) fast
chargers, are the fastest charging option and can provide approximately 100 to 200+ miles of range in as little as 30 minutes.
Our megawatt chargers, being designed to provide
1,500kW of electricity, represent the next generation of charging solutions needed to expedite the mass adoption of electric vehicles
for individual drivers, commercial fleets, medium-to-heavy duty equipment customers and businesses. To take advantage of the expected
rapid growth in the number of EVs on the road in the United States, the Company plans to deploy and test its chargers for mass rollout
in the near future.
We also believe that energy storage solutions
are important for both consumer and commercial markets as grid stability and resiliency becomes critical to enabling the adoption of electric
vehicles. Stationary energy storage systems are technologically adjacent opportunities which can leverage the modular design of our battery
packs and advanced battery management systems to create solutions that address residential, commercial and utility-scale needs. Energy
storage can also provide backup power during grid outages or emergencies, helping to ensure that critical services like hospitals and
emergency responders remain operational.
Nxu is an early-stage company and has not yet scaled production
of its products or delivered any products to customers. Of the products we intend to bring to market, our proprietary battery technology
is the furthest along in development and closest to mass production. We intend to deliver battery cells and packs to customers in 2023.
Simultaneously, we plan to deploy our megawatt charging stations and energy storage solutions as soon as the next twelve months and the next twenty-four months respectively. Finally, we plan to
continue to develop our vehicle products in the future, both of which we believe will provide incremental value to our target market in
the long run. Scaling to reach high-volume battery production will require significant effort and capital. Based on our plans, we estimate
that the cost to build and completely tool multi-gigawatt hour facility will range from $200 million to $300 million per gigawatt hour
of capacity. Our ability to raise the significant capital required continues to be a challenge. Additionally, as of the date of this prospectus,
we have no actionable plan of operation to commence sales of our products. As such, Nxu will need to build out detailed go-to-market plans
as we get closer to customer deliveries and sales.
Our Target Market
Customers across the commercial and industrial segments
are progressively contemplating EVs for a range of reasons such as improved performance, expansion of the EV charging infrastructure,
significantly reduced environmental impact, and lower costs for maintenance and operation. However, the players in these market segments
face unique barriers to the adoption of EVs due to their high-demand usage patterns and operational requirements. In addition, the use
of conventional Li-ion batteries in heavy-duty vehicles and equipment poses several inherent challenges that limit their adoption. Some
of these challenges include:
| · | Limited energy density: Conventional batteries have a relatively low
energy density, which means that heavy-duty vehicles and equipment require a large number of batteries to achieve sufficient range. This
can add significant weight to the vehicle and reduce payload capacity. |
| · | Temperature sensitivity: Conventional Li-ion batteries are sensitive
to temperature changes, particularly at extreme temperatures. This can impact the performance and lifespan of the battery, particularly
in hot or cold environments. |
| · | Charging time: Charging time for Li-ion batteries can be significant,
particularly for larger batteries. This can impact the operational efficiency of heavy-duty vehicles and equipment, which may require
frequent charging throughout the day. |
| · | High upfront costs: Electric commercial vehicles can have a higher
upfront cost than their conventional counterparts, which can be a significant barrier for companies that operate on tight profit margins. |
| · | Limited range and charging infrastructure: Commercial vehicles often
need to travel longer distances than passenger cars and require more frequent stops for refueling. The limited range of electric commercial
vehicles and the lack of charging infrastructure can make it difficult for fleets to operate efficiently. |
| · | Payload capacity: Electric commercial vehicles often have lower payload
capacity than their conventional counterparts due to the weight of the battery, which can limit their utility for certain applications. |
| · | Vehicle
downtime: Commercial vehicles and equipment are often in use for long hours and may have
limited downtime for charging, which can be a challenge for EVs that require longer charging
times than refueling with gasoline or diesel. |
| · | Uncertainty about total cost of ownership: Companies may be hesitant
to invest in electric commercial vehicles due to uncertainty about the total cost of ownership, including maintenance, repair, and replacement
costs. |
We believe that effective adoption to electrification by the
commercial and industrial markets requires a unified solution that addresses all concerns simultaneously. A piecemeal solution where multiple
companies independently develop and build pieces of the electrification puzzle while leaving the customer to figure out the rest may not
adequately address all needs and may even drive greater execution risk for the customer. An effective Li-ion battery technology along
with megawatt level charging solution and energy storage solutions to support grid resiliency are critical and foundational components
of a unified solution. Nxu plans to develop these foundational components.
Production Development Phases
In producing
its various products and services, Nxu follows a phased development approach comprised of the stages noted below.
Stage 1: Concept Verification and
Test. This is the concept verification and test phase of development. Product ideas are evaluated to assess viability and whether or not
there is potential to further develop and invest.
Stage 2: Engineering Verification
and Test. This is the engineering verification and test phase of development. Validation of the technology within a product is completed.
Stage 3: Design Verification and Test.
This is the design verification phase of development. The product has reached a final design phase and engineering and production teams
are validating feasibility of the final product.
Stage 4: Production Verification and
Test. This is the production validation phase of development. The product design has been finalized, and the production process is developing
and undergoing verification before being sold to customers.
Principal Products and Services
Nxu plans to address the needs highlighted above by developing
a unified set of products and solutions to support a seamless transition to electrification by the commercial and industrial industry.
Our products start with the Nxu Qcell battery cells that are intended to go into our high-performing Qube battery packs, which in turn,
can be used by OEMs to power their electrified vehicles and equipment. Simultaneously, we plan to build megawatt charging stations that
will enable 15-minute charge time for our batteries. Finally, we plan to build energy storage systems, called Qube+, that will use our
battery packs to augment rising energy demand across residential, commercial and infrastructure customers. Eventually, we plan to introduce
a modular and scalable electric powered platform and an electric pickup truck purposely built to leverage our battery technology to deliver
high performing, all-electric vehicles for our target market.
Our Products
| · | Qcell Cell – Our proprietary battery technology is the foundation of the Nxu ecosystem. The Qcell
is designed to leverage an in-house developed NMC-811 chemistry, combined with a unique, proprietary mechanical construction, to significantly
improve thermal management and reduce electrical resistance. In addition, our battery cell structure eliminates excess volume and space,
thereby providing high energy density. The Qcell, when implemented utilizing our proprietary Qube battery pack technology and our advanced
charging station currently under development - will be capable of delivering consistent power from 0% to 100% battery pack usable capacity,
while charging from 0% to 100% usable capacity in 15 minutes. This is the same amount of time it normally takes to fill an Internal Combustion
Engine (ICE) vehicle with fuel. Battery cells are currently being produced in low volumes at our facility in Mesa, AZ and production is
not dependent on any currently unknown advances in technology. We are in small-batch, pilot production of our battery cells and expect
to make customer deliveries in late 2023. To ensure we are capable of scaling production output, Nxu will need to continue to make investments
in capital expenses, additional facilities, and team growth for the coming years. Nxu has earmarked capital investment to ramp cell production
throughout 2023. As a byproduct of increased production, Nxu will continue to make significant investments in equipment for the foreseeable
future. |
| · | The Nxu Qube is a 30 Kilowatt hours (“kWh”) battery pack focused on serving customers within
mobility, equipment, and energy storage and infrastructure applications. The Qube will utilize our proprietary battery cell, pack design,
electronics, and software systems, all of which are currently in development. Legacy manufacturers of vehicle battery packs typically
utilize Li-ion battery cells in either cylindrical or pouch form factor which are inherently inefficient due to high thermal and electrical
resistance. Our Qube’s competitive advantage is our direct cell integration approach which minimizes thermal resistance while maximizing
electrical conductivity. Our Qcell is intended to directly integrate into our Qube. In addition, Nxu is developing the battery pack system
with a completely integrated power management, thermal management, and battery management system. The Qube is in Production Verification
and Test phase of development and completion of the engineering design and production line is not subject to any currently unknown advances
in technology. Our efforts are focused on target customers that are seeking to deploy packs in 2023. As of February 2023, Nxu announced
it had secured two gigawatt-hours’ worth of battery capacity demand in the form of non-binding Letters
of Intent (LOI), Memoranda of Understanding (MOU), and Purchase Orders (PO) from multiple customers in the automotive, heavy equipment,
and solar industries. Nxu plans to continue securing MOUs and LOIs for additional battery packs and will work to expand production
output in order to capitalize on that demand and deliver products as quickly as our facilities and production processes allow. Our ability
to deliver these battery packs to customers at a growing rate is dependent on our ability to raise capital and leverage that capital into
increased production, among other factors. |
| · | Megawatt charger – Our proprietary megawatt charger is intended to be capable of delivering up to
1.5 megawatts of continuous power, deployable in standalone charging station or as a drop-in direct-grid connection solution. The megawatt
charger is intended to be a proprietary charging solution to provide charging capabilities to the XT, the XP, and non-Nxu branded electric
vehicle that are compatible with Combined Charging System 2.0 (“CCS 2.0”). Recently, the Company successfully demonstrated
our one megawatt plus charging capability, The megawatt charger is still in the research and development phase and is not yet in production.
The charging system is expected to complete the Production Verification and Test phase of development as early as the end of 2023. Our
ability to execute this plan is dependent on our ability to raise the necessary capital and therefore, if the company is unable to secure
appropriate funding, these timelines are subject to change. Engineering design of the Megawatt charger is not yet complete. We expect
to encounter unforeseen engineering challenges and may be reliant on unknown advances in technology. |
Future Products for Commercial and Industrial Markets
| · | Nxu Platform– The Platform is designed to be a modular vehicle system, or electric skateboard, providing
all technology, software, and mobility technology required to develop a vehicle by third parties. Intended to be a universal, connected,
complete vehicle hardware and mechanical architecture system, the Platform will utilize our proprietary Qcell battery, electronics hardware,
mechanical, and software technologies to create a vehicle platform for sale to low-volume vehicle OEMs to develop new EV solutions for
niche- and mass-market opportunities. The Platform has completed the Concept Verification and Test phase of development and Nxu has produced
a functioning concept as demonstrated in 2021 on our social media channels. We expect that the production intent development of the Platform
will follow our successful commercialization of the Qcell, Qube, Qube+ and megawatt charger. We intend to commercialize and scale our
energy products first and expect the Platform to begin the Design Verification and Test phase of development as early as 2024. However,
our ability to execute is dependent on our ability to raise the necessary capital and therefore, if the Company is unable to secure appropriate
funding, these timelines are subject to change. |
| · | Nxu pickup truck – The pickup truck is intended to be our flagship vehicle and a 100% electric full-sized work truck. The pickup
truck is intended to be built on our platform. We intend to provide up to 500 miles of range, up to 35,000 pounds of towing capacity,
and a simplified operational approach that that utilizes our software and cloud service solutions to provide seamless fleet connectivity.
The pickup truck is still in the research and development phase. Given ongoing capital constraints and current market sentiment, the Company
has decided to focus its resources on commercializing and scaling energy products at this time. We expect that the production intent development
of the truck will follow the ramp of the Platform. The pickup truck has completed the Concept Verification and Test phase of development,
we expect to begin the Engineering Verification and Test phase of development as soon as 2024. We expect to encounter unforeseen engineering
challenges and may be reliant on unknown advances in technology. In addition, our ability to execute is dependent on our ability to raise
the necessary capital and therefore, if the Company is unable to secure appropriate funding, these timelines are subject to change. |
The execution of our vision is highly dependent on multiple
factors that include our ability to raise the necessary capital required to bring all products and services to market and, more specifically,
our ability to successfully deliver Qubes to customers. Our successful implementation of the Qcell and Qube would allow us to tackle a
key challenge that we face in the industry: the lack of available, adequate, and accessible battery technology. Thus, we have focused
our attention on developing our own battery technology in order to mitigate the external risk created from a lack of suitable and available
battery technology in the market.
We are currently producing Qcells sufficient to produce one Qube per
month. We will continue to incrementally increase yield via process improvement projects. To ensure we are capable of scaling production
output, we will need to continue to make investments in capital expenses, additional facilities, and team growth. Nxu has earmarked capital
investment to ramp cell production throughout 2023. As a byproduct of increased production, Nxu will continue to make significant investments
in equipment for the foreseeable future. Assuming the maximum number of Units are sold in this offering, we expect to invest approximately
$6 million of the proceeds of this offering into capital equipment and raw materials, which we expect will enable us to produce Qcells
sufficient to produce approximately ten Qubes per month. If we are unable to raise proceeds in this offering sufficient to invest $6 million
into capital equipment and raw materials, our planned production capacity may be less than anticipated and we will need to raise such
funds through other sources. See “Use of Proceeds.”
Additionally, our ability to scale high-volume
mobility and energy storage solutions is highly dependent on our success with the Qcell and Qube. As there is a limited supply of these
materials, Qcell and Qube production delays will likely delay high volume mobility and energy storage solutions. Any disruption from competitors
or any disruption to internal material and cell availability could impact the Company’s ability to succeed in any program that relies
on battery cells.
While we remain optimistic in our ability to bring Qcell and
Qube to market, these two programs carry high technical challenges due to the fact that the intellectual property required for the programs
to successfully scale must be developed, as it cannot be purchased nor is it readily available in the market. Nxu appreciates the importance
of overcoming this challenge and is accordingly focusing the majority of its efforts on bringing the Qcell and Qube products to market.
We signed an Amended Collaboration Agreement on July 28, 2022 with an
Australian company called Australian Manufactured Vehicles (“AUSEV”) to jointly develop a right-hand drive version of the
pickup truck. Under the terms of the AUSEV agreement, we agreed to supply pickup trucks in limited volume of prototype and test vehicles
in 2024, up to a total of 19,000 production intent pickup trucks beginning in 2026 through 2027, contingent upon production capacity,
funding, and raw material availability. The AUSEV agreement requires the parties to enter into binding definitive supply agreements. Given
our decision to focus our resources on commercializing and scaling energy products at this time, we do not expect to supply pickup trucks
in 2024. AUSEV is supportive of our strategy and we are working closely together and endeavor to deliver pickup trucks to AUSEV as soon
as practicable. The AUSEV agreement has an initial term of five (5) years from August 28, 2021. Upon expiration of the initial term, the
AUSEV agreement will automatically renew for an additional two-year term unless either party notifies the other party in writing of its
intent to terminate, at least 90 days prior to such expiration.
Our People
Beyond our products and solutions in development, we believe
the largest competitive advantage Nxu has is our culture. Our company culture embodies the idea that a transition to electrification and
a sustainable future should not require compromise. We are unwilling to bend in our belief that when a technology does not exist, we find
creative and innovative ways of developing solutions to solve these challenges. Our team is built of a diverse group of individuals with
a singular focus, to power the future of work through an ecosystem of technologies and solutions that provide incremental value to those
who build, dig, grow, and maintain.
Competition
The EV market and battery segment are highly competitive and
rapidly evolving, with new technologies and potential new entrants emerging frequently. Several major manufacturers currently supply batteries
for the EV industry, including Panasonic Corporation, Samsung SDI, Contemporary Amperex Technology Co. Limited, LG Energy Solutions, and
BYD Co. Limited. These companies primarily supply conventional Li-ion batteries and are also working on developing new solid-state battery
technologies, including potentially lithium-metal batteries. In addition to these established players, many new entrants and automotive
OEMs are also investing in battery development and production, with some researching and developing solid-state battery technologies.
For example, Quantumscape and Solid Power are developing solid-state batteries while Tesla, Inc. is building multiple battery gigafactories
and has the potential to supply batteries to other automotive OEMs. Overall, the competitive landscape of the EV battery market is likely
to continue evolving, with new technologies and players emerging over time. Companies operating in this market will need to be nimble
and responsive to these changes to remain competitive and successful.
Similarly, the competitive landscape for energy
storage products is rapidly evolving, with new technologies and players entering the market. Currently, major companies supplying batteries
for energy storage systems include Panasonic Corporation, LG Energy Solutions, Samsung SDI, and Tesla, Inc. In addition to established
players, there are many startups and smaller companies that are developing new energy storage technologies, such as flow batteries, solid-state
batteries, and hydrogen fuel cells. Large energy companies, such as Total, Shell, and Enel, are also entering the market and investing
in energy storage projects. The competitive landscape for energy storage products is expected to remain highly dynamic, with new technologies
and players emerging over time, driven by factors such as declining costs, increasing demand for renewable energy, and government incentives.
Competitive Strengths
We believe that Nxu is well positioned to compete
successfully in both electric battery and megawatt charging technologies
Our competitive strengths include:
| · | Fast-Charging Nxu Battery Tech with Superior Cycle Life. Nxu has developed a battery technology
that is industry competitive in terms of energy density through chemistry development of proprietary coating mixtures. In addition, the
terminal size of the battery cells is designed with increased surface area to enable a much higher electric current intake at a cell level
than the capabilities of conventional Li-ion cells. We believe that this, coupled with a differentiated form factor, allows our batteries
to charge fast and to last a long time. Nxu battery technology is being designed to charge in 15 minutes or less and sustain duty-cycle
performance for up to one million miles of vehicle life. |
| · | Robust Intellectual Property Portfolio. As of March 31, 2023, Nxu has one issued and 37
pending U.S. patents. Our issued patent is effective until April 9, 2039. For all other patents, the rights and duration are pending grant
of the patent by the U.S. Patent and Trademark Office. |
| · | Vertical Integration. By taking a vertically integrated approach to development, Nxu is
engineering solutions from the ground up. Starting with the foundational battery, our Qcell technology, we plan to build our Qube packs
and Qube+ energy storage solutions in-house. Further, to build high quality cells, we will bring the entire manufacturing process in-house.
This includes, but is not limited to, raw materials processing, electrode and electrolyte preparation, cell assembly, cell formation,
grading, testing and many other quality-control steps. Owning the battery cell manufacturing process allows us to produce high-quality
products. Simultaneously developing from cell to vehicle, Nxu’s product offering, development costs, pricing, and success is not
dependent on Tier 1 suppliers. |
| · | A Team with Deep Experience in Disruption. Nxu’s leadership team is made up of individuals
with experience in developing products or working in companies that have disrupted traditional industries. Instead of building a team
with traditional automotive experience, Nxu has prioritized innovation as a requirement when recruiting talent. |
| · | Company Core Values & Culture. Nxu has four Core Values: “Candid Ownership”,
“Team First”, “Intentional Simplicity”, and “Make it Happen”. These beliefs make Nxu a unique company.
Nxu has been dedicated to Candid Ownership from its inception, as can be seen in the transparency of the YouTube videos and social media
updates that the company publishes on a regular basis. This level of transparency and authenticity sets Nxu apart from other companies
in the electric vehicle and battery industries. “Team First” is a commitment to always do what is best for the team over any
one individual, holding Nxu to a high standard of performance management internally. “Intentional Simplicity” captures the
deliberate decisions Nxu takes to keep things simple in its product and process designs and in its functionality, or both. Intentional
Simplicity is the opposite of complexity, and it involves making conscious choices to minimize unnecessary elements or features, and to
prioritize simplicity and ease of use. Finally, “Make It Happen” instills in the team a relentlessness and perseverance that
has resulted in Nxu delivering results using far less resources than our competitors. |
| · | Magnetic Brand with an Engaged Community. Nxu has built a social media following of over 175,000 combined followers
across Facebook, Instagram, LinkedIn, and YouTube. This community is highly engaged in Nxu’s progress and updates, and many of them
have even participated in one of our previous equity crowdfunding offerings. This community base is a resource for Nxu to test new ideas,
validate product-market fit, and solicit feedback from a community that we believe is representative of our future customer base. |
| · | Made in the USA. Nxu plans to build its products in-house in its facility in Arizona. As
Nxu scales production output, we may need to expand into additional or alternative facilities. Nxu intends to continue manufacturing in
the United States, which we believe will likely make the Company one of the few American companies building electric vehicle batteries
on United States soil. |
Company History
Since its incorporation in 2016 under the name
“Atlis Motor Vehicles Inc.,” Nxu has been primarily focused on research and development. The business strategy, intellectual
property, and initial truck design were created by the founding team. From 2018 and until the Company’s public listing, the company
raised approximately $36 million through multiple successful crowdfunding campaigns. On September 27, 2022, Atlis became a publicly listed
company under the ticker symbol “AMV” on Nasdaq. On May 12, 2023, we completed the Reorganization Merger, pursuant to which
Nxu became the publicly traded corporation, and Nxu began trading under the ticker symbol “NXU” on May 15, 2023. Nxu is an
execution focused company and plans to continue to raise capital needed to execute on its immediate and long-term goals. We are currently
focused on developing and scaling our Qcell batteries, Qube battery packs, Qube+ energy storage solutions and our megawatt charging stations.
How We Plan to Generate Revenue
In the near term, we intend to pursue opportunities
as an EV battery technology manufacturer, an energy storage systems company, a megawatt charging technology company, and a supplier for
other automotive OEMs. We also intend to leverage our battery technology solutions to support other emerging electric applications such
as heavy machinery, agriculture, aircraft, including electric vertical take-off and landing aircraft (“eVTOL”), and marine
transportation. Long-term, we also intend to bring our XP platform technology and out XT truck to market.
To date, Nxu has not yet generated any revenue.
The Company plans to generate revenue through the sale of our products which include our Qcell batteries, Qube battery packs, Qube+ energy
storage solutions and megawatt charging services. Upon executing on our goals to develop, build, deploy and scale these products and services,
Nxu plans to bring our vehicle technology to market.
We plan to take a risk mitigated approach in going
to market. We realize that building up a technology firm like ours from the ground up is a time intensive, resource intensive and capital-intensive
process. A crawl, walk, run and leap approach to implementing our eco-system of products and solutions, enables the Nxu team to mitigate
execution risk and it mitigates investment risk for our investors and supporters.
We plan to deploy our Crawl phase in 2023 by launching the Qcell
and Qube battery packs into the market, followed closely by the pilot deployment of 1.5 megawatt charging stations. The development and
launch of the battery cell and its integration into a battery pack, both slated for manufacturing ramp in 2023, are the foundational pieces.
In the Walk Phase, we plan to ramp up the production of our
Qcell and Qube packs. We intend to invest in equipment, facilities, working capital and labor to support the ramp up manufacturing of
Qcell and production of Qube battery packs. We also intend to build, test and deploy our Qube+ energy storage solutions as part of the
strategy to capture adjacent market. Finally, we intend to deploy additional megawatt chargers across strategic locations.
The Run Phase is a multi-year endeavor to scale
battery cell and pack production, deploy energy infrastructure solutions which includes a network of megawatt charging stations and energy
storage solutions across multiple markets and geographies. In addition, Nxu plans to build a set of software and hardware services that
make up the ecosystem of products and services that the Company would offer its customers.
In the Leap Phase, we plan to introduce the Nxu Platform and
Pickup truck as well as a suite of vehicle specific products and services focused on solving the electrification needs of commercial,
industrial and fleet users. The leap phase is designed to complete the ecosystem and provide a unified set of products and services geared
towards driving accelerated transition to electrification for our intended market segment.
Ultimately, we believe that this path allows us
to focus on driving execution and building incremental value as we grow.
Industry
Electric Vehicle Battery, Energy Storage
and Charging Infrastructure
The electric vehicle battery industry is rapidly
growing as OEMs target transition to completely electric product offerings, some as soon as 2025. Electric vehicle batteries are in high
demand, and smaller companies are not able to secure battery supply for their production targets from the larger battery manufacturers.
According to Wood Mackenzie, by 2030, the 2.3 terawatt hour global need for electric vehicle batteries is 77% higher than the forecasted
supply of 1.3 gigawatt hour. Furthermore, as EV’s become increasingly popular, there has been a growth in charging infrastructure
around the world. According to Acumen Research and Consulting, the electric vehicle charging market is projected to hit $182 billion by
2030. However, there are still challenges to widespread adoption of EV’s. These primarily include long charge times and limited
charging infrastructure. Nxu intends to supply battery cells, packs, and charging infrastructure to help fill these gaps in supply.
Energy Storage
Energy storage systems have a wide range of emerging use cases that
are becoming increasingly important as the adoption of renewable energy sources and electrification continues to grow. Some of the emerging
use cases for energy storage systems include:
| · | Grid Stabilization - Energy storage systems can help stabilize the electrical grid by storing excess energy during periods of low
demand and releasing it during periods of high demand. This can help prevent blackouts and improve the reliability of the electrical grid. |
| · | Renewable Integration - Energy storage systems can help integrate renewable energy sources, such as solar and wind, into the grid
by storing excess energy and releasing it when demand is high. This can help balance the variability of renewable energy sources and increase
the penetration of renewable energy into the grid. |
| · | Electric Vehicle Charging - Energy storage systems can be used to store energy for electric vehicle charging. This can help reduce
the strain on the electrical grid during peak charging periods and enable more efficient use of renewable energy sources. |
| · | Microgrids - Energy storage systems can be used in microgrids, which are small-scale power grids that can operate independently of
the main electrical grid. Microgrids can be used to provide power to remote or off-grid locations, improve the reliability of the electrical
grid, and enable more efficient use of renewable energy sources. |
| · | Emergency Backup Power - Energy storage systems can be used as backup power sources during power outages or other emergencies. This
can help ensure critical facilities, such as hospitals, data centers, and emergency response centers, have continuous power. |
Overall, the emerging use cases for energy storage systems are diverse
and are becoming increasingly important as the world shifts toward a more sustainable energy system. Nxu intends to leverage its battery
technology to support the growth of the energy storage solutions market given that energy storage solutions requirements are technologically
adjacent to electric vehicle batteries.
Pickup Trucks
Pickup trucks have been the top three best-selling
vehicles in the United States for the past five years. Altogether, including the new and used truck market, vehicle up-fitter market,
and charging opportunity, the total market opportunity for manufacturers in the pickup truck space is north of $241 billion. Nxu intends
to capture the largest market share of the electric work truck market. Our proprietary battery technology is being designed to allow us
to deliver unprecedented range and charge times.
Our Company
Geographic Sales Territory
Ultimately, Nxu is developing a technology platform
that is intended to add value across the globe, and our long-term vision includes s global footprint. Although our initial focus is to
manufacture and sell our products in the United States, we believe a strong interest from international markets allows us quick expansion
paths in the future. The Company has signed an agreement with an Australian company Australian Manufactured Vehicles for XT pickup trucks.
We have registered interest in battery packs for vehicles and energy storage solutions in the United Kingdom, France and New Zealand as
well as interest in our XP platform and XT pickup trucks from South American distributors.
Distribution Channels
Our hardware and services will be facilitated
online via our Company's website and through our internally developed business to business sales process. Our intent is to allow fleet
and consumer customers to purchase Nxu products both online and directly through the Company’s sales process.
Supply Chain
As we begin our production ramp, we have been keeping close contact
with our supply chain partners to ensure we can satisfy our production goals. We have shared our 3-year production forecast with our raw
material suppliers to confirm their capability to support our build plan, and have purchasing agreements with such suppliers for raw materials
through 2023. Our ability to meet this demand is heavily dependent on our ability to raise the necessary capital. Our suppliers include
large global companies geared toward supporting Li-Ion battery manufacturing with multi-site and international presence. While we believe
demand for raw materials will increase over the next several years, we also believe that our suppliers have the ability to support our
requested demand.
At the same time, we are paying close attention
to the global geopolitical situation. Similar to other manufacturing companies a large portion of our supply chain is based in China.
Currently, approximately 75% of our raw material is supplied directly or indirectly from China. We intend to explore risk mitigation opportunities
in parallel for alternative suppliers in Europe and North America to strengthen our supplier diversity.
Growth Strategy
We plan to take a strategic approach to scale.
First, we plan to bring our battery cell and pack technology, charging stations and energy storage systems to market to drive early revenue.
This will be followed by a period of growth in manufacturing scale and deployment scale. Simultaneously, we intend to bring hardware and
software services to augment our offerings and revenue opportunity. Geographically, we plan to penetrate the U.S. market and seek overseas
growth over time. However, given various incentive programs available in foreign markets along with opportunities, we may accelerate our
international footprint.
Our strategy is to focus on execution. We believe
that a deliberate, milestone driven approach to product development and introduction along with a milestone driven approach to market
penetration will provide an optimized path to revenue generation for Nxu and value generation for our shareholders.
We plan to leverage our active social media presence,
influencer marketing and customer word of mouth to generate additional interest in our products. Additionally, we plan to develop a dedicated
sales team to pursue large customers.
Regulatory Approval of Principal Products
or Services
We will be subject to extensive regulatory requirements
that we plan to comply with to begin distribution of our products. Our batteries, and the sale of electric vehicles and motor vehicles
in general, are subject to regulation under international, federal, state, and local laws, including export and import control laws. Compliance
with changing regulations could be time consuming, burdensome, and expensive. To the extent compliance with new and existing regulations
is cost prohibitive, our business prospects, financial condition, and operating results may be adversely affected. We are also subject
to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage,
treatment and disposal, and remediation of releases of hazardous materials. There are significant capital, operating and other costs associated
with compliance with these environmental laws and regulations. Environmental laws and regulations may become more stringent in the future,
which could increase costs of compliance or require us to manufacture with alternative technologies and materials. Obtaining necessary
regulatory approvals is critical to Nxu successfully launching its Qcell, Qube battery pack, Qube+ energy storage systems, megawatt charging
and finally the XP and XT. See “Risk Factors We may face regulatory challenges” for more information.
EPA Emissions and Certificate of Conformity
The U.S. Clean Air Act requires that we obtain
a Certificate of Conformity issued by the Environmental Protection Agency (the “EPA”) certifying that certain of our vehicles
comply with all applicable emissions and related certification requirements. A Certificate of Conformity will be required for vehicles
to be sold in states covered by the Clean Air Act’s standards. A California Executive Order issued by the California Air Resources
Board (“CARB”) is also required for vehicles to be sold in California and states that have adopted California’s stricter
standards for emissions controls related to new vehicles and engines sold in such states. States that have adopted the California standards,
as approved by the EPA, also recognize the CARB Executive Order for sales of vehicles. In addition to California, there are several other
states that have either adopted or are in the process of adopting the stricter California standards, including New York, Massachusetts,
Vermont, Maine, Pennsylvania, Connecticut, Rhode Island, Washington, Oregon, New Jersey, Maryland, Delaware and Colorado.
Battery Products and Charging Station Safety
and Testing
Our battery products and charging station deployments
will need to meet rigorous regulatory requirements and safety standards. Although not comprehensive, below are some considerations:
| · | Compliance with safety standards - Li-ion batteries must meet safety standards, including UL 2580 for electric vehicles, to ensure
that they are safe for use in these applications. |
| · | Hazardous materials regulations - Li-ion batteries are classified as hazardous materials and must be transported and stored in compliance
with U.S. Department of Transportation regulations, which include labeling, packaging, and shipping requirements. |
| · | Environmental regulations - Battery manufacturers must comply with environmental regulations, including
disposal and recycling requirements, such as those set forth by the Environmental Protection Agency. |
| · | Quality management systems - Battery manufacturers must implement quality management systems to ensure
that their products meet strict quality and safety standards. |
| · | Certification - Li-ion batteries for electric vehicles must be certified by independent testing laboratories to ensure that they meet
safety and performance standards. |
| · | Thermal management - Li-ion batteries generate heat and can pose a fire risk if not properly managed. We must have systems in place
to monitor and control battery temperature to prevent overheating and fires. |
| · | Manufacturing and assembly - Battery cells must be manufactured and assembled in accordance with strict
quality and safety standards to ensure that they are reliable and safe for use in electric vehicles and equipment use. |
| · | Design and testing - Battery cells must be designed and tested to meet the unique requirements of electric
vehicle applications, including power output, energy density, and cycle life. |
| · | International regulations - If we plan to export Nxu battery products, we must comply with international
regulations, such as the UN Model Regulations for the Transport of Dangerous Goods. |
| · | Grid interconnection - Charging stations must comply with grid interconnection requirements to ensure that they are properly connected
to the power grid and do not cause disruptions. |
| · | Energy management - Charging stations must be designed with energy management systems to ensure that they do not overload the grid
or exceed their capacity. |
| · | Cybersecurity - Charging stations must be designed with cybersecurity measures to protect against cyber threats and prevent unauthorized
access. |
Seasonality
We expect that our operating results will fluctuate
in the future due to various factors including changing economic conditions. Seasonal trends may also be impacted by externalities
such as pandemics, supply chain disruptions and materials and machinery shortages.
Impact of Inflation
At the end of the period, inflation was the highest
in the United States in over 30 years. Our ability to obtain revenue generation and ultimately cash flow can be adversely impacted by
sudden increases in specific costs, such as increases in material and labor. In addition, measures used to combat inflation, such as increases
in interest rates, could also have an impact on our ability to obtain adequate terms for equipment and material financing. There can be
no assurance that inflation will not affect our future results or our speed to market.
Employees
As of March 31, 2023, the Company had a total
of 120 full time employees. We believe that an engaged, productive workforce is critically important to creating shareholder value. To
that end, we are committed to providing a safe workplace and opportunities for professional growth and advancement based on performance,
qualification, demonstrated skill and achievement at a fair wage. Additionally, given the success of our businesses hinges on the proficiency
and abilities of our workforce, and we are committed to recruiting, nurturing, and retaining personnel who are well-suited to the demands
of our operating environment, the Company leverages its equity as a tool to attract and retain high-skilled talent and to incentivize
our management team to achieve its execution goals.
Implications of Being an Emerging Growth Company
and Smaller Reporting Company
We qualify as an “emerging growth company”
under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). As a result, we are permitted to, and
intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required
to:
| · | have
an auditor report on our internal controls over financial reporting pursuant to Section 404(b)
of the Sarbanes-Oxley Act of 2002, as amended; |
| · | comply
with any requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements (i.e., an auditor discussion
and analysis); |
| · | submit
certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,”
“say-on-frequency” and pay ratio; and |
| · | disclose
certain executive compensation related items such as the correlation between executive compensation
and performance and comparisons of the chief executive officer’s compensation to median
employee compensation. |
In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain
accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits
of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such
new or revised accounting standards.
We will remain an “emerging growth company”
for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues are
$1.07 billion or more, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange
Act, which would occur if the market value of our Class A common stock that are held by non-affiliates exceeds $700 million as of the
last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion
in non-convertible debt during the preceding three year period.
We are also a “smaller reporting company”
as defined by Rule 12b-2 of the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging
growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to
take advantage of these scaled disclosures as long as the market value of our voting and non-voting Class A common stock held by non-affiliates
is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million
during the most recently completed fiscal year and the market value of our voting and non-voting Class A common stock held by non-affiliates
is less than $700 million measured on the last business day of our second fiscal quarter.
Controlled Company Exemption
Our Chief Executive Officer, Mark Hanchett, beneficially
owns and controls a majority of the combined voting power of our common stock. As a result, we are a “controlled company”
within the meaning of the Nasdaq listing rules. Under these rules, a company of which more than 50% of the voting power is held by an
individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance
requirements of Nasdaq. Our stockholders do not have the same protections afforded to stockholders of companies that are subject to such
requirements. Mark Hanchett also serves as the Chairman of the Board of Nxu.
Liquidity & Capital Resources
As of March 31, 2023, Nxu had a balance of approximately
$12.9 million in cash available. As of March 31, 2023, Nxu has $260,000 in revolving credit with Divvy.
Property
Nxu has occupied 1828 Higley Road, Mesa AZ, for
all its operations. The 42,828 Sq. Ft. industrial facility is occupied solely by Nxu. The facility includes both office space and warehouse
space.
Intellectual Property
As of March 31, 2023, we have one issued patent and 37 pending U.S.
patent applications. Our issued patent is effective until April 9, 2039. For all other patents, the rights and duration are pending grant
of the patent by the U.S. Patent and Trademark Office.
As of March 31, 2023, we have one registered and
two pending U.S. trademarks. Our registered trademark is effective until 2037 with renewals. Our pending trademarks are subject to use
in commerce and registration, with the first extension filed.
Legal Proceedings
No active legal proceedings are currently pending
to which the Company or any of its property are subject.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and
analysis of our financial condition and results of our operations together with our unaudited condensed consolidated financial statements
and the notes thereto appearing elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current
expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from
those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled
“Risk Factors,” “Cautionary Statement regarding Forward-Looking Statements” and elsewhere in this prospectus.
Please see the notes to our Financial Statements for information about our Significant Accounting Policies and Recent Accounting Pronouncements.
Company Overview
Nxu is a US-based technology company manufacturing innovative battery cells and
battery packs for use in advanced energy storage systems, megawatt charging stations, and mobility products. We believe that widespread
adoption of EVs by the commercial and industrial markets requires high performing battery and pack solutions that can effectively compete
with legacy diesel-based products. Nxu designs, engineers, and plans to build proprietary Li-ion battery cells and packs, 1 megawatt
plus charging stations, energy storage solutions and a suite of software and services designed to allow an easy transition from diesel
to electric for our target segment.
The Company was incorporated as Atlis Motor Vehicles
Inc. in the State of Delaware on November 9, 2016. On May 12, 2023, we completed the Reorganization Merger, pursuant to which Nxu replaced
Atlis Motor Vehicles Inc. as the publicly listed corporation.
Nxu is a pre-revenue development stage company
with a goal to design, develop and produce a range of EV solutions and suite services and products designed to accelerate the adoption
of EVs in the Work industry. We have incurred losses from operations and have had negative cash flows from operating activities since
our inception. The Company’s current operating plan indicates that it will continue to incur losses from operations and generate
negative cash flows from operating activities given expenses related to the completion of its ongoing research and development activities.
During the three months ended March 31, 2023,
the Company achieved important milestones and we believe we have built the foundation on which we plan to grow our company.
We plan to continue executing our goals for 2023.
We believe that our continued development and execution will lead to revenue generation in the current fiscal year.
Company and Industry Outlook
Nxu is an execution focused company and plans
to continue to raise capital needed to execute on its immediate and long-term goals. We are currently focused on developing and scaling
our Qcell batteries, Qube battery packs, Qube+ energy storage solutions and our megawatt charging stations.
In the near term, we intend to pursue opportunities
as an EV battery technology manufacturer, an energy storage systems company, a megawatt charging technology company, and a supplier for
other automotive OEMs. We also intend to leverage our battery technology solutions to support other emerging electric applications such
as heavy machinery, agriculture, aircraft, including electric vertical take-off and landing aircraft (“eVTOL”), and marine
transportation. Long-term, we also intend to bring our XP platform technology and out XT truck to market.
To date, Nxu has not yet generated any revenue.
The Company plans to generate revenue through the sale of our products which include our Qcell batteries, Qube battery packs, Qube+ energy
storage solutions and megawatt charging services. Upon executing on our goals to develop, build, deploy and scale these products and services,
Nxu plans to bring our vehicle technology to market.
We plan to take a risk mitigated approach in going
to market. We realize that building up a technology firm like ours from the ground up is a time intensive, resource intensive and capital-intensive
process. A crawl, walk, run and leap approach to implementing our eco-system of products and solutions, enables the Nxu team to mitigate
execution risk and it mitigates investment risk for our investors and supporters.
We plan to deploy our Crawl phase in 2023 by launching the Qcell
and Qube battery packs into the market, followed closely by the pilot deployment of 1.5 megawatt charging stations. The development and
launch of the battery cell and its integration into a battery pack, both slated for manufacturing ramp in 2023, are the foundational pieces.
In the Walk Phase, we plan to ramp up the production of our
Qcell and Qube packs. We intend to invest in equipment, facilities, working capital and labor to support the ramp up manufacturing of
Qcell and production of Qube battery packs. We also intend to build, test and deploy our Qube+ energy storage solutions as part of the
strategy to capture adjacent market. Finally, we intend to deploy additional megawatt chargers across strategic locations.
The Run Phase is a multi-year endeavor to scale
battery cell and pack production, deploy energy infrastructure solutions which includes a network of megawatt charging stations and energy
storage solutions across multiple markets and geographies. In addition, Nxu plans to build a set of software and hardware services that
make up the ecosystem of products and services that the Company would offer its customers.
In the Leap Phase, we plan to introduce the Nxu
XP Platform and XT Pickup truck as well as a suite of vehicle specific products and services focused on solving the electrification needs
of commercial, industrial and fleet users. The leap phase is designed to complete the ecosystem and provide a unified set of products
and services geared towards driving accelerated transition to electrification for our intended market segment.
Ultimately, we believe that this path allows us
to focus on driving execution and building incremental value as we grow.
As mentioned above, we are currently a pre-revenue company. During
the fiscal year ended December 31, 2022, we received deposits for production of battery packs and hardware for planned delivery in the
second half of 2023. We expect to incur a loss on this project and on all of our early customer deliveries. Additionally, until we obtain
sufficient capital to efficiently scale our production capabilities and increase production volume, we expect to incur losses on each
product we sell.
We will continue to seek additional capital to
fund our production goals. We pursued a public listing via registration of our Regulation A Class A shares with the SEC and listing on
Nasdaq on September 27, 2022. The registration of Regulation A Class A shares allowed for already issued shares to be traded on the open
market. Although this direct offering and listing on Nasdaq did not result in any capital infusion into the Company, it allows the Company
access to capital markets as a vehicle for fund raising. In November 2022, the Company entered into a Securities Purchase Agreement with
certain institutional investors for up to $30 million in convertible debt and warrants in three separate tranches. The Company received
net proceeds of $9 million upon signing of the Securities Purchase Agreement related to the first tranche. In January 2023, the Company
entered into an amendment to the Securities Purchase Agreement, pursuant to which the terms of the second tranche were amended and the
third tranche of funding was cancelled. The Company received an additional $9 million in January 2023 related to the second tranche of
funding. Additionally, on February 21, 2023, the Company consummated a public offering for an aggregate of 8.3 million units at an offering
price of 1.56 per Unit resulting in gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common
stock, (ii) 0.65 Series A warrants to purchase 0.65 shares of Class A common stock and (iii) 0.75 Series B warrants to purchase 0.75 shares
of Class A common stock, each such Warrant being exercisable from time to time for one share of Class A common stock at an exercise price
of $1.56. See the notes to consolidated financial statements contained elsewhere in this prospectus for more information. The Company
intends to continue obtaining additional capital through the public markets and other means. There can be no assurance that we will obtain
a sufficient level of capital through these channels in the time frames needed to sustain or grow the business or on terms agreeable to
us.
The ongoing conflict in Russia and Ukraine has
resulted in economic disruption globally. In response to the conflict, governments have imposed sanctions and other restrictive actions
against Russia. This conflict has also resulted in increased costs of materials and other supply chain challenges. While some of our suppliers
source materials from this region, as well as other countries globally, we have not been materially impacted by these events. We plan
to continue to source raw materials from suppliers outside of the United States and we expect the volume of these activities to increase
as we begin production. Our management team works closely with our vendors to ensure they have an adequate supply of the materials and
equipment we will need for production and to find alternative solutions in areas where there are supply chain constraints. While we are
working to minimize the potential future impact related to these events, we cannot be certain that all inventory or equipment we need
for production will be able to be delivered in time for production plans. The extent of the adverse impacts of the ongoing conflict on
the broader global economy cannot be predicted and could negatively impact our business and results of operations in the future. Limited
supply availability could lead to unforeseen cost and delivery challenges in relation to our operational and production plans for 2023.
During the period, inflation was at historic highs. Cost inflation
has been a significant challenge across all aspects of our business, and we anticipate it to persist. Our ability to attract skilled engineering
talent and to eventually generate revenue and ultimately positive cash flow can be adversely impacted by sudden increases in specific
costs, such as increases in material and labor. In addition, measures used to combat inflation, such as increases in interest rates, could
also have an impact on our ability to obtain adequate terms for equipment and material financing. There can be no assurance that inflation
will not affect our future results or our speed to market.
Results of Operations
Three Months Ended March 31, 2023 Compared to the Three Months Ended
March 31, 2022
The following table sets forth certain statement of operations data
for the three-month periods ended March 31, 2023 and March 31, 2022 (certain amounts may not calculate due to rounding):
|
|
2023 |
|
|
% of
Total
Expenses |
|
|
2022 |
|
|
% of
Total
Expenses |
|
|
Change |
|
|
|
(Dollar amounts in thousands) |
|
Revenue |
|
$ |
- |
|
|
|
-% |
|
|
$ |
|
|
|
|
-% |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
5,963 |
|
|
|
44 |
|
|
|
13,955 |
|
|
|
71 |
|
|
|
(7,992 |
) |
General and administrative |
|
|
4,726 |
|
|
|
35 |
|
|
|
2,558 |
|
|
|
13 |
|
|
|
2,168 |
|
Advertising |
|
|
34 |
|
|
|
- |
|
|
|
1,856 |
|
|
|
9 |
|
|
|
(1,822 |
) |
Research and development |
|
|
2,900 |
|
|
|
21 |
|
|
|
1,304 |
|
|
|
7 |
|
|
|
1,596 |
|
Total operating expenses |
|
|
13,623 |
|
|
|
100 |
|
|
|
19,673 |
|
|
|
100 |
|
|
|
(6,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(13,623 |
) |
|
|
|
|
|
|
(19,673 |
) |
|
|
|
|
|
|
(6,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
1,314 |
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
1,327 |
|
Total other income (expense) |
|
|
1,314 |
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
1,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(12,309 |
) |
|
|
|
% |
|
$ |
(19,686 |
) |
|
|
|
% |
|
$ |
7,377 |
|
Stock based compensation. Stock
based compensation decreased $8.0 million from $14.0 million during the first quarter of 2022 to $6.0 million in the first quarter of
2023 as a result of the vesting of stock options for employees and executives including $5.1 million of expense in the period ended March
31, 2023 and $12.5 million in the three months of the prior year period related to stock options for the Company’s President and
its Chief Executive Officer. See Note 9 to the notes to condensed consolidated financial statements (unaudited) elsewhere in this prospectus.
Non-cash stock compensation expenses are expected to remain elevated in the future since it is a crucial element of our comprehensive
employee compensation and management incentive plan.
Research and development.
Research and development increased $1.6 million from 2022 compared to the current period as the Company continued to ramp up battery and
platform development during the period ended March 31, 2023. We expect to continue to invest heavily in research and development as we
work toward bringing our products to market.
General and administrative.
General and administrative expenses increased $2.1 million to $4.7 million in the period ended March 31, 2023 from $2.5 million in the
prior year quarter. This increase was primarily from $1.5 million in increased legal and professional fees as a result of the Company’s
convertible debt and equity offerings during the quarter ended March 31, 2023 as well as an additional $0.3 million in employee compensation
as we continue to ramp up our operations in support of bringing our products to market.
Advertising. Advertising
decreased by $1.8 million from $1.9 million in the first three months of 2022 to $34 thousand in the same period in 2023. The prior year
period included several campaigns associated with the Company’s crowd funding activities.
Other income/(expense). Other income (expense)
increased by $1.3 million from the first quarter in 2022 to the first quarter in 2023 as a result of warrant expense related to the true
up warrants issued on January 5, 2023 and changes in the fair value of the Company’s convertible debt and warrant liabilities during
the current fiscal quarter. See Note 10 to the condensed consolidated financial statements (unaudited) elsewhere in this prospectus.
Year ended December 31, 2022, compared to the year ended December 31, 2021
The following table sets forth certain statement of operations data
for the year ended December 31, 2022, and December 31, 2021 (certain amounts may not calculate due to rounding):
|
|
2022 |
|
|
% of
Total
Expenses |
|
|
2021 |
|
|
% of
Total
Expenses |
|
|
Change |
|
|
|
(Dollar amounts in thousands) |
|
Revenue |
|
$ |
- |
|
|
- |
% |
|
$ |
|
|
|
- |
% |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
41,502 |
|
|
|
60 |
|
|
|
123,245 |
|
|
|
92 |
|
|
|
(81,743 |
) |
Research and Development |
|
|
9,648 |
|
|
|
14 |
|
|
|
4,429 |
|
|
|
3 |
|
|
|
5,219 |
|
General and administrative |
|
|
12,353 |
|
|
|
18 |
|
|
|
3,329 |
|
|
|
3 |
|
|
|
9,024 |
|
Advertising |
|
|
5,297 |
|
|
|
8 |
|
|
|
2,678 |
|
|
|
2 |
|
|
|
2,619 |
|
Total operating expenses |
|
|
68,800 |
|
|
|
100 |
|
|
|
133,681 |
|
|
|
100 |
|
|
|
(64,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(68,800 |
) |
|
|
|
|
|
|
(133,681 |
) |
|
|
|
|
|
|
(64,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/(expense) |
|
|
(1,881 |
) |
|
|
|
|
|
|
(55 |
) |
|
|
|
|
|
|
(1,826 |
) |
Total other income/(expense) |
|
|
(1,881 |
) |
|
|
|
|
|
|
(55 |
) |
|
|
|
|
|
|
(1,826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(70,681 |
) |
|
|
% |
|
|
$ |
(133,736 |
) |
|
|
- |
% |
|
$ |
(63,055 |
) |
Stock based compensation. Stock based compensation decreased
$81.8 million from $123.2 million during the year of 2021 to $41.5 million in the year of 2022 as a result of the vesting of stock options
for employees and executives including $12.8 million of expense in the period ended December 31, 2022 and $121 million in the twelve months
of the prior year period related to stock options for the Company’s President and its Chief Executive Officer. The prior year period
included approximately $115 million of one time incremental compensation expense related to the conversion of stock grants to stock options
offered to employees in August of 2021. See Note 11 to the Notes to the audited consolidated financial statements elsewhere in this prospectus.
Our non-cash stock compensation expenses are expected to remain elevated in the future since it is a crucial element of our comprehensive
employee compensation and management incentive plan.
Research and development. Research and development related
to employee compensation increased $3.3 million from 2021 compared to the current year as the Company continued to ramp up development
on its core products. Additionally, research and development related to materials and equipment increased $1.9 million from 2021 to 2022
as a result of increased purchases of materials and equipment to support battery and platform development during 2022. We expect to continue
to invest heavily in our R&D as we work toward bringing our products to market.
General and administrative. General and administrative
expenses related to employee compensation increased from $1.2 million in 2021 to $3.8 million in 2022, of which $2.6 million was from
increased salaries and benefits from increased headcount. Additionally, other General and administrative expenses increased from $2.1
million in 2021 to $8.6 million in 2022, of which the company incurred $5.2 million in expenses related to legal and professional services
in preparation for the Company’s public offering.
Advertising. Advertising increased by $2.6 million from
$2.7 million in the 2021 to $5.3 million in the 2022 as the Company worked to increase awareness of its products with consumers and to
support the Company’s crowd funding campaigns through its various social media outlets. We expect our advertising costs to decline
as a percent of total operational expenses as the company no longer engages in Regulation A marketing.
Other income/(expense). Other
income (expense) decreased by $1.8 Million from fiscal year 2021 to fiscal year 2022 as a result of changes in the fair value of the Company’s
convertible long term debt and warrant liability. These obligations were entered into during the fourth quarter of the year ended December
31, 2022.
Liquidity and Capital Resources
For the Three Months Ended March 31, 2023 Compared to March 31, 2022
The table below sets forth a summary of our cash flows for the three
months ended March 31, 2023 and 2022 (in thousands):
| |
Three Months Ended March 31, | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Net cash used in operating activities | |
$ | (9,370 | ) | |
$ | (5,252 | ) |
Net cash used in investing activities | |
| (134 | ) | |
| (174 | ) |
Net cash provided by financing activities | |
| 19,702 | | |
| 3,413 | |
As disclosed in Note 1 of
the Notes to the audited condensed consolidated financial statements included elsewhere in this prospectus, the accompanying audited condensed
consolidated financial statements have been prepared assuming the Company will continue as a going concern.
During the three months ended
March 31, 2023, the Company incurred a net loss of approximately $12.3 million and had net cash used in operating activities of $9.4 million.
On March 31, 2023, the Company had $12.9 million in cash and an accumulated deficit of approximately $231 million.
During the quarter ended March
31, 2023, the Company raised capital through convertible debt and public offerings. The Company raised $21 million through these avenues.
The Company cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter
will not increase the need for the Company to raise additional capital on an immediate basis.
These matters, among others,
raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date these
financial statements are issued. We believe that the Company currently has sufficient cash resources to fund its plan of operations for
up to the next two quarters. Company management is addressing this risk by pursuing all available options for funding including accessing
the public markets through public listing. The Company plans to continue considering all avenues available to it in order to obtain the
necessary capital to be able to continue as a going concern and to execute on our business objectives including but not limited to debt
financing, private placements, public offerings and equity lines of credit. The Company’s success is dependent upon achieving its
strategic and financial objectives, including continuing to acquire capital through public markets.
Net cash used in operating
activities. Net cash used in operating activities during the three months ended March 31, 2023, was $9.4 million. The use
of cash resulted primarily from a net loss of $12.3 million, offset by employee and non-employee stock based compensation expense of $6.0
million, net changes in working capital and changes in the fair value of convertible debt.
Net cash used in operating
activities during the three months ended March 31, 2022, of $5.3 million resulted primarily from a net loss of $19.6 million, offset by
employee and non-employee stock compensation of $14 million, and net changes in working capital.
Net cash used in investing
activities. Net cash used in investing activities for the three months ended March 31, 2023, and 2022, was $0.1 million.
Cash used in investing activities was related to purchases of property and equipment during each period.
Net cash provided by financing
activities. Net cash provided by financing activities of $19.7 million during the three months ended March 31, 2023, primarily
consisted of proceeds from stock and convertible debt issuance offset by payments on convertible debt.
Net cash provided by financing activities of $3.4
million for the three months ended March 31, 2022, consisted of proceeds from stock issuance of $3.4 million.
For the Year Ended December 31, 2022, Compared to December 31,
2021
The table below sets forth a summary of our cash
flows for the years ended December 31, 2022, and 2021 (in thousands):
| |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Net cash used in operating activities | |
$ | (23,450 | ) | |
$ | (11,188 | ) |
Net cash used in investing activities | |
| (1,557 | ) | |
| (1,031 | ) |
Net cash provided by financing activities | |
| 24,562 | | |
| 15,322 | |
As disclosed in Note 1 of the Notes to the audited condensed consolidated
financial statements included elsewhere in this prospectus, the accompanying audited condensed consolidated financial statements have
been prepared assuming the Company will continue as a going concern.
During the year ended December 31, 2022, the Company incurred a net
loss of approximately $70.7 million and had net cash used in operating activities of $23.5 million. On December 31, 2022, the Company
had $2.7 million in cash and an accumulated deficit of approximately $218.6 million.
During the year, the Company raised capital through stock sales and
crowdfunded investment campaigns as well as through convertible debt. During the year ended December 31, 2022, the Company raised $15.3
million from the sale of common stock through its Regulation A+ offering and the exercise of stock options and an additional $9 million
from the first tranche related to its convertible debt agreement. The Company cannot provide any assurance that unforeseen circumstances
that could occur at any time within the next twelve months or thereafter will not increase the need for the Company to raise additional
capital on an immediate basis.
These matters, among others, raise substantial
doubt about the Company’s ability to continue as a going concern for a period of one year after the date these financial statements
are issued. We believe that the Company currently has sufficient cash resources to fund its plan of operations for up to the next two
quarters. Company management is addressing this risk by pursuing all available options for funding including accessing the public markets
through public listing. On September 27, 2022, the Company registered its Regulation A Class A shares with the SEC and listed
on Nasdaq under the ticker symbol “AMV.” Additionally, as disclosed in Note 14 of the Notes to the audited condensed consolidated
financial statements included elsewhere in this prospectus, in January 2023, the company received the second tranche of funding related
to its convertible debt agreement entered into on November 4, 2022. Net proceeds were $9 million. Further, in February 2023, the company
consummated a public offering of approximately 8.3 million units of Company stock at an effective public offering price of $1.56 per unit
for gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock, (ii) 0.65 Series A warrants
to purchase 0.65 shares of Class A common stock and (iii) 0.75 Series B warrants to purchase 0.75 shares of Class A common stock, each
such warrant being exercisable from time to time for one share of Class A common stock at an exercise price of $1.56. The Company plans
to continue considering all avenues available to it in order to obtain the necessary capital to be able to continue as a going concern
and to execute on our business objectives including but not limited to debt financing, private placements, and equity lines of credit.
The Company’s success is dependent upon achieving its strategic and financial objectives, including continuing to acquire capital
through public markets.
Net cash used in operating activities. Net cash used in operating
activities during the year ended December 31, 2022, was $23.5 million. The use of cash resulted primarily from a net loss of $70.7 million,
offset by employee and non-employee stock based compensation expense of $41.5 million, changes in working capital, changes in the fair
value of convertible debt and warrant liabilities and forgiveness of the PPP loan.
Net cash used in operating activities during the
year ended December 31, 2021, of $11.1 million resulted primarily from a net loss of $133.7 million, offset by employee and non employee
stock compensation of $123 million, and net changes in working capital.
Net cash used in investing activities.
Net cash used in investing activities for the years ended December 31, 2022, and 2021, was $1.6 million and $1.0 million, respectively.
Cash used in investing activities was related to purchases of property and equipment during each period.
Net cash provided by financing activities.
Net cash provided by financing activities of $24.6 million during the year ended December 31, 2022, primarily consisted of proceeds from
stock issuance from our Regulation A+ offering and crowd funding campaigns as well as proceeds from issuance of $9 million convertible
debt and the conversion of $260 thousand in employee stock options during the period.
Net cash provided by financing activities of $15.3 million for the
year ended December 31, 2021, primarily consisted of proceeds from stock issuance of $14.9 million and receipt of $397 thousand in proceeds
from the PPP loan. This loan was forgiven in April of 2022.
Because our working capital requirements depend upon numerous factors
there can be no assurance that our current cash resources will be sufficient to fund our operations. Thus, we will require immediate additional
financing to fund future operations. There can be no assurance, however, that we will be able to obtain funds on acceptable terms, if
at all.
We have contractual lease obligations for our facility with an initial
five year lease term. The agreement includes one or more options to renew with renewal terms that can extend the lease term by five years
or more. For additional information related to these obligations, see Note 8 to the Consolidated Financial Statements. In addition, we
also have obligations under our convertible debt facility to repay the remaining balance not converted into equity at the maturity date
two years from issuance. See Note 12 to the Consolidated Financial Statements.
Basis of Presentation and Critical Accounting Policies
See Note 2, Basis of Presentation, of the Notes to unaudited
condensed consolidated financial statements included elsewhere in this prospectus.
We prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ materially from our estimates.
To the extent that there are material differences between these estimates and our actual results, our financial condition or results of
operations may be affected. There have been no changes to our critical accounting policies since we filed our Annual Report on Form 10-K
for the year ended December 31, 2023.
Critical Accounting Policies
Stock Based Compensation
As disclosed in Note 11 of the unaudited condensed consolidated financial
statements included elsewhere in this prospectus, the Company accounts for stock-based compensation in accordance with ASC Topic 718,
Compensation - Stock Compensation. Under the fair value recognition provisions of this topic, stock based compensation cost is measured
at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period, which is the
vesting period.
We have granted stock-based awards consisting primarily of incentive
and non-qualified stock options to employees, members of our board of directors and non-employees. Stock options generally vest over three
years at a rate of 33.33% each year beginning one year after the grant date, with the exception of stock options granted to our Chief
Executive Officer and our President which vest on the first of each month through December 1, 2024. Stock options generally expire 10
years from the grant date and are exercisable when the options vest. Stock-based compensation expense for stock options is generally recognized
on a straight-line basis over the requisite service period based on the estimated fair value of the awards on the grant date. Forfeitures
are accounted for as they occur in accordance with ASC 718-10-35-3. We estimate the fair value of stock options granted using the Black-Scholes
option-pricing model. Calculating the fair value of stock option awards using the Black-Scholes option pricing model requires the input
of certain subjective assumptions, including the fair value of the underlying common stock, expected common stock price volatility, expected
dividend yield of our common stock, risk-free interest rates, and the expected option term. The assumptions used in the Black-Scholes
option-pricing model is estimated as described below. Other reasonable assumptions could have a material impact on our stock based compensation
expense and therefore, our operational results.
Fair value of common stock – Historically, the fair value
of our common stock was estimated using a 409a valuation performed by a third party because our common stock had not yet been publicly
traded. The 409a valuation included certain inputs and assumptions related to the Company’s projections of future earnings and growth.
Expected Volatility – The volatility rate was determined
by using an average of historical volatilities of selected peers deemed to be comparable to our business corresponding to the expected
option term as we did not have sufficient history of trading on our common stock prior to our public offering.
Dividend Yield – The expected dividend yield was
zero as we have never declared or paid cash dividends and have no plans to do so in the foreseeable future.
Risk Free Interest Rate – The risk-free interest
rate was based on the U.S. Treasury yield curve in effect at that time of grant for zero-coupon U.S. Treasury notes with maturities corresponding
to the expected option term.
Expected Option Term – The expected option term
represented the period that the Company’s options were expected to be outstanding and is based on historical experience of similar
awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.
We continue to use judgement in evaluating the expected volatility
over the expected option term and the expected option term utilized in our stock-based compensation expense calculation on a prospective
basis. As we continue to accumulate additional data related to our common stock, we may refine our estimates of the expected volatility
over the expected option term, which could materially impact our future stock-based compensation expense.
Convertible Debt and Warrants
As disclosed in Note 12 of the unaudited condensed consolidated financial
statements included elsewhere in this prospectus, the Company elected the fair value options for its convertible debt and warrant liability
in accordance with ASC 815 and 820. As a result, the Company’s convertible debt instrument and warrant liabilities require the use
of the Monte Carlo valuation model to determine fair value. Calculating the fair value of convertible debt and warrants utilizing this
model requires the input of certain subjective assumptions, including the expected share price at conversion/exercise, equity volatility,
dividend yield, expected life and risk free rate. Other reasonable assumptions related to the inputs used in the calculation could have
a material impact on the fair market value of our convertible debt and warrants and therefore, our operational results.
Expected Volatility – The volatility rate was determined
by using an average of historical volatilities of selected peers deemed to be comparable to our business corresponding to the expected
option term as we did not have sufficient history of trading on our common stock at the time of valuation.
Dividend Yield – The expected dividend yield was zero
as we have never declared or paid cash dividends and have no plans to do so in the foreseeable future.
Expected Life – The expected life represented the period
that the Company’s debt or warrants were expected to be outstanding and is based on historical experience of similar instruments,
giving consideration to the contractual terms and expectations of future conversions or exercises.
Risk Free Interest Rate – The risk-free interest rate
was based on the U.S. Treasury Bond for the expected life.
Roll Forward Discount Rate – Calculated by incorporating
the market adjustment factor to the implied discount rate calculated as at the transaction date and based on 92.5% of the average of the
three lowest closing prices for the 10 trading days prior to the date of value. Simulated closing prices were used as a proxy for the
projected Volume Weighted Average Price.
We continue to use judgement in evaluating the expected volatility
and the expected term utilized in our calculation on a prospective basis. As we continue to accumulate additional data related to our
common stock, we may refine our estimates of the expected volatility over the expected term, which could materially impact the fair market
value of these instruments in the future.
MANAGEMENT
The directors and executive officers of Nxu as of July 26,
2023 include:
Name |
|
Age |
|
Position |
Mark Hanchett |
|
42 |
|
Chief Executive Officer and Chairman of the Board |
Annie Pratt |
|
31 |
|
President and Director |
Apoorv Dwivedi |
|
42 |
|
Chief Financial Officer |
Britt Ide |
|
52 |
|
Director |
Caryn Nightengale |
|
48 |
|
Director |
Jessica Billingsley |
|
45 |
|
Director |
Mark Hanchett,
Chief Executive Officer - Mark Hanchett has over ten years of product development experience with
16 successful electromechanical and software product launches that have already created significant change in the world. Mr. Hanchett
brings a passion for solving hard problems in product strategy, design, manufacturing, and business operations, while continuously driving
a focus on the best possible customer experience. He has served as Founder, Director, and CEO since inception in 2016. Before starting
Nxu, Mr. Hanchett was a director at Axon Enterprise, Inc. (NASDAQ: AXON) from 2012 to 2017, leading teams in the development of innovative
hardware and software products for law enforcement. From 2007 to 2012, he served as a senior mechanical engineer and project manager leading
cross-functional teams through design and development of innovative conductive electrical weapons at Axon Enterprise Inc.
Annie
Pratt, President - Annie Pratt is a creative problem solver with a background in product
management, design, and business. After studying Product Design at Stanford’s design school, she kicked off her career as a Product
Manager at Axon Enterprise, Inc. (NASDAQ: AXON) from 2014-2016, launching in-car video solutions for law enforcement. From 2016-2019,
Ms. Pratt served as the Director of Consumer Products at Axon, where she built an independent business unit on its own P&L with dedicated
sales, customer service, marketing, product development, manufacturing, and quality functions. That Consumer business unit doubled both
revenue and profit in three years. Ms. Pratt joined the Company as Chief of Staff in 2019 and has served as the Company’s President
since April 2020, where she has run marketing, sales, finance, people operations, and legal functions.
Apoorv
Dwivedi, Chief Financial Officer – Apoorv Dwivedi leads our finance function and ensures that Nxu continues
to optimize capital and resources as we grow. He brings extensive finance and corporate strategy experience from Fortune 100 companies
across multiple industries that include automotive, technology, financial services, retail, and industrial. Prior to Nxu, from 2019 to
2022, Mr. Dwivedi was the Director of Finance for Cox Automotive where he successfully ran the Manheim Logistics business. From 2018 to
2019, he was Director of Presales within the finance solutions group at Workiva. From 2010 to 2017, Mr. Dwivedi held corporate finance
roles at the General Electric Company (NYSE: GE) across both the GE Capital and GE Industrial businesses. Apoorv began his career at ABN-AMRO,
N.A. and was instrumental in building one of the first data analytics teams at Sears Holdings Company. Mr. Dwivedi earned his Bachelors
in Finance from Loyola University – Chicago and his MBA from Yale School of Management.
Britt Ide, Director - Britt Ide has
been a director since 2021 and brings a deep background and many connections to help Nxu grow. She is an experienced private and public
board director (e.g., Nasdaq: NorthWestern Energy 2017-Present and CleanTech Acquisition Corp 2021-2022) with deep expertise in the clean
energy and cleantech sectors. Ms. Ide has served as President and Chief Executive Officer of Ide Energy & Strategy since 2010. Her
degrees include BS Mechanical Engineering from the Ohio State University, MS Environmental Engineering from Montana State University-Bozeman,
and a Juris Doctor from University of Utah. She has extensive experience in corporate governance, ESG (environmental, social, and governance),
M&A, and executive development. Ms. Ide was appointed by the US Secretary of the Department of Energy to serve as an Ambassador for
the Clean Energy, Education, and Empowerment program. Ms. Ide’s significant familiarity with our industry and business and financial
expertise make her an ideal candidate to serve on our Board and serve as a member of our Audit Committee.
Caryn Nightengale, Director - Caryn
Nightengale is seasoned executive with an extensive background in operations, fiscal management, corporate development, and investment
banking and has served as a director since 2022. Also since 2022, Ms. Nightengale has been working to launch a start-up whose focus is
helping businesses advance their diversity, equity, inclusion, and belonging efforts. From 2019-2022 she was the Chief Financial Officer
of Wisk Aero LLC, manufacturer of a self-flying air taxi. Prior to joining Wisk, Ms. Nightengale served as the Chief Financial Officer
of Liquid Robotics from 2017-2019, a sustainability-focused robotics company. Previously, she was an internal strategic advisor to senior
leadership of The Boeing Company (NYSE: BA), and she was an investment banking advisor at BMO Capital Markets. In both roles, Ms. Nightengale
leveraged her financial and strategic expertise to accelerate growth through M&A, joint venture, equity, venture capital and debt
transactions. Ms. Nightengale earned an MBA from the Tuck School of Business at Dartmouth College and a BS in Economics from The Wharton
School, University of Pennsylvania with a major in finance and a minor in Japanese Studies. She serves on the Penn Athletics Board of
Advisors, the Penn Basketball Board of Directors, and is Vice Chairperson of the MBA Council at the Tuck School of Business at Dartmouth.
Ms. Nightengale brings extensive business and financial expertise to our board. For this reason, we believe she is an ideal candidate
to serve on our Board and serve as our Audit Committee Chairman.
Jessica Billingsley, Director - Jessica
Billingsley has served as a director since July 1, 2023. She has served as Chief Executive Officer and Chairman of the board of Akerna
(NASDAQ:KERN), a Software as a Service ag-tech company serving the cannabis, hemp, and CBD industry, since July 2019. Ms. Billingsley
co-founded MJ Freeway, Akerna's wholly owned subsidiary in 2010. She has successfully taken the company public, completed multiple accretive
acquisitions, and maintained market leadership for over a decade. Before Akerna, she founded and led Zoco, a technology services firm
with a diverse nationwide client base. Ms. Billingsley served on the board and as audit chair of Bhang (CSE:BHNG) from November 2020
– November 2022. She currently serves on the private boards and as governance chair of both yWhales and OARO, and as the elected
Vice Engagement Officer for the Young President’s Organization (YPO) Entrepreneurship Network Board. She has served as an active
mentor for multiple accelerator programs, most currently for Colorado’s Boardbound program. Jessica Billingsley is a seasoned executive
and innovator with over 25 years of experience in frontier technology. With a strong background in cutting-edge technologies, she has
dedicated her career to the pursuit of solutions that address real-world challenges, particularly in the fields of emerging technologies
and nascent industries. As a pioneering innovator, she is named on multiple patents, including one that advances supply chain technology
across hardware, software, and methodology domains. Another patent features cutting-edge anti-counterfeit algorithms that bridge the
digital and physical worlds using blockchain and NFT technology. Her extensive experience includes leading successful public and private
companies as CEO and serving on multiple boards of directors in chair, executive committee, audit, and governance roles. She possesses
in-depth expertise in private and public capital markets, successfully navigating complex transactions to drive growth and business transformation.
Her leadership approach emphasizes the synergy of culture and performance. With over 25 years of experience in advanced technologies,
emerging growth markets, and scaling businesses, she brings substantial domain expertise in P&L oversight, enterprise risk management,
data analytics, machine learning, cybersecurity and data privacy, global supply chain management, DEI, and media and public relations.
She holds FINRA securities licenses 7, 79, 63, and 24 and a dual degree in Computer Science and Communications from the University of
Georgia. She has been recognized with numerous awards, including the Titan 100 CEO, Outstanding Women in Business, Inc. Top 100 Female
Founder, and Fortune’s Most Promising Woman Entrepreneur. Her thought leadership has been featured in prominent media outlets,
including Business Insider, Bloomberg, CNN, Cheddar, Fortune, and Forbes, in addition to her contributions to Entrepreneur and Rolling
Stone publications. Ms. Billingsley was selected to serve on our Board based on her extensive experience with technology and emerging
growth companies, her capital markets expertise, and her background as an entrepreneur.
Controlled Company
Mr. Hanchett holds more than 50% of the voting
power of the Company’s voting securities for the election of directors. As a result, the Company is, and expects to continue to
be, a controlled company within the meaning of the Nasdaq rules, and, as a result, we qualify for exemptions from certain corporate governance
requirements.
Under Nasdaq rules, a controlled company is exempt
from certain corporate governance requirements, including:
| · | the requirement that a majority of the board of directors consist of independent directors; |
| · | the requirement that a listed company have a nominating and governance committee that is composed of independent
directors with a written charter addressing the committee’s purpose and responsibilities; |
| · | the requirement that a listed company have a compensation committee that is composed entirely of independent
directors with a written charter addressing the committee’s purpose and responsibilities; and |
| · | the requirement for an annual performance evaluation of the nominating and governance committee and compensation
committee. |
Controlled companies must comply with the exchange’s
other corporate governance standards. These include having and audit committee and the special meetings of independent or non-management
directors.
Independence of Directors
Under the listing rules of Nasdaq, the Company
is not required to have a majority of independent directors serving on the Board, for so long as the Company is considered a controlled
company within the meaning of the Nasdaq corporate governance standards. The Board has determined Mses. Ide, Nightengale and Billingsley
are independent within the meaning of Nasdaq Marketplace Rule 5605(a)(2).
Committees of the Board
Audit Committee
Our Audit Committee consists of Mses. Ide
and Nightengale with Ms. Nightengale serving as chairperson, resulting in two independent directors as members of the audit committee.
Our Board has determined that the chairperson of the audit committee can read and understand financial statements and will ensure that
each member seated in the future will be able to, read and understand fundamental financial statements and qualifies as an audit committee
financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of Nasdaq. As a controlled
company, we remain subject to rules of Sarbanes-Oxley and Nasdaq that require us to have an audit committee composed entirely of independent
directors, subject to certain “phase-in” provisions for newly public companies, which we are utilizing. Under these rules,
we must have at least one independent director on our audit committee by the date our Class A common stock is listed on Nasdaq, at least
two independent directors on our audit committee within 90 days of the listing date, and at least three independent directors on our
audit committee within one year of the listing date.
Our audit committee assists our Board with
its oversight of the integrity of our financial statements; our compliance with legal and regulatory requirements; the qualifications,
independence, and performance of the independent registered public accounting firm; the design and implementation of our risk assessment;
and risk management. Among other things, our audit committee is responsible for reviewing and discussing with our management the adequacy
and effectiveness of our disclosure controls and procedures. The audit committee also discusses with our management and independent registered
public accounting firm the annual audit plan and scope of audit activities, scope and timing of the annual audit of our financial statements,
and the results of the audit, quarterly reviews of our financial statements and, as appropriate, initiates inquiries into certain aspects
of our financial affairs. Our audit committee is responsible for establishing and overseeing procedures for the receipt, retention, and
treatment of any complaints regarding accounting, internal accounting controls or auditing matters, as well as for the confidential and
anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters. In addition, our audit committee
has direct responsibility for the appointment, compensation, retention, and oversight of the work of our independent registered public
accounting firm. Our audit committee has sole authority to approve the hiring and discharging of our independent registered public accounting
firm, all audit engagement terms and fees, and all permissible non-audit engagements with the independent auditor. Our audit committee
reviews and oversees all related person transactions in accordance with our policies and procedures.
Our written audit committee charter can be found on the Company website.
Compensation Committee
Because we are a “controlled company,”
we are not required to, and do not intend to, have a fully independent compensation committee. If and when we are no longer a “controlled
company” within the meaning of Nasdaq’s corporate governance standards, we will be required to establish a compensation committee.
This committee would assist our Board with its oversight of the forms and amount of compensation for our executive officers (including
officers reporting under Section 16 of the Exchange Act), the administration of our equity and non-equity incentive plans for employees
and other service providers and certain other matters related to our compensation programs. Our compensation committee, among other responsibilities,
will evaluate the performance of our Chief Executive Officer and, in consultation with him, will evaluate the performance of our other
executive officers (including officers reporting under Section 16 of the Exchange Act).
Upon formation of a compensation committee, we
would expect to adopt a compensation committee charter defining the committee’s primary duties in a manner consistent with the rules
of the SEC and the applicable Nasdaq or market corporate governance standards.
Nominating and Corporate Governance Committee
Because we are a "controlled company,"
we are not required to, and do not currently expect to, have a nominating and corporate governance committee. If and when we are no longer
a "controlled company" within the meaning of Nasdaq’s corporate governance standards, we will be required to establish
a nominating and corporate governance committee. We anticipate that such a nominating and corporate governance committee would consist
of three directors who will be "independent" under the rules of the SEC. This committee would identify, evaluate and recommend
qualified nominees to serve on our Board, develop and oversee our internal corporate governance processes and maintain a management succession
plan.
Upon formation of a nominating and corporate
governance committee, we would expect to adopt a nominating and corporate governance committee charter defining the committee's primary
duties in a manner consistent with the rules of the SEC and applicable stock exchange or market standards.
Code of Business Ethics and Conduct Policy
Our Board has adopted a Code of Business Ethics
and Conduct Policy applicable to the Company’s directors, officers and employees in accordance with applicable securities laws and
the corporate governance rules of Nasdaq. Copies of our Code of Business Ethics and Conduct Policy are available on our Company website.
The information on our website is not a part of this prospectus. Any amendments to or waivers of certain provisions of our Code of Conduct
may be made only by our Board and will be disclosed on our corporate website promptly following the date of such amendment or waiver as
required by applicable securities laws and the corporate governance rules of Nasdaq.
EXECUTIVE COMPENSATION
As an emerging growth company,
we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such
term is defined in the rules promulgated under the Securities Act. This section describes the material components of the executive compensation
program for our Chief Executive Officer and our two other most highly compensated executive officers whom we refer to as our “Named
Executive Officers” or “NEOs”.
Introduction
For the year ended December 31,
2022, the Company’s Named Executive Officers were:
| ● | Mark Hanchett, Chief Executive Officer; |
| ● | Annie Pratt, President; and |
| ● | Apoorv Dwivedi, Chief Financial Officer. |
The objective of the Company’s
compensation program is to provide a total compensation package to each Named Executive Officer that will enable the Company to attract,
motivate and retain outstanding individuals, align the interests of our executive team with those of our stockholders, encourage individual
and collective contributions to the successful execution of our short and long-term business strategies, and reward our Named Executive
Officers for favorable performance.
Summary Compensation Table
The following table shows information
concerning the annual compensation for services provided to the Company by our Named Executive Officers for the year ended December 31,
2022. Additional information on our Named Executive Officers’ annual compensation for the year ended December 31, 2022 is provided
in the narrative sections following the Summary Compensation Table.
Name and
Principal Position |
Year |
Salary
($)(1) |
Stock Awards
($)(2) |
Option Awards
($)(2) |
Total
($) |
|
|
|
|
|
|
Mark Hanchett,
Chief Executive Officer |
2022 |
200,000 |
- |
- |
200,000 |
|
2021 |
167,692 |
4,380,061 |
121,891,436 |
126,439,189 |
Annie Pratt,
President |
2022 |
200,000 |
- |
- |
200,000 |
|
2021 |
167,692 |
4,986,133 |
41,420,328 |
46,574,153 |
Apoorv Dwivedi,
Chief Financial Officer(4) |
2022 |
200,000 |
770,000 |
1,651,190 |
2,621,190 |
| (1) | The amounts reported in the “Salary” column for Mr. Hanchett and Ms. Pratt represent the portion
of each NEO’s base salary paid in cash. |
| (2) | The amounts reported in the “Stock Awards” and “Option Awards” columns for 2022
represent the aggregate grant date fair value of restricted share units and stock options awarded pursuant to Mr. Dwivedi’s offer
letter (described under the “Agreements with our Named Executive Officers”), plus the aggregate incremental fair value associated
with the modifications thereto (described under “Equity Incentive Compensation”), calculated in accordance with FASB ASC Topic
718. As of December 31, 2022, the achievement of the performance vesting condition with respect to 180,000 of the performance-based options
was not considered probable, and therefore no associated expenses were recognized and such performance-based options are not reflected
in this column. Since the performance vesting condition with respect to 100,000 of the performance-based options became probable when
the condition was obtained in September 2022, compensation expense was recognized for this tranche of options and such performance-based
options are reflected in this column. Assuming achievement of all performance-based vesting conditions with respect to the performance-based
options granted in 2022 to Mr. Dwivedi, the aggregate grant date fair value of such performance-based options would be $1,807,400. For
a discussion of the assumptions and methodologies used in calculating the grant date fair value of Mr. Dwivedi’s restricted share
units and stock options, please see the summary of our significant accounting policies under the “Management Discussion and Analysis”
section, filed herewith. |
| (3) | Because Mr. Dwivedi was not an NEO before 2021, only his 2022 compensation is reported in the table. |
Narrative Disclosure to Summary Compensation
Table
Agreements with our Named Executive Officers
All of our Named Executive Officers are employees-at-will
and we have not entered into any employment, severance, change in control or similar agreements with any of them, nor are we otherwise
currently responsible for any payment upon the termination of their employment. Ms. Pratt and Mr. Dwivedi have entered into the Company’s
standard confidentiality agreement that generally applies to all salaried employees. Treatment of option awards upon the termination of
a Named Executive Officer’s employment or a change in control is described in more detail below under the section titled “Potential
Payments Upon Termination or Change in Control.”
In 2021, Mr. Hanchett and Ms. Pratt each received
a letter that superseded any prior offer letter or compensation arrangement with the Company. The letters provided that each executive
would receive 70% of their base salary in cash and 30% of their base salary as a stock award (“Salary Stock Award”), granted
each bi-weekly payroll period (“Hybrid Base Salary”), plus an additional stock award equal to 15% of the Named Executive Officer’s
base salary paid on the same schedule as the Salary Stock Award (“Additional Stock Award”). The Hybrid Base Salary and Additional
Stock Award were paid from January 1, 2021 until July 11, 2021, after which point both Mr. Hanchett and Ms. Pratt's base salaries were
paid in cash for the remainder of 2021. With respect to their Salary Stock Awards and Additional Stock Awards, both Mr. Hanchett and Ms.
Pratt received 420.09 shares of Class A common stock for each bi-weekly pay period the Hybrid Base Salary was in effect.
On June 8, 2022, Mr. Dwivedi received an offer
letter that superseded a prior offer letter dated as of November 24, 2021 (the “Amended Dwivedi Letter”). The superseding
letter provides for: (i) Mr. Dwivedi’s employment as Chief Financial Officer beginning January 17, 2022 (the “Dwivedi Start
Date”); (ii) an initial base salary of $200,000 per year; (iii) a restatement the Company’s promise to award 110,000 restricted
share units and 490,000 stock options of Class A common stock, subject to the vesting conditions and certain modifications set forth below
under the section titled “Equity Incentive Compensation”; and (iv) Mr, Dwivedi’s eligibility to participate in the standard
benefits plans made available to the Company’s executive employees.
Base Salary
Each Named Executive Officer’s base salary
is a fixed component of annual compensation for performing specific job duties and functions. The annual base salary rate for each of
the Named Executive Officers was established at levels commensurate with historical compensation with any adjustments deemed necessary
to attract and retain individuals with superior talent appropriate and relative to their expertise and experience. For 2022, our Named
Executive Officers’ base salary rates were $200,000, $200,000 and $200,000 for Mr. Hanchett, Ms. Pratt and Mr. Dwivedi, respectively.
For a description of the Hybrid Base Salary paid in 2021, see “Agreements with our Named Executive Officers.”
Annual Bonus
Annual cash incentive awards are used to motivate
and reward our employees. We do not maintain a formal annual cash incentive award plan. Instead, such awards are determined on a discretionary
basis and are generally based on individual and Company performance. We intend to adopt a formal bonus plan in which certain of our employees,
including the Named Executive Officers, will be eligible to participate going forward but have not done so as of the date of this prospectus.
For 2022, no Named Executive Officer was determined to have earned a discretionary cash bonus.
Equity Incentive Compensation
Equity incentive compensation is used to promote
performance-based pay that aligns the interests of our executive officers with the long-term interests of our equity-owners and to enhance
executive retention. Historically, the Company has made stock awards to each of the Named Executive Officers on a fully vested basis
or subject to monthly or annual ratable vesting.
In August 2021, the Board approved the Employee Stock Option Plan (the
“Equity Compensation Plan”), which was shortly thereafter implemented by the Company. The Equity Compensation Plan authorizes
a committee of the Board to issue grants of stock options to employees, non-employee directors and consultants as a component of overall
compensation. On August 23, 2021, the Board determined it was in the best interests of the Company and its stockholders to modify employees
prior stock awards. Under the Equity Compensation Plan, employees could elect to convert their stock awards into nonqualified stock options
at a weighted average conversion ratio for every one stock award (for Mr. Hanchett – 1:1 option to share ratio for the first 10
million shares, 6.64 option to share ratio thereafter; and Ms. Pratt – 6.64 option to share ratio). A condition of the conversion
was the relinquishment of all stock awards previously awarded through the August 24, 2021 conversion date. Mr. Pratt and Ms. Hanchett
elected to convert their prior stock awards into options, including the Hybrid Stock Award, Additional Stock Award and certain stock award
grants of Class A common stock made to Mr. Hanchett (869,537 shares) and Ms. Pratt (991,483 shares) in the first half of 2021 for services
provided to the Company. The option awards were generally subject to time-vesting conditions, as set forth in the footnotes to the “Outstanding
Equity Awards at 2022 Fiscal Year-End” table.
In addition, pursuant to certain Assignment of
Stock agreements entered into by Mr. Hanchett and Ms. Pratt, the Company assigned 17,803,675 fully vested shares and 5,671,695 fully vested
shares, respectively, of Class D common stock, and 12,300,000 restricted share units and 6,150,000 restricted share units, respectively,
of Class D common stock, on August 27, 2021. The restricted share units are subject to the vesting conditions set forth in the footnotes
to the “Outstanding Equity Awards at 2022 Fiscal Year-End” table. For a description of our Class D common stock, see Note
2 to the Company’s audited financial statements for the fiscal year ended December 31, 2021, filed herewith.
With respect to Mr. Dwivedi’s equity incentive
compensation, the Amended Dwivedi Letter provides for a promise to award 490,000 stock options to purchase shares of Class A common stock,
subject to the following vesting schedule: (i) 210,000 options shall vest as follows, subject to Mr. Dwivedi’s continued service
through each of the following vesting dates: (a) 20,000 vested options on the 6-month anniversary of the Dwivedi Start Date, (b) 30,000
vested options on the 12-month anniversary of the Dwivedi Start Date and (c) 40,000 vested options on each successive 6-month anniversary
thereafter, ending on the 36-month anniversary of the Dwivedi Start Date and (ii) 280,000 options shall vest as follows, subject to the
Company meeting the following milestones after the Dwivedi Start Date: (a) 40,000 vested options upon raising $150 million, (b) 40,000
vested options upon recognizing $50 million in revenue, (c) 100,000 vested options upon recognizing $500 million in revenue and (d) 100,000
vested options upon becoming a publicly-traded Company. In connection with entering into the Amended Dwivedi Letter, the Company modified
Mr. Dwivedi’s stock option awards’ strike price from $12.74 to $7.00 to align with the Company’s then-current Code Section
409A third-party common stock valuation.
The Dwivedi Letter also provides for a promise
to award 110,000 restricted share units of Class A common stock (the “Dwivedi RSUs”). The Dwivedi Letter provides that for
the Dwivedi RSUs to vest, both of the following vesting conditions must be met: (i) the Company’s completion of a “liquidation
event” (which was achieved when the Company became publicly traded in September 2022) and (ii) Mr. Dwivedi’s continued service
through each of the following vesting dates: (a) 20,000 shares on the 6-month anniversary of the Dwivedi Start Date, (b) 30,000 shares
on the 12-month anniversary of the Dwivedi Start Date, (c) 30,000 shares on the 24-month anniversary of the Dwivedi Start Date and (d)
30,000 shares on the 36-month anniversary of the Dwivedi Start Date. In connection with entering into the Amended Dwivedi Letter, the
Company modified the Dwivedi RSUs to allow for vesting in connection with a “liquidation event.”
Other Compensation Elements
We offer participation in broad-based retirement,
health and welfare plans to all of our employees. We have not maintained, and do not currently maintain, a defined benefit pension plan
or nonqualified deferred compensation plan. We currently maintain a retirement plan intended to provide benefits under section 401(k)
of the Internal Revenue Code whereby employees, including our Named Executive Officers, are allowed to contribute portions of their base
compensation to a tax-qualified retirement account. We currently do not provide matching contributions under the plan. In addition, we
do not provide perquisites to our Named Executive Officers.
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table reflects information regarding
outstanding equity-based awards held by our Named Executive Officers as of December 31, 2022.
|
|
Option Awards(1) |
Stock Awards |
Name |
|
Number of
securities
underlying
unexercised
options
(#)
exercisable |
Number of
securities
underlying
unexercised
options
(#)
unexercisable |
Equity incentive plan awards:
Number of
securities
underlying
unexercised
options
(#)
unexercisable |
Option exercise
price
($) |
Option
expiration date |
Number of
shares or units
of stock that
have not vested
(#)(2) |
Market value
of shares or
units of stock
that have not
vested
(#)(3) |
|
|
|
|
|
|
|
|
|
Mark
Hanchett |
|
22,903,675 |
7,200,000 |
- |
7.00 |
8/24/2031 |
7,200,000 |
0 |
Annie
Pratt |
|
8,221,695 |
3,600,000 |
- |
7.00 |
8/24/2031 |
3,600,000 |
0 |
Apoorv Dwivedi |
(4) |
20,000 |
190,000 |
- |
7.00 |
1/17/2032 |
- |
- |
|
(5) |
100,000 |
- |
180,000 |
7.00 |
6/8/2032 |
90,000 |
292,500 |
| (1) | All option awards reflected in this table for Mr. Hanchett and Ms. Pratt were granted under the Company’s
Equity Compensation Plan on August 24, 2021. For Mr. Hanchett and Ms. Pratt, their option awards vest or vested as follows: (i) 17,803,676
options and 5,671,696 options, respectively, on August 24, 2021; (ii) 375,000 options and 187,500 options, respectively, vesting monthly
on the first of the month from September 1, 2021 through December 1, 2021; and (iii) 300,000 options and 150,000 options, respectively,
vesting monthly on the first of the month starting January 1, 2022 through December 1, 2024. |
| (2) | All outstanding restricted share units of Class D common stock were granted on August 27, 2021. Mr. Hanchett
and Ms. Pratt’s restricted share units of Class D common stock vest or vested as follows: (i) 375,000 units and 187,500 units, respectively,
vesting monthly on the first of the month from September 1, 2021 through December 1, 2021; and (ii) 300,000 units and 150,000 units, respectively,
vesting monthly on the first of the month starting January 1, 2022 through December 1, 2024. |
| (3) | The amount listed for Mr. Hanchett and Ms. Pratt reflects the market value per share of our Class
D common stock determined by our Board as of December 31, 2022, multiplied by the amount shown in the column for the number of shares
underlying unvested awards. For a description of some of the factors the Board used in determining the market value of our Class D common
stock, the summary of our significant accounting policies under the “Management Discussion and Analysis” section, filed herewith.
The amount listed for Mr. Dwivedi reflects the market value per share the Company’s common stock on the NASDAQ Global Market of
$3.25 per share on the last trading day of the year (December 30, 2022). |
| (4) | The options in this row have a grant date of January 17, 2022. Of the 190,000 stock options that remain
unexercisable as of December 31, 2022, 30,000 stock options vest on January 17, 2023 and the remainder vest in installments of 40,000
every six months thereafter. |
| (5) | The equity awards in this row have a grant date of January 1, 2022. The options vested on the date the
Company became publicly-traded in September 2022. Of the 180,000 stock options that remain unexercisable as of December 31, 2022, 40,000
stock options vest upon the Company raising $150 million, 40,000 stock options vest upon the Company recognizing $50 million in revenue
and 100,000 stock options vest upon the Company recognizing $500 million in revenue. Of the 90,000 restricted share units that remain
unvested, 30,000 shares vest on the 12-month anniversary of the Dwivedi Start Date, 30,000 shares vest on the 24-month anniversary of
the Dwivedi Start Date and 30,000 shares vest on the 36-month anniversary of the Dwivedi Start Date. |
Potential Payments Upon Termination or Change
in Control
As described above under the section titled “Narrative
Disclosure to Summary Compensation Table—Employment Agreements,” we have not entered into any employment, severance, change
in control or similar agreements with any of our Named Executive Officers, nor are we otherwise currently responsible for any payment
upon the termination of any of our Named Executive Officers for any reason.
A Named Executive Officer’s outstanding,
unvested option awards will be forfeited and immediately terminate in the event of a Named Executive Officer’s termination of employment
for any reason. A Named Executives Officer’s outstanding, unvested option awards will become 100% vested upon the consummation of
a “change in control” (as defined under the Equity Compensation Plan). Options which are vested as of a Named Executive Officer’s
cessation of service as an employee will generally remain exercisable through their expiration date, unless the Named Executive Officer’s
cessation of service as an employee is due to death or disability, in which case the vested options only remain exercisable through the
earlier of (i) the 12-month anniversary of the Named Executive Officer’s death or disability or (ii) the expiration date of the
options.
DIRECTOR COMPENSATION
Director Compensation Table
The following table provides information
concerning the compensation of the Company’s non-employee directors who served on the Company’s Board during fiscal year ending
December 31, 2022. Mark Hanchett and Annie Pratt also served as directors of the Company during fiscal year ending December 31, 2022,
but did not receive any additional compensation with respect to such Board service.
Name(1) |
Fees Earned or
Paid in Cash
($) |
Option Awards
($)(2) |
Total
($) |
Caryn Nightengale |
20,000 |
232,560 |
252,560 |
Britt Ide |
22,000 |
- |
22,000 |
Mark Nelson |
1,000 |
1,287,188 |
1,288,188 |
| (1) | Ms. Ide joined the Company’s Board on February 19, 2021. Ms. Nightengale and Mr. Nelson joined the
Company’s Board on July 1, 2022 and February 1, 2022, respectively. Mr. Nelson resigned from his Board service to pursue another
opportunity on May 9, 2022. |
| (2) | The amounts reported in the “Option Awards” column represent the aggregate grant date fair
value associated with the 2022 grant of 36,000 nonqualified stock options to Ms. Nightengale and the 2022 grant of 300,000 and 18,750
nonqualified stock options to Mr. Nelson, respectively, and have been calculated in accordance with FASB ASC Topic 718. Mr. Nelson forfeited
his 300,000 stock option award in connection with his Board resignation, which had a grant date fair value of $1,188,000. Ms. Nightengale,
Ms. Ide and Mr. Nelson held 36,000, 54,000 and 18,750 outstanding options, respectively, as of December 31, 2022. |
Director Compensation Program
Prior to his resignation, the Company entered
into a Non-Employee Director Agreement with Mr. Nelson, effective February 1, 2022 (the “Nelson Agreement”), which is substantially
similar to the Ide Agreement and the Nightengale Agreement described below, and which terminated following his resignation. Mr. Nelson
served just over three months with the Board, during which he attended one Board meeting and was paid $1,000. Under the terms of the Nelson
Agreement and in connection with his resignation, Mr. Nelson forfeited his original incentive equity award of 300,000 nonqualified stock
options, and received 18,750 fully vested nonqualified stock options, representing his receipt of 6,250 options for each full month of
completed Board service. Mr. Nelson is not owed any additional compensation from the Company in connection with his Board service in 2022.
The Company initially entered into a Non-Employee
Director Agreement with Ms. Ide, effective February 19, 2021, that was later superseded by a Non-Employee Director Agreement dated August
30, 2021 (the “Ide Agreement”), a Board of Directors Agreement, effective as of July 1, 2022, with Caryn Nightengale who joined
the Company’s Board in 2022 (the “Nightengale Agreement”), and a Board of Directors Agreement, effective as of February
1, 2022, with Mark Nelson who joined the Company’s Board in 2022 (the “Nelson Agreement”).
The Ide Agreement and the Nightengale Agreement
were each later superseded when the Company entered into a Board of Directors Agreement with Mses. Ide and Nightengale, respectively,
effective as of September 27, 2022 (the “A&R Director Agreements”). The A&R Director Agreements will have an initial
term lasting from the effective date until the earlier of the 12-month anniversary thereof or the date of the Company’s annual shareholder
meeting, subject to each director’s election by the Company’s shareholders. If a director is re-elected, the agreement will
continue to renew at each annual shareholder meeting, until the director is not re-elected, resigns, or is otherwise removed from the
Board. The A&R Director Agreements also provide for the following material terms (the descriptions of which are qualified in their
entirety by reference to the respective A&R Director Agreements): (i) cash fees in the amount of a $10,000 quarterly stipend, payable
until the Company’s 2023 annual shareholders; (ii) a quarterly award of restricted share units having a grant date fair value of
$40,000, for each quarter from the effective date until the Company’s 2023 annual shareholder meeting (“Quarterly RSUs”);
(iii) a one-time special award of restricted share units having a grant date fair value of $25,000, in recognition of the director’s
efforts related to the Company’s public listing (“Special RSUs”); (iv) an indemnification provision, which includes
the obligation of the Company to maintain directors and officers insurance; and (v) a provision providing for attorneys’ fees if
ever any proceeding commences between the parties relating to the terms of the agreement. The A&R Director Agreements also provide
for certain confidentiality and non-disclosure covenants in favor of the Company and a mutual non-disparagement provision.
The amounts reflected in the above “Director
Compensation Table” were made under the Ide Agreement and Nightengale Agreement, as well as the A&R Director Agreements, which
in relevant part provided for cash fees of $1,000 per Board meeting attended by each director and the option award grants reflected above,
each of which were fully vested on the date of grant.
In order for the Quarterly RSUs and Special RSUs
described herein (the “RSU Awards”) to be granted, the director must provide continuous service through each of the following
events: (i) successful completion of a reorganization transaction (the resulting entity, “Pubco”), (ii) approval of an equity
incentive plan by the Pubco’s stockholders; and (iii) approval of the terms and conditions of the RSU Awards by the Pubco’s
board of directors. Provided the terms of the awards are approved by the Pubco’s board of directors, generally, it is intended for
the RSU Awards to be granted on the final trading day of the first week after the Pubco’s equity plan is approved, and shall be
fully vested on such date.
DESCRIPTION OF
SECURITIES
The following summary of the material terms of
Nxu’s common stock is not intended to be a complete summary of the rights and preferences of such securities. Nxu’s common
stock is governed by Nxu’s Certificate of Incorporation, Bylaws and the DGCL. We urge you to read the Certificate of Incorporation
and Bylaws in their entirety for a complete description of the rights and preferences of Nxu’s common stock.
General
Nxu’s Certificate of Incorporation authorizes
the issuance of 5,010,000,000 shares, consisting of (x) 5,000,000,000 authorized shares of common stock, including (1) 4,000,000,000 authorized
shares of Class A common stock, (2) 1,000,000,000 authorized shares of Class B common stock and (y) 10,000,000 authorized shares of preferred
stock, par value $0.0001 per share.
As of July 6, 2023, there were 38,154,853 shares of Class A common stock
outstanding, 34,275,372 shares of Class B common stock outstanding and no shares of preferred stock outstanding.
Common Stock
Voting Rights
Each holder of Class A common stock, as such,
shall have the right to one (1) vote per share of Class A common stock held of record by such holder and each holder of Class B common
stock, as such, shall have the right to ten (10) votes per share of Class B common stock held of record by such holder. There are no cumulative
voting rights.
Dividend Rights
The holders of shares of Class A common stock
and the holders of shares of Class B common stock shall be entitled to receive, ratably in proportion to the number of shares of Class
A common stock or Class B common stock, respectively, with respect to any dividends or distributions as may be declared and paid from
time to time by Nxu; provided, however, that in the event a dividend is paid in the form of shares of Class A common stock
or Class B Common Stock, then holders of Class A common stock shall be entitled to receive shares of Class A common stock, and holders
of Class B common stock shall be entitled to receive shares of Class B common stock, with holders of shares of Class A common stock and
Class B common stock receiving, on a per share basis, an identical number of shares of Class A common stock or Class B common stock, as
applicable.
Liquidation Rights
Subject to the rights of any then outstanding
preferred stock which ranks senior to common stock, in the event of a liquidation, dissolution or winding up of Nxu, the holders of Class
A common stock will be entitled to receive, after payment or provision for payment of all of its debts and liabilities, all of the assets
of Nxu legally available for distribution to stockholders.
The holders of shares of Class B common stock,
as such, shall not be entitled to receive any assets of Nxu in the event of any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Nxu.
Other Rights
There are no conversion rights or redemption,
purchase, retirement or sinking fund provisions with respect to the common stock.
Anti-Takeover Effects of Delaware Law and Certificate
of Incorporation and Bylaws
Delaware law, the Certificate of Incorporation
and Bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of
Nxu. These provisions are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed
to encourage persons seeking to acquire control of Nxu to first negotiate with the Board.
Board of Directors; Removal of Directors
The Certificate of Incorporation and Bylaws provide
that a director may be removed with or without cause and only by the affirmative vote of the holders of at least two-thirds of the votes
that all the stockholders would be entitled to cast in an election of directors. Any vacancy on the Board, including a vacancy resulting
from an enlargement of the Board, may be filled only by the affirmative vote of a majority of the votes cast in favor or against the election
of a nominee at a meeting of stockholders. At each annual meeting, the entire board will stand for election for a one-year term. The limitations
on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third
party from seeking to acquire, control of Nxu.
Stockholder Action by Written Consent;
Special Meetings
The Certificate of Incorporation provides that
any action required or permitted to be taken by stockholders must be effected at a duly called annual or special meeting of such holders
and may not be effected by any consent in writing by such holders. The Certificate of Incorporation and Bylaws also provide that, except
as otherwise required by law, special meetings of stockholders can only be called by the chairman of the board, chief executive officer
or board of directors.
Advance Notice Requirements for Stockholder
Proposals
The Bylaws establish an advance notice procedure
for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election
to the Board. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of the Board or by a stockholder of record on the record date for the meeting, who is entitled
to vote at the meeting and who has delivered timely written notice in proper form to the secretary of the stockholder’s intention
to bring such business before the meeting. This written notice must contain certain information specified in the Bylaws. These provisions
could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority
of outstanding voting securities.
Delaware Business Combination Statute
Nxu has opted out of Section 203 of the DGCL.
Amendment of Certificate of Incorporation and
Bylaws
The DGCL provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation
or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. The
Bylaws may be amended or repealed by a majority vote of the Board or by the affirmative vote of the holders of at least two-thirds of
the votes which all stockholders would be entitled to cast in any election of directors. The Certificate of Incorporation may be amended
by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board at which a quorum is present
in any manner not inconsistent with the laws of the State of Delaware.
Warrants and Pre-Funded Warrants
The following summary of certain terms and provisions
of the Warrants and Pre-Funded Warrants offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions
of the warrant agency agreement between us and American Stock Transfer & Trust Company, LLC, as warrant agent, and the form of Warrant
and Pre-Funded Warrant, which are filed as exhibits to the registration statement of which this prospectus is a part. Prospective investors
should carefully review the terms and provisions set forth in the warrant agency agreement, including the annexes thereto, and the form
of Warrant and Pre-Funded Warrant.
Warrants
Form
Pursuant to the warrant agency agreement between
us and American Stock Transfer & Trust Company, LLC, as warrant agent, the Warrants will be issued in book-entry form and shall initially
be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company,
or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Exercisability
The Warrants are exercisable at any time after
their original issuance up to the date that is three (3) years after their original issuance. Each of the Warrants will be exercisable,
at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice accompanied by payment in full
in immediately available funds for the number of shares of Class A common stock subscribed for upon such exercise. No fractional shares
of Class A common stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, we will either (i)
pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or (ii) round up to the next whole share.
Exercise Limitation.
A holder will not have the right to exercise any
portion of the Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election by a
holder prior to the issuance of any warrants, 9.99%) of the number of shares of Class A common stock outstanding immediately after giving
effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, any holder may
increase or decrease such percentage to any other percentage not in excess of 9.99%, upon at least 61 days’ prior notice from the
holder to us with respect to any increase in such percentage.
Exercise Price.
The
exercise price per whole share of Class A common stock issuable upon exercise of Warrants
is $0.5880 per share (100% of the offering price per Unit). The exercise price and number
of shares of Class A common stock issuable upon exercise will adjust in the event of certain
stock dividends and distributions, stock splits, stock combinations, reclassifications, dilutive
issuances or similar events.
Cashless Exercise
If, at the time
a holder exercises its Warrants, a registration statement registering the issuance of the shares of Class A common stock underlying the
Warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash
payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead
to receive upon such exercise (either in whole or in part) the net number of shares of Class A common stock determined according to a
formula set forth in the Warrants, which generally provides for a number of shares of Class A common stock equal to (A) (1) the volume
weighted average price on (x) the trading day preceding the notice of exercise, if the notice of exercise is executed and delivered on
a day that is not a trading day or prior to the opening of “regular trading hours” on a trading day or (y) the trading day
of the notice of exercise, if the notice of exercise is executed and delivered after the close of “regular trading hours”
on such trading day, or (2) the bid price on the day of the notice of exercise, if the notice of exercise is executed during “regular
trading hours” on a trading day and is delivered within two hours thereafter, less (B) the exercise price, multiplied by (C) the
number of shares of Class A common stock the Warrant was exercisable into, with such product then divided by the number determined under
clause (A) in this sentence.
Transferability
Subject to applicable laws, the Warrants may be
offered for sale, sold, transferred or assigned without our consent.
Exchange Listing
We do not intend to apply for the listing of the
Warrants offered in this offering on any stock exchange. Without an active trading market, the liquidity of the Warrants will be limited.
Rights as a Shareholder
Except as otherwise provided in the Warrants or
by virtue of such holder’s ownership of our shares of Class A common stock, the holder of a Warrant does not have the rights or
privileges of a holder of shares of our Class A common stock, including any voting rights, until the holder exercises the Warrant.
Fundamental Transactions
In the event of a fundamental transaction, as described in the
Warrants and generally including any reorganization, recapitalization or reclassification of our shares of Class A common stock, the sale,
transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another
person, the acquisition of more than 50% of our outstanding shares of Class A common stock, the holders of the Warrants will be entitled
to receive upon exercise of the Warrants the kind and amount of securities, cash or other property that the holders would have received
had they exercised the Warrants immediately prior to such fundamental transaction. Additionally, in the event of a fundamental transaction,
we or any successor entity will, at the option of the holder of a Warrant exercisable at any time concurrently with or within 30 days
after the consummation of the fundamental transaction (or, if later, the date of the public announcement thereof), purchase the Warrant
from the holder by paying to the holder an amount of consideration equal to the value of the remaining unexercised portion of such Warrant
on the date of consummation of the fundamental transaction based on the Black-Scholes option pricing model, determined pursuant to a formula
set forth in the Warrants. The consideration paid to the holder will be the same type or form of consideration that was offered and paid
to the holders of ordinary shares in connection with the fundamental transaction; provided that if no such consideration was offered or
paid, the holders of ordinary shares will be deemed to have received ordinary shares of the successor entity in such fundamental transaction
for purposes of this provision of the Warrants.
Governing Law
The Warrants are governed by New York law.
Pre-Funded Warrants
Form
Pursuant to the warrant agency agreement between
us and American Stock Transfer & Trust Company, LLC, as warrant agent, the Warrants will be issued in book-entry form and shall initially
be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company,
or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Duration and Exercise Price
Each Pre-Funded Warrant will have an initial exercise
price per share equal to $0.0001. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until the Pre-Funded
Warrants are exercised in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate
adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise
price. The Pre-Funded Warrants will be issued separately from the accompanying Warrants included in the Units and may be transferred separately
immediately thereafter.
Exercisability
The Pre-Funded Warrants will be exercisable, at
the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for
the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below).
A holder (together with its affiliates) may not exercise any portion of the Pre-Funded Warrant to the extent that the holder would own
more than 4.99% of the outstanding common stock immediately after exercise. However, any holder may increase such percentage to any other
percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after the holder
give notice to us of such increase. Purchasers of Pre-Funded Warrants in this offering may also elect, prior to the issuance of the Pre-Funded
Warrants, to have the initial exercise limitation set at 9.99% of our outstanding common stock.
Cashless Exercise
The Pre-Funded Warrants may also be exercised, in whole or in
part, at such time by means of “cashless exercise” in which the holder shall be entitled to receive upon such exercise (either
in whole or in part) the net number of shares of Class A common stock determined according to a formula set forth in the Pre-Funded Warrants,
which generally provides for a number of shares of Class A common stock equal to (A)(1) the volume weighted average price on (x) the trading
day preceding the notice of exercise, if the notice of exercise is executed and delivered on d ay that is not a trading day or prior to
the opening of “regular trading hours” on a trading day or (y) the trading day of the notice of exercise, if the notice of
exercise is executed and delivered after the close of “regular trading hours” on such trading day, or (2) the bid price on
the day of the notice of exercise, if the notice of exercise is executed during “regular trading hours” on a trading day and
is delivered within two hours thereafter, less (B) the exercise price, multiplied by (C) the number of shares of Class A common stock
the Pre-Funded Warrant was exercisable into, with such product then divided by the number determined under clause (A) in the this sentence.
Transferability
Subject to applicable laws, a Pre-Funded Warrant
may be transferred at the option of the holder upon surrender of the Pre-Funded Warrant to us together with the appropriate instruments
of transfer.
Fractional Shares
No fractional shares of common stock will be issued
upon the exercise of the Pre-Funded Warrants. Rather, the number of shares of common stock to be issued will, at our election, either
be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the exercise price.
Trading Market
There is no trading market available for the Pre-Funded
Warrants on any securities exchange or nationally recognized trading system.
Rights as a Stockholder
Except as otherwise provided in the Pre-Funded
Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the Pre-Funded Warrants do not have
the rights or privileges of holders of our common stock, including any voting rights, until they exercise their Pre-Funded Warrants.
Fundamental Transaction
In the event of a fundamental transaction,
as described in the Pre-Funded Warrants and generally including any reorganization, recapitalization or reclassification of our shares
of Class A common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation
or merger with or into another person, the acquisition of more than 50% of our outstanding shares of Class A common stock, the holders
of the Pre-Funded Warrants will be entitled to receive upon exercise of the Pre-Funded Warrants the kind and amount of securities, cash
or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such fundamental
transaction.
Exclusive Forum Provisions
Our Certificate of Incorporation requires that,
unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that court
lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) will be the sole and exclusive forum for
(i) any derivative action or proceeding brought on behalf of our business, (ii) any action asserting a claim of breach of a duty owed
by any director, officer, employee, agent or stockholder of ours to us or our stockholders, (iii) any action asserting a claim arising
pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal affairs doctrine. In addition, our
Certificate of Incorporation requires that, unless we consent in writing to the selection of an alternative forum, the federal district
courts of the United States will be the exclusive forum for the resolution of any action, suit or proceeding asserting a cause of action
arising under the Securities Act. These forum selection provisions will not apply to claims arising under the Exchange Act or other federal
securities laws for which there is exclusive federal jurisdiction. Any person or entity purchasing or otherwise acquiring or holding any
interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions.
Rule 144
Pursuant to Rule 144, a person who has beneficially
owned restricted shares of Nxu’s voting common stock for at least six months would be entitled to sell their securities provided
that (i) such person is not deemed to have been one of Nxu’s affiliates at the time of, or at any time during the three months preceding,
a sale and (ii) Nxu is subject to the Exchange Act periodic reporting requirements for at least three months before the sale and has filed
all required reports under Section 13 or 15(d) of the Exchange Act during the twelve months (or such shorter period as Nxu was required
to file reports) preceding the sale.
Persons who have beneficially owned restricted
shares of Nxu’s voting common stock for at least six months but who are Nxu’s affiliates at the time of, or at any time during
the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within
any three-month period only a number of securities that does not exceed the greater of:
| · | 1% of the total number of shares of such securities then-outstanding; or |
| · | the average weekly reported trading volume of such securities during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to the sale. |
Sales by Nxu’s affiliates under Rule 144 are also limited by
manner of sale provisions and notice requirements and to the availability of current public information about us.
Listing of Securities
Nxu’s Class A common stock is listed for
trading on Nasdaq under the symbol “NXU.”
Transfer Agent and Warrant Agent
The transfer agent for our Class A common stock
and the warrant agent for the Warrants and the Pre-Funded Warrants is American Stock Transfer & Trust Company, LLC. We have agreed
to indemnify American Stock Transfer & Trust Company, LLC in its role as transfer agent and warrant agent, its agents and each of
its stockholders, directors, officers and employees against all liabilities, including judgments, costs and reasonable counsel fees that
may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence,
willful misconduct or bad faith of the indemnified person or entity.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the
Company regarding the beneficial ownership of shares of our common stock as of July 6, 2023 by:
| · | each person who is known by the Company to own beneficially more than 5% of the outstanding shares of
any class of the Company’s common stock; |
| · | each of the Company’s current named executive officers and directors; and |
| · | all current executive officers and directors of the Company, as a group. |
The SEC has defined “beneficial ownership”
of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A stockholder
is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days
after that date, including but not limited to the right to acquire through (i) the exercise of any option, warrant or right, (ii) the
conversion of a security, (iii) the power to revoke a trust, discretionary account or similar arrangement, or (iv) the automatic
termination of a trust, discretionary account or similar arrangement. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares that may be acquired by that person within 60 days thereafter are deemed outstanding,
while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person. Each person named in
the table has sole voting and investment power with respect to all of the common stock shown as beneficially owned by such person, except
as otherwise indicated in the table or footnotes below.
The beneficial ownership of voting securities of the Company is based
on 38,154,853 and 34,275,372 shares of Nxu’s Class A common stock and Class B common stock, respectively, issued and outstanding
as of July 6, 2023.
Name of Beneficial Owner(1) |
|
Class A
Shares |
|
|
% of
Class |
|
|
Class B
Shares |
|
|
% of
Class |
|
|
Combined
Voting
Power(2) |
|
Mark Hanchett |
|
|
25,778,369 |
(3) |
|
|
40.3 |
% |
|
|
25,603,676 |
(4) |
|
|
72.8 |
% |
|
|
65.7 |
% |
Annie Pratt |
|
|
9,746,359 |
(5) |
|
|
20.3 |
% |
|
|
9,571,696 |
(6) |
|
|
27.2 |
% |
|
|
24.5 |
% |
Apoorv Dwivedi |
|
|
366,263 |
(7) |
|
|
1.0 |
% |
|
|
- |
|
|
|
- |
|
|
|
* |
|
Britt Ide |
|
|
350,975 |
(8) |
|
|
* |
|
|
|
- |
|
|
|
- |
|
|
|
* |
|
Caryn Nightengale |
|
|
332,945 |
(9) |
|
|
* |
|
|
|
- |
|
|
|
- |
|
|
|
* |
|
Jessica Billingsley(10) |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
All directors and executive officers as a group (6 individuals) |
|
|
36,574,912 |
|
|
|
48.9 |
% |
|
|
35,175,372 |
|
|
|
100.0 |
% |
|
|
90.2 |
% |
* Represents beneficial ownership of less than
1%.
| (1) | The business address of each of the individuals is c/o Nxu, Inc., 1828 N Higley Rd., Suite 116 Mesa, Arizona
85205. |
| (2) | Represents the percentage of voting power
with respect to all shares of the Company’s outstanding capital stock voting together
as a single class. Does not include shares underlying stock options that are currently exercisable
or exercisable within 60 days of July 6, 2023 or restricted stock units that vest within
60 days. The holders of our Class B common stock are entitled to 10 votes per share and the
holders of our Class A common stock are entitled to one vote per share. |
| (3) | Includes 25,603,676 shares of Class A
common stock underlying options that are currently exercisable or are exercisable within
60 days and 174,663 restricted stock units that vest within 60 days. |
| (4) | Includes 600,000 restricted stock units that vest within 60 days. |
| (5) | Represents 9,571,696 shares of Class A
common stock underlying options that are currently exercisable or are exercisable within
60 days and 174,663 restricted stock units that vest within 60 days. |
| (6) | Includes 300,000 restricted stock units that vest within 60 days. |
| (7) | Includes 190,000 shares of Class A common
stock underlying options that are currently exercisable or are exercisable within 60 days
and 126,263 restricted stock units that vest within 60 days. |
| (8) | Includes 54,000 shares of Class A common
stock underlying options that are currently exercisable or are exercisable within 60 days
and 296,945 restricted stock units that vest within 60 days. |
| (9) | Represents 36,000 shares of Class A common
stock underlying options that are currently exercisable or are exercisable within 60 days
and 296,945 restricted stock units that vest within 60 days. |
| (10) | Pursuant to the Board of Directors Agreement,
dated as of June 15, 2023 and effective as of July 1, 2023, between Ms. Billingsley and Nxu,
Ms. Billingsley will receive $35,000 in restricted stock units under the Nxu, Inc. 2023 Omnibus
Incentive Plan for each quarter of service on the Board, which will be calculated by dividing
$35,000 by the closing share price on the final trading day of each financial quarter from
June 30, 2023 until the 2024 annual shareholder meeting, subject to approval by the Board. |
CERTAIN RELATIONSHIPS
AND RELATED PARTY TRANSACTIONS
Compensation arrangements with our Named Executive
Officers and directors are described elsewhere in this prospectus. See “Security Ownership of Certain Beneficial Owners and Management”
for information regarding the ownership of our securities by our control persons.
Related Party Transactions
Since the beginning of the fiscal year preceding
our last fiscal year, there are no transactions, or any currently proposed transactions, to which we were or are to be a participant,
in which (i) the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end
for the last two completed fiscal years; and (ii) any of our directors, executive officers or, to our knowledge, beneficial owners
of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or
indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are
described above in the section titled “Executive Compensation.”
Indemnification Agreements
The Company assumed certain indemnification agreements
(the “Indemnity Agreements”) that the Predecessor entered into with each director and executive officer of the Company. Each
Indemnity Agreement provides that, subject to limited exceptions, and among other things, we will indemnify the director or executive
officer to the fullest extent permitted by law for claims arising in his or her capacity as our director or officer.
Review, Approval or Ratification
of Transactions with Related Parties
Our Board reviews and approves transactions with
directors, officers and holders of five percent or more of our voting securities and their affiliates, each a related party. The material
facts as to the related party’s relationship or interest in the transaction are disclosed to our Board prior to their consideration
of such transaction, and the transaction is not considered approved by our Board unless a majority of the directors who are not interested
in the transaction approve the transaction. Further, when stockholders are entitled to vote on a transaction with a related party, the
material facts of the related party’s relationship or interest in the transaction are disclosed to the stockholders, who must approve
the transaction in good faith.
Additionally, we adopted a written related party
transactions policy that such transactions must be approved by our audit committee.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Subject to the limitations, assumptions and qualifications
described herein, the following is a summary of certain U.S. federal income tax considerations of the purchase, ownership and disposition
of the Units and the shares of Class A common stock issued pursuant to this offering (the “Shares”), the purchase, exercise,
disposition and lapse of the Warrants and the Pre-Funded Warrants to purchase shares of Class A common stock issued pursuant to this offering,
and the purchase, ownership and disposition of shares of Class A common stock issuable upon exercise of the Warrants and the Pre-Funded
Warrants (the “Warrant Shares”). Because the components of a Unit are separable at the option of the holder, the holder of
a Unit generally should be treated, for U.S. federal income tax purposes, as the owner of the underlying Shares or Pre-Funded Warrants,
as the case may be, and the Warrants. As a result, the discussion below with respect to actual holders of Shares, Warrants and Pre-Funded
Warrants should also apply to holders of Units (as the deemed owners of the underlying Shares or Pre-Funded Warrants, as the case may
be, and the Warrants that comprise the Units). The Shares, Warrants, Pre-Funded Warrants and Warrant Shares are collectively referred
to herein as the “Offered Securities.” All prospective holders of the Offered Securities should consult their tax advisors
with respect to the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership and disposition of the
Offered Securities.
This discussion is based on current provisions
of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing U.S. Treasury regulations promulgated thereunder,
published administrative pronouncements and rulings of the U.S. Internal Revenue Service (the “IRS”), and judicial decisions,
all as in effect as of the date of this prospectus supplement. These authorities are subject to change and to differing interpretation,
possibly with retroactive effect. Any change or differing interpretation could alter the tax consequences to holders described in this
discussion. There can be no assurance that a court or the IRS will not challenge one or more of the tax consequences described herein,
and we have not obtained, nor do we intend to obtain, a ruling with respect to the U.S. federal income tax consequences to a holder of
the purchase, ownership or disposition of the Offered Securities.
This discussion addresses only Offered Securities
that are held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion
does not address all the U.S. federal income tax consequences that may be relevant to particular holders in light of their individual
circumstances, nor does it address any alternative minimum tax, Medicare tax on certain investment income, estate or gift tax consequences,
or any aspects of U.S. state, local or non-U.S. taxes. It does not address holders that are subject to special rules, such as:
| • | banks, insurance companies or other financial institutions; |
| • | tax-exempt organizations or governmental organizations; |
| • | brokers or dealers in securities; |
| • | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
| • | persons who hold any of the Offered Securities as a position in a hedging transaction, “straddle,” “conversion transaction,”
or other risk reduction transaction; |
| • | persons deemed to sell any of the Offered Securities under the constructive sale provisions of the Code; |
| • | entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities such as subchapter
S corporations (or investors in such entities or arrangements); |
| • | regulated investment companies or real estate investment trusts; |
| • | controlled foreign corporations, passive foreign investment companies or corporations that accumulate earnings to avoid U.S. federal
income tax; |
| • | U.S. Holders (as defined below) whose functional currency is not the U.S. dollar; |
| • | “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of
which are held by qualified foreign pension funds; |
| • | U.S. expatriates and former citizens or former long-term residents of the United States; or |
| • | holders that acquire the Offered Securities through the exercise of an employee stock option or otherwise as compensation or through
a tax-qualified retirement plan. |
If a holder is a partnership or other pass-through
entity (including an entity or arrangement treated as a partnership or other type of pass-through entity for U.S. federal income tax purposes),
the U.S. federal income tax treatment of a partner or beneficial owner will generally depend on the status of such partner or beneficial
owner and the entity’s activities. Partnerships, partners and beneficial owners in partnerships or other pass-through entities that
own the Offered Securities should consult their tax advisors as to the particular U.S. federal income tax considerations applicable to
the acquisition, ownership and disposition of the Offered Securities.
For purposes of this discussion, a “U.S.
Holder” is a beneficial owner of the Offered Securities, that, for U.S. federal income tax purposes, is:
| • | an individual that is a citizen or resident of the United States; |
| • | a corporation, or an entity treated as a corporation, created or organized in or under the laws of the United States, any state thereof
or the District of Columbia; |
| • | a trust that (1) is subject to (A) the primary supervision of a court within the United States and (B) the authority
of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) to control all substantial
decisions of the trust or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a United States
person; or |
| • | an estate that is subject to U.S. federal income tax on its income regardless of its source. |
As used herein, the term “Non-U.S. Holder”
means a beneficial owner, other than an entity treated as a partnership for U.S. federal income tax purposes, of the Offered Securities
that is for U.S. federal income tax purposes not a U.S. Holder.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR TAX ADVISORS REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE OFFERED SECURITIES.
Allocation of Purchase Price and Characterization
of a Unit
No statutory, administrative or judicial authority
directly addresses the treatment of a Unit or instruments similar to a Unit for U.S. federal income tax purposes and, therefore, that
treatment is not entirely clear. The acquisition of a Unit should be treated for U.S. federal income tax purposes as the acquisition of
one share of our Class A common stock (or one Pre-Funded Warrant) and one Warrant. For U.S. federal income tax purposes, each holder
of a Unit must allocate the purchase price paid by such holder for such unit between the one share of Class A common stock (or one
Pre-Funded Warrant) and one Warrant based on the relative fair market value of each at the time of issuance. Under U.S. federal income
tax law, each investor must make his or her own determination of such value based on all the relevant facts and circumstances. Therefore,
we strongly urge each investor to consult his or her tax adviser regarding the determination of value for these purposes. The price allocated
to each share of Class A common stock (or Pre-Funded Warrant)and each Warrant should be the stockholder’s tax basis in such
share or warrant, as the case may be. Any disposition of a Unit should be treated for U.S. federal income tax purposes as a disposition
of the share of Class A common stock (or Pre-Funded Warrant) and the Warrant comprising the Unit, and the amount realized on the
disposition should be allocated between the Class A common stock (or Pre-Funded Warrant) and the Warrant based on their respective
relative fair market values (as determined by each such unit holder on all the relevant facts and circumstances) at the time of disposition.
The separation of shares of Class A common stock (or Pre-Funded Warrant) and Warrant comprising Units should not be a taxable
event for U.S. federal income tax purposes.
The foregoing treatment of the shares of Class A
common stock (or Pre-Funded Warrant) and Warrant and a holder’s purchase price allocation are not binding on the IRS or the courts.
Because there are no authorities that directly address instruments that are similar to the Units, no assurance can be given that
the IRS or the courts will agree with the characterization described above or the discussion below. Accordingly, each prospective investor
is urged to consult its own tax advisors regarding the tax consequences of an investment in a Unit (including alternative characterizations
of a Unit). The balance of this discussion assumes that the characterization of the Units described above is respected for U.S. federal
income tax purposes.
General Treatment of Pre-Funded Warrants
Although it is not entirely free from doubt, a
Pre-Funded Warrant should be treated as a share of Class A common stock for U.S. federal income tax purposes and a holder of Pre-Funded
Warrants should generally be taxed in the same manner as a holder of Class A common stock as described below. Accordingly, upon exercise,
the holding period of a Pre-Funded Warrant should carry over to the Warrant Share received. Similarly, the tax basis of the Pre-Funded
Warrant should carry over to the Warrant Share received upon exercise increased by the exercise price of $0.01. Holders should consult
their tax advisors regarding the risks associated with the acquisition of a Unit comprised of a Pre-Funded Warrant pursuant to this offering
(including potential alternative characterizations). The balance of this discussion generally assumes that the characterization described
above is respected for U.S. federal income tax purposes.
Tax Considerations Applicable to U.S. Holders
Distributions on Shares, Warrant Shares
and Pre-Funded Warrants
We do not anticipate declaring or paying any cash
dividends to holders of Class A common stock in the foreseeable future. If we make distributions of cash or other property on the Shares,
Warrant Shares or Pre-Funded Warrants (other than certain distributions of stock), such distributions will constitute dividends to the
extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Dividends received
by a corporate U.S. Holder may be eligible for a dividends received deduction, subject to applicable limitations. Dividends received by
certain non-corporate U.S. Holders, including individuals, are generally taxed at the lower applicable capital gains rate provided
certain holding period and other requirements are satisfied. Distributions in excess of our current and accumulated earnings and profits
will constitute a return of capital and first be applied against and reduce a U.S. Holder’s adjusted tax basis in its Shares, Warrant
Shares or Pre-Funded Warrants, as applicable, but not below zero. Any excess will be treated as capital gain and will be treated as described
below under “—Sale or Other Taxable Disposition of the Shares, Warrant Shares and Pre-Funded Warrants.”
Sale or Other Taxable Disposition of the
Shares, Warrant Shares and Pre-Funded Warrants
Upon the sale, exchange or other taxable disposition
of the Shares, Warrant Shares or Pre-Funded Warrants, a U.S. Holder will generally recognize capital gain or loss equal to the difference
between the amount of cash and the fair market value of any property received upon the sale, exchange or other taxable disposition and
such U.S. Holder’s adjusted tax basis in the Shares, Warrant Shares or Pre-Funded Warrants. This capital gain or loss will be long
term capital gain or loss if the U.S. Holder’s holding period in such Shares, Warrant Shares or Pre-Funded Warrants is
more than one year at the time of the sale, exchange or other taxable disposition. Long-term capital gains recognized by certain non-corporate U.S.
Holders, including individuals, generally will be subject to reduced rates of U.S. federal income tax. The deductibility of capital losses
is subject to certain limitations.
Sale or Other Disposition or Exercise of
Warrants
Upon the sale, exchange or other disposition of
a Warrant (other than by exercise), a U.S. Holder will generally recognize capital gain or loss equal to the difference between the amount
realized on the sale, exchange or other disposition and the U.S. Holder’s tax basis in the Warrant. This capital gain or loss will
be long-term capital gain or loss if the U.S. Holder’s holding period in such Warrant is more than one year at the time of the sale,
exchange or other disposition. The deductibility of capital losses is subject to certain limitations.
In general, a U.S. Holder will not be required
to recognize income, gain or loss upon exercise of a Warrant for its exercise price. A U.S. Holder’s tax basis in Warrant Shares
received upon exercise of Warrants will be equal to the sum of (i) the U.S. Holder’s tax basis in the Warrants exchanged therefor
and (ii) the exercise price of such Warrants. A U.S. Holder’s holding period in the Warrant Shares received upon exercise will
commence on the day after such U.S. Holder exercises the Warrants. Although there is no direct legal authority as to the U.S. federal
income tax treatment of an exercise of a warrant on a cashless basis, we intend to take the position that such exercise will not be taxable,
either because the exercise is not a gain realization event or because it qualifies as a tax-free recapitalization. In the former
case, the holding period of Warrant Shares received upon exercise of Warrants should commence on the day after the Warrants are exercised.
In the latter case, the holding period of the Warrant Shares received upon exercise of Warrants would include the holding period of the
exercised Warrants. However, our position is not binding on the IRS and the IRS may treat a cashless exercise of a warrant as a taxable
exchange. U.S. Holders are urged to consult their tax advisors as to the consequences of an exercise of a Warrant on a cashless basis,
including with respect to their holding period and tax basis in the Warrant Shares received.
Lapse of Warrants
If a Warrant expires without being exercised,
a U.S. Holder will recognize a capital loss in an amount equal to such U.S. Holder’s tax basis in the warrant. Such loss will be
long-term capital loss if, at the time of the expiration, the U.S. Holder’s holding period in such warrant is more than one year.
The deductibility of capital losses is subject to certain limitations.
Certain Adjustments to and Distributions
on Pre-Funded Warrants and Warrants
Under Section 305 of the Code, an adjustment
to the number of Warrant Shares that will be issued on the exercise of the Pre-Funded Warrants and Warrants, or an adjustment to the exercise
price of the Pre-Funded Warrants and Warrants (or in certain circumstances, there is a failure to make adjustments), may be
treated as a constructive distribution to a U.S. Holder of the Pre-Funded Warrants and Warrants if, and to the extent that, such adjustment
has the effect of increasing such U.S. Holder’s proportionate interest in our earnings and profits as determined under U.S. federal
income tax principles or our assets, depending on the circumstances of such adjustment (for example, if such adjustment is to compensate
for a distribution of cash or other property to our shareholders). Such distributions will constitute dividends to the extent deemed paid
out of our current or accumulated earnings and profits, as discussed above under “Distributions on Shares, Warrant Shares and Pre-Funded
Warrants.” U.S. Holders should consult their tax advisors regarding the proper treatment of any adjustments to the number of Warrant
Shares that will be issued on the exercise of the Pre-Funded Warrants or Warrants or the exercise price of the Pre-Funded Warrants or
Warrants.
In addition, if we were to make a distribution
in cash or other property with respect to our Class A common stock after the issuance of the Warrants, then we may, in certain circumstances,
make a corresponding distribution to holders of Warrants. The taxation of a distribution received with respect to a Warrant is unclear.
It is possible such a distribution would be treated as a distribution (or constructive distribution), although other treatments are possible.
U.S. Holders should consult their tax advisors regarding the proper treatment of distributions received with respect to Warrants.
Backup Withholding and Information Reporting
In general, backup withholding and information
reporting requirements may apply to payments on the Offered Securities and to the receipt of proceeds on the sale, exchange or other taxable
disposition of the Offered Securities. Backup withholding (currently at a rate of 24 percent) may apply if a U.S. Holder fails to furnish
its taxpayer identification number, a U.S. Holder fails to certify under penalties of perjury that such taxpayer identification number
is correct and that such U.S. Holder is not subject to backup withholding (generally on a properly completed and duly executed IRS Form W-9), the
applicable withholding agent is notified by the IRS that the holder previously failed to properly report payments of interest or dividends,
or such U.S. Holder otherwise fails to comply with the applicable requirements of the backup withholding rules.
Certain U.S. Holders generally are not subject
to backup withholding and information reporting requirements, provided that their exemptions from backup withholding and information reporting
are properly established. Backup withholding is not an additional tax. Any amounts withheld from a payment to a U.S. Holder under the
backup withholding rules generally will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and
may entitle such U.S. Holder to a refund, provided the required information is furnished to the IRS in a timely manner. U.S. Holders should
consult their tax advisors regarding the application of backup withholding, the availability of an exemption from backup withholding,
and the procedure for obtaining such an exemption, if available.
Tax Considerations Applicable to Non-U.S. Holders
Distributions on Shares, Warrant Shares
and Pre-Funded Warrants
As mentioned above, we does not anticipate declaring
or paying any cash dividends to holders of our Class A common stock in the foreseeable future. However, distributions of cash or other
property (other than certain distributions of stock) on the Shares, Warrant Shares or Pre-Funded Warrants will constitute dividends to the
extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Distributions
in excess of our current and accumulated earnings and profits will constitute a return of capital and first be applied against and reduce
a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be subject to the
treatment as described below under “— Gain on Sale or Other Taxable Disposition of the Offered Securities”.
Dividends paid to a Non-U.S. Holder
that are not effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States generally
will be subject to withholding tax at a 30-percent rate or a reduced rate specified by an applicable income tax treaty. In order
to obtain a reduced rate of withholding, the Non-U.S. Holder will be required to provide us or our paying agent with a properly
executed applicable IRS Form W-8BEN or IRS Form W-8BEN-E (or appropriate successor form), as applicable,
certifying under penalties of perjury that the Non-U.S. Holder is not a United States person and is eligible for the benefits
under the applicable tax treaty. These forms may need to be periodically updated. If a Non-U.S. Holder holds the Offered
Securities through a financial institution or other intermediary, the Non-U.S. Holder generally will be required to
provide the appropriate documentation to the financial institution or other intermediary. A Non-U.S. Holder eligible
for a reduced rate of U.S. withholding tax pursuant to an income tax treaty who fails to timely provide an IRS Form W-8BEN or W-8BEN-E, as
applicable, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim with the IRS.
If dividends paid to a Non-U.S. Holder
are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required
by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder
in the United States), the Non-U.S. Holder will generally be taxed on the dividends in the same manner as a U.S. Holder. In
this case, the Non-U.S. Holder will be exempt from the withholding tax discussed in the preceding paragraph, although the Non-U.S. Holder
will be required to provide a properly executed IRS Form W-8ECI (or appropriate successor form) in order to claim
an exemption from withholding. Such effectively connected dividends, although not subject to U.S. federal withholding tax, are subject
to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates generally applicable to Non-U.S. Holders.
Dividends received by a corporate Non-U.S. Holder that are effectively connected with such Non-U.S. Holder’s conduct
of a trade or business in the United States (and, if required by an applicable income tax treaty, attributable to a permanent establishment
or fixed base maintained by the Non-U.S. Holder in the United States) may be subject to an additional branch profits
tax at a 30-percent rate (or such lower rate as may be specified by an applicable income tax treaty). Non-U.S. Holders
should consult their tax advisors with respect to other U.S. tax consequences of the acquisition, ownership and disposition of the Offered
Securities, including the possible imposition of the branch profits tax.
Exercise of Warrants
A Non-U.S. Holder generally will not
recognize gain or loss on the exercise of a Warrant and the related receipt of Warrant Shares. However, if a cashless exercise of Warrants
results in a taxable exchange, as described above under “—Tax Considerations Applicable to U.S. Holders— Sale or Other
Disposition or Exercise of Warrants,” the rules described below under “Gain on Sale or Other Taxable Disposition of the Offered
Securities” would apply.
Gain on Sale or Other Taxable Disposition
of the Offered Securities
Subject to the discussions below under “—Information
Reporting and Backup Withholding” and “—FATCA,” a Non-U.S. Holder generally will not be subject to U.S.
federal income or withholding tax on gain realized on a sale, exchange or other taxable disposition of the Offered Securities unless:
| • | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and,
if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder
in the United States), |
| • | the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable
year of the disposition and certain other requirements are met; or |
| • | We are or have been a “United States real property holding corporation,” as defined in the Code, at any time within the
five-year period ending on the date of disposition or the Non-U.S. Holder’s holding period, whichever period is shorter,
and the Non-U.S. Holder is not eligible for an exemption under an applicable income tax treaty. |
We believe that we are not, and do not anticipate
becoming, a United States real property holding corporation. Even if we are or have been a United States real property holding corporation
during the specified testing period, as long as our common stock is regularly traded on an established securities market (such as Nasdaq)
at any time during the calendar year in which the disposition occurs, a Non-U.S. Holder will not be subject to U.S. federal
income tax on the disposition of Shares or Warrant Shares if the Non-U.S. Holder does not own or has not owned (actually or
constructively) more than 5 percent of our common stock at any time during the shorter of the two periods mentioned above. Special
rules may apply to the determination of the 5-percent threshold in the case of a Non-U.S. Holder of a Pre-Funded Warrants and/or Warrants.
Non-U.S. Holders are urged to consult their tax advisors regarding the effect of holding Pre-Funded Warrants or Warrants on the calculation
of such 5-percent threshold. Non-U.S. Holders should consult their tax advisors regarding the application of this regularly traded exception.
In addition, although a 15% withholding tax generally
applies to gross proceeds from the sale or other taxable disposition of the stock of or certain other interests in a United States real
property holding company, such 15% withholding tax generally will not apply to the disposition of Shares or Warrant Shares so long as
our Class A common stock is regularly traded on an established securities market. However, the exception described in the previous sentence
may not apply to certain dispositions of Pre-Funded Warrants or the Warrants if the Non-U.S. Holder exceeds the 5-percent threshold
mentioned above.
If a Non-U.S. Holder recognizes gain
on a sale, exchange or other disposition of the Offered Securities that is effectively connected with the Non-U.S. Holder’s
conduct of a trade or business in the United States (and if required by an applicable income tax treaty, is attributable to a permanent
establishment or fixed base maintained by the Non-U.S. Holder in the United States), the Non-U.S. Holder will generally
be subject to U.S. federal income tax at the regular graduated U.S. federal income tax rates generally applicable to a United States person.
If the Non-U.S. Holder is a corporation, the Non-U.S. Holder may also be subject to the branch profits tax at a 30-percent rate
or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. Holders should consult their tax advisors
with respect to other U.S. tax consequences of the acquisition, ownership and disposition of the Offered Securities, including the possible
imposition of the branch profits tax.
Certain Adjustments to and Distributions
on Pre-Funded Warrants and Warrants
As discussed above under “—Tax Considerations
Applicable to U.S. Holders—Certain Adjustments to and Distributions on Pre-Funded Warrants and Warrants,” certain adjustments
to the number of Warrant Shares on the exercise of the Pre-Funded Warrants or Warrants, or an adjustment to the exercise price of the
Pre-Funded Warrants or Warrants (or certain failures to make adjustments), may be deemed to be the payment of a distribution with respect
to the Pre-Funded Warrants or Warrants. Such a deemed distribution could be deemed to be the payment of a dividend to a Non-U.S. Holder
to the extent of our earnings and profits, notwithstanding the fact that such Holder will not receive a cash payment. In the event of
such a deemed dividend, we may be required to withhold tax from subsequent distributions of cash or property to Non-U.S. Holders. Non-U.S. Holders
should consult their tax advisors regarding the proper treatment of any adjustments to the Pre-Funded Warrants and Warrants.
In addition, as discussed above under “—Tax
Considerations Applicable to U.S. Holders— Certain Adjustments to and Distributions on Pre-Funded Warrants and Warrants,”
the taxation of a distribution received with respect to a Warrant is unclear. It is possible such a distribution would be treated as a
distribution (or constructive distribution), although other treatments are possible. Non-U.S. Holders should consult their tax advisors
regarding the U.S. withholding tax and other U.S. tax consequences of distributions received with respect to Warrants.
Information Reporting and Backup Withholding
Information returns will be filed with the IRS
in connection with payments of dividends on the Offered Securities. Copies of the information returns reporting those dividends and withholding
may also be made available to the tax authorities in the country in which a Non-U.S. Holder is a resident under the provisions
of an applicable income tax treaty or agreement. Unless a Non-U.S. Holder complies with certification procedures to establish
that the Non-U.S. Holder is not a United States person, information returns may also be filed with the IRS in connection with
the proceeds from a sale, exchange or other disposition of the Offered Securities to or through the U.S. office (and, in certain cases,
the foreign office) of a broker.
A Non-U.S. Holder may be subject to
backup withholding (currently at a rate of 24 percent) on payments on the Offered Securities or on the proceeds from a sale, exchange
or other disposition of the Offered Securities unless the Non-U.S. Holder complies with certification procedures to establish
that the Non-U.S. Holder is not a United States person or otherwise establishes an exemption. Compliance with the certification
procedures required to claim a reduced rate of withholding under a treaty (including properly certifying non-U.S. status on
an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8 (or appropriate
successor form)) generally will satisfy the certification requirements necessary to avoid backup withholding as well. Notwithstanding
the foregoing, U.S. federal backup withholding may apply if the payor has actual knowledge, or reason to know, that a holder is a United
States person.
Backup withholding is not an additional tax. Any
amounts withheld from a payment to a Non-U.S. Holder under the backup withholding rules generally will be allowed as a credit
against such Non-U.S. Holder’s U.S. federal income tax liability and may entitle such Non-U.S. Holder to a refund,
provided the required information is furnished to the IRS in a timely manner. Non-U.S. Holders are urged to consult their tax
advisors regarding the application of backup withholding and the availability of and procedure for obtaining an exemption from backup
withholding in their particular circumstances.
Foreign Account Tax Compliance Act
Under Sections 1471 through 1474 of the Code
and the U.S. Treasury regulations promulgated thereunder (collectively, “FATCA”), a U.S. federal withholding tax of 30% generally
will be imposed on certain payments made to a “foreign financial institution” (as specifically defined under these rules)
unless such institution enters into an agreement with the U.S. tax authorities to withhold on certain payments and to collect and provide
to the U.S. tax authorities substantial information regarding U.S. account holders of such institution or meets other exceptions. Under
FATCA and administrative guidance, a U.S. federal withholding tax of 30% generally also will be imposed on certain payments made to a
“non-financial foreign entity” (as specifically defined under these rules) unless such entity provides the withholding agent
with a certification identifying its direct and indirect U.S. owners or meets other exceptions. Foreign financial institutions located
in jurisdictions that have an intergovernmental agreement with the U.S. governing these withholding and reporting requirements may be
subject to different rules.
These withholding taxes would be imposed on dividends
with respect to our Class A common stock to foreign financial institutions or non-financial foreign entities (including in their capacity
as agents or custodians for beneficial owners of our common stock) that fail to satisfy the above requirements. Prior to the issuance
of proposed U.S. Treasury regulations, withholding taxes under FATCA also would have applied to gross proceeds from the disposition of
our Class A common stock. However, the proposed U.S. Treasury regulations provide that such gross proceeds are generally not subject to
withholding taxes under FATCA. Taxpayers (including withholding agents) may currently rely on these proposed U.S. Treasury regulations
until they are revoked or final U.S. Treasury regulations are issued.
Under certain circumstances, a Non-U.S. Holder
might be eligible for refunds or credits of such taxes. Prospective Non-U.S. Holders should consult their tax advisors regarding the possible
implications of FATCA on their investment in our common stock. We will not pay any additional amounts to Non-U.S. Holders
with respect to any amounts withheld, including pursuant to FATCA.
THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING
THE PARTICULAR U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF
THE OFFERED SECURITIES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
PLAN
OF DISTRIBUTION
We are offering up to 22,108,843 Units, based
on an assumed public offering price of $0.5880 per Unit, which represents the closing price of our Class A common stock on Nasdaq
on June 16, 2023, for gross proceeds of up to approximately $13.0 million before deduction of placement agent commissions and offering
expenses, in a best-efforts offering. There is no minimum amount of proceeds that is a condition to closing of this offering. The actual
amount of gross proceeds, if any, in this offering could vary substantially from the gross proceeds from the sale of the maximum amount
of securities being offered in this prospectus.
Pursuant to a placement agency agreement, dated as of
, 2023, we have engaged A.G.P./Alliance Global Partner to act as our lead-placement agent
and Maxim Group LLC to act as our co-placement agent (together, the “Placement Agents”) to solicit offers to purchase the
securities offered by this prospectus. The Placement Agents are not purchasing or selling any securities, nor are they required to arrange
for the purchase and sale of any specific number or dollar amount of securities, other than to use their “reasonable best efforts”
to arrange for the sale of the securities by us. Therefore, we may not sell the entire amount of securities being offered. We will enter
into a securities purchase agreement directly with the institutional investors, at the investor’s option, who purchase our securities
in this offering. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus in connection
with the purchase of our securities in this offering. The Placement Agents may engage one or more subagents or selected dealers in connection
with this offering.
The placement agency agreement provides
that the Placement Agents’ obligations are subject to conditions contained in the placement agency agreement.
We will deliver the securities being issued to the investors upon receipt
of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver the securities being offered
pursuant to this prospectus on or about , 2023.
Placement Agent Fees, Commissions and Expenses
We have
agreed to pay to the Placement Agents a cash fee equal to eight percent (8.0%) of the aggregate gross proceeds raised in this
offering. Because there is no minimum offering amount required as a condition to closing in this offering, the actual aggregate cash
placement fee, if any, is not presently determinable and may be substantially less than the maximum amount set forth
above.
We estimate
the total expenses payable by us for this offering to be approximately $1.5 million, which amount includes: (i) a placement agent fee
of $1,040,000, assuming the purchase of all of the securities we are offering; (ii) a non-accountable expense allowance payable to the
Placement Agents of $10,000; (iii) reimbursement of the accountable expenses of the Placement Agents of up to $75,000 related to the
legal fees and other reasonable and documented out-of-pocket expenses of the Placement Agents being paid by us (none of which has been
paid in advance); (iv) a one-time advisory fee payable to Maxim Group LLC of $50,000 and (v) other estimated expenses of approximately
$330,000, which include our legal, accounting, and printing costs and various fees associated with the registration and listing of our
securities.
The following table shows the public
offering price, placement agent fees and proceeds, before expenses, to us.
|
|
Per Unit
(including Class A
common stock) |
|
|
Per Unit
(including Pre-
Funded Warrants) |
|
|
Total |
|
Public offering price(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Placement agent fees(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Proceeds, before expenses, to us(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
| (1) | The combined public offering price is $ per
share of Class A common stock and accompanying Warrant and $ per Pre-Funded Warrant
and accompanying Warrant. |
|
(2) |
Represents a cash fee equal to eight percent (8.0%) of the aggregate purchase
price paid by investors in this offering. We have also agreed to reimburse the Placement Agents for their accountable offering-related
legal expenses in an amount up to $75,000, pay the Placement Agents a non-accountable expense allowance of $10,000 and pay Maxim Group
LLC a one-time advisory fee of $50,000. |
| (3) | The amount of offering proceeds to us presented in this table assumes no Pre-Funded Warrants are issued
in lieu of shares of Class A common stock and does not give effect to any exercise of the Warrants. |
Offering Lock-Up Agreements
We have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any
option for the sale of or otherwise dispose of any of our Class A common stock or other securities convertible into or exercisable or
exchangeable for our Class A common stock for a period of 30 days after this offering is completed without the prior written consent of
the Placement Agents. We have also agreed, subject to certain exceptions, not to effect or enter into an agreement to effect any
issuance by us or any of our subsidiaries of shares of shares of our Class A common stock or other securities convertible into or exercisable
or exchangeable for our Class A common stock involving a variable rate transaction for a period of 90 days. Additionally, each of our
officers and directors as of the date of this prospectus have agreed, subject to certain exceptions, not to offer, issue, sell, contract
to sell, encumber, grant any option for the sale of or otherwise dispose of any of our Class A common stock or other securities convertible
into or exercisable or exchangeable for our Class A common stock for a period of 90 days after this offering is completed without the
prior written consent of the Placement Agents.
The Placement Agents may in their sole discretion,
and at any time without notice, release some or all of the shares subject to lock-up agreements prior to the expiration of the lock-up
period. When determining whether or not to release shares from the offering lock-up agreements, the Placement Agents will consider, among
other factors, the security holder’s reasons for requesting the release, the number of shares for which the release is being requested
and market conditions at the time.
Indemnification
We have agreed to indemnify the Placement
Agents against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the Placement
Agents may be required to make for these liabilities.
Determination of Offering Price
and Exercise Price
The actual public offering price of the securities
we are offering, and the exercise price of the Warrants included in the Units and the Pre-Funded Warrants that we are offering, will be
negotiated between us and the investors in the offering based on the trading of our common stock prior to the offering, among other things.
Other factors considered in determining the public offering price of the securities we are offering, as well as the exercise price of
the Warrants included in the Units and the Pre-Funded Warrants that we are offering, will include the stage of development of our business,
our business plans for the future and the extent to which they have been implemented, an assessment of our management, the general conditions
of the securities markets at the time of the offering and such other factors as are deemed relevant.
Regulation M
The Placement Agents may be deemed to be underwriters within
the meaning of Section 2(a)(ii) of the Securities Act, and any commissions received by them and any profit realized on the resale of
the securities sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities
Act. As underwriters, the Placement Agents would be required to comply with the requirements of the Securities Act and the Exchange Act,
including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of
purchases and sales of our securities by the Placement Agents acting as principals. Under these rules and regulations, the Placement
Agents (i) may not engage in any stabilization activity in connection with our securities and (ii) may not bid for or purchase any of
our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until
they have completed their participation in the distribution.
Electronic Distribution
A prospectus in electronic format may be made
available on a website maintained by the Placement Agents. In connection with the offering, the Placement Agents or selected dealers
may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe®
PDF will be used in connection with this offering.
Other than the prospectus in electronic format,
the information on either Placement Agent’s website and any information contained in any other website maintained by either Placement
Agent is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or the Placement Agents in their capacity as placement agents and should not be relied upon by investors.
Discretionary Accounts
The Placement Agents do not intend to confirm sales of the
securities offered hereby to any accounts over which they have discretionary authority.
Other Activities and Relationships
The Placement Agents and certain of their respective affiliates
are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment
banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.
The Placement Agents and certain of their respective affiliates have, from time to time, performed, and may in the future perform, various
commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive
customary fees and expenses.
In the ordinary course of their various business activities,
the Placement Agents and certain of their respective affiliates may make or hold a broad array of investments and actively trade debt
and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for
the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us
and our affiliates. If the Placement Agents or their respective affiliates enter into a lending relationship with us, they will routinely
hedge their credit exposure to us consistent with their customary risk management policies. The Placement Agents and their respective
affiliates may hedge such exposure by entering into transactions that consist of either the purchase of credit default swaps or the creation
of short positions in our securities or the securities of our affiliates, including potentially the Common Stock offered hereby. Any
such short positions could adversely affect future trading prices of the Common Stock offered hereby. The Placement Agents and certain
of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish
or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients
that they acquire, long and/or short positions in such securities and instruments.
This prospectus in electronic format may be made available
on a website maintained by the Placement Agents, and the Placement Agents may distribute this prospectus electronically.
The foregoing does not purport to be a complete statement of
the terms and conditions of the placement agency agreement or the securities purchase agreement, copies of which are attached to the registration
statement of which this prospectus is a part. See “Where You Can Find Additional Information”.
Selling Restrictions
Other than in the United States, no action
has been taken by us or the Placement Agents that would permit a public offering of the securities offered by this prospectus in any
jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any
such securities be distributed or published, in any jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves
about and to observe any restrictions relating to this offering and the distribution of this prospectus. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an
offer or a solicitation is unlawful.
Canada. The securities may
be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in
National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as
defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities
must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities
laws.
Securities legislation in certain provinces or
territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment
thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the
time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any
applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or
consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument
33 105 Underwriting Conflicts (NI 33 105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding
underwriters conflicts of interest in connection with this offering.
European Economic Area. In relation
to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”)
an offer to the public of any securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant
Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State:
| ● | to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
| ● | to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010
PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted
under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or |
| ● | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such
offer of securities shall result in a requirement for the publication by us or any underwriters of a prospectus pursuant to Article 3
of the Prospectus Directive. |
For the purposes of this provision, the expression
an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and
by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide
to purchase any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that
Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010
PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the
Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Israel. This document does not constitute
a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel
Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the
shares is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily
of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the
Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals”,
each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case
purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in
the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are
aware of the meaning of same and agree to it.
United Kingdom. Each underwriter
has represented and agreed that:
| ● | it has only communicated or caused to be communicated and will only communicate or cause to be communicated
an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act
2000 (the FSMA) received by it in connection with the issue or sale of the securities in circumstances in which Section 21(1) of the FSMA
does not apply to us; and |
| ● | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done
by it in relation to the securities in, from or otherwise involving the United Kingdom. |
Switzerland. The securities may
not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the SIX) or on any other stock exchange or regulated
trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses
under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of
the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document
nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made
publicly available in Switzerland.
Neither this document nor any other offering or
marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority.
In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market
Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective
Investment Schemes (CISA). Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances
and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be
undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under
CISA does not extend to acquirers of securities.
Australia. No placement document,
prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission
(ASIC), in relation to the offering.
This prospectus does not constitute a prospectus,
product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act) and does not purport
to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations
Act.
Any offer in Australia of the securities may only
be made to persons (the Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations
Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one
or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to
investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors
in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except
in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption
under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter
6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only
and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not
contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether
the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice
on those matters.
Notice to Prospective Investors in the Cayman
Islands. No invitation, whether directly or indirectly, may be made to the public in the Cayman Islands to subscribe for our securities.
Taiwan. The securities have not
been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations
and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the
meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission
of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering
and sale of the securities in Taiwan.
Notice to Prospective Investors in Hong
Kong. The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise
caution in relation to the offer. If you are in any doubt about any of the contents of this prospectus, you should obtain independent
professional advice. Please note that (i) our shares may not be offered or sold in Hong Kong, by means of this prospectus or any document
other than to “professional investors” within the meaning of Part I of Schedule 1 of the Securities and Futures Ordinance
(Cap.571, Laws of Hong Kong) (SFO) and any rules made thereunder, or in other circumstances which do not result in the document being
a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong) (CO) or which do not constitute an
offer or invitation to the public for the purpose of the CO or the SFO, and (ii) no advertisement, invitation or document relating to
our shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere)
which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do
so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended to be disposed of only to persons
outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder.
Notice to Prospective Investors in the People’s
Republic of China. This prospectus may not be circulated or distributed in the PRC and the shares may not be offered or sold,
and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC except pursuant to
applicable laws, rules and regulations of the PRC. For the purpose of this paragraph only, the PRC does not include Taiwan and the special
administrative regions of Hong Kong and Macau.
Listing
Our Class A common stock is listed on Nasdaq under
the symbol “NXU.”
LEGAL MATTERS
Certain legal matters relating to the validity of Nxu’s
common stock covered by this registration statement will be passed upon for Nxu by Winston & Strawn LLP, Houston, Texas. Certain
legal matters in connection with this offering will be passed upon for the Placement Agents by Pryor Cashman LLP, New York, New York.
EXPERTS
The financial statements of Atlis Motor Vehicles
Inc. appearing elsewhere in this prospectus have been audited by Prager Metis CPAs LLP, an independent registered public accounting firm,
as stated in their report appearing therein (which report expresses an unqualified opinion and includes an explanatory paragraph as to
the Company’s ability to continue as a going concern). Such financial statements have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN
FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form
S-1, including exhibits, under the Securities Act, with respect to the securities offered by this prospectus. This prospectus does not
contain all of the information included in the registration statement. For further information pertaining to us and our securities, you
should refer to the registration statement and our exhibits.
In addition, we file annual, quarterly and current
reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on a website maintained by the
SEC located at www.sec.gov. We also maintain a website at www.nxu.com. Through our website, we make available, free of charge, annual,
quarterly and current reports, proxy statements and other information as soon as reasonably practicable after they are electronically
filed with, or furnished to, the SEC. The information contained on, or that may be accessed through, our website is not part of, and is
not incorporated into, this prospectus.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ATLIS MOTOR VEHICLES INC.
Unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2023 and 2022 |
|
|
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023, and December 31, 2022 |
|
F-19 |
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023, and 2022 |
|
F-20 |
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023, and 2022 |
|
F-21 |
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023, and 2022 |
|
F-22 |
Notes to Unaudited Condensed Consolidated Financial Statements |
|
F-23 |
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and
Stockholders of Atlis Motor Vehicles, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Atlis Motor
Vehicles, Inc. (the Company) as of December 31, 2022 and 2021, and the related statements of operations, stockholders’ deficit,
and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively referred to as
the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year
period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements were prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, as of December 31, 2022, the
Company had recurring losses from operations and an accumulated deficit. These conditions, among others, raise substantial doubt about
its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current
period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate
to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. We determined that there are no critical audit matters.
/s/ Prager Metis CPAs, LLP
We have served as the Company’s auditor since 2020.
El Segundo California
March 16, 2023
ATLIS MOTOR VEHICLES INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
| |
| | | |
| | |
| |
December
31, 2022 | | |
December
31, 2021 | |
| |
| | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 2,701 | | |
$ | 3,146 | |
Prepaid expenses and other assets | |
| 966 | | |
| 290 | |
Total current assets | |
| 3,667 | | |
| 3,436 | |
| |
| | | |
| | |
Property and equipment, net | |
| 2,441 | | |
| 980 | |
Intangible assets, net | |
| 10 | | |
| 11 | |
| |
| | | |
| | |
| |
| | | |
| | |
Right-of-use assets | |
| 798 | | |
| - | |
Security deposits | |
| 101 | | |
| 90 | |
Vendor deposits | |
| 21 | | |
| 96 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 7,038 | | |
$ | 4,613 | |
| |
| | | |
| | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS'
EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 1,523 | | |
$ | 66 | |
Accrued expenses | |
| 1,686 | | |
| 167 | |
Payroll tax liabilities | |
| 10 | | |
| 57 | |
Contract Liability | |
| 523 | | |
| - | |
Paycheck protection program loan | |
| - | | |
| 397 | |
Current portion of deferred rent | |
| - | | |
| 22 | |
Current portion of finance lease
liability | |
| 157 | | |
| | |
Current portion of lease liability | |
| 344 | | |
| - | |
Total current liabilities | |
| 4,243 | | |
| 709 | |
| |
| | | |
| | |
Deferred rent | |
| - | | |
| 104 | |
Lease liability, net of current portion | |
| 558 | | |
| - | |
Warrant liability, at fair value | |
| 374 | | |
| | |
Convertible debt, at fair value | |
| 10,911 | | |
| | |
| |
| | | |
| | |
Total liabilities | |
| 16,086 | | |
| 813 | |
Commitments and contingencies (Note 9) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Class C Stock, par value $0.0001; 15,000 shares authorized; no shares issued and outstanding at December 31, 2022; 5,000 shares issued and outstanding at December 31, 2021. | |
| - | | |
| - | |
Class D Stock, par value $0.0001; 41,925,572 authorized; 31,125,370 issued and outstanding at December 31, 2022; 25,725,370 issued and outstanding at December 31, 2021. | |
| 3 | | |
| 2 | |
Class A Common stock, par value $0.0001; 54,307,968 shares authorized; 9,763,838 issued and outstanding as of December 31, 2022; 6,854,576 issued and outstanding as of December 31, 2021. | |
| 1 | | |
| 1 | |
Additional paid-in capital | |
| 209,564 | | |
| 151,733 | |
Accumulated deficit | |
| (218,616 | ) | |
| (147,936 | ) |
| |
| | | |
| | |
Total stockholders’ equity | |
| (9,048 | ) | |
| 3,800 | |
| |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 7,038 | | |
$ | 4,613 | |
The accompanying notes are an integral part
of these consolidated financial statements.
ATLIS MOTOR VEHICLES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per-share
data)
| |
| | | |
| | |
| |
Years Ended December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Revenue | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Stock based compensation | |
| 41,502 | | |
| 123,245 | |
Research and development | |
| 9,648 | | |
| 4,429 | |
General and administrative | |
| 12,353 | | |
| 3,329 | |
Advertising | |
| 5,297 | | |
| 2,678 | |
Total operating expenses | |
| 68,800 | | |
| 133,681 | |
| |
| | | |
| | |
Operating loss | |
| (68,800 | ) | |
| (133,681 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Paycheck protection program forgiveness | |
| 397 | | |
| - | |
Loss on disposal of property and equipment | |
| (152 | ) | |
| - | |
Interest expense | |
| (7 | ) | |
| - | |
Other income | |
| 166 | | |
| (55 | ) |
Net loss on convertible debt and warrant liability | |
| (2,285 | ) | |
| | |
Total other income | |
| (1,881 | ) | |
| (55 | ) |
| |
| | | |
| | |
Net Loss | |
$ | (70,681 | ) | |
$ | (133,736 | ) |
| |
| | | |
| | |
Loss per share, basic | |
$ | (8.88 | ) | |
$ | (10.77 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding used in computing loss per share: | |
| 7,961,009 | | |
| 12,417,226 | |
The accompanying notes are an integral part
of these consolidated financial statements.
ATLIS MOTOR VEHICLES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(in thousands, except share data)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Common
Stock | | |
| | |
| | |
| | |
| |
| |
Class
A | | |
Class
C | | |
Class
D | | |
| | |
| | |
| | |
| | |
| |
Number
of
Shares | | |
Amount | | |
Number
of
Shares | | |
Amount | | |
Number
of
Shares | | |
Amount | | |
Securities
Receivable | | |
Additional
Paid-
in Capital | | |
Accumulated
Equity (Deficit) | | |
Total | |
Balance at December 31, 2020 | |
| 14,845,067 | | |
$ | 2 | | |
| - | | |
$ | - | | |
| - | | |
$ | | | |
$ | - | | |
$ | 13,378 | | |
$ | (14,199 | ) | |
$ | (819 | ) |
Common Stock issued for cash | |
| 1,977,009 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 14,542 | | |
| | | |
| 14,542 | |
Series D Stock Issued | |
| | | |
| | | |
| | | |
| | | |
| 25,725,370 | | |
| 2 | | |
| | | |
| | | |
| | | |
| 2 | |
Founder Class A shares relinquished | |
| (10,000,000 | ) | |
| (1 | ) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1 | ) |
Shares issued for services and
rent guarantees | |
| 32,500 | | |
| | | |
| 5,000 | | |
| 1 | | |
| | | |
| | | |
| | | |
| 568 | | |
| | | |
| 569 | |
Stock based compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 123,245 | | |
| | | |
| 123,245 | |
Net Loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| | | |
| (133,736 | ) | |
| (133,736 | ) |
Balance at December 31, 2021 | |
| 6,854,576 | | |
$ | 1 | | |
| 5,000 | | |
$ | 1 | | |
| 25,725,370 | | |
$ | 2 | | |
$ | - | | |
$ | 151,733 | | |
$ | (147,935 | ) | |
$ | 3,802 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common Stock issued for cash | |
| 2,475,616 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 15,302 | | |
| | | |
| 15,302 | |
Shares issued for services and
rent guarantees | |
| 151,546 | | |
| - | | |
| 5,000 | | |
| - | | |
| | | |
| | | |
| - | | |
| 89 | | |
| - | | |
| 89 | |
Series D Stock Issued | |
| | | |
| | | |
| | | |
| | | |
| 5,400,000 | | |
| 1 | | |
| | | |
| | | |
| | | |
| 1 | |
Exchange of Class C to Class A | |
| 75,000 | | |
| - | | |
| (10,000 | ) | |
| (1 | ) | |
| | | |
| | | |
| | | |
| 572 | | |
| | | |
| 571 | |
Stock based compensation | |
| 170,000 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 41,608 | | |
| | | |
| 41,608 | |
Options exercised to stock | |
| 37,100 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 260 | | |
| | | |
| 260 | |
Net Loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (70,681 | ) | |
| (70,681 | ) |
Balance at December 31, 2022 | |
| 9,763,838 | | |
$ | 1 | | |
| - | | |
$ | - | | |
| 31,125,370 | | |
$ | 3 | | |
$ | - | | |
$ | 209,564 | | |
$ | (218,616 | ) | |
$ | (9,048 | ) |
The accompanying notes are an integral part
of these consolidated financial statements.
ATLIS MOTOR VEHICLES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| |
| | | |
| | |
| |
Years Ended December 31, | |
| |
2022 | | |
2021 | |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (70,681 | ) | |
$ | (133,736 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| |
| | | |
| | |
Depreciation and amortization | |
| 348 | | |
| 89 | |
Employee stock based compensation | |
| 41,502 | | |
| 123,245 | |
Non-employee stock compensation | |
| 768 | | |
| 186 | |
Forgiveness of Paycheck Protection Loan | |
| (397 | ) | |
| (93 | ) |
Loss on the fair value of Convertible debt and Warrant liability | |
| 2,285 | | |
| | |
Loss on the sale of property and equipment | |
| 152 | | |
| - | |
| |
| | | |
| | |
| |
| | | |
| | |
Changes in assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other current assets | |
| (676 | ) | |
| (285 | ) |
Accounts payable | |
| 1,211 | | |
| (56 | ) |
Accrued expenses | |
| 1,520 | | |
| 70 | |
Payroll tax liabilities | |
| (47 | ) | |
| (555 | ) |
Net change in operating lease assets and liabilities | |
| (22 | ) | |
| | |
Contract liability | |
| 523 | | |
| - | |
Deferred rent | |
| | | |
| (12 | ) |
Security deposits | |
| (11 | ) | |
| (3 | ) |
Vendor deposits | |
| 75 | | |
| (38 | ) |
| |
| | | |
| | |
Net cash used in operating activities | |
| (23,450 | ) | |
| (11,188 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchases of property and equipment | |
| (1,787 | ) | |
| (1,019 | ) |
Addition of intangible assets | |
| - | | |
| (12 | ) |
Proceeds from sale of property and equipment | |
| 230 | | |
| - | |
| |
| | | |
| | |
Net cash used in investing activities | |
| (1,557 | ) | |
| (1,031 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from stock issuance | |
| 15,302 | | |
| 14,925 | |
Proceeds from the issuance of convertible debt | |
| 9,000 | | |
| | |
Proceeds from exercised stock options | |
| 260 | | |
| | |
Proceeds from paycheck protection loan | |
| - | | |
| 397 | |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 24,562 | | |
| 15,322 | |
| |
| | | |
| | |
Net (decrease) increase in cash | |
| (445 | ) | |
| 3,103 | |
Cash, beginning of period | |
| 3,146 | | |
| 43 | |
Cash, end of period | |
$ | 2,701 | | |
$ | 3,146 | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 7 | | |
$ | 1 | |
Supplemental disclosures of non-cash activity: | |
| | | |
| | |
Purchases on account related to property and equipment | |
$ | 232 | | |
$ | - | |
Incremental expense on Class C to Class A stock exchange | |
$ | 572 | | |
$ | - | |
The accompanying notes are an integral part
of these consolidated financial statements.
ATLIS MOTOR VEHICLES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Organization and Basis of Presentation |
Organization
Atlis Motor Vehicles Inc. (the “Company,” “AMV”
or “Atlis”), a Delaware corporation based in Mesa, Arizona, was incorporated in 2016. ATLIS is a vertically integrated, electric
vehicle technology ecosystem company committed to electrifying vehicles and equipment for Work. The Company is developing three products
to meet the needs of our target customer, proprietary AMV battery cell and pack technology, a modular and scalable electric powered platform
and an electric pickup truck. The AMV battery technology is the core of the Company’s hardware platform and is designed to be capable
of charging a full-size pickup in less than 15 minutes.
Basis of Presentation
The Company’s financial
statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based
on assumptions about current, and for some estimates, future economic and market conditions which affect reported amounts and related
disclosures in our financial statements. Although our estimates contemplate current and expected future conditions, it is reasonably possible
that actual conditions could differ from our expectations, which could materially affect our results of operations, our financial position
and cash flows.
The presentation of certain
prior period amounts have been adjusted to reflect current period classifications and presentation. Specifically, Research and development
costs now include Research and development related employee compensation as well as Research and development, materials and equipment.
General and administrative expenses include employee compensation specific to general and administrative expenses as well as Legal and
other general and administrative expenses.
References to amounts in the
consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.
Going
Concern
The accompanying condensed
consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization
of assets and the liquidation of liabilities in the normal course of business. These financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
During the year ended December 31, 2022, the Company incurred a net
loss of $70.7 million and had net cash flows used in operating activities of $23.5 million. On December 31, 2022, the Company had $2.7
million in cash and an accumulated deficit of $218.6 million.
The Company cannot provide
any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase
the need for the Company to raise additional capital on an immediate basis. Additionally, Company cannot provide any assurance that access
to capital will be readily available when needed.
These matters, among others,
raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date these
financial statements are issued. Company management is addressing this risk by pursuing all available options for funding including accessing
the public markets through public listing. On September 27, 2022, the Company registered its Regulation A Class A shares with the SEC
and listed on Nasdaq under the ticker symbol “AMV.” Additionally, as disclosed in Note 14, in January 2023, the company received
the second tranche of funding related to its convertible debt agreement entered into on November 4, 2022. Net proceeds were $9 million.
Further, in February 2023, the company consummated a public offering of 8.3 million units of Company stock at an effective public offering
price of $1.56 per unit for gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock,
(ii) 0.65 Series A warrants to purchase 0.65 shares of Class A common stock and (iii) 0.75 Series B warrants to purchase 0.75 shares of
Class A common stock, each such warrant being exercisable from time to time for one share of Class A common stock at an exercise price
of $1.56. The Company plans to continue considering all avenues available to it in order to obtain the necessary capital to be able to
continue as a going concern and to execute on our business objectives including but not limited to debt financing, private placements,
and equity lines of credit. The Company’s success is dependent upon achieving its strategic and financial objectives, including
continuing to acquire capital through public markets.
Change in Accounting
Policy
The Company has opted for
an effective adoption date of January 1, 2022, for the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2016-02, Leases. At the transition date, the operating lease ROU asset and operating lease
liability were $1.1 million and
$1.2 million, respectively. The
difference between the ROU asset and operating lease liability is due to deferred rent and prepaid rent balances that were reclassified
as a component of the ROU asset at the transition date. The Company recorded a right of use asset, current portion of lease liability
and lease liability, net of current portion in the amounts of $798
thousand, $344 thousand and $558
thousand, in the condensed consolidated balance sheets at December 31, 2022. See Note 8 for more information.
| 2. | Summary
of Significant Accounting Policies |
Recent Accounting Pronouncements
and Summary of Significant Accounting Policies
Recent Accounting Pronouncements
In December 2019, the FASB
issued Accounting Standards Update, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes
(“ASC 740”). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general
principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal
years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective
basis and others on a retrospective basis with earlier application permitted. The Company does not expect this update to have a
material impact on its consolidated financial statements.
In August 2020, the FASB issued
Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models
in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments.
The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is
effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company
has chosen to early adopt this standard for the period ended December 31, 2022.
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
Summary of Significant
Accounting Policies
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the consolidated financial
statements.
Segment Reporting
The Company evaluated segment
reporting in accordance with Accounting Standards Codification 280 – Segment Reporting (“ASC 280”) and concluded that
ATLIS is comprised of one operating segment. The Company reports segment information based on the operating results regularly reviewed
by the chief operating decision maker to make decisions about resource allocation and the performance of the business.
Concentration of Credit
Risks
The Company is subject to
concentrations of credit risk primarily from cash and cash equivalents.
The Company considers all
highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company’s cash and
cash equivalents accounts are held at a financial institution and are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250 thousand. From time to time, the Company’s bank balances exceed the FDIC insurance limit. To reduce its risk associated
with the failure of such financial institutions, the Company periodically evaluates the credit quality of the financial institution in
which it holds deposits.
Advertising
The Company began utilizing
media networks, including, but not limited to online and social media presence to build awareness for the product and brand. Advertising
costs for the year ended December 31, 2022, were $5.3 million. Advertising costs for the year ended December 31, 2021, were $2.7 million.
Income Taxes
Income taxes are accounted
for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Valuation allowances are established, when necessary, but no less than quarterly,
to reduce deferred tax assets to the amounts expected to be realized.
Property
and Equipment
Property and equipment are carried at cost. Depreciation
is calculated using the straight-line method over the estimated useful life of each asset. Estimated useful lives for significant classes
of assets are currently 5 years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are
capitalized according to their estimated useful lives or over the lease term for leasehold improvements. The Company capitalizes property
and equipment with an initial value over $2,500.
Long-Lived Assets
In accordance with ASC 360-10,
the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value
may not be recoverable. When such facts and circumstances exist, the Company compares the projected undiscounted future cash flows associated
with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any,
is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows,
of those assets and is recorded in the period in which the determination is made. Depending on the asset, estimated fair market value may be determined
either by use of the discounted cash flow model or by reference to estimated selling values of assets in similar condition. There were no impairment charges for the years
ended December 31, 2022, or December 31, 2021.
Research and Development
Expenses
Research and development costs are charged to operations when incurred
and are included in Operating expenses on the consolidated statements of operations. The Company recorded $9.6 million in Research and
development expenses for the year ended December 31, 2022 of which $6 million was related to employee compensation and $3.6 million was
related to materials and equipment purchases, primarily related to battery and platform research and development activities. In the year
ended December 31, 2021, the Company recorded $2.8 million and $1.6 million in Research and development employee compensation and materials
and equipment, respectively for a total of $4.4 million for the year ended December 31, 2021.
General and administrative
expenses
General and administrative costs include salaries related to non-production
and non research and development employees, legal and other professional fees, rent and other general expenses incurred by the company.
The company recorded $12.4 million in general and administrative expenses consisting of $3.8 million in employee compensation and $8.6
million in legal and other expenses for the year ended December 31, 2022. The Company recorded $3.3 million in general and administrative
expenses in the year ended December 31, 2021 consisting of $1.2 million in employee compensation and $2.1 million in legal and other expenses.
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with
ASC Topic 718, Compensation-Stock Compensation. Under the fair value recognition provisions of this topic, stock-based compensation cost
is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period,
which is the vesting period. Forfeitures are accounted for as they occur in accordance with ASC 718-10-35-3.
The Company uses the Black-Scholes
option-pricing method for valuing stock option awards. Calculating the fair value of stock option awards requires the input of subjective
assumptions. Other reasonable assumptions could have a material impact on the Company’s stock-based compensation expense and therefore,
its operational results.
Stock Issued for Services
The Company periodically grants common stock
awards to non-employees in exchange for services. The fair value of the stock-based compensation awards granted is based on the fair value
of the award on the grant date. Stock-based payments are recorded on the consolidated statements of operations in the same manner and
to the same financial statement line item as it would have been had such settlement been made in cash.
Contract Liability
The Company defers the recognition of revenue
when cash payments are received or due in advance of satisfying its performance obligations, including amounts which are refundable. The
Company recorded no Contract Liability at December 31, 2021 and $523 thousand at December 31, 2022.
Other income, net
Other income primarily consists of realized and
unrealized gains and losses on convertible debt and warrant liabilities, gains and losses on the sale of property and equipment and gains
on forgiveness of the Company’s Paycheck Protection Program.
Fair Value of Financial
Instruments.
Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 820“Fair Value Measurements and Disclosures”
(“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. ASC 820establishes a fair value hierarchy for inputs, which represent
the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable
inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller
would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three
levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted
quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments
and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an
active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on (i)
quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or
similar assets, (iii) inputs other than quoted prices for the assets and liabilities, or (iv) inputs that are derived principally from
or corroborated by market through correlation or other means.
Level 3 - Valuations based on inputs
that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain
assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the
balance sheets as of December 31, 2022, and 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued
expenses are estimated to approximate the carrying values as of December 31, 2022, and 2021, due to the short maturities of such instruments.
There were no transfers between Levels 1,
2 or 3 during the year ended December 31, 2022, or for the year ended December 31, 2021.
Property and equipment consist
of the following (in thousands):
Schedule of property and equipment | |
| | | |
| | |
| |
As of December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Leasehold improvements | |
$ | 261 | | |
$ | 130 | |
Office equipment | |
| 114 | | |
| 64 | |
Tools and plant equipment | |
| 2,354 | | |
| 830 | |
Vehicles | |
| 70 | | |
| 59 | |
| |
| | | |
| | |
Less—Accumulated depreciation | |
| (358 | ) | |
| (103 | ) |
Property and equipment, net | |
$ | 2,441 | | |
$ | 980 | |
Depreciation expense for the years ended December 31, 2022, and December
31, 2021, were $348 thousand and $89 thousand, respectively. Property and equipment include tools and plant equipment obtained under capital
lease in the amount of $232 thousand. The equipment is being depreciated over 5 years. The capital lease was entered into on July 1, 2022,
and is payable over 18 months at 7% interest with monthly installments of $14 thousand. The company had an outstanding balance of $157
thousand on the capital lease at December 31, 2022
Intangible assets consist of the following (in
thousands):
Schedule of intangible assets | |
| | | |
| | |
| |
As of December 31, | |
| |
2022 | | |
2021 | |
Patents | |
$ | 12 | | |
$ | 12 | |
Less—Accumulated amortization | |
| (2 | ) | |
| (1 | ) |
Intangible assets, net | |
$ | 10 | | |
$ | 11 | |
The Company recorded amortization expense related to patent number
11.069.945 on July 20, 2021. The Company amortizes patents using the straight-line method over the estimated useful life of the patent,
which is ten 10 years. The Company recorded amortization expense of $1 thousand during the year ended December 31, 2022. The Company recorded
amortization expense of $1 thousand for the year ended December 31, 2021.
Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. The Company recorded a valuation allowance due to the uncertainty of future realization of federal and state
net operating loss carryforwards.
Deferred income tax assets are comprised of the
following at December 31, 2022, and 2021 (in thousands):
Schedule of operating loss carryforwards | |
2022 | | |
2021 | |
Deferred income tax assets: | |
$ | 51,919 | | |
$ | 34,912 | |
Valuation allowance | |
| (51,919 | ) | |
| (34,912 | ) |
Net total | |
$ | - | | |
$ | - | |
At December 31, 2021, the Company had net operating
loss carryforwards of approximately $16.5 million which will carryforward through 2037. The Company’s current
year net operating loss will carry forward indefinitely.
In December 2017, the U.S. Tax Cuts and Jobs Act
of 2017 ("Tax Act") was enacted into law which significantly revises the Internal Revenue Code of 1986, as amended. The newly
enacted federal income tax law, among other things, contains significant changes to corporate taxation, including a flat corporate tax
rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income, limitation of the deduction
for newly generated net operating losses to 80% of current year taxable income and elimination of net operating loss ("NOL")
carrybacks, future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for
certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions
and credits beginning in 2018.
The Company generated an income tax benefit of $14.9 million
for the year ended December 31, 2022. The Company has increased its valuation allowance accordingly as the Company's ability to generate
sufficient taxable income to utilize its net operating loss carry forwards is uncertain. The Company’s deferred tax balances primarily
consist of its operating loss carryforwards.
Reconciliation between the statutory rate and
the effective tax rate is as follows as of December 31, 2022, and 2021:
Schedule of effective income tax rate reconciliation | |
| | |
| |
| |
2022 | | |
2021 | |
Effective Tax Rate Reconciliation: | |
| | |
| |
| |
| | |
| |
Federal statutory tax rate | |
| 21 | % | |
| 21 | % |
State taxes, net of federal benefit | |
| - | % | |
| - | % |
Change in valuation allowance | |
| (21 | %) | |
| (21 | %) |
Effective Tax Rate | |
| - | % | |
| - | % |
The Company recognizes interest and penalties
related to uncertain tax positions in general and administrative expense. At December 31, 2022, and 2021 the Company did not have any
unrecognized uncertain tax positions or any associated interest and penalties.
The Company's federal income tax returns for tax
years ended December 31, 2019, and beyond remain subject to examination by the Internal Revenue Service. The returns for Arizona, the
Company's most significant state tax jurisdiction, remain subject to examination by the Arizona Department of Revenue for tax years ended
December 31, 2017, and beyond.
| 6. | Paycheck Protection Program Loan |
On February 11, 2021, The Company was granted
a loan from Washington Federal Bank, in the aggregate amount of $397 thousand, pursuant to the Paycheck Protection Program (“PPP”).
The loan was granted under the provisions of the second offering of PPP loans by the Small Business Association. The loan, which was in
the form of a Note dated February 11, 2021, issued to the Company, was to mature February 11, 2026, and bore an interest at a rate of
1.0% annually. The Note was allowed to be prepaid by the Borrower at any time prior to the maturity with no prepayment penalties. Funds
from the loan were to only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities
and interest on other debit obligations incurred before February 15, 2020. On April 13, 2022, the Company received notice that the note
was fully forgiven. As a result, the Company recorded Other income in the amount of $397 thousand in its condensed consolidated statements
of operations for the year ended December 31, 2022.
On April 30, 2020, The Company was granted a loan
from Washington Federal Bank, in the aggregate amount of $93 thousand, pursuant to the PPP under Division A, Title 1 of the CARES
Act, which was enacted March 27, 2020. This PPP note was fully forgiven on July 12, 2021.
Net loss per share is computed by dividing net
loss by the weighted-average number of common shares outstanding during the period, excluding shares of Class D common stock as these
shares do not participate in the earnings of the Company. For the years ended December 31, 2022, and 2021, respectively, the Company’s
basic and diluted net loss per share were the same because the Company generated a net loss for each period and potentially dilutive securities
are excluded from diluted net loss per share as a result of their anti-dilutive impact. The Company’s basic net loss per share was
$8.88 and $10.77 for the years ended December 31, 2022, and 2021, respectively. Potentially dilutive securities represented approximately
55.9 million (consisting of 45.7 million options and RSUs, 231 thousand warrants, and 10 million shares related to convertible debt) and
46.8 million options and RSUs for the years ended December 31, 2022, and 2021, respectively.
Operating Lease
The Company adopted ASC 842,
Leases (“ASC 842”), on January 1, 2022. Consequently, financial information has not been updated for dates and periods before
this date. Additionally, the Company chose to elect certain relief options offered in ASC 842 including the package of practical expedients,
the option to account for separate lease and non-lease components as a single unit, and the option to exclude right-of-use assets and
lease liabilities that arise from short term leases (i.e., leases with terms of twelve months or less). Under ASC 842, the Company determines
if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying
asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease
term. The Company’s lease consists of mixed-use office and warehouse space in Mesa, Arizona. The Company’s lease evaluation
may include options to terminate the lease when it is reasonably certain that the Company will exercise such options. When readily determinable,
the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any lease payments
made and excludes lease incentives. Lease expense for amortization of the ROU asset is recognized on a straight-line basis over the lease
term. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or covenants.
The Company had a weighted average remaining lease term of 5 years and a weighted average discount rate of 3.25%, which was determined
based on the United States Prime borrowing rate at the lease commencement date, as the rate implicit in the lease was not readily determinable.
The Company’s aggregate
lease maturities as of December 31, 2022, are as follows (in thousands):
Schedule of lease maturities | |
| | |
Year | |
| |
2023 | |
$ | 368 | |
2024 | |
| 379 | |
2025 | |
| 194 | |
Total minimum lease payments | |
| 941 | |
Less imputed interest | |
| (39 | ) |
Total operating lease liabilities | |
$ | 902 | |
Financing Lease
The Company entered into a
capital lease agreement on July 1, 2022, with a vendor to purchase equipment to be used in research and development. The terms of the
note are 18 months at 7% interest payable in monthly installments of $14 thousand. The Company recorded a total of $157 thousand in the
current portion of Lease liability line item in the condensed consolidated balance sheets at December 31, 2022, in relation to this agreement.
The following table provides
information about the financial statement classification of our lease expenses reported within the Consolidated Statements of Comprehensive
Income for the years ended December 31, 2022 and December 31, 2021 (in thousands):
Schedule of lease expenses | |
| |
| | | |
| | |
| |
| |
| 2022 | | |
| 2021 | |
Lease Expense Category: | |
Classification | |
| | | |
| | |
| |
| |
| | | |
| | |
Operating Lease Expense | |
General and administrative expenses Legal and other | |
$ | 335 | | |
$ | 457 | |
Finance lease expense: | |
| |
| | | |
| | |
Amortization of leased assets | |
General and administrative expenses Legal and Other | |
| 23 | | |
| - | |
Interest on lease liabilities | |
Interest expense | |
| 7 | | |
| - | |
Total lease expense | |
| |
$ | 365 | | |
$ | 457 | |
| 9. | Commitments
and Contingencies |
Registration
Rights
The holders of the 2022 convertible
note that was issued will have registration rights to require the Company to register the sale of its debt securities held by them pursuant
to a registration rights agreement to be signed in conjunction with the convertible note.
Legal Proceedings
The Company
is not currently subject to any material legal proceedings, nor, to the Company’s knowledge, are any material legal proceedings
threatened against the Company. From time to time, the Company may be a party to certain legal or regulatory proceedings in the ordinary
course of business. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, management
does not expect that any such future proceedings will have a material effect on the Company’s financial condition or results of
operations.
During 2021, the Company paid $60 thousand to Salt River Project, an
Arizona utility company, as a refundable deposit for engineering services for implementation of additional electricity capacity to facilitate
the development of the Company’s 1.5MW charging capabilities. In 2022, this contract was cancelled, and the deposit was refunded.
Additionally, the Company recorded a total of $38 thousand in 2021 for deposits on equipment purchases to be delivered at future dates.
At December 31, 2022, the company had total Vendor deposits of $20 thousand related to deposits on equipment.
| 11. | Stock
Based Compensation and Common Stock |
The Company accounts for stock-based
compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, (“ASC 718”). Under the fair value recognition
provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized
as an expense over the requisite service period, which is the vesting period.
Prior to and up until the
quarter ended September 30, 2021, the Company awarded employees grants in common stock as part of employee compensation, which typically
vested over four years. Upon vesting, the company recorded employee stock compensation to additional paid-in-capital as the shares were
vested but not issued. The share value was calculated based on the most recent funding event. Subsequently, the Company changed its accounting
policy to value company shares based on appraisal of fair market value that considered all available information material to the value
of the Company, including the present value of anticipated future cash flows and other relevant factors such as a discount for lack of
marketability. The same method was applied retrospectively to value stock grant awards in prior years.
On August 24, 2021, the Company
offered employees the option to convert their vested stock grants into stock options at weighted average conversion ratio of approximately
6.64 options for every share grant. A condition of the conversion was the relinquishment of all prior awarded stock through the August
24, 2021, conversion date. Although not all, a majority of former and current employees at the time elected to convert their shares to
options. The Company accounted for this transaction as a modification as per ASC 718. As a result, the company recorded approximately
$115 million of incremental compensation expense as of December 31, 2021. The originally vested stock grants were unissued as of the modification
date with the exception of 10,000,000 Class A shares held by the Company’s Chief Executive Officer, who subsequently relinquished
these on August 24, 2021.
On August 24,2021, the Company
issued 25,725,370 Class D stock to the Company’s Chief Executive Officer and the President.
Between August 24, 2021, and
December 31, 2021, the Company awarded 578,400 stock options to new employees, non-employees and to our Board of Directors.
On June 17, 2022, the Company
agreed with a third party who provided a rent guarantee to the Company’s landlord on the Company’s building in Mesa, Arizona
to exchange 75,000 shares of Class A common stock for 10,000 shares of Class C common stock. The Company recorded General and Administrative
expenses of $572 thousand on the Company’s Condensed Consolidated Statements of operations for the year ended December 31, 2022,
resulting from consideration provided for the loss of perquisites afforded to the Class C shareholder.
The Company recorded $41.5
million and $123.2 million in stock based compensation expense for the years ended December 31, 2022, and 2021, respectively.
The Company uses the Black-Scholes
option-pricing method for valuing stock option awards. Calculating the fair value of stock option awards requires the input of subjective
assumptions. Other reasonable assumptions could provide differing results. The fair value of stock options at the grant date was determined
using the following assumptions for the years ended December 31, 2022, and 2021.
Schedule of stock options at the grant date | |
| |
|
| |
Years ended December 31, |
| |
2022 | |
2021 |
| |
| |
|
Expected average life (years) | |
7.0 | |
7.0 |
Expected volatility | |
75.33% | |
73.56% |
Risk-free interest rate | |
1.65% | |
0.06% |
Expected dividend yield | |
-% | |
-% |
Compensation expense was determined
by applying the Black-Scholes model on the appraised value of the underlying share price for each stock on the grant date.
A summary of the Company’s
outstanding stock options and restricted stock units (“RSU”) as of December 31, 2022, and changes during the year is presented
below:
Schedule of stock options and restricted stock units activity | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Options | | |
RSUs | |
| |
Shares | | |
Weighted average exercise price | | |
Weighted average contractual term (in years) | | |
Shares | | |
Weighted average grant date fair value | |
Outstanding, December 31, 2021 | |
| 45,486,067 | | |
$ | 7.00 | | |
| 7 | | |
| 1,344,657 | | |
$ | - | |
Granted | |
| 946,800 | | |
| | | |
| 7 | | |
| 110,000 | | |
| 7.00 | |
Exercised | |
| (37,100 | ) | |
| - | | |
| | | |
| - | | |
| - | |
Forfeited | |
| (899,063 | ) | |
| 7.00 | | |
| | | |
| (7,456 | ) | |
| - | |
Shares issued | |
| - | | |
| | | |
| | | |
| (1,278,858 | ) | |
| | |
Unissued shares converted to options | |
| 78,343 | | |
| | | |
| | | |
| (78,343 | ) | |
| | |
Expired | |
| - | | |
| - | | |
| | | |
| - | | |
| - | |
Outstanding, December 31, 2022 | |
| 45,575,047 | | |
$ | 7.00 | | |
| 7 | | |
| 90,000 | | |
| 7.00 | |
Exercisable, December 31, 2022 | |
| 33,425,287 | | |
$ | 7.00 | | |
| 7 | | |
| - | | |
| - | |
Common Stock
The total number of shares
of common stock the Company has authority to issue is 96,248,541 at $0.0001 par value per share.
In 2021 and 2022, the Company
issued Class D shares of Common Stock. These shares are not traded openly or available for sale to the public. Class D shares are offered
only to the President and the Chief Executive Officer of the Company. Each class D share of common stock is granted ten votes compared
to Class A shares of common stock which are granted one vote per share. The shares of Class D Stock are not entitled to receive any dividends
or any distribution on a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Class D shares
are not convertible, are deemed to have no economic value, and upon a holder’s cessation of service to the Company, such holder
shall, on the one-year anniversary of such cessation, surrender to the Company for no consideration all shares of Class D Stock owned
by such holder. Class D stock were issued to the Chief Executive Officer and President in the amount of 31,125,370 shares as of December
31, 2022.
The breakdown of common stock
by class at December 31, 2022, and December 31, 2021, were as follows:
Schedule of breakdown of common stock by class | |
| | | |
| | |
| |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Class A | |
| 9,763,838 | | |
| 6,854,576 | |
Class C | |
| - | | |
| 5,000 | |
Class D | |
| 31,125,370 | | |
| 25,725,370 | |
Total Shares Outstanding | |
| 40,889,208 | | |
| 32,584,946 | |
| 12. | Convertible Debt and Warrant Liability |
On November 4, 2022,
the Company issued the first tranche of the 10% Original Issue Discount Convertible Notes in the aggregate principal amount of $10.0 million
for gross proceeds of $9.0 million to various investors. These convertible notes have a maturity date of 24 months from the issuance date.
The convertible notes earn interest at a rate of 10% per annum which will only accrue upon an event of default. The convertible notes
are convertible solely in common stock of the Company at a conversion price of (a) $15 per share or (b) 92.5% of the average of the
three lowest daily VWAP of the Common Stock during the ten trading day period, whichever is lower. These convertible notes are secured
by a first priority security interest in all of the assets of the Company.
The Company elected the fair value option
to account for the 2022 Convertible Notes. As such, the Company recorded the 2022 Convertible Notes at fair value and will subsequently
measure them to fair value at each reporting date. Changes in fair value were recognized as a component of other income (expense), net
in the consolidated statements of operations. Losses as a result in changes in fair value of the Company’s convertible notes during
the year ended December 31, 2022 were as follows (in thousands):
Schedule of convertible debt | |
| | |
| |
Years ended December 31, |
|
| |
2022 | |
| |
| |
Balance at the beginning of the year | |
$ | - | |
Convertible Debt issued during the period | |
| 7,034 | |
Unrealized loss | |
| 3,877 | |
Convertible Debt Liability at the end of the year | |
$ | 10,911 | |
As a result of applying the fair value option, direct costs and fees
related to the convertible notes were expensed as incurred and were not deferred.
The
following table provides the fair value and contractual principal balance outstanding of the 2022 Convertible debt accounted
for under the fair value option as of December 31, 2022:
Schedule
of fair value option | |
| Amount | |
Convertible debt fair value | |
$ | 10,911 | |
2022 Convertible Notes, contractual principal outstanding | |
$ | 10,000 | |
Fair value less unpaid principal balance | |
$ | 911 | |
All convertible notes and warrants, by
written agreement, provide for a beneficial ownership limitation cap of 4.99% shares of the total issued and outstanding common stock
of the Company, at any given time.
Warrant Liability
In connection with the issuance of the
convertible note, the investors received a number of warrants equal to 30% of the face value of the convertible note divided by the VWAP
prior to the applicable closing date. The Common Stock Warrants entitles the holder to purchase one share of the Company’s Class
A ordinary shares at the exercise price of a) $15 per share or (b) 92.5% of the average of the three lowest daily VWAP of the Common
Stock during the ten trading day period, whichever is lower. There are 231,312 warrants issued upon closing of the first tranche
of the Convertible Note which have a five-year exercise period from the issuance date.
The Company recorded the Warrants at fair
value and subsequently remeasured them to fair value at the reporting date. Changes in fair value were recognized as a component of other
income (expense), net in the consolidated statements of operations. The Company recognized a gain in the consolidated statements of operations
in relation to these instruments for fiscal year 2022 as follows (in thousands). There were no warrants exercised as of
December 31, 2022.
Schedule of warrant liability | |
| | |
| |
Years ended December 31, |
|
| |
2022 | |
| |
| |
Balance at the beginning of the year | |
$ | - | |
Warrants issued during the period | |
| 1,966 | |
Unrealized Gain | |
| (1,592 | ) |
Warrant Liability at the end of the year | |
$ | 374 | |
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2022, and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The company had no such instruments at
December 31, 2021:
Schedule of fair value, liabilities measured on recurring basis | |
| |
| | |
Description: | |
Level | |
December 31, 2022 | |
Liabilities: | |
| |
| | |
Warrant liability | |
3 | |
$ | 374 | |
Convertible Notes | |
3 | |
$ | 10,911 | |
Warrant Liability
The Common Stock Warrants are accounted for as
liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting period. Changes in the fair value of
the Warrants are recorded in the statements of operations each period. Changes in fair value of the liability resulting from the cumulative
changes in instrument- specific credit risk will be presented in accumulated other comprehensive income.
The Common Stock Warrants were valued using a
Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an options pricing model are assumptions
related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest
rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of
the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is
based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information
regarding Level 3 fair value measurements for Common Stock Warrants as of December 31, 2022.
Schedule of fair value measurements for common stock warrants | |
| | |
| |
December 31, 2022 | |
Exercise price | |
$ | 15.00 | |
Share price | |
$ | 3.25 | |
Volatility | |
| 85 | % |
Expected life | |
| 4.84 | |
Risk-free rate | |
| 4.01 | % |
Dividend yield | |
| - | |
Convertible Note
The Company accounts for its convertible
note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be at the inception
of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company
has made such election for its convertible note. Using the fair value option, the convertible note, in its entirety, is
required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the note are recognized as non-cash change in the fair value of the convertible note in the statements of operations. Changes
in fair value of the liability resulting from the cumulative changes in instrument- specific credit risk will be presented in accumulated
other comprehensive income. The fair value of the conversion feature of the note was valued utilizing the Monte Carlo simulation model.
The estimated fair value of the Convertible
Notes was based on the following significant inputs:
Schedule of fair value of the convertible notes | |
| | |
| |
December 31, 2022 | |
Risk-free interest rate | |
| 4.46 | % |
Time to expiration (in years) | |
| 1.84 | |
Expected volatility | |
| 85 | % |
Dividend yield | |
| - | |
Stock price | |
$ | 3.25 | |
Face value | |
$ | 10,000,000 | |
Fixed conversion rate | |
$ | 15.00 | |
Roll-forward discount rate | |
| 5.11 | % |
On January 5, 2023, the Company entered into an amendment to the
Securities Purchase Agreement dated November 3, 2022, pursuant to which the Company and each Investor agreed, among other things, to amend
the terms and conditions of the second tranche of funding and terminate the third tranche of funding contemplated under the Purchase Agreement.
The Purchase
Agreement Amendment provides that, with respect to the Second Tranche, at any time prior to the earlier to occur of (x) April 30, 2024
and (y) the twentieth (20th) trading day following the effectiveness of the resale registration statement covering the resale
of all of the shares of the Company’s Class A common stock issuable under the first tranche of funding (the “First Tranche”),
which closed upon signing of the Purchase Agreement, each Investor shall have the right, severally and not jointly, to purchase a base
allocation of $5.0 million in Senior Secured Original Issue 10% Discount Convertible Promissory Notes (the “Notes”),
which are convertible into shares of the Company’s Class A common stock, and warrants (the “Warrants”) to purchase
a number of shares of the Company’s Class A common stock equal to 30% of the face value of the Notes divided by the volume weighted
average price at one or more Second Tranche closings (with a total base allocation of $10.0 million, in the aggregate, for all Investors)
and, solely with respect to the initial Second Tranche closing, up to an additional $5.0 million in additional Notes and related Warrants
pursuant to oversubscription rights, to the extent then available. In connection with the Purchase Agreement Amendment, the Company also
issued a Warrant to each Investor purchase up to an aggregate of 268,980 shares of the Company’s Class A common stock.
Concurrently
with the Purchase Agreement Amendment, the Company also entered into an amendment (the “Registration Rights Agreement Amendment”)
to the Registration Rights Agreement, dated as of November 3, 2022, with each Investor, pursuant to which the Company agreed to file a
registration statement (a “Registration Statement”) with the Securities and Exchange Commission registering the resale of
the shares of the Company’s Class A common stock issuable under the First Tranche within 20 days after the closing of the First
Tranche and registering the resale of the shares of the Company’s Class A common stock issuable under the Second Tranche within
two trading days after the closing of the Second Tranche, as applicable, and to cause any such Registration Statement to become effective
within 60 days after filing. On January 27, 2023, the investors exercised their rights to purchase the allowable amounts under the
agreement. The Company received net proceeds of $9 million in the transaction.
On February
21, 2023, the Company consummated a public offering of an aggregate of 8.3 million units at an effective public offering price of $1.56
per unit, resulting in aggregate gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock,
$0.0001 par value per share (“Class A common stock”), of the Company , (ii) 0.65 Series A warrants to purchase 0.65 shares
of Class A common stock (the “Series A Warrants”) and (iii) 0.75 Series B warrants to purchase 0.75 shares of Class A common
stock (the “Series B Warrants” and, together with the Series A Warrants, the “Warrants”), each such Warrant being
exercisable from time to time for one share of Class A common stock at an exercise price of $1.56. The Series A Warrants were immediately
exercisable and will expire five (5) years after the date of issuance. The Series B Warrants will not be exercisable until after
the date the Company effects a corporate reorganization of the Company or until after the date stockholder approval is obtained to
have a sufficient number of shares of Class A common stock authorized to permit the exercise in full of the Series B Warrants, and will
then expire five (5) years after the date of such corporate reorganization or stockholder approval, as applicable. The shares of Class
A common stock and Warrants included in each Unit were issued separately and were immediately separable upon issuance. The Company intends
to use the net proceeds of the offering primarily for general corporate purposes, which may include, but is not limited to, research and
development and operations, capital equipment and raw materials. In addition, the Company may be required to use up to 40% of the gross
proceeds from the offering to prepay its outstanding convertible notes at the option of the holders of such notes.
On March 13, 2023, the Company received a notice from The Nasdaq stating
that, based on Nasdaq’s review of the Company’s Market Value of Listed Securities (“MVLS”) for the last 38 consecutive
business days, the Company no longer meets the minimum MVLS requirement of $50 million for continued listing of the Company’s Class
A common stock on Nasdaq under Nasdaq Listing Rule 5450(b)(2)(A) (the “MLVS Rule”).
The Notice has no immediate effect on the listing
of the Company’s Class A common stock on Nasdaq and, in accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company will have
180 calendar days, or until September 11, 2023, to regain compliance with the MVLS Rule. To regain compliance with the MLVS Rule, the
MVLS for the Company’s shares of Class A common stock must be at least $50 million for a minimum of 10 consecutive business days
at any time during this 180-day period. If the Company regains compliance with the MLVS Rule, Nasdaq will provide the Company with written
confirmation and will close the matter.
If the Company does not regain compliance by September
11, 2023, Nasdaq will provide notice that the Company’s shares of Class A common stock are subject to delisting. In the event of
such notification, the Nasdaq rules permit the Company an opportunity to appeal Nasdaq’s determination.
There can be no assurance that the Company will
be able to regain compliance with the MVLS requirement or maintain compliance with the other Nasdaq listing requirements. The Company
is monitoring the MLVS of its shares of Class A common stock and will consider options available to it to potentially achieve compliance.
The Company may be eligible to transfer to The Nasdaq Capital Market before the expiry of the 180-day period. To qualify, the Company
would be required to meet the continued listing requirements for The Nasdaq Capital Market.
ATLIS MOTOR VEHICLES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
12,899 |
|
|
$ |
2,701 |
|
Prepaid expenses and other assets |
|
|
1,054 |
|
|
|
868 |
|
Inventory |
|
|
678 |
|
|
|
98 |
|
Total current assets |
|
|
14,631 |
|
|
|
3,667 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
2,393 |
|
|
|
2,441 |
|
Intangible assets, net |
|
|
10 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets |
|
|
722 |
|
|
|
798 |
|
Security deposits |
|
|
203 |
|
|
|
101 |
|
Vendor deposits |
|
|
88 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
18,047 |
|
|
$ |
7,038 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,383 |
|
|
$ |
1,523 |
|
Accrued expenses |
|
|
761 |
|
|
|
1,686 |
|
Payroll tax liabilities |
|
|
71 |
|
|
|
10 |
|
Contract Liability |
|
|
526 |
|
|
|
523 |
|
Current portion of finance lease liability |
|
|
119 |
|
|
|
157 |
|
Current portion of lease liability |
|
|
348 |
|
|
|
344 |
|
Total current liabilities |
|
|
3,208 |
|
|
|
4,243 |
|
|
|
|
|
|
|
|
|
|
Lease liability, net of current portion |
|
|
470 |
|
|
|
558 |
|
Convertible debt and warrant liability, at fair value |
|
|
6,442 |
|
|
|
11,285 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
10,120 |
|
|
|
16,086 |
|
Commitments and contingencies (Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit) |
|
|
|
|
|
|
|
|
Class C Stock, par value $0.0001; 15,000 shares authorized; no shares issued and outstanding at March 31, 2023; no shares issued and outstanding at December 31, 2022. |
|
|
- |
|
|
|
- |
|
Class D Stock, par value $0.0001; 41,925,572 authorized; 32,475,370 issued and outstanding at March 31, 2023; 31,125,370 issued and outstanding at December 31, 2022. |
|
|
3 |
|
|
|
3 |
|
Class A Common stock, par value $0.0001; 54,307,968 shares authorized; 32,856,398 issued and outstanding as of March 31, 2023; 9,763,838 issued and outstanding as of December 31, 2022. |
|
|
3 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
238,846 |
|
|
|
209,564 |
|
Accumulated deficit |
|
|
(230,925 |
) |
|
|
(218,616 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficit) |
|
|
7,927 |
|
|
|
(9,048 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
18,047 |
|
|
$ |
7,038 |
|
See accompanying notes to condensed consolidated
financial statements (unaudited).
ATLIS MOTOR VEHICLES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
5,963 |
|
|
|
13,955 |
|
Research and development |
|
|
2,900 |
|
|
|
1,304 |
|
General and administrative |
|
|
4,726 |
|
|
|
2,558 |
|
Advertising |
|
|
34 |
|
|
|
1,856 |
|
Total operating expenses |
|
|
13,623 |
|
|
|
19,673 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(13,623 |
) |
|
|
(19,673 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(1 |
) |
|
|
- |
|
Warrant expense |
|
|
(983 |
) |
|
|
- |
|
Other income |
|
|
17 |
|
|
|
(13 |
) |
Gain on convertible debt and warrant liability |
|
|
2,281 |
|
|
|
|
|
Total other income |
|
|
1,314 |
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(12,309 |
) |
|
$ |
(19,686 |
) |
|
|
|
|
|
|
|
|
|
Loss per share, basic |
|
$ |
(0.66 |
) |
|
$ |
(2.85 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding used in computing loss per share: |
|
|
18,726,573 |
|
|
|
6,908,545 |
|
See accompanying notes to condensed consolidated
financial statements (unaudited).
ATLIS MOTOR VEHICLES INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(Amounts in thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Class D |
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares |
|
|
Amount |
|
|
Number of
Shares |
|
|
Amount |
|
|
Additional Paid-
in Capital |
|
|
Accumulated
Equity (Deficit) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2022 |
|
|
9,763,838 |
|
|
$ |
1 |
|
- |
|
31,125,370 |
|
|
$ |
3 |
|
- |
$ |
209,564 |
|
|
$ |
(218,616 |
) |
|
$ |
(9,048 |
) |
Common Stock issued for cash |
|
|
8,297,059 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
4,920 |
|
|
|
|
|
|
|
4,921 |
|
Series D Stock Issued |
|
|
|
|
|
|
|
|
|
|
1,350,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,963 |
|
|
|
|
|
|
|
5,963 |
|
Shares issued for services |
|
|
85,934 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
72 |
|
|
|
- |
|
|
|
72 |
|
Exercise of Series A Warrants |
|
|
5,417,100 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
3,300 |
|
|
|
|
|
|
|
3,300 |
|
Exercise of Stock Options |
|
|
77,973 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
546 |
|
|
|
|
|
|
|
546 |
|
Conversion of Long Term Debt |
|
|
9,214,494 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
14,481 |
|
|
|
|
|
|
|
14,482 |
|
Net Loss |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
(12,309 |
) |
|
|
(12,309 |
) |
Balance at March 31, 2023 |
|
|
32,856,398 |
|
|
$ |
3 |
|
- |
|
32,475,370 |
|
|
$ |
3 |
|
- |
$ |
238,846 |
|
|
$ |
(230,925 |
) |
|
$ |
7,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 |
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Class C |
|
|
Class D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares |
|
|
Amount |
|
|
Number of
Shares |
|
|
Amount |
|
|
Number of
Shares |
|
|
Amount |
|
|
Securities
Receivable |
|
|
Additional Paid-
in Capital |
|
|
Accumulated
Equity (Deficit) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
|
6,854,576 |
|
|
$ |
1 |
|
|
|
5,000 |
|
|
$ |
1 |
|
|
|
25,725,370 |
|
|
$ |
2 |
|
|
$ |
- |
|
|
$ |
151,733 |
|
|
$ |
(147,935 |
) |
|
$ |
3,802 |
|
Common Stock issued for cash |
|
|
307,493 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,413 |
|
|
|
|
|
|
|
3,413 |
|
Shares issued for services and rent guarantees |
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
35 |
|
|
|
- |
|
|
|
35 |
|
Series D Stock Issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Securities Receivable |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,361 |
) |
|
|
1,361 |
|
|
|
|
|
|
|
- |
|
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,955 |
|
|
|
|
|
|
|
13,955 |
|
Options exercised to stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,686 |
) |
|
|
(19,686 |
) |
Balance at March 31, 2022 |
|
|
7,162,069 |
|
|
$ |
1 |
|
|
|
10,000 |
|
|
$ |
1 |
|
|
|
27,075,370 |
|
|
$ |
2 |
|
|
$ |
(1,361 |
) |
|
$ |
170,497 |
|
|
$ |
(167,621 |
) |
|
$ |
1,518 |
|
See accompanying notes to condensed consolidated
financial statements unaudited.
ATLIS MOTOR VEHICLES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(12,309 |
) |
|
$ |
(19,686 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
142 |
|
|
|
55 |
|
Employee stock based compensation |
|
|
5,963 |
|
|
|
13,955 |
|
Non-employee stock compensation |
|
|
72 |
|
|
|
35 |
|
Non-cash warrant expense |
|
|
984 |
|
|
|
|
|
Net change in operating lease assets and liabilities |
|
|
(6 |
) |
|
|
(4 |
) |
Gain on fair value of Convertible debt and Warrant liability |
|
|
(2,281 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
(185 |
) |
|
|
(23 |
) |
Change in inventory |
|
|
(580 |
) |
|
|
|
|
Accounts payable |
|
|
(139 |
) |
|
|
167 |
|
Accrued expenses |
|
|
(926 |
) |
|
|
312 |
|
Payroll tax liabilities |
|
|
61 |
|
|
|
(51 |
) |
Contract liability |
|
|
3 |
|
|
|
- |
|
Security deposits |
|
|
(102 |
) |
|
|
- |
|
Vendor deposits |
|
|
(67 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(9,370 |
) |
|
|
(5,253 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(94 |
) |
|
|
(174 |
) |
Payments on financing lease liability |
|
|
(40 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(134 |
) |
|
|
(174 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from public offering, net of offering costs |
|
|
12,020 |
|
|
|
3,413 |
|
Proceeds from the issuance of convertible debt |
|
|
9,000 |
|
|
|
- |
|
Payments on Convertible Debt |
|
|
(1,864 |
) |
|
|
- |
|
Proceeds from exercised stock options |
|
|
546 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
19,702 |
|
|
|
3,413 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash |
|
|
10,198 |
|
|
|
(2,014 |
) |
Cash, beginning of period |
|
|
2,701 |
|
|
|
3,146 |
|
Cash, end of period |
|
$ |
12,899 |
|
|
$ |
1,132 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
1 |
|
|
$ |
1 |
|
Supplemental disclosures of non-cash activity: |
|
|
|
|
|
|
|
|
Debt converted to equity |
|
$ |
14,481 |
|
|
$ |
- |
|
See accompanying notes to condensed consolidated
financial statements (unaudited).
ATLIS MOTOR VEHICLES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
1. |
Organization and Basis of Presentation |
Organization
Atlis Motor Vehicles Inc.
(the “Company,” “AMV” or “Atlis”), a Delaware corporation based in Mesa, Arizona, was incorporated
in 2016. Atlis is a US-based technology company manufacturing innovative battery cells and battery packs for use in advanced energy storage
systems, megawatt charging stations, and mobility products. Atlis is a pre-revenue company with a goal to design, develop and produce
a range of Electronic Vehicle (“EV”) solutions and suite services and products designed to accelerate the adoption of EVs
in the commercial and industrial markets. The Company designs, engineers, and plans to build proprietary AMV battery cells and packs,
Megawatt (MW) charging stations, energy storage solutions to support infrastructure and a suite of software and services designed to allow
an easy transition from diesel to electric for our target segment.
Basis of Presentation
The accompanying condensed
consolidated financial statements (unaudited) are presented on the same basis as the Company’s Annual Report on Form 10-K for the
year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC") on March 16, 2023 (“2022 Form 10-K")
pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Company has made its disclosures in accordance
with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Rule 8-03 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to
interim financial statements, have been included. The results for any of the interim periods are not necessarily indicative of the results
to be expected for the full year or any other period. The condensed consolidated financial statements (unaudited) should be read in conjunction
with the audited consolidated financial statements and the notes thereto in the 2022 Form 10-K.
Certain prior period balances
have been reclassified to conform to current period presentation. These reclassifications had no impact on total operating expenses, net
loss, total assets, total liabilities or shareholder deficit.
References to amounts in the
consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.
Going
Concern
The accompanying condensed
consolidated financial statements (unaudited) have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the liquidation of liabilities in the normal course of business. These financial statements do not include
any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
During the three month period
ended March 31, 2023, the Company incurred a net loss of $12.3 million and had net cash used in operating activities of $9.4 million.
As of March 31, 2023, the Company had $12.9 million in cash and an accumulated deficit of $231 million.
The Company cannot provide
any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase
the need for the Company to raise additional capital on an immediate basis. Additionally, Company cannot provide any assurance that access
to capital will be readily available when needed.
These matters, among others,
raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date these
financial statements are issued. Company management is addressing this risk by pursuing all available options for funding including accessing
the public markets through public listing. The Company plans to continue considering all avenues available to it in order to obtain the
necessary capital to be able to continue as a going concern and to execute on our business objectives including but not limited to debt
financing, private placements, public offerings and equity lines of credit. The Company’s success is dependent upon achieving its
strategic and financial objectives, including continuing to acquire capital through public markets.
|
2. |
Recent Accounting Pronouncements and Summary of Significant Accounting Policies |
Recent Accounting Pronouncements
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Due to uncertainties, actual results could differ from the estimates and
assumptions used in preparation of the consolidated financial statements.
Inventory is stated at the
lower of cost or net realizable value (“LCNRV”) and consists of raw materials and work in progress. The Company primarily
calculates inventory value actual cost on the first-in, first-out (“FIFO”) basis. NRV is the estimated selling price of inventory
in the ordinary course of business, less estimated costs of completion, disposal, and transportation. The Company assesses the valuation
of inventory and periodically adjusts its value for estimated excess and obsolete inventory based upon expectations of future demand and
market conditions, as well as damaged or otherwise impaired goods. The following table summarizes the components of Inventory on the Condensed
Consolidated Balance Sheets at March 31, 2023 (in thousands):
Schedule of inventory |
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
98 |
|
|
$ |
98 |
|
Work in process |
|
|
580 |
|
|
|
- |
|
Total Inventory |
|
$ |
678 |
|
|
$ |
98 |
|
|
4. |
Property and Equipment |
Property and equipment consist of the following
(in thousands):
Schedule of property and equipment |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
$ |
261 |
|
|
$ |
261 |
|
Office equipment |
|
|
164 |
|
|
|
114 |
|
Tools and plant equipment |
|
|
2,398 |
|
|
|
2,354 |
|
Vehicles |
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
Less—Accumulated depreciation |
|
|
(500 |
) |
|
|
(358 |
) |
Property and equipment, net |
|
$ |
2,393 |
|
|
$ |
2,441 |
|
Depreciation expense for the
three months ended March 31, 2023 and March 31, 2022, was $142 thousand and $55 thousand, respectively. Property and equipment include
tools and plant equipment obtained under capital lease in the amount of $232 thousand. The equipment is being depreciated over 5 years.
The capital lease was entered into on July 1, 2022, and is payable over 18 months at 7% interest with monthly installments of $14 thousand.
The company had an outstanding balance of $119 thousand on the capital lease at March 31, 2023.
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company recorded a valuation allowance due to the uncertainty
of future realization of federal and state net operating loss carryforwards.
At December 31, 2022, the
Company had net operating loss carryforwards of approximately $16.5 million which will carryforward through 2037. The Company’s
fiscal year 2022 and current year net operating loss will carry forward indefinitely.
In December 2017, the U.S.
Tax Cuts and Jobs Act of 2017 ("Tax Act") was enacted into law which significantly revised the Internal Revenue Code of 1986,
as amended. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including
a flat corporate tax rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income, limitation of
the deduction for newly generated net operating losses to 80% of current year taxable income and elimination of net operating loss ("NOL")
carrybacks, future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for
certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions
and credits beginning in 2018.
The Company generated an income
tax benefit of $3 million for the three months ended March 31, 2023, resulting in a cumulative income tax benefit of $53 million. The
Company has increased its valuation allowance accordingly as the Company's ability to generate sufficient taxable income to utilize its
net operating loss carry forwards is uncertain. The Company’s deferred tax balances primarily consist of its operating loss carryforwards.
The Company recognizes interest
and penalties related to uncertain tax positions in general and administrative expense. At March 31, 2023 and 2022 the Company did not
have any unrecognized uncertain tax positions or any associated interest and penalties.
Net loss per share is computed
by dividing net loss by the weighted-average number of common shares outstanding during the period, excluding shares Class D common stock
as these shares do not participate in the earnings of the Company. For the three months ended March 31, 2023, and 2022, respectively,
the Company’s basic and diluted net loss per share were the same because the Company generated a net loss for each period and potentially
dilutive securities are excluded from diluted net loss per share as a result of their anti-dilutive impact. The Company’s basic
net loss and diluted net loss per share was $0.66 and $2.85 for the three months ended March 31, 2023 and 2022, respectively.
|
7. |
Commitments and Contingencies |
Registration Rights
The holders of the convertible
notes that were issued have registration rights that required the Company to register the sale of their debt securities held by them pursuant
to a registration rights agreement, as amended, that was signed in conjunction with the convertible notes.
Legal Proceedings
The Company is not currently
subject to any material legal proceedings, nor, to the Company’s knowledge, are any material legal proceedings threatened against
the Company. From time to time, the Company may be a party to certain legal or regulatory proceedings in the ordinary course of business.
While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, management does not expect that
any such future proceedings will have a material effect on the Company’s financial condition or results of operations.
At March 31, 2023, the Company
had total Vendor deposits of $88 thousand related to deposits on equipment. Deposits on the purchase of new equipment was $68 thousand
in the first quarter of 2023.
|
9. |
Stock Based Compensation and Common Stock |
A summary of the Company’s
outstanding stock options and restricted stock units (“RSU”) as of March 31, 2023, and changes during the year is presented
below:
Schedule of stock options and restricted stock units Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
RSUs |
|
|
|
Shares |
|
|
Weighted average exercise price |
|
|
Weighted average contractual term (in years) |
|
|
Shares |
|
|
Weighted average grant date fair value |
|
Outstanding, December 31, 2022 |
|
|
45,575,047 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
90,000 |
|
|
$ |
7.00 |
|
Granted |
|
|
5,000 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(77,973 |
) |
|
|
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(25,036 |
) |
|
|
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2023 |
|
|
45,477,038 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
90,000 |
|
|
|
7.00 |
|
Exercisable, March 31, 2023 |
|
|
35,150,269 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
Common Stock
The total number of shares
of common stock the Company has authority to issue is 96,248,541 at $0.0001 par value per share.
Schedule of common stock by class:
Schedule of common stock by class |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
Class A |
|
|
32,856,398 |
|
|
|
9,763,838 |
|
Class C |
|
|
- |
|
|
|
- |
|
Class D |
|
|
32,475,370 |
|
|
|
31,125,370 |
|
Total Shares Outstanding |
|
|
65,331,768 |
|
|
|
40,889,208 |
|
|
10. |
Convertible Debt and Warrant Liability |
On November 3, 2022, the Company
issued the first tranche of the 10% Original Issue Discount Convertible Notes (“Convertible Notes”) in the aggregate principal
amount of $10.0 million and warrants (“Common Stock Warrants”) to purchase up to an aggregate of 231,312 shares of Class A
common stock for gross proceeds of $9.0 Million (the “First Tranche”) to various investors (the “Investors”) pursuant
to a securities purchase agreement dated November 3, 2022 (the “Purchase Agreement”). These Convertible Notes have a maturity
date of 24 months from the issuance date. The Convertible Notes earn interest at a rate of 10% per annum which will only accrue upon an
event of default. The Convertible Notes are convertible solely into Class A common stock of the Company at a conversion price of (a) $15 per
share or (b) 92.5% of the average of the three lowest daily VWAP of the Common Stock during the ten trading day period, whichever is lower.
These Convertible Notes are secured by a first priority security interest in all of the assets of the Company.
On January 5, 2023, the Company
entered into an amendment to the Purchase Agreement (the “Purchase Agreement Amendment”), pursuant to which the Company and
each Investor agreed, among other things, to amend the terms and conditions of the second tranche of funding (“Second Tranche”)
and terminate the third tranche of funding contemplated under the Purchase Agreement.
In connection with the Purchase
Agreement Amendment, the Company also issued a Warrant to each Investor purchase up to an aggregate of 268,980 shares of the Company’s
Class A common stock.
Concurrently with the Purchase
Agreement Amendment, the Company also entered into an amendment (the “Registration Rights Agreement Amendment”) to the Registration
Rights Agreement, dated as of November 3, 2022, with each Investor, pursuant to which the Company agreed to file a registration statement
(a “Registration Statement”) with the SEC registering the resale of the shares of the Company’s Class A common stock
issuable under the First Tranche within 20 days after the closing of the First Tranche and registering the resale of the shares of the
Company’s Class A common stock issuable under the Second Tranche within two trading days after the closing of the Second Tranche,
as applicable, and to cause any such Registration Statement to become effective within 60 days after filing.
On January 27, 2023, the Investors
exercised their rights to purchase the allowable amounts under the Purchase Agreement Amendment and the Company issued $10.0 million of
Convertible Notes and 942,034 Common Stock Warrants in the Second Tranche. The Company received net proceeds of $9 million in the transaction.
The Company elected the fair
value option to account for the Convertible Notes. As such, the Company recorded the Convertible Notes at fair value and will subsequently
measure them to fair value at each reporting date. Changes in fair value were recognized as a component of other income (expense), net
in the consolidated statements of operations. Activity as a result in changes in fair value of the Company’s convertible Notes during
the three month period ended March 31, 2023 were as follows (in thousands):
Schedule of convertible debt |
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
Balance at December 31, 2022 |
|
$ |
10,911 |
|
Convertible Debt issued during the period |
|
|
7,330 |
|
Conversions/payoffs |
|
|
(16,346 |
) |
Unrealized Loss |
|
|
2,159 |
|
Convertible Debt Liability at March 31, 2023 |
|
$ |
4,054 |
|
As a result of applying the fair value option,
direct costs and fees related to the convertible notes were expensed as incurred and were not deferred.
The following table provides
the fair value and contractual principal balance outstanding of the Convertible debt accounted for under the fair value option as of March
31, 2023 and December 31, 2022:
Schedule of fair value option |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Convertible Notes fair value |
|
$ |
4,054 |
|
|
$ |
10,911 |
|
Convertible Notes, contractual principal outstanding |
|
|
3,654 |
|
|
|
10,000 |
|
Fair value less unpaid principal balance |
|
$ |
400 |
|
|
$ |
911 |
|
All Convertible Notes and Common Stock Warrants,
by written agreement, provide for a beneficial ownership limitation cap of 4.99% shares of the total issued and outstanding common stock
of the Company, at any given time.
Warrant Liability
In connection with the issuance
of the Convertible Notes, the investors received a number of Common Stock Warrants equal to 30% of the face value of the Convertible Notes
divided by the VWAP prior to the applicable closing date. The Warrants entitle the holder to purchase one share of the Company’s
Class A common stock at the exercise price of a) $15 per share or (b) 92.5% of the average of the three lowest daily VWAP of the
Common Stock during the ten trading day period, whichever is lower. There were 231,312 Common Stock Warrants issued upon closing
of the First Tranche of the Convertible Note, 537,960 Common Stock Warrants issued upon signing the Purchase Agreement Amendment and 942,034
Common Stock Warrants issued upon closing of the Second Tranche, all of which have a five-year exercise period from the issuance
date.
On February 21, 2023, the
Company, consummated the offering of an aggregate of 8,334,000 Units at an effective public offering price of $1.56 per Unit, resulting
in aggregate gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock (or one prefunded
warrant to purchase one share of Class A common stock in lieu thereof), (ii) 0.65 Series A Warrants to purchase 0.65 shares of Class A
common stock and (iii) 0.75 Series B Warrants to purchase 0.75 shares of Class A common stock, each such Warrant being exercisable from
time to time for one share of Class A common stock at an exercise price of $1.56. The Series A Warrants were exercised following issuance.
The Series B Warrants will not be exercisable until after the date the Company effects a corporate reorganization of the Company or until
after the date stockholder approval is obtained to have a sufficient number of shares of Class A common stock authorized to permit the
exercise in full of the Series B Warrants, and will then expire five (5) years after the date of such corporate reorganization or stockholder
approval, as applicable.
There were 5,417,100 shares
of common stock issued associated with the Series A Warrants and 6,250,500 shares of common stock issued associated with the Series
B Warrants upon the closing of the Offering. The Series B Warrants are recorded as a liability at fair value. Changes to the fair value
of the B common stock warrants are recognized in the income statement. There were 6,250,500 Series B Warrants outstanding as of March
31, 2023. All of the Series A Warrants were exercised following issuance.
The Company recorded all
of the Warrants at fair value and subsequently remeasured unexercised Warrants to fair value at the reporting date. Changes in fair value
were recognized as a component of other income (expense), net in the consolidated statements of operations. The Company recognized a gain
in the consolidated statements of operations in relation to these instruments for the three months ended March 31, 2023 as follows (in
thousands).
Schedule of warrant liability |
|
|
|
|
|
|
March 31, 2023 |
|
|
|
|
|
Balance at December 31, 2022 |
|
$ |
374 |
|
Warrants issued during the period |
|
|
9,754 |
|
Series A warrants exercised during the period |
|
|
(3,300 |
) |
Unrealized gain |
|
|
(4,440 |
) |
Warrant Liability at March 31, 2023 |
|
$ |
2,388 |
|
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2023 and
December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in
thousands).
Schedule of fair value, liabilities measured on recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
Description: |
|
Level |
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability |
|
|
3 |
|
|
$ |
2,388 |
|
|
$ |
374 |
|
Convertible Notes |
|
|
3 |
|
|
|
4,054 |
|
|
|
10,911 |
|
Convertible debt and warrant liability, at fair value |
|
|
|
|
|
$ |
6,442 |
|
|
$ |
11,285 |
|
Warrant Liability
The Common Stock Warrants
and Series B Warrants are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting
period. Changes in the fair value of the Warrants are recorded in the statements of operations each period. Changes in fair value of the
liability resulting from the cumulative changes in instrument- specific credit risk will be presented in accumulated other comprehensive
income.
The Warrants were valued
using a Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an options pricing model
are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates
the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free
interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining
life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend
rate is based on the historical rate, which the Company anticipates remaining at zero.
The following tables provide
quantitative information regarding Level 3 fair value measurements for Common Stock Warrants and Series B Warrants as of March 31, 2023
and December 31, 2022.
Common Stock Warrants
Schedule of fair value measurements for common stock warrants |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Exercise price |
|
$ |
15.00 |
|
|
$ |
15.00 |
|
Share price |
|
$ |
0.58 |
|
|
$ |
3.25 |
|
Volatility |
|
|
95 |
% |
|
|
85 |
% |
Expected life |
|
|
4.76 |
|
|
|
4.84 |
|
Risk-free rate |
|
|
3.62 |
% |
|
|
4.01 |
% |
Dividend yield |
|
|
- |
|
|
|
- |
|
Series B Warrants
|
|
March 31, 2023 |
|
Exercise price |
|
$ |
1.56 |
|
Share price |
|
$ |
0.58 |
|
Volatility |
|
|
95 |
% |
Expected life |
|
|
4.89 |
|
Risk-free rate |
|
|
3.61 |
% |
Dividend yield |
|
|
- |
|
Convertible Notes
The Company accounts for its
Convertible Notes under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be
at the inception of a financial instrument to account for the instrument under the fair value option under ASC
825. The Company has made such election for its Convertible Notes. Using the fair value option, the Convertible Notes,
in their entirety, are required to be recorded at initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the notes are recognized as non-cash change in the fair value of the convertible notes in the statements
of operations. The fair value of the conversion feature of the Convertible Notes were valued utilizing the Monte Carlo simulation model.
The estimated fair value of the Convertible Notes
was based on the following significant inputs:
Schedule of fair value of the convertible notes |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Risk-free interest rate |
|
|
4.20 |
% |
|
|
4.46 |
% |
Time to expiration (in years) |
|
|
1.76 |
|
|
|
1.84 |
|
Expected volatility |
|
|
95 |
% |
|
|
85 |
% |
Dividend yield |
|
|
- |
|
|
|
- |
|
Stock price |
|
$ |
0.58 |
|
|
$ |
3.25 |
|
Face value |
|
$ |
3,654,342 |
|
|
$ |
10,000,000 |
|
Fixed conversion rate |
|
$ |
15.00 |
|
|
$ |
15.00 |
|
Roll-forward discount rate |
|
|
23.19 |
% |
|
|
5.11 |
% |
Nasdaq Bid Price Deficiency Letter
On April 11, 2023, the Company
received a notice from Nasdaq indicating that the Company is not in compliance with the $1.00 minimum bid price requirement set forth
in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Global Market. On April 11, 2023, the Company also determined that
receipt of the notice from Nasdaq constituted an event of default under its Convertible Notes. As a result, unless waived by the holders,
the Convertible Notes began accruing default interest at a rate of 10% per annum and the Company is obligated to pay to the holders $3.3
million, which amount represents 100% of the sum of (x) the outstanding principal of the Convertible Notes as of April 11, 2023 and (y)
accrued and unpaid interest thereon. The holders have the option to instead convert the amount due and payable under the event of default,
including at an alternative conversion price as described in the Convertible Notes.
Pending Holding Company Reorganization Merger
On April 17, 2023, the Company
filed a registration statement on Form S-4 indicating that the board of directors unanimously approved an agreement and plan of merger
dated April 16, 2023 among the Company, Nxu, Inc. a Delaware corporation (“Nxu”), and Atlis Merger Sub Inc., a Delaware corporation
and wholly-owned subsidiary of Nxu, pursuant to which Atlis will merge with Atlis Merger Sub. Inc. with Atlis surviving as a wholly-owned
subsidiary of Nxu Upon completion of the merger, Nxu will replace Atlis as the publicly listed corporation and will conduct all the operations
currently conducted by Atlis. On May 9, 2023, the merger was approved by the Company’s shareholders.
Nasdaq Notice of Capital Market Listing Approval
As
previously disclosed in the Company’s 2022 Form 10-K, on March 13, 2023, the Company received a notice from Nasdaq stating that,
based on Nasdaq’s review of the Company’s Market Value of Listed Securities (“MVLS”) for the last 38 consecutive
business days, the Company no longer meets the minimum MVLS requirement of $50 million for continued listing of the Company’s Class
A common stock on Nasdaq under Nasdaq Listing Rule 5450(b)(2)(A). The Company also disclosed that the Company may be eligible to transfer
to The Nasdaq Capital Market before the expiry of the 180-day period. To qualify, the Company would be required to meet the continued
listing requirements for The Nasdaq Capital Market.
On
May 11, 2023, the Company received notice from the Nasdaq that it had been approved for listing on the Nasdaq Capital Market. The transfer
will be effective at the opening of trading on or about May 15, 2023.
Up to 22,108,843 Units
(each Unit consists of One Share of Class A
Common Stock or
One Pre-Funded Warrant to Purchase One Share
of Class A Common Stock and
One Warrant to Purchase Two Shares of Class
A Common Stock)
44,217,686 Shares of Class A Common Stock
Underlying the Warrants
Nxu, Inc.
A.G.P.
Lead-Placement Agent |
Maxim Group LLC
Co-Placement Agent |
, 2023.
Until
, 2023 all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as placement agent and with respect
to their unsold allotments or subscriptions.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other
Expenses of Issuance and Distribution.
The following table sets forth costs and expenses
payable by us in connection with the registration of the securities of Nxu being registered hereby. With the exception of the SEC registration
fee and the FINRA filing fee, the amounts set forth below are estimates.
SEC registration fee |
|
$ |
2,865 |
|
FINRA filing fee |
|
|
4,400 |
|
Accounting fees and expenses |
|
|
30,000 |
|
Legal fees and expenses |
|
|
250,000 |
|
Printing and engraving expenses |
|
|
5,000 |
|
Transfer agent and registrar fees |
|
|
20,000 |
|
Miscellaneous |
|
|
20,000 |
|
Total |
|
$ |
332,265 |
|
Item 14. Indemnification
of Directors and Officers.
Section 145 of the DGCL authorizes a court to
award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities
Act.
Nxu’s bylaws provide that Nxu shall indemnify
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director or officer of Nxu, or, while a director or officer of Nxu, is or was serving at the request
of Nxu as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of Nxu, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such person’s conduct was unlawful.
Nxu’s bylaws further provide that Nxu shall
indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit
by or in the right of Nxu to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of
Nxu, or, while a director or officer of Nxu, is or was serving at the request of Nxu as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of Nxu; except that
no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable
to Nxu unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity by Nxu for such expenses which the Court of Chancery or such other court shall deem proper.
Any of the foregoing indemnification provisions
(unless ordered by a court) shall be made by Nxu only as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because such person has met the applicable standard of conduct described above,
which determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority
vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of
such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall
be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of
Nxu. To the extent, however, that a present or former director or officer of Nxu has been successful on the merits or otherwise in defense
of any action, suit or proceeding or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses
(including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization
in the specific case.
Expenses, including without limitation attorneys’
fees, incurred by a current or former director or officer in defending any civil, criminal, administrative or investigative action, suit
or proceeding to which such person is a party or is threatened to be made a party or otherwise involved as a witness or otherwise by reason
of the fact that such person is or was a director or officer of Nxu, or, while a director or officer of Nxu, is or was serving at the
request of Nxu as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, shall be paid by Nxu in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such current or former director or officer to repay such amount if it shall ultimately be determined that such person
is not entitled to be indemnified by Nxu.
In addition, Nxu assumed certain customary indemnification agreements
that Nxu’s predecessor, Atlis Motor Vehicles Inc., entered into with each of its directors and officers. The assumption of these
agreements require Nxu to indemnify these individuals to the fullest extent permitted under Delaware law and to advance expenses incurred
as a result of any proceeding against them as to which they could be indemnified.
Nxu purchased and maintains directors’ and officers’ liability
insurance that insures Nxu’s directors and officers against the cost of defense, settlement or payment of a judgement in some circumstances
and insures Nxu against its obligations to indemnify the directors and officers.
The foregoing is only a general summary of certain
aspects of Delaware law and Nxu’s certificate of incorporation and bylaws dealing with indemnification of directors and officers
and does not purport to be complete. It is qualified in its entirety by reference to the detailed provisions of those sections of the
DGCL referenced above and Nxu’s certificate of incorporation and bylaws.
Item 15. Recent
Sales of Unregistered Securities.
Regulation D Offering
During the past three years, the Predecessor issued
an aggregate of 280,195 shares of Class A common stock to various investors at a weighted average share price of $9.04 per share for aggregate
proceeds of $2,532,761, under the Company’s Regulation D funding campaign.
Regulation A Offering
During the past three years, the Predecessor issued
an aggregate of 1,665,996 shares of Class A common stock to various investors at a weighted average share price of $7.63, 871,938 shares
of Class A common stock at a weighted average share price of $16.64 and 143,864 bonus shares of Class A common stock issued at a weighted
average share price of $0, for aggregate gross proceeds of $14,506,595, under the terms of the Regulation A offering which became qualified
on September 23, 2022.
Private Placement
On November 3, 2022, the Predecessor entered into
the Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (collectively, the “Investors”),
pursuant to which it agreed to issue to the Investors, for gross proceeds of up to $27,000,000, Senior Secured Original Issue 10% Discount
Convertible Promissory Notes (the “notes”) in the aggregate principal amount of up to $30,000,000 and warrants to purchase
a number of shares of the Predecessor’s Class A common stock equal to 30% of the face value of the notes divided by the volume
weighted average price, in three tranches.
Under the first tranche of funding, which closed
upon signing of the Purchase Agreement, for gross proceeds of $9,000,000, the Predecessor issued notes to the Investors in the aggregate
principal amount of $10,000,000 (the “First Tranche Notes”) and warrants to purchase up to an aggregate of 231,312 shares
of the Predecessor’s Class A common stock (the “First Tranche Warrants”).
On January 5, 2023, the Predecessor entered into
an amendment (the “Amendment”) to the Purchase Agreement with each Investor, pursuant to which the Predecessor and each Investor
agreed, among other things, to amend the terms and conditions of the second tranche of funding and terminate the third tranche of funding
contemplated under the Purchase Agreement.
The Amendment provides that, with respect to the
second tranche of funding, at any time prior to the earlier to occur of (x) April 30, 2024 and (y) the twentieth (20th) trading
day following the effectiveness of the resale registration statement covering the resale of all of the shares of the Predecessor’s
Class A common stock issuable under the first tranche of funding, each Investor shall have the right, severally and not jointly, to purchase
a base allocation of $5.0 million in notes and warrants to purchase a number of shares of the Predecessor’s Class A common stock
equal to 30% of the face value of the notes divided by the volume weighted average price at one or more closings (with a total base allocation
of $10.0 million, in the aggregate, for all Investors) and, solely with respect to the initial closing, up to an additional $5.0 million
in additional notes and related warrants pursuant to oversubscription rights, to the extent then available. In connection with the Amendment,
the Predecessor also issued top-up warrants to the Investors to purchase up to an aggregate of 537,960 shares of the Predecessor’s
Class A common stock (the “Top-Up Warrants”).
On January 27, 2023, the Investors elected to purchase notes
and warrants pursuant to the second tranche of funding. Under the second tranche of funding, which closed on January 31, 2023, for gross
proceeds of $9,000,000, we issued notes to the Investors in the aggregate principal amount of $10,000,000 (the “Second Tranche Notes”
and together with the First Tranche Notes, the “Notes”) and warrants to purchase up to an aggregate of 942,034 shares of our
Class A common stock (the “Second Tranche Warrants” and collectively with the First Tranche Warrants and the Top-Up Warrants,
the “Warrants”).
A registration statement registering the resale of the shares of Class
A common stock issuable upon the conversion of the First Tranche Notes and exercise of the First Tranche Warrants went effective on January
20, 2023. A registration statement registering the resale of the shares of Class A common stock issuable upon the conversion of the Second
Tranche Notes and exercise of the Second Tranche Warrants and the Top-Up Warrants went effective on February 9, 2023. As of July 6, 2023,
there was an aggregate of approximately $1.4 million of Notes outstanding and 1,711,306 Warrants outstanding.
The Notes mature 24 months after issuance, do not initially bear any interest and
are convertible into shares of the Predecessor’s Class A common stock at an initial conversion price equal to the lesser of a fixed
price per share of Class A common stock ($0.6403 per share in the case of the First Tranche Notes and $15.00 per share in the case of
the Second Tranche Notes) or 92.5% of the average of the three lowest daily volume weighted average prices of the Class A common stock
during the ten trading days immediately preceding the notice of voluntary conversion of the notes, subject to adjustment as further specified
in the notes. The Notes will be fully repayable in cash upon maturity. In addition, the Investors have the option of prepaying up to 20%
of the issuance amount of a subsequent financing.
The Warrants are exercisable at an initial exercise price equal to the lesser of
a fixed price per share ($0.5910 per share in the case of the First Tranche Warrants, $0.5825 per share in the case of the Top-Up Warrants
and $15.00 per share in the case of the Second Tranche Warrants) or 92.5% of the average of the three lowest daily volume weighted average
prices of the Class A common stock during the ten trading days immediately preceding the notice of exercise, subject to adjustment. The
Warrants carry a 5-year term and, if not exercised, will terminate.
The securities were issued and sold in reliance
upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) promulgated
thereunder since, among other things, the issuance was made without any public solicitation to a limited number of accredited investors
and/or qualified institutional buyers and were acquired for investment purposes only.
Item 16. Exhibits
and Financial Statement Schedules.
A list of exhibits included as part of this registration
statement is set forth in the Exhibit Index which is hereby incorporated by reference.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this
registration statement: |
| (a) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933, as amended; |
| (b) | To reflect in the prospectus any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (c) | To include any material information with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such information in the registration statement. |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, as amended,
each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act to any purchaser, each
prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use. |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act to
any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (a) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required
to be filed pursuant to Rule 424; |
| (b) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant
or used or referred to by the undersigned registrant; |
| (c) | The portion of any other free writing prospectus relating to the offering containing material information
about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (d) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (6) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
EXHIBIT INDEX
Exhibit No. |
|
Description |
1.1* |
|
Form of Placement Agency Agreement. |
|
|
|
2.1 |
|
Agreement and Plan of Merger, dated April 16, 2023, by and among Atlis Motor Vehicles Inc., a Delaware corporation, Nxu, Inc., a Delaware corporation, and Atlis Merger Sub Inc., a Delaware corporation (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-4 filed with the SEC on April 17, 2023). |
|
|
|
3.1 |
|
Certificate of Incorporation of Nxu, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 filed with the SEC on April 17, 2023). |
|
|
|
3.2 |
|
Bylaws of Nxu, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 filed with the SEC on April 17, 2023). |
|
|
|
4.1 |
|
Form of Senior Secured Original Issue 10% Discount Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Predecessor’s Current Report on Form 8-K filed with the SEC on November 4, 2022). |
|
|
|
4.2 |
|
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.2 to the Predecessor’s Current Report on Form 8-K filed with the SEC on November 4, 2022). |
|
|
|
4.3** |
|
Form of Warrant Agency Agreement. |
|
|
|
4.4* |
|
Form of Common Stock Purchase Warrant. |
|
|
|
4.5** |
|
Form of Pre-Funded Warrant. |
|
|
|
5.1* |
|
Opinion of Winston & Strawn LLP as to the validity of the securities being registered. |
|
|
|
10.1+** |
|
Board of Directors Agreement, dated May 11, 2023, between the Company and Britt Ide. |
|
|
|
10.2+** |
|
Board
of Directors Agreement, dated May 11, 2023, between the Company and Caryn Nightengale. |
|
|
|
10.3+** |
|
Board of Directors Agreement, dated June 15, 2023, between the Company and Jessica Billingsley. |
|
|
|
10.4+** |
|
Employment Agreement, dated as of May 12, 2023, between the Company and Mark Hanchett. |
|
|
|
10.5+** |
|
Employment
Agreement, dated as of May 12, 2023, between the Company and Annie Pratt. |
|
|
|
10.6+** |
|
Employment
Agreement, dated as of May 12, 2023, between the Company and Apoorv Dwivedi. |
|
|
|
10.7† |
|
Amended Collaboration Agreement, dated July 28, 2022, between the Predecessor and Australian Manufactured Vehicles (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 filed with the SEC on January 4, 2023). |
|
|
|
10.8 |
|
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed with the SEC on January 4, 2023). |
|
|
|
10.9 |
|
Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Predecessor’s Current Report on Form 8-K filed with the SEC on November 4, 2022). |
|
|
|
10.10 |
|
Form of Amendment No. 1 to Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Predecessor’s Current Report on Form 8-K filed with the SEC on January 6, 2023). |
|
|
|
10.11 |
|
Form of Securities Agreement (incorporated by reference to Exhibit 10.2 to the Predecessor’s Current Report on Form 8-K filed with the SEC on November 4, 2022). |
+ Management contract or compensatory plan or arrangement.
† Portions of the exhibit have been omitted pursuant to Item
601(b)(10) of Regulation S-K. The Company agrees to furnish a supplemental copy with any omitted information to the SEC upon request.
* Filed herewith.
** Previously filed.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Mesa, State of Arizona, on August 4, 2023.
|
NXU, INC. |
|
|
|
|
|
|
|
By: |
/s/ Mark Hanchett |
|
|
Mark Hanchett |
|
|
Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on August 4, 2023.
Signatures |
|
Title |
|
|
|
/s/ Mark Hanchett |
|
Chief Executive Officer and Chairman |
Mark Hanchett |
|
(Principal Executive Officer) |
|
|
|
* |
|
Chief Financial Officer |
Apoorv Dwivedi |
|
(Principal Financial and Accounting Officer) |
|
|
|
* |
|
President and Director |
Annie Pratt |
|
|
|
|
|
* |
|
Director |
Britt Ide |
|
|
|
|
|
* |
|
Director |
Caryn Nightengale |
|
|
*By: |
/s/ Mark Hanchett |
|
|
Mark Hanchett, as attorney-in-fact |
|
II-7
Exhibit 1.1
[ ],
2023
Nxu, Inc.
1828 N. Higley Road, Suite 116
Mesa, Arizona 85205
Attn: Chief Executive Officer
Dear Mr. Hanchett:
This
letter (the “Agreement”) constitutes the agreement between A.G.P./Alliance
Global Partners, as lead placement agent (the “Lead Agent”), and Maxim
Group LLC as co-placement agent (the “Co-Agent” and collectively with
the Lead Agent, the “Placement Agent”), and Nxu, Inc., a company incorporated
under the laws of the State of Delaware (the “Company”), that the Placement
Agent shall serve as the placement agent for the Company, on a “reasonable best efforts”
basis, in connection with the proposed placement (the “Placement”) of
units, with each unit consisting of a combination of (i) one share (a “Share”
and, collectively, the “Shares”) of the Company’s Class A common
stock, par value $0.0001 per share (the “Common Stock”), or one pre-funded
warrant to purchase one share of Common Stock (the “Pre-Funded Warrants”),
depending on the beneficial ownership percentage of the purchaser of the Common Stock following
its purchase, and (ii) one warrant to purchase two shares of Common Stock of the Company
(the “Common Warrants” and together with the Pre-Funded Warrants, the
“Warrants,” and collectively with the Shares, the “Securities”).
The Securities shall be offered and sold under the Company’s registration statement
on Form S-1 (File No. 333-272793) (the “Registration Statement”). The
Securities actually placed by the Placement Agent are referred to herein as the “Placement
Agent Securities.” The terms of the Placement shall be mutually agreed upon by
the Company, the Placement Agent, and the purchasers (each, a “Purchaser”
and collectively, the “Purchasers”); provided, however, that nothing
herein shall obligate the Company to issue any Securities or complete the Placement. The
Company expressly acknowledges and agrees that the Placement Agent’s obligations hereunder
are on a reasonable best efforts basis only and that the execution of this Agreement does
not constitute a commitment by the Placement Agent to purchase the Securities and does not
ensure the successful placement of the Securities or any portion thereof or the success of
the Placement Agent with respect to securing any other financing on behalf of the Company.
The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers
on its behalf in connection with the Placement, with approval from the Company. Certain affiliates
of the Placement Agent may participate in the Placement by purchasing some of the Placement
Agent Securities. The sale of Placement Agent Securities to any Purchaser will be evidenced
by a securities purchase agreement (the “Purchase Agreement”) between
the Company and such Purchaser, in a form reasonably acceptable to the Company and the Purchaser.
Subject to the terms and conditions hereof, payment of the purchase price for, and delivery
of, the Placement Agent Securities shall be made at one or more closings (each a “Closing”
and the date on which each Closing occurs, a “Closing Date”). Capitalized terms
that are not otherwise defined herein have the meanings given to such terms in the Purchase
Agreement. Prior to the signing of any Purchase Agreement, officers of the Company will be
available to answer inquiries from prospective Purchasers.
SECTION
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY; COVENANTS OF THE COMPANY.
A. Representations
of the Company. With respect to the Placement Agent Securities, each of the representations and warranties (together with any related
disclosure schedules thereto) and covenants made by the Company to the Purchasers in the Purchase Agreement in connection with the Placement,
is hereby incorporated herein by reference into this Agreement (as though fully restated herein) and is, as of the date of this Agreement
and as of the Closing Date, hereby made to, and in favor of, the Placement Agent. In addition to the foregoing, the Company represents
and warrants that there are no affiliations with any FINRA member firm among the Company's officers, directors or, to the knowledge of
the Company, any five percent (5.0%) or greater stockholder of the Company, except as set forth in the Purchase Agreement and SEC Reports.
B. Covenants
of the Company. The Company covenants and agrees to continue to retain (i) a firm of independent PCAOB registered public accountants
for a period of at least two (2) years after the Closing Date and (ii) a competent transfer agent with respect to the Placement Agent
Securities for a period of three (3) years after the Closing Date. Furthermore, the Company covenants and agrees that for thirty (30)
days after the Closing Date, the Company shall be restricted from issuing certain securities pursuant to the terms of Section 4.10 of
the Purchase Agreement.
SECTION 2. REPRESENTATIONS
OF THE PLACEMENT AGENT. The Placement Agent represents and warrants that it (i) is a member in good standing of FINRA, (ii) is registered
as a broker/dealer under the Exchange Act, (iii) is licensed as a broker/dealer under the laws of the United States of America, applicable
to the offers and sales of the Placement Agent Securities by the Placement Agent, (iv) is and will be a corporate body validly existing
under the laws of its place of incorporation, (v) has full power and authority to enter into and perform its obligations under this Agreement.
The Placement Agent will immediately notify the Company in writing of any change in its status with respect to subsections (i) through
(v) above. The Placement Agent covenants that it will use its reasonable best efforts to conduct the Placement hereunder in compliance
with the provisions of this Agreement and the requirements of applicable law.
SECTION
3. COMPENSATION. In consideration of
the services to be provided for hereunder, the Company shall pay to the (a) Lead Agent or
its designee a total cash fee equal to (1) five percent (5.0%) of the gross proceeds from
the total amount of Placement Agent Securities sold in the Placement to investors other than
those set forth on Schedule 1 hereto (the “Tail Investors”) plus
(2) three percent (3.0%) of the gross proceeds from the total amount of Placement Agent Securities
sold in the Placement to the Tail Investors and (b) Co-Agent or its designee a total cash
fee equal to (1) five percent (5.0%) of the gross proceeds from the total amount of Placement
Agent Securities sold in the Placement to the Tail Investors and (2) three percent (3.0%)
of the gross proceeds from the total amount of Placement Agent Securities sold in the Placement
to investors other than the Tail Investors (collectively, the “Cash Fee”).
The Company shall also pay to the Co-Agent or its designee an advisory fee in cash equal
to $50,000 (the “Advisory Fee”) The Cash Fee and the Advisory Fee shall
be paid and delivered to the Lead Agent and the Co-Agent, as applicable, on the Closing Date.
The Company shall not be required to pay the Placement Agent any fees or expenses except
for the Cash Fee, the Advisory Fee and the reimbursement of (i) accountable
legal fees and other reasonable and documented out-of-pocket expenses incurred by the Placement
Agent in connection with the transaction in the amount of up to $75,000 and (ii) non-accountable
expenses equal to $10,000. The Placement Agent reserves the right to reduce any item
of compensation or adjust the terms thereof as specified herein in the event that a determination
shall be made by FINRA to the effect that the Placement Agent’s aggregate compensation
is in excess of FINRA Rules or that the terms thereof require adjustment.
SECTION 4. INDEMNIFICATION.
A. To
the extent permitted by law, with respect to the Placement Agent Securities, the Company will indemnify the Placement Agent and its affiliates,
stockholders, directors, officers, employees, members and controlling persons (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including
the reasonable fees and expenses of counsel), relating to or arising out of its activities hereunder or pursuant to this Agreement, except
to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) are found in a final judgment
(not subject to appeal) by a court of law to have resulted from a Placement Agent’s fraud, willful misconduct or gross negligence
in executing this Agreement or performing the services described herein. For the avoidance of doubt, this Section 4 is not intended to
govern claims between the parties hereto.
B. Promptly
after receipt by the Placement Agent of notice of any claim or the commencement of any action or proceeding with respect to which the
Placement Agent is entitled to indemnity hereunder, the Placement Agent will notify the Company in writing of such claim or of the commencement
of such action or proceeding, but failure to so notify the Company shall not relieve the Company from any obligation it may have hereunder,
except and only to the extent such failure results in the forfeiture by the Company of substantial rights or defenses or prejudice to
the Company’s substantial rights or defenses. If the Company so elects or is requested by the Placement Agent, the Company will
assume the defense of such action or proceeding and will employ counsel reasonably satisfactory to the Placement Agent and will pay the
fees and expenses of such counsel. Notwithstanding the preceding sentence, the Placement Agent will be entitled to employ its own counsel
separate from counsel for the Company and from any other party in such action if counsel for the Placement Agent reasonably determines
that it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both the Company
and the Placement Agent. In such event, the reasonable fees and disbursements of no more than one such separate counsel will be paid
by the Company, in addition to fees of local counsel. The Company will have the right to settle the claim or proceeding, provided that
the Company will not settle any such claim, action or proceeding without the prior written consent of the Placement Agent, which will
not be unreasonably withheld or delayed.
C. The
Company agrees to notify the Placement Agent promptly of the assertion against it or any other person of any claim or the commencement
of any action or proceeding relating to a transaction contemplated by this Agreement.
D. If
for any reason the foregoing indemnity is unavailable to the Placement Agent or insufficient to hold the Placement Agent harmless, then
the Company shall contribute to the amount paid or payable by the Placement Agent as a result of such losses, claims, damages or liabilities
in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the Placement
Agent on the other, but also the relative fault of the Company on the one hand and the Placement Agent on the other that resulted in
such losses, claims, damages or liabilities, as well as any relevant equitable considerations. The amounts paid or payable by a party
in respect of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees and expenses
incurred in defending any litigation, proceeding or other action or claim. Notwithstanding the provisions hereof, the liable Placement
Agent’s share of the liability hereunder shall not be in excess of the amount of fees actually received, or to be received, by
the Placement Agent under this Agreement (excluding any amounts received as reimbursement of expenses incurred by the Placement Agent).
E. These
indemnification provisions shall remain in full force and effect whether or not the transaction contemplated by this Agreement is completed
and shall survive the termination of this Agreement, and shall be in addition to any liability that the Company might otherwise have
to any indemnified party under this Agreement or otherwise.
SECTION 5. ENGAGEMENT
TERM. The Placement Agent’s engagement hereunder will be until the earlier of (i) August 8, 2023 and (ii) the Closing Date
(such date, the “Termination Date.”) In the event, however, in the course of the Placement Agent’s performance
of due diligence it deems, it necessary to terminate the engagement, the Placement Agent may do so prior to the Termination Date. The
Company may elect to terminate the engagement hereunder for any reason prior to the Termination Date but will remain responsible for
fees pursuant to Section 3 hereof with respect to the Placement Agent Securities if sold in the Placement. Notwithstanding anything to
the contrary contained herein, the provisions concerning the Company’s obligation to pay any fees actually earned pursuant to Section
3 hereof and the provisions concerning confidentiality, indemnification and contribution contained herein will survive any expiration
or termination of this Agreement. If this Agreement is terminated by the Company prior to the completion of the Placement, all fees due
to the Placement Agent shall be paid by the Company to the Placement Agent on or before the Termination Date (in the event such fees
are earned or owed as of the Termination Date). The Placement Agent agrees not to use any confidential information concerning the Company
provided to the Placement Agent by the Company for any purposes other than those contemplated under this Agreement.
SECTION 6. PLACEMENT
AGENT INFORMATION. The Company agrees that any information or advice rendered by the Placement Agent in connection with this engagement
is for the confidential use of the Company only in its evaluation of the Placement and, except as otherwise required by law, the Company
will not disclose or otherwise refer to the advice or information in any manner without the Placement Agent’s prior written consent.
SECTION 7. NO
FIDUCIARY RELATIONSHIP. This Agreement does not create, and shall not be construed as creating, rights enforceable by any person
or entity not a party hereto, except those entitled hereto by virtue of the indemnification provisions hereof. The Company acknowledges
and agrees that the Placement Agent is not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities
to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of the Placement
Agent hereunder, all of which are hereby expressly waived.
SECTION 8. CLOSING.
The obligations of the Placement Agent, and the Closing hereunder, are subject to the accuracy, when made and on the Closing Date, of
the representations and warranties on the part of the Company contained herein and in the Purchase Agreement, to the performance by the
Company of its obligations hereunder, and to each of the following additional terms and conditions, except as otherwise disclosed to
and acknowledged and waived by the Placement Agent:
A. All
corporate proceedings and other legal matters incident to the authorization, form, execution, delivery and validity of each of this Agreement,
the Placement Agent Securities, and all other legal matters relating to this Agreement and the transactions contemplated hereby with
respect to the Placement Agent Securities shall be reasonably satisfactory in all material respects to the Placement Agent.
B. The
Placement Agent shall have received from outside counsel to the Company such counsel’s written opinion with respect to the Placement
Agent Securities, addressed to the Placement Agent and the Purchasers and dated as of the Closing Date, in form and substance reasonably
satisfactory to the Placement Agent.
C. The
Common Stock shall be registered under the Exchange Act and, as of the Closing Date, the Common Stock shall be listed and admitted and
authorized for trading on the Trading Market or other applicable U.S. national exchange and satisfactory evidence of such action shall
have been provided to the Placement Agent. The Company shall have taken no action designed to, or likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act or removing or suspending from trading the Common Stock from the Trading
Market or other applicable U.S. national exchange, nor has the Company received any information suggesting that the Commission or the
Trading Market or other U.S. applicable national exchange is contemplating terminating such registration or listing other than as previously
disclosed by the Company in its public filings with the Commission.
D. No
action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental
agency or body which would, as of the Closing Date, prevent the issuance or sale of the Placement Agent Securities or materially and
adversely affect or potentially and adversely affect the business or operations of the Company; and no injunction, restraining order
or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which
would prevent the issuance or sale of the Placement Agent Securities or materially and adversely affect or potentially and adversely
affect the business or operations of the Company.
E. The
Company shall have entered into a Purchase Agreement with each of the Purchasers of the Placement Agent Securities and such agreements
shall be in full force and effect and shall contain representations, warranties and covenants of the Company as agreed upon between the
Company and the Purchasers.
F. FINRA
shall have raised no objection to the fairness and reasonableness of the terms and arrangements of this Agreement. In addition, the Company
shall, if requested by the Placement Agent, make or authorize Placement Agent’s counsel to make on the Company’s behalf,
any filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, if applicable, with respect to the Placement and
pay all filing fees required in connection therewith.
If any of the conditions
specified in this Section 8 shall not have been fulfilled when and as required by this Agreement, all obligations of the Placement Agent
hereunder may be cancelled by the Placement Agent at, or at any time prior to, the Closing Date. Notice of such cancellation shall be
given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.
SECTION 9.
GOVERNING LAW. This Agreement will be governed by, and construed in accordance with, the laws of the State of New
York applicable to agreements made and to be performed entirely in such State. This Agreement may not be assigned by either party without
the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and
their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement
or any transaction or conduct in connection herewith is waived. Any dispute arising under this Agreement may be brought into the courts
of the State of New York or into the Federal Court located in New York, New York and, by execution and delivery of this Agreement, the
Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts.
Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by delivering a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If either
party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorney's fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
SECTION 10. ENTIRE
AGREEMENT/MISCELLANEOUS. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes
all prior agreements and understandings, relating to the subject matter hereof. If any provision of this Agreement is determined to be
invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision
of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except
by an instrument in writing signed by the Placement Agent and the Company. The representations, warranties, agreements and covenants
contained herein shall survive the Closing Date of the Placement and delivery of the Placement Agent Securities. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format file (including
any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures
and Records Act or other applicable law, e.g., www.docusign.com), such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page
were an original thereof.
SECTION 11. NOTICES.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is sent to the email
address specified on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a business day, (b) the next business
day after the date of transmission, if such notice or communication is sent to the email address on the signature pages attached hereto
on a day that is not a business day or later than 6:30 p.m. (New York City time) on any business day, (c) the third business day following
the date of mailing, if sent by U.S. internationally recognized air courier service, or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.
SECTION 12. PRESS
ANNOUNCEMENTS. The Company agrees that the Placement Agent shall, on and after the Closing Date, have the right to reference the
Placement and the Placement Agent’s role in connection therewith in the Placement Agent’s marketing materials and on its
website and to place advertisements in financial and other newspapers and journals, in each case at its own expense.
[The remainder of this
page has been intentionally left blank.]
Please confirm that the foregoing correctly
sets forth our agreement by signing and returning to the Placement Agents the enclosed copy of this Agreement.
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Very truly yours, |
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A.G.P./ALLIANCE GLOBAL PARTNERS |
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By: |
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Name: |
Thomas Higgins |
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Title: |
Managing Director |
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Address for notice: |
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590 Madison Avenue 28th Floor |
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New York, New York 10022 |
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Attn: Thomas Higgins |
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Email: thiggins@allianceg.com |
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MAXIM GROUP LLC |
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By: |
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Name: |
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Title: |
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Address for notice: |
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300 Park Avenue, 16th Floor |
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New York, New York 10022 |
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Attn: Legal Department |
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Email: jsiegel@maximgrp.com |
[Signature Page to Placement Agency Agreement.]
Accepted and Agreed to as of
the date first written above:
NXU, INC. |
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By: |
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Name: |
Mark Hanchett |
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Title: |
Chief Executive Officer |
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Address for notice: |
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1828 N. Higley Road, Suite 116 |
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Mesa, Arizona 85205 |
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Attention: Mark Hanchett |
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Email: mark@nxuenergy.com |
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[Signature Page to Placement Agency Agreement.]
7
Exhibit 4.4
COMMON STOCK PURCHASE WARRANT
NXU, INC.
Warrant Shares: _______ |
Issue Date: [ ], 2023 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject
to the limitations on exercise and the conditions hereinafter set forth, at any time or times on or after the date hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on the three-year anniversary of the Initial Exercise Date
(the “Termination Date”) but not thereafter, to subscribe for and purchase from Nxu, Inc., a Delaware corporation
(the “Company”), up to ______ shares of Class A common stock, par value $0.0001 per share (the “Common Stock”)
(as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant shall initially be issued and maintained
in the form of a security held in book-entry form and the Depository Trust Company or its nominee (“DTC”) shall initially
be the sole registered holder of this Warrant, subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant
to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated [ ], 2023, among the Company and the purchasers signatory thereto.
Section 2. Exercise.
(a) Exercise
of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy
or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the
“Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising
the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver
the aggregate Exercise Price for the number of Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and
the Warrant has been exercised in full, at which time, the Holder shall surrender this Warrant to the Company for cancellation within
three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares purchasable hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder by the number of Warrant Shares equal to the applicable number of Warrant
Shares purchased in connection with such partial exercise. The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one
(1) Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
Notwithstanding the foregoing in this
Section 2(a), a Holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant held in book-entry
form through DTC (or another established clearing corporation performing similar functions), shall effect exercises made pursuant to
this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction form for exercise,
complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable), subject
to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in
which case this sentence shall not apply.
(b) Exercise
Price. The exercise price per share of Common Stock under this Warrant shall be $[ ], subject to adjustment hereunder
(the “Exercise Price”).
(c) Cashless
Exercise. Notwithstanding anything to the contrary set forth herein, if at the time of exercise hereof there is no effective registration
statement registering, or the prospectus contained therein is not available for the issuance of, the Warrant Shares to the Holder, then
this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on
the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and
delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a)
hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated
under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported
by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise
if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours
thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section
2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;
(B) = the Exercise Price of this Warrant,
as adjusted hereunder; and
(X) = the number of Warrant Shares that
would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash
exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise,
the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the
registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the
price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the VWAP of the Common Stock for such date (or the nearest preceding
date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices
for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities
then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Trading Day” means any day on which
the Trading Market is open for trading, including any day on which the Trading Market is open for trading for a period of time less than
the customary time.
“VWAP” means, for any date, the price
determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02
p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading
on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
(d) Mechanics
of Exercise.
i. Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted to the Holder by
crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit
or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there
is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or
(B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of the Warrant Shares, registered in the
Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares set forth in the Notice of
Exercise to the address specified by the Holder in such Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days
after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price
to the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder
shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price
(other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading
Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver
to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of
the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third
Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares
are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent (the “Transfer Agent”)
that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard
Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary
Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing,
with respect to any Notice(s) of Exercise delivered on or prior to 9:00 a.m. (New York City time) on the Initial Exercise Date, which
may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver, or cause to be delivered,
the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date, and the Initial Exercise
Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than
in the case of a cashless exercise) is received by such Warrant Share Delivery Date. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time will be less than the amount stated
on the face hereof.
ii.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of
a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if
the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for the Warrant Shares so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence satisfactory to the Company with respect to
the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional Warrant Shares or scrip representing fractional Warrant Shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise,
the Company shall, at its election and in lieu of the issuance of such fractional Warrant Share, either (i) pay cash in an amount equal
to such fraction multiplied by the Exercise Price or (ii) round up to the next whole Warrant Share.
vi. Charges,
Taxes and Expenses. The issuance and delivery of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder,
the Notice of Exercise shall be accompanied by the Assignment Form, attached hereto as Exhibit B, duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto and this Warrant shall be surrendered to the Company and, if any portion of this Warrant remains unexercised, a new Warrant in
the form hereof shall be delivered to the assignee. The Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
(e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
all or any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance upon
exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other
Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial
ownership of the shares of Common Stock would or could be aggregated with the Holder’s for the purposes of Section 13(d) (such
Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which
such determination is being made, but shall exclude the number of the Warrant Shares which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation,
any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this
Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the
Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject
to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s
most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since
the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be [4.99%/9.99%] of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant
Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number
of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant
held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
(a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii)
subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable
upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant remains unchanged.
Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) [RESERVED]
(c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells
any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as
a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided,
however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding
the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in
the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
(e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person, (ii) the Company (or any Subsidiary), directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company’s
assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of Common
Stock or more than 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or recapitalization of shares of Common Stock or any compulsory
share exchange pursuant to which the shares of Common Stock are effectively converted into or exchanged for other securities, cash or
property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement)
with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common
Stock or more than 50% of the voting power of the common equity of the Company (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option,
exercisable at any time concurrently with, or within thirty (30) days after, the consummation of the Fundamental Transaction (or, if
later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying
to the Holder, as described below, an amount of consideration equal to the Black Scholes Value (as defined below) of the remaining unexercised
portion of this Warrant on the date of the consummation of such Fundamental Transaction, provided, however, that, if the Fundamental
Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall
only be entitled to receive from the Company or any Successor Entity, as of the date of the consummation of such Fundamental Transaction
the same type or form of consideration (and in the same proportion), valued at the Black Scholes Value of the unexercised portion of
this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction,
whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given
the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided further,
that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders
of Common Stock will be deemed to have received shares of the Successor Entity (which Successor Entity may be the Company following such
Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on
the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined
as of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable contemplated Fundamental
Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from
the HVT function on Bloomberg (determined utilizing a 365-day annualization factor) as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater
of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered
in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the announcement
of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the
Trading Day of the Holder’s request pursuant to this Section 3(d) and (D) a remaining option time equal to the time between the
date of the public announcement of the applicable Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The
payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five Business Days of the Holder’s
election (or, if later, on the effective date of the Fundamental Transaction). The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the Holder prior to such Fundamental Transaction and shall, at
the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of
shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior
to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations
of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.
(f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share of Common Stock, as the case
may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice
to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company declares a dividend (or any other distribution in whatever form) on the shares of
Common Stock, (B) the Company declares a special nonrecurring cash dividend on or a redemption of the shares of Common Stock, (C) the
Company authorizes the granting to all holders of the shares of Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company is required in connection with a
Fundamental Transaction, or (E) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains,
material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly
set forth herein.
(h) Voluntary
Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time while this Warrant
is outstanding, reduce the then-current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors
of the Company in its sole discretion.
Section 4. Transfer of Warrant.
(a) Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of
this Warrant substantially in the form attached hereto as Exhibit B duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of
this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which
case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an
assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised
by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
(b) New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and
shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant
Register. The Company shall cause the Warrant Agent to register this Warrant, upon records to be maintained by the Warrant Agent
for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company
and the Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
(a) No
Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends
or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set
forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to
Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required
to net cash settle an exercise of this Warrant.
(b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include
the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make
and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted
herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized
Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
shares of Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares underlying this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of
issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued, and the Warrant Shares, delivered, as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares underlying this Warrant, which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the
Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any shares of Common Stock above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (iii) use commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would
result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall
obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.
(e) Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
(f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and if the Holder does
not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of
this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.
(i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase
price of any share of Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors
of the Company.
(j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate.
(k) Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable
by the Holder or holder of Warrant Shares.
(l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
(o) Warrant
Agency Agreement. If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject
to the Warrant Agency Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agency
Agreement, the provisions of this Warrant shall govern and be controlling.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant
to be executed by its officer thereunto duly authorized as of the date first above indicated.
NXU, INC. |
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EXHIBIT A
NOTICE OF EXERCISE
TO: NXU, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
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lawful money of the United States; or |
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permitted the cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c). |
(3) Please
issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
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The Warrant Shares shall be delivered to the following DWAC Account Number: |
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
Name: |
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18
Exhibit 5.1
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NORTH
AMERICA SOUTH AMERICA EUROPE ASIA |
800
Capitol St., Suite 2400
Houston, TX 77002-2925
T +1 (713) 651-2600
F +1 (713) 651-2700 |
August 4, 2023
Nxu, Inc.
1828 N. Higley Road, Suite 116
Mesa, AZ 85205
Re: Nxu,
Inc. – Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special counsel to Nxu, Inc.,
a Delaware corporation (the “Company”), in connection with the preparation of the Company’s registration statement
on Form S-1 initially filed with the U.S. Securities and Exchange Commission (the “Commission”) on June 21, 2023 (the
“Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”).
The Registration Statement relates to the offer and sale of up to 22,108,843 units (the “Units”), each Unit consisting
of (i) one share of Class A common stock of the Company, $0.0001 par value per share (the “Shares”), or one
pre-funded warrant (the “Pre-Funded Warrants”), each such Pre-Funded Warrant being exercisable from time to time for
one Share (the “Pre-Funded Warrant Shares”), and (ii) one warrant (the “Warrants”), each such Warrant
being exercisable from time to time for two Shares (the “Warrant Shares”). The Units, the Shares, the Pre-Funded Warrants,
the Pre-Funded Warrant Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities.”
This opinion letter is
being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K promulgated under the Securities Act.
In rendering the opinions
set forth below, we examined and relied upon such certificates, corporate records, agreements, instruments and other documents, and examined
such matters of law, that we considered necessary or appropriate as a basis for the opinions. In rendering the opinions set forth below,
we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration
Statement, (ii) the Certificate of Incorporation of the Company, as in effect on the date hereof,
(iii) the Bylaws of the Company, as in effect on the date hereof, (iv) the Form of Warrant, (v) the Form of Pre-Funded Warrant
and (vi) such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth below. In our examination,
we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents submitted to us as copies and the authenticity of the originals
of such latter documents. As to any facts material to the opinion expressed herein that we did not independently establish or verify,
we have relied upon oral or written statements and representations of officers and other representatives of the Company and others. In
rendering the opinions set forth below, we have further assumed that, before the issuance of the Securities, the Registration Statement
will have become effective under the Securities Act.
Based upon the foregoing
and subject to the assumptions, qualifications and limitations set forth herein, we are of the opinion that:
1. The
Shares have been duly authorized and, when issued by the Company as described in the Registration Statement, will be validly issued,
fully paid and non-assessable.
2. The
Units, the Pre-Funded Warrants and the Warrants have been duly authorized and, when issued by the Company as described in the Registration
Statement, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their
terms.
3. The
Pre-Funded Warrant Shares and the Warrant Shares have been duly authorized and, when issued by the Company upon exercise of, and in accordance
with the provisions of, the Pre-Funded Warrants and the Warrants, respectively, will be validly issued, fully paid and nonassessable.
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August
4, 2023 Page 2
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The opinions expressed
herein are based upon and limited to the laws of the State of New York and the General Corporation Law of the State of Delaware, including
the statutory provisions, the applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the foregoing.
We express no opinion herein as to any other laws, statutes, regulations or ordinances. The opinions expressed herein that are based
on the laws of the State of New York are limited to the laws generally applicable in transactions of the type covered by the Registration
Statement.
We hereby consent to the
filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption “Legal
Matters” in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we are
experts within the meaning of the Securities Act or the rules and regulations of the Commission or that this consent is required by Section
7 of the Securities Act.
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Very truly
yours, |
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/s/ Winston & Strawn
LLP |
Exhibit 10.15
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT
(this “Agreement”) is dated as of [ ], 2023, between Nxu, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors
and assigns, a “Purchaser” and collectively the “Purchasers”).
WHEREAS, subject to the terms and conditions
set forth in this Agreement and pursuant to an effective registration statement under the Securities Act (as defined below), the Company
desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities
of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and each Purchaser agree as follows:
Section 1.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings
set forth in this Section 1.1:
“Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.
“Action” shall have
the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means
any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with
a Person as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors”
means the board of directors of the Company.
“Business Day” means
any day other than Saturday, Sunday, or other day on which banking institutions in the State of New York are authorized or required by
law to remain closed.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount at the Closing and (ii) the Company’s
obligations to deliver the Securities, in each case, at the Closing have been satisfied or waived, but in no event later than the second
(2nd) Trading Day following the date hereof.
“Commission” means
the United States Securities and Exchange Commission.
“Common Stock” means
the Class A common stock of the Company, par value $0.0001 per share.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Common Warrants”
means the common warrants delivered to the Purchasers at Closing in accordance with Section 2.2(a) hereof, which common warrants shall
be exercisable immediately upon issuance and may be exercised during a period of three years commencing from their issuance, in the form
of Exhibit A attached hereto.
“Company Counsel”
means Winston & Strawn LLP, with offices located at 800 Capitol Street, Suite 2400, Houston, Texas 77002-2925.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently herewith.
“Disclosure Time”
means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight
(New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, unless
otherwise instructed as to an earlier time by the Placement Agent, and (ii) if this Agreement is signed between midnight (New York City
time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof, unless
otherwise instructed as to an earlier time by the Placement Agent.
“DVP” shall have
the meaning ascribed to such term in Section 2.1.
“Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance”
means the issuance of (a) shares of Common Stock, restricted share units or options to employees, consultants, officers, or directors
of the Company pursuant to any share or option plan in existence as of the date hereof; (b) shares of Common Stock upon the exercise
or exchange of or conversion of securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since
the date of this Agreement to increase the number of such securities or to extend the term of such securities, but, for the avoidance
of doubt, may be amended to decrease the exercise price, exchange price or conversion price of such securities; (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that
such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require
or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.10(a) herein, and
provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in securities (for avoidance of doubt,
securities issued to a venture arm of a strategic investor shall be deemed an “Exempt Issuance”); (d) issuances of shares
of Common Stock to consultants or vendors of the Company, provided that such securities are issued as “restricted securities”
(as defined in Rule 144) and carry no registration rights; (e) shares of Common Stock to existing holders of the Company’s securities
in compliance with the terms of agreements entered into with, or instruments issued to, such holders, provided that such securities are
issued as “restricted securities” (as defined in Rule 144) and carry no registration rights (other than shares of Common
Stock issuable to holders of the Company’s outstanding convertible notes or warrants upon the conversion of such notes or exercise
of such warrants, as registered under the Registration Statements on Form S-1 (File Nos. 333-269120, 333-269492 and 333-272793), provided
that such securities have not been amended since the date of this Agreement to increase the number of such securities or to extend the
term of such securities, but, for the avoidance of doubt, may be amended to decrease the exercise price, exchange price or conversion
price of such securities; and (f) warrants (and shares of Common Stock issuable upon exercise of such warrants) in compliance with the
terms of the GEM Facility.
“FCPA” means the
Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” means generally
accepted accounting principles in the United States.
“GEM Facility” means the
Company’s Share Subscription Facility, dated June 25, 2021, with GEM Global Yield, LLC SCS and GEM Yield Bahamas Limited, as may
be amended, modified or supplemented from time to time.
“General Disclosure Package”
means the Preliminary Prospectus and any free writing prospectus (as defined in the Securities Act) identified on Schedule A hereto,
taken together.
“Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(z).
“Intellectual Property Rights”
shall have the meaning ascribed to such term in Section 3.1(p).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Lock-Up Agreement”
means the Lock-Up Agreement, dated as of the date hereof, by and among the Company and the directors, officers and 5% stockholders of
the Company, in the form of Exhibit C attached hereto.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).
“Per Share Purchase Price”
equals $[ ], subject to adjustment for reverse and forward share splits, share dividends, share combinations and other similar transactions
of shares of Common Stock that occur between the date hereof and the Closing Date.
“Per Pre-Funded Warrant Purchase
Price” equals $0.0001, subject to adjustment for reverse and forward share splits, share dividends, share combinations and
other similar transactions relating to shares of Common Stock that occur after the date of this Agreement.
“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Placement Agent”
means A.G.P./Alliance Global Partners.
“Placement Agent Counsel”
means Pryor Cashman LLP with offices located at 7 Times Square, New York, New York 10036.
“Pre-Funded Warrants”
means, collectively, the warrants delivered to the Purchasers at Closing in accordance with Section 2.2(a) hereof, which Pre-Funded Warrants
shall be exercisable immediately upon issuance and shall expire when exercised in full, in the form of Exhibit B attached hereto.
“Preliminary Prospectus”
means the preliminary prospectus included in the Registration Statement at the time the Registration Statement is declared effective.
“Proceeding” means
an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
“Prospectus” means
the final prospectus filed pursuant to the Registration Statement.
“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.
“Registration Statement”
means the effective registration statement with the Commission on Form S-1 (File No. 333-[ ]), as amended, which registers the sale of
the Securities and includes any Rule 462(b) Registration Statement.
“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).
“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time,
or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time,
or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 462(b) Registration Statement”
means any registration statement prepared by the Company registering additional Securities, which was filed with the Commission on or
prior to the date hereof and became automatically effective pursuant to Rule 462(b) promulgated by the Commission pursuant to the Securities
Act.
“SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities” means
the Shares, the Warrants, and the Warrant Shares.
“Securities Act”
means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Shares” means the
shares of Common Stock issued and issuable to each Purchaser pursuant to this Agreement.
“Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating
and/or borrowing shares of Common Stock).
“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for shares of Common Stock, and Pre-Funded Warrants, purchased hereunder
as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.
“Subsidiary” means
any subsidiary of the Company as set forth in the Exhibit 21.1 to the Registration Statement and shall, where applicable, also include
any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Trading Day” means
a day on which the principal Trading Market is open for trading.
“Trading Market”
means any of the following markets or exchanges on which the shares of Common Stock are listed or quoted for trading on the date in question:
the NYSE American, The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select Market, or the New York Stock Exchange
(or any successors to any of the foregoing).
“Transaction Documents”
means this Agreement, the Warrants, the Lock-Up Agreements and all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated hereunder.
“Variable Rate Transaction”
shall have the meaning ascribed to such term in Section 4.10(b).
“Warrants” means,
collectively, the Common Warrants and the Pre-Funded Warrants.
“Warrant Shares”
means, collectively, the shares of Common Stock issuable upon exercise of the Warrants.
Section 2.
PURCHASE AND SALE
2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, (i) the number of shares of Common Stock set forth under the heading “Subscription Amount”
on the Purchaser’s signature page hereto, at the Per Share Purchase Price, and (ii) Common Warrants exercisable for shares of Common
Stock as calculated pursuant to Section 2.2(a); provided, however, that, to the extent that a Purchaser determines, in its sole
discretion, that such Purchaser (together with such Purchaser’s Affiliates, and any Person acting as a group together with such
Purchaser or any of such Purchaser’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation, or as
such Purchaser may otherwise choose, in lieu of purchasing shares of Common Stock, such Purchaser may elect to purchase Pre-Funded Warrants
in such manner to result in the full Subscription Amount being paid by such Purchaser to the Company. The “Beneficial Ownership
Limitation” shall be 4.99% (or, at the election of the Purchaser, 9.99%) of the number of shares of Common Stock, in each case,
outstanding immediately after giving effect to the issuance of the Securities on the Closing Date.
Each Purchaser’s Subscription
Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for Delivery Versus Payment (“DVP”)
settlement with the Company or its designees. The Company shall deliver to each Purchaser its respective Shares and Warrants as determined
pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 at the Closing.
Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur remotely via the exchange
of documents and signatures or such other location as the parties shall mutually agree. Unless otherwise directed by the Placement Agent,
settlement of the Shares shall occur via DVP (i.e., on the Closing Date, the Company shall issue the Shares registered in the Purchasers’
names and addresses and released by the Depositary directly to the account(s) at the Placement Agent identified by each Purchaser; upon
receipt of such Shares, the Placement Agent shall promptly electronically deliver such Shares to the applicable Purchaser, and payment
therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company). Notwithstanding anything herein
to the contrary, if at any time on or after the time of execution of this Agreement by the Company and an applicable Purchaser through,
and including the time immediately prior to the Closing (the “Pre-Settlement Period”), such Purchaser sells to any
Person all, or any portion, of any Securities to be issued hereunder to such Purchaser at the Closing (collectively, the “Pre-Settlement
Shares”), such Person shall, automatically hereunder (without any additional required actions by such Purchaser or the Company),
be deemed to be a Purchaser under this Agreement unconditionally bound to purchase, and the Company shall be deemed unconditionally bound
to sell, such Pre-Settlement Shares to such Person at the Closing; provided, that the Company shall not be required to deliver any Pre-Settlement
Shares to such Purchaser prior to the Company’s receipt of the Subscription Amount for such Pre-Settlement Shares hereunder; and
provided, further, that the Company hereby acknowledges and agrees that the forgoing shall not constitute a representation or covenant
by such Purchaser as to whether or not such Purchaser will elect to sell any Pre-Settlement Shares during the Pre-Settlement Period.
The decision to sell any shares of Common Stock by such Purchaser shall solely be made at the time such Purchaser elects to effect any
such sale, if any. To the extent that a Purchaser’s beneficial ownership of the Shares would otherwise be deemed to exceed the
Beneficial Ownership Limitation, such Purchaser’s Subscription Amount shall automatically be reduced as necessary in order to comply
with this paragraph. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise (as defined in the Prefunded Warrants)
delivered on or prior to 9:00 a.m. (New York City time) on the Closing Date, which may be delivered at any time after the time of execution
of the this Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on
the Closing Date and the Closing Date shall be the Warrant Share Delivery Date (as defined in the Prefunded Warrants) for purposes hereunder.
2.2 Deliveries.
(a) On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) the
Company’s wire instructions, on Company letterhead and executed by the Company’s Chief Executive Officer or Chief Financial
Officer;
(iii) subject to the
provision of Section 2.1 that settlement of the Shares shall occur via DVP, a copy of the irrevocable instructions to the Transfer Agent
instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system
shares of Common Stock equal to the portion of such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered
in the name of such Purchaser;
(iv) for each Purchaser
of Pre-Funded Warrants pursuant to Section 2.1, a Pre-Funded Warrant registered in the name of such Purchaser to purchase up to a number
of shares of Common Stock equal to the portion of such Purchaser’s Subscription Amount applicable to Pre-Funded Warrants divided
by the sum of the Per Pre-Funded Warrant Purchase Price, subject to adjustment therein;
(v) the
Preliminary Prospectus and the Prospectus (which may be delivered in accordance with Rule 172 under the Securities Act);
(vi) a Common
Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to [ ]% of such Purchaser’s
shares of Common Stock or Pre-Funded Warrants, as applicable, with an exercise price equal to $[ ] per share, subject to adjustment therein;
(vii) the duly
executed Lock-Up Agreements; and
(viii) a legal opinion
of Company Counsel, in form reasonably acceptable to the Placement Agent and the Purchasers.
(b) On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following:
(i) this
Agreement duly executed by such Purchaser; and
(ii) such Purchaser’s
Subscription Amount with respect to the Securities purchased by such Purchaser, which shall be made available for DVP settlement with
the Company or its designees.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect,
in all respects) when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as
of a specific date therein in which case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed;
and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect,
in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of
a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations,
covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or any Trading Market,
and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there
have occurred after the date of this Agreement any material outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable
judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.
Section 3.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section
of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries.
The Company owns, directly or indirectly, all of the capital shares or other equity interests of each Subsidiary, free and clear of any
Liens, except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.
(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing,
and, if applicable under the laws of the jurisdiction in which they are formed, in good standing under the laws of the jurisdiction of
its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective
certificate or articles of incorporation, bylaws, operating agreement, or other organizational or charter documents. Each of the Company
and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document, (ii) material adverse effect on the results of operations,
assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further
action is required by the Company, the Board of Directors, a committee of the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document
to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with
the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d) No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which
it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles
of incorporation, bylaws, operating agreement, or other organizational or charter documents, or (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar
adjustments acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals. Except as set forth in Schedule 3.1(e), the Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents,
other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus,
(iii) notices and/or application(s) to and approvals by each applicable Trading Market for the listing of the applicable Securities for
trading thereon in the time and manner required thereby, and (iv) filings required by the Financial Industry Regulatory Authority (“FINRA”)
(collectively, the “Required Approvals”).
(f) Issuance
of the Securities; Registration. The Shares and Warrant Shares are duly authorized and, when issued and paid for in accordance with
the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens imposed
by the Company. The Warrants are duly authorized and binding obligations of the Company under the law of the jurisdiction governing the
Warrants, and, when issued in accordance with this Agreement, will be duly and validly issued, and free and clear of all Liens imposed
by the Company. The Company has reserved from its duly authorized share capital the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements
of the Securities Act, which became effective on [ ], 2023, including the Prospectus,
and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is effective
under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Preliminary Prospectus or the Prospectus has been issued by the Commission and no proceedings for that purpose
have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and
regulations of the Commission, shall file the Preliminary Prospectus or the Prospectus with the Commission pursuant to Rule 424(b). At
the time the Registration Statement and any amendments thereto became effective as determined under the Securities Act, at the date of
this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material
respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus
and any amendments or supplements thereto, at the time the Preliminary Prospectus, the Prospectus or any amendment or supplement thereto
was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and
did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
(g) Capitalization.
The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall
also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant
to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the Exchange Act. Except as set forth on Schedule 3.1(g),
no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(g), and as a result of the purchase and sale of
the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company
or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale
of the Securities will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. There are no outstanding securities or instruments of the Company or any Subsidiary with any provision
that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company
or any Subsidiary. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is
or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any share appreciation rights or
“phantom share” plans or agreements or any similar plan or agreement. All of the outstanding shares of the Company are duly
authorized, validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities laws
where applicable, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except for the Required Approvals, no further approval or authorization of any stockholder, the Board of
Directors or others is required for the issuance and sale of the Securities. Except as set forth on Schedule 3.1(g), there are
no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s share capital to which
the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
(h) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one
year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such materials) (the
foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Preliminary Prospectus
and the Prospectus, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received
a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in
accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position
of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Except as set forth on Schedule 3.1(i), since the date of the latest
financial statements filed by the Company with the SEC, the General Disclosure Package and the Prospectus, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and strategic acquisitions and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any of its shares and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company equity incentive plans. The Company does not have pending
before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by
this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses,
prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading
Day prior to the date that this representation is made.
(j) Litigation.
There has not been, and to the knowledge of the Company, there is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”). None of the Actions set forth on Schedule 3.1(j), (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents, the Shares or the Warrant Shares, or (ii) could, if there
were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty, which could result in a Material Adverse Effect. There has not been,
and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company
or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees
is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company
nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary,
is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third
party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state,
local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement
or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default
or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority
or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality
and safety and employment and labor matters, except in each case of (i), (ii) and (iii) as could not have or reasonably be expected to
result in a Material Adverse Effect.
(m) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution
or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata),
including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have
received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses;
and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and
(iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Registration Statement,
the General Disclosure Package and the Prospectus, except where the failure to possess such certificates, authorizations or permits could
not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
(o) Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good
and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment
of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries
are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance in all
material respects.
(p) Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights
necessary or required for use in connection with their respective businesses as described in the Registration Statement, the General
Disclosure Package and the Prospectus and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any
of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement except as would not reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the Registration
Statement, the General Disclosure Package or the Prospectus, a written notice of a claim or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material
Adverse Effect. To the actual knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage in an amount deemed commercially reasonable. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(r) Transactions
with Affiliates and Employees. Except as set forth in Schedule 3.1(r), none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any
transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to
or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, shareholder, member or partner, in each case in excess of $120,000 other than for (i) payment
of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company or a Subsidiary
and (iii) other employee benefits, including share option agreements under any share option plan of the Company.
(s) Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in material compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and
designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s
rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of
the Company and the Subsidiaries as of the end of the period covered by the most recently filed Form 10-Q under the Exchange Act (such
date, the “Evaluation Date”). The Company presented in its most recently filed Form 10-Q under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as
of the Evaluation Date. Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, since the
Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange
Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the
Company and its Subsidiaries.
(t) Certain
Fees. Except for fees payable to the Placement Agent, no brokerage or finder’s fees or commissions are or will be payable by
the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction Documents (for the avoidance of doubt, the foregoing shall not
include any fees and/or commissions owed to the Depositary). Other than for Persons engaged by any Purchaser, if any, the Purchasers
shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
(u) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be
or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The
Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration
under the Investment Company Act of 1940, as amended.
(v) Registration
Rights. Except as set forth on Schedule 3.1(v), no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company or any Subsidiary.
(w) Listing
and Maintenance Requirements. The shares of Common Stock are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration. Except as set forth in the Registration Statement, the General Disclosure Package and the Prospectus, the Company
has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock are or have been
listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.
The shares of Common Stock are currently eligible for electronic transfer through The Depository Trust Company or another established
clearing corporation and the Company is current in payment of the fees to The Depository Trust Company (or such other established clearing
corporation) in connection with such electronic transfer.
(x) Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation or the laws of its state of incorporation that is or could
become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’
ownership of the Securities.
(y) Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms
that it has not provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in the Prospectus. The Company understands and confirms
that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure
furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and
the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects
and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made and when made, not misleading. The Company acknowledges and believes, to its best knowledge,
that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(z) No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither
the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of any applicable stockholder approval provisions of any Trading Market
on which any of the securities of the Company are listed or designated.
(aa) Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as
now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of
the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when
such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any
facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa) sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For
the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess
of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s
consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due
under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to
any Indebtedness.
(bb) Tax Compliance.
Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect,
the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign tax returns,
reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments
and charges, fines or penalties that are material in amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its financial statements provision reasonably adequate for the payment of all material tax liability of which
has not been finally determined and all material taxes for periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company or of any Subsidiary know of no basis for any such claim.
(cc) Foreign Corrupt
Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person
acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign
or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.
(dd) Accountants.
The Company’s independent registered public accounting firm is Prager Metis CPAs LLP.
To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange
Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for
the fiscal year ending December 31, 2023.
(ee) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.
The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s
decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
(ff) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except
for Sections 3.2(f) and 4.12 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked
by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company,
or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii)
past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of
the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the shares of Common
Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party
in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage
in hedging activities at various times during the period that the Securities are outstanding, and (z) such hedging activities (if any)
could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities
are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction
Documents.
(gg) Regulation M Compliance.
The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale
of any of the shares of Common Stock, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the
shares of Common Stock, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities
of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement
of the shares of Common Stock.
(hh) Reserved
(ii) Stock
Option Plans. Each stock option granted by the Company under the Company’s stock incentive plans was granted (i) in accordance
with the terms of such plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such
stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option
plan has been backdated.
(jj) Cybersecurity.
Except as would not, individually or in the aggregate, have a Material Adverse Effect, (i) the Company and the Subsidiaries are presently
in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental
or regulatory authority, internal policies and contractual obligations relating to the privacy and security of the Company’s or
any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective
customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively,
“IT Systems and Data”) and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation
or modification; (ii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain
and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems
and Data; and (iii) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with commercially
reasonable industry standards and practices.
(kk) Office of Foreign
Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee
or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).
(nn) Money Laundering.
The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes
and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary
with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate
as of such date):
(a) Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited liability company
or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited
by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable
law.
(b) Understandings
or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement
or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty
not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with
applicable federal and state securities laws).
(c) Purchaser
Status and Experience. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each
date on which it exercises any Warrants, it will be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7), (a)(8), (a)(9), (a)(12), or (a)(13) under the Securities Act. Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is
able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such
investment.
(d) Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has
any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or
sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first
received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms,
which terms include definitive pricing terms, of the transactions contemplated hereunder and ending immediately prior to the execution
hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives,
including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser
has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms
of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to locating or borrowing shares order to effect Short Sales or similar transactions
in the future.
(e) Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits
and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results
of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity
to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary
to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement
Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect to the Securities
nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation
as to the Company or the quality of the Securities and the Placement Agent and any Affiliate may have acquired non-public information
with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities
to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.
(f) Independent
Advice. Each Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company
to the Purchaser in connection with the purchase of the Securities constitutes legal, tax or investment advice.
The Company acknowledges and agrees
that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation
of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute
a representation or warranty, or preclude any actions, except as set forth in this Agreement, with respect to locating or borrowing shares
in order to effect Short Sales or similar transactions in the future.
Section 4.
OTHER AGREEMENTS OF THE PARTIES
4.1 Legends.
The shares of Common Stock and the Warrant Shares shall be issued free of legends. If at any time following the date hereof the Registration
Statement is not effective or is not otherwise available for the sale of the shares of Common Stock, the Warrants or the Warrant Shares,
the Company shall immediately notify the holders of the Warrants in writing that such registration statement is not then effective and
thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale of the Shares,
the Warrants or the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue,
or any Purchaser to sell, any of the Shares, the Warrants or the Warrant Shares in compliance with applicable federal and state securities
laws). The Company shall use commercially reasonable best efforts to keep a registration statement (including the Registration Statement)
registering the issuance of the Warrant Shares effective during the term of the Warrants.
4.2 Furnishing
of Information; Public Information. Until the earliest of the time that (i) no Purchaser owns Securities, or (ii) the Common Warrants
have expired, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act
and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed
by the Company after the date hereof pursuant to the Exchange Act, even if the Company is not then subject to the reporting requirements
of the Exchange Act, except in the event that the Company consummates (in each case on or after the date as of which the Purchasers may
sell all of their Securities without restriction or limitation pursuant to Rule 144): (a) any transaction or series of related transactions
as a result of which any Person (together with its Affiliates) acquires then outstanding securities of the Company representing more
than fifty percent (50%) of the voting control of the Company; (b) a merger or reorganization of the Company with one or more other entities
in which the Company is not the surviving entity; or (c) a sale of all or substantially all of the assets of the Company, where the consummation
of such transaction results in the Company no longer being subject to the reporting requirements of the Exchange Act.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations
of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Securities
Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of
the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto,
with the Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents
to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the
Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and
agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any
of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers
or any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue
any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities
law in connection with the filing of final Transaction Documents with the Commission, and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted
under this clause (b).
4.5 Stockholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser
is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Purchasers.
4.6 Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information that the Company reasonably believes constitutes material
non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the
confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information
to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any
duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or
Affiliates, or a duty to the Company, and of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates
not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law.
To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current
Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.7 Use of Proceeds.
The Company shall use the net proceeds from the sale of the Securities hereunder as set forth in the Prospectus, and shall not use such
proceeds: (a) for the redemption of any shares of Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding
litigation or (c) in violation of FCPA or OFAC regulations or similar applicable regulations.
4.8 Indemnification
of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack
of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements,
court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result
of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement
or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity (including a Purchaser
Party’s status as an investor), or any of them or their respective Affiliates, any stockholder of the Company who is not an Affiliate
of such Purchaser Party, arising out of or relating to any of the transactions contemplated by the Transaction Documents (unless such
action is based upon a material breach of such Purchaser Party’s representations, warranties, covenants or agreements made by such
Purchaser Party in any Transaction Document or any conduct by a Purchaser Party which is finally judicially determined to constitute
fraud, gross negligence or willful misconduct). If any action shall be brought against any Purchaser Party in respect of which indemnity
may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser
Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of counsel to the applicable Purchaser Party (which may be internal
counsel), a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company
will not be liable to any Purchaser Party under this Agreement for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed, or the extent that a loss, claim, damage, or liability is
attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents. The indemnification and other payment obligations required by this Section
4.8 shall be made by periodic payments of the amount thereof during the course of the investigation, defense, collection, enforcement
or action, as and when bills are received or are incurred; provided, that if any Purchaser Party is finally judicially determined not
to be entitled to indemnification or payment under this Section 4.8, such Purchaser Party shall promptly reimburse the Company for any
payments that are advanced under this sentence. The indemnity agreements contained herein shall be in addition to any cause of action
or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.9 Listing
of Shares. The Company hereby agrees to use commercially reasonable best efforts to maintain the listing or quotation of the shares
of Common Stock on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to
list or quote all of the shares of Common Stock on such Trading Market and promptly secure the listing of all of the shares of Common
Stock on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading
Market, it will then include in such application all of the shares of Common Stock and Warrant Shares, and will take such other action
as is necessary to cause all of the shares of Common Stock and Warrant Shares to be listed or quoted on such other Trading Market as
promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of the Common Stock
on a Trading Market and will comply in all material respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market. The Company agrees to use commercially reasonable efforts to maintain the eligibility of the shares
of Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including,
without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection
with such electronic transfer.
4.10 Subsequent Equity
Sales.
(a) From the date hereof until thirty (30) days
after the Closing Date, neither the Company nor any Subsidiary shall (i) issue, enter into any agreement to issue or announce the issuance
or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or amendment or
supplement thereto, other than (A) the Prospectus Supplement, (B) a registration statement on Form S-8 in connection with any employee
benefit plan, (C) one or more post-effective amendments to existing registration statements on Form S-1 or (D) one or more resale registration
statements in compliance with the terms of the GEM Facility.
(b) From the date hereof until ninety (90) days
after the Closing Date, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company
or any of its Subsidiaries of shares of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable
Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt
or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of
Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the Common Stock at any time after the initial issuance of such debt or equity securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company
or the market for shares of Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited
to, an equity line of credit or an “at-the-market offering”, whereby the Company may issue securities at a future determined
price regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether such agreement is subsequently
canceled. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy
shall be in addition to any right to collect damages.
(c) Notwithstanding the foregoing, this Section
4.10 shall not apply (1) in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance and (2)
following the ninety (90) day period after the Closing Date, to an at-the-market offering with the Placement Agent as sales agent.
4.11 Equal Treatment
of Purchasers. No consideration (including any modification of the Transaction Documents) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as
a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition
or voting of the shares of Common Stock or otherwise.
4.12 Certain Transactions
and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate
acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the
Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement
are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain
the confidentiality of the existence and terms of this transaction. Notwithstanding the foregoing, and notwithstanding anything contained
in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to
the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade
in the securities of the Company to the Company or its Subsidiaries after the issuance of the initial press release as described in Section
4.4. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.
4.13 Exercise Procedures.
The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order
to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise
their Warrants. Without limiting the preceding sentences, no ink-original Notice of Exercise shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required in order to exercise the Warrants.
The Company shall honor exercises of the Warrants and shall deliver shares of Common Stock and/or Warrant Shares in accordance with the
terms, conditions and time periods set forth in the Transaction Documents.
4.14 Reservations
of Shares. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times,
free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue shares of Common
Stock pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.15 Lock-Up Agreements.
The Company shall not amend, modify, waive or terminate any provision of any of the Lock-Up Agreements without the prior written consent
of the Placement Agent, except to extend the term of the lock-up period, and shall enforce the provisions of each Lock-Up Agreement in
accordance with its terms. If any party to a Lock-Up Agreement breaches any provision of a Lock-Up Agreement, the Company shall promptly
use its best efforts to seek specific performance of the terms of such Lock-Up Agreement.
Section 5.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever
on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been
consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination
will affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees and
Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all Depositary Fees (including, without limitation,
any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser),
stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
5.3 Entire Agreement.
The Transaction Documents, together with the exhibits and schedules thereto, the Preliminary Prospectus and the Prospectus, contain the
entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via facsimile
at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication
is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the
party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature
pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material,
non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in
the case of an amendment, by the Company and the Purchasers who purchased at least 50.1% in interest of the sum of (i) the Shares and
(ii) the Pre-Funded Warrant Shares initially issuable upon exercise of the Pre-Funded Warrants based on the initial Subscription Amounts
hereunder, or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought; provided, that
if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of
at least 50.1% in interest of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of
any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay
or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment
or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable
rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment
effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.
5.6 Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any
of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser
(other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns
or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities,
by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No Third-Party
Beneficiaries. The Placement Agent shall be the third-party beneficiary of the representations and warranties of the Company in Section
3.1 and the representations and warranties of the Purchasers in Section 3.2. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8 and this Section 5.8.
5.9 Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts
of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.8, the prevailing party in such action, suit or proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for the applicable statute
of limitations.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that
the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery
of a “.pdf” format data file (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic
Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com), such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect
as if such facsimile or “.pdf” signature page was an original thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission and
Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the
other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw,
in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of an exercise of a Warrant,
the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently
with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s
right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing
such restored right).
5.14 Replacement of
Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of
and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and
hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.16 Payment Set Aside.
To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces
or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation,
any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation
or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred.
5.17 Independent Nature
of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance
of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document,
and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For
reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through
the Placement Agent Counsel, the legal counsel of the Placement Agent. Placement Agent Counsel does not represent any of the Purchasers
and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood
and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser,
solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.18 Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
5.19 Liquidated Damages.
The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall
have been canceled.
5.20 Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to
share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions relating to shares of Common Stock that occur after the date of this
Agreement.
5.21 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated
above.
NXU, INC. |
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Address for Notice: |
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By: |
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Name: |
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Email: |
Title: |
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Fax: |
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With a copy to (which shall not constitute notice): |
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Winston
& Strawn
800 Capital Street, Suite 2400
Houston, Texas 77002-2925
Attn: James R. Brown
Email: JRBrown@winston.com |
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGES FOR PURCHASERS FOLLOW.]
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned
have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated
above.
Name of Purchaser:
Signature of Authorized Signatory of Purchaser:
Name of Authorized Signatory:
Title of Authorized Signatory:
Email Address of Authorized Signatory:
Facsimile Number of Authorized Signatory:
Address for Notice to Purchaser:
Address for Delivery of Warrant Shares to the Purchaser
(if not same address for notice):
DWAC for Common Stock:
Subscription Amount: $___________________
Shares of Common Stock: ___________________
Shares of Common Stock underlying the Pre-Funded Warrants:
________ Beneficial Ownership Blocker o 4.99% or o
9.99%
Warrant Shares underlying the Common Warrants: ________
Beneficial Ownership Blocker o 4.99% or o 9.99%
EIN Number: ___________________
o Notwithstanding
anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities
set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities
to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur on the second
(2nd) Trading Day following the date of this Agreement and (iii) any condition to Closing contemplated by this Agreement (but prior to
being disregarded by clause (i) above) that required delivery by the Company or the above-signed of any agreement, instrument, certificate
or the like or purchase price (as applicable) shall no longer be a condition and shall instead be an unconditional obligation of the
Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable)
to such other party on the Closing Date.
[SIGNATURE PAGES CONTINUE]
Exhibit A
Form of Common Warrant
(See Attached)
COMMON STOCK PURCHASE WARRANT
NXU, INC.
Warrant Shares: _______ |
Issue Date: [ ], 2023 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”)
certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject
to the limitations on exercise and the conditions hereinafter set forth, at any time or times on or after the date hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on the three-year anniversary of the Initial Exercise Date
(the “Termination Date”) but not thereafter, to subscribe for and purchase from Nxu, Inc., a Delaware corporation
(the “Company”), up to ______ shares of Class A common stock, par value $0.0001 per share (the “Common Stock”)
(as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant shall initially be issued and maintained
in the form of a security held in book-entry form and the Depository Trust Company or its nominee (“DTC”) shall initially
be the sole registered holder of this Warrant, subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant
to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated [ ], 2023, among the Company and the purchasers signatory thereto.
Section 2. Exercise.
(a) Exercise
of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy
or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the
“Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising
the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver
the aggregate Exercise Price for the number of Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and
the Warrant has been exercised in full, at which time, the Holder shall surrender this Warrant to the Company for cancellation within
three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares purchasable hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder by the number of Warrant Shares equal to the applicable number of Warrant
Shares purchased in connection with such partial exercise. The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one
(1) Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
Notwithstanding the foregoing in this
Section 2(a), a Holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant held in book-entry
form through DTC (or another established clearing corporation performing similar functions), shall effect exercises made pursuant to
this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction form for exercise,
complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable), subject
to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in
which case this sentence shall not apply.
(b) Exercise
Price. The exercise price per share of Common Stock under this Warrant shall be $[ ], subject to adjustment hereunder
(the “Exercise Price”).
(c) Cashless
Exercise. Notwithstanding anything to the contrary set forth herein, if at the time of exercise hereof there is no effective registration
statement registering, or the prospectus contained therein is not available for the issuance of, the Warrant Shares to the Holder, then
this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on
the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and
delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a)
hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated
under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported
by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise
if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours
thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section
2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;
(B) = the Exercise Price of this Warrant,
as adjusted hereunder; and
(X) = the number of Warrant Shares that
would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash
exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise,
the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the
registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the
price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the VWAP of the Common Stock for such date (or the nearest preceding
date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices
for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities
then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Trading Day” means any day on which
the Trading Market is open for trading, including any day on which the Trading Market is open for trading for a period of time less than
the customary time.
“VWAP” means, for any date, the price
determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02
p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading
on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall
be paid by the Company.
(d) Mechanics
of Exercise.
i. Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted to the Holder by
crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit
or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there
is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or
(B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of the Warrant Shares, registered in the
Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares set forth in the Notice of
Exercise to the address specified by the Holder in such Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days
after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price
to the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder
shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price
(other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading
Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver
to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of
the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third
Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares
are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent (the “Transfer Agent”)
that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard
Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary
Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing,
with respect to any Notice(s) of Exercise delivered on or prior to 9:00 a.m. (New York City time) on the Initial Exercise Date, which
may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver, or cause to be delivered,
the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date, and the Initial Exercise
Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than
in the case of a cashless exercise) is received by such Warrant Share Delivery Date. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time will be less than the amount stated
on the face hereof.
ii.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of
a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if
the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for the Warrant Shares so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence satisfactory to the Company with respect to
the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional Warrant Shares or scrip representing fractional Warrant Shares shall be issued upon the
exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise,
the Company shall, at its election and in lieu of the issuance of such fractional Warrant Share, either (i) pay cash in an amount equal
to such fraction multiplied by the Exercise Price or (ii) round up to the next whole Warrant Share.
vi. Charges,
Taxes and Expenses. The issuance and delivery of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder,
the Notice of Exercise shall be accompanied by the Assignment Form, attached hereto as Exhibit B, duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto and this Warrant shall be surrendered to the Company and, if any portion of this Warrant remains unexercised, a new Warrant in
the form hereof shall be delivered to the assignee. The Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
(e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
all or any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance upon
exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other
Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial
ownership of the shares of Common Stock would or could be aggregated with the Holder’s for the purposes of Section 13(d) (such
Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which
such determination is being made, but shall exclude the number of the Warrant Shares which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation,
any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this
Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the
Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject
to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s
most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since
the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation”
shall be [4.99%/9.99%] of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant
Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number
of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant
held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
(a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii)
subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable
upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant remains unchanged.
Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) [RESERVED]
(c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells
any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as
a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided,
however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding
the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in
the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
(e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person, (ii) the Company (or any Subsidiary), directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company’s
assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of Common
Stock or more than 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or recapitalization of shares of Common Stock or any compulsory
share exchange pursuant to which the shares of Common Stock are effectively converted into or exchanged for other securities, cash or
property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement)
with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common
Stock or more than 50% of the voting power of the common equity of the Company (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary,
in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option,
exercisable at any time concurrently with, or within thirty (30) days after, the consummation of the Fundamental Transaction (or, if
later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying
to the Holder, as described below, an amount of consideration equal to the Black Scholes Value (as defined below) of the remaining unexercised
portion of this Warrant on the date of the consummation of such Fundamental Transaction, provided, however, that, if the Fundamental
Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall
only be entitled to receive from the Company or any Successor Entity, as of the date of the consummation of such Fundamental Transaction
the same type or form of consideration (and in the same proportion), valued at the Black Scholes Value of the unexercised portion of
this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction,
whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given
the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided further,
that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders
of Common Stock will be deemed to have received shares of the Successor Entity (which Successor Entity may be the Company following such
Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on
the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined
as of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable contemplated Fundamental
Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from
the HVT function on Bloomberg (determined utilizing a 365-day annualization factor) as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater
of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered
in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the announcement
of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the
Trading Day of the Holder’s request pursuant to this Section 3(d) and (D) a remaining option time equal to the time between the
date of the public announcement of the applicable Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The
payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five Business Days of the Holder’s
election (or, if later, on the effective date of the Fundamental Transaction). The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the Holder prior to such Fundamental Transaction and shall, at
the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of
shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior
to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations
of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.
(f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share of Common Stock, as the case
may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice
to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company declares a dividend (or any other distribution in whatever form) on the shares of
Common Stock, (B) the Company declares a special nonrecurring cash dividend on or a redemption of the shares of Common Stock, (C) the
Company authorizes the granting to all holders of the shares of Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company is required in connection with a
Fundamental Transaction, or (E) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains,
material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly
set forth herein.
(h) Voluntary
Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time while this Warrant
is outstanding, reduce the then-current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors
of the Company in its sole discretion.
Section 4. Transfer of Warrant.
(a) Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of
this Warrant substantially in the form attached hereto as Exhibit B duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination
or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of
this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which
case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an
assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised
by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
(b) New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and
shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant
Register. The Company shall cause the Warrant Agent to register this Warrant, upon records to be maintained by the Warrant Agent
for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company
and the Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
(a) No
Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends
or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set
forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to
Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required
to net cash settle an exercise of this Warrant.
(b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include
the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make
and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted
herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized
Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
shares of Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares underlying this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of
issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued, and the Warrant Shares, delivered, as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares underlying this Warrant, which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the
Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any shares of Common Stock above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (iii) use commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would
result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall
obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.
(e) Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
(f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and if the Holder does
not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of
this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.
(i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase
price of any share of Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors
of the Company.
(j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate.
(k) Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable
by the Holder or holder of Warrant Shares.
(l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
(o) Warrant
Agency Agreement. If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject
to the Warrant Agency Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agency
Agreement, the provisions of this Warrant shall govern and be controlling.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant
to be executed by its officer thereunto duly authorized as of the date first above indicated.
NXU, INC. |
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EXHIBIT A
NOTICE OF EXERCISE
TO: NXU, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
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lawful money of the United States; or |
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permitted the cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c). |
(3) Please
issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
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The Warrant Shares shall be delivered to the following DWAC Account Number: |
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[SIGNATURE OF HOLDER] |
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Signature of Authorized Signatory of Investing Entity: |
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
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Dated: _______________ ____, _______ |
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Exhibit B
Form of Pre-Funded Warrant
(See Attached)
Pre-Funded
WARRANT
To
purchase Shares of Common Stock
NXU,
INC.
Warrant Shares: _______ |
Initial Exercise Date: [ ], 2023 |
THIS Pre-Funded
WARRANT to Purchase Shares of Common Stock (the “Warrant”) certifies that, for value received, _____________
or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) until this Warrant is
exercised in full (the “Termination Date”), but not thereafter, to subscribe for and purchase from Nxu, Inc.,
a Delaware corporation (the “Company”), up to ______ shares of Class A common stock, par value $0.0001 per share (the
“Common Stock”) (as subject to adjustment hereunder, the “Warrant Shares”). The purchase price
of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant shall
initially be issued and maintained in the form of a security held in book-entry form and the Depository Trust Company or its nominee
(“DTC”) shall initially be the sole registered holder of this Warrant, subject to a Holder’s right to elect
to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in which case this sentence shall not
apply.
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated [ ], 2023, among the Company and the purchasers signatory thereto.
Section 2.
Exercise.
(a) Exercise
of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy
or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the
“Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising
the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver
the aggregate Exercise Price for the number of Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares purchasable hereunder and
the Warrant has been exercised in full, at which time the Holder shall surrender this Warrant to the Company for cancellation within
three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares purchasable hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder by the number of Warrant Shares equal to the applicable number of Warrant
Shares purchased in connection with
such partial exercise. The Holder and the
Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. Notwithstanding the foregoing, with respect
to any Notice(s) of Exercise delivered on or prior to 9:00 a.m. (New York City time) on the Initial Exercise Date, which may be delivered
at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver, or cause to be delivered, the Warrant
Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date, and the Initial Exercise Date shall
be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case
of a cashless exercise) is received by such Warrant Share Delivery Date. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase hereunder at any given time will be less than the amount stated on the
face hereof.
Notwithstanding the foregoing
in this Section 2(a), a Holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant held
in book-entry form through DTC (or another established clearing corporation performing similar functions), shall effect exercises made
pursuant to this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction form
for exercise, complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable),
subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement,
in which case this sentence shall not apply.
(b) Exercise
Price. The aggregate exercise price of this Warrant, except for a nominal exercise price of $0.0001 per Warrant Share, was pre-funded
to the Company on or prior to the Initial Exercise Date and, consequently, no additional consideration (other than the nominal exercise
price of $0.0001 per Warrant Share) shall be required to be paid by the Holder to any Person to effect any exercise of this Warrant.
The Holder shall not be entitled to the return or refund of all, or any portion, of such pre-paid aggregate exercise price under any
circumstance or for any reason whatsoever, including in the event this Warrant shall not have been exercised prior to the Termination
Date. The remaining unpaid exercise price per Warrant Share under this Warrant shall be $0.0001, subject to adjustment hereunder (the
“Exercise Price”).
(c) Cashless
Exercise. Notwithstanding anything to the contrary set forth herein, if at the time of exercise hereof there is no effective registration
statement registering, or the prospectus contained therein is not available for the issuance of, the Warrant Shares to the Holder, then
this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as
applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise
is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)
of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the
VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock
on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution
of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day
and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours”
on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such
Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after
the close of “regular trading hours” on such Trading Day;
(B) = the
Exercise Price, as adjusted hereunder; and
(X) = the
number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise
were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless
exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take
on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section
2(c).
“Bid Price” means, for
any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on
a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time)
to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the VWAP of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority
in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid
by the Company.
“Trading Day” means any
day on which the Trading Market is open for trading, including any day on which the Trading Market is open for trading for a period of
time less than the customary time.
“VWAP” means, for any date,
the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market
on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time)
to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for
trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses
of which shall be paid by the Company.
Notwithstanding anything herein to the contrary,
on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
(d) Mechanics
of Exercise.
i. Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant
in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to, or resale
of, the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of
the Warrant Shares, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant
Shares set forth in the Notice of Exercise to the address specified by the Holder in such Notice of Exercise by the date that is the
earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery
of the aggregate Exercise Price to the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after
the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery
of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment
of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the
Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery
Date, the Company shall pay to the Holder in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject
to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing
to $20 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share
Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent
(the “Transfer Agent”) that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable.
As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading
Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice
of Exercise.
ii.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of
a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant.
iii. Rescission
Rights. Except in connection with an exercise on the Initial Exercise Date, if the Company fails to cause the Transfer Agent to transmit
to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right
to rescind such exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if
the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for the Warrant Shares so purchased exceeds (y) the
amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection
with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock
that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the
Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence satisfactory to the Company with respect to
the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional Warrant Shares or scrip representing fractional Warrant Shares shall be issued upon the
exercise of this Warrant. As to any fraction of a Warrant Share which the Holder would otherwise be entitled to purchase upon such exercise,
the Company shall, at its election and in lieu of the issuance of such fractional Warrant Share, either (i) pay cash in an amount equal
to such fraction multiplied by the Exercise Price or (ii) round up to the next whole Warrant Share.
vi. Charges,
Taxes and Expenses. The issuance and delivery of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder,
the Notice of Exercise shall be accompanied by the Assignment Form, attached hereto as Exhibit B, duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto and this Warrant shall be surrender to the Company and, if any portion of this Warrant remains unexercised, a new Warrant in
the form hereof shall be delivered to the assignee. The Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
(e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
all or any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance upon
exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other
Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial
ownership of the shares of Common Stock would or could be aggregated with the Holder’s for the purposes of Section 13(d) (such
Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which
such determination is being made, but shall exclude the number of the Warrant Shares which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation,
any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this
Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the
Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject
to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status
as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section
2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B)
a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading
Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including
this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be [4.99%/9.99%] of the number of shares of
Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares issuable upon exercise of this Warrant. The
Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided
that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after
giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e)
shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice
is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain
Adjustments.
(a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii)
subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable
upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant remains unchanged.
Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) [RESERVED]
(c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells
any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without
limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as
a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided,
however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding
the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in
the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
(e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person, (ii) the Company (or any Subsidiary), directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company’s
assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of Common
Stock or more than 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or recapitalization of shares of Common Stock or any compulsory
share exchange pursuant to which the shares of Common Stock are effectively converted into or exchanged for other securities, cash or
property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement)
with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common
Stock or more than 50% of the voting power of the common equity of the Company (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions
of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange
for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to
this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder
to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the
purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other
Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
(f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share of Common Stock, as the case
may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice
to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company declares a dividend (or any other distribution in whatever form) on the shares of
Common Stock, (B) the Company declares a special nonrecurring cash dividend on or a redemption of the shares of Common Stock, (C) the
Company authorizes the granting to all holders of the shares of Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company is required in connection with a
Fundamental Transaction, or (E) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains,
material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly
set forth herein.
(h) Voluntary
Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time while this Warrant
is outstanding, reduce the then-current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors
of the Company in its sole discretion.
Section 4. Transfer
of Warrant.
(a) Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of
this Warrant substantially in the form attached hereto as Exhibit B duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
(b) New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and
shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant
Register. The Company shall cause the Warrant Agent to register this Warrant, upon records to be maintained by the Warrant Agent
for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company
and the Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
(a) No
Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends
or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set
forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to
Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required
to net cash settle an exercise of this Warrant.
(b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include
the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make
and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted
herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized
Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
shares of Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares underlying this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of
issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued, and the Warrant Shares, delivered, as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares underlying this Warrant, which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the
Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any shares of Common Stock above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action
which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
(e) Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
(f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and if the Holder does
not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of
this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.
(i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase
price of any share of Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors
of the Company.
(j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate.
(k) Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable
by the Holder or holder of Warrant Shares.
(l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
(o) Warrant
Agency Agreement. If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject
to the Warrant Agency Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agency
Agreement, the provisions of this Warrant shall govern and be controlling.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company
has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
NXU,
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EXHIBIT A
NOTICE OF EXERCISE
TO: NXU,
INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
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lawful money of the United States; or |
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permitted the cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c). |
(3) Please
issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
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The Warrant Shares shall be delivered to the following DWAC Account Number: |
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[SIGNATURE OF HOLDER] |
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Name of Investing Entity: |
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Signature of Authorized Signatory of Investing Entity: |
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EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant
and all rights evidenced thereby are hereby assigned to
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Dated: _______________ ____, _______ |
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Exhibit C
Form of Lock-Up Agreement
(See Attached)
Lock-Up Agreement
[●], 2023
A.G.P./Alliance Global Partners
590 Madison Avenue, 28th Floor
New York, New York 10022
Ladies and Gentlemen:
This lock-up agreement (this “Lock-Up
Agreement”) is being delivered to you in connection with the Securities Purchase Agreement (the “Purchase Agreement”),
dated as of [●], 2023, by and among Nxu, Inc. (the “Company”) and the investors party thereto (collectively,
the “Purchasers”), with respect to the issuance of (i) shares (the “Shares”) of Class A common
stock, par value $0.0001 per share (“Common Stock”), or, depending on the beneficial ownership percentage of the purchaser
of the Common Stock following its purchase, pre-funded warrants to purchase shares of Common Stock and (ii) warrants to purchase shares
of Common Stock (the “Offering”). Capitalized terms used herein and not otherwise defined shall have the respective
meanings set forth in the Purchase Agreement.
To induce the Purchasers to enter into the
Purchase Agreement, the undersigned hereby agrees that, without the prior written consent of the Placement Agent, the undersigned will
not, and will cause all affiliates (as defined in Rule 144 promulgated under the Securities Act) of the undersigned not to, during the
period commencing on the Closing Date and ending 90 days after the Effective Date (the “Lock-Up Period”), (1) offer,
pledge, sell, contract to sell, encumber, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, whether now owned or hereafter acquired
by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up
Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect
to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition
of, or to enter into any transaction, swap, hedge or other arrangement relating to, any Lock-Up Securities. Notwithstanding the foregoing,
and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Placement
Agent in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion
of the Offering; provided that no filing under Section 16(a) of the Exchange Act, shall be voluntarily made in connection
with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a
bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member (for purposes of this Lock-Up
Agreement, “family member” means any relationship by blood, current or former marriage, domestic partnership or adoption,
not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the
undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers
of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case
may be; (e) transactions relating to Lock-Up Securities acquired in the Offering; (f) (X) surrender or forfeiture of Lock-Up Securities
or other securities of the Company to the Company to satisfy tax withholding obligations upon exercise or vesting or the exercise price
upon a cashless net exercise, in each case, of stock options, equity awards, warrants or other right to acquire shares of Common Stock
expiring during the Lock-Up Period pursuant to the Company’s equity incentive plans or (Y) through a “sell to cover”
transaction for the purpose of satisfying tax withholding obligations upon the issuance of stock awards or vesting of restricted stock
units pursuant to the Company’s equity incentive plans, provided that any filing made pursuant to Section 16(a) of the Exchange
Act shall include a footnote noting the circumstances described in this clause and no other public announcement shall be required or
voluntarily made in connection with such transfer; (g) by operation of law or pursuant to a court order or settlement agreement related
to the distribution of assets in connection with the dissolution of a marriage or civil union; or (h) pursuant to a bona fide third party
tender offer, merger, consolidation or other similar transaction made to all holders of shares of Common Stock involving a change of
control of the Company that, in each case, has been approved by the Company’s board of directors, provided that all of the undersigned’s
shares of Common Stock subject to the restrictions in this Lock-Up Agreement that are not so transferred, sold, tendered or otherwise
disposed of remain subject to this Lock-Up Agreement, and, provided that in the event that the tender offer, merger, consolidation or
other such transaction is not completed, the shares of Common Stock owned by the undersigned shall remain subject to the restrictions
contained in this Lock-Up Agreement; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or
(d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Placement
Agent a lock-up agreement substantially in the form of this Lock-Up Agreement and (iii) no filing under Section 16(a) of
the Exchange Act shall be voluntarily made. The undersigned also agrees and consents to the entry of stop transfer instructions with
the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance
with this Lock-Up Agreement.
The Placement Agent agrees that the Placement
Agent will notify the Company of the impending release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up
Securities at least three (3) business days before the effective date of any such release or waiver. The provisions of this paragraph
will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration
and (b) the transferee has agreed in writing to be bound by the same terms described in this Lock-Up Agreement to the extent and
for the duration that such terms remain in effect at the time of such transfer.
No provision in this Lock-Up Agreement shall
be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable
for or convertible into shares of Common Stock, as applicable; provided that the terms of this Lock-Up Agreement will apply to
the shares of Common Stock acquired on such exercise, exchange or conversion during the Lock-Up Period. In addition, no provision herein
shall be deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than
the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period).
The undersigned understands that the Company,
the Purchasers and the Placement Agent are relying upon this Lock-Up Agreement in proceeding toward consummation of the Offering. The
undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns. This Lock-Up Agreement may not be amended without the prior written consent of the Placement
Agent.
This Lock-Up Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made and to be performed in such state.
This Lock-Up Agreement may be delivered via facsimile, electronic
mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.com)
or other transmission method and any copy so delivered shall be deemed to have been duly and validly delivered and be valid and effective
for all purposes.
The undersigned understands that, if the Purchase
Agreement is not executed by August 8, 2023, or if the Purchase Agreement (other than the provisions thereof which survive termination)
terminates prior to the initial closing date of the Securities to be sold thereunder, then this Lock-Up Agreement shall be void and of
no further force or effect.
This Lock-Up Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provisions hereof be enforced
by, any other person.
[Remainder of Page Intentionally Blank]
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Very truly yours, |
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(Name - Please Print) |
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(Signature) |
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(Name of Signatory, in the case of entities - Please
Print) |
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(Title of Signatory, in the case of entities - Please
Print) |
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Exhibit 23.1
To the Board of Directors and Stockholders of
Nxu, Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM’S CONSENT
We consent to the inclusion in this Registration
Statement on Form S-1 of our report dated March 16, 2023 (which report expresses an unqualified opinion
and includes an explanatory paragraph related to Atlis Motor Vehicles, Inc.’s ability to continue as a going concern) related to
our audit of the financial statements of Atlis Motor Vehicles, Inc. as of December 31, 2022 and 2021 and for the years then ended, which
report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the
heading “Experts” in such Registration Statement.
/s/ Prager Metis CPAs, LLP
Prager Metis CPAs, LLP
El Segundo, CA
August 4, 2023
Exhibit
107
Calculation of Filing Fee Tables
Form S-1
(Form Type)
Nxu, Inc.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered and Carry Forward
Securities
|
Security
Type |
Security
Class
Title |
Fee
Calculation
or Carry
Forward Rule |
Amount
Registered(1) |
Proposed
Maximum
Offering
Price Per
Unit(2) |
Maximum
Aggregate
Offering
Price |
Fee
Rate |
Amount of
Registration
Fee |
Fees
Previously
Paid |
Equity |
Units consisting of (i) either one
share of Class A common stock, par value $0.0001 per share, or one Pre-Funded Warrant to purchase shares of Class A common stock
and (ii) one Warrant to purchase two shares of Class A common stock |
457(o) |
— |
— |
$13,000,000 |
0.00011020 |
$1,432.60 |
Fees
Previously
Paid |
Equity |
Class A common stock included as part of the Units(3) |
— |
— |
— |
— |
— |
— |
Fees
Previously
Paid |
Equity |
Pre-Funded Warrants to purchase shares of Class A common stock included as part of the Units(3) |
— |
— |
— |
— |
— |
— |
Fees
Previously
Paid |
Equity |
Class A common stock issuable upon exercise of Pre-Funded Warrants(3) |
— |
— |
— |
— |
— |
— |
Fees
Previously
Paid |
Equity |
Warrants to purchase shares of Class A common stock included as part of the Units(3) |
— |
— |
— |
— |
— |
— |
Fees
Previously
Paid |
Equity |
Class A common stock issuable upon exercise of Warrants |
457(o) |
— |
— |
$13,000,000 |
0.00011020 |
$1,432.60 |
Fees
to be
Paid |
Equity |
Class A common stock issuable upon
exercise of Warrants |
457(o) |
— |
— |
$13,000,000 |
0.00011020 |
$1,432.60 |
|
Total Offering Amounts |
|
$39,000,000 |
0.00011020 |
$4,297.80 |
|
Total Fees Previously
Paid |
|
|
|
$2,865.20 |
|
Net Fee Due |
|
|
|
$1,432.60 |
| (1) | Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the registrant is also registering
an indeterminate number of additional shares of Class A common stock that may become issuable as a result of any stock dividend, stock
split, recapitalization or other similar transaction, and the shares of Class A common stock set forth in this table shall be adjusted
to include such shares, as applicable. |
| (2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act. |
| (3) | No separate fee is required pursuant to Rule 457(g) under the Securities Act. |
v3.23.2
Cover
|
3 Months Ended |
Mar. 31, 2023 |
Entity Addresses [Line Items] |
|
Document Type |
S-1/A
|
Amendment Flag |
true
|
Amendment Description |
Amendment
No. 3
|
Entity Registrant Name |
Nxu, Inc.
|
Entity Central Index Key |
0001722969
|
Entity Tax Identification Number |
92-2819012
|
Entity Incorporation, State or Country Code |
DE
|
Entity Address, Address Line One |
1828 N Higley Rd.
|
Entity Address, Address Line Two |
Suite 116
|
Entity Address, City or Town |
Mesa
|
Entity Address, State or Province |
AZ
|
Entity Address, Postal Zip Code |
85205
|
City Area Code |
(760)
|
Local Phone Number |
515-1133
|
Entity Filer Category |
Non-accelerated Filer
|
Entity Small Business |
true
|
Entity Emerging Growth Company |
true
|
Elected Not To Use the Extended Transition Period |
false
|
Business Contact [Member] |
|
Entity Addresses [Line Items] |
|
Entity Address, Address Line One |
1828 N Higley Rd.
|
Entity Address, Address Line Two |
Suite 116
|
Entity Address, City or Town |
Mesa
|
Entity Address, State or Province |
AZ
|
Entity Address, Postal Zip Code |
85205
|
City Area Code |
(760)
|
Local Phone Number |
515-1133
|
Contact Personnel Name |
Mark Hanchett
|
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v3.23.2
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Current assets: |
|
|
|
Cash |
$ 12,899
|
$ 2,701
|
$ 3,146
|
Prepaid expenses and other assets |
1,054
|
868
|
|
Inventory |
678
|
98
|
|
Prepaid expenses and other assets |
|
966
|
290
|
Total current assets |
14,631
|
3,667
|
3,436
|
Property and equipment, net |
2,393
|
2,441
|
980
|
Intangible assets, net |
10
|
10
|
11
|
Right-of-use assets |
722
|
798
|
|
Security deposits |
203
|
101
|
90
|
Vendor deposits |
88
|
21
|
96
|
TOTAL ASSETS |
18,047
|
7,038
|
4,613
|
Current liabilities: |
|
|
|
Accounts payable |
1,383
|
1,523
|
66
|
Accrued expenses |
761
|
1,686
|
167
|
Payroll tax liabilities |
71
|
10
|
57
|
Contract Liability |
526
|
523
|
|
Paycheck protection program loan |
|
|
397
|
Current portion of deferred rent |
|
|
22
|
Current portion of finance lease liability |
119
|
157
|
|
Current portion of lease liability |
348
|
344
|
|
Total current liabilities |
3,208
|
4,243
|
709
|
Deferred rent |
|
|
104
|
Lease liability, net of current portion |
470
|
558
|
|
Convertible debt and warrant liability, at fair value |
6,442
|
11,285
|
|
Warrant liability, at fair value |
|
374
|
|
Convertible debt, at fair value |
4,054
|
10,911
|
|
Total liabilities |
10,120
|
16,086
|
813
|
Stockholders’ equity (deficit) |
|
|
|
Additional paid-in capital |
238,846
|
209,564
|
151,733
|
Accumulated deficit |
(230,925)
|
(218,616)
|
(147,936)
|
Total stockholders’ equity (deficit) |
7,927
|
(9,048)
|
3,800
|
Total liabilities and stockholders’ equity |
18,047
|
7,038
|
4,613
|
Common Class C [Member] |
|
|
|
Stockholders’ equity (deficit) |
|
|
|
Common stock par value |
|
|
|
Common Class D [Member] |
|
|
|
Stockholders’ equity (deficit) |
|
|
|
Common stock par value |
3
|
3
|
2
|
Common Class A [Member] |
|
|
|
Stockholders’ equity (deficit) |
|
|
|
Common stock par value |
$ 3
|
$ 1
|
$ 1
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v3.23.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
|
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Common stock, par value (in dollars per share) |
$ 0.0001
|
$ 0.0001
|
|
Common stock, shares authorized |
96,248,541
|
96,248,541
|
|
Common Class C [Member] |
|
|
|
Common stock, par value (in dollars per share) |
$ 0.0001
|
$ 0.0001
|
$ 0.0001
|
Common stock, shares authorized |
15,000
|
15,000
|
15,000
|
Common stock, shares issued |
0
|
0
|
5,000
|
Common stock, shares outstanding |
0
|
0
|
5,000
|
Common Class D [Member] |
|
|
|
Common stock, par value (in dollars per share) |
$ 0.0001
|
$ 0.0001
|
$ 0.0001
|
Common stock, shares authorized |
41,925,572
|
41,925,572
|
41,925,572
|
Common stock, shares issued |
32,475,370
|
31,125,370
|
25,725,370
|
Common stock, shares outstanding |
32,475,370
|
31,125,370
|
25,725,370
|
Common Class A [Member] |
|
|
|
Common stock, par value (in dollars per share) |
$ 0.0001
|
$ 0.0001
|
$ 0.0001
|
Common stock, shares authorized |
54,307,968
|
54,307,968
|
54,307,968
|
Common stock, shares issued |
32,856,398
|
9,763,838
|
6,854,576
|
Common stock, shares outstanding |
32,856,398
|
9,763,838
|
6,854,576
|
X |
- DefinitionFace amount or stated value per share of common stock.
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v3.23.2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Income Statement [Abstract] |
|
|
|
|
Revenue |
|
|
|
|
Operating expenses: |
|
|
|
|
Stock based compensation |
5,963
|
13,955
|
41,502
|
123,245
|
Research and development |
2,900
|
1,304
|
9,648
|
4,429
|
General and administrative |
4,726
|
2,558
|
12,353
|
3,329
|
Advertising |
34
|
1,856
|
5,297
|
2,678
|
Total operating expenses |
13,623
|
19,673
|
68,800
|
133,681
|
Operating loss |
(13,623)
|
(19,673)
|
(68,800)
|
(133,681)
|
Other income (expense): |
|
|
|
|
Paycheck protection program forgiveness |
|
|
397
|
|
Loss on disposal of property and equipment |
|
|
(152)
|
|
Interest expense |
(1)
|
|
(7)
|
|
Warrant expense |
(983)
|
|
|
|
Other income |
17
|
(13)
|
166
|
(55)
|
Net loss on convertible debt and warrant liability |
|
|
(2,285)
|
|
Gain on convertible debt and warrant liability |
2,281
|
|
|
|
Total other income |
1,314
|
(13)
|
(1,881)
|
(55)
|
Net Loss |
$ (12,309)
|
$ (19,686)
|
$ (70,681)
|
$ (133,736)
|
Loss per share, basic |
$ (0.66)
|
$ (2.85)
|
$ (8.88)
|
$ (10.77)
|
Weighted average number of common shares outstanding used in computing loss per share: |
18,726,573
|
6,908,545
|
7,961,009
|
12,417,226
|
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v3.23.2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands |
Common Stock Class A [Member] |
Common Stock Class C [Member] |
Common Stock Class D [Member] |
Securities Receivable [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
Beginning balance, value at Dec. 31, 2020 |
$ 2
|
|
|
|
$ 13,378
|
$ (14,199)
|
$ (819)
|
Beginning balance, Shares at Dec. 31, 2020 |
14,845,067
|
|
|
|
|
|
|
Common Stock issued for cash |
|
|
|
|
14,542
|
|
14,542
|
Common Stock issued for cash, Shares |
1,977,009
|
|
|
|
|
|
|
Series D Stock Issued |
|
|
$ 2
|
|
|
|
2
|
Series D Stock Issued, Shares |
|
|
25,725,370
|
|
|
|
|
Founder Class A shares relinquished |
$ (1)
|
|
|
|
|
|
(1)
|
Founder class A shares relinquished, Shares |
(10,000,000)
|
|
|
|
|
|
|
Shares issued for services and rent guarantees |
|
$ 1
|
|
|
568
|
|
569
|
Shares issued for services and rent guarantees, Shares |
32,500
|
5,000
|
|
|
|
|
|
Stock based compensation |
|
|
|
|
123,245
|
|
123,245
|
Net Loss |
|
|
|
|
|
(133,736)
|
(133,736)
|
Ending balance, value at Dec. 31, 2021 |
$ 1
|
$ 1
|
$ 2
|
|
151,733
|
(147,935)
|
3,802
|
Ending balance, Shares at Dec. 31, 2021 |
6,854,576
|
5,000
|
25,725,370
|
|
|
|
|
Common Stock issued for cash |
|
|
|
|
3,413
|
|
3,413
|
Common Stock issued for cash, Shares |
307,493
|
|
|
|
|
|
|
Series D Stock Issued |
|
|
|
|
|
|
|
Series D Stock Issued, Shares |
|
|
1,350,000
|
|
|
|
|
Securities Receivable |
|
|
|
(1,361)
|
1,361
|
|
|
Shares issued for services and rent guarantees |
|
|
|
|
35
|
|
35
|
Shares issued for services and rent guarantees, Shares |
|
5,000
|
|
|
|
|
|
Exercise of Stock Options |
|
|
|
|
|
|
|
Stock based compensation |
|
|
|
|
13,955
|
|
13,955
|
Options exercised to stock |
|
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
(19,686)
|
(19,686)
|
Ending balance, value at Mar. 31, 2022 |
$ 1
|
$ 1
|
$ 2
|
(1,361)
|
170,497
|
(167,621)
|
1,518
|
Ending balance, Shares at Mar. 31, 2022 |
7,162,069
|
10,000
|
27,075,370
|
|
|
|
|
Beginning balance, value at Dec. 31, 2021 |
$ 1
|
$ 1
|
$ 2
|
|
151,733
|
(147,935)
|
3,802
|
Beginning balance, Shares at Dec. 31, 2021 |
6,854,576
|
5,000
|
25,725,370
|
|
|
|
|
Common Stock issued for cash |
|
|
|
|
15,302
|
|
15,302
|
Common Stock issued for cash, Shares |
2,475,616
|
|
|
|
|
|
|
Series D Stock Issued |
|
|
$ 1
|
|
|
|
1
|
Series D Stock Issued, Shares |
|
|
5,400,000
|
|
|
|
|
Exchange of Class C to Class A |
|
$ (1)
|
|
|
572
|
|
571
|
Exchange of Class C to Class A, Shares |
75,000
|
(10,000)
|
|
|
|
|
|
Shares issued for services and rent guarantees |
|
|
|
|
89
|
|
89
|
Shares issued for services and rent guarantees, Shares |
151,546
|
5,000
|
|
|
|
|
|
Exercise of Stock Options |
|
|
|
|
|
|
260
|
Stock based compensation |
|
|
|
|
41,608
|
|
41,608
|
Stock based compensation, Shares |
170,000
|
|
|
|
|
|
|
Options exercised to stock |
|
|
|
|
260
|
|
260
|
Option exercised of stock, Shares |
37,100
|
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
(70,681)
|
(70,681)
|
Ending balance, value at Dec. 31, 2022 |
$ 1
|
|
$ 3
|
|
209,564
|
(218,616)
|
(9,048)
|
Ending balance, Shares at Dec. 31, 2022 |
9,763,838
|
|
31,125,370
|
|
|
|
|
Common Stock issued for cash |
$ 1
|
|
|
|
4,920
|
|
4,921
|
Common Stock issued for cash, Shares |
8,297,059
|
|
|
|
|
|
|
Series D Stock Issued |
|
|
|
|
|
|
|
Series D Stock Issued, Shares |
|
|
1,350,000
|
|
|
|
|
Shares issued for services and rent guarantees |
|
|
|
|
72
|
|
72
|
Shares issued for services and rent guarantees, Shares |
85,934
|
|
|
|
|
|
|
Exercise of Series A Warrants |
|
|
|
|
3,300
|
|
3,300
|
Exercise of Series A Warrants, shares |
5,417,100
|
|
|
|
|
|
|
Exercise of Stock Options |
|
|
|
|
546
|
|
546
|
Exercise of Stock Options, shares |
77,973
|
|
|
|
|
|
|
Conversion of Long Term Debt |
$ 1
|
|
|
|
14,481
|
|
14,482
|
Conversion of long term debt, shares |
9,214,494
|
|
|
|
|
|
|
Stock based compensation |
|
|
|
|
5,963
|
|
5,963
|
Net Loss |
|
|
|
|
|
(12,309)
|
(12,309)
|
Ending balance, value at Mar. 31, 2023 |
$ 3
|
|
$ 3
|
|
$ 238,846
|
$ (230,925)
|
$ 7,927
|
Ending balance, Shares at Mar. 31, 2023 |
32,856,398
|
|
32,475,370
|
|
|
|
|
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v3.23.2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Cash flows from operating activities: |
|
|
|
|
Net loss |
$ (12,309)
|
$ (19,686)
|
$ (70,681)
|
$ (133,736)
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Depreciation and amortization |
142
|
55
|
348
|
89
|
Employee stock based compensation |
5,963
|
13,955
|
41,502
|
123,245
|
Non-employee stock compensation |
72
|
35
|
768
|
186
|
Non-cash warrant expense |
984
|
|
|
|
Forgiveness of Paycheck Protection Loan |
|
|
(397)
|
(93)
|
Loss on the fair value of Convertible debt and Warrant liability |
|
|
2,285
|
|
Loss on the sale of property and equipment |
|
|
152
|
|
Changes in assets and liabilities: |
|
|
|
|
Prepaid expenses and other current assets |
(185)
|
(23)
|
(676)
|
(285)
|
Change in inventory |
(580)
|
|
|
|
Accounts payable |
(139)
|
167
|
1,211
|
(56)
|
Accrued expenses |
(926)
|
312
|
1,520
|
70
|
Payroll tax liabilities |
61
|
(51)
|
(47)
|
(555)
|
Net change in operating lease assets and liabilities |
(6)
|
(4)
|
(22)
|
|
Gain on fair value of Convertible debt and Warrant liability |
(2,281)
|
|
|
|
Contract liability |
3
|
|
523
|
|
Deferred rent |
|
|
|
(12)
|
Security deposits |
(102)
|
|
(11)
|
(3)
|
Vendor deposits |
(67)
|
(13)
|
75
|
(38)
|
Net cash used in operating activities |
(9,370)
|
(5,253)
|
(23,450)
|
(11,188)
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property and equipment |
(94)
|
(174)
|
(1,787)
|
(1,019)
|
Payments on financing lease liability |
(40)
|
|
|
|
Addition of intangible assets |
|
|
|
(12)
|
Proceeds from sale of property and equipment |
|
|
230
|
|
Net cash used in investing activities |
(134)
|
(174)
|
(1,557)
|
(1,031)
|
Cash flows from financing activities |
|
|
|
|
Proceeds from stock issuance |
|
|
15,302
|
14,925
|
Proceeds from the issuance of convertible debt |
9,000
|
|
9,000
|
|
Payments on Convertible Debt |
(1,864)
|
|
|
|
Proceeds from exercised stock options |
546
|
|
260
|
|
Proceeds from paycheck protection loan |
|
|
|
397
|
Proceeds from public offering, net of offering costs |
12,020
|
3,413
|
|
|
Net cash provided by financing activities |
19,702
|
3,413
|
24,562
|
15,322
|
Net (decrease) increase in cash |
10,198
|
(2,014)
|
(445)
|
3,103
|
Cash, beginning of period |
2,701
|
3,146
|
3,146
|
43
|
Cash, end of period |
12,899
|
1,132
|
2,701
|
3,146
|
Supplemental disclosure of cash flow information: |
|
|
|
|
Cash paid for interest |
1
|
1
|
7
|
1
|
Supplemental disclosures of non-cash activity: |
|
|
|
|
Purchases on account related to property and equipment |
|
|
232
|
|
Incremental expense on Class C to Class A stock exchange |
|
|
$ 572
|
|
Debt converted to equity |
$ 14,481
|
|
|
|
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v3.23.2
Organization and Basis of Presentation
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
|
|
Organization and Basis of Presentation |
|
1. |
Organization and Basis of Presentation |
Organization
Atlis Motor Vehicles Inc.
(the “Company,” “AMV” or “Atlis”), a Delaware corporation based in Mesa, Arizona, was incorporated
in 2016. Atlis is a US-based technology company manufacturing innovative battery cells and battery packs for use in advanced energy storage
systems, megawatt charging stations, and mobility products. Atlis is a pre-revenue company with a goal to design, develop and produce
a range of Electronic Vehicle (“EV”) solutions and suite services and products designed to accelerate the adoption of EVs
in the commercial and industrial markets. The Company designs, engineers, and plans to build proprietary AMV battery cells and packs,
Megawatt (MW) charging stations, energy storage solutions to support infrastructure and a suite of software and services designed to allow
an easy transition from diesel to electric for our target segment.
Basis of Presentation
The accompanying condensed
consolidated financial statements (unaudited) are presented on the same basis as the Company’s Annual Report on Form 10-K for the
year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC") on March 16, 2023 (“2022 Form 10-K")
pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Company has made its disclosures in accordance
with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Rule 8-03 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to
interim financial statements, have been included. The results for any of the interim periods are not necessarily indicative of the results
to be expected for the full year or any other period. The condensed consolidated financial statements (unaudited) should be read in conjunction
with the audited consolidated financial statements and the notes thereto in the 2022 Form 10-K.
Certain prior period balances
have been reclassified to conform to current period presentation. These reclassifications had no impact on total operating expenses, net
loss, total assets, total liabilities or shareholder deficit.
References to amounts in the
consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.
Going
Concern
The accompanying condensed
consolidated financial statements (unaudited) have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the liquidation of liabilities in the normal course of business. These financial statements do not include
any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
During the three month period
ended March 31, 2023, the Company incurred a net loss of $12.3 million and had net cash used in operating activities of $9.4 million.
As of March 31, 2023, the Company had $12.9 million in cash and an accumulated deficit of $231 million.
The Company cannot provide
any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase
the need for the Company to raise additional capital on an immediate basis. Additionally, Company cannot provide any assurance that access
to capital will be readily available when needed.
These matters, among others,
raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date these
financial statements are issued. Company management is addressing this risk by pursuing all available options for funding including accessing
the public markets through public listing. The Company plans to continue considering all avenues available to it in order to obtain the
necessary capital to be able to continue as a going concern and to execute on our business objectives including but not limited to debt
financing, private placements, public offerings and equity lines of credit. The Company’s success is dependent upon achieving its
strategic and financial objectives, including continuing to acquire capital through public markets.
|
| 1. | Organization and Basis of Presentation |
Organization
Atlis Motor Vehicles Inc. (the “Company,” “AMV”
or “Atlis”), a Delaware corporation based in Mesa, Arizona, was incorporated in 2016. ATLIS is a vertically integrated, electric
vehicle technology ecosystem company committed to electrifying vehicles and equipment for Work. The Company is developing three products
to meet the needs of our target customer, proprietary AMV battery cell and pack technology, a modular and scalable electric powered platform
and an electric pickup truck. The AMV battery technology is the core of the Company’s hardware platform and is designed to be capable
of charging a full-size pickup in less than 15 minutes.
Basis of Presentation
The Company’s financial
statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP), which requires us to make estimates based
on assumptions about current, and for some estimates, future economic and market conditions which affect reported amounts and related
disclosures in our financial statements. Although our estimates contemplate current and expected future conditions, it is reasonably possible
that actual conditions could differ from our expectations, which could materially affect our results of operations, our financial position
and cash flows.
The presentation of certain
prior period amounts have been adjusted to reflect current period classifications and presentation. Specifically, Research and development
costs now include Research and development related employee compensation as well as Research and development, materials and equipment.
General and administrative expenses include employee compensation specific to general and administrative expenses as well as Legal and
other general and administrative expenses.
References to amounts in the
consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.
Going
Concern
The accompanying condensed
consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization
of assets and the liquidation of liabilities in the normal course of business. These financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
During the year ended December 31, 2022, the Company incurred a net
loss of $70.7 million and had net cash flows used in operating activities of $23.5 million. On December 31, 2022, the Company had $2.7
million in cash and an accumulated deficit of $218.6 million.
The Company cannot provide
any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase
the need for the Company to raise additional capital on an immediate basis. Additionally, Company cannot provide any assurance that access
to capital will be readily available when needed.
These matters, among others,
raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date these
financial statements are issued. Company management is addressing this risk by pursuing all available options for funding including accessing
the public markets through public listing. On September 27, 2022, the Company registered its Regulation A Class A shares with the SEC
and listed on Nasdaq under the ticker symbol “AMV.” Additionally, as disclosed in Note 14, in January 2023, the company received
the second tranche of funding related to its convertible debt agreement entered into on November 4, 2022. Net proceeds were $9 million.
Further, in February 2023, the company consummated a public offering of 8.3 million units of Company stock at an effective public offering
price of $1.56 per unit for gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock,
(ii) 0.65 Series A warrants to purchase 0.65 shares of Class A common stock and (iii) 0.75 Series B warrants to purchase 0.75 shares of
Class A common stock, each such warrant being exercisable from time to time for one share of Class A common stock at an exercise price
of $1.56. The Company plans to continue considering all avenues available to it in order to obtain the necessary capital to be able to
continue as a going concern and to execute on our business objectives including but not limited to debt financing, private placements,
and equity lines of credit. The Company’s success is dependent upon achieving its strategic and financial objectives, including
continuing to acquire capital through public markets.
Change in Accounting
Policy
The Company has opted for
an effective adoption date of January 1, 2022, for the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2016-02, Leases. At the transition date, the operating lease ROU asset and operating lease
liability were $1.1 million and
$1.2 million, respectively. The
difference between the ROU asset and operating lease liability is due to deferred rent and prepaid rent balances that were reclassified
as a component of the ROU asset at the transition date. The Company recorded a right of use asset, current portion of lease liability
and lease liability, net of current portion in the amounts of $798
thousand, $344 thousand and $558
thousand, in the condensed consolidated balance sheets at December 31, 2022. See Note 8 for more information.
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v3.23.2
Summary of Significant Accounting Policies
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Accounting Policies [Abstract] |
|
|
Summary of Significant Accounting Policies |
|
2. |
Recent Accounting Pronouncements and Summary of Significant Accounting Policies |
Recent Accounting Pronouncements
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Due to uncertainties, actual results could differ from the estimates and
assumptions used in preparation of the consolidated financial statements.
|
| 2. | Summary
of Significant Accounting Policies |
Recent Accounting Pronouncements
and Summary of Significant Accounting Policies
Recent Accounting Pronouncements
In December 2019, the FASB
issued Accounting Standards Update, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes
(“ASC 740”). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general
principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal
years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective
basis and others on a retrospective basis with earlier application permitted. The Company does not expect this update to have a
material impact on its consolidated financial statements.
In August 2020, the FASB issued
Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models
in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments.
The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is
effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company
has chosen to early adopt this standard for the period ended December 31, 2022.
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
Summary of Significant
Accounting Policies
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the consolidated financial
statements.
Segment Reporting
The Company evaluated segment
reporting in accordance with Accounting Standards Codification 280 – Segment Reporting (“ASC 280”) and concluded that
ATLIS is comprised of one operating segment. The Company reports segment information based on the operating results regularly reviewed
by the chief operating decision maker to make decisions about resource allocation and the performance of the business.
Concentration of Credit
Risks
The Company is subject to
concentrations of credit risk primarily from cash and cash equivalents.
The Company considers all
highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company’s cash and
cash equivalents accounts are held at a financial institution and are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250 thousand. From time to time, the Company’s bank balances exceed the FDIC insurance limit. To reduce its risk associated
with the failure of such financial institutions, the Company periodically evaluates the credit quality of the financial institution in
which it holds deposits.
Advertising
The Company began utilizing
media networks, including, but not limited to online and social media presence to build awareness for the product and brand. Advertising
costs for the year ended December 31, 2022, were $5.3 million. Advertising costs for the year ended December 31, 2021, were $2.7 million.
Income Taxes
Income taxes are accounted
for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Valuation allowances are established, when necessary, but no less than quarterly,
to reduce deferred tax assets to the amounts expected to be realized.
Property
and Equipment
Property and equipment are carried at cost. Depreciation
is calculated using the straight-line method over the estimated useful life of each asset. Estimated useful lives for significant classes
of assets are currently 5 years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are
capitalized according to their estimated useful lives or over the lease term for leasehold improvements. The Company capitalizes property
and equipment with an initial value over $2,500.
Long-Lived Assets
In accordance with ASC 360-10,
the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value
may not be recoverable. When such facts and circumstances exist, the Company compares the projected undiscounted future cash flows associated
with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any,
is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows,
of those assets and is recorded in the period in which the determination is made. Depending on the asset, estimated fair market value may be determined
either by use of the discounted cash flow model or by reference to estimated selling values of assets in similar condition. There were no impairment charges for the years
ended December 31, 2022, or December 31, 2021.
Research and Development
Expenses
Research and development costs are charged to operations when incurred
and are included in Operating expenses on the consolidated statements of operations. The Company recorded $9.6 million in Research and
development expenses for the year ended December 31, 2022 of which $6 million was related to employee compensation and $3.6 million was
related to materials and equipment purchases, primarily related to battery and platform research and development activities. In the year
ended December 31, 2021, the Company recorded $2.8 million and $1.6 million in Research and development employee compensation and materials
and equipment, respectively for a total of $4.4 million for the year ended December 31, 2021.
General and administrative
expenses
General and administrative costs include salaries related to non-production
and non research and development employees, legal and other professional fees, rent and other general expenses incurred by the company.
The company recorded $12.4 million in general and administrative expenses consisting of $3.8 million in employee compensation and $8.6
million in legal and other expenses for the year ended December 31, 2022. The Company recorded $3.3 million in general and administrative
expenses in the year ended December 31, 2021 consisting of $1.2 million in employee compensation and $2.1 million in legal and other expenses.
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with
ASC Topic 718, Compensation-Stock Compensation. Under the fair value recognition provisions of this topic, stock-based compensation cost
is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period,
which is the vesting period. Forfeitures are accounted for as they occur in accordance with ASC 718-10-35-3.
The Company uses the Black-Scholes
option-pricing method for valuing stock option awards. Calculating the fair value of stock option awards requires the input of subjective
assumptions. Other reasonable assumptions could have a material impact on the Company’s stock-based compensation expense and therefore,
its operational results.
Stock Issued for Services
The Company periodically grants common stock
awards to non-employees in exchange for services. The fair value of the stock-based compensation awards granted is based on the fair value
of the award on the grant date. Stock-based payments are recorded on the consolidated statements of operations in the same manner and
to the same financial statement line item as it would have been had such settlement been made in cash.
Contract Liability
The Company defers the recognition of revenue
when cash payments are received or due in advance of satisfying its performance obligations, including amounts which are refundable. The
Company recorded no Contract Liability at December 31, 2021 and $523 thousand at December 31, 2022.
Other income, net
Other income primarily consists of realized and
unrealized gains and losses on convertible debt and warrant liabilities, gains and losses on the sale of property and equipment and gains
on forgiveness of the Company’s Paycheck Protection Program.
Fair Value of Financial
Instruments.
Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 820“Fair Value Measurements and Disclosures”
(“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. ASC 820establishes a fair value hierarchy for inputs, which represent
the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable
inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller
would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three
levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted
quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments
and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an
active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on (i)
quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or
similar assets, (iii) inputs other than quoted prices for the assets and liabilities, or (iv) inputs that are derived principally from
or corroborated by market through correlation or other means.
Level 3 - Valuations based on inputs
that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain
assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the
balance sheets as of December 31, 2022, and 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued
expenses are estimated to approximate the carrying values as of December 31, 2022, and 2021, due to the short maturities of such instruments.
There were no transfers between Levels 1,
2 or 3 during the year ended December 31, 2022, or for the year ended December 31, 2021.
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v3.23.2
Property and Equipment
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Property, Plant and Equipment [Abstract] |
|
|
Property and Equipment |
|
4. |
Property and Equipment |
Property and equipment consist of the following
(in thousands):
Schedule of property and equipment |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
$ |
261 |
|
|
$ |
261 |
|
Office equipment |
|
|
164 |
|
|
|
114 |
|
Tools and plant equipment |
|
|
2,398 |
|
|
|
2,354 |
|
Vehicles |
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
Less—Accumulated depreciation |
|
|
(500 |
) |
|
|
(358 |
) |
Property and equipment, net |
|
$ |
2,393 |
|
|
$ |
2,441 |
|
Depreciation expense for the
three months ended March 31, 2023 and March 31, 2022, was $142 thousand and $55 thousand, respectively. Property and equipment include
tools and plant equipment obtained under capital lease in the amount of $232 thousand. The equipment is being depreciated over 5 years.
The capital lease was entered into on July 1, 2022, and is payable over 18 months at 7% interest with monthly installments of $14 thousand.
The company had an outstanding balance of $119 thousand on the capital lease at March 31, 2023.
|
Property and equipment consist
of the following (in thousands):
Schedule of property and equipment | |
| | | |
| | |
| |
As of December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Leasehold improvements | |
$ | 261 | | |
$ | 130 | |
Office equipment | |
| 114 | | |
| 64 | |
Tools and plant equipment | |
| 2,354 | | |
| 830 | |
Vehicles | |
| 70 | | |
| 59 | |
| |
| | | |
| | |
Less—Accumulated depreciation | |
| (358 | ) | |
| (103 | ) |
Property and equipment, net | |
$ | 2,441 | | |
$ | 980 | |
Depreciation expense for the years ended December 31, 2022, and December
31, 2021, were $348 thousand and $89 thousand, respectively. Property and equipment include tools and plant equipment obtained under capital
lease in the amount of $232 thousand. The equipment is being depreciated over 5 years. The capital lease was entered into on July 1, 2022,
and is payable over 18 months at 7% interest with monthly installments of $14 thousand. The company had an outstanding balance of $157
thousand on the capital lease at December 31, 2022
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v3.23.2
Intangible Assets
|
12 Months Ended |
Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] |
|
Intangible Assets |
Intangible assets consist of the following (in
thousands):
Schedule of intangible assets | |
| | | |
| | |
| |
As of December 31, | |
| |
2022 | | |
2021 | |
Patents | |
$ | 12 | | |
$ | 12 | |
Less—Accumulated amortization | |
| (2 | ) | |
| (1 | ) |
Intangible assets, net | |
$ | 10 | | |
$ | 11 | |
The Company recorded amortization expense related to patent number
11.069.945 on July 20, 2021. The Company amortizes patents using the straight-line method over the estimated useful life of the patent,
which is ten 10 years. The Company recorded amortization expense of $1 thousand during the year ended December 31, 2022. The Company recorded
amortization expense of $1 thousand for the year ended December 31, 2021.
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v3.23.2
Income Taxes
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Income Tax Disclosure [Abstract] |
|
|
Income Taxes |
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company recorded a valuation allowance due to the uncertainty
of future realization of federal and state net operating loss carryforwards.
At December 31, 2022, the
Company had net operating loss carryforwards of approximately $16.5 million which will carryforward through 2037. The Company’s
fiscal year 2022 and current year net operating loss will carry forward indefinitely.
In December 2017, the U.S.
Tax Cuts and Jobs Act of 2017 ("Tax Act") was enacted into law which significantly revised the Internal Revenue Code of 1986,
as amended. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including
a flat corporate tax rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income, limitation of
the deduction for newly generated net operating losses to 80% of current year taxable income and elimination of net operating loss ("NOL")
carrybacks, future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for
certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions
and credits beginning in 2018.
The Company generated an income
tax benefit of $3 million for the three months ended March 31, 2023, resulting in a cumulative income tax benefit of $53 million. The
Company has increased its valuation allowance accordingly as the Company's ability to generate sufficient taxable income to utilize its
net operating loss carry forwards is uncertain. The Company’s deferred tax balances primarily consist of its operating loss carryforwards.
The Company recognizes interest
and penalties related to uncertain tax positions in general and administrative expense. At March 31, 2023 and 2022 the Company did not
have any unrecognized uncertain tax positions or any associated interest and penalties.
|
Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. The Company recorded a valuation allowance due to the uncertainty of future realization of federal and state
net operating loss carryforwards.
Deferred income tax assets are comprised of the
following at December 31, 2022, and 2021 (in thousands):
Schedule of operating loss carryforwards | |
2022 | | |
2021 | |
Deferred income tax assets: | |
$ | 51,919 | | |
$ | 34,912 | |
Valuation allowance | |
| (51,919 | ) | |
| (34,912 | ) |
Net total | |
$ | - | | |
$ | - | |
At December 31, 2021, the Company had net operating
loss carryforwards of approximately $16.5 million which will carryforward through 2037. The Company’s current
year net operating loss will carry forward indefinitely.
In December 2017, the U.S. Tax Cuts and Jobs Act
of 2017 ("Tax Act") was enacted into law which significantly revises the Internal Revenue Code of 1986, as amended. The newly
enacted federal income tax law, among other things, contains significant changes to corporate taxation, including a flat corporate tax
rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income, limitation of the deduction
for newly generated net operating losses to 80% of current year taxable income and elimination of net operating loss ("NOL")
carrybacks, future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for
certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions
and credits beginning in 2018.
The Company generated an income tax benefit of $14.9 million
for the year ended December 31, 2022. The Company has increased its valuation allowance accordingly as the Company's ability to generate
sufficient taxable income to utilize its net operating loss carry forwards is uncertain. The Company’s deferred tax balances primarily
consist of its operating loss carryforwards.
Reconciliation between the statutory rate and
the effective tax rate is as follows as of December 31, 2022, and 2021:
Schedule of effective income tax rate reconciliation | |
| | |
| |
| |
2022 | | |
2021 | |
Effective Tax Rate Reconciliation: | |
| | |
| |
| |
| | |
| |
Federal statutory tax rate | |
| 21 | % | |
| 21 | % |
State taxes, net of federal benefit | |
| - | % | |
| - | % |
Change in valuation allowance | |
| (21 | %) | |
| (21 | %) |
Effective Tax Rate | |
| - | % | |
| - | % |
The Company recognizes interest and penalties
related to uncertain tax positions in general and administrative expense. At December 31, 2022, and 2021 the Company did not have any
unrecognized uncertain tax positions or any associated interest and penalties.
The Company's federal income tax returns for tax
years ended December 31, 2019, and beyond remain subject to examination by the Internal Revenue Service. The returns for Arizona, the
Company's most significant state tax jurisdiction, remain subject to examination by the Arizona Department of Revenue for tax years ended
December 31, 2017, and beyond.
|
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v3.23.2
Paycheck Protection Program Loan
|
12 Months Ended |
Dec. 31, 2022 |
Paycheck Protection Program Loan |
|
Paycheck Protection Program Loan |
| 6. | Paycheck Protection Program Loan |
On February 11, 2021, The Company was granted
a loan from Washington Federal Bank, in the aggregate amount of $397 thousand, pursuant to the Paycheck Protection Program (“PPP”).
The loan was granted under the provisions of the second offering of PPP loans by the Small Business Association. The loan, which was in
the form of a Note dated February 11, 2021, issued to the Company, was to mature February 11, 2026, and bore an interest at a rate of
1.0% annually. The Note was allowed to be prepaid by the Borrower at any time prior to the maturity with no prepayment penalties. Funds
from the loan were to only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities
and interest on other debit obligations incurred before February 15, 2020. On April 13, 2022, the Company received notice that the note
was fully forgiven. As a result, the Company recorded Other income in the amount of $397 thousand in its condensed consolidated statements
of operations for the year ended December 31, 2022.
On April 30, 2020, The Company was granted a loan
from Washington Federal Bank, in the aggregate amount of $93 thousand, pursuant to the PPP under Division A, Title 1 of the CARES
Act, which was enacted March 27, 2020. This PPP note was fully forgiven on July 12, 2021.
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v3.23.2
Net Loss per Share
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Earnings Per Share [Abstract] |
|
|
Net Loss per Share |
Net loss per share is computed
by dividing net loss by the weighted-average number of common shares outstanding during the period, excluding shares Class D common stock
as these shares do not participate in the earnings of the Company. For the three months ended March 31, 2023, and 2022, respectively,
the Company’s basic and diluted net loss per share were the same because the Company generated a net loss for each period and potentially
dilutive securities are excluded from diluted net loss per share as a result of their anti-dilutive impact. The Company’s basic
net loss and diluted net loss per share was $0.66 and $2.85 for the three months ended March 31, 2023 and 2022, respectively.
|
Net loss per share is computed by dividing net
loss by the weighted-average number of common shares outstanding during the period, excluding shares of Class D common stock as these
shares do not participate in the earnings of the Company. For the years ended December 31, 2022, and 2021, respectively, the Company’s
basic and diluted net loss per share were the same because the Company generated a net loss for each period and potentially dilutive securities
are excluded from diluted net loss per share as a result of their anti-dilutive impact. The Company’s basic net loss per share was
$8.88 and $10.77 for the years ended December 31, 2022, and 2021, respectively. Potentially dilutive securities represented approximately
55.9 million (consisting of 45.7 million options and RSUs, 231 thousand warrants, and 10 million shares related to convertible debt) and
46.8 million options and RSUs for the years ended December 31, 2022, and 2021, respectively.
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v3.23.2
Leases
|
12 Months Ended |
Dec. 31, 2022 |
Leases [Abstract] |
|
Leases |
Operating Lease
The Company adopted ASC 842,
Leases (“ASC 842”), on January 1, 2022. Consequently, financial information has not been updated for dates and periods before
this date. Additionally, the Company chose to elect certain relief options offered in ASC 842 including the package of practical expedients,
the option to account for separate lease and non-lease components as a single unit, and the option to exclude right-of-use assets and
lease liabilities that arise from short term leases (i.e., leases with terms of twelve months or less). Under ASC 842, the Company determines
if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying
asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease
term. The Company’s lease consists of mixed-use office and warehouse space in Mesa, Arizona. The Company’s lease evaluation
may include options to terminate the lease when it is reasonably certain that the Company will exercise such options. When readily determinable,
the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any lease payments
made and excludes lease incentives. Lease expense for amortization of the ROU asset is recognized on a straight-line basis over the lease
term. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or covenants.
The Company had a weighted average remaining lease term of 5 years and a weighted average discount rate of 3.25%, which was determined
based on the United States Prime borrowing rate at the lease commencement date, as the rate implicit in the lease was not readily determinable.
The Company’s aggregate
lease maturities as of December 31, 2022, are as follows (in thousands):
Schedule of lease maturities | |
| | |
Year | |
| |
2023 | |
$ | 368 | |
2024 | |
| 379 | |
2025 | |
| 194 | |
Total minimum lease payments | |
| 941 | |
Less imputed interest | |
| (39 | ) |
Total operating lease liabilities | |
$ | 902 | |
Financing Lease
The Company entered into a
capital lease agreement on July 1, 2022, with a vendor to purchase equipment to be used in research and development. The terms of the
note are 18 months at 7% interest payable in monthly installments of $14 thousand. The Company recorded a total of $157 thousand in the
current portion of Lease liability line item in the condensed consolidated balance sheets at December 31, 2022, in relation to this agreement.
The following table provides
information about the financial statement classification of our lease expenses reported within the Consolidated Statements of Comprehensive
Income for the years ended December 31, 2022 and December 31, 2021 (in thousands):
Schedule of lease expenses | |
| |
| | | |
| | |
| |
| |
| 2022 | | |
| 2021 | |
Lease Expense Category: | |
Classification | |
| | | |
| | |
| |
| |
| | | |
| | |
Operating Lease Expense | |
General and administrative expenses Legal and other | |
$ | 335 | | |
$ | 457 | |
Finance lease expense: | |
| |
| | | |
| | |
Amortization of leased assets | |
General and administrative expenses Legal and Other | |
| 23 | | |
| - | |
Interest on lease liabilities | |
Interest expense | |
| 7 | | |
| - | |
Total lease expense | |
| |
$ | 365 | | |
$ | 457 | |
|
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- DefinitionThe entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
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v3.23.2
Commitments and Contingencies
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Commitments and Contingencies Disclosure [Abstract] |
|
|
Commitments and Contingencies |
|
7. |
Commitments and Contingencies |
Registration Rights
The holders of the convertible
notes that were issued have registration rights that required the Company to register the sale of their debt securities held by them pursuant
to a registration rights agreement, as amended, that was signed in conjunction with the convertible notes.
Legal Proceedings
The Company is not currently
subject to any material legal proceedings, nor, to the Company’s knowledge, are any material legal proceedings threatened against
the Company. From time to time, the Company may be a party to certain legal or regulatory proceedings in the ordinary course of business.
While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, management does not expect that
any such future proceedings will have a material effect on the Company’s financial condition or results of operations.
|
| 9. | Commitments
and Contingencies |
Registration
Rights
The holders of the 2022 convertible
note that was issued will have registration rights to require the Company to register the sale of its debt securities held by them pursuant
to a registration rights agreement to be signed in conjunction with the convertible note.
Legal Proceedings
The Company
is not currently subject to any material legal proceedings, nor, to the Company’s knowledge, are any material legal proceedings
threatened against the Company. From time to time, the Company may be a party to certain legal or regulatory proceedings in the ordinary
course of business. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, management
does not expect that any such future proceedings will have a material effect on the Company’s financial condition or results of
operations.
|
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- DefinitionThe entire disclosure for commitments and contingencies.
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v3.23.2
Vendor Deposits
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Vendor Deposits |
|
|
Vendor Deposits |
At March 31, 2023, the Company
had total Vendor deposits of $88 thousand related to deposits on equipment. Deposits on the purchase of new equipment was $68 thousand
in the first quarter of 2023.
|
During 2021, the Company paid $60 thousand to Salt River Project, an
Arizona utility company, as a refundable deposit for engineering services for implementation of additional electricity capacity to facilitate
the development of the Company’s 1.5MW charging capabilities. In 2022, this contract was cancelled, and the deposit was refunded.
Additionally, the Company recorded a total of $38 thousand in 2021 for deposits on equipment purchases to be delivered at future dates.
At December 31, 2022, the company had total Vendor deposits of $20 thousand related to deposits on equipment.
|
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v3.23.2
Stock Based Compensation and Common Stock
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Equity [Abstract] |
|
|
Stock Based Compensation and Common Stock |
|
9. |
Stock Based Compensation and Common Stock |
A summary of the Company’s
outstanding stock options and restricted stock units (“RSU”) as of March 31, 2023, and changes during the year is presented
below:
Schedule of stock options and restricted stock units Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
RSUs |
|
|
|
Shares |
|
|
Weighted average exercise price |
|
|
Weighted average contractual term (in years) |
|
|
Shares |
|
|
Weighted average grant date fair value |
|
Outstanding, December 31, 2022 |
|
|
45,575,047 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
90,000 |
|
|
$ |
7.00 |
|
Granted |
|
|
5,000 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(77,973 |
) |
|
|
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(25,036 |
) |
|
|
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2023 |
|
|
45,477,038 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
90,000 |
|
|
|
7.00 |
|
Exercisable, March 31, 2023 |
|
|
35,150,269 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
Common Stock
The total number of shares
of common stock the Company has authority to issue is 96,248,541 at $0.0001 par value per share.
Schedule of common stock by class:
Schedule of common stock by class |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
Class A |
|
|
32,856,398 |
|
|
|
9,763,838 |
|
Class C |
|
|
- |
|
|
|
- |
|
Class D |
|
|
32,475,370 |
|
|
|
31,125,370 |
|
Total Shares Outstanding |
|
|
65,331,768 |
|
|
|
40,889,208 |
|
|
| 11. | Stock
Based Compensation and Common Stock |
The Company accounts for stock-based
compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, (“ASC 718”). Under the fair value recognition
provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized
as an expense over the requisite service period, which is the vesting period.
Prior to and up until the
quarter ended September 30, 2021, the Company awarded employees grants in common stock as part of employee compensation, which typically
vested over four years. Upon vesting, the company recorded employee stock compensation to additional paid-in-capital as the shares were
vested but not issued. The share value was calculated based on the most recent funding event. Subsequently, the Company changed its accounting
policy to value company shares based on appraisal of fair market value that considered all available information material to the value
of the Company, including the present value of anticipated future cash flows and other relevant factors such as a discount for lack of
marketability. The same method was applied retrospectively to value stock grant awards in prior years.
On August 24, 2021, the Company
offered employees the option to convert their vested stock grants into stock options at weighted average conversion ratio of approximately
6.64 options for every share grant. A condition of the conversion was the relinquishment of all prior awarded stock through the August
24, 2021, conversion date. Although not all, a majority of former and current employees at the time elected to convert their shares to
options. The Company accounted for this transaction as a modification as per ASC 718. As a result, the company recorded approximately
$115 million of incremental compensation expense as of December 31, 2021. The originally vested stock grants were unissued as of the modification
date with the exception of 10,000,000 Class A shares held by the Company’s Chief Executive Officer, who subsequently relinquished
these on August 24, 2021.
On August 24,2021, the Company
issued 25,725,370 Class D stock to the Company’s Chief Executive Officer and the President.
Between August 24, 2021, and
December 31, 2021, the Company awarded 578,400 stock options to new employees, non-employees and to our Board of Directors.
On June 17, 2022, the Company
agreed with a third party who provided a rent guarantee to the Company’s landlord on the Company’s building in Mesa, Arizona
to exchange 75,000 shares of Class A common stock for 10,000 shares of Class C common stock. The Company recorded General and Administrative
expenses of $572 thousand on the Company’s Condensed Consolidated Statements of operations for the year ended December 31, 2022,
resulting from consideration provided for the loss of perquisites afforded to the Class C shareholder.
The Company recorded $41.5
million and $123.2 million in stock based compensation expense for the years ended December 31, 2022, and 2021, respectively.
The Company uses the Black-Scholes
option-pricing method for valuing stock option awards. Calculating the fair value of stock option awards requires the input of subjective
assumptions. Other reasonable assumptions could provide differing results. The fair value of stock options at the grant date was determined
using the following assumptions for the years ended December 31, 2022, and 2021.
Schedule of stock options at the grant date | |
| |
|
| |
Years ended December 31, |
| |
2022 | |
2021 |
| |
| |
|
Expected average life (years) | |
7.0 | |
7.0 |
Expected volatility | |
75.33% | |
73.56% |
Risk-free interest rate | |
1.65% | |
0.06% |
Expected dividend yield | |
-% | |
-% |
Compensation expense was determined
by applying the Black-Scholes model on the appraised value of the underlying share price for each stock on the grant date.
A summary of the Company’s
outstanding stock options and restricted stock units (“RSU”) as of December 31, 2022, and changes during the year is presented
below:
Schedule of stock options and restricted stock units activity | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Options | | |
RSUs | |
| |
Shares | | |
Weighted average exercise price | | |
Weighted average contractual term (in years) | | |
Shares | | |
Weighted average grant date fair value | |
Outstanding, December 31, 2021 | |
| 45,486,067 | | |
$ | 7.00 | | |
| 7 | | |
| 1,344,657 | | |
$ | - | |
Granted | |
| 946,800 | | |
| | | |
| 7 | | |
| 110,000 | | |
| 7.00 | |
Exercised | |
| (37,100 | ) | |
| - | | |
| | | |
| - | | |
| - | |
Forfeited | |
| (899,063 | ) | |
| 7.00 | | |
| | | |
| (7,456 | ) | |
| - | |
Shares issued | |
| - | | |
| | | |
| | | |
| (1,278,858 | ) | |
| | |
Unissued shares converted to options | |
| 78,343 | | |
| | | |
| | | |
| (78,343 | ) | |
| | |
Expired | |
| - | | |
| - | | |
| | | |
| - | | |
| - | |
Outstanding, December 31, 2022 | |
| 45,575,047 | | |
$ | 7.00 | | |
| 7 | | |
| 90,000 | | |
| 7.00 | |
Exercisable, December 31, 2022 | |
| 33,425,287 | | |
$ | 7.00 | | |
| 7 | | |
| - | | |
| - | |
Common Stock
The total number of shares
of common stock the Company has authority to issue is 96,248,541 at $0.0001 par value per share.
In 2021 and 2022, the Company
issued Class D shares of Common Stock. These shares are not traded openly or available for sale to the public. Class D shares are offered
only to the President and the Chief Executive Officer of the Company. Each class D share of common stock is granted ten votes compared
to Class A shares of common stock which are granted one vote per share. The shares of Class D Stock are not entitled to receive any dividends
or any distribution on a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Class D shares
are not convertible, are deemed to have no economic value, and upon a holder’s cessation of service to the Company, such holder
shall, on the one-year anniversary of such cessation, surrender to the Company for no consideration all shares of Class D Stock owned
by such holder. Class D stock were issued to the Chief Executive Officer and President in the amount of 31,125,370 shares as of December
31, 2022.
The breakdown of common stock
by class at December 31, 2022, and December 31, 2021, were as follows:
Schedule of breakdown of common stock by class | |
| | | |
| | |
| |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Class A | |
| 9,763,838 | | |
| 6,854,576 | |
Class C | |
| - | | |
| 5,000 | |
Class D | |
| 31,125,370 | | |
| 25,725,370 | |
Total Shares Outstanding | |
| 40,889,208 | | |
| 32,584,946 | |
|
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- DefinitionThe entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP).
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v3.23.2
Convertible Debt and Warrant Liability
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Debt Disclosure [Abstract] |
|
|
Convertible Debt and Warrant Liability |
|
10. |
Convertible Debt and Warrant Liability |
On November 3, 2022, the Company
issued the first tranche of the 10% Original Issue Discount Convertible Notes (“Convertible Notes”) in the aggregate principal
amount of $10.0 million and warrants (“Common Stock Warrants”) to purchase up to an aggregate of 231,312 shares of Class A
common stock for gross proceeds of $9.0 Million (the “First Tranche”) to various investors (the “Investors”) pursuant
to a securities purchase agreement dated November 3, 2022 (the “Purchase Agreement”). These Convertible Notes have a maturity
date of 24 months from the issuance date. The Convertible Notes earn interest at a rate of 10% per annum which will only accrue upon an
event of default. The Convertible Notes are convertible solely into Class A common stock of the Company at a conversion price of (a) $15 per
share or (b) 92.5% of the average of the three lowest daily VWAP of the Common Stock during the ten trading day period, whichever is lower.
These Convertible Notes are secured by a first priority security interest in all of the assets of the Company.
On January 5, 2023, the Company
entered into an amendment to the Purchase Agreement (the “Purchase Agreement Amendment”), pursuant to which the Company and
each Investor agreed, among other things, to amend the terms and conditions of the second tranche of funding (“Second Tranche”)
and terminate the third tranche of funding contemplated under the Purchase Agreement.
In connection with the Purchase
Agreement Amendment, the Company also issued a Warrant to each Investor purchase up to an aggregate of 268,980 shares of the Company’s
Class A common stock.
Concurrently with the Purchase
Agreement Amendment, the Company also entered into an amendment (the “Registration Rights Agreement Amendment”) to the Registration
Rights Agreement, dated as of November 3, 2022, with each Investor, pursuant to which the Company agreed to file a registration statement
(a “Registration Statement”) with the SEC registering the resale of the shares of the Company’s Class A common stock
issuable under the First Tranche within 20 days after the closing of the First Tranche and registering the resale of the shares of the
Company’s Class A common stock issuable under the Second Tranche within two trading days after the closing of the Second Tranche,
as applicable, and to cause any such Registration Statement to become effective within 60 days after filing.
On January 27, 2023, the Investors
exercised their rights to purchase the allowable amounts under the Purchase Agreement Amendment and the Company issued $10.0 million of
Convertible Notes and 942,034 Common Stock Warrants in the Second Tranche. The Company received net proceeds of $9 million in the transaction.
The Company elected the fair
value option to account for the Convertible Notes. As such, the Company recorded the Convertible Notes at fair value and will subsequently
measure them to fair value at each reporting date. Changes in fair value were recognized as a component of other income (expense), net
in the consolidated statements of operations. Activity as a result in changes in fair value of the Company’s convertible Notes during
the three month period ended March 31, 2023 were as follows (in thousands):
Schedule of convertible debt |
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
Balance at December 31, 2022 |
|
$ |
10,911 |
|
Convertible Debt issued during the period |
|
|
7,330 |
|
Conversions/payoffs |
|
|
(16,346 |
) |
Unrealized Loss |
|
|
2,159 |
|
Convertible Debt Liability at March 31, 2023 |
|
$ |
4,054 |
|
As a result of applying the fair value option,
direct costs and fees related to the convertible notes were expensed as incurred and were not deferred.
The following table provides
the fair value and contractual principal balance outstanding of the Convertible debt accounted for under the fair value option as of March
31, 2023 and December 31, 2022:
Schedule of fair value option |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Convertible Notes fair value |
|
$ |
4,054 |
|
|
$ |
10,911 |
|
Convertible Notes, contractual principal outstanding |
|
|
3,654 |
|
|
|
10,000 |
|
Fair value less unpaid principal balance |
|
$ |
400 |
|
|
$ |
911 |
|
All Convertible Notes and Common Stock Warrants,
by written agreement, provide for a beneficial ownership limitation cap of 4.99% shares of the total issued and outstanding common stock
of the Company, at any given time.
Warrant Liability
In connection with the issuance
of the Convertible Notes, the investors received a number of Common Stock Warrants equal to 30% of the face value of the Convertible Notes
divided by the VWAP prior to the applicable closing date. The Warrants entitle the holder to purchase one share of the Company’s
Class A common stock at the exercise price of a) $15 per share or (b) 92.5% of the average of the three lowest daily VWAP of the
Common Stock during the ten trading day period, whichever is lower. There were 231,312 Common Stock Warrants issued upon closing
of the First Tranche of the Convertible Note, 537,960 Common Stock Warrants issued upon signing the Purchase Agreement Amendment and 942,034
Common Stock Warrants issued upon closing of the Second Tranche, all of which have a five-year exercise period from the issuance
date.
On February 21, 2023, the
Company, consummated the offering of an aggregate of 8,334,000 Units at an effective public offering price of $1.56 per Unit, resulting
in aggregate gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock (or one prefunded
warrant to purchase one share of Class A common stock in lieu thereof), (ii) 0.65 Series A Warrants to purchase 0.65 shares of Class A
common stock and (iii) 0.75 Series B Warrants to purchase 0.75 shares of Class A common stock, each such Warrant being exercisable from
time to time for one share of Class A common stock at an exercise price of $1.56. The Series A Warrants were exercised following issuance.
The Series B Warrants will not be exercisable until after the date the Company effects a corporate reorganization of the Company or until
after the date stockholder approval is obtained to have a sufficient number of shares of Class A common stock authorized to permit the
exercise in full of the Series B Warrants, and will then expire five (5) years after the date of such corporate reorganization or stockholder
approval, as applicable.
There were 5,417,100 shares
of common stock issued associated with the Series A Warrants and 6,250,500 shares of common stock issued associated with the Series
B Warrants upon the closing of the Offering. The Series B Warrants are recorded as a liability at fair value. Changes to the fair value
of the B common stock warrants are recognized in the income statement. There were 6,250,500 Series B Warrants outstanding as of March
31, 2023. All of the Series A Warrants were exercised following issuance.
The Company recorded all
of the Warrants at fair value and subsequently remeasured unexercised Warrants to fair value at the reporting date. Changes in fair value
were recognized as a component of other income (expense), net in the consolidated statements of operations. The Company recognized a gain
in the consolidated statements of operations in relation to these instruments for the three months ended March 31, 2023 as follows (in
thousands).
Schedule of warrant liability |
|
|
|
|
|
|
March 31, 2023 |
|
|
|
|
|
Balance at December 31, 2022 |
|
$ |
374 |
|
Warrants issued during the period |
|
|
9,754 |
|
Series A warrants exercised during the period |
|
|
(3,300 |
) |
Unrealized gain |
|
|
(4,440 |
) |
Warrant Liability at March 31, 2023 |
|
$ |
2,388 |
|
|
| 12. | Convertible Debt and Warrant Liability |
On November 4, 2022,
the Company issued the first tranche of the 10% Original Issue Discount Convertible Notes in the aggregate principal amount of $10.0 million
for gross proceeds of $9.0 million to various investors. These convertible notes have a maturity date of 24 months from the issuance date.
The convertible notes earn interest at a rate of 10% per annum which will only accrue upon an event of default. The convertible notes
are convertible solely in common stock of the Company at a conversion price of (a) $15 per share or (b) 92.5% of the average of the
three lowest daily VWAP of the Common Stock during the ten trading day period, whichever is lower. These convertible notes are secured
by a first priority security interest in all of the assets of the Company.
The Company elected the fair value option
to account for the 2022 Convertible Notes. As such, the Company recorded the 2022 Convertible Notes at fair value and will subsequently
measure them to fair value at each reporting date. Changes in fair value were recognized as a component of other income (expense), net
in the consolidated statements of operations. Losses as a result in changes in fair value of the Company’s convertible notes during
the year ended December 31, 2022 were as follows (in thousands):
Schedule of convertible debt | |
| | |
| |
Years ended December 31, |
|
| |
2022 | |
| |
| |
Balance at the beginning of the year | |
$ | - | |
Convertible Debt issued during the period | |
| 7,034 | |
Unrealized loss | |
| 3,877 | |
Convertible Debt Liability at the end of the year | |
$ | 10,911 | |
As a result of applying the fair value option, direct costs and fees
related to the convertible notes were expensed as incurred and were not deferred.
The
following table provides the fair value and contractual principal balance outstanding of the 2022 Convertible debt accounted
for under the fair value option as of December 31, 2022:
Schedule
of fair value option | |
| Amount | |
Convertible debt fair value | |
$ | 10,911 | |
2022 Convertible Notes, contractual principal outstanding | |
$ | 10,000 | |
Fair value less unpaid principal balance | |
$ | 911 | |
All convertible notes and warrants, by
written agreement, provide for a beneficial ownership limitation cap of 4.99% shares of the total issued and outstanding common stock
of the Company, at any given time.
Warrant Liability
In connection with the issuance of the
convertible note, the investors received a number of warrants equal to 30% of the face value of the convertible note divided by the VWAP
prior to the applicable closing date. The Common Stock Warrants entitles the holder to purchase one share of the Company’s Class
A ordinary shares at the exercise price of a) $15 per share or (b) 92.5% of the average of the three lowest daily VWAP of the Common
Stock during the ten trading day period, whichever is lower. There are 231,312 warrants issued upon closing of the first tranche
of the Convertible Note which have a five-year exercise period from the issuance date.
The Company recorded the Warrants at fair
value and subsequently remeasured them to fair value at the reporting date. Changes in fair value were recognized as a component of other
income (expense), net in the consolidated statements of operations. The Company recognized a gain in the consolidated statements of operations
in relation to these instruments for fiscal year 2022 as follows (in thousands). There were no warrants exercised as of
December 31, 2022.
Schedule of warrant liability | |
| | |
| |
Years ended December 31, |
|
| |
2022 | |
| |
| |
Balance at the beginning of the year | |
$ | - | |
Warrants issued during the period | |
| 1,966 | |
Unrealized Gain | |
| (1,592 | ) |
Warrant Liability at the end of the year | |
$ | 374 | |
|
X |
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- DefinitionThe entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
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v3.23.2
Fair Value
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Fair Value Disclosures [Abstract] |
|
|
Fair Value |
The following table presents
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2023 and
December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in
thousands).
Schedule of fair value, liabilities measured on recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
Description: |
|
Level |
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability |
|
|
3 |
|
|
$ |
2,388 |
|
|
$ |
374 |
|
Convertible Notes |
|
|
3 |
|
|
|
4,054 |
|
|
|
10,911 |
|
Convertible debt and warrant liability, at fair value |
|
|
|
|
|
$ |
6,442 |
|
|
$ |
11,285 |
|
Warrant Liability
The Common Stock Warrants
and Series B Warrants are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting
period. Changes in the fair value of the Warrants are recorded in the statements of operations each period. Changes in fair value of the
liability resulting from the cumulative changes in instrument- specific credit risk will be presented in accumulated other comprehensive
income.
The Warrants were valued
using a Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an options pricing model
are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates
the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free
interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining
life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend
rate is based on the historical rate, which the Company anticipates remaining at zero.
The following tables provide
quantitative information regarding Level 3 fair value measurements for Common Stock Warrants and Series B Warrants as of March 31, 2023
and December 31, 2022.
Common Stock Warrants
Schedule of fair value measurements for common stock warrants |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Exercise price |
|
$ |
15.00 |
|
|
$ |
15.00 |
|
Share price |
|
$ |
0.58 |
|
|
$ |
3.25 |
|
Volatility |
|
|
95 |
% |
|
|
85 |
% |
Expected life |
|
|
4.76 |
|
|
|
4.84 |
|
Risk-free rate |
|
|
3.62 |
% |
|
|
4.01 |
% |
Dividend yield |
|
|
- |
|
|
|
- |
|
Series B Warrants
|
|
March 31, 2023 |
|
Exercise price |
|
$ |
1.56 |
|
Share price |
|
$ |
0.58 |
|
Volatility |
|
|
95 |
% |
Expected life |
|
|
4.89 |
|
Risk-free rate |
|
|
3.61 |
% |
Dividend yield |
|
|
- |
|
Convertible Notes
The Company accounts for its
Convertible Notes under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be
at the inception of a financial instrument to account for the instrument under the fair value option under ASC
825. The Company has made such election for its Convertible Notes. Using the fair value option, the Convertible Notes,
in their entirety, are required to be recorded at initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the notes are recognized as non-cash change in the fair value of the convertible notes in the statements
of operations. The fair value of the conversion feature of the Convertible Notes were valued utilizing the Monte Carlo simulation model.
The estimated fair value of the Convertible Notes
was based on the following significant inputs:
Schedule of fair value of the convertible notes |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Risk-free interest rate |
|
|
4.20 |
% |
|
|
4.46 |
% |
Time to expiration (in years) |
|
|
1.76 |
|
|
|
1.84 |
|
Expected volatility |
|
|
95 |
% |
|
|
85 |
% |
Dividend yield |
|
|
- |
|
|
|
- |
|
Stock price |
|
$ |
0.58 |
|
|
$ |
3.25 |
|
Face value |
|
$ |
3,654,342 |
|
|
$ |
10,000,000 |
|
Fixed conversion rate |
|
$ |
15.00 |
|
|
$ |
15.00 |
|
Roll-forward discount rate |
|
|
23.19 |
% |
|
|
5.11 |
% |
|
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2022, and indicates the
fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. The company had no such instruments at
December 31, 2021:
Schedule of fair value, liabilities measured on recurring basis | |
| |
| | |
Description: | |
Level | |
December 31, 2022 | |
Liabilities: | |
| |
| | |
Warrant liability | |
3 | |
$ | 374 | |
Convertible Notes | |
3 | |
$ | 10,911 | |
Warrant Liability
The Common Stock Warrants are accounted for as
liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting period. Changes in the fair value of
the Warrants are recorded in the statements of operations each period. Changes in fair value of the liability resulting from the cumulative
changes in instrument- specific credit risk will be presented in accumulated other comprehensive income.
The Common Stock Warrants were valued using a
Monte Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an options pricing model are assumptions
related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest
rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of
the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is
based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information
regarding Level 3 fair value measurements for Common Stock Warrants as of December 31, 2022.
Schedule of fair value measurements for common stock warrants | |
| | |
| |
December 31, 2022 | |
Exercise price | |
$ | 15.00 | |
Share price | |
$ | 3.25 | |
Volatility | |
| 85 | % |
Expected life | |
| 4.84 | |
Risk-free rate | |
| 4.01 | % |
Dividend yield | |
| - | |
Convertible Note
The Company accounts for its convertible
note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be at the inception
of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company
has made such election for its convertible note. Using the fair value option, the convertible note, in its entirety, is
required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated
fair value of the note are recognized as non-cash change in the fair value of the convertible note in the statements of operations. Changes
in fair value of the liability resulting from the cumulative changes in instrument- specific credit risk will be presented in accumulated
other comprehensive income. The fair value of the conversion feature of the note was valued utilizing the Monte Carlo simulation model.
The estimated fair value of the Convertible
Notes was based on the following significant inputs:
Schedule of fair value of the convertible notes | |
| | |
| |
December 31, 2022 | |
Risk-free interest rate | |
| 4.46 | % |
Time to expiration (in years) | |
| 1.84 | |
Expected volatility | |
| 85 | % |
Dividend yield | |
| - | |
Stock price | |
$ | 3.25 | |
Face value | |
$ | 10,000,000 | |
Fixed conversion rate | |
$ | 15.00 | |
Roll-forward discount rate | |
| 5.11 | % |
|
X |
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- DefinitionThe entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.
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v3.23.2
Subsequent Events
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Subsequent Events [Abstract] |
|
|
Subsequent Events |
Nasdaq Bid Price Deficiency Letter
On April 11, 2023, the Company
received a notice from Nasdaq indicating that the Company is not in compliance with the $1.00 minimum bid price requirement set forth
in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Global Market. On April 11, 2023, the Company also determined that
receipt of the notice from Nasdaq constituted an event of default under its Convertible Notes. As a result, unless waived by the holders,
the Convertible Notes began accruing default interest at a rate of 10% per annum and the Company is obligated to pay to the holders $3.3
million, which amount represents 100% of the sum of (x) the outstanding principal of the Convertible Notes as of April 11, 2023 and (y)
accrued and unpaid interest thereon. The holders have the option to instead convert the amount due and payable under the event of default,
including at an alternative conversion price as described in the Convertible Notes.
Pending Holding Company Reorganization Merger
On April 17, 2023, the Company
filed a registration statement on Form S-4 indicating that the board of directors unanimously approved an agreement and plan of merger
dated April 16, 2023 among the Company, Nxu, Inc. a Delaware corporation (“Nxu”), and Atlis Merger Sub Inc., a Delaware corporation
and wholly-owned subsidiary of Nxu, pursuant to which Atlis will merge with Atlis Merger Sub. Inc. with Atlis surviving as a wholly-owned
subsidiary of Nxu Upon completion of the merger, Nxu will replace Atlis as the publicly listed corporation and will conduct all the operations
currently conducted by Atlis. On May 9, 2023, the merger was approved by the Company’s shareholders.
Nasdaq Notice of Capital Market Listing Approval
As
previously disclosed in the Company’s 2022 Form 10-K, on March 13, 2023, the Company received a notice from Nasdaq stating that,
based on Nasdaq’s review of the Company’s Market Value of Listed Securities (“MVLS”) for the last 38 consecutive
business days, the Company no longer meets the minimum MVLS requirement of $50 million for continued listing of the Company’s Class
A common stock on Nasdaq under Nasdaq Listing Rule 5450(b)(2)(A). The Company also disclosed that the Company may be eligible to transfer
to The Nasdaq Capital Market before the expiry of the 180-day period. To qualify, the Company would be required to meet the continued
listing requirements for The Nasdaq Capital Market.
On
May 11, 2023, the Company received notice from the Nasdaq that it had been approved for listing on the Nasdaq Capital Market. The transfer
will be effective at the opening of trading on or about May 15, 2023.
|
On January 5, 2023, the Company entered into an amendment to the
Securities Purchase Agreement dated November 3, 2022, pursuant to which the Company and each Investor agreed, among other things, to amend
the terms and conditions of the second tranche of funding and terminate the third tranche of funding contemplated under the Purchase Agreement.
The Purchase
Agreement Amendment provides that, with respect to the Second Tranche, at any time prior to the earlier to occur of (x) April 30, 2024
and (y) the twentieth (20th) trading day following the effectiveness of the resale registration statement covering the resale
of all of the shares of the Company’s Class A common stock issuable under the first tranche of funding (the “First Tranche”),
which closed upon signing of the Purchase Agreement, each Investor shall have the right, severally and not jointly, to purchase a base
allocation of $5.0 million in Senior Secured Original Issue 10% Discount Convertible Promissory Notes (the “Notes”),
which are convertible into shares of the Company’s Class A common stock, and warrants (the “Warrants”) to purchase
a number of shares of the Company’s Class A common stock equal to 30% of the face value of the Notes divided by the volume weighted
average price at one or more Second Tranche closings (with a total base allocation of $10.0 million, in the aggregate, for all Investors)
and, solely with respect to the initial Second Tranche closing, up to an additional $5.0 million in additional Notes and related Warrants
pursuant to oversubscription rights, to the extent then available. In connection with the Purchase Agreement Amendment, the Company also
issued a Warrant to each Investor purchase up to an aggregate of 268,980 shares of the Company’s Class A common stock.
Concurrently
with the Purchase Agreement Amendment, the Company also entered into an amendment (the “Registration Rights Agreement Amendment”)
to the Registration Rights Agreement, dated as of November 3, 2022, with each Investor, pursuant to which the Company agreed to file a
registration statement (a “Registration Statement”) with the Securities and Exchange Commission registering the resale of
the shares of the Company’s Class A common stock issuable under the First Tranche within 20 days after the closing of the First
Tranche and registering the resale of the shares of the Company’s Class A common stock issuable under the Second Tranche within
two trading days after the closing of the Second Tranche, as applicable, and to cause any such Registration Statement to become effective
within 60 days after filing. On January 27, 2023, the investors exercised their rights to purchase the allowable amounts under the
agreement. The Company received net proceeds of $9 million in the transaction.
On February
21, 2023, the Company consummated a public offering of an aggregate of 8.3 million units at an effective public offering price of $1.56
per unit, resulting in aggregate gross proceeds of approximately $13 million. Each unit consists of (i) one share of Class A common stock,
$0.0001 par value per share (“Class A common stock”), of the Company , (ii) 0.65 Series A warrants to purchase 0.65 shares
of Class A common stock (the “Series A Warrants”) and (iii) 0.75 Series B warrants to purchase 0.75 shares of Class A common
stock (the “Series B Warrants” and, together with the Series A Warrants, the “Warrants”), each such Warrant being
exercisable from time to time for one share of Class A common stock at an exercise price of $1.56. The Series A Warrants were immediately
exercisable and will expire five (5) years after the date of issuance. The Series B Warrants will not be exercisable until after
the date the Company effects a corporate reorganization of the Company or until after the date stockholder approval is obtained to
have a sufficient number of shares of Class A common stock authorized to permit the exercise in full of the Series B Warrants, and will
then expire five (5) years after the date of such corporate reorganization or stockholder approval, as applicable. The shares of Class
A common stock and Warrants included in each Unit were issued separately and were immediately separable upon issuance. The Company intends
to use the net proceeds of the offering primarily for general corporate purposes, which may include, but is not limited to, research and
development and operations, capital equipment and raw materials. In addition, the Company may be required to use up to 40% of the gross
proceeds from the offering to prepay its outstanding convertible notes at the option of the holders of such notes.
On March 13, 2023, the Company received a notice from The Nasdaq stating
that, based on Nasdaq’s review of the Company’s Market Value of Listed Securities (“MVLS”) for the last 38 consecutive
business days, the Company no longer meets the minimum MVLS requirement of $50 million for continued listing of the Company’s Class
A common stock on Nasdaq under Nasdaq Listing Rule 5450(b)(2)(A) (the “MLVS Rule”).
The Notice has no immediate effect on the listing
of the Company’s Class A common stock on Nasdaq and, in accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company will have
180 calendar days, or until September 11, 2023, to regain compliance with the MVLS Rule. To regain compliance with the MLVS Rule, the
MVLS for the Company’s shares of Class A common stock must be at least $50 million for a minimum of 10 consecutive business days
at any time during this 180-day period. If the Company regains compliance with the MLVS Rule, Nasdaq will provide the Company with written
confirmation and will close the matter.
If the Company does not regain compliance by September
11, 2023, Nasdaq will provide notice that the Company’s shares of Class A common stock are subject to delisting. In the event of
such notification, the Nasdaq rules permit the Company an opportunity to appeal Nasdaq’s determination.
There can be no assurance that the Company will
be able to regain compliance with the MVLS requirement or maintain compliance with the other Nasdaq listing requirements. The Company
is monitoring the MLVS of its shares of Class A common stock and will consider options available to it to potentially achieve compliance.
The Company may be eligible to transfer to The Nasdaq Capital Market before the expiry of the 180-day period. To qualify, the Company
would be required to meet the continued listing requirements for The Nasdaq Capital Market.
|
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- DefinitionThe entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
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v3.23.2
Recent Accounting Pronouncements and Summary of Significant Accounting Policies
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Accounting Policies [Abstract] |
|
|
Recent Accounting Pronouncements and Summary of Significant Accounting Policies |
|
2. |
Recent Accounting Pronouncements and Summary of Significant Accounting Policies |
Recent Accounting Pronouncements
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Due to uncertainties, actual results could differ from the estimates and
assumptions used in preparation of the consolidated financial statements.
|
| 2. | Summary
of Significant Accounting Policies |
Recent Accounting Pronouncements
and Summary of Significant Accounting Policies
Recent Accounting Pronouncements
In December 2019, the FASB
issued Accounting Standards Update, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes
(“ASC 740”). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general
principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal
years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective
basis and others on a retrospective basis with earlier application permitted. The Company does not expect this update to have a
material impact on its consolidated financial statements.
In August 2020, the FASB issued
Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models
in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments.
The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is
effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company
has chosen to early adopt this standard for the period ended December 31, 2022.
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
Summary of Significant
Accounting Policies
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the consolidated financial
statements.
Segment Reporting
The Company evaluated segment
reporting in accordance with Accounting Standards Codification 280 – Segment Reporting (“ASC 280”) and concluded that
ATLIS is comprised of one operating segment. The Company reports segment information based on the operating results regularly reviewed
by the chief operating decision maker to make decisions about resource allocation and the performance of the business.
Concentration of Credit
Risks
The Company is subject to
concentrations of credit risk primarily from cash and cash equivalents.
The Company considers all
highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company’s cash and
cash equivalents accounts are held at a financial institution and are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250 thousand. From time to time, the Company’s bank balances exceed the FDIC insurance limit. To reduce its risk associated
with the failure of such financial institutions, the Company periodically evaluates the credit quality of the financial institution in
which it holds deposits.
Advertising
The Company began utilizing
media networks, including, but not limited to online and social media presence to build awareness for the product and brand. Advertising
costs for the year ended December 31, 2022, were $5.3 million. Advertising costs for the year ended December 31, 2021, were $2.7 million.
Income Taxes
Income taxes are accounted
for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Valuation allowances are established, when necessary, but no less than quarterly,
to reduce deferred tax assets to the amounts expected to be realized.
Property
and Equipment
Property and equipment are carried at cost. Depreciation
is calculated using the straight-line method over the estimated useful life of each asset. Estimated useful lives for significant classes
of assets are currently 5 years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are
capitalized according to their estimated useful lives or over the lease term for leasehold improvements. The Company capitalizes property
and equipment with an initial value over $2,500.
Long-Lived Assets
In accordance with ASC 360-10,
the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value
may not be recoverable. When such facts and circumstances exist, the Company compares the projected undiscounted future cash flows associated
with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any,
is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows,
of those assets and is recorded in the period in which the determination is made. Depending on the asset, estimated fair market value may be determined
either by use of the discounted cash flow model or by reference to estimated selling values of assets in similar condition. There were no impairment charges for the years
ended December 31, 2022, or December 31, 2021.
Research and Development
Expenses
Research and development costs are charged to operations when incurred
and are included in Operating expenses on the consolidated statements of operations. The Company recorded $9.6 million in Research and
development expenses for the year ended December 31, 2022 of which $6 million was related to employee compensation and $3.6 million was
related to materials and equipment purchases, primarily related to battery and platform research and development activities. In the year
ended December 31, 2021, the Company recorded $2.8 million and $1.6 million in Research and development employee compensation and materials
and equipment, respectively for a total of $4.4 million for the year ended December 31, 2021.
General and administrative
expenses
General and administrative costs include salaries related to non-production
and non research and development employees, legal and other professional fees, rent and other general expenses incurred by the company.
The company recorded $12.4 million in general and administrative expenses consisting of $3.8 million in employee compensation and $8.6
million in legal and other expenses for the year ended December 31, 2022. The Company recorded $3.3 million in general and administrative
expenses in the year ended December 31, 2021 consisting of $1.2 million in employee compensation and $2.1 million in legal and other expenses.
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with
ASC Topic 718, Compensation-Stock Compensation. Under the fair value recognition provisions of this topic, stock-based compensation cost
is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period,
which is the vesting period. Forfeitures are accounted for as they occur in accordance with ASC 718-10-35-3.
The Company uses the Black-Scholes
option-pricing method for valuing stock option awards. Calculating the fair value of stock option awards requires the input of subjective
assumptions. Other reasonable assumptions could have a material impact on the Company’s stock-based compensation expense and therefore,
its operational results.
Stock Issued for Services
The Company periodically grants common stock
awards to non-employees in exchange for services. The fair value of the stock-based compensation awards granted is based on the fair value
of the award on the grant date. Stock-based payments are recorded on the consolidated statements of operations in the same manner and
to the same financial statement line item as it would have been had such settlement been made in cash.
Contract Liability
The Company defers the recognition of revenue
when cash payments are received or due in advance of satisfying its performance obligations, including amounts which are refundable. The
Company recorded no Contract Liability at December 31, 2021 and $523 thousand at December 31, 2022.
Other income, net
Other income primarily consists of realized and
unrealized gains and losses on convertible debt and warrant liabilities, gains and losses on the sale of property and equipment and gains
on forgiveness of the Company’s Paycheck Protection Program.
Fair Value of Financial
Instruments.
Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 820“Fair Value Measurements and Disclosures”
(“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. ASC 820establishes a fair value hierarchy for inputs, which represent
the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable
inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller
would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three
levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted
quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments
and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an
active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on (i)
quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or
similar assets, (iii) inputs other than quoted prices for the assets and liabilities, or (iv) inputs that are derived principally from
or corroborated by market through correlation or other means.
Level 3 - Valuations based on inputs
that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain
assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the
balance sheets as of December 31, 2022, and 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued
expenses are estimated to approximate the carrying values as of December 31, 2022, and 2021, due to the short maturities of such instruments.
There were no transfers between Levels 1,
2 or 3 during the year ended December 31, 2022, or for the year ended December 31, 2021.
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v3.23.2
Inventory
|
3 Months Ended |
Mar. 31, 2023 |
Inventory Disclosure [Abstract] |
|
Inventory |
Inventory is stated at the
lower of cost or net realizable value (“LCNRV”) and consists of raw materials and work in progress. The Company primarily
calculates inventory value actual cost on the first-in, first-out (“FIFO”) basis. NRV is the estimated selling price of inventory
in the ordinary course of business, less estimated costs of completion, disposal, and transportation. The Company assesses the valuation
of inventory and periodically adjusts its value for estimated excess and obsolete inventory based upon expectations of future demand and
market conditions, as well as damaged or otherwise impaired goods. The following table summarizes the components of Inventory on the Condensed
Consolidated Balance Sheets at March 31, 2023 (in thousands):
Schedule of inventory |
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
98 |
|
|
$ |
98 |
|
Work in process |
|
|
580 |
|
|
|
- |
|
Total Inventory |
|
$ |
678 |
|
|
$ |
98 |
|
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v3.23.2
Summary of Significant Accounting Policies (Policies)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Accounting Policies [Abstract] |
|
|
Recent Accounting Pronouncements |
Recent Accounting Pronouncements
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
|
Recent Accounting Pronouncements
In December 2019, the FASB
issued Accounting Standards Update, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes
(“ASC 740”). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general
principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal
years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective
basis and others on a retrospective basis with earlier application permitted. The Company does not expect this update to have a
material impact on its consolidated financial statements.
In August 2020, the FASB issued
Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models
in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments.
The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is
effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company
has chosen to early adopt this standard for the period ended December 31, 2022.
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
|
Use of Estimates |
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Due to uncertainties, actual results could differ from the estimates and
assumptions used in preparation of the consolidated financial statements.
|
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the consolidated financial
statements.
|
Segment Reporting |
|
Segment Reporting
The Company evaluated segment
reporting in accordance with Accounting Standards Codification 280 – Segment Reporting (“ASC 280”) and concluded that
ATLIS is comprised of one operating segment. The Company reports segment information based on the operating results regularly reviewed
by the chief operating decision maker to make decisions about resource allocation and the performance of the business.
|
Concentration of Credit Risks |
|
Concentration of Credit
Risks
The Company is subject to
concentrations of credit risk primarily from cash and cash equivalents.
The Company considers all
highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company’s cash and
cash equivalents accounts are held at a financial institution and are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250 thousand. From time to time, the Company’s bank balances exceed the FDIC insurance limit. To reduce its risk associated
with the failure of such financial institutions, the Company periodically evaluates the credit quality of the financial institution in
which it holds deposits.
|
Advertising |
|
Advertising
The Company began utilizing
media networks, including, but not limited to online and social media presence to build awareness for the product and brand. Advertising
costs for the year ended December 31, 2022, were $5.3 million. Advertising costs for the year ended December 31, 2021, were $2.7 million.
|
Income Taxes |
|
Income Taxes
Income taxes are accounted
for in accordance with the provisions of ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Valuation allowances are established, when necessary, but no less than quarterly,
to reduce deferred tax assets to the amounts expected to be realized.
|
Property and Equipment |
|
Property
and Equipment
Property and equipment are carried at cost. Depreciation
is calculated using the straight-line method over the estimated useful life of each asset. Estimated useful lives for significant classes
of assets are currently 5 years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are
capitalized according to their estimated useful lives or over the lease term for leasehold improvements. The Company capitalizes property
and equipment with an initial value over $2,500.
|
Long-Lived Assets |
|
Long-Lived Assets
In accordance with ASC 360-10,
the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value
may not be recoverable. When such facts and circumstances exist, the Company compares the projected undiscounted future cash flows associated
with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any,
is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows,
of those assets and is recorded in the period in which the determination is made. Depending on the asset, estimated fair market value may be determined
either by use of the discounted cash flow model or by reference to estimated selling values of assets in similar condition. There were no impairment charges for the years
ended December 31, 2022, or December 31, 2021.
|
Research and Development Expenses |
|
Research and Development
Expenses
Research and development costs are charged to operations when incurred
and are included in Operating expenses on the consolidated statements of operations. The Company recorded $9.6 million in Research and
development expenses for the year ended December 31, 2022 of which $6 million was related to employee compensation and $3.6 million was
related to materials and equipment purchases, primarily related to battery and platform research and development activities. In the year
ended December 31, 2021, the Company recorded $2.8 million and $1.6 million in Research and development employee compensation and materials
and equipment, respectively for a total of $4.4 million for the year ended December 31, 2021.
|
General and administrative expenses |
|
General and administrative
expenses
General and administrative costs include salaries related to non-production
and non research and development employees, legal and other professional fees, rent and other general expenses incurred by the company.
The company recorded $12.4 million in general and administrative expenses consisting of $3.8 million in employee compensation and $8.6
million in legal and other expenses for the year ended December 31, 2022. The Company recorded $3.3 million in general and administrative
expenses in the year ended December 31, 2021 consisting of $1.2 million in employee compensation and $2.1 million in legal and other expenses.
|
Stock Based Compensation |
|
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with
ASC Topic 718, Compensation-Stock Compensation. Under the fair value recognition provisions of this topic, stock-based compensation cost
is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period,
which is the vesting period. Forfeitures are accounted for as they occur in accordance with ASC 718-10-35-3.
The Company uses the Black-Scholes
option-pricing method for valuing stock option awards. Calculating the fair value of stock option awards requires the input of subjective
assumptions. Other reasonable assumptions could have a material impact on the Company’s stock-based compensation expense and therefore,
its operational results.
|
Stock Issued for Services |
|
Stock Issued for Services
The Company periodically grants common stock
awards to non-employees in exchange for services. The fair value of the stock-based compensation awards granted is based on the fair value
of the award on the grant date. Stock-based payments are recorded on the consolidated statements of operations in the same manner and
to the same financial statement line item as it would have been had such settlement been made in cash.
|
Contract Liability |
|
Contract Liability
The Company defers the recognition of revenue
when cash payments are received or due in advance of satisfying its performance obligations, including amounts which are refundable. The
Company recorded no Contract Liability at December 31, 2021 and $523 thousand at December 31, 2022.
|
Other income, net |
|
Other income, net
Other income primarily consists of realized and
unrealized gains and losses on convertible debt and warrant liabilities, gains and losses on the sale of property and equipment and gains
on forgiveness of the Company’s Paycheck Protection Program.
|
Fair Value of Financial Instruments |
|
Fair Value of Financial
Instruments.
Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 820“Fair Value Measurements and Disclosures”
(“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. ASC 820establishes a fair value hierarchy for inputs, which represent
the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable
inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller
would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three
levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted
quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments
and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an
active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on (i)
quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or
similar assets, (iii) inputs other than quoted prices for the assets and liabilities, or (iv) inputs that are derived principally from
or corroborated by market through correlation or other means.
Level 3 - Valuations based on inputs
that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain
assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the
balance sheets as of December 31, 2022, and 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued
expenses are estimated to approximate the carrying values as of December 31, 2022, and 2021, due to the short maturities of such instruments.
There were no transfers between Levels 1,
2 or 3 during the year ended December 31, 2022, or for the year ended December 31, 2021.
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v3.23.2
Recent Accounting Pronouncements and Summary of Significant Accounting Policies (Policies)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Accounting Policies [Abstract] |
|
|
Recent Accounting Pronouncements |
Recent Accounting Pronouncements
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
|
Recent Accounting Pronouncements
In December 2019, the FASB
issued Accounting Standards Update, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes
(“ASC 740”). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general
principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal
years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective
basis and others on a retrospective basis with earlier application permitted. The Company does not expect this update to have a
material impact on its consolidated financial statements.
In August 2020, the FASB issued
Accounting Standards Update 2020-06 (ASU 2020-06). ASU 2020-06 eliminates the beneficial conversion feature and cash conversion models
in Accounting Standards Codification 470-20 that require separate accounting for embedded conversion features in convertible instruments.
The new guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The standard is
effective for smaller reporting companies for annual periods beginning after December 15, 2023. Early adoption is permitted. The Company
has chosen to early adopt this standard for the period ended December 31, 2022.
The Company has reviewed all
recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact
on its consolidated financial statements.
|
Use of Estimates |
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Due to uncertainties, actual results could differ from the estimates and
assumptions used in preparation of the consolidated financial statements.
|
Use of Estimates
The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the consolidated financial
statements.
|
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v3.23.2
Property and Equipment (Tables)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Property, Plant and Equipment [Abstract] |
|
|
Schedule of property and equipment |
Schedule of property and equipment |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
$ |
261 |
|
|
$ |
261 |
|
Office equipment |
|
|
164 |
|
|
|
114 |
|
Tools and plant equipment |
|
|
2,398 |
|
|
|
2,354 |
|
Vehicles |
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
Less—Accumulated depreciation |
|
|
(500 |
) |
|
|
(358 |
) |
Property and equipment, net |
|
$ |
2,393 |
|
|
$ |
2,441 |
|
|
Schedule of property and equipment | |
| | | |
| | |
| |
As of December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Leasehold improvements | |
$ | 261 | | |
$ | 130 | |
Office equipment | |
| 114 | | |
| 64 | |
Tools and plant equipment | |
| 2,354 | | |
| 830 | |
Vehicles | |
| 70 | | |
| 59 | |
| |
| | | |
| | |
Less—Accumulated depreciation | |
| (358 | ) | |
| (103 | ) |
Property and equipment, net | |
$ | 2,441 | | |
$ | 980 | |
|
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- DefinitionTabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.
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v3.23.2
Leases (Tables)
|
12 Months Ended |
Dec. 31, 2022 |
Leases [Abstract] |
|
Schedule of lease maturities |
Schedule of lease maturities | |
| | |
Year | |
| |
2023 | |
$ | 368 | |
2024 | |
| 379 | |
2025 | |
| 194 | |
Total minimum lease payments | |
| 941 | |
Less imputed interest | |
| (39 | ) |
Total operating lease liabilities | |
$ | 902 | |
|
Schedule of lease expenses |
Schedule of lease expenses | |
| |
| | | |
| | |
| |
| |
| 2022 | | |
| 2021 | |
Lease Expense Category: | |
Classification | |
| | | |
| | |
| |
| |
| | | |
| | |
Operating Lease Expense | |
General and administrative expenses Legal and other | |
$ | 335 | | |
$ | 457 | |
Finance lease expense: | |
| |
| | | |
| | |
Amortization of leased assets | |
General and administrative expenses Legal and Other | |
| 23 | | |
| - | |
Interest on lease liabilities | |
Interest expense | |
| 7 | | |
| - | |
Total lease expense | |
| |
$ | 365 | | |
$ | 457 | |
|
X |
- DefinitionTabular disclosure of lessee's lease cost. Includes, but is not limited to, interest expense for finance lease, amortization of right-of-use asset for finance lease, operating lease cost, short-term lease cost, variable lease cost and sublease income.
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v3.23.2
Stock Based Compensation and Common Stock (Tables)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Equity [Abstract] |
|
|
Schedule of stock options at the grant date |
|
Schedule of stock options at the grant date | |
| |
|
| |
Years ended December 31, |
| |
2022 | |
2021 |
| |
| |
|
Expected average life (years) | |
7.0 | |
7.0 |
Expected volatility | |
75.33% | |
73.56% |
Risk-free interest rate | |
1.65% | |
0.06% |
Expected dividend yield | |
-% | |
-% |
|
Schedule of stock options and restricted stock units Activity |
Schedule of stock options and restricted stock units Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
RSUs |
|
|
|
Shares |
|
|
Weighted average exercise price |
|
|
Weighted average contractual term (in years) |
|
|
Shares |
|
|
Weighted average grant date fair value |
|
Outstanding, December 31, 2022 |
|
|
45,575,047 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
90,000 |
|
|
$ |
7.00 |
|
Granted |
|
|
5,000 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(77,973 |
) |
|
|
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(25,036 |
) |
|
|
7.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2023 |
|
|
45,477,038 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
90,000 |
|
|
|
7.00 |
|
Exercisable, March 31, 2023 |
|
|
35,150,269 |
|
|
$ |
7.00 |
|
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
Schedule of stock options and restricted stock units activity | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Options | | |
RSUs | |
| |
Shares | | |
Weighted average exercise price | | |
Weighted average contractual term (in years) | | |
Shares | | |
Weighted average grant date fair value | |
Outstanding, December 31, 2021 | |
| 45,486,067 | | |
$ | 7.00 | | |
| 7 | | |
| 1,344,657 | | |
$ | - | |
Granted | |
| 946,800 | | |
| | | |
| 7 | | |
| 110,000 | | |
| 7.00 | |
Exercised | |
| (37,100 | ) | |
| - | | |
| | | |
| - | | |
| - | |
Forfeited | |
| (899,063 | ) | |
| 7.00 | | |
| | | |
| (7,456 | ) | |
| - | |
Shares issued | |
| - | | |
| | | |
| | | |
| (1,278,858 | ) | |
| | |
Unissued shares converted to options | |
| 78,343 | | |
| | | |
| | | |
| (78,343 | ) | |
| | |
Expired | |
| - | | |
| - | | |
| | | |
| - | | |
| - | |
Outstanding, December 31, 2022 | |
| 45,575,047 | | |
$ | 7.00 | | |
| 7 | | |
| 90,000 | | |
| 7.00 | |
Exercisable, December 31, 2022 | |
| 33,425,287 | | |
$ | 7.00 | | |
| 7 | | |
| - | | |
| - | |
|
Schedule of common stock by class |
Schedule of common stock by class |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
Class A |
|
|
32,856,398 |
|
|
|
9,763,838 |
|
Class C |
|
|
- |
|
|
|
- |
|
Class D |
|
|
32,475,370 |
|
|
|
31,125,370 |
|
Total Shares Outstanding |
|
|
65,331,768 |
|
|
|
40,889,208 |
|
|
Schedule of breakdown of common stock by class | |
| | | |
| | |
| |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Class A | |
| 9,763,838 | | |
| 6,854,576 | |
Class C | |
| - | | |
| 5,000 | |
Class D | |
| 31,125,370 | | |
| 25,725,370 | |
Total Shares Outstanding | |
| 40,889,208 | | |
| 32,584,946 | |
|
X |
- DefinitionTabular disclosure of share-based payment arrangement.
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v3.23.2
Convertible Debt and Warrant Liability (Tables)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Debt Disclosure [Abstract] |
|
|
Schedule of convertible debt |
Schedule of convertible debt |
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
|
|
|
|
Balance at December 31, 2022 |
|
$ |
10,911 |
|
Convertible Debt issued during the period |
|
|
7,330 |
|
Conversions/payoffs |
|
|
(16,346 |
) |
Unrealized Loss |
|
|
2,159 |
|
Convertible Debt Liability at March 31, 2023 |
|
$ |
4,054 |
|
|
Schedule of convertible debt | |
| | |
| |
Years ended December 31, |
|
| |
2022 | |
| |
| |
Balance at the beginning of the year | |
$ | - | |
Convertible Debt issued during the period | |
| 7,034 | |
Unrealized loss | |
| 3,877 | |
Convertible Debt Liability at the end of the year | |
$ | 10,911 | |
|
Schedule of fair value option |
Schedule of fair value option |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Convertible Notes fair value |
|
$ |
4,054 |
|
|
$ |
10,911 |
|
Convertible Notes, contractual principal outstanding |
|
|
3,654 |
|
|
|
10,000 |
|
Fair value less unpaid principal balance |
|
$ |
400 |
|
|
$ |
911 |
|
|
Schedule
of fair value option | |
| Amount | |
Convertible debt fair value | |
$ | 10,911 | |
2022 Convertible Notes, contractual principal outstanding | |
$ | 10,000 | |
Fair value less unpaid principal balance | |
$ | 911 | |
|
Schedule of warrant liability |
Schedule of warrant liability |
|
|
|
|
|
|
March 31, 2023 |
|
|
|
|
|
Balance at December 31, 2022 |
|
$ |
374 |
|
Warrants issued during the period |
|
|
9,754 |
|
Series A warrants exercised during the period |
|
|
(3,300 |
) |
Unrealized gain |
|
|
(4,440 |
) |
Warrant Liability at March 31, 2023 |
|
$ |
2,388 |
|
|
Schedule of warrant liability | |
| | |
| |
Years ended December 31, |
|
| |
2022 | |
| |
| |
Balance at the beginning of the year | |
$ | - | |
Warrants issued during the period | |
| 1,966 | |
Unrealized Gain | |
| (1,592 | ) |
Warrant Liability at the end of the year | |
$ | 374 | |
|
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v3.23.2
Fair Value (Tables)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Fair Value Disclosures [Abstract] |
|
|
Schedule of fair value, liabilities measured on recurring basis |
Schedule of fair value, liabilities measured on recurring basis |
|
|
|
|
|
|
|
|
|
|
|
|
Description: |
|
Level |
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability |
|
|
3 |
|
|
$ |
2,388 |
|
|
$ |
374 |
|
Convertible Notes |
|
|
3 |
|
|
|
4,054 |
|
|
|
10,911 |
|
Convertible debt and warrant liability, at fair value |
|
|
|
|
|
$ |
6,442 |
|
|
$ |
11,285 |
|
|
Schedule of fair value, liabilities measured on recurring basis | |
| |
| | |
Description: | |
Level | |
December 31, 2022 | |
Liabilities: | |
| |
| | |
Warrant liability | |
3 | |
$ | 374 | |
Convertible Notes | |
3 | |
$ | 10,911 | |
|
Schedule of fair value measurements for common stock warrants |
Schedule of fair value measurements for common stock warrants |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Exercise price |
|
$ |
15.00 |
|
|
$ |
15.00 |
|
Share price |
|
$ |
0.58 |
|
|
$ |
3.25 |
|
Volatility |
|
|
95 |
% |
|
|
85 |
% |
Expected life |
|
|
4.76 |
|
|
|
4.84 |
|
Risk-free rate |
|
|
3.62 |
% |
|
|
4.01 |
% |
Dividend yield |
|
|
- |
|
|
|
- |
|
Series B Warrants
|
|
March 31, 2023 |
|
Exercise price |
|
$ |
1.56 |
|
Share price |
|
$ |
0.58 |
|
Volatility |
|
|
95 |
% |
Expected life |
|
|
4.89 |
|
Risk-free rate |
|
|
3.61 |
% |
Dividend yield |
|
|
- |
|
|
Schedule of fair value measurements for common stock warrants | |
| | |
| |
December 31, 2022 | |
Exercise price | |
$ | 15.00 | |
Share price | |
$ | 3.25 | |
Volatility | |
| 85 | % |
Expected life | |
| 4.84 | |
Risk-free rate | |
| 4.01 | % |
Dividend yield | |
| - | |
|
Schedule of fair value of the convertible notes |
Schedule of fair value of the convertible notes |
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Risk-free interest rate |
|
|
4.20 |
% |
|
|
4.46 |
% |
Time to expiration (in years) |
|
|
1.76 |
|
|
|
1.84 |
|
Expected volatility |
|
|
95 |
% |
|
|
85 |
% |
Dividend yield |
|
|
- |
|
|
|
- |
|
Stock price |
|
$ |
0.58 |
|
|
$ |
3.25 |
|
Face value |
|
$ |
3,654,342 |
|
|
$ |
10,000,000 |
|
Fixed conversion rate |
|
$ |
15.00 |
|
|
$ |
15.00 |
|
Roll-forward discount rate |
|
|
23.19 |
% |
|
|
5.11 |
% |
|
Schedule of fair value of the convertible notes | |
| | |
| |
December 31, 2022 | |
Risk-free interest rate | |
| 4.46 | % |
Time to expiration (in years) | |
| 1.84 | |
Expected volatility | |
| 85 | % |
Dividend yield | |
| - | |
Stock price | |
$ | 3.25 | |
Face value | |
$ | 10,000,000 | |
Fixed conversion rate | |
$ | 15.00 | |
Roll-forward discount rate | |
| 5.11 | % |
|
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v3.23.2
Organization and Basis of Presentation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
|
1 Months Ended |
3 Months Ended |
12 Months Ended |
|
|
Nov. 04, 2022 |
Feb. 21, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Jan. 02, 2022 |
Dec. 31, 2021 |
Subsidiary, Sale of Stock [Line Items] |
|
|
|
|
|
|
Net Loss |
|
|
$ 12,300
|
$ 70,700
|
|
|
Net cash flows used in operating activities |
|
|
9,400
|
23,500
|
|
|
Cash |
|
|
12,900
|
2,700
|
|
|
Accumulated deficit |
|
|
231,000
|
218,600
|
|
|
Proceeds from debt |
$ 9,000
|
|
9,000
|
|
|
|
Operating lease ROU asset |
|
|
722
|
798
|
$ 1,100
|
|
Current portion of lease liability |
|
|
348
|
344
|
$ 1,200
|
|
Operating lease liability, net of current portion |
|
|
$ 470
|
$ 558
|
|
|
Public Offering [Member] |
|
|
|
|
|
|
Subsidiary, Sale of Stock [Line Items] |
|
|
|
|
|
|
Shares issued |
|
8,300,000
|
|
|
|
|
Share price |
|
$ 1.56
|
|
|
|
|
Value of shares issued |
|
$ 13,000
|
|
|
|
|
Voting rights |
|
Each unit consists of (i) one share of Class A common stock,
(ii) 0.65 Series A warrants to purchase 0.65 shares of Class A common stock and (iii) 0.75 Series B warrants to purchase 0.75 shares of
Class A common stock, each such warrant being exercisable from time to time for one share of Class A common stock at an exercise price
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v3.23.2
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended |
Dec. 31, 2022 |
Dec. 31, 2021 |
Accounting Policies [Abstract] |
|
|
Cash fdic insurance amount |
$ 250
|
|
Advertising costs |
5,300
|
$ 2,700
|
Capitalizes property and equipment |
2,500
|
|
Impairment charges |
0
|
0
|
Research and development expenses |
9,600
|
4,400
|
Employee compensastion |
6,000
|
2,800
|
Research and development expenses related to materials and equipment purchases |
3,600
|
1,600
|
General and administrative |
12,400
|
3,300
|
General and administrative expenses related to employee |
3,800
|
1,200
|
Legal and other expenses |
8,600
|
2,100
|
Contract Liability |
$ 523
|
$ 0
|
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v3.23.2
Property and Equipment (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] |
|
|
|
Less - Accumulated depreciation |
$ (500)
|
$ (358)
|
$ (103)
|
Property plant and equipment, net |
2,393
|
2,441
|
980
|
Leasehold Improvements [Member] |
|
|
|
Property, Plant and Equipment [Line Items] |
|
|
|
Property and equipment, gross |
261
|
261
|
130
|
Office Equipment [Member] |
|
|
|
Property, Plant and Equipment [Line Items] |
|
|
|
Property and equipment, gross |
164
|
114
|
64
|
Equipment [Member] |
|
|
|
Property, Plant and Equipment [Line Items] |
|
|
|
Property and equipment, gross |
2,398
|
2,354
|
830
|
Vehicles [Member] |
|
|
|
Property, Plant and Equipment [Line Items] |
|
|
|
Property and equipment, gross |
$ 70
|
$ 70
|
$ 59
|
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Income Taxes (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended |
12 Months Ended |
|
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2017 |
Mar. 31, 2022 |
Income Tax Disclosure [Abstract] |
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Operating loss carry forward |
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$ 16,500
|
$ 16,500
|
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Operating loss carryforward expiration date |
|
2037
|
2037
|
|
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Corporate tax rate |
|
|
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21.00%
|
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Current income tax expenses benefit |
$ 3,000
|
$ 14,900
|
|
|
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Uncertain tax positions |
0
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$ 0
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$ 0
|
|
$ 0
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Net Loss per Share (Details Narrative) - $ / shares
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
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|
|
|
|
Earning per share basic |
$ 0.66
|
$ 2.85
|
$ 8.88
|
$ 10.77
|
Potentially dilutive securities |
|
|
55,900,000
|
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Options And R S Us [Member] |
|
|
|
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] |
|
|
|
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Potentially dilutive securities |
|
|
45,700,000
|
|
Warrants [Member] |
|
|
|
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] |
|
|
|
|
Potentially dilutive securities |
|
|
231,000
|
|
Convertible Debts [Member] |
|
|
|
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] |
|
|
|
|
Potentially dilutive securities |
|
|
10,000,000
|
|
Options And R S Us 1 [Member] |
|
|
|
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] |
|
|
|
|
Potentially dilutive securities |
|
|
46,800,000
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46,800,000
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Stock Based Compensation and Common Stock (Details 1) - $ / shares
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Share-Based Payment Arrangement, Option [Member] |
|
|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] |
|
|
Balance at beginning |
45,575,047
|
45,486,067
|
Balance at beginning fair value |
$ 7.00
|
$ 7.00
|
Weighted average conttractual term (in years) |
7 years
|
7 years
|
Granted | shares |
5,000
|
946,800
|
Weighted average conttractual term (in years) |
7 years
|
7 years
|
Exercised | shares |
(77,973)
|
(37,100)
|
Forfeited | shares |
(25,036)
|
(899,063)
|
Fair value Forfeited |
$ 7.00
|
$ 7.00
|
Shares issued | shares |
|
|
Unissued shares converted to options | shares |
|
78,343
|
Expired | shares |
|
|
Balance at ending |
45,477,038
|
45,575,047
|
Balance at ending fair value |
$ 7.00
|
$ 7.00
|
Weighted average conttractual term (in years) |
7 years
|
7 years
|
Options, Exercisable, Number |
35,150,269
|
33,425,287
|
Options, Exercisable, Weighted Average Exercise Price |
$ 7.00
|
$ 7.00
|
Weighted average conttractual term (in years) |
7 years
|
7 years
|
Fair value Forfeited |
$ 7.00
|
|
Restricted Stock Units (RSUs) [Member] |
|
|
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] |
|
|
Balance at beginning |
90,000
|
1,344,657
|
Balance at beginning fair value |
$ 7.00
|
|
Granted | shares |
|
110,000
|
Granted fair value |
|
$ 7.00
|
Forfeited | shares |
|
(7,456)
|
Shares issued | shares |
|
(1,278,858)
|
Unissued shares converted to options | shares |
|
(78,343)
|
Balance at ending |
90,000
|
90,000
|
Balance at ending fair value |
$ 7.00
|
$ 7.00
|
Options, Exercisable, Number |
|
|
Options, Exercisable, Weighted Average Exercise Price |
|
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v3.23.2
Stock Based Compensation and Common Stock (Details 2) - shares
|
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Class of Stock [Line Items] |
|
|
|
Total Shares Outstanding |
65,331,768
|
40,889,208
|
32,584,946
|
Common Class A [Member] |
|
|
|
Class of Stock [Line Items] |
|
|
|
Total Shares Outstanding |
32,856,398
|
9,763,838
|
6,854,576
|
Common Class C [Member] |
|
|
|
Class of Stock [Line Items] |
|
|
|
Total Shares Outstanding |
|
|
5,000
|
Common Class D [Member] |
|
|
|
Class of Stock [Line Items] |
|
|
|
Total Shares Outstanding |
32,475,370
|
31,125,370
|
25,725,370
|
X |
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v3.23.2
Stock Based Compensation and Common Stock (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
|
12 Months Ended |
|
Aug. 24, 2021 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2023 |
Class of Stock [Line Items] |
|
|
|
|
Weighted average conversion ratio |
6.64%
|
|
|
|
Employee Benefits and Share-Based Compensation |
|
|
$ 115,000
|
|
Vested stock unissued |
10,000,000
|
|
|
|
Stock based compensation expense |
|
$ 41,500
|
$ 123,200
|
|
Common stock, shares authorized |
|
96,248,541
|
|
96,248,541
|
Common stock, par value |
|
$ 0.0001
|
|
$ 0.0001
|
Common Stock Class D [Member] |
|
|
|
|
Class of Stock [Line Items] |
|
|
|
|
Stock issued during period |
25,725,370
|
|
|
|
Stock Issued During Period to employees |
|
|
578,400
|
|
Common Class D [Member] |
|
|
|
|
Class of Stock [Line Items] |
|
|
|
|
Common stock, shares authorized |
|
41,925,572
|
41,925,572
|
41,925,572
|
Common stock, par value |
|
$ 0.0001
|
$ 0.0001
|
$ 0.0001
|
Common stock, shares issued |
|
31,125,370
|
25,725,370
|
32,475,370
|
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v3.23.2
Convertible Debt and Warrant Liability (Details) - USD ($) $ in Thousands |
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Debt Disclosure [Abstract] |
|
|
Balance at beginning |
$ 10,911
|
|
Convertible Debt issued during the period |
7,330
|
7,034
|
Unrealized Gain (Loss) |
2,159
|
3,877
|
Balance at end |
4,054
|
$ 10,911
|
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|
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|
|
1 Months Ended |
3 Months Ended |
12 Months Ended |
Apr. 11, 2023 |
Nov. 04, 2022 |
Feb. 21, 2023 |
Jan. 27, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Debt Instrument [Line Items] |
|
|
|
|
|
|
|
Proceeds from convertible debt |
|
|
|
$ 9,000
|
$ 9,000
|
|
$ 9,000
|
Interest rate |
10.00%
|
|
|
|
|
|
|
Net proceeds |
|
$ 9,000
|
|
|
9,000
|
|
|
Proceeds from public oppering |
|
|
|
|
$ 12,020
|
$ 3,413
|
|
Warrant Liability [Member] | Public Offering [Member] |
|
|
|
|
|
|
|
Debt Instrument [Line Items] |
|
|
|
|
|
|
|
Public offering consummated |
|
|
8,334,000
|
|
|
|
|
Public offering price |
|
|
$ 1.56
|
|
|
|
|
Proceeds from public oppering |
|
|
$ 13,000
|
|
|
|
|
Warrant Liability [Member] | First Tranche [Member] |
|
|
|
|
|
|
|
Debt Instrument [Line Items] |
|
|
|
|
|
|
|
Warrants issued |
|
|
|
|
231,312
|
|
|
Warrant Liability [Member] | Second Tranche [Member] |
|
|
|
|
|
|
|
Debt Instrument [Line Items] |
|
|
|
|
|
|
|
Warrants issued |
|
|
|
|
942,034
|
|
|
Warrant Liability [Member] | Class A Ordinary Shares [Member] |
|
|
|
|
|
|
|
Debt Instrument [Line Items] |
|
|
|
|
|
|
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Warrant exercise price |
|
|
|
|
$ 15
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
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|
|
|
|
5,417,100
|
|
|
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|
|
|
|
|
|
|
Debt Instrument [Line Items] |
|
|
|
|
|
|
|
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|
|
|
|
6,250,500
|
|
|
Convertible Notes [Member] |
|
|
|
|
|
|
|
Debt Instrument [Line Items] |
|
|
|
|
|
|
|
Principal amount |
|
10,000
|
|
|
|
|
|
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|
$ 9,000
|
|
|
|
|
|
Interest rate |
|
10.00%
|
|
|
|
|
|
Conversion price |
|
$ 15
|
|
|
|
|
|
Warrant exercise price |
|
$ 15
|
|
|
|
|
|
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Fair Value (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] |
|
|
|
Warrant liability |
$ 2,388
|
$ 374
|
|
Convertible Notes |
4,054
|
10,911
|
|
Convertible debt and warrant liability, at fair value |
6,442
|
11,285
|
|
Fair Value, Inputs, Level 3 [Member] |
|
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] |
|
|
|
Warrant liability |
2,388
|
374
|
|
Convertible Notes |
4,054
|
10,911
|
|
Convertible debt and warrant liability, at fair value |
$ 6,442
|
$ 11,285
|
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v3.23.2
Fair Value (Details 2) - USD ($)
|
3 Months Ended |
12 Months Ended |
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Debt Instrument [Line Items] |
|
|
|
Risk-free interest rate |
|
1.65%
|
0.06%
|
Time to expiration (in years) |
|
7 years
|
7 years
|
Dividend yield |
|
|
|
Face value |
$ 4,054,000
|
$ 10,911,000
|
|
Convertible Notes [Member] |
|
|
|
Debt Instrument [Line Items] |
|
|
|
Risk-free interest rate |
4.20%
|
4.46%
|
|
Time to expiration (in years) |
1 year 9 months 3 days
|
1 year 10 months 2 days
|
|
Volatility |
95.00%
|
85.00%
|
|
Dividend yield |
|
|
|
Stock price |
$ 0.58
|
$ 3.25
|
|
Face value |
$ 3,654,342
|
$ 10,000,000
|
|
Fixed conversion rate |
$ 15.00
|
$ 15.00
|
|
Roll-forward discount rate |
23.19%
|
5.11%
|
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v3.23.2
Subsequent Events (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
|
|
1 Months Ended |
3 Months Ended |
12 Months Ended |
Apr. 11, 2023 |
Jan. 05, 2023 |
Feb. 21, 2023 |
Jan. 27, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Proceeds from convertible debt |
|
|
|
$ 9,000
|
$ 9,000
|
|
$ 9,000
|
Interest rate |
10.00%
|
|
|
|
|
|
|
Obligation payment |
$ 3,300
|
|
|
|
|
|
|
Public Offering [Member] |
|
|
|
|
|
|
|
Shares issued |
|
|
8,300,000
|
|
|
|
|
Share price |
|
|
$ 1.56
|
|
|
|
|
Value of shares issued |
|
|
$ 13,000
|
|
|
|
|
Punlic Offering [Member] |
|
|
|
|
|
|
|
Voting rights |
|
|
Each unit consists of (i) one share of Class A common stock,
$0.0001 par value per share (“Class A common stock”), of the Company , (ii) 0.65 Series A warrants to purchase 0.65 shares
of Class A common stock (the “Series A Warrants”) and (iii) 0.75 Series B warrants to purchase 0.75 shares of Class A common
stock (the “Series B Warrants” and, together with the Series A Warrants, the “Warrants”), each such Warrant being
exercisable from time to time for one share of Class A common stock at an exercise price of $1.56.
|
|
|
|
|
Common Class A [Member] |
|
|
|
|
|
|
|
Warrants issued |
|
268,980
|
|
|
|
|
|
X |
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