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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
or
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission file number 1-41509
Nxu, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
92-2819012 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Number) |
1828 N. Higley Rd. Ste 116
Mesa, AZ 85205
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area
code: (760) 515-1133
Former name, former address and former fiscal year,
if changed since last report: N/A
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
Class A Common Stock, par value $0.0001 per share |
NXU |
NASDAQ |
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No ¨
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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 Exchange Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
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 pursuant to
Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 6, 2024,
there were 11,934,072 and 267,503 shares of
the Registrant’s Class A and Class B Common Stock outstanding, respectively, par value $0.0001.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NXU, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
| |
| | | |
| | |
| |
June 30, 2024 | | |
December 31, 2023 | |
Assets | |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash | |
$ | 4,599 | | |
$ | 2,846 | |
Prepaid expenses and other current assets | |
| 987 | | |
| 999 | |
Notes receivable from related party | |
| 250 | | |
| 250 | |
Total current assets | |
| 5,836 | | |
| 4,095 | |
| |
| | | |
| | |
Property and equipment, net | |
| 2,078 | | |
| 3,865 | |
Assets held for sale | |
| 1,013 | | |
| - | |
Right-of-use assets, net | |
| 1,439 | | |
| 1,507 | |
Investment in Lynx | |
| 3,000 | | |
| 3,000 | |
Intangible assets, net | |
| 42 | | |
| 20 | |
Other assets | |
| 704 | | |
| 772 | |
Total assets | |
$ | 14,112 | | |
$ | 13,259 | |
| |
| | | |
| | |
Liabilities and Stockholders' Equity | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 1,747 | | |
$ | 3,371 | |
Variable share settled restricted stock units | |
| 2,080 | | |
| 1,334 | |
Current portion of operating lease liability | |
| 1,874 | | |
| 864 | |
Other current liabilities | |
| - | | |
| 40 | |
Total current liabilities | |
| 5,701 | | |
| 5,609 | |
| |
| | | |
| | |
Lease liability, net of current portion | |
| 710 | | |
| 688 | |
Convertible debt and warrant liability, at fair value | |
| 16 | | |
| 65 | |
Other long-term liabilities | |
| 33 | | |
| 233 | |
Total liabilities | |
| 6,460 | | |
| 6,595 | |
Commitments and contingencies (Note 12) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' Equity: | |
| | | |
| | |
| |
| | | |
| | |
Class A Common Stock, par value $0.0001; 4,000,000,000 shares authorized; 11,930,986 issued and outstanding as of June 30, 2024;
2,563,288 issued and outstanding as of December 31, 2023 | |
| 1 | | |
| — | |
Class B Common Stock, par value $0.0001; 1,000,000,000 authorized; 261,503 issued and outstanding at
June 30, 2024; 243,503 issued and outstanding at December 31, 2023 | |
| — | | |
| — | |
Series A Convertible Preferred Stock, par value $0.0001; 5,000 shares authorized; 0 issued and
outstanding at June 30, 2024; 1,000 issued and outstanding at December 31, 2023 | |
| — | | |
| — | |
Additional paid-in capital | |
| 280,370 | | |
| 266,302 | |
Accumulated deficit | |
| (272,719 | ) | |
| (259,638 | ) |
Total stockholders' equity | |
| 7,652 | | |
| 6,664 | |
Total liabilities and stockholders' equity | |
$ | 14,112 | | |
$ | 13,259 | |
See accompanying notes to condensed consolidated
financial statements (unaudited).
NXU, INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per
share data)
(Unaudited)
| |
| | |
| | |
| | |
| |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Revenue | |
$ | 7 | | |
$ | — | | |
$ | 11 | | |
$ | — | |
| |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| 4 | | |
| — | | |
| 7 | | |
| — | |
Depreciation | |
| 21 | | |
| — | | |
| 39 | | |
| — | |
Total cost of revenue | |
| 25 | | |
| — | | |
| 46 | | |
| — | |
Gross loss | |
| (18 | ) | |
| — | | |
| (35 | ) | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 562 | | |
| 5,060 | | |
| 957 | | |
| 9,022 | |
General and administrative | |
| 4,011 | | |
| 9,437 | | |
| 10,162 | | |
| 18,925 | |
Advertising | |
| 22 | | |
| 146 | | |
| 44 | | |
| 180 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 4,595 | | |
| 14,643 | | |
| 11,163 | | |
| 28,127 | |
| |
| | | |
| | | |
| | | |
| | |
Operating loss | |
| (4,613 | ) | |
| (14,643 | ) | |
| (11,198 | ) | |
| (28,127 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest income (expense) | |
| 72 | | |
| (39 | ) | |
| 72 | | |
| (40 | ) |
Impairment of long-lived assets | |
| (1,128 | ) | |
| — | | |
| (1,128 | ) | |
| — | |
Impairment of held for sale assets | |
| (603 | ) | |
| — | | |
| (603 | ) | |
| — | |
Gain (loss) on sale or disposal of property and equipment | |
| (316 | ) | |
| 110 | | |
| (316 | ) | |
| 110 | |
Warrant expense | |
| — | | |
| — | | |
| — | | |
| (984 | ) |
Gain (loss) on convertible debt and warrant liability | |
| 5 | | |
| (177 | ) | |
| 49 | | |
| 2,104 | |
Other income | |
| 43 | | |
| 15 | | |
| 43 | | |
| 33 | |
| |
| | | |
| | | |
| | | |
| | |
Total other (loss) income, net | |
| (1,927 | ) | |
| (91 | ) | |
| (1,883 | ) | |
| 1,223 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (6,540 | ) | |
$ | (14,734 | ) | |
$ | (13,081 | ) | |
$ | (26,904 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss per share, basic and diluted | |
$ | (0.55 | ) | |
$ | (60.61 | ) | |
$ | (1.37 | ) | |
$ | (145.98 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding used in computing loss per share: | |
| 11,930,986 | | |
| 243,103 | | |
| 9,548,922 | | |
| 184,300 | |
See accompanying notes
to condensed consolidated financial statements (unaudited).
NXU, INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(Amounts in thousands, except share data)
(Unaudited)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Three
Months Ended June 30, 2024 |
| |
Common
Stock | | |
| | |
| | |
| | |
| | |
| |
| |
Class
A | | |
Class
B | | |
Series
A Convertible
Preferred Stock | | |
Additional | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-in
Capital | | |
(Deficit) | | |
Total | |
Balance at March 31, 2024 | |
| 11,930,986 | | |
$ | 1 | | |
| 252,503 | | |
$ | — | | |
| — | | |
$ | — | | |
$ | 279,332 | | |
$ | (266,179 | ) | |
$ | 13,154 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Class B common stock issued | |
| — | | |
| — | | |
| 9,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Stock-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,038 | | |
| — | | |
| 1,038 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (6,540 | ) | |
| (6,540 | ) |
Balance at June 30, 2024 | |
| 11,930,986 | | |
$ | 1 | | |
| 261,503 | | |
$ | — | | |
| — | | |
$ | — | | |
$ | 280,370 | | |
$ | (272,719 | ) | |
$ | 7,652 | |
Six
Months Ended June 30, 2024 |
| |
Common
Stock | | |
| | |
| | |
| | |
| | |
| |
| |
Class
A | | |
Class
B | | |
Series
A Convertible
Preferred Stock | | |
Additional | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-in
Capital | | |
(Deficit) | | |
Total | |
Balance at December 31, 2023 | |
| 2,563,288 | | |
$ | — | | |
| 243,503 | | |
$ | — | | |
| 1,000 | | |
$ | — | | |
$ | 266,302 | | |
$ | (259,638 | ) | |
$ | 6,664 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Class A common stock issued for cash under ATM | |
| 8,153,574 | | |
| 1 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 10,711 | | |
| — | | |
| 10,712 | |
Class B common stock issued | |
| — | | |
| — | | |
| 18,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Conversion of Series A Convertible Preferred Stock | |
| 1,000,000 | | |
| — | | |
| — | | |
| — | | |
| (1,000 | ) | |
| — | | |
| — | | |
| — | | |
| — | |
Stock-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,357 | | |
| — | | |
| 3,357 | |
Common stock issued under stock compensation plans | |
| 214,124 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (13,081 | ) | |
| (13,081 | ) |
Balance at June 30, 2024 | |
| 11,930,986 | | |
$ | 1 | | |
| 261,503 | | |
$ | — | | |
| — | | |
$ | — | | |
$ | 280,370 | | |
$ | (272,719 | ) | |
$ | 7,652 | |
See accompanying notes to condensed consolidated
financial statements (unaudited).
NXU, INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(Amounts in thousands, except share data)
(Unaudited)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Three
Months Ended June 30, 2023 |
| |
Common
Stock | | |
| | |
| | |
| |
| |
Class
A | | |
Class
B | | |
Additional | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-in
Capital | | |
(Deficit) | | |
Total | |
Balance at March 31, 2023 | |
| 219,043 | | |
$ | — | | |
| 216,503 | | |
$ | — | | |
$ | 239,557 | | |
$ | (231,630 | ) | |
$ | 7,927 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Class B common stock issued | |
| — | | |
| — | | |
| 9,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Stock-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 5,501 | | |
| — | | |
| 5,501 | |
Shares issued for services | |
| 400 | | |
| — | | |
| — | | |
| — | | |
| 34 | | |
| — | | |
| 34 | |
Conversion of long term debt to equity | |
| 35,056 | | |
| — | | |
| — | | |
| — | | |
| 1,815 | | |
| — | | |
| 1,815 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (14,734 | ) | |
| (14,734 | ) |
Balance at June 30, 2023 | |
| 254,499 | | |
$ | — | | |
| 225,503 | | |
$ | — | | |
$ | 246,907 | | |
$ | (246,364 | ) | |
$ | 543 | |
Six
Months Ended June 30, 2023 |
| |
Common
Stock | | |
| | |
| | |
| |
| |
Class
A | | |
Class
B | | |
Additional | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-in
Capital | | |
(Deficit) | | |
Total | |
Balance at December 31, 2022 | |
| 65,092 | | |
$ | — | | |
| 207,503 | | |
$ | — | | |
$ | 210,412 | | |
$ | (219,460 | ) | |
$ | (9,048 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Class A common stock issued for cash | |
| 55,314 | | |
| — | | |
| — | | |
| — | | |
| 4,921 | | |
| — | | |
| 4,921 | |
Class B common stock issued | |
| — | | |
| — | | |
| 18,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Stock-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 11,295 | | |
| — | | |
| 11,295 | |
Shares issued for services | |
| 973 | | |
| — | | |
| — | | |
| — | | |
| 106 | | |
| — | | |
| 106 | |
Exercise of warrants | |
| 36,114 | | |
| — | | |
| — | | |
| — | | |
| 3,330 | | |
| — | | |
| 3,330 | |
Exercise of stock options | |
| 520 | | |
| — | | |
| — | | |
| — | | |
| 547 | | |
| — | | |
| 547 | |
Conversion of long term debt to equity | |
| 96,486 | | |
| — | | |
| — | | |
| — | | |
| 16,296 | | |
| — | | |
| 16,296 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (26,904 | ) | |
| (26,904 | ) |
Balance at June 30, 2023 | |
| 254,499 | | |
$ | — | | |
| 225,503 | | |
$ | — | | |
$ | 246,907 | | |
$ | (246,364 | ) | |
$ | 543 | |
See accompanying notes to condensed consolidated
financial statements (unaudited).
NXU, INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| |
| | | |
| | |
| |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (13,081 | ) | |
$ | (26,904 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 524 | | |
| 301 | |
Employee stock-based compensation | |
| 4,036 | | |
| 11,500 | |
Non-employee stock-based compensation | |
| — | | |
| 106 | |
Non-cash warrant expense | |
| — | | |
| 984 | |
Net change in operating lease assets and liabilities | |
| 15 | | |
| (15 | ) |
(Gain) loss on the sale or disposal of property and equipment | |
| 395 | | |
| (110 | ) |
Loss on impairment of lease right-of-use assets and related improvements | |
| 1,128 | | |
| — | |
Loss on impairment of assets held for sale | |
| 603 | | |
| — | |
Gain on fair value of convertible debt and warrant liability | |
| (49 | ) | |
| (2,104 | ) |
Changes in assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other current assets | |
| 12 | | |
| (340 | ) |
Inventory | |
| — | | |
| (832 | ) |
Other assets | |
| 68 | | |
| (895 | ) |
Accounts payable and accrued liabilities | |
| (1,569 | ) | |
| (719 | ) |
Other current liabilities | |
| — | | |
| 64 | |
Other long-term liabilities | |
| (200 | ) | |
| — | |
Net cash used in operating activities | |
| (8,118 | ) | |
| (18,964 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Purchases of property and equipment | |
| (839 | ) | |
| (380 | ) |
Proceeds from sale of property and equipment | |
| 61 | | |
| 559 | |
Capitalized patent costs | |
| (23 | ) | |
| — | |
Net cash (used in) provided by investing activities | |
| (801 | ) | |
| 179 | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from public offering, net of equity offering costs | |
| — | | |
| 12,020 | |
Proceeds from ATM, net of offering costs | |
| 10,712 | | |
| — | |
Proceeds from the issuance of convertible debt | |
| — | | |
| 9,000 | |
Payments on convertible debt | |
| — | | |
| (2,351 | ) |
Payments on financing liability | |
| (40 | ) | |
| (77 | ) |
Proceeds from the exercise of stock options | |
| — | | |
| 547 | |
Net cash provided by financing activities | |
| 10,672 | | |
| 19,139 | |
Net decrease in cash | |
| 1,753 | | |
| 354 | |
Cash, beginning of period | |
| 2,846 | | |
| 2,701 | |
Cash, end of period | |
$ | 4,599 | | |
$ | 3,055 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | — | | |
$ | 1 | |
Cash paid for income taxes | |
$ | — | | |
$ | 1 | |
Supplemental disclosure of non-cash investing and financing activities: | |
| | | |
| | |
Debt converted to equity | |
$ | — | | |
$ | 16,294 | |
Operating lease right-of-use asset obtained in exchange for operating lease liability | |
$ | 1,861 | | |
$ | — | |
Stock-based compensation expense capitalized to property and equipment | |
$ | 67 | | |
$ | — | |
See accompanying notes to condensed consolidated
financial statements (unaudited).
NXU, INC. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Organization and Basis of Presentation |
Organization
Nxu, Inc. (the “Company”
or “Nxu”) is a US-based technology company focused on leveraging its intellectual property and innovations to support energy
storage and charging solutions for the infrastructure needed to power an electrified future. Nxu historically focused on building megawatt
(“MW”) charging stations and developing innovative battery cells and battery packs for use in advanced energy storage systems,
and mobility products.
Reorganization, Merger and Incorporation of
Nxu, Inc.
On May 12, 2023, Atlis Motor Vehicles Inc. (“Atlis”)
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 Atlis, Nxu, Inc., a Delaware Corporation, 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 Atlis and Merger Sub, with Atlis surviving the merger as a wholly-owned subsidiary
of Nxu (the “Reorganization Merger”). The Reorganization Agreement was approved and adopted by Atlis’s stockholders
at Atlis’s Special Meeting of Stockholders, which was held on May 9, 2023. After the Reorganization Merger, Atlis was reclassified
from a corporation to a limited liability company and renamed Nxu Technologies, LLC. Nxu Technologies, LLC is a wholly owned operating
company and the sole subsidiary of Nxu. References to “Nxu” or the “Company” shall collectively mean Nxu,
Inc. and its wholly owned subsidiary, Nxu Technologies, LLC.
The directors and executive officers of Nxu immediately
following the completion of the Reorganization Merger were the same individuals who were directors and executive officers, respectively,
of Atlis as of immediately prior to the Reorganization Merger.
Upon completion of the Reorganization Merger,
Nxu Class A Common Stock was deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, pursuant
to Rule 12g-3(a) promulgated thereunder and for purposes of Rule 12g-3(a), Nxu is the successor issuer to Atlis.
Transactions that occurred in connection with
the Reorganization Merger are considered transactions between entities under common control, and thus the financial statements for periods
prior to the Reorganization Merger have been adjusted to combine the previously separate entities for presentation purpose. See more information
regarding shares of common stock authorized, issued and outstanding in connection with the Reorganization Merger in Note
13 – Stock-based Compensation and Common Stock.
Evaluation
of Strategic Alternatives
On May 10, 2024, Nxu announced its intention to
evaluate strategic alternatives, with the Strategic Planning Committee of its Board of Directors (the “Strategic Planning Committee”)
leading such evaluation with outside assistance from advisors. At the time of announcement, the Strategic Planning Committee had identified
targets for a business combination intended to position the newly combined company for sustainable
long-term value creation with a strengthened financial profile.
There can be no assurance that Nxu will be successful
in effecting any such transactions or realizing any of the intended benefits, including obtaining a sufficient level of capital through
this or other channels in the time frames needed to sustain or grow the business or on terms agreeable to it.
Basis
of Consolidation
The accompanying
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP")
and the rules of the Securities and Exchange Commission, which require 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 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. 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.
Certain information and note disclosures normally
included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations.
The December 31, 2023 balance sheet was derived from audited financial statements. This Quarterly Report on Form 10-Q should be read in
conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 10-K").
References to amounts in the consolidated financial
statement sections are in thousands, except share and per share data, unless otherwise specified.
Reverse Stock Split
On December 26, 2023, the Company effected a 1-for-150
reverse stock split of the shares of common stock of the Company. All historical share and per share amounts reflected throughout the
financial statements have been retroactively adjusted to give effect to the reverse stock split. See Note
13 – Stock-based Compensation and Common Stock for further discussion.
Correction of Immaterial Misclassification
Management identified an immaterial error in its
previously reported stock-based compensation expense in the June 30, 2023 unaudited condensed consolidated financial statements. Correction
of the error resulted in an increase to stock-based compensation expense of $0.02 million for the three months ended June 30, 2023 and
a $0.12 million decrease for the six months ended June 30, 2023, respectively. The restatement had no effect on stockholders’ equity
as of June 30, 2023 and had no other effect to the Company's condensed consolidated financial statements.
Going Concern
The accompanying unaudited 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.
The Company
has incurred recurring losses from operations and has not yet achieved profitability in its charging operations. During the six-month
period ended June 30, 2024, the Company incurred a net loss of $13.1 million
and had net cash used in operating activities of $8.1 million.
As of June 30, 2024, the Company had $4.6 million in cash and an accumulated deficit of $272.7million. These conditions indicate that there is substantial doubt about the Company’s ability
to continue as a going concern within one year after the condensed consolidated financial statement issuance date.
Unforeseen circumstances could occur at any time
within the next twelve months or thereafter that could increase the need for the Company to raise additional capital on an immediate basis.
The Company cannot provide any assurance that access to capital will be readily available when needed.
Company management is addressing this risk by
pursuing all available options for funding, including further reducing expenses, selling assets and exploring strategic alternatives for
its business. The Company cannot provide any assurance that it will be successful in implementing any strategic alternative, which may
be subject to the satisfaction of conditions beyond the Company’s control.
| 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 unaudited condensed
consolidated financial statements.
Use of Estimates
The preparation of unaudited condensed consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
the unaudited condensed consolidated financial statements and accompanying notes. Due to uncertainties, actual results could differ from
the estimates and assumptions used in preparation of the unaudited condensed consolidated financial statements.
Assets Held for Sale
The Company classifies long-lived assets, including
property and equipment and right-of-use assets, and finite-lived intangible assets to be sold as held for sale in the period in which
all of the required criteria under Accounting Standards Codification (“ASC”) 360, Impairment or Disposal of Long-lived Assets
(“ASC 360”) are met. The Company initially measures a long-lived asset that is classified as held for sale at the lower of
its carrying amount or fair value less any costs to sell. Fair value is determined based on discounted or undiscounted cash flows, appraised
values, or management's estimates, depending upon the nature of the assets and the information available to the Company. Any loss resulting
from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on
the sale of a long-lived asset until the date of sale. Upon determining that a long-lived asset meets the criteria to be classified as
held for sale, the Company ceases depreciation and reports long-lived assets as “Assets held for sale” on the condensed consolidated
balance sheets.
Impairment of Long-lived Assets
In accordance with ASC 360, the Company evaluates
long-lived assets, including property and equipment and right-of-use assets, and finite-lived intangible assets for impairment whenever
events or changes in circumstances indicate that their carrying amount 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.
See Note
4 – Assets Held for Sale, Note 5 – Property and Equipment, and Note
11 – Leases for additional information on impairment losses recognized as of June 30, 2024.
Stock-based Compensation
The Company accounts for stock-based compensation
in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). The
Company classifies stock-based awards granted in exchange for services as either equity awards or liability awards. The classification
of an award as either an equity award or a liability award is generally based upon cash settlement options. Equity awards are measured
based on the fair value of the award at the grant date. Liability awards are granted at a fixed dollar amount settled in a variable number
of shares and are measured at fair value at the grant date and remeasured at the end of each reporting period until fully vested. As such,
the fair value of awards classified as liabilities at each reporting date approximates the fixed dollar amount at inception.
The Company generally recognizes stock-based compensation
on a straight-line basis over the award’s requisite service period, which is generally the vesting period of the award, less actual
forfeitures. No compensation expense is recognized for awards for which participants do not render the requisite services. For equity
and liability awards earned based on performance or upon occurrence of a contingent event, when and if the awards will be earned is estimated.
If an award is not considered probable of being earned, no amount of stock-based compensation is recognized. If the award is deemed probable
of being earned, related compensation expense is recorded over the estimated service period. To the extent the estimate of awards considered
probable of being earned changes, the amount of stock-based compensation recognized will also change.
The Company accounts for modification of stock-based
compensation awards in accordance with ASC 718-20-35. Upon modification, the Company records any incremental fair value of the modified
award as stock-based compensation on the date of modification for vested awards or over the remaining vesting period for unvested awards.
The incremental compensation is the excess of the fair value of the modified award on the date of modification over the fair value of
the original award immediately before the modification. In addition, the Company records any remaining unrecognized compensation cost
for the original cost for the original award on the modification date over the remaining vesting period for unvested awards.
In 2023, the Company began recognizing revenue
from the delivery of electricity to customer electric vehicles using its NxuOne™ charging station. During the three and six months
ended June 30, 2024, respectively, the Company recognized $7 thousand and $11 thousand of revenue related to retail charging services.
During the three and six months ended June 30,
2024, respectively, the Company recognized no revenue from the delivery of battery systems and components.
On June 28, 2024, the Company entered into a contract
with Silicon Valley Disposition (“SVD”) to sell battery manufacturing equipment and certain other assets located in its leased
warehouse space in Mesa, Arizona. Pursuant to the contract, assets identified and held for sale would be sold in an online public auction
(the “Auction”) to be held on or about August 13, 2024. In connection with the contract, and in preparation for the Auction,
SVD physically observed and catalogued assets in the warehouse and provided an estimate of cash proceeds generated from the future sale,
less 5% sales commission.
Assets held for sale will no longer be used in
the Company’s continuing operations and thus management’s projections of future cash flows related to the assets changed as
of June 30, 2024. As such, and in accordance with ASC 360, the Company compared the carrying amount of the assets to their fair value,
less costs to sell, and recorded an impairment loss. The Company’s management used the mid-point of SVD’s estimate of Auction
sales proceeds, less sales commission, for purposes of determining the fair value of assets held for sale, less costs to sell.
The carrying amount of assets held for sale consist
of the following (in thousands):
Schedule of assets held for sale | |
| |
| |
June 30, 2024 | |
| |
| |
Tools and plant equipment | |
$ | 1,556 | |
Office equipment | |
| 29 | |
Vehicles | |
| 31 | |
Total carrying amount of assets held for sale | |
| 1,616 | |
Less: Carrying amount in excess of fair value (less selling costs) | |
| (603 | ) |
Assets held for sale, net of impairment | |
$ | 1,013 | |
The Company ceased recording depreciation expense
related to assets held for sale as of June 30, 2024.
Property and equipment consist of the following
(in thousands):
Schedule of property and equipment | |
| | | |
| | |
| |
June 30, 2024 | | |
December 31, 2023 | |
| |
| | |
| |
Charging station equipment | |
$ | 1,206 | | |
$ | 649 | |
Leasehold improvements | |
| 151 | | |
| 151 | |
Tools and plant equipment | |
| — | | |
| 2,715 | |
Office equipment | |
| — | | |
| 318 | |
Software | |
| 1,059 | | |
| 860 | |
Vehicles | |
| — | | |
| 70 | |
Total property and equipment excluding construction in progress | |
| 2,416 | | |
| 4,763 | |
Less: Impairment of property and equipment | |
| (43 | ) | |
| — | |
Less: Accumulated depreciation and amortization | |
| (394 | ) | |
| (898 | ) |
Property and equipment excluding construction in progress, net | |
| 1,979 | | |
| 3,865 | |
Charging station equipment and charging site construction in progress | |
| 99 | | |
| — | |
Property and equipment, net | |
$ | 2,078 | | |
$ | 3,865 | |
Depreciation and amortization expense was $0.25
million and $0.52 million for the three
and six months ended June 30, 2024, respectively of which $0.23
million and $0.48
million, respectively, was recorded to general and administrative expense, and $0.02
million and $0.04
million, respectively, was expensed to cost of revenue. Depreciation and amortization expense was $0.16
million and $0.30 million for the three
and six months ended June 30, 2023, respectively, all of which was recorded to general and administrative expense.
The Company recorded impairment charges for leasehold
improvements classified as property and equipment of $0.04 million for the three and six months ended June 30, 2024. See Note
11 – Leases for additional information.
| 6. | Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets
consist of the following (in thousands):
Schedule of prepaid expenses and other current assets | |
| | | |
| | |
| |
June 30, 2024 | | |
December 31, 2023 | |
| |
| | |
| |
Tax credit receivable | |
$ | 351 | | |
$ | 372 | |
Prepaid insurance | |
| 309 | | |
| 302 | |
Prepaid rent | |
| 43 | | |
| 98 | |
Deferred offering costs | |
| — | | |
| 102 | |
Other prepaid expenses | |
| 284 | | |
| 125 | |
Total prepaid expenses and other current assets | |
$ | 987 | | |
$ | 999 | |
As of June 30, 2024 and December 31, 2023, the entire balance of other
assets consisted of security deposits.
| 8. | Accounts Payable and Accrued Liabilities |
Accounts payable and accrued liabilities consist of the following (in
thousands):
Schedule of accounts payable and accrued liabilities | |
| | | |
| |
| |
June 30, 2024 | | |
December 31, 2023 | |
| |
| | |
| |
Accounts payable | |
$ | 803 | | |
$ | 2,501 | |
Accrued contract settlement, current portion | |
| 400 | | |
| — | |
Accrued compensation and benefits | |
| 16 | | |
| 153 | |
Other accrued liabilities | |
| 528 | | |
| 717 | |
Total accounts payable and accrued liabilities | |
$ | 1,747 | | |
$ | 3,371 | |
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 full valuation allowance due to the uncertainty of future realization of federal
and state net operating loss carryforwards.
As of June 30, 2024, total net operating loss
carryforwards totaled approximately $64.3 million. The Company’s net operating loss
carryforwards consist of approximately $16.6 million related to years prior to 2022, which will carryforward through 2037, and approximately
$19.9 million and $17.8 million for fiscal years 2022 and 2023, respectively, which will carry forward indefinitely. The Company’s
net operating loss carryforward of $10.0 million for the first six months of fiscal year
2024 will also 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 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 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
$1.6 million and $3.3 million for the three
and six months ended June 30, 2024, respectively, resulting in a cumulative income tax benefit of $63.8
million. The Company has increased its valuation allowance for this deferred tax asset 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 and stock-based compensation.
The Company recognizes interest and penalties
related to uncertain tax positions in general and administrative expense. At June 30, 2024 and 2023, 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 of Class B common stock as these
shares do not participate in the earnings of the Company. For the three and six months ended June 30, 2024 and 2023, 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 following table presents the calculation of
basic and diluted net loss per share during the three and six months ended June 30, 2024 and 2023 (dollars in thousands, except per share
data):
Schedule of net loss per share | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (6,540 | ) | |
$ | (14,734 | ) | |
$ | (13,081 | ) | |
$ | (26,904 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares of Class A common stock outstanding | |
| 11,930,986 | | |
| 243,103 | | |
| 9,548,922 | | |
| 184,300 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share, basic and diluted | |
$ | (0.55 | ) | |
$ | (60.61 | ) | |
$ | (1.37 | ) | |
$ | (145.98 | ) |
Real Estate Leases
As of June 30, 2024, the Company had operating
leases for office space in Tempe, Arizona and warehouse space in Mesa, Arizona, which had initial terms of two years and five years, respectively.
Both lease terms expire in 2025. In June 2024, the Company listed and began to actively market both leased properties for sublease.
Right-of-use assets related to these real estate
leases are not considered held for sale; however, they are no longer being fully utilized for purposes of the Company’s continuing
operations. As the nature and extent of the Company’s use of these leases changed in the second quarter of 2024, management’s
projections of future cash flows related to the underlying assets changed as of June 30, 2024. As such, and in accordance with ASC
360, the Company compared the carrying amount of the lease right-of-use assets to their respective estimate of future undiscounted cash
flows and recorded an impairment loss totaling $0.55 million.
Equipment Lease
As of June 30, 2024, the Company had an operating
lease for equipment used primarily for battery manufacturing in its leased warehouse space in Mesa, Arizona. The lease had initial terms of two
years and expires in December 2025. On July 3, 2024, the Company executed an agreement to cancel its equipment lease contract and subsequently
purchased all equipment held under the lease (“Equipment Purchase Agreement”) for a total purchase price of approximately $1.7
million.
Under the terms of the Equipment Purchase Agreement,
title of all assets held under the equipment lease transfer to Nxu. The Company intends to sell all assets acquired pursuant to the Equipment
Purchase Agreement in the Auction to be held on or about August 13, 2024. In preparation for the Auction, SVD physically observed and
catalogued assets still held under the equipment lease as of June 30, 2024 and provided an estimate of cash proceeds generated from the
future sale of these assets, less 5% sales commission. See Note 4 – Assets Held for
Sale for additional information related to the Company’s Auction plans.
Right-of-use assets related to the equipment lease
are not considered held for sale; however, they are no longer being fully utilized for purposes of the Company’s continuing operations.
As the nature and extent of the Company’s use of this lease changed in the second quarter of 2024, management’s projections
of future cash flows related to the underlying assets changed as of June 30, 2024. As such, and in accordance with ASC 360, the
Company compared the carrying amount of the lease right-of-use assets to their fair value, less costs of sell, and recorded an impairment
loss totaling $0.54 million. The Company’s management used the mid-point of SVD’s estimate of Auction sales proceeds,
less sales commission, for purposes of determining the fair value of assets held for sale, less costs to sell.
| 12. | Commitments and Contingencies |
Registration Rights
The holders of the Convertible Notes (as defined
below) have registration rights that require 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.
Contract Losses
In December 2021, the Company entered into an
agreement (the “Agreement”) with QAD, Inc. (“QAD”), a cloud-based enterprise resource software provider. Under
the Agreement, QAD would facilitate implementation services and access to the cloud-based software platform for a non-cancellable, 5-year
term. Subsequent to executing the Agreement, the Company determined that the software did not fit the Company’s needs and the Company
and QAD (collectively, the “Parties”) were unable to successfully implement the software platform. The Parties attempted to
mutually terminate the Agreement but were unsuccessful, and in May 2023, the dispute moved to arbitration to determine whether the Company
owed QAD a payment for cancellation of the contract. On October 27, 2023, the Parties agreed to a settlement whereby the Company has agreed
to pay a termination fee of $0.70 million to QAD over a 21-month period, upon which the Company will be released from the contract. The
Company accrued the portion of the fee due within the next twelve months of $0.4 million in accounts payable and accrued liabilities,
and the remaining $0.03 million within other long-term liabilities in the Company’s unaudited condensed consolidated balance sheets as
of June 30, 2024.
The Company is not currently subject to any other
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.
| 13. | Stock-based Compensation and Common Stock |
Stock-based Compensation
A summary of stock-based compensation expense recognized during
the three and six months ended June 30, 2024 and 2023 is as follows (in thousands):
Schedule of stock-based compensation | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Restricted stock units (classified as liabilities) | |
$ | 342 | | |
$ | 1,291 | | |
$ | 787 | | |
$ | 1,291 | |
Restricted stock units (classified as equity) | |
| (35 | ) | |
| 226 | | |
| (22 | ) | |
| 279 | |
Stock options | |
| 1,072 | | |
| 4,159 | | |
| 3,338 | | |
| 9,930 | |
Total stock-based compensation | |
| 1,379 | | |
| 5,676 | | |
| 4,103 | | |
| 11,500 | |
Stock-based compensation capitalized to property and equipment | |
| — | | |
| — | | |
| (67 | ) | |
| — | |
Stock-based compensation, net of capitalized amount | |
$ | 1,379 | | |
$ | 5,676 | | |
$ | 4,036 | | |
$ | 11,500 | |
As of June 30, 2024, the total unrecognized
compensation related to outstanding stock option awards and restricted stock units (“RSUs”) was $3.6
million, which the Company expects to recognize over a weighted-average period of approximately 0.8
years. Total unrecognized stock-based compensation will be adjusted for actual forfeitures.
During the three months ending March 31, 2023,
the Company issued 573 shares of its Class A common stock to a vendor for services rendered and recognized $0.1 million of expense related
to this issuance.
On October 31, 2023, the Company’s Board
of Directors approved an amendment to certain existing Executive grant agreements to delay the vesting of service-based liability-classified
Executive RSU awards that would have vested between October and December 2023 to vest on January 31, 2024. The
Board of Directors subsequently approved additional amendments in January, March and June 2024 to further delay the vesting of the same
RSUs, including vests between January 2024 and December 2024, until January 2025.
In March and May 2024, the Company’s Board
of Directors approved amendments to certain existing Independent Director grant agreements to delay the vesting of service-based liability-classified
Director RSU awards that would have vested between March 31, 2024 and December 31, 2024 until January 31, 2025 (collectively with the
amendments to Executive grants agreements, the “Amendments”).
As of the dates of the Amendments, the Company
determined there was no incremental value of the awards in connection with the Amendments. Additionally, as all Executives and Directors
affected by the Amendments were still providing service as of the original vest dates, the Company determined it was probable they would
meet the service requirements, and their awards would vest within the initial vesting period of the awards. Therefore, the Company recognized
stock-based compensation expense at the fair value of the awards through the initial vesting dates. The amended awards will remain classified
in liabilities in the consolidated balance sheets of the Company until they are settled in a variable number of shares.
On February 23, 2024 (the “Exchange Date”),
the Compensation Committee of the Board of Directors authorized a mandatory Exchange Program (the “RSU Exchange Program”)
to provide for the cancellation and exchange of approximately $0.4 million of stock-based compensation related to unvested RSUs (“Exchanged
RSUs”), previously recorded as liabilities within the unaudited condensed consolidated balance sheets, for an option to purchase
shares of Class A common stock of the Company (“Exchange Option”). The Company accounts for the effects of the RSU Exchange
Program as a modification of liability-classified awards in accordance with ASC 718.
Pursuant to the RSU Exchange Program, the Company
granted 1,117,457 Exchange Options to employees, which were scheduled to vest in equal amounts on March 31, 2024 and June 30, 2024. The
Exchange Options had an initial fair value of $0.7 million, which is equal to the fair value of the Exchanged RSUs at the Exchange Date,
and as such no additional compensation cost was recorded as a result of the modification on the Exchange Date. Concurrently with the grant
of the Exchange Options, the Company granted 553,236 additional stock options with a fair value of $0.3 million to employees, which were
scheduled to vest in equal amounts on June 30, 2024 and September 30, 2024. Both the Exchange Options and the additional options are classified
as equity awards. As of June 30, 2024, 628,776 Exchange Options and 44,343 additional stock options were vested with a fair valuing totaling
approximately $0.4 million. As of June 30, 2024, a total of 972,109 Exchange Options and additional stock options were forfeited.
2023 Omnibus Incentive Plan
On May 12, 2023, the Company adopted the 2023
Omnibus Incentive Plan (the “Plan”). The purposes of the Plan are to a) encourage the growth of the Company through short
and long-term incentives that are consistent with the Company’s objectives; (b) give participants an incentive for excellence in
individual performance; (c) promote teamwork among participants; and (d) give the Company a significant advantage in attracting and retaining
key employees, directors and consultants. To accomplish such purposes, the Plan provides that the Company may grant (i) options, (ii)
stock appreciation rights, (iii) restricted shares, (iv) RSUs, (v) performance-based awards (including performance-based restricted shares
and RSUs), (vi) other share-based awards, (vii) other cash-based awards or (viii) any combination of the foregoing. The Plan was originally
adopted in connection with the consummation of the Company’s Reorganization Merger as contemplated by that certain agreement and
plan of merger, dated as of April 14, 2023, by and among the Company, Atlis, and such other parties to the agreement.
With respect to awards granted under the Plan
and in accordance with the Plan, the Company’s Board of Directors (or the “Administrator”) is authorized to deliver
an aggregate of 350 million shares of common stock to be reserved and available for issuance under the Plan (the “Initial Share
Limit”), which includes (i) 250 million shares of common stock available for new issuances under the Plan and (ii) 100 million shares
of common stock relating to a portion of outstanding stock options and RSUs assumed by the Company in connection with the Reorganization
Merger; provided, that the total number of shares of common stock that will be reserved, and that may be issued, under the Plan will automatically
increase on the first trading day of each calendar year, beginning with calendar year 2024, by a number of common shares equal to five
percent (5%) of the total number of outstanding shares on the last day of the prior calendar year. Notwithstanding the foregoing, the
Administrator may act prior to January 1 of a given year to provide that there will be no such increase in the share reserve for that
year or that the increase in the share reserve for such year will be a lesser number of common shares than provided herein.
Common Stock
Organizational Structure
As described in Note 1 - Organization and Basis
of Presentation, on May 12, 2023, Atlis completed its Reorganization Merger to Nxu. At the effective time of the Reorganization Merger,
all of the issued and outstanding shares of Atlis’s Class A common stock, par value $0.0001 per share (“Atlis Class A Common
Stock”) were converted automatically on a one-for-one basis into shares of Nxu’s Class A common stock, par value $0.0001 per
share (“Nxu Class A Common Stock”) and all of the issued and outstanding shares of Atlis’s Class D common stock, par
value $0.0001 per share (“Atlis Class D Common Stock” and, together with Atlis Class A Common Stock, “Atlis Common Stock”)
were converted automatically on a one-for-one basis into shares of Nxu’s Class B common stock, par value $0.0001 per share (“Nxu
Class B Common Stock” and, together with Nxu Class A Common Stock, “Nxu Common Stock”), and, as a result, the current
stockholders of Atlis automatically became stockholders of Nxu, holding the same number and percentage of shares of Nxu Common Stock as
they held of Atlis Common Stock as of immediately prior to the Reorganization Merger.
Issuance and conversion of shares of common stock
pursuant to the Reorganization Merger are considered transactions between entities under common control. As a result, the unaudited condensed
consolidated financial statements for periods prior to these transactions have been adjusted to combine the previously separate entities
for presentation purposes.
Except as otherwise required by applicable law,
and the voting rights described below, shares of Class A common stock and Class B common stock have the same rights, privileges and powers,
rank equally, share ratably and be identical in all respects and as to all matters. The voting, dividend, liquidation and other rights,
powers and preferences of the holders of Class A common stock and Class B common stock are subject to and qualified by the rights, powers
and preferences of the holders of the preferred stock of any series as may be designated by the Board of Directors of the Corporation
(the “Board”) upon any issuance of the preferred stock of any series.
In addition, at the effective time of the Reorganization
Merger, (i) each outstanding option to purchase shares of Atlis Class A Common Stock (“Atlis Option”), whether vested or unvested,
automatically converted into an option to purchase shares of Nxu Class A Common Stock (a “Nxu Option”) and (ii) each outstanding
Atlis RSU (an “Atlis Restricted Share”), whether vested or unvested, automatically converted into a RSU of Nxu (a “Nxu
RSU”). Each Nxu Option is subject to terms and conditions consistent with the Employee Stock Option Plan and the applicable Atlis
Option award agreement as in effect immediately prior to the effective time. Each Nxu RSU is subject to terms and conditions consistent
with the applicable Atlis RSU award agreement as in effect immediately prior to the effective time.
At the effective time of the Reorganization Merger,
(i) each outstanding Senior Secured Original Issue 10% Discount Convertible Promissory Note (an “Atlis Note”) convertible
into shares of Atlis Class A Common Stock automatically converted into a Senior Secured Original Issue 10% Discount Convertible Promissory
Note convertible into shares of Nxu Class A Common Stock (a “Nxu Note”) and (ii) each outstanding warrant to purchase shares
of Atlis Class A Common Stock (an “Atlis Warrant”) automatically converted into a warrant to purchase shares of Nxu Class
A Common Stock (a “Nxu Warrant”). Each Nxu Note is subject to terms and conditions consistent with the applicable Atlis Note
as in effect immediately prior to the effective time. Each Nxu Warrant is subject to terms and conditions consistent with the applicable
Atlis Warrant as in effect immediately prior to the effective time.
In 2022, the Company began issuing Class B shares
of common stock. These shares are not traded openly nor available for sale to the public. Class B shares are offered only to the (1) Chief
Executive Officer and (2) President of the Company. At all meetings of stockholders and on all matters submitted to a vote of stockholders
of the Corporation generally, 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. The shares of Class B common stock are not entitled to receive any dividends
or any distribution upon voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Class B 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 B shares owned
by such holder.
Common
Stock Offerings
On February
21, 2023, the Company completed a public offering of 0.1 million units at a public offering price of $234.00 per unit (the “February
2023 Offering”). Each unit consists of one share of Class A common stock, Series A warrants to purchase 0.65 shares of Class A common
stock (the “Series A Warrants”), and Series B warrants to purchase 0.75 shares of Class A common stock (the “Series
B Warrants”). See Note 14 - Convertible Notes and Warrant Liability for
more information regarding the Series A and Series B warrants. Proceeds from the offering, net of offering costs, were approximately $12.0 million.
On August
11, 2023, the Company completed a public offering of 0.1 million units at an offering price of $45.00 per unit (the “August
2023 Offering”). Each unit consists of one share of Class A common stock (or a pre-funded warrant in lieu thereof) and one common
warrant, with each warrant exercisable for two shares of Class A common stock at an exercise price of $45.00 per share (the “August
2023 Warrants). See Note 14 - Convertible Notes and Warrant Liability for
more information regarding the August 2023 Warrants. Proceeds from the offering, net of offering costs, were approximately $4.5 million.
On
September 27, 2022, a stock purchase agreement between the Company and GEM Global Yield LLC SCS and GEM Yield Bahamas Limited,
respectively (together, “GEM Global”) became effective whereby GEM Global committed to purchase up to $300.0 million in
shares of the Company’s Class A common stock for up to three 3years (the “GEM Stock Purchase Facility”). In
connection with the GEM Stock Purchase Facility, GEM Global would earn a commitment fee proportionate to number of shares sold in
the first year, or a $6.0 million commitment fee on September 27, 2023 if no shares were sold. As of September 27, 2023, the Company
had not sold any shares under the GEM Stock Purchase Facility and, as such, registered 0.3 million Class A common shares, 0.2
million of which were immediately issuable to GEM Global for payment of the commitment fee. Additionally, in connection with the
share registration, approximately 2 thousand warrants were issuable to GEM Global. On October 2, 2023, 0.2 million shares of
Class A common stock and 2 thousand common stock warrants were issued to GEM Global.
On October 23, 2023, the Company completed a public
offering of 0.6 million shares of its Class A common stock at an offering price of $5.25 per share.
Proceeds from the offering, net of offering costs, were approximately $2.6 million.
In November 2023, the Company launched its ATM
pursuant to its shelf registration on Form S-3 for sale from time to time of up to $75.0 million of Class A common stock. As of June 30,
2024, the Company has issued and sold approximately 9.1 million shares of its Class A common stock, resulting in $14.0 million of proceeds,
net of commissions and offering costs.
Series A Convertible Preferred Stock
Share Exchange Agreement with Lynx Motor Corporation
On
December 27, 2023, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with
Lynx, pursuant to which Lynx sold to the Company, and the Company purchased from Lynx, a number of newly issued shares of Lynx representing
15% of the issued and outstanding equity interests in Lynx in exchange for 1,000 newly issued shares of series A convertible preferred
stock, par value $0.0001 per share, of the Company (the “Series A Convertible Preferred Stock” or “Series A Convertible
Preferred Shares”). Each Series A Convertible Preferred Share is convertible into 1,000 shares of Class A common stock, par value
$0.0001 per share, of the Company for a conversion price of $3.00 per share. The Share Exchange Agreement contains customary representations
and warranties by the Company. As a part of the transaction, the Company designated one person to serve on the board of directors of Lynx.
The Company’s investment in Lynx is presented within investment in Lynx at the fair market value of the Series A Convertible Preferred
Stock on the transaction date, with the corresponding issuance of Series A Convertible Preferred Stock presented within stockholders’
equity in the unaudited condensed consolidated balance sheets.
On January 29, 2024,
the Company registered 1.0 million shares of Class A common stock, par value $0.0001, pursuant to the terms of its Share Exchange
Agreement with Lynx, under which Nxu sold to Lynx 1,000 shares of Series A convertible preferred stock, par value $0.0001, which
are convertible into shares of Class A common stock. The Company did not sell any shares of its Class A common stock and received no proceeds
from the offering. On February 8, 2024, Lynx converted all the Series A Convertible Preferred Stock into 1.0 million shares of Class A
common stock.
Concurrently with the
Share Exchange Agreement, Lynx issued a non-interest bearing promissory note (“Note”) in the principal amount of $0.3 million
to Lynx in exchange for $0.3 million in immediately available funds from the Company. The Note was due and payable by June 2024 and is
presented in notes receivable from related party in the unaudited condensed consolidated balance sheets. Effective June 28, 2024, the
Company and Lynx agreed to amend the terms of the Note, which was extended to be repaid over nine months at an annual interest rate of
8% (the “Amended Note”). Payments on the Amended Note included an upfront principal payment of $20,000, which was due and
paid upon execution of the amendment, eight payments of $20,000 in principal and interest from July 2024 to February 2025, and a lump
sum payment of the remaining principal and interest of approximately $0.08 million due no later than March 27, 2025. As of the date of
this Form 10-Q, the Company is engaged in further discussion with Lynx about the terms of the Amended Note. Ongoing discussions contemplate
negotiations around the term date of the Amended Note, the monthly payment amount, and Lynx’s offer to make payment on the note
in shares of Lynx, rather than in cash funds. While management of the Company is actively participating in negotiations, the Company currently
intends to pursue recovery of the note in full and in cash and has not recognized an allowance for estimated losses as of June 30, 2024.
The total number of shares of all classes of capital
stock which the Company has authority to issue is 5.0 billion shares, consisting of (1) 5.0 billion authorized shares of common stock,
including (a) 4.0 billion authorized shares of Class A Common Stock, (b) 1.0 billion authorized shares of Class B common stock and (2)
10.0 million authorized shares of preferred stock, par value $0.0001 per share.
| 14. | Convertible Notes and Warrant Liability |
Convertible Notes
On November 3, 2022, the Company entered into
a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (collectively, the “Investors”),
pursuant to which the Company agreed to issue to the Investors Senior Secured Original Issue 10% Discount Convertible Promissory Notes
(“Convertible Notes” or “Notes”) and common stock 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 (“VWAP”), in
three tranches.
The Convertible Notes are convertible solely into
Class A common stock of the Company at a conversion price of (a) $2,250 per share (“Fixed Conversion Price”) or (b) 92.5%
of the average of the three lowest daily VWAP of the common stock during the ten-trading day period (“Variable Conversion Price”),
whichever is lower. The Fixed Conversion Price includes a one-time reset at the six-month anniversary of the Original Issuance Date
(the “Reset Date”) to the lower of the conversion price (with the Variable Conversion Price determined as if the conversion
notice was delivered on the Reset Date) and 130% of the daily VWAP of the common stock for the trading day immediately prior to the Reset
Date.
All Convertible Notes and related 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. Upon an event of default, the Convertible Notes earn interest at a rate of 10% per annum.
First Tranche
On November 3, 2022, the Company issued the first
tranche of the Convertible Notes in the aggregate principal amount of $10.0 million and common stock warrants to purchase up to an aggregate
of 1,543 shares of Class A common stock (the “First Tranche”) to the Investors pursuant to the Purchase Agreement for net
proceeds of $9.0 million. These Convertible Notes have a maturity date of 24 months from the issuance date. Subsequently, upon reaching
the Reset Date, the exercise price of the remaining balance was changed to $96.05 per share. 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 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 the
Investors to purchase up to an aggregate of 3,587 shares of the Company’s Class A common stock (the “Purchase Agreement Amendment
Tranche”).
Second Tranche
On January 27, 2023, the Investors exercised their
rights to purchase the allowable amounts under the Purchase Agreement Amendment and the Company issued the second tranche of the Convertible
Notes in the aggregate principal amount of $10.0 million and common stock warrants to purchase up to an aggregate of 6,281 shares of Class
A common stock (the “Second Tranche”) to the Investors pursuant to the Purchase Agreement for net proceeds of $9.0 million.
These Convertible Notes have a maturity date of 24 months from the issuance date. Subsequently, upon reaching the Reset Date, the exercise
price of the remaining balance was changed to $112.32 per share.
The Company elected the fair value option to account
for the Convertible Notes, as further discussed in Note 15 – Fair Value. As such,
the Company recorded the Convertible Notes at fair value and subsequently remeasures them at fair value at each reporting date. Changes
in fair value are recognized as a component of other income (expense), net in the unaudited condensed consolidated statements of operations.
Activity related to the Company’s Convertible Notes during the six-month period ended June 30, 2024 were as follows (in thousands):
Schedule of convertible debt | |
| | |
| |
Six Months Ended June 30, 2024 | |
| |
| |
Balance at December 31, 2023 | |
$ | 10 | |
Convertible Notes issued during the period | |
| — | |
Conversions | |
| — | |
Payments | |
| — | |
Change in fair value measurement | |
| — | |
Convertible Notes liability at June 30, 2024 | |
$ | 10 | |
Warrant Liability
As discussed in previous sections of this Form
10-Q, the Company has issued warrants in connection with various capital raises. The following tables summarizes the Company’s warrants
outstanding as of June 30, 2024 and December 31, 2023:
Schedule of warrants outstanding | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
First Tranche | | |
Purchase Agreement Amendment | | |
Second Tranche | | |
Series B | | |
August 2023 | | |
GEM Warrants | |
December 31, 2023 | | |
| 1,543 | | |
| 3,587 | | |
| 6,281 | | |
| 33,605 | | |
| 62,223 | | |
| 2,270 | |
Issued | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Exercised | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
June 30, 2024 | | |
| 1,543 | | |
| 3,587 | | |
| 6,281 | | |
| 33,605 | | |
| 62,223 | | |
| 2,270 | |
Schedule of warrant activity | |
| |
| |
| | | |
| | |
Common Stock Warrants | |
Issue Date | |
Reset Date | |
Exercise Price at Issuance | | |
Reset Exercise Price | |
First Tranche | |
11/3/2022 | |
5/3/2023 | |
$ | 2,250 | | |
$ | 88.65 | |
Purchase Agreement Amendment | |
1/5/2023 | |
6/5/2023 | |
$ | 2,250 | | |
$ | 87.38 | |
Second Tranche | |
1/27/2023 | |
7/30/2023 | |
$ | 2,250 | | |
$ | 103.68 | |
Series A | |
2/21/2023 | |
No Reset | |
$ | — | | |
| N/A | |
Series B | |
2/21/2023 | |
No Reset | |
$ | 234 | (1) | |
| N/A | |
August 2023 | |
8/11/2023 | |
No Reset | |
$ | 45 | (2) | |
| N/A | |
GEM Warrants | |
10/2/2023 | |
No Reset | |
$ | 26.54 | | |
| N/A | |
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 common stock warrants entitle the holder to purchase one share of the Company’s Class
A common stock at the exercise price of a) $2,250 per share (“Exercise Price”) or (b) 92.5% of the average of the three
lowest daily VWAP of the common stock during the ten-trading day period (“Variable Exercise Price”), whichever is lower. The
Exercise Price included a one-time reset at the six-month anniversary of the initial exercise date (the “Reset Date”) to the
lower of the initial Exercise Price and 120% of the daily VWAP on the trading day prior to the Reset Date. The common stock warrants issued
in First Tranche, Purchase Agreement Amendment Tranche, and Second Tranche have a five-year exercise period from their respective
issuance date. Subsequently to their issuance, upon reaching the Reset Date, the Exercise Price of these warrants was changed to $88.65,
$87.38, and $103.68 per share for the First Tranche, Purchase Agreement Amendment Tranche, and Second Tranche, respectively.
As discussed in Note
13 – Stock-based Compensation and Common Stock, in connection with the February 2023 Offering, the purchasing shareholders
received Series A and Series B Warrants with each Class A common share issued. All Series A warrants were exercised following issuance
for no consideration. The Series B Warrants were exercisable upon completion of the Reorganization Merger and will expire five years from
the merger date.
As discussed in Note
13 – Stock-based Compensation and Common Stock, in connection with the August 2023
Offering, the purchasing shareholders received August 2023 Warrants with each Class A common share issued. The Company also issued pre-funded
warrants (the “Pre-Funded Warrants”) which were immediately exercisable for one share of Class A common stock at an Exercise
Price of $0.0001 and do not expire until exercised. The August 2023 Warrants were immediately exercisable and expire three years from
the date of issuance. All of these Pre-Funded Warrants were exercised in 2023.
In connection
with the August 2023 Offering, the Company amended existing Series B warrant agreements to authorize certain Investors to purchase 12,865 shares
of the Company’s Class A common stock for no consideration. As of June 30, 2024, 8,065 of these Series B warrants were exercised.
Series B warrants are accounted for as liabilities and the fair market value of the warrants is remeasured at the end of every reporting
period. As such, the change in the valuation of the liabilities related to the Series B warrant agreements are reflected in the Company’s
unaudited condensed consolidated balance sheets as of June 30, 2024.
The First Tranche, Purchase Agreement Amendment
tranche, Second Tranche, Series A, Series B, and August 2023 Warrants (together, the “Common Stock Warrants”) contain a feature
that precludes them from being considered indexed to the Company’s own stock and therefore are accounted for as liabilities in the
Company’s unaudited condensed consolidated balance sheets. The Company records the Common Stock Warrants at fair value and subsequently
remeasures unexercised warrants to fair value at the reporting date, and further discussed in Note
15 – Fair Value. Activity related to the Company’s warrants during the six-month period ended June 30, 2024 were as
follows (in thousands):
Schedule of warrant liability | |
| | |
| |
June 30, 2024 | |
| |
| |
Balance at December 31, 2023 | |
$ | 55 | |
Warrants issued during the period | |
| — | |
Warrants exercised during the period | |
| — | |
Change in fair value measurement | |
| (49 | ) |
Warrant liability at June 30, 2024 | |
$ | 6 | |
The following table presents information about
the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023, 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 | | |
June 30, 2024 | | |
December 31, 2023 | |
Convertible Notes | |
3 | | |
$ | 10 | | |
$ | 10 | |
Warrant liability | |
3 | | |
| 6 | | |
| 55 | |
Convertible Notes and warrant liability, at fair value | |
| | |
$ | 16 | | |
$ | 65 | |
Convertible Notes
The following table provides the fair value and contractual principal
balance outstanding of the Convertible Notes accounted for under the fair value option as of June 30, 2024 and December 31, 2023:
Schedule of fair value option | |
| | | |
| | |
| |
June 30, 2024 | | |
December 31, 2023 | |
Convertible Notes fair value | |
$ | 10 | | |
$ | 10 | |
Convertible Notes, contractual principal outstanding | |
| 10 | | |
| 10 | |
Fair value less unpaid principal balance | |
$ | — | | |
$ | — | |
As of June 30, 2024 and December 31, 2023, the Second Tranche of Convertible
Notes was fully converted, and a nominal amount of the First Tranche was outstanding.
Warrant Liability
The following tables provide quantitative information
regarding Level 3 fair value measurements for Common Stock Warrants as of June 30, 2024 and December 31, 2023.
Schedule of fair value of the convertible notes | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
June 30, 2024 | |
| |
First Tranche | | |
Purchase Agreement Amendment | | |
Second Tranche | | |
Series B Warrants | | |
August 2023 | | |
GEM Warrants | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Risk-free interest rate | |
| 4.33 | % | |
| 4.33 | % | |
| 4.33 | % | |
| 4.46 | % | |
| 4.33 | % | |
| 4.33 | % |
Time to expiration (in years) | |
| 3.34 | | |
| 3.51 | | |
| 3.51 | | |
| 3.64 | | |
| 2.11 | | |
| 1.16 | |
Expected volatility | |
| 85 | % | |
| 85 | % | |
| 85 | % | |
| 85 | % | |
| 85 | % | |
| 85 | % |
Dividend yield | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Stock price | |
$ | 0.37 | | |
$ | 0.37 | | |
$ | 0.37 | | |
$ | 0.37 | | |
$ | 0.37 | | |
$ | 0.37 | |
Exercise price | |
$ | 88.65 | | |
$ | 87.38 | | |
$ | 103.68 | | |
$ | 234.00 | | |
$ | 45.00 | | |
$ | 26.54 | |
| |
December 31, 2023 | |
| |
First Tranche | | |
Purchase Agreement Amendment | | |
Second Tranche | | |
Series B Warrants | | |
August 2023 | | |
GEM Warrants | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Risk-free interest rate | |
| 3.84 | % | |
| 3.84 | % | |
| 3.84 | % | |
| 3.91 | % | |
| 3.84 | % | |
| 3.84 | % |
Time to expiration (in years) | |
| 3.84 | | |
| 4.01 | | |
| 4.01 | | |
| 4.14 | | |
| 2.61 | | |
| 1.66 | |
Expected volatility | |
| 90 | % | |
| 90 | % | |
| 90 | % | |
| 125 | % | |
| 85 | % | |
| 90 | % |
Dividend yield | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Stock price | |
$ | 2.30 | | |
$ | 2.30 | | |
$ | 2.30 | | |
$ | 2.30 | | |
$ | 2.30 | | |
$ | 2.30 | |
Exercise price | |
$ | 88.65 | | |
$ | 87.38 | | |
$ | 103.68 | | |
$ | 234.00 | | |
$ | 45.00 | | |
$ | 26.54 | |
During the
second quarter of 2024, management began considering necessary actions it may take due to its limited ability to raise additional capital
or generate cash flows from operations to support future operations and growth. On May 10, 2024, the Company significantly reduced its
headcount across Product, Engineering, Manufacturing, and General & Administrative functions as a cost saving and cash preserving
measure. Additionally, other cost saving measures were implemented, including preparing assets for sale, negotiating lease terminations
and accounts payables balances, and cleaning and vacating unneeded leased space.
Severance
and other benefits were provided to employees terminated in this action during the three months ended June 30, 2024, totally $0.8 million,
with no future amounts accrued or expected to be paid. Additionally, costs of $0.02 million for clean-up of the leased warehouse facility
in Mesa, Arizona were incurred during the three months ended June 30, 2024. These costs are included in general and administrative expenses
in the condensed consolidated statements of operations.
Management
also assessed long-lived fixed assets and lease ROU assets held for use for indicators of impairment and recorded resulting losses during
the three months ended June 30, 2024. See Note 4 – Assets Held for Sale, Note 5 – Fixed Assets and Note 11 – Leases
for information about the above actions.
The following
table presents the effects of the above actions on the condensed consolidated statements operations for the three and six months ended
June 30, 2024 (in thousands):
Schedule of restructuring costs | |
| | |
| | |
| | |
| | |
| |
| |
Severance | | |
Warehouse
Clean-Up | | |
Impairment of Lease
ROU Assets and
Related Improvements
(Note 5 and Note 11) | | |
Impairment of held
for sale assets
(Note 4) | | |
Total | |
General and administrative | |
$ | 799 | | |
$ | 21 | | |
$ | - | | |
$ | - | | |
$ | 820 | |
Total operating expenses | |
| 799 | | |
| 21 | | |
| - | | |
| - | | |
| 820 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Impairment of long-lived assets | |
| - | | |
| - | | |
| (1,128 | ) | |
| - | | |
| (1,128 | ) |
Impairment of held for sale assets | |
| - | | |
| - | | |
| - | | |
| (603 | ) | |
| (603 | ) |
Total other (loss) income, net | |
| - | | |
| - | | |
| (1,128 | ) | |
| (603 | ) | |
| (1,731 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (799 | ) | |
$ | (21 | ) | |
$ | (1,128 | ) | |
$ | (603 | ) | |
$ | (2,551 | ) |
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Concerning Forward-Looking Statements
The Securities and Exchange Commission (“SEC”) encourages
companies to disclose forward-looking information so that investors can better understand a company’s future prospects and
make informed investment decisions. This Quarterly Report on Form 10-Q for the period ended June 30, 2024 (this “Form 10-Q”)
contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,”
“could,” “may,” “estimates,” “expects,” “projects,” “intends,”
“plans,” “believes,” “will” and words or phrases of similar substance used in connection with any
discussion of future operations, financial performance, plans, events, trends or circumstances can be used to identify some, but not all,
forward-looking statements. In particular, statements regarding our ability to continue as a going concern; our belief that additional
funding will be required in order to continue operations; our ability to obtain additional funding in the form of potential equity and/or
debt financing arrangements or similar transactions; our plans to seek strategic alternatives for our business; expectations and opportunities,
industry trends, new product expectations and capabilities, and our outlook regarding our performance and growth are forward-looking statements.
This Form 10-Q also contains statements regarding plans, goals and objectives. There is no assurance that we will be able to carry out
our plans or achieve our goals and objectives or that we will be able to do so successfully on a profitable basis. These forward-looking
statements are just predictions and involve significant risks and uncertainties, many of which are beyond our control, and actual results
may differ materially from these statements. Factors that could cause actual outcomes or results to differ materially from those reflected
in forward-looking statements include, but are not limited to, those discussed in this Item 2 (including in the section entitled “Overview”
below), Part II, Item 1A of this Form 10-Q, and under the heading “Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2023 filed with the SEC on April 1, 2024 (the “2023 Form 10-K”). Investors are urged not to place
undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they were made. Except as
may be required by law, we do not undertake any obligation, and expressly disclaim any obligation, to update or alter any forward-looking
statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are qualified
in their entirety by the foregoing cautionary statements.
The following discussion of our results of operations
and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and related notes
included in Part I, Item 1 of this Form 10-Q and our audited consolidated financial statements and the notes thereto in the 2023 Form
10-K.
Our investor relations website is located at https://investors.nxuenergy.com.
At or through the Investor Relations section of our website, we make available free of charge our Annual Reports on Form 10-K, other reports
and all amendments to these reports as soon as practicable after the reports are electronically filed with or furnished to the SEC. Additionally,
the Company uses its website, nxuenergy.com and social media channels including Instagram, YouTube, Facebook, LinkedIn, and X (formerly
known as Twitter) (@Nxu) to disclose information about the Company and its products to customers, investors, and the public. It is important
to note that this information is not incorporated by reference in any reports or documents filed with the SEC, and website URLs are intended
to be inactive textual references only. The information posted on these channels may be considered material, so investors should monitor
them in addition to press releases, SEC filings, and public conference calls and webcasts. By enrolling your email address to any of our
newsletters, you may receive automatic alerts and other information about Nxu.
Unless the context otherwise requires, the terms
“we”, “us”, “our”, “Nxu” and “Company” refer to Nxu, Inc. and its consolidated
subsidiaries.
Company Overview
Nxu, Inc. is a US-based technology company leveraging its intellectual
property and innovations to support energy storage and charging solutions for the infrastructure needed to power an electrified future.
We historically focused on building energy and infrastructure solutions for consumers and businesses to enable faster transition to electrification
across all market segments, including building megawatt NxuOne™ charging stations and innovative battery cells and battery packs
for use in advanced energy storage systems and mobility products.
On May 12, 2023, Atlis Motor Vehicles Inc. (“Atlis”),
our predecessor company, 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 Atlis, 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 Atlis and Merger Sub, with Atlis surviving the merger as a wholly-owned subsidiary of Nxu (the “Reorganization
Merger”). The Reorganization Agreement was approved and adopted by Atlis’s stockholders at Atlis’s Special Meeting of
Stockholders, which was held on May 9, 2023.
Nxu is an early-stage company and as such, has
incurred losses from operations and has had negative cash flows from operating activities since our inception.
In light of our liquidity position and anticipated future funding requirements,
we continue to pursue all available options for funding including further reducing expenses, selling assets and exploring strategic alternatives
for our business. Even if we are successful in implementing a strategic alternative, we will continue to require additional funding. The
Company cannot provide any assurance that access to capital will be readily available when needed or that it will be successful in implementing
any strategic alternative, which may be subject to the satisfaction of conditions beyond the Company’s control. If we are unable
to complete a strategic transaction in a timely manner, we could be required to dissolve and liquidate our assets under the bankruptcy
laws or otherwise.
Company Outlook
We have historically focused on building products to capture the commercial
and industrial markets which represent a portion of the electric vehicle opportunity that we believe is not fully serviced by existing
electric vehicle solutions. Individuals and companies that make up these segments require vehicles and equipment that are comparable in
performance to their existing diesel-powered vehicles and equipment. However, limited battery capacity, range anxiety, and long charge
times continue to be primary challenges to electrification. We historically developed products aimed at addressing these challenges,
including our proprietary mega-watt charging infrastructure and energy storage solutions.
Following a shift in focus in the latter half
of 2023, we continued developing and producing our NxuOne™ megawatt charging station in our Mesa, Arizona facility. As of March
31, 2024, we successfully launched our first charging station and produced multiple production units ready for deployment. Production
costs, including costs of materials and labor, reduced with each unit produced, as we focused on scale and efficiency. We started the
second quarter of 2024 centered on developing plans for charging station deployment, continued scaled production of our NxuOne™
megawatt charging station, and initial design of future charging products.
So far in 2024, we incurred losses from the operation of our first
NxuOne™ charging station. We expect to continue to incur losses until we obtain sufficient capital to restart and efficiently
scale our production capabilities, increase production volume, and deploy additional NxuOne™ charging systems for public use.
Our operations have been financed primarily through net proceeds from
the sale of securities. During the six months ended June 30, 2024, we raised approximately $10.7 million net, after expenses, through
our “At-The-Market” equity offering (“ATM”).
On May 10, 2024, we announced our intention to
evaluate strategic alternatives, with the Strategic Planning Committee of our Board of Directors (the “Strategic Planning Committee”)
leading such evaluation with outside assistance from advisors. At the time of announcement, the Strategic Planning Committee had identified
targets for a business combination intended to position the newly combined company for sustainable long-term value creation with a strengthened
financial profile. We continue to be in discussions with prospective targets as we believe a strategic alternative to be the best path
forward to obtain operational stability and growth and provide value in the public market. There can be no assurance that we will be successful
in effecting any such transactions or realizing any of the intended benefits, including obtaining a sufficient level of capital through
this or other channels in the time frames needed to sustain or grow the business or on terms agreeable to us.
As we conduct our strategic alternative review process, we are focused
on reducing costs to maximize the strength of our balance sheet and reduce our use of cash. On May 10, 2024, we significantly reduced
our headcount across Product, Engineering, Manufacturing, and General & Administrative functions as a cost saving measure, as we successfully
pursued avenues for a business combination with limited access to continued capital funding.
Segment Information
We evaluated segment reporting in accordance with
Accounting Standards Codification 280 – Segment Reporting and concluded that Nxu is comprised of one operating segment. We report
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.
Revenue and Profitability
Focus on Megawatt Charging
During the three and six months ended June 30,
2024, we generated revenue from the operation of our NxuOne™ megawatt charging station delivering electricity to consumer and
commercial customer electric vehicles in Mesa, Arizona. We expect to continue to generate revenue from charging customer vehicles. Sales
of electricity to consumer and commercial customers for electric vehicle charging generated losses during the quarter, primarily as a
result of discounted prices offered to customers near the beginning of the year to generate customer interest and encourage high charging
station utilization, and due to the cost of depreciation. In the future, our goal is to continue to drive customer interest while focusing
on increasing opportunities for profitability through utilization of our NxuOne™ charging station network, competitive pricing,
and deployment of additional NxuOne™ charging stations.
For the year ended December 31, 2023, we generated revenue totaling
approximately $0.5 million through the sale of battery systems and components. We have not continued to generate revenue from the production
and sale of battery systems and components. On June 28, 2024, we entered into a contract with Silicon Valley Disposition (“SVD”)
to sell battery manufacturing equipment and certain other assets located in our leased warehouse space in Mesa, Arizona. Pursuant to the
contract, assets identified and held for sale would be sold in an online public auction (the “Auction”) to be held on or about
August 13, 2024. In connection with the contract, and in preparation for the Auction, SVD physically observed and catalogued assets in
the warehouse and provided an estimate of cash proceeds generated from the future sale, less 5% sales commission. See Note
4 – Assets Held for Sale of our accompanying unaudited condensed consolidated financial
statements included in Part I, Item 1, Financial Statements of this Form 10-Q for additional information
related to the Company’s Auction plans.
Production Investment and Cost Management
We achieved success in our strategic focus to
reduce costs of operations and scale the production of our NxuOne™ megawatt charging system in the three months ended March 31,
2024. During that quarter, we doubled our production of units from the prior quarter and reduced costs of materials and labor through
product development, process efficiency and team organization.
During the three months ended June 30, 2024, we paused production of
our NxuOne™ charging station and reduced our headcount across Product, Engineering, Manufacturing, and General & Administrative
functions in an effort to reduce costs. In addition, we consolidated and streamlined product plans and processes within our remaining
functions, with a focus on lessening our reliance on outside vendors. The resulting cost savings we gained allowed us to shift our focus
toward evaluating strategic alternatives.
Results of Operations
Three Months ended June 30, 2024 Compared to the Three Months Ended
June 30, 2023
The following table sets forth certain statement of operations data
for the three-month periods ended June 30, 2024 and 2023 (dollars in thousands):
| |
Three Months Ended June 30, | |
| |
2024 | | |
% of Total
operating
expenses | | |
2023 | | |
% of Total
operating
expenses | | |
Change | |
| |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 7 | | |
| — | % | |
$ | — | | |
| — | % | |
$ | 7 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| 4 | | |
| - | | |
| — | | |
| — | | |
| 4 | |
Depreciation | |
| 21 | | |
| — | | |
| — | | |
| — | | |
| 21 | |
Total cost of revenue | |
| 25 | | |
| - | | |
| — | | |
| — | | |
| 25 | |
Gross loss | |
| (18 | ) | |
| - | | |
| — | | |
| — | | |
| (18 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 562 | | |
| 12 | | |
| 5,060 | | |
| 36 | | |
| (4,498 | ) |
General and administrative | |
| 4,011 | | |
| 87 | | |
| 9,437 | | |
| 64 | | |
| (5,426 | ) |
Advertising | |
| 22 | | |
| — | | |
| 146 | | |
| 1 | | |
| (124 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 4,595 | | |
| 99 | | |
| 14,643 | | |
| 100 | | |
| (10,048 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating loss | |
| (4,613 | ) | |
| — | | |
| (14,643 | ) | |
| — | | |
| 10,030 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other loss, net | |
| (1,927 | ) | |
| — | | |
| (91 | ) | |
| — | | |
| (1,836 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (6,540 | ) | |
| — | % | |
$ | (14,734 | ) | |
| — | % | |
$ | 8,194 | |
Revenue
Three months ended June 30, 2024 vs. 2023.
We recognized charging revenue during the second quarter of 2024 of approximately $7 thousand from the delivery of electricity to customer
electric vehicles through our NxuOne™ megawatt charging station in Mesa, Arizona. Prior to September 2023, the Company had never
generated revenue.
Cost of revenue
Three months ended June 30, 2024 vs. 2023.
We recognized cost of revenue during the second quarter of 2024 of approximately $0.03 million. The cost of revenue represents energy
costs and depreciation related to charging station services.
Gross loss
Three months ended June 30, 2024 vs. 2023.
We recognized gross loss during the second quarter of 2024 of approximately $0.02 million. Gross loss represents revenue less energy costs
and depreciation related to charging station services.
Research and development
Three months ended June 30, 2024 vs. 2023.
Research and development decreased $4.5 million from $5.1 million during the second quarter of 2023 to $0.6 million in the second
quarter of 2024 as we paused development and production of our battery technologies and megawatt charging stations and additionally initiated
cost saving measures, including reducing headcount in operations and ceasing initial development of future products.
General and administrative
Three months ended June 30, 2024 vs. 2023.
General and administrative expenses decreased $5.4 million from $9.4 million during the second quarter of 2023 to $4.0 million in
the second quarter of 2024. The reduction in general and administrative expense was primarily due to decreases in stock-based compensation
of approximately $3.8 million, due to less vesting expense and a smaller team compared to the three months ended June 30, 2023. The reduction
in general and administrative expense also resulted from a decrease in corporate insurance expense of approximately $0.8 million and in
legal and other outside services expense of approximately $1.2 million as compared to the three months ended June 30, 2023, and partially
offset by $0.8 million of severance expense.
Other loss, net
Three months ended June 30, 2024 vs. 2023.
Other loss, net increased by $1.8 million from the second quarter of 2023 to the second quarter of 2024 primarily as a result of a
write down of fixed assets held for sale and impairment of lease right of use (“ROU”) assets and related lease improvements
of approximately $1.1 and $0.6 million, respectively, and $0.3 million loss on disposal of assets. See Note
4 – Assets Held for Sale, Note 5
– Property and Equipment, and Note 11
- Leases of our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1, Financial
Statements of this Form 10-Q for further discussion.
Six Months ended June 30, 2024 Compared to the Six Months Ended
June 30, 2023
The following table sets forth certain statement of operations data
for the six-month periods ended June 30, 2024 and 2023 (dollars in thousands):
| |
Six Months Ended June 30, | |
| |
2024 | | |
% of Total
operating
expenses | | |
2023 | | |
% of Total
operating
expenses | | |
Change | |
| |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 11 | | |
| — | % | |
$ | — | | |
| — | % | |
$ | 11 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| 7 | | |
| — | | |
| — | | |
| — | | |
| 7 | |
Depreciation | |
| 39 | | |
| — | | |
| — | | |
| — | | |
| 39 | |
Total cost of revenue | |
| 46 | | |
| — | | |
| — | | |
| — | | |
| 46 | |
Gross loss | |
| (35 | ) | |
| — | | |
| — | | |
| — | | |
| (35 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 957 | | |
| 9 | | |
| 9,022 | | |
| 33 | | |
| (8,065 | ) |
General and administrative | |
| 10,162 | | |
| 91 | | |
| 18,925 | | |
| 67 | | |
| (8,763 | ) |
Advertising | |
| 44 | | |
| — | | |
| 180 | | |
| 1 | | |
| (136 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 11,163 | | |
| 100 | | |
| 28,127 | | |
| 100 | | |
| (16,964 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating loss | |
| (11,198 | ) | |
| — | | |
| (28,127 | ) | |
| — | | |
| 16,929 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other (loss) income, net | |
| (1,883 | ) | |
| — | | |
| 1,223 | | |
| — | | |
| (3,106 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (13,081 | ) | |
| — | % | |
$ | (26,904 | ) | |
| — | % | |
$ | 13,823 | |
Revenue
Six months ended June 30, 2024 vs. 2023.
We recognized charging revenue during the first six months of 2024 of approximately $11 thousand from the delivery of electricity to customer
electric vehicles through our NxuOne™ megawatt charging station in Mesa, Arizona. Prior to September 2023, the Company had never
generated revenue.
Cost of revenue
Six months ended June 30, 2024 vs. 2023.
We recognized cost of revenue during the first six months of 2024 of approximately $0.05 million. The cost of revenue represents energy
costs and depreciation related to charging station services.
Gross loss
Six months ended June 30, 2024 vs. 2023.
We recognized gross loss during the first six months of 2024 of approximately $0.04 million. Gross loss represents revenue less energy
costs and depreciation related to charging station services.
Research and development
Six months ended June 30, 2024 vs. 2023. Research and development decreased $8.0 million from $9.0 million during
the first six months of 2023 to $1.0 million in the first six months of 2024. During the third quarter of 2023, we paused development
and production of our battery technologies to focus on development of our megawatt charging stations and utilized labor hours from research
and development team in construction of our megawatt charging units. During the second quarter of 2024, we implemented cost savings measures
that included reducing headcount in operations and ceasing initial development of future products.
General and administrative
Six months ended June 30, 2024 vs. 2023. General and administrative expenses decreased $8.7 million from $18.9
million during the first six months of 2023 to $10.2 million in the first six months of 2024. The reduction in general and administrative
expense was primarily due to decreases in stock-based compensation and employee payroll and benefits, due to less vesting expense and
a smaller team compared to the six months ended June 30, 2023 and partially offset by $0.8 million
of severance expense. Additionally, we incurred less costs for corporate insurance and outside services, in connection with capital offerings
in the first six months of 2024 in comparison to the first six months of 2023.
Other (loss) income, net
Six months ended June 30, 2024 vs. 2023. Other (loss) income, net decreased $3.1 million from other income,
net of $1.2 million during the first six months of 2023 to other loss, net of $1.9 million during the first six months of 2024 primarily
as a result of a $1.7 million write down of fixed assets held for sale and impairment of lease ROU assets and $0.3 million loss on disposal
of assets. Additionally, during the six months ended June 30, 2023, the Company recognized a $2.1 million gain on the fair value of long-term
debt and warrant liability, partially offset by $1.0 million of warrant expense. See Note 15
– Fair Value of our accompanying unaudited condensed consolidated financial statements included
in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q for further discussion.
Liquidity and Capital Resources
As disclosed in Note 1 – Organization and
Basis of Presentation of our accompanying unaudited condensed consolidated financial statements
included in Part I, Item 1, Financial Statements of this Form 10-Q, the accompanying unaudited condensed
consolidated financial statements have been prepared assuming the Company will continue as a going concern.
During the six months ended June 30, 2024, the
Company incurred a net loss of approximately $13.1 million and had net cash used in operating activities of $8.1 million. On June 30,
2024, the Company had $4.6 million in cash and an accumulated deficit of approximately $272.7 million.
During the six months ended June 30, 2024, the Company raised approximately
$10.7 million, net of offering costs and commissions, through its ATM. As of June 30, 2024, the Company received the maximum amount of
capital available under the shelf registration and is currently unable to continue to raise capital with the ATM.
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. . The 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 the financial statements in this Form 10-Q are issued.
Company management is addressing this risk by pursuing all available options for funding, including reducing expenses, selling assets
and exploring strategic alternatives for its business. The Company cannot provide any assurance that it will be successful in implementing
any strategic alternative, which may be subject to the satisfaction of conditions beyond the Company’s control.
The table below sets forth a summary of our cash
flows for the six months ended June 30, 2024 and 2023 (in thousands):
| |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
| |
| | |
| |
Net cash used in operating activities | |
$ | (8,118 | ) | |
$ | (18,964 | ) |
Net cash (used in) provided by investing activities | |
| (801 | ) | |
| 179 | |
Net cash provided by financing activities | |
| 10,672 | | |
| 19,139 | |
Net cash used in operating activities. Net
cash used in operating activities during the six months ended June 30, 2024 was $8.1 million. The use of cash resulted primarily from
a net loss of $13.1 million, partially offset by employee stock-based compensation expense of $4.0 million, $1.7 million in impairment
charges, and net changes in working capital.
Net cash used in operating activities during the
six months ended June 30, 2023 was $18.9 million. The use of cash resulted primarily from a net loss of $26.9 million, offset by employee
and non-employee stock-based compensation expense of $11.5 million, warrant expense of $1.0 million, net changes in working capital, and
changes in the fair value of convertible debt and warrant liability.
Net cash used in investing activities. Net
cash used in investing activities for the six months ended June 30, 2024 was $0.8 million. The cash used in investing activities was related
to production of NxuOne™ charging station, and the purchase of other property and equipment, during the period.
Net cash provided by investing activities for
the six months ended June 30, 2023 was $0.2 million. Cash provided by investing activities was related to purchases of property and equipment
during the period, offset by proceeds of sales of certain assets.
Net cash provided by financing activities. Net
cash provided by financing activities of $10.7 million during the six months ended June 30, 2024 primarily consisted of proceeds from
stock issued under the ATM.
Net cash provided by financing activities of $19.1 million during the
three months ended June 30, 2023, primarily consisted of proceeds from stock and convertible debt issuance offset by payments on convertible
debt.
Off-balance sheet arrangements and contractual
obligations
We did not have, during the periods presented,
and we do not currently have, any off-balance sheet arrangements.
We have contractual lease obligations for our
two properties with initial lease terms ending in the summer of 2025. The lease agreement for our warehouse facility in Mesa, Arizona
includes one or more options to renew with renewal terms that can extend the lease term by five years or more. We added one equipment
lease during the six months ended June 30, 2024, with a lease term ending in December 2025. This equipment lease was terminated subsequent
to June 30, 2024, see Note 11 – Leases of our accompanying unaudited condensed consolidated financial statements included in Part
I, Item 1, Financial Statements of this Form 10-Q for further discussion. In addition, we 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 14 - Convertible
Notes and Warrant Liability of our accompanying unaudited condensed consolidated financial statements
included in Part I, Item 1, Financial Statements of this Form 10-Q for further discussion.
Critical
Accounting Estimates
There have
been no material changes to the items disclosed as critical accounting policies and estimates under “Liquidity and Capital Resources—Critical
Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in Part II, Item 7 of the 2023 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
Not required.
Item 4. Controls and Procedures
Our Chief Executive Officer and Chief Financial
Officer (our principal executive officer and principal financial officer, respectively) have evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Security Exchange Act of 1934, as amended, (the “Exchange
Act”) as of June 30, 2024, the end of the period covered by this Form 10-Q (the “Evaluation Date”). They have concluded
that, as of the Evaluation Date, these disclosure controls and procedures were effective to ensure that material information relating
to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on
a timely basis. The Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are
designed, and are effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file
under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the
SEC. They have also concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed
in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2024, there
were no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) and 15d-15(f)under the Exchange
Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note
12 – Commitments and Contingencies of our accompanying unaudited condensed consolidated financial statements included in
Part I, Item 1, Financial Statements of this Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth
in this Form 10-Q, you should carefully consider the factors discussed in the section entitled “Risk Factors,” in the 2023
Form 10-K, which could materially affect our business, financial condition, or future results. As of the date of this Form 10-Q, there
have been no material changes to the risk factors disclosed in the section entitled “Risk Factors” in our 2023 Form 10-K other
than as set forth below:
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 2, 2024, 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”).
No assurances can be provided
that we will regain compliance with the minimum bid price requirement within the initial compliance period. We intend to request a second
six month compliance period upon the expiration of the initial compliance period. 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.
We have incurred significant losses since
our inception, and we expect to continue to incur losses for the foreseeable future. Accordingly, our financial condition raises substantial
doubt regarding our ability to continue as a going concern.
During the six-month period ended June 30, 2024,
we incurred a net loss of $13.1 million and had net cash used in operating activities of $8.1 million. As of June 30, 2024, we had $4.6
million in cash and an accumulated deficit of $272.7 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, the 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. The report of our independent registered public accountant on our financial
statements as of and for the years ended December 31, 2023 and 2022 also includes explanatory language describing the existence of substantial
doubt about our ability to continue as a going concern. See Note 1 – Organization and Basis of Presentation of
our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1, Financial Statements of this Form 10-Q
and “—Liquidity and Capital Resources” in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition
and Results of Operations of this Form 10-Q for further information.
If we are unable to satisfy our capital requirements, we could be required
to adopt one or more of the following alternatives: delaying the implementation of or revising certain aspects of our business strategy;
reducing or delaying the development of our products; reducing or delaying capital spending, product development spending and marketing
and promotional spending; entering into financing agreements on unattractive terms; significantly curtailing or discontinuing discontinue
operations, or dissolve and liquidate our assets under the bankruptcy laws or otherwise.
There can be no assurance that we would be able
to take any of the actions referred to above because of a variety of commercial or market factors, including, without limitation, market
conditions being unfavorable for an equity or debt issuance or similar transactions. In addition, such actions, if taken, may not enable
us to satisfy our capital requirements if the actions that we are able to consummate do not generate a sufficient amount of additional
capital. If we are ultimately unable to satisfy our capital requirements, we would likely need to dissolve and liquidate our assets under
the bankruptcy laws or otherwise.
There can be no assurance that our evaluation
of strategic alternatives will enhance stockholder value or result in any transaction being consummated, and speculation and
uncertainty regarding the outcome of our evaluation of strategic alternatives may adversely impact our business, financial condition
and results of operations.
On May 10, 2024, we announced our intention to
evaluate strategic alternatives. There can be no assurance of the terms, timing or structure of any transaction, or whether any such transaction
will take place at all, and any such transaction is subject to risks and uncertainties. The process of reviewing strategic alternatives may
involve significant resources and costs. In addition, the announced evaluation of strategic alternatives may cause or result
in:
| · | disruption of our business; |
| · | diversion of the attention of management; |
| · | increased stock price volatility; |
| · | increased costs and advisory fees; and |
| · | challenges in retaining key employees |
If we are unable to mitigate these or other potential
risks related to the uncertainty caused by our exploration of strategic alternatives, it may disrupt our business or could have a
material adverse effect on our financial condition and results of operations in future periods.
Our ability to complete a transaction, if our
Board of Directors decides to pursue one, will depend on numerous factors, some of which are outside of our control. Even if
a transaction is completed, there can be no assurance that it will be successful or have a positive effect on stockholder value. Further,
it is not certain what impact any potential transaction may have on our stock price, business, financial condition, and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the three months ended June 30, 2024, no director or officer
of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading
arrangement” (as such terms are defined under Item 408(a) of Regulation S-K).
Item 6. Exhibits
Exhibit No. |
Exhibit Description |
3.1 |
Certificate
of Incorporation of Nxu, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Form 10-K filed with the SEC on April
1, 2024) |
|
|
3.2 |
Certificate
of Amendment to the Certificate of Incorporation of Nxu, Inc., dated December 26, 2023 (incorporated by reference to Exhibit 3.2
of the Company’s Form 8-K filed with the SEC on December 27, 2023) |
|
|
3.3 |
Certificate of Designations of Series
A Convertible Preferred Stock of Nxu, Inc., dated December 22, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s
Form 8-K filed with the SEC on December 27, 2023) |
|
|
3.4 |
Bylaws of Nxu, Inc. (incorporated by reference
to Exhibit 3.4 of the Company’s Form 10-K filed with the SEC on April 1, 2024) |
|
|
3.5 |
Amendment No. 1 to the Bylaws of Nxu, Inc. (incorporated by reference to Exhibit 3.1 of the Company's Form 8-K filed with the SEC on July 24, 2024) |
|
|
10.1+ |
Letter Agreement
dated April 5, 2024 by and between the Company and Britt Ide (incorporated by reference to Exhibit 10.1 of the Company’s Form
8-K filed wi |