Nxu(NXU) - 2022 Q4 - Annual Report

Part I Business Atlis Motor Vehicles Inc. is an early-stage technology company focused on electrifying the commercial "Work" sector through proprietary battery technology, a modular vehicle platform, and electric trucks - Atlis is a technology company developing battery solutions, EV infrastructure, and vehicles for 'Work' industries, which include building, digging, growing, and hauling[22] - The company is an early-stage entity that has not yet scaled production or delivered products, with its proprietary battery technology being the most advanced product, targeting customer deliveries in late 2023[24] - Atlis plans a phased go-to-market strategy: 'Crawl' phase in 2023 launching AMV cells and packs, followed by the 'Walk' phase with the XP Platform, and the 'Run' phase with the XT truck[39][40][41] - As of December 31, 2022, the company had 93 full-time employees and plans to manufacture its products in its Mesa, Arizona facility[35][61] Principal Products and Services Atlis is developing a vertically integrated ecosystem of products, including a proprietary 15-minute fast-charging battery cell, battery packs, a 1.5 MW charging station, a modular vehicle platform, and an electric pickup truck - AMV Energy Cell: Proprietary battery technology designed for 15-minute charging (0-100%) and high energy density, with small-batch pilot production underway and customer deliveries expected in late 2023[30] - AMV Energy 30 pack: A 30 KWh battery pack utilizing the AMV Energy Cell, designed for mobility, equipment, and energy storage applications[30] - AMV Advanced Charger (AAC): A proprietary charging station capable of delivering up to 1.5 MW of power, currently in the R&D phase[30] - Future Products: The AMV XP, a modular vehicle platform, and the AMV XT, a full-sized electric work truck with up to 500 miles of range and 35,000 pounds of towing capacity, are in the R&D phase[30] Competition and Competitive Strengths Atlis faces intense competition in the EV battery and vehicle markets but leverages its fast-charging battery technology, intellectual property, vertical integration, and "Made in the USA" strategy as competitive strengths - The EV battery market is highly competitive, with major players including Panasonic, Samsung SDI, CATL, LG Energy Solutions, and Tesla[32] - Key competitive strengths include fast-charging battery technology (15-minute charge, 1 million-mile life), vertical integration, and a strong company culture focused on innovation[34] - As of December 31, 2022, Atlis holds one issued U.S. patent (effective until 2039) and has 32 pending U.S. patents[34] - The company plans to manufacture its products in-house at its Arizona facility, positioning itself as one of the few American companies building EV batteries on U.S. soil[35] Supply Chain and Growth Strategy Atlis's supply chain is heavily reliant on China, prompting diversification efforts, while its growth strategy prioritizes early revenue generation from battery sales before scaling to vehicle platforms and trucks - Approximately 75% of the company's raw material supply chain is currently based in China, with Atlis exploring risk mitigation by seeking alternative suppliers in Europe and North America[49] - The growth strategy prioritizes bringing the AMV Battery and related products (Energy Storage Systems, Charging) to market first to generate early revenue[50] - The company plans to leverage its social media presence and develop a dedicated sales team to pursue large customers and drive growth[52] Risk Factors The company faces substantial risks due to its early-stage nature, limited operating history, and lack of profits, including significant capital needs, unproven manufacturing scalability, intense competition, and complex regulatory hurdles Risks Related to Our Business Atlis is an early-stage company with a history of losses, requiring significant additional funding to develop products and scale manufacturing, while facing supply chain dependencies, inflation, and cybersecurity threats - Atlis is an early-stage company with a limited operating history, has never been profitable, and requires significant additional funding to continue development of its XP platform and XT truck[17][67][76] - The company is dependent on single or limited-source suppliers for critical components and faces risks related to supply chain disruptions, price fluctuations, and component availability[90] - An event of default occurred under the company's convertible notes due to a notice of non-compliance from Nasdaq, making approximately $4.9 million in principal and interest potentially due and payable immediately[132] - The business is exposed to risks from rising interest rates and inflation, which increase operating costs and the cost of capital[102][103] Risks Related to the Automobile Industry The automotive market is highly competitive, posing risks to Atlis from production bottlenecks, raw material scarcity, the need for adequate charging infrastructure, inherent lithium-ion battery fire risks, and minimal vehicle servicing experience - The automotive industry is highly competitive, with competitors like Ford, GM, Rivian, and Tesla having greater resources and potentially bringing similar products to market sooner[134][136] - The company's success depends on avoiding battery production bottlenecks and securing scarce natural resources like lithium and cobalt, which are subject to price volatility and supply constraints[152][154] - The use of lithium-ion battery cells presents a risk of fire or thermal events, which could lead to injury, product recalls, and brand damage[157] - Atlis has minimal experience servicing and repairing its vehicles, and failure to establish an adequate service network could materially harm the business[158] Risks Related to Our Management and Capital Structure The company's management team lacks public company experience, and a dual-class stock structure concentrates over 97% of voting power with the CEO and President, making Atlis a 'controlled company' and exposing it to Nasdaq delisting risk - The company's management team lacks experience in operating a publicly traded company, and the business is highly dependent on its key executives, Mark Hanchett and Annie Pratt[167][168] - A dual-class stock structure gives CEO Mark Hanchett ~71% and President Annie Pratt ~26% of the voting power, concentrating control and limiting the influence of other stockholders[169][176] - Atlis is a 'controlled company' under Nasdaq rules, exempting it from requirements such as having a majority of independent directors[178] - On March 13, 2023, Atlis received a notice from Nasdaq for failing to meet the minimum $50 million market value of listed securities requirement, posing a risk of delisting[201] Properties Atlis leases a 42,828 square foot industrial facility in Mesa, Arizona, serving as its headquarters for all operations, including office and manufacturing space, which is considered adequate for current needs - The Company leases a 42,828 sq. ft. facility at 1828 Higley Road, Mesa, AZ, which includes office (7,828 sq. ft.) and manufacturing (35,000 sq. ft.) space[205] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on Nasdaq under 'AMV', with 17,449 holders as of March 13, 2023, and no plans to pay cash dividends in the foreseeable future - The company's common stock is listed on Nasdaq under the symbol 'AMV'[210] - As of March 13, 2023, there were 17,449 holders of record of the common stock[210] - The company has never paid cash dividends and does not plan to in the foreseeable future[210] Management's Discussion and Analysis of Financial Condition and Results of Operations Atlis, a pre-revenue development stage company, incurred a $70.7 million net loss in 2022, faces substantial doubt about its going concern ability, and relies on recent and future capital raises to fund operations while prioritizing AMV battery commercialization Results of Operations For the year ended December 31, 2022, Atlis reported a net loss of $70.7 million, a significant improvement from $133.7 million in 2021, primarily due to an $81.8 million reduction in stock-based compensation, despite increased operating expenses Statement of Operations Data (2022 vs 2021) | | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Revenue | $ - | $ - | - | | Operating loss | $ (68,800) | $ (133,681) | $ (64,881) | | Net loss | $ (70,681) | $ (133,736) | $ (63,055) | | Stock based compensation | $ 41,502 | $ 123,245 | $ (81,743) | | Research and Development | $ 9,648 | $ 4,429 | $ 5,219 | | General and administrative | $ 12,353 | $ 3,329 | $ 9,024 | - Stock-based compensation decreased by $81.8 million, primarily because 2021 included a one-time incremental expense of approximately $115 million related to the conversion of stock grants to stock options[225] - General and administrative expenses increased by $9.0 million, driven by a $2.6 million increase in salaries from higher headcount and $5.2 million in legal and professional services for the public offering[227] Liquidity and Capital Resources The company faces substantial doubt about its ability to continue as a going concern, having incurred a $70.7 million net loss in 2022 and ending the year with $2.7 million in cash, necessitating significant capital raises through debt and equity offerings - The company has substantial doubt about its ability to continue as a going concern due to a net loss of $70.7 million in 2022 and an accumulated deficit of $218.6 million[231][233] Summary of Cash Flows (in thousands) | | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $ (23,450) | $ (11,188) | | Net cash used in investing activities | $ (1,557) | $ (1,031) | | Net cash provided by financing activities | $ 24,562 | $ 15,322 | - In 2022, the company raised $15.3 million from stock sales and $9 million from convertible debt, with an additional $9 million from debt and gross proceeds of approximately $13 million from a public offering in early 2023[232][233] Critical Accounting Estimates The company's critical accounting estimates involve significant judgment, primarily concerning stock-based compensation valued using the Black-Scholes model and convertible debt and warrants valued at fair value using a Monte Carlo simulation model - Stock-Based Compensation is a critical estimate, valued using the Black-Scholes model which requires subjective inputs like expected volatility (75.33% in 2022) and expected option term (7.0 years)[242][243][371] - Convertible Debt and Warrants are valued using a Monte Carlo simulation model, which is a Level 3 fair value measurement requiring significant assumptions about stock price, volatility (85% at year-end 2022), and other factors[249][388] Financial Statements and Supplementary Data This section incorporates the company's audited consolidated financial statements for 2022 and 2021, including the Independent Registered Public Accounting Firm's report which expresses substantial doubt about the company's ability to continue as a going concern Report of Independent Registered Public Accounting Firm The independent auditor, Prager Metis CPAs, LLP, issued an opinion that the financial statements are fairly presented, but included a 'Going Concern' paragraph highlighting substantial doubt due to recurring losses and an accumulated deficit - The auditor's report contains a 'Going Concern' paragraph, citing recurring losses from operations and an accumulated deficit as conditions that raise substantial doubt about the company's ability to continue[298] Consolidated Financial Statements As of December 31, 2022, Atlis had total assets of $7.0 million and total liabilities of $16.1 million, resulting in a stockholders' deficit of $9.0 million, with no revenue and a net loss of $70.7 million for the year Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $ 3,667 | $ 3,436 | | Total Assets | $ 7,038 | $ 4,613 | | Total Current Liabilities | $ 4,243 | $ 709 | | Total Liabilities | $ 16,086 | $ 813 | | Total Stockholders' Equity (Deficit) | $ (9,048) | $ 3,800 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Revenue | $ - | $ - | | Operating loss | $ (68,800) | $ (133,681) | | Net Loss | $ (70,681) | $ (133,736) | | Loss per share, basic | $ (8.88) | $ (10.77) | Notes to Consolidated Financial Statements The notes detail critical accounting policies and financial items, including substantial doubt about going concern, a full valuation allowance against deferred tax assets, forgiveness of a $397 thousand PPP loan, $41.5 million in stock-based compensation, and the $10 million convertible debt issued in November 2022 - The company's financial statements were prepared with the assumption of it being a 'going concern', but management notes that recurring losses and negative cash flows raise substantial doubt about this ability[318][319] - On November 4, 2022, the Company issued $10.0 million in 10% Original Issue Discount Convertible Notes, receiving gross proceeds of $9.0 million, secured by all company assets[376] - In February 2023, the company raised approximately $13 million in gross proceeds from a public offering of 8.3 million units at $1.56 per unit[393] - On March 13, 2023, the company received a notice from Nasdaq for failing to meet the minimum market value of listed securities requirement, which constituted an event of default under its convertible notes[266][394] Controls and Procedures As of December 31, 2022, management concluded that the company's disclosure controls and procedures were effective, with Atlis being exempt from providing a management report or auditor attestation on internal control over financial reporting as a newly public and emerging growth company - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective[259] - The company is exempt from providing a management report on internal control over financial reporting and an auditor attestation report for this period due to its status as a newly public and emerging growth company[260] Other Information On March 13, 2023, Atlis received a Nasdaq notice for failing to meet the $50 million Market Value of Listed Securities requirement, triggering an event of default under its convertible notes and making approximately $4.9 million potentially due immediately - On March 13, 2023, the Company received a notice from Nasdaq for failing to meet the minimum $50 million Market Value of Listed Securities (MVLS) requirement[262] - The company has a 180-day period, until September 11, 2023, to regain compliance by having its MVLS close at or above $50 million for at least 10 consecutive business days[263] - Receipt of the Nasdaq notice constituted an event of default under the company's convertible notes, making ~$4.9 million in principal and interest potentially due immediately[266] Part III Directors, Executive Compensation, and Corporate Governance Information for Items 10 through 14, covering Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships and Related Transactions, and Principal Accountant Fees, will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2023 Proxy Statement[270] Part IV Exhibits and Financial Statement Schedules This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K, including the company's articles of incorporation, bylaws, debt and warrant agreements, material contracts, and CEO/CFO certifications - This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K[278][279]