Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.22.4
Commitments and Contingencies
12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Purchase Requirements
The Company is party to firm purchase commitments with some of its suppliers. A firm purchase commitment represents an agreement that specifies all significant terms, including price and timing of the transactions, and includes a disincentive for non-performance that is sufficiently large to make performance probable. This disincentive is generally in the form of a take-or-pay provision, which requires the Company to pay for committed volumes regardless of whether the Company actually acquires the materials. The Company evaluates these agreements and records a loss, if any, on firm purchase commitments using the same lower of cost or market approach as that used to value inventory.
The Company amended certain firm purchase commitments during the year ended December 31, 2022, which significantly reduced its commitments. Negotiations with other suppliers are still ongoing to blend and extend or terminate other future commitments due to supply chain constraints and cost increases for both parties. The Company recognized $0.6 million in losses associated with firm purchase commitments during the year ended December 31, 2022. If negotiations to amend certain purchase commitments are not successful, the Company may incur additional losses in future periods.

The Company also has other commitments, including marketing and software subscription agreements and equipment leases. The equipment leases included here only relate to leases for which the equipment had not yet been delivered to the Company as of December 31, 2022. Since the Company did not receive the equipment, the related right-of-use asset and lease liability were not recognized as of December 31, 2022. However, the Company was still committed to the financing arrangement. All other financial commitments under leasing arrangements are described in Note 9.

The amounts in the table below represent the Company’s future minimum commitments:
As of December 31, 2022
Purchase Commitments Other Total
2023 $ 59,852  $ 826  $ 60,678 
2024 7,266  483  7,749 
2025 —  203  203 
2026 —  163  163 
2027 —  12  12 
Thereafter —  —  — 
Total $ 67,118  $ 1,687  $ 68,805 
Legal Proceedings
The Company is involved in various legal proceedings in the ordinary course of business. The Company records an accrual for legal contingencies when it determines that it is probable that it has incurred a liability and it can reasonably estimate the amount of the loss.
On August 4, 2021, a purported stockholder of the Company filed a putative class action complaint in the Delaware Chancery Court, captioned Delman v. GigCapitalAcquisitions3, LLC, et al. (Case No. 2021-0679) on behalf of a purported class of stockholders. The lawsuit names GigCapitalAcquisitions3, LLC and the Company’s former directors Dr. Katz, Dr. Dinu, and Messrs. Betti-Berutto, Mikulsky, Miotto and Wang, as defendants. The lawsuit alleges that the defendants breached their fiduciary duty stemming from Gig’s merger with Lightning Systems and unjust enrichment of certain of the defendants. The lawsuit seeks, among other relief, unspecified damages, redemption rights, and attorneys’ fees. Neither the Company nor any of its current officers or directors are parties to the lawsuit. The Company’s former directors are subject to certain indemnification obligations of the Company. On January 4, 2023, the Delaware Chancery Court denied the defendant's motion to dismiss.
In addition, on October 15, 2021, the Company and certain of its officers were named as defendants in a putative securities class action. The action is pending in the U.S. District Court for the District of Colorado, and is captioned Shafer v. Lightning eMotors, Inc., et al., Case No. 1:21-cv02774. The lawsuit alleges violations of Sections 10(b), Section 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder for purported false or misleading statements regarding the Company’s business operations and financial condition. A related lawsuit captioned Cohen v. Lightning eMotors, Inc., et al., Case No. 1:21-cv-03215, was filed in the United States District Court for the District of Colorado on December 1, 2021. On December 17, 2021, the Cohen lawsuit was consolidated with the Shafer lawsuit. On April 22, 2022, the court appointed a lead plaintiff in the consolidated lawsuit. The lead plaintiff’s filed a consolidated complaint on May 20, 2022. On July 13, 2022, the Company and the other defendants filed a motion to dismiss the class action. On February 21, 2023, the court denied the motion to dismiss. The plaintiffs seek damages in an unspecified amount, attorneys’ fees, and other remedies. The Company believes the allegations are without merit and intends to defend vigorously against such allegations.
On February 6, 2023, a purported stockholder of the Company filed a derivative complaint in the Delaware Chancery Court, captioned Uvaydov v. Robert Fenwick-Smith, Tim Reeser, et al. (Case No. 2023-0137-LWW). The lawsuit names
certain current and former officers and directors of the Company as defendants. The lawsuit alleges that the defendants breached their fiduciary duty stemming from GigCapital3’s merger with Lightning Systems. The lawsuit seeks, among other relief, unspecified damages, redemption rights, and attorneys’ fees. The Company believes the allegations are without merit and intends to defend vigorously against them.
On February 24, 2023, a purported stockholder of the Company filed a derivative complaint in the U.S. District Court for the District of Colorado, captioned Lanham v. Robert Fenwick-Smith, et al. (Case No. 1:23-cv00507). The lawsuit names certain current and former officers and directors of the Company as defendants. The lawsuit alleges, among others, that the defendants breached their fiduciary duty stemming from GigCapital3’s merger with Lightning Systems. The lawsuit seeks, among other relief, unspecified damages, and attorneys’ fees. The Company believes the allegations are without merit and intends to defend vigorously against them.
Recall Campaign
On December 16, 2022, the Company initiated a voluntary recall for certain 2021-2022 model year Lightning eMotors FE4-129 vehicles due to multiple software and hardware discrepancies internal to the Romeo Power battery packs installed in the FE4-129 series vehicles. The affected vehicles may fail to operate in cold temperatures, fail to start, or may lose traction power while driving, increasing the risk of an accident. The potential remedies for the recall remains under development. Romeo Power has been formally notified of the recall and the Company will seek to recover the costs and expenses associated with the recall from Romeo Power. Because the remedy is still being developed, and due to the uncertainty of Romeo Power's performance of its warranty obligation to the Company, the Company is unable to reasonably estimate a range of the potential losses associated with the recall.