Quarterly report pursuant to Section 13 or 15(d)

Description of Business and Basis of Presentations

Description of Business and Basis of Presentations
9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Basis of Presentation Description of Business and Basis of Presentation
Lightning eMotors, Inc. (the “Company”, “Lightning”) designs and manufactures zero-emission vehicles (“ZEV”) and charging infrastructure solutions for commercial fleets, large enterprises, original equipment manufacturers, and governments. The Company’s product offerings range from electrified cargo vans, transit and shuttle buses, school buses, specialty work trucks, ambulances, mobile and stationary chargers and electric powertrains for school buses, transit buses and motorcoaches. The Company operates predominately in the United States.
On May 6, 2021, GigCapital3, Inc. (“Gig”), consummated the merger pursuant to the Business Combination Agreement, dated December 10, 2020, by and among Project Power Merger Sub, Inc., a wholly-owned subsidiary of Gig incorporated in the State of Delaware, and Lightning Systems, Inc., a Delaware corporation (“Lightning Systems”) (the “Business Combination”). On May 6, 2021, and in connection with the closing of the Business Combination, Gig changed its name to Lightning eMotors, Inc.
The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated.
NYSE Suspension of Trading and OTC Quotation
On September 18, 2023, the Company received notice from the New York Stock Exchange (“NYSE”) indicating that the staff determined to suspend trading immediately and commence proceedings to delist the shares of common stock and the redeemable warrants of the Company from the NYSE (the “Notice”). The decision was reached by the NYSE staff under Section 802.01B of the NYSE Listed Company Manual because it had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15 million over a consecutive 30-trading day period.
The Company requested to appeal the proposed delisting and was granted a hearing on December 14, 2023 in front of the NYSE Board to review the staff’s decision. During the pending appeal, the Company’s common stock remains listed on the NYSE, but trading in the Company’s common stock and warrants on the NYSE has been suspended as of September 18, 2023. Effective September 19, 2023, the Company’s common stock and warrants trade on the over-the-counter markets under the symbols “ZEVY” and “ZEVYW,” respectively.
Impairment of long-lived assets
Long-lived assets to be held and used in the Company’s operations are evaluated for impairment when events or circumstances indicate the carrying value of a long-lived asset or asset group may not be recovered. The Company assesses recoverability by comparing the sum of projected undiscounted cash flows from the use and eventual disposition over the remaining economic life of a long-lived asset or asset group to its carrying value. Should the sum of the expected future net cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value, or the estimated discounted future cash flows, of the long-lived assets. Assets or asset groups to be abandoned or from which no future benefit is expected are written down to zero in the period it is determined they will no longer be used and are removed entirely from service.
For the three and nine months ended September 30, 2023, and due to the Notice received from the NYSE, the Company determined a triggering event occurred that required the Company to evaluate the Company’s long-lived assets for impairment. The Company’s long-lived assets were evaluated using a market approach based on an in exchange premise, estimating recovery percentages that would take into account cost of installation, freight and other costs that would not be recovered. As a result, the Company recorded a loss on the impairment of property and equipment of $4,878 for the three
and nine months ended September 30, 2023, which is included in “Cost of revenues” on the consolidated statements of operations.
Reverse Stock Split
The Company effected a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share, effective as of 5:00 p.m. Eastern Time on April 27, 2023. As a result of the Reverse Stock Split, every twenty shares of common stock issued and outstanding were automatically reclassified into one share of common stock. The Reverse Stock Split did not reduce the number of authorized shares of common stock of 250,000,000, or change the par value of the common stock. All outstanding options, warrants, restricted stock units and similar securities entitling their holders to receive or purchase shares of common stock were adjusted as a result of the Reverse Stock Split, as required by the terms of each security. All share and per share amounts were retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of the Company’s common stock to additional paid-in capital. See Note 9 for additional information.
Liquidity and Capital
As of September 30, 2023, the Company had $6,022 in cash and cash equivalents. For the nine months ended September 30, 2023, the Company incurred a net loss of $95,555 and cash used in operating activities was $49,886. The Company had negative working capital of $30,601 as of September 30, 2023. The current and historical operating cash flows, current cash and working capital balances, and forecasted obligations of the Company were considered in connection with management’s evaluation of the Company’s ongoing liquidity.
The Company has suffered recurring losses from operations. The continuation of the Company as a going concern is dependent upon the Company attaining and maintaining profitable operations and/or raising additional capital from equity offerings, debt financings or other capital markets transactions, collaborations, strategic partnerships or licensing arrangements.
The Company entered into a Pre-Paid Advance Agreement with YA II PN, Ltd. (“Yorkville”) on May 16, 2023 and into a purchase agreement (“ELOC”) with Lincoln Park Capital, LLC on August 30, 2022. Due to the suspension of trading of the Company’s common stock from the NYSE or other Principal Market (as defined in the ELOC), the Company is currently unable to utilize either the ELOC or the Pre-Paid Advance Agreement. Moreover, the ability to access the Pre-Paid Advance Agreement or the ELOC in full is dependent on various factors, such as common stock trading volumes, market prices and obtaining stockholder approval, which cannot be assured, and as a result cannot be included as sources of liquidity for the Company's Accounting Standards Codification (“ASC”) 205-40 Going Concern analysis. During the three and nine months ended September 30, 2023, the Company received proceeds in the amount of $2,944 and issued 443,303 and 904,851 shares of common stock, respectively, to Yorkville. Since September 30, 2023 and through the filing date, the Company issued zero shares of common stock to Yorkville. As of September 30, 2023 and through the date of this filing, the Company has not sold any shares of common stock to Lincoln Park under the ELOC other than the commitment shares (and is prohibited from accessing the ELOC while advances are outstanding to Yorkville).
Due to the timing of cash receipts, the Company may not be in a financial position to fund its next scheduled interest payment on its outstanding Convertible Notes, which payment is due no later than December 15, 2023 to avoid an event of default. Although the Company is working to collect outstanding accounts receivable and/or obtain bridge financing, there can be no certainty that either will occur prior to the December 15 payment deadline. Further, in the event the Company is not successful in its appeal of delisting to the NYSE, such delisting will represent a “Fundamental Change,” giving each holder of Convertible Notes the right to require the Company to repurchase its Convertible Notes pursuant to the terms and procedures set forth in the indenture for a cash repurchase price equal to 100% of the principal amount of the Convertible Notes to be so repurchased, plus accrued and unpaid interest thereon, if any, plus any remaining amounts that would be owed to, but excluding the Maturity Date (as defined in the indenture), including all regularly scheduled interest payments.
The Company has been working with financial advisors to assist the Company in identifying strategic partners and financing to fund operations and to take actions to maximize our liquidity. If capital is not available to the Company when, and in the amounts needed, the Company could be required to liquidate its inventory, cease or curtail operations, or seek protection under applicable bankruptcy laws or similar state proceedings. The result of the Company's ASC 205-40 analysis, due to uncertainties discussed above, there is substantial doubt about the Company's ability to continue as a going concern through the next twelve months from the date of issuance of these consolidated financial statements.
These consolidated financial statements have been prepared by management in accordance with GAAP and this basis assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.