|6 Months Ended|
Jun. 30, 2020
|Subsequent Events [Abstract]|
|Subsequent Events||SUBSEQUENT EVENTS
The Company evaluates events and transactions occurring subsequent to the date of the condensed consolidated financial statements for matters requiring recognition or disclosure in the condensed consolidated financial statements. The accompanying condensed consolidated financial statements consider events through the date on which the condensed consolidated financial statements were available to be issued.
High Trail Convertible Note
The Company entered into a securities purchase agreement, with HT Investments MA LLC pursuant to which the Company agreed to issue and sell a senior secured convertible note for the principal amount of $70.0 million (the “Note”). The closing of the offering took place on July 16, 2020.
The Company did not pay underwriting discounts or commissions. However, after discounts the proceeds before expenses were $69.0 million. The Company expects to use the net proceeds from this offering for working capital to finance the production of its trucks and for general corporate purposes.
The Note ranks equal with the Company’s outstanding senior secured note and senior to all unsecured debt of the Company, and will be due on July 1, 2023. Interest is payable quarterly beginning October 1, 2020 at a rate of 4.5% per annum. The Note is initially convertible at a rate of $19.00 per share, subject to customary anti-dilution adjustments and adjustments for certain corporate events.
Any principal repayment of the Note is at 110% of the par value (the “Repayment Price”). Beginning October 1, 2020, the holder of the Note may require the Company to redeem up to $3.5 million of the par value (“Redemption Payment”). Subject to certain limitations, the Company, at its discretion, can pay some or all of the Redemption Payment in cash or shares of common stock. The Company may redeem all (or any portion in excess of $8.0 million) of the Note at any time at the greater of (a) 115% of the conversion value, calculated based on the highest volume weighted average price during the period beginning 30 days prior to such redemption and ending the day prior to the redemption date, or (b) 105% of the Repayment Price, in each case plus accrued and unpaid interest.
Pursuant to the credit agreement entered into between the Company and Marathon Asset Management, LP, on behalf of certain entities it manages (the "Marathon Lenders") dated December 31, 2018, until December 31, 2020, the Company must issue additional warrants to the Marathon Lenders when the Company makes certain equity issuances, in amount equal to approximately 10% of the Company’s fully diluted equity interests, and on substantially the same terms and conditions of the initial warrants issued, except that (i) the expiration date shall be five years from the issuance date, (ii) the exercise price shall be equal to 110% of the issuance price per share in the relevant issuance, and (iii) the holder shall be entitled to exercise the warrant on a cashless basis at any time. Accordingly, the Company issued the Marathon Lenders warrants to acquire an aggregate of 409,356 shares of common stock exercisable at a price of $20.90 per share.
Lordstown Motors Corp. Merger
On November 7, 2019, the Company entered into a transaction with LMC pursuant to which the Company granted LMC a perpetual and worldwide license to certain intellectual property relating to the Company’s W-15 electric pickup truck platform and its related technology (the “Licensed Intellectual Property”) in exchange for royalties, equity interests in LMC, and other consideration (the “LMC Transaction”). LMC will endeavor to, among other things, raise sufficient third-party capital for the acquisition, retrofitting, and restart of the Lordstown Assembly Complex, and the ongoing operating costs it expects to incur (the “Capital Raise”). Among other consideration, LMC is required to pay the Company one percent of the aggregate debt and equity commitments funded to LMC upon completion of the Capital Raise (the “Royalty Advance”). LMC must also pay a one percent royalty on the gross sales price of the first 200,000 vehicles sold, but only to the extent that the aggregate amount of such royalty fees exceed the amount paid as the Royalty Advance.
In order to fully implement its business plan and close on the Capital Raise, on August 1, 2020, LMC entered into an Agreement and Plan of Merger (the “LMC Merger Agreement”) with DiamondPeak Holdings Corp., pursuant to which LMC agreed to merge with and into a subsidiary of DiamondPeak (the “LMC Merger”). The LMC Merger Agreement may be terminated under certain circumstance, including, termination at the option of either party if the LMC Merger is not consummated by February 1, 2021, and conditions precedent including no Material Adverse Effect (as defined in the Merger Agreement), the retention by LMC of certain key employees and LMC having cash on hand equal to or in excess of $300 million. The shareholders of LMC will receive in the aggregate 58% of the issued and outstanding shares of Class A Common Stock of DiamondPeak as of the closing of the LMC Merger. Further, on August 1, 2020, DiamondPeak entered into subscription agreements with certain investors, pursuant to which, DiamondPeak agreed to issue and sell, in private placements to close immediately prior to the closing of the LMC Merger, an aggregate of 50 million shares of Class A Common Stock for $10.00 per share.In order to further define the Company’s rights with respect to LMC, the Company and LMC entered into an Agreement on August 1, 2020 pursuant to which the parties confirmed that the Company will own 9.99% of DiamondPeak following the closing of the LMC Merger and the Royalty Advance was defined as $4,750,000. Further, the Company has entered into a Registration Rights and Lock Up Agreement with DiamondPeak, which will become effective upon completion of the LMC Merger pursuant to which DiamondPeak has agreed to file a registration statement with the Securities and Exchange Commission, registering the Company’s shares of Class A Common Stock held in DiamondPeak within 45 days of the closing of the LMC Merger (the “Filing Deadline”) and to use reasonable efforts to have such registration statement declared effective within 60 days of the Filing Deadline, which may be extended up to 120 days in the event the Securities and Exchange Commission elects to review such registration statement. The Company has agreed, subject to certain exceptions, to not sell any of its shares of Class A Common Stock for a period of six months following the closing of the LMC Merger.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef