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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
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☐ |
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 001-38818
CarLotz, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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83-2456129 |
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(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer Identification No.) |
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3301 W. Moore Street |
Richmond |
Virginia |
23230 |
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(Address of principal executive offices, including zip
code) |
Registrant’s telephone number, including area
code:
(804) 510-0744
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Class A common stock, par value $0.0001 per share |
LOTZ |
The Nasdaq Global Market |
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Redeemable warrants, exercisable for Class A common stock at an
exercise price of $11.50 per share |
LOTZW |
The Nasdaq Global Market |
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.
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Large accelerated filer
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¨
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Accelerated filer
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x |
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Non-accelerated filer
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¨
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Smaller reporting company
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Emerging growth company
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x |
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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 provided 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
The registrant had outstanding 119,703,273 shares of common stock
as of November 7, 2022.
CarLotz, Inc.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CarLotz, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share data)
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September 30,
2022 |
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December 31,
2021 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
$ |
84,809 |
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$ |
75,029 |
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Restricted cash |
4,049 |
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4,336 |
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Marketable securities – at fair value |
28,125 |
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116,589 |
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Accounts receivable, net |
4,786 |
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8,206 |
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Inventories |
13,062 |
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40,985 |
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Other current assets |
4,349 |
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4,705 |
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Operating and finance lease assets, property, and equipment held
for sale |
20,860 |
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— |
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Total Current Assets |
160,040 |
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249,850 |
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Marketable securities – at fair value |
760 |
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1,941 |
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Property and equipment, net |
7,118 |
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22,628 |
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Capitalized website and internal-use software costs,
net |
12,725 |
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13,716 |
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Operating lease assets |
22,092 |
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— |
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Finance lease assets, net |
4,459 |
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— |
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Lease vehicles, net |
2,869 |
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1,596 |
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Other assets |
474 |
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558 |
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Total Assets |
$ |
210,537 |
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$ |
290,289 |
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Liabilities and Stockholders’ Equity (Deficit) |
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Current Liabilities: |
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Current portion of finance lease liabilities |
$ |
116 |
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$ |
509 |
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Floor plan notes payable |
5,433 |
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27,815 |
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Accounts payable |
2,236 |
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6,352 |
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Accrued expenses |
11,215 |
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14,428 |
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Current portion of operating lease liabilities |
4,600 |
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— |
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Other current liabilities |
593 |
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754 |
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Operating and finance lease liabilities associated with assets held
for sale |
22,294 |
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— |
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Total Current Liabilities |
46,487 |
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49,858 |
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Finance lease liabilities, less current portion |
6,083 |
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12,206 |
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Operating lease liabilities, less current portion |
22,384 |
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— |
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Earnout shares liability |
722 |
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7,679 |
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Merger warrants liability |
675 |
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6,291 |
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Other liabilities |
417 |
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744 |
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Total Liabilities |
76,768 |
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76,778 |
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Commitments and Contingencies (Note 15) |
— |
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— |
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Stockholders’ Equity (Deficit): |
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Common stock, $0.0001 par value; 500,000,000 authorized shares,
114,879,689 and 113,996,401 shares issued and outstanding at
September 30, 2022 and December 31, 2021
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11 |
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Additional paid-in capital |
291,827 |
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287,509 |
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Accumulated deficit |
(157,956) |
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(73,916) |
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Accumulated other comprehensive loss |
(113) |
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(93) |
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Total Stockholders’ Equity (Deficit) |
133,769 |
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213,511 |
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Total Liabilities and Stockholders’ Equity (Deficit) |
$ |
210,537 |
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$ |
290,289 |
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See notes to condensed consolidated financial
statements.
1
CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues: |
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Retail vehicle sales |
$ |
32,545 |
|
|
$ |
56,284 |
|
|
$ |
142,344 |
|
|
$ |
150,897 |
|
|
Wholesale vehicle sales |
16,357 |
|
|
8,989 |
|
|
38,880 |
|
|
18,217 |
|
|
Finance and insurance, net |
1,691 |
|
|
2,639 |
|
|
8,591 |
|
|
5,973 |
|
|
Lease income, net |
245 |
|
|
129 |
|
|
528 |
|
|
334 |
|
|
Total Revenues |
50,838 |
|
|
68,041 |
|
|
190,343 |
|
|
175,421 |
|
|
Cost of sales (exclusive of depreciation) |
51,429 |
|
|
66,017 |
|
|
187,375 |
|
|
167,207 |
|
|
Gross Profit |
(591) |
|
|
2,024 |
|
|
2,968 |
|
|
8,214 |
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
19,334 |
|
|
24,780 |
|
|
74,017 |
|
|
63,039 |
|
|
Stock-based compensation expense |
1,409 |
|
|
3,447 |
|
|
4,234 |
|
|
49,114 |
|
|
Depreciation and amortization expense |
2,025 |
|
|
1,214 |
|
|
6,173 |
|
|
1,692 |
|
|
Management fee expense – related party |
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
Impairment expense |
420 |
|
|
— |
|
|
1,143 |
|
|
— |
|
|
Restructuring expenses |
1,885 |
|
|
— |
|
|
12,616 |
|
|
— |
|
|
Total Operating Expenses |
25,073 |
|
|
29,441 |
|
|
98,183 |
|
|
113,847 |
|
|
Loss from Operations |
(25,664) |
|
|
(27,417) |
|
|
(95,215) |
|
|
(105,633) |
|
|
Interest expense |
302 |
|
|
650 |
|
|
1,512 |
|
|
1,009 |
|
|
Other Income, net |
|
|
|
|
|
|
|
|
Change in fair value of Merger warrants liability |
803 |
|
|
12,111 |
|
|
5,616 |
|
|
24,794 |
|
|
|
|
|
|
|
|
|
|
Change in fair value of earnout shares |
341 |
|
|
12,565 |
|
|
6,957 |
|
|
56,621 |
|
|
Other income (expense) |
523 |
|
|
(85) |
|
|
113 |
|
|
(476) |
|
|
Total Other Income, net |
1,667 |
|
|
24,591 |
|
|
12,686 |
|
|
80,939 |
|
|
Loss Before Income Tax Expense |
(24,299) |
|
|
(3,476) |
|
|
(84,041) |
|
|
(25,703) |
|
|
Income tax expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net Loss |
$ |
(24,299) |
|
|
$ |
(3,476) |
|
|
$ |
(84,041) |
|
|
$ |
(25,703) |
|
|
Net Loss per Share, basic and diluted |
$ |
(0.21) |
|
|
$ |
(0.03) |
|
|
$ |
(0.74) |
|
|
$ |
(0.23) |
|
|
Weighted-average Shares used in Computing Net Loss per Share, basic
and diluted |
114,705,449 |
|
113,707,013 |
|
114,334,960 |
|
109,447,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial
statements.
2
CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive
(Loss)
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net loss |
$ |
(24,299) |
|
|
$ |
(3,476) |
|
|
$ |
(84,041) |
|
|
$ |
(25,703) |
|
|
Other Comprehensive (Loss), net of tax: |
|
|
|
|
|
|
|
|
Unrealized gains (losses) on marketable securities arising during
the period |
38 |
|
|
(40) |
|
|
(6) |
|
|
(110) |
|
|
Tax effect |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Unrealized gains (losses) on marketable securities arising during
the period, net of tax |
38 |
|
|
(40) |
|
|
(6) |
|
|
(110) |
|
|
Reclassification adjustment for realized gains |
(8) |
|
|
— |
|
|
(14) |
|
|
(5) |
|
|
Tax effect |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Reclassification adjustment for realized gains, net of
tax |
(8) |
|
|
— |
|
|
(14) |
|
|
(5) |
|
|
Other Comprehensive Income (Loss), net of tax |
30 |
|
|
(40) |
|
|
(20) |
|
|
(115) |
|
|
Total Comprehensive (Loss) |
$ |
(24,269) |
|
|
$ |
(3,516) |
|
|
$ |
(84,061) |
|
|
$ |
(25,818) |
|
See notes to condensed consolidated financial
statements.
3
CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Deficit)
Nine Months Ended September 30, 2022 and 2021
(Unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock
|
|
|
Common Stock |
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Stockholders’ Equity (Deficit) |
|
|
|
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
|
Balance December 31, 2021 |
— |
|
|
$ |
— |
|
|
|
113,996,401 |
|
|
$ |
11 |
|
|
$ |
287,509 |
|
|
$ |
(73,916) |
|
|
$ |
(93) |
|
|
$ |
213,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(24,836) |
|
|
— |
|
|
(24,836) |
|
|
|
|
|
Other comprehensive income, net of tax
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(73) |
|
|
(73) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless exercise of options |
— |
|
|
— |
|
|
|
44,424 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
1,684 |
|
|
— |
|
|
— |
|
|
1,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock to settle vested restricted stock
units |
— |
|
|
— |
|
|
|
70,971 |
|
|
— |
|
|
(2) |
|
|
— |
|
|
— |
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2022 |
— |
|
|
$ |
— |
|
|
|
114,111,796 |
|
|
$ |
11 |
|
|
$ |
289,191 |
|
|
$ |
(98,752) |
|
|
$ |
(166) |
|
|
$ |
190,284 |
|
|
|
|
|
Net loss |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(34,905) |
|
|
$ |
— |
|
|
$ |
(34,905) |
|
|
|
|
|
Other comprehensive income, net of tax |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23 |
|
|
$ |
23 |
|
|
|
|
|
Exercise of options |
— |
|
|
$ |
— |
|
|
|
104,818 |
|
|
$ |
— |
|
|
$ |
66 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
66 |
|
|
|
|
|
Stock-based compensation |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
1,141 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,141 |
|
|
|
|
|
Issuance of common stock to settle vested restricted stock
units |
— |
|
|
$ |
— |
|
|
|
263,048 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
Balance June 30, 2022 |
— |
|
|
$ |
— |
|
|
|
114,479,662 |
|
|
$ |
11 |
|
|
$ |
290,398 |
|
|
$ |
(133,657) |
|
|
$ |
(143) |
|
|
$ |
156,609 |
|
|
|
|
|
Net loss |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(24,299) |
|
|
$ |
— |
|
|
$ |
(24,299) |
|
|
|
|
|
Other comprehensive income, net of tax |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
30 |
|
|
$ |
30 |
|
|
|
|
|
Exercise of options |
— |
|
|
$ |
— |
|
|
|
81,541 |
|
|
$ |
— |
|
|
$ |
20 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
20 |
|
|
|
|
|
Cashless exercise of options |
— |
|
|
$ |
— |
|
|
|
26,435 |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
— |
|
|
|
|
|
Stock-based compensation |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
1,409 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,409 |
|
|
|
|
|
Issuance of common stock to settle vested restricted stock
units |
— |
|
|
$ |
— |
|
|
|
292,051 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
— |
|
|
|
|
|
Balance September 30, 2022 |
— |
|
|
$ |
— |
|
|
|
114,879,689 |
|
|
$ |
11 |
|
|
$ |
291,827 |
|
|
$ |
(157,956) |
|
|
$ |
(113) |
|
|
$ |
133,769 |
|
|
|
|
See notes to condensed consolidated financial
statements.
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock
|
|
|
Common Stock |
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Stockholders’ Equity (Deficit) |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
|
Balance December 31, 2020 |
2,034,751 |
|
|
$ |
17,560 |
|
|
|
37,881,435 |
|
|
$ |
4 |
|
|
$ |
3,221 |
|
|
$ |
(34,037) |
|
|
$ |
15 |
|
|
$ |
(30,797) |
|
|
Retroactive application of recapitalization |
(2,034,751) |
|
|
(17,560) |
|
|
|
20,739,607 |
|
|
2 |
|
|
17,558 |
|
|
— |
|
|
— |
|
|
17,560 |
|
|
Adjusted balance, beginning of period |
— |
|
|
— |
|
|
|
58,621,042 |
|
|
6 |
|
|
20,779 |
|
|
(34,037) |
|
|
15 |
|
|
(13,237) |
|
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(15,022) |
|
|
— |
|
|
(15,022) |
|
|
Other comprehensive income, net of tax
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(131) |
|
|
(131) |
|
|
Accrued dividends on redeemable convertible preferred
stock |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(19) |
|
|
— |
|
|
— |
|
|
(19) |
|
|
PIPE issuance |
— |
|
|
— |
|
|
|
12,500,000 |
|
|
1 |
|
|
124,999 |
|
|
— |
|
|
— |
|
|
125,000 |
|
|
Merger financing |
— |
|
|
— |
|
|
|
38,194,390 |
|
|
4 |
|
|
309,995 |
|
|
— |
|
|
— |
|
|
309,999 |
|
|
Consideration to existing shareholders of Former CarLotz, net of
accrued dividends |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(62,693) |
|
|
— |
|
|
— |
|
|
(62,693) |
|
|
Transaction costs and advisory fees |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(47,579) |
|
|
— |
|
|
— |
|
|
(47,579) |
|
|
Settlement of redeemable convertible preferred stock tranche
obligation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
2,832 |
|
|
— |
|
|
— |
|
|
2,832 |
|
|
Cashless exercise of options |
— |
|
|
— |
|
|
|
54,717 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Cash consideration paid to Former Carlotz optionholders |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(2,465) |
|
|
— |
|
|
— |
|
|
(2,465) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
41,963 |
|
|
— |
|
|
— |
|
|
41,963 |
|
|
Earnout liability |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(74,284) |
|
|
— |
|
|
— |
|
|
(74,284) |
|
|
Merger warrants liability |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(39,025) |
|
|
— |
|
|
— |
|
|
(39,025) |
|
|
KAR/AFC note payable conversion |
— |
|
|
— |
|
|
|
3,546,984 |
|
|
— |
|
|
3,625 |
|
|
— |
|
|
— |
|
|
3,625 |
|
|
KAR/AFC warrant exercise |
— |
|
|
— |
|
|
|
752,927 |
|
|
— |
|
|
144 |
|
|
— |
|
|
— |
|
|
144 |
|
|
Balance March 31, 2021 |
— |
|
|
$ |
— |
|
|
|
113,670,060 |
|
|
$ |
11 |
|
|
$ |
278,272 |
|
|
$ |
(49,059) |
|
|
$ |
(116) |
|
|
$ |
229,108 |
|
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(7,205) |
|
|
— |
|
|
(7,205) |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
56 |
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
3,704 |
|
|
— |
|
|
— |
|
|
3,704 |
|
|
Balance June 30, 2021 |
— |
|
|
$ |
— |
|
|
|
113,670,060 |
|
|
$ |
11 |
|
|
$ |
281,976 |
|
|
$ |
(56,264) |
|
|
$ |
(60) |
|
|
$ |
225,663 |
|
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(3,476) |
|
|
— |
|
|
(3,476) |
|
|
Other comprehensive income, net of tax |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(40) |
|
|
(40) |
|
|
Issuance of Class A common stock to settle vested restricted stock
units |
— |
|
|
— |
|
|
|
36,953 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
3,447 |
|
|
— |
|
|
— |
|
|
3,447 |
|
|
Balance September 30, 2021 |
— |
|
|
$ |
— |
|
|
|
113,707,013 |
|
|
$ |
11 |
|
|
$ |
285,423 |
|
|
$ |
(59,740) |
|
|
$ |
(100) |
|
|
$ |
225,594 |
|
See notes to condensed consolidated financial
statements.
5
CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
Cash Flow from Operating Activities |
|
|
|
|
Net loss |
$ |
(84,041) |
|
|
$ |
(25,703) |
|
|
Adjustments to reconcile net loss to net cash used in operating
activities |
|
|
|
|
Depreciation and amortization – property, equipment, ROU assets and
capitalized software |
8,532 |
|
|
1,623 |
|
|
Impairment expense |
1,143 |
|
|
— |
|
|
Non-cash restructuring expenses |
10,387 |
|
|
— |
|
|
Gain on lease assignment |
(236) |
|
|
— |
|
|
Amortization and accretion - marketable securities |
752 |
|
|
1,712 |
|
|
Depreciation – lease vehicles |
360 |
|
|
69 |
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts |
656 |
|
|
85 |
|
|
Stock-based compensation expense |
4,234 |
|
|
49,114 |
|
|
Change in fair value of Merger warrants liability |
(5,616) |
|
|
(24,794) |
|
|
Change in fair value of earnout shares |
(6,957) |
|
|
(56,621) |
|
|
Unpaid interest expense on capital lease obligations |
— |
|
|
199 |
|
|
Change in Operating Assets and Liabilities: |
|
|
|
|
Accounts receivable |
2,764 |
|
|
(4,786) |
|
|
Inventories |
27,923 |
|
|
(46,774) |
|
|
Other current assets |
356 |
|
|
(8,414) |
|
|
Other assets |
84 |
|
|
(4,267) |
|
|
Accounts payable |
(4,116) |
|
|
3,541 |
|
|
Accrued expenses |
(2,237) |
|
|
5,441 |
|
|
Accrued expenses – related party |
— |
|
|
(229) |
|
|
Other current liabilities |
(161) |
|
|
382 |
|
|
Other liabilities |
(327) |
|
|
(753) |
|
|
Net Cash Used in Operating Activities |
(46,500) |
|
|
(110,175) |
|
|
Cash Flows from Investing Activities |
|
|
|
|
Purchase of property and equipment |
(5,642) |
|
|
(6,766) |
|
|
Capitalized website and internal-use software costs |
(2,958) |
|
|
(11,511) |
|
|
Purchase of marketable securities |
(63,858) |
|
|
(359,381) |
|
|
Proceeds from sales of marketable securities |
152,758 |
|
|
212,823 |
|
|
Purchase of lease vehicles |
(1,633) |
|
|
(939) |
|
|
Net Cash Provided by (Used in) Investing Activities |
78,667 |
|
|
(165,774) |
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Payments made on finance leases |
(376) |
|
|
(51) |
|
|
Advance from holder of marketable securities |
— |
|
|
4,722 |
|
|
Repayment of advance from marketable securities |
— |
|
|
(4,722) |
|
|
PIPE issuance |
— |
|
|
125,000 |
|
|
Merger financing |
— |
|
|
309,999 |
|
|
Payment made on accrued dividends |
— |
|
|
(4,853) |
|
|
Payments to existing shareholders of Former CarLotz |
— |
|
|
(62,693) |
|
|
Transaction costs and advisory fees |
— |
|
|
(47,579) |
|
See notes to condensed consolidated financial
statements.
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments made on cash considerations associated with stock
options |
— |
|
|
(2,465) |
|
|
Repayment of Paycheck Protection Program loan |
— |
|
|
(1,749) |
|
|
Payments made on note payable |
— |
|
|
(3,000) |
|
|
Payments on floor plan notes payable |
(102,592) |
|
|
(109,034) |
|
|
Borrowings on floor plan notes payable |
80,211 |
|
|
127,279 |
|
|
Employee stock option exercise |
91 |
|
|
— |
|
|
Payments made for tax on equity award transactions |
(8) |
|
|
— |
|
|
Net Cash (Used in) Provided by Financing Activities |
(22,674) |
|
|
330,854 |
|
|
Net Change in Cash and Cash Equivalents Including Restricted
Cash |
9,493 |
|
|
54,905 |
|
|
Cash and cash equivalents and restricted cash,
beginning |
79,365 |
|
|
2,813 |
|
|
Cash and cash equivalents and restricted cash, ending |
$ |
88,858 |
|
|
$ |
57,718 |
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
Cash paid for interest |
$ |
1,589 |
|
|
$ |
1,000 |
|
|
Supplementary Schedule of Non-cash Investing and Financing
Activities: |
|
|
|
|
|
|
|
|
Transfer from lease vehicles to inventory |
$ |
— |
|
|
$ |
166 |
|
|
|
|
|
|
KAR/AFC exercise of stock warrants |
— |
|
|
(144) |
|
|
KAR/AFC conversion of notes payable |
— |
|
|
(3,625) |
|
|
Convertible redeemable preferred stock tranche obligation
expiration |
— |
|
|
(2,832) |
|
|
Capitalized website and internal use software costs
accrued |
— |
|
|
(1,898) |
|
|
Purchases of property under capital lease obligation |
(247) |
|
|
(7,651) |
|
See notes to condensed consolidated financial
statements.
7
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Note 1 Description of Business
Defined Terms
Unless otherwise indicated or unless the context otherwise
requires, the following terms used herein shall have the following
meanings:
•references
to “CarLotz,” “we,” “us,” “our” and the “Company” are to CarLotz,
Inc. and its consolidated subsidiaries;
•references
to “Acamar Partners” refer to the Company for periods prior to the
consummation of the Merger referred to below;
•references
to “Acamar Sponsor” are to Acamar Partners Sponsor I LLC;
and
•references
to the “Merger” are to the merger pursuant to that certain
Agreement and Plan of Merger, dated as of October 21, 2020 (as
amended by Amendment No. 1, dated December 16, 2020, the “Merger
Agreement”), by and among CarLotz, Inc. (f/k/a Acamar Partners
Acquisition Corp.) (the “Company”), Acamar Partners Sub, Inc., a
wholly owned subsidiary of CarLotz, Inc. (“Merger Sub”), and
CarLotz Group, Inc. (f/k/a CarLotz, Inc.) (“Former CarLotz”),
pursuant to which Merger Sub merged with and into Former CarLotz,
with Former CarLotz surviving as the surviving company and as a
wholly owned subsidiary of the Company.
The Company is a used vehicle consignment and Retail
RemarketingTM
company based in Richmond, Virginia. The Company operates an
innovative and one-of-a-kind consumer and commercial used vehicle
consignment and sales business model, with an online marketplace
and 11 retail hub locations throughout the United States, including
in Alabama, California, Colorado, Florida, Illinois, North
Carolina, and Virginia.
Subsidiaries are consolidated when the parent is deemed to have
control over the subsidiaries’ operations.
Subsidiary Operations
CarLotz, Inc. owns 100% of CarLotz Group, Inc. (a Delaware
corporation), which owns 100% of CarLotz, Inc. (an Illinois
corporation), CarLotz Nevada, LLC (a Delaware LLC), CarLotz
California, LLC (a California LLC), CarLotz Logistics, LLC (a
Delaware LLC), Orange Grove Fleet Solutions, LLC (a Virginia LLC),
Orange Peel Protection Reinsurance Co. Ltd. (a Turks and Caicos
Islands, British West Indies company) and Orange Peel LLC (a
Virginia LLC), which owns 100% of Orange Peel Reinsurance, Ltd. (a
Turks and Caicos Islands, British West Indies
company).
Basis of Presentation
On January 21, 2021 (the “Closing Date”), the Company consummated
the merger pursuant to that certain Agreement and Plan of Merger,
dated as of October 21, 2020, by and among the Company, Merger Sub
and Former CarLotz, as amended by Amendment No. 1 to the Agreement
and Plan of Merger, dated December 16, 2020, by and among the
Company, Merger Sub and Former CarLotz (See Note 3 “Merger” for
further discussion).
Pursuant to the terms of the Merger Agreement, a business
combination between the Company and Former CarLotz was effected
through the merger of Merger Sub with and into Former CarLotz with
Former CarLotz continuing as the surviving company. Notwithstanding
the legal form of the Merger pursuant to the Merger Agreement, the
Merger is accounted for as a reverse recapitalization in accordance
with U.S. generally accepted accounting principles (U.S. GAAP).
Under this method of accounting, CarLotz is treated as the acquired
company and Former CarLotz is treated as the acquiror for financial
statement reporting and accounting purposes.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
As a result of Former CarLotz being the accounting acquirer, the
financial reports filed with the U.S. Securities and Exchange
Commission (“SEC”) by the Company subsequent to the Merger are
prepared “as if” Former CarLotz is the predecessor and legal
successor to the Company. The historical operations of Former
CarLotz are deemed to be those of the Company. Thus, the financial
statements included in this report reflect (i) the historical
operating results of Former CarLotz prior to the Merger, (ii) the
combined results of the Company and Former CarLotz following the
Merger on January 21, 2021, (iii) the assets and liabilities of
Former CarLotz at their historical cost and (iv) the Company’s
equity structure for all periods presented. The recapitalization of
the number of shares of common stock attributable to the purchase
of Former CarLotz in connection with the Merger is reflected
retroactively to the earliest period presented and will be utilized
for calculating earnings per share in all prior periods presented.
No step-up basis of intangible assets or goodwill was recorded in
the Merger transaction consistent with the treatment of the
transaction as a reverse recapitalization of Former
CarLotz.
In connection with the Merger, Acamar Partners Acquisition Corp.
changed its name to CarLotz, Inc. The Company’s common stock is now
listed on The Nasdaq Global Market under the symbol “LOTZ” and
warrants to purchase the common stock at an exercise price of
$11.50 per share are listed on The Nasdaq Global Market under the
symbol “LOTZW”. Prior to the Merger, the Company neither engaged in
any operations nor generated any revenue. Until the Merger, based
on the Company’s business activities, it was a “shell company” as
defined under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).
The accompanying interim condensed consolidated financial
statements have been prepared in accordance with U.S. GAAP and
applicable rules and regulations of the SEC regarding interim
financial reporting. Certain information and note disclosures
normally included in annual financial statements have been
condensed or omitted pursuant to such rules and regulations.
Therefore, these interim condensed consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements and related notes included in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2021, except for those related to recent accounting
pronouncements adopted in the current fiscal year.
The unaudited interim condensed consolidated financial statements
have been prepared on the same basis as the audited consolidated
financial statements and, in management’s opinion, include all
adjustments, which consist of only normal recurring adjustments,
necessary for the fair statement of the Company’s condensed
consolidated balance sheet as of September 30, 2022 and its
results of operations for the three and nine months ended
September 30, 2022 and 2021. The results for the three and
nine months ended September 30, 2022 are not necessarily
indicative of the results expected for the current fiscal year or
any other future periods.
Restructuring
On June 21, 2022, we announced the closure of retail operations at
11 hub locations and determined not to commence retail operations
at 3 unopened hub locations with executed lease agreements. The
costs associated with the hub closures are classified as
restructuring expenses. See Note 21 — Restructuring Charges, Asset
Impairment, and Assets Held For Sale
for further detail.
Shift Merger
On August 9, 2022, the Company entered into the Agreement and Plan
of Merger (the “Shift Merger Agreement”) with Shift Technologies,
Inc., a Delaware corporation (“Shift”), and Shift Remarketing
Operations, Inc., a Delaware corporation and direct wholly owned
subsidiary of Shift (“Shift Merger Sub”), pursuant to which, among
other things and subject to the terms and conditions contained
therein, Shift Merger Sub will be merged with and into CarLotz,
with CarLotz continuing as the surviving corporation and as a
wholly owned subsidiary of Shift (the “Shift Merger”). The Shift
Merger is expected to close in the fourth quarter of 2022, subject
to Shift and Company stockholder approval and other customary and
regulatory approvals.
Certain transaction expenses (“Shift Merger expenses”) such as
financial advisory, legal, accounting costs and associated fees and
expenses that will be paid at the close of the Shift Merger are
expensed as incurred and included in Accrued Expenses (see Note 12
— Accrued Expenses for further detail).
Note 2 — Summary of Significant Accounting Policies
For a detailed discussion about the Company’s significant
accounting policies and for further information on accounting
updates adopted in the prior year, see Note 2 to the audited
consolidated financial statements.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
During the nine months ended September 30, 2022, there
were no significant revisions to the Company’s significant
accounting policies, other than those indicated herein related to
the adoption of
Leases
Topic 842.
Use of Estimates
The preparation of condensed consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities.
Following the closing of the Merger, Former CarLotz equity holders
at the effective time of the Merger will have the contingent right
to receive, in the aggregate, up to 7,500,000 shares of common
stock if, from the closing of the Merger until the fifth
anniversary thereof, the reported closing trading price of the
common stock exceeds certain thresholds. Estimating the change in
fair value of the earnout liability for the earnout shares that
could be earned by Former CarLotz equity holders at the effective
time of the Merger requires determining both the fair value
valuation model to use and inputs to the valuation model. The fair
value of the earnout shares was estimated by utilizing a
Monte-Carlo simulation model, which is a commonly used valuation
model for this type of transaction. Inputs that have a significant
effect on the earnout shares valuation include the expected
volatility, starting stock price, expected term, risk-free interest
rate and the earnout hurdles. See Note 6 — Fair Value of Financial
Instruments.
Warrants that were issued by Acamar Partners (Merger warrants) and
continue to exist following the closing of the Merger are accounted
for as freestanding financial instruments. These warrants are
classified as liabilities on the Company’s condensed consolidated
balance sheets and are recorded at their estimated fair value. The
estimated fair value of the warrants is determined by using the
market value in an active trading market. See Note 6 — Fair Value
of Financial Instruments.
Beginning in the first quarter of 2020, the World Health
Organization declared the outbreak and spread of the COVID-19 virus
a pandemic. The COVID-19 pandemic and global macroeconomic and
geopolitical conditions continue to disrupt supply chains and
impact production and sales across a wide range of industries. The
full economic impact of the pandemic and global conditions has not
been determined, including the impact on the Company’s suppliers,
customers and credit markets. Due to the evolving and uncertain
nature of COVID-19 and global macroeconomic and geopolitical
conditions, it is reasonably possible that it could materially
impact the Company’s estimates, particularly those noted above that
require consideration of forecasted financial information, in the
near to medium term. The ultimate impact will depend on numerous
evolving factors that the Company may not be able to accurately
predict, including the duration and extent of the pandemic, the
impact of federal, state, local and foreign governmental actions,
consumer behavior in response to the pandemic and other economic
and operational conditions the Company may face.
Restricted Cash
As of September 30, 2022 and December 31, 2021,
restricted cash included approximately $4,049 and $4,336,
respectively. The restricted cash is legally and contractually
restricted as collateral for lines of credit, including floorplan,
and for the payment of claims on the reinsurance
companies.
Advertising Costs
The Company expenses advertising costs as they are incurred.
Advertising costs are included in selling, general and
administrative expenses on the accompanying condensed consolidated
statements of operations. Advertising expenses were approximately
$6,237 and $13,674 for the nine months ended
September 30, 2022 and 2021, respectively.
Concentration of Credit Risk
Concentrations of credit risk with respect to accounts receivables
are limited due to the large diversity and number of customers
comprising the Company’s retail customer base.
Assets and Liabilities Held For Sale
As a result of the announced hub closures on June 21, 2022, the ROU
and finance lease assets and liabilities associated with hub
locations where the Company has or intends to assign the lease to a
third-party or terminate the lease agreement (as
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
opposed to subleasing to a third-party) are classified as held for
sale. The fixed assets associated with all closed hub locations, to
the extent they are not impaired, are also classified as held for
sale.
Revenues
The Company recognizes revenue upon transfer of control of goods or
services to customers, in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those
goods or services. Control passes to the retail and wholesale
vehicle sales customer when the title is delivered to the customer,
who then assumes control of the vehicle.
Retail Vehicle Sales
We sell used vehicles to our retail customers through our hubs in
various cities. The transaction price for used vehicles is a fixed
amount as set forth in the customer contract. Customers frequently
trade-in their existing vehicle to apply toward the transaction
price of a used vehicle. Trade-in vehicles represent noncash
consideration which we measure at estimated fair value of the
vehicle received on trade. We satisfy our performance obligation
and recognize revenue for used vehicle sales at a point in time
when the title to the vehicle passes to the customer, at which
point the customer controls the vehicle. We provide a
12-month/12,000-mile limited warranty on most retail vehicle sales.
The limited warranty is not treated as a separate performance
obligation given the nature of the limited warranty is to provide
assurance as to the quality of the vehicle being sold. The revenue
recognized by CarLotz includes the agreed upon transaction price,
including any service fees. Revenue excludes any sales taxes, title
and registration fees, and other government fees that are collected
from customers.
We receive payment for used vehicle sales directly from the
customer at the time of sale or from third-party financial
institutions within a short period of time following the sale if
the customer obtains financing.
Our exchange policy allows customers to initiate an exchange during
the first seven days or 400 miles after delivery, whichever comes
first. If the vehicle is returned, the sale and associated revenue
recognition is reversed, and the vehicle is treated as a purchase
of inventory.
See the remainder of the Company’s revenue accounting policy
related to wholesale, finance and insurance, and other revenue in
the Form 10-K for the year ended December 31, 2021 filed on March
15, 2022.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases
(Topic 842). The standard affected all entities that lease assets
and requires lessees to recognize a lease liability and a
right-of-use asset for all leases (except for short-term leases
that have a duration of less than one year) as of the date on which
the lessor makes the underlying asset available to the lessee. For
lessors, accounting for leases is substantially the same as in
prior periods. In July 2018, the FASB issued ASU 2018-10,
Codification Improvements to Topic 842, Leases,
to clarify how to apply certain aspects of the new leases standard.
ASU 2016-02, as subsequently amended for various technical issues,
was effective for emerging growth companies following private
company adoption dates in fiscal years beginning after December 15,
2021, and interim periods within annual periods beginning after
December 15, 2022, and early adoption was permitted.
We adopted ASC 842 for the year beginning January 1, 2022 using the
modified retrospective transition approach applied at the beginning
of the period of adoption, which did not result in a
cumulative-effect adjustment to retained earnings. Comparative
periods presented in the financial statements continue to be
presented in accordance with ASC 840. As permitted under the
standard, we have elected the package of practical expedients for
the transition to ASC 842, under which we did not reassess our
prior conclusions regarding lease identification, lease
classification, or initial direct costs for contracts existing as
of the transition date. We have also elected to apply the following
practical expedients for contracts existing as of the transition
date and all new contracts after our adoption of ASC 842: 1)
recognizing lease expense on a straight-line basis over the lease
term for leases with a term of 12 months or less and not
recognizing them on the balance sheet and 2) accounting for lease
and non-lease components for all asset classes as a combined single
unit of account. We have not elected the practical expedient
related to all land easements nor the hindsight practical
expedient.
The adoption of ASC 842 resulted in the recognition of
$50.5 million of operating lease assets, which included an
adjustment for deferred rent, and $52.6 million of operating
lease liabilities on our opening consolidated balance sheet. We
have
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
implemented new business processes, accounting policies, systems
and internal controls as part of adopting the new standard. See
Note 14 for additional information on leases.
In June 2016, the FASB issued ASU
2016-13, Financial
Instruments — Credit Losses: Measurement of Credit Losses on
Financial Instruments,
which changes the impairment model for most financial assets. The
new model uses a forward-looking expected loss method, which will
generally result in earlier recognition of allowances for losses.
ASU 2016-13, as subsequently amended for various technical issues,
is effective for emerging growth companies following private
company adoption dates for fiscal years beginning after
December 15, 2022 and for interim periods within those
fiscal years. The Company is currently evaluating the impact
of this standard to its financial statements.
In December 2019, the FASB issued ASU
2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income
Taxes,
which is intended to simplify various aspects related to accounting
for income taxes. ASU 2019-12 removes certain exceptions to the
general principles in Topic 740 and also clarifies and amends
existing guidance to improve consistent application. ASU 2019-12 is
effective for emerging growth companies following private company
adoption dates in fiscal years beginning after
December 15, 2021, and interim periods within annual periods
beginning after December 15, 2022, with early adoption
permitted, including adoption in an interim period. The Company is
currently evaluating the impact of this standard on its financial
statements.
Note 3 — Merger
On the Closing Date, the Company consummated the merger pursuant to
that certain Agreement and Plan of Merger, dated as of October 21,
2020, by and among the Company, Merger Sub and Former CarLotz, as
amended by Amendment No. 1, dated December 16, 2020, by and among
the Company, Merger Sub and Former CarLotz.
Pursuant to the terms of the Merger Agreement, a business
combination between the Company and Former CarLotz was effected
through the merger of Merger Sub with and into Former CarLotz with
Former CarLotz surviving as the surviving company.
The Merger was accounted for as a reverse recapitalization in
accordance with U.S. GAAP. Under this method of accounting, Acamar
Partners was treated as the “acquired” company for financial
reporting purposes (See Note 1 — Description of the Business).
Accordingly, for accounting purposes, the Merger was treated as the
equivalent of Former CarLotz issuing stock for the net assets of
Acamar Partners, accompanied by a recapitalization.
Prior to the Merger, Former CarLotz and Acamar Partners filed
separate standalone federal, state and local income tax returns. As
a result of the Merger, structured as a reverse acquisition for tax
purposes, Acamar Partners was renamed CarLotz, Inc. and became the
parent of the consolidated filing group, with Former CarLotz as a
subsidiary.
|
|
|
|
|
|
|
|
Recapitalization |
|
Cash - Acamar Partners’ trust and cash |
$ |
309,999 |
|
|
Cash - PIPE |
125,000 |
|
|
Less: consideration delivered to existing stockholders of Former
CarLotz |
(62,693) |
|
|
Less: consideration to pay accrued dividends |
(4,853) |
|
|
Less: transaction costs and advisory fees paid |
(47,579) |
|
|
Less: payments on cash considerations associated with stock
options |
(2,465) |
|
|
Net contributions from Merger and PIPE financing |
317,409 |
|
|
Liabilities relieved: preferred stock obligation |
2,832 |
|
|
Liabilities relieved: KAR/AFC note payable |
3,625 |
|
|
Liabilities relieved: historic warrant liability |
144 |
|
|
Less: earnout shares liability |
(74,285) |
|
|
Less: Merger warrants liability |
(39,024) |
|
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Merger warrants
The following is an analysis of the warrants to purchase shares of
the Company’s stock deemed acquired as part of the Merger and
outstanding during the nine months ended September 30,
2022. There has been no change in outstanding stock warrants since
the Merger.
|
|
|
|
|
|
|
September 30, 2022
|
|
Stock warrants outstanding - Public |
10,185,774 |
|
|
Stock warrants outstanding - Private |
6,074,310 |
|
|
Stock warrants cancelled |
— |
|
|
Stock warrants exercised |
— |
|
|
Stock warrants outstanding |
16,260,084 |
|
Earnout Shares
Former CarLotz equity holders at the closing of the Merger are
entitled to receive up to an additional 6,945,732 earnout shares.
The earnout shares will be issued to the beneficiaries if certain
targets are met in the post-acquisition period. The earnouts for
the earnout shares are subject to an earnout period, which is
defined as the date 60 months following the consummation of the
Merger. The Merger closed on January 21, 2021, and the earnout
period expires January 21, 2026. The earnout shares will be issued
if any of the following conditions are achieved following January
21, 2021:
i.If
at any time during the 60 months following the Closing Date (the
first business day following the end of such period, the
“Forfeiture Date”), the closing trading price of the common stock
is greater than $12.50 over any 20 trading days within any 30
trading day period (the “First Threshold”), the Company will issue
50% of the earnout shares.
ii.If
at any time prior to the Forfeiture Date, the closing trading price
of the common stock is greater than $15.00 over any 20 trading days
within any 30 trading day period (the “Second Threshold”), the
Company will issue 50% of the earnout shares.
iii.If
either the First Threshold or the Second Threshold is not met on or
before the Forfeiture Date, any unissued earnout shares are
forfeited. All unissued earnout shares will be issued if there is a
change of control of the Company that will result in the holders of
the common stock receiving a per share price equal to or in excess
of $10.00 (as equitably adjusted for stock splits, stock dividends,
special cash dividends, reorganizations, combinations,
recapitalizations and similar transactions affecting the common
stock) prior to the Forfeiture Date.
Before the contingency is met, the earnout shares will be
classified as a liability under the FASB’s Accounting Standards
Codification (“ASC”) Topic 815, so changes in the fair value of the
earnout shares in future periods will be recognized in the
condensed consolidated statement of operations. The estimated fair
value of the liability is determined by using a Monte-Carlo
simulation model.
Note 4 — Revenue Recognition
Disaggregation of Revenue
The significant majority of the Company’s revenue is derived from
contracts with customers related to the sales of vehicles. In the
following tables, revenue is disaggregated by major lines of goods
and services and timing of transfer of goods and services. The
Company has determined that these categories depict how the nature,
amount, timing and uncertainty of its revenue and cash flows are
affected by economic factors.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
The tables below include disaggregated revenue under ASC 606
(Revenue
from Contracts with Customers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2022 |
|
Vehicle Sales |
|
Fleet Management |
|
Total |
|
Vehicle Sales |
|
Fleet Management
|
|
Total |
|
Retail vehicle sales |
$ |
32,545 |
|
|
$ |
— |
|
|
$ |
32,545 |
|
|
$ |
142,344 |
|
|
$ |
— |
|
|
$ |
142,344 |
|
|
Wholesale vehicle sales |
16,357 |
|
|
— |
|
|
16,357 |
|
|
38,880 |
|
|
— |
|
|
38,880 |
|
|
Finance and insurance, net |
$ |
1,691 |
|
|
$ |
— |
|
|
$ |
1,691 |
|
|
8,591 |
|
|
— |
|
|
8,591 |
|
|
Lease income, net |
— |
|
|
245 |
|
|
245 |
|
|
— |
|
|
528 |
|
|
528 |
|
|
Total Revenues |
$ |
50,593 |
|
|
$ |
245 |
|
|
$ |
50,838 |
|
|
$ |
189,815 |
|
|
$ |
528 |
|
|
$ |
190,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
Nine Months Ended September 30, 2021 |
|
Vehicle Sales |
|
Fleet Management |
|
Total |
|
Vehicle Sales |
|
Fleet Management
|
|
Total |
|
Retail vehicle sales |
$ |
56,284 |
|
|
$ |
— |
|
|
$ |
56,284 |
|
|
$ |
150,897 |
|
|
$ |
— |
|
|
$ |
150,897 |
|
|
Wholesale vehicle sales |
8,989 |
|
|
— |
|
|
8,989 |
|
|
18,217 |
|
|
— |
|
|
18,217 |
|
|
Finance and insurance, net |
$ |
2,639 |
|
|
$ |
— |
|
|
$ |
2,639 |
|
|
5,973 |
|
|
— |
|
|
5,973 |
|
|
Lease income, net |
— |
|
|
129 |
|
|
129 |
|
|
— |
|
|
334 |
|
|
334 |
|
|
Total Revenues |
$ |
67,912 |
|
|
$ |
129 |
|
|
$ |
68,041 |
|
|
$ |
175,087 |
|
|
$ |
334 |
|
|
$ |
175,421 |
|
The following table summarizes revenues and cost of sales for
retail and wholesale vehicle sales for the periods
ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Retail vehicles: |
|
|
|
|
|
|
|
|
Retail vehicle sales |
$ |
32,545 |
|
|
$ |
56,284 |
|
|
$ |
142,344 |
|
|
$ |
150,897 |
|
|
Retail vehicle cost of sales |
32,141 |
|
|
56,584 |
|
|
144,058 |
|
|
147,142 |
|
|
Gross Profit – Retail Vehicles |
$ |
404 |
|
|
$ |
(300) |
|
|
$ |
(1,714) |
|
|
$ |
3,755 |
|
|
Wholesale vehicles: |
|
|
|
|
|
|
|
|
Wholesale vehicle sales |
$ |
16,357 |
|
|
$ |
8,989 |
|
|
$ |
38,880 |
|
|
$ |
18,217 |
|
|
Wholesale vehicle cost of sales |
19,288 |
|
|
9,433 |
|
|
43,317 |
|
|
20,065 |
|
|
Gross Profit – Wholesale Vehicles |
$ |
(2,931) |
|
|
$ |
(444) |
|
|
$ |
(4,437) |
|
|
$ |
(1,848) |
|
Retail Vehicle Sales
The Company sells used vehicles to retail customers through its
retail hub locations. The transaction price for used vehicles is a
fixed amount as set forth in the customer contract, and the revenue
recognized by the Company is inclusive of the agreed upon
transaction price and any service fees. Customers frequently
trade-in their existing vehicle to apply toward the transaction
price of a used vehicle. Trade-in vehicles represent noncash
consideration, which the Company measures at estimated fair value
of the vehicle received on the trade. The Company satisfies its
performance obligation and recognizes revenue for used vehicle
sales at a point in time when the title to the vehicle passes to
the customer, at which point the customer controls the vehicle. The
12-month/12,000-mile limited warranty included in most retail
vehicle sales is not treated as a separate performance obligation
given the nature of the limited warranty is to provide assurance as
to the quality of the vehicle being sold.
The Company receives payment for used vehicle sales directly from
the customer at the time of sale or from third-party financial
institutions within a short period of time following the sale if
the customer obtains financing.
The Company’s exchange/return policy allows customers to initiate
an exchange/return of a vehicle during the first seven days or 400
miles after delivery, whichever comes first. An exchange/return
reserve is immaterial based on the Company’s historical
activity.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Wholesale Vehicle Sales
Vehicles that do not meet the Company’s standards for retail
vehicle sales, vehicles that did not sell through the retail
channel within a reasonable period of time and vehicles that the
Company determines offer greater financial benefit through the
wholesale channel are sold through various wholesale methods. The
Company satisfies its performance obligation and recognizes revenue
for wholesale vehicle sales when the vehicle is sold at auction or
directly to a wholesaler and title to the vehicle passes to the
next owner. Additionally, the Company sold or will sell vehicles
that were at the closed hub locations through the wholesale channel
that may not have been sold through the wholesale channel if the
hubs had remained open.
Finance and Insurance, net
The Company provides customers with options for financing,
insurance and extended warranties. Certain warranties are serviced
by a company owned by a major stockholder. All other services are
provided by third-party vendors, and the Company has agreements
with each of these vendors giving the Company the right to offer
such services.
When a customer selects a service from these third-party vendors,
the Company earns a commission based on the actual price paid or
financed. The Company concluded that it is an agent for these
transactions because it does not control the products before they
are transferred to the customer. Accordingly, the Company
recognizes finance and insurance revenue at the point in time when
the customer enters into the contract.
Note 5 — Marketable Securities
The following table summarizes amortized cost, gross unrealized
gains and losses and fair values of the Company’s investments in
fixed maturity debt securities as of September 30, 2022 and
December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022
|
|
|
Amortized
Cost/
Cost Basis
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
U.S. Treasuries |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Corporate bonds |
16,228 |
|
|
1 |
|
|
(64) |
|
|
16,165 |
|
|
Municipal bonds |
3,517 |
|
|
5 |
|
|
(15) |
|
|
3,507 |
|
|
Commercial paper |
8,375 |
|
|
— |
|
|
— |
|
|
8,375 |
|
|
Foreign governments |
417 |
|
|
69 |
|
|
(109) |
|
|
377 |
|
|
Total Fixed Maturity Debt Securities |
$ |
28,537 |
|
|
$ |
75 |
|
|
$ |
(188) |
|
|
$ |
28,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
Amortized
Cost/
Cost Basis
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
U.S. Treasuries |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Corporate bonds |
57,460 |
|
|
— |
|
|
(72) |
|
|
57,388 |
|
|
Municipal bonds |
28,325 |
|
|
5 |
|
|
(10) |
|
|
28,320 |
|
|
Commercial paper |
19,989 |
|
|
— |
|
|
— |
|
|
19,989 |
|
|
Foreign governments |
12,291 |
|
|
2 |
|
|
(18) |
|
|
12,275 |
|
|
Total Fixed Maturity Debt Securities |
$ |
118,065 |
|
|
$ |
7 |
|
|
$ |
(100) |
|
|
$ |
117,972 |
|
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
The amortized cost and fair value of the Company’s fixed maturity
debt securities as of September 30, 2022 by contractual
maturity are shown below. Expected maturities may differ from
contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment
penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Fair Value
|
|
Due in one year or less |
$ |
27,706 |
|
|
$ |
27,664 |
|
|
Due after one year through five years |
666 |
|
|
624 |
|
|
Due after five years through ten years |
165 |
|
|
136 |
|
|
Total |
$ |
28,537 |
|
|
$ |
28,424 |
|
The following tables summarize the Company’s gross unrealized
losses in fixed maturity securities as of September 30, 2022
and December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022
|
|
|
|
|
Less Than 12 Months |
|
12 Months or More |
|
Total |
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Corporate bonds |
$ |
16,030 |
|
|
$ |
(47) |
|
|
$ |
133 |
|
|
$ |
(16) |
|
|
$ |
16,163 |
|
|
$ |
(63) |
|
|
Municipal bonds |
3,379 |
|
(3) |
|
128 |
|
(12) |
|
3,507 |
|
(15) |
|
Commercial paper |
8,376 |
|
0 |
|
— |
|
— |
|
8,376 |
|
0 |
|
Foreign governments |
183 |
|
(78) |
|
88 |
|
(32) |
|
271 |
|
(110) |
|
Total Fixed Maturity Debt Securities |
$ |
27,968 |
|
|
$ |
(128) |
|
|
$ |
349 |
|
|
$ |
(60) |
|
|
$ |
28,317 |
|
|
$ |
(188) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
Less Than 12 Months |
|
12 Months or More |
|
Total |
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Fair Value
|
|
Unrealized
Losses
|
|
Corporate bonds |
$ |
56,902 |
|
|
$ |
(69) |
|
|
$ |
376 |
|
|
$ |
(3) |
|
|
$ |
57,278 |
|
|
$ |
(72) |
|
|
Municipal bonds |
$ |
19,945 |
|
|
$ |
(7) |
|
|
$ |
340 |
|
|
$ |
(3) |
|
|
$ |
20,285 |
|
|
$ |
(10) |
|
|
Foreign governments |
$ |
12,152 |
|
|
$ |
(18) |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,152 |
|
|
$ |
(18) |
|
|
Total Fixed Maturity Debt Securities |
$ |
88,999 |
|
|
$ |
(94) |
|
|
$ |
716 |
|
|
$ |
(6) |
|
|
$ |
89,715 |
|
|
$ |
(100) |
|
Unrealized losses shown in the tables above are believed to be
temporary. Fair value of investments in fixed maturity debt
securities change and are based primarily on market rates. As of
September 30, 2022, the Company’s fixed maturity portfolio had
13 securities with gross unrealized losses totaling $(60) that had
been in loss positions in excess of 12 months and 21 securities
with gross unrealized losses totaling $(128) that had been in loss
positions less than 12 months. No single issuer had a gross
unrealized loss position greater than $(43), or 69.3% of its
amortized cost. As of December 31, 2021, the Company’s fixed
maturity portfolio had 23 securities with gross unrealized losses
totaling $(6) that had been in loss positions in excess of 12
months and 106 securities with gross unrealized losses totaling
$(94) that had been in loss positions less than 12 months. No
single issuer had a gross unrealized loss position greater than $12
(actual), or 0.4% of its amortized cost.
The following tables summarize cost and fair values of the
Company’s investments in equity securities as of September 30,
2022 and December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022
|
|
Cost |
|
Fair Value
|
|
Equity securities |
$ |
425 |
|
|
$ |
461 |
|
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
Cost |
|
Fair Value
|
|
Equity securities |
$ |
432 |
|
|
$ |
558 |
|
Proceeds from sales and maturities, gross realized gains, gross
realized losses and net realized gains (losses) from sales and
maturities of fixed maturity securities for the nine months
ended September 30, 2022 and 2021 consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022
|
|
Proceeds |
|
Gross
Realized
Gains
|
|
Gross
Realized
Losses
|
|
Net
Realized
Gain
|
|
Fixed maturity debt securities |
$ |
152,753 |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
14 |
|
|
Equity securities |
5 |
|
|
— |
|
|
— |
|
|
— |
|
|
Total Marketable Securities |
$ |
152,758 |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Proceeds |
|
Gross
Realized
Gains
|
|
Gross
Realized
Losses
|
|
Net
Realized
Gain
|
|
Fixed maturity debt securities |
$ |
212,822 |
|
|
$ |
7 |
|
|
$ |
(2) |
|
|
$ |
5 |
|
|
Equity securities |
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
Total Marketable Securities |
$ |
212,823 |
|
|
$ |
7 |
|
|
$ |
(2) |
|
|
$ |
5 |
|
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Note 6 — Fair Value of Financial Instruments
Items Measured at Fair Value on a Recurring Basis
As of September 30, 2022 and December 31, 2021, the
Company held certain assets and liabilities that were required to
be measured at fair value on a recurring basis.
The following tables are summaries of fair value measurements and
hierarchy level as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
Money market funds |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Equity securities |
461 |
|
|
— |
|
|
— |
|
|
461 |
|
|
Fixed maturity debt securities, including cash
equivalents |
— |
|
|
60,034 |
|
|
— |
|
|
60,034 |
|
|
Total Assets |
$ |
461 |
|
|
$ |
60,034 |
|
|
$ |
— |
|
|
$ |
60,495 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger warrants liability |
423 |
|
|
252 |
|
|
— |
|
|
675 |
|
|
Earnout shares liability |
— |
|
|
— |
|
|
722 |
|
|
722 |
|
|
Total Liabilities |
$ |
423 |
|
|
$ |
252 |
|
|
$ |
722 |
|
|
$ |
1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
Money market funds |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Equity securities |
558 |
|
|
— |
|
|
— |
|
|
558 |
|
|
Fixed maturity debt securities |
— |
|
|
135,346 |
|
|
— |
|
|
135,346 |
|
|
Total Assets |
$ |
558 |
|
|
$ |
135,346 |
|
|
$ |
— |
|
|
$ |
135,904 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Merger warrants liability |
$ |
3,941 |
|
|
$ |
2,350 |
|
|
$ |
— |
|
|
$ |
6,291 |
|
|
Earnout shares liability |
— |
|
|
— |
|
|
7,679 |
|
|
7,679 |
|
|
Total Liabilities |
$ |
3,941 |
|
|
$ |
2,350 |
|
|
$ |
7,679 |
|
|
$ |
13,970 |
|
Money market funds consist of highly liquid investments with
original maturities of three months or less and classified in
restricted cash in the accompanying condensed consolidated balance
sheets.
The Company recognizes transfers between the levels as of the
actual date of the event or change in circumstances that caused the
transfer. There were no transfers between the levels during the
nine months ended September 30, 2022 and
2021.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
The following tables set forth a summary of changes in the
estimated fair value of the Company’s Level 3 redeemable
convertible preferred stock tranche obligation, historic warrants
liability and earnout shares for the nine months ended
September 30, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2022 |
|
Issuances |
|
Settlements |
|
Change in
fair value
|
|
September 30,
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnout shares |
7,679 |
|
|
— |
|
|
— |
|
|
(6,957) |
|
|
722 |
|
|
Total |
$ |
7,679 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(6,957) |
|
|
$ |
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2021 |
|
Issuances |
|
Settlements |
|
Change in
fair value
|
|
September 30,
2021 |
|
Redeemable convertible preferred stock tranche
obligation |
$ |
2,832 |
|
|
$ |
— |
|
|
$ |
(2,832) |
|
|
$ |
— |
|
|
$ |
— |
|
|
Historic warrants liability |
144 |
|
|
— |
|
|
(144) |
|
|
— |
|
|
— |
|
|
Earnout shares |
— |
|
|
74,284 |
|
|
— |
|
|
(56,621) |
|
|
17,663 |
|
|
Total |
$ |
2,976 |
|
|
$ |
74,284 |
|
|
$ |
(2,976) |
|
|
$ |
(56,621) |
|
|
$ |
17,663 |
|
The fair value of the earnout shares was estimated by using a model
based on previous Monte-Carlo simulation models. The inputs into
the Monte-Carlo pricing model included significant unobservable
inputs. The table below summarizes the significant observable
inputs used when valuing the earnout shares as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
September 30, 2021 |
|
Expected volatility |
120.00 |
% |
|
80.00 |
% |
|
Starting stock price |
$0.30 |
|
$3.81 |
|
Expected term (in years) |
3.3 years |
|
4.30 years |
|
Risk-free interest rate |
4.25 |
% |
|
0.79 |
% |
|
Earnout hurdle |
$12.50-$15.00
|
|
$12.50-$15.00
|
Fair Value of Financial Instruments Not Measured at Fair Value on a
Recurring Basis
The carrying amounts of restricted cash, accounts receivable and
accounts payable approximate fair value because their respective
maturities are less than three months.
The Company has entered a $25,000 floor plan credit facility with
Ally Financial. The carrying value of the Ally Financial floor plan
notes payable outstanding as of September 30, 2022
approximates fair value due to its variable interest rate
determined to approximate current market rates.
Note 7 — Accounts Receivable, Net
The following table summarizes accounts receivable as
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Contracts in transit |
$ |
3,974 |
|
|
$ |
7,540 |
|
|
Trade |
962 |
|
|
386 |
|
|
Finance commission |
193 |
|
|
284 |
|
|
Other |
614 |
|
|
296 |
|
|
Total |
5,743 |
|
|
8,506 |
|
|
Allowance for doubtful accounts |
(957) |
|
|
(300) |
|
|
Total Accounts Receivable, net |
$ |
4,786 |
|
|
$ |
8,206 |
|
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Note 8 — Inventory and Floor Plan Notes Payable
The following table summarizes inventory as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Used vehicles |
$ |
13,062 |
|
|
$ |
40,739 |
|
|
Parts |
— |
|
|
246 |
|
|
Total |
$ |
13,062 |
|
|
$ |
40,985 |
|
Beginning March 10, 2021, the Company entered into a $30,000 floor
plan credit facility, which was expanded to $40,000 in the second
quarter of 2021, with Ally Financial to finance the acquisition of
used vehicle inventory. Concurrently, proceeds from the agreement
were used to settle outstanding debt obligations on the Company’s
preexisting floor plan facility with AFC. Borrowings under the Ally
Financial facility accrue interest at a variable rate based on the
most recent prime rate plus 2.50% per annum. The prime rate as of
September 30, 2022 was 6.25%. Effective as of October 1, 2022,
the maximum available credit line under the floor plan credit
facility was reduced from $40,000 to $25,000.
Floor plan notes payable are generally due upon the sale of the
related used vehicle inventory.
Note 9 — Property and Equipment, Net
The following table summarizes property and equipment as
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Capital lease assets |
— |
|
|
12,566 |
|
|
Leasehold improvements |
4,880 |
|
|
4,628 |
|
|
Furniture, fixtures and equipment |
4,964 |
|
|
7,993 |
|
|
Corporate vehicles |
74 |
|
|
158 |
|
|
Total property and equipment |
9,918 |
|
|
25,345 |
|
|
Less: accumulated depreciation |
(2,800) |
|
|
(2,609) |
|
|
Less: impairment |
— |
|
|
(108) |
|
|
Property and Equipment, net |
$ |
7,118 |
|
|
$ |
22,628 |
|
Depreciation expense for property and equipment was approximately
$1,776 and $761 for the nine months ended September 30,
2022 and 2021, respectively.
As a result of the hub closures on June 21, 2022, we classified
$7,497 and $1,228 of gross property and equipment and accumulated
depreciation, respectively, associated with property and equipment
at the closed hub locations as held-for-sale. See Note 21 —
Restructuring Charges, Asset Impairment, and Assets Held For Sale
for further information regarding the property and equipment at the
closed hub locations.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Note 10 — Other Assets
The following table summarizes other assets as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Other Current Assets: |
|
|
|
|
Lease receivable, net |
$ |
20 |
|
|
$ |
29 |
|
|
Deferred acquisition costs |
26 |
|
|
46 |
|
|
Prepaid expenses |
4,131 |
|
|
3,664 |
|
|
Interest receivable |
172 |
|
|
966 |
|
|
|
|
|
|
Total Other Current Assets |
$ |
4,349 |
|
|
$ |
4,705 |
|
|
Other Assets: |
|
|
|
|
Lease receivable, net |
$ |
16 |
|
|
$ |
16 |
|
|
Deferred acquisition costs |
26 |
|
|
35 |
|
|
Security deposits |
432 |
|
|
507 |
|
|
Total Other Assets |
$ |
474 |
|
|
$ |
558 |
|
Note 11 — Long-term Debt
The following table summarizes long-term debt as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Capital lease obligation |
$ |
— |
|
|
$ |
12,715 |
|
|
Finance lease liabilities |
$ |
6,199 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,199 |
|
|
12,715 |
|
|
Current portion of long-term debt |
— |
|
|
(509) |
|
|
Current portion of finance lease liabilities |
(116) |
|
|
— |
|
|
Long-term Debt |
$ |
6,083 |
|
|
$ |
12,206 |
|
Promissory Note
Concurrently with the closing of the Merger on January 21, 2021,
the promissory note was extinguished through a cash payment of
$3,000.
Convertible Notes Payable
As of December 31, 2020, the Company had a convertible note balance
of $3,500. The note accrued interest at 6.00% on a 365-day basis
and the outstanding interest payable as of December 31, 2020 was
approximately $212. Concurrently with the closing of the Merger on
January 21, 2021, the historic warrants and the note were converted
to a fixed number of shares pursuant to a conversion agreement with
AFC. The convertible notes were extinguished by issuing AFC 347,992
shares of Former CarLotz common stock and the warrants were
exercised into 73,869 shares of Former CarLotz common stock. There
are no historic warrants outstanding subsequent to the
exercise.
Payroll Protection Program Loan
In April 2020, the Company received a Paycheck Protection
Program (“PPP”) loan, a new loan program under the Small Business
Administration’s 7(a) program providing loans to qualifying
businesses, totaling approximately $1,749. As of December 31, 2020,
the Company had an outstanding PPP loan balance of $1,749, which
was extinguished concurrently with the closing of the
Merger.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Note 12 — Accrued Expenses
The following table summarizes accrued expenses as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
License and title fees |
$ |
535 |
|
|
$ |
903 |
|
|
Payroll and bonuses |
2,303 |
|
|
2,047 |
|
|
Deferred rent |
— |
|
|
1,636 |
|
|
Technology |
1,504 |
|
|
1,127 |
|
|
Inventory |
839 |
|
|
2,542 |
|
|
Shift Merger |
3,044 |
|
|
— |
|
|
Other |
2,990 |
|
|
6,173 |
|
|
Total Accrued Expenses |
$ |
11,215 |
|
|
$ |
14,428 |
|
Note 13 — Other Liabilities
The following table summarizes other liabilities as
of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Other Current Liabilities |
|
|
|
|
Unearned insurance premiums |
$ |
593 |
|
|
$ |
754 |
|
|
|
|
|
|
|
|
|
|
Other Liabilities |
|
|
|
|
Unearned insurance premiums |
298 |
|
|
622 |
|
|
Other long-term liabilities |
119 |
|
|
122 |
|
|
|
|
|
|
Other Liabilities |
$ |
417 |
|
|
$ |
744 |
|
Note 14 — Leases
The Company leases its operating facilities from various third
parties under non-cancelable operating and finance leases. The
leases require various monthly rental payments ranging from
approximately $3 to $70, with various ending dates through
September 2036. The initial term for real property leases is
typically 5 to 15 years. Most leases include one or more options to
renew, with renewal terms that can extend the lease term from 1 to
5 years or more. We include options to renew (or terminate) in our
lease term, and as part of our right-of-use ("ROU") assets and
lease liabilities, when it is reasonably certain that we will
exercise that option. ROU assets and the related lease liabilities
are initially measured at the present value of future lease
payments over the lease term. The leases are triple net, whereby
the Company is liable for taxes, insurance and repairs. These
amounts are generally considered to be variable and are not
included in the measurement of the ROU asset and lease liability.
Most of these leases have escalating rent payments, which are being
expensed on a straight-line basis and are included in operating
lease amounts on the balance sheet.
The Company also leases vehicles from a third party under
noncancelable operating leases and leases these same vehicles to
end customers with similar lease terms, with the exception of the
interest rate. The leases require various monthly rental payments
from the Company ranging from $229 to $2,356 (actual) with various
ending dates through March 2027. The initial term for vehicle
leases is typically 36 to 72 months. Most leases do not include an
option to renew. The lease payments are generally fixed throughout
the term and any variable lease payments (non-recurring
maintenance, taxes, registration) are not included in the
measurement of the ROU asset and lease liability.
As most of our leases do not provide an implicit rate, we use our
collateralized incremental borrowing rate based on the information
available at the commencement date in determining the present value
of future payments. We have elected the practical expedient on not
separating lease components from non-lease components. All leases
with a term of 12 months or less are not recorded on the balance
sheet; we recognize lease expense for these leases on a
straight-line basis over the lease term.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2022 |
|
Operating lease cost
(1)
|
$ |
2,343 |
|
|
$ |
7,080 |
|
|
Finance lease cost: |
|
|
|
|
Depreciation of lease assets |
95 |
|
|
621 |
|
|
Interest on lease liabilities |
283 |
|
|
856 |
|
|
Total finance lease cost |
378 |
|
|
1,477 |
|
|
Total lease cost |
2,721 |
|
|
8,557 |
|
(1)
Includes short-term leases and variable lease costs, which are
immaterial.
Supplemental balance sheet information related to leases was as
follows:
|
|
|
|
|
|
|
|
|
|
Classification |
As of September 30, 2022
|
|
Assets: |
|
|
|
Operating lease assets |
Operating lease assets |
22,092 |
|
|
|
Operating and finance lease assets, property, and equipment held
for sale |
15,906 |
|
|
Finance lease assets |
Finance lease assets |
4,459 |
|
|
|
Operating and finance lease assets, property, and equipment held
for sale |
4,668 |
|
|
Total lease assets |
|
47,125 |
|
|
Liabilities: |
|
|
|
Current: |
|
|
|
Operating leases |
Current portion of operating lease liabilities |
4,600 |
|
|
Operating and finance lease liabilities associated with assets held
for sale |
17,123 |
|
|
Finance leases |
Current portion of finance lease liabilities |
116 |
|
|
Operating and finance lease liabilities associated with assets held
for sale |
5,171 |
|
|
Long-term: |
|
|
|
Operating leases, less current portion |
|
22,384 |
|
|
Finance leases, less current portion |
|
6,083 |
|
|
Total lease liabilities |
|
55,477 |
|
(1) Finance lease assets are recorded net of accumulated
depreciation of $846 as of September 30, 2022.
(2) Operating lease assets are recorded net of impairment of $420
and $1,020 in the three and nine months ended September 30, 2022,
respectively, due to a change in the physical condition of a
right-of-use asset.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Lease term and discount rate information related to leases was as
follows:
|
|
|
|
|
|
|
Lease Term and Discount Rate |
As of September 30, 2022 |
|
Weighted Average Remaining Lease Term (in years) |
|
|
Operating leases |
7.69 years |
|
Finance leases |
11.34 years |
|
|
|
Weighted Average Discount Rate |
|
|
Operating leases |
5.90 |
% |
|
Finance leases |
9.99 |
% |
Supplemental cash flow information related to leases was as
follows:
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
Cash paid for amounts included in the measurement of lease
liabilities: |
|
|
Operating cash flows from operating leases |
6,991 |
|
|
Operating cash flows from finance leases |
621 |
|
|
Financing cash flows from finance leases |
376 |
|
|
|
|
|
Lease assets obtained in exchange for lease obligation |
|
|
Operating leases |
49,183 |
|
|
Finance leases |
247 |
|
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
As of September 30, 2022 |
|
|
Operating Leases
(1)
|
Finance Leases
(1)
|
|
Fiscal 2022, remaining |
2,174 |
|
382 |
|
|
Fiscal 2023 |
8,572 |
|
1,539 |
|
|
Fiscal 2024 |
7,797 |
|
1,561 |
|
|
Fiscal 2025 |
7,050 |
|
1,583 |
|
|
Fiscal 2026 |
5,969 |
|
1,625 |
|
|
Thereafter |
23,835 |
|
13,447 |
|
|
Total lease payments |
55,397 |
|
20,137 |
|
|
Less: interest |
(11,290) |
|
(8,767) |
|
|
Present value of lease liabilities |
44,107 |
|
11,370 |
|
(1)
There are no legally binding minimum lease payments for leases
signed but not yet commenced excluded from the table.
As previously disclosed in our Annual Report on Form 10-K for the
year ended December 31, 2021 and under the previous lease
accounting standard, the following is a table of facility lease
commitments due for the next five years, and thereafter, as of
December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Per Year |
|
Total Capital Leases |
|
2022 |
$ |
6,788 |
|
|
$ |
1,643 |
|
|
2023 |
6,931 |
|
|
1,669 |
|
|
2024 |
6,657 |
|
|
1,695 |
|
|
2025 |
6,832 |
|
|
1,721 |
|
|
2026 |
5,884 |
|
|
1,766 |
|
|
Thereafter |
23,715 |
|
|
14,322 |
|
|
Total |
$ |
56,807 |
|
|
$ |
22,816 |
|
|
Less: amount representing interest |
|
|
(10,101) |
|
|
Present value of minimum lease payments |
|
|
12,715 |
|
|
Less: current obligation |
|
|
(509) |
|
|
Long-term obligations under capital lease |
|
|
$ |
12,206 |
|
The following is a schedule of the approximate future minimum lease
payments due to third parties and the related expected future
receipts related to these lease vehicles as of December 31,
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due to
Third-Parties
|
|
Future Receipts |
|
2022 |
$ |
1,435 |
|
|
$ |
1,721 |
|
|
2023 |
1,017 |
|
|
1,205 |
|
|
2024 |
605 |
|
|
716 |
|
|
2025 |
180 |
|
|
216 |
|
|
2026 |
55 |
|
|
69 |
|
|
Total |
3,292 |
|
|
3,927 |
|
In the three months ended September 30, 2022, the Company
guaranteed the lease obligation of one of its closed hub locations
assigned to a third-party that operates a used vehicle dealership.
The Company continues as guarantor of such lease
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
obligation with maximum total payments of $1,695 and will continue
as the guarantor through March 2031. The Company would be required
to perform under the guarantee if the third-party is in default.
Given the assignment took place in September 2022, there is not a
substantial risk that the third-party will default and the Company
will have to perform under the guarantee. We have not recognized a
liability associated with this guarantee.
Note 15 — Commitments and Contingencies
The Company’s facilities are subject to federal, state and local
provisions regulating the discharge of materials into the
environment. Compliance with these provisions has not had, nor does
the Company expect such compliance to have, any material effect
upon the capital expenditures, net income, financial condition or
competitive position of the Company. Management believes that its
current practices and procedures for the control and disposition of
such materials comply with the applicable federal and state
requirements.
Legal Matters
Federal Securities Litigation
On July 8, 2021, purported CarLotz stockholder Daniel Erdman,
individually and on behalf of others similarly situated, filed a
putative class action complaint in the United States District Court
for the Southern District of New York, alleging that CarLotz and
certain of its current and former executive officers made various
false and misleading statements or omissions about the Company’s
business, operations, financial performance and prospects in
violation of Sections 10(b) and 20(a) of the Exchange Act and SEC
Rule 10b-5, promulgated thereunder. See Daniel Erdman v. CarLotz,
Inc., et al., 21-cv-5906 (S.D.N.Y.) The action is stated to be
brought on behalf of purchasers of the securities of Acamar
Partners Acquisition Corp. and CarLotz during the period from
December 30, 2020 to May 25, 2021. The action seeks to recover
unspecified compensatory damages allegedly caused by the
defendants’ purported violations of the federal securities laws,
plus interest and costs and expenses.
On July 20, 2021, purported CarLotz stockholder Michael Widuck,
individually and on behalf of others similarly situated, filed a
putative class action complaint in the United States District Court
for the Southern District of New York, alleging that CarLotz and
certain of its current and former executive officers made various
false and misleading statements or omissions about the Company’s
business, operations, financial performance and prospects in
violation of Sections 10(b) and 20(a) of the Exchange Act and SEC
Rule 10b-5, promulgated thereunder. See Michael Widuck v. CarLotz,
Inc., et al., 21-cv-6191 (S.D.N.Y.). The action is stated to be
brought on behalf of purchasers of the securities of Acamar
Partners Acquisition Corp. and CarLotz during the period from
December 30, 2020 to May 25, 2021. The action seeks to recover
unspecified compensatory damages allegedly caused by the
defendants’ purported violations of the federal securities laws,
plus interest and costs and expenses.
On August 5, 2021, purported CarLotz stockholder Michael Turk,
individually and on behalf of others similarly situated, filed a
putative class action complaint in the United States District Court
for the Southern District of New York, alleging that CarLotz and
certain of its current and former executive officers made various
false and misleading statements or omissions about the Company’s
business, operations, financial performance and prospects in
violation of Sections 10(b) and 20(a) of the Exchange Act and SEC
Rule 10b-5, promulgated thereunder. See Michael Turk v. CarLotz,
Inc., et al., 21-cv-6627 (S.D.N.Y.) The action is stated to be
brought on behalf of purchasers of the securities of Acamar
Partners Acquisition Corp. and CarLotz during the period from
December 30, 2020 to May 25, 2021. The action seeks to recover
unspecified compensatory damages allegedly caused by the
defendants’ purported violations of the federal securities laws,
plus interest and costs and expenses.
The above three cases were consolidated by the Court on August 31,
2021 under In re CarLotz, Inc. Sec. Litig., 21-cv-05906 (S.D.N.Y.).
On October 15, 2021, the Court appointed David Berger lead
plaintiff and Kahn Swick & Foti, LLC lead counsel for the
putative class. On December 14, 2021, Lead Plaintiff Berger and
Additional Plaintiff Craig Bailey filed an Amended Complaint
against CarLotz, various current and former directors and officers
of CarLotz, Acamar, various directors of Acamar, Acamar Partners
Sponsor I LLC, and Acamar Partners Sub, Inc., purporting to assert
claims on behalf of purchasers of Acamar and CarLotz securities
during the period from October 22, 2020 through May 25, 2021. The
Amended Complaint alleges that the defendants made various false
and misleading statements or omissions about CarLotz’ business,
operations, financial performance and prospects in violation of
Sections 10(b), 14(a) and 20(a) of the Exchange Act; and Sections
11, 12(a)(2) and 15 of the Securities Act. The Amended Complaint
sought a declaration that it is a proper class action pursuant to
Fed. R. Civ. P. 23, as well as unspecified compensatory damages
allegedly caused by the defendants’ purported violations of the
federal securities laws, plus interest and costs and expenses, and
any further relief that the Court may deem proper.
CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(In thousands, except share data)
On February 17, 2022, Plaintiffs filed a Letter Motion for Leave to
File Second Amended Complaint, citing the need “to resolve certain
factual and legal issues bearing on the viability of certain of
plaintiffs’ claims and named defendants.” On February 18, 2022, the
Court granted Plaintiffs’ letter motion for leave to file a Second
Amended Complaint and ordered that the Second Amended Complaint be
filed by March 4, 2022.
On March 4, 2022, Lead Plaintiff Berger and Additional Plaintiff
Bailey filed a Second Amended Complaint against CarLotz, various
current and former directors and officers of CarLotz, Acamar,
various directors of Acamar, and Acamar Partners Sponsor I LLC,
purporting to assert claims on behalf of purchasers of Acamar and
CarLotz securities during the period from October 22, 2020 through
May 25, 2021. The Second A