Lordstown Motors Seeks to Cancel IP Agreement with Workhorse
LORDSTOWN, Ohio – Startup electric-vehicle manufacturer Lordstown Motors Corp. has informed Workhorse Group Inc. that it intends to terminate an intellectual property agreement the parties signed in November 2019.
Workhorse, based near Cincinnati, disclosed in a federal regulatory filing Feb. 2 that Lordstown Motors has given the company notice that it plans to cancel the agreement effective March 27.
Nevertheless, Workhorse says it would still be owed royalties on sales of the Lordstown Motors Endurance pickup even after the agreement ends, according to documents filed with the U.S. Securities and Exchange Commission.
Workhorse manufactures electric-powered delivery vans and was founded by Stephen Burns, who left the company in 2019 to start Lordstown Motors. He resigned from that company in 2021.
Under the agreement, Lordstown Motors received the right to use Workhorse’s licensed intellectual property toward the development of “certain electric pickup trucks,” the filing says. The IP license agreement covered technology related to Workhorse’s own EV pickup platform and other intellectual assets.
In exchange, Workhorse received a 10% equity stake in Lordstown Motors and an up-front royalty payment equal to 1% of the EV startup’s aggregate debt and equity commitments.
Workhorse sold its entire stake in Lordstown Motors during the third quarter of 2001, recording a loss of $76.5 million, according to earlier regulatory filings.
The license agreement also calls for Workhorse to receive a 1% royalty payment on gross sales of Lordstown Motors’ first 200,000 pickup trucks.
Workhorse said in its filing that it believes the company would still be entitled to royalties after the agreement is terminated.
“Notwithstanding LMC’s termination of the agreement, the royalties would still be due and payable if LMC sells vehicles,” the Workhorse filing said. “LMC has not informed the company that it has sold any vehicles since the date of the agreement.”
Workhorse added in its filing that it “cannot currently predict to what extent, if at all, LMC will sell any such vehicles, whether LMC will pay the applicable royalties on any such vehicles it does sell, or whether the amount of any such royalties will be material.”
Lordstown Motors announced in 2019 that it would build a new EV pickup, the Endurance, at the former General Motors assembly plant in Lordstown. However, its founder and CEO, Burns, resigned in June 2021 after an internal inquiry found that executives had publicly exaggerated preorders for the Endurance.
Last year, Lordstown Motors sold its plant to Foxconn for $230 million and entered into a contract manufacturing agreement that allows Foxconn to build the Endurance.
Production of the EV pickup started in late September 2022, and the company started commercial deliveries Nov. 29. Then, the company projected it would manufacture a first batch of 500 units beginning in the latter half of 2022 and into the first half of 2023.
However, Lordstown Motors said in January that it projects a “slow rate” of production for the Endurance, which would accelerate as the company resolves supply chain constraints. Through January 3, 2023, Lordstown Motors had produced 31 vehicles for sale, of which six have been delivered to customers.
Of the remaining units, the company intends to use approximately 15 for sales, demo drives, marketing and service training purposes prior to sale, Lordstown Motors said. The balance will be sold following completion of updates, final inspection and establishment of service arrangements to meet customer specifications.
“The company expects a slow rate of production through the first quarter of 2023, with supply chain constraints, particularly with respect to the availability of hub motor components, continuing as the primary factor governing volume and timing,” Lordstown Motors said in a statement filed earlier this year with regulators.
Pictured at top: Lordstown Motors’ Endurance pickup truck.
Copyright 2024 The Business Journal, Youngstown, Ohio.
