What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-03-06 · 102 added, 110 removed, 187 unchanged (53% of the section changed)

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Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Form 10-K, particularly in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” discussions.

Overview and 2022 Highlights

LiveWire is an industry-leading all-electric vehicle brand with a mission to pioneer the rapidly growing two-wheel electric motorcycle space.

The Company operates in two segments:

Electric Motorcycles and STACYC.

LiveWire’s Electric Motorcycles segment sells electric motorcycles, related parts and accessories and apparel in the United States, while the STACYC segment sells electric balance bikes, related parts and accessories and apparel in the United States and certain international markets.

H-D introduced its first electric motorcycle in late 2019 as the “Harley-Davidson LiveWire.” In 2021, building on early success and the continued growth in the global market demand for electric vehicles, H-D launched LiveWire as a standalone electric vehicle division, with the first LiveWire-branded product, the LiveWire ONE, debuting in

July 2021, followed by a special launch edition of 100 S2 Del Mars in May 2022.

In 2019, H-D acquired STACYC Inc.

and began selling electric balance bikes.

Electric motorcycles are sold at wholesale to a network of independent retail partners, at retail through a Company-owned dealer, and through online sales.

Electric balance bikes are sold at wholesale to independent dealers and independent distributors, as well as direct to consumers online.

LiveWire is focused on innovating and developing technology in the electric vehicle market.

LiveWire’s vision is to create the next generation of electric motorcycles with products and experiences that merge the power and technology of electric with the unique soulful connection that comes from an analog machine.

As discussed below, on September 26, 2022 as part of the Business Combination, LiveWire, which included LiveWire branded electric motorcycles and STACYC, became a separate, publicly traded company.

LiveWire’s net loss for 2022 was $78,938 thousand compared to $68,292 thousand in 2021.

LiveWire’s net losses reflect the start-up nature of LiveWire’s business including investments in product development as LiveWire continues to focus on technological innovation that will support future products and growth, and investments in talent and capabilities to support the new company.

The Electric Motorcycles segment operating losses were partially offset by favorable operating income at STACYC.

The Electric Motorcycles segment operating loss for 2022 was $89,105 thousand, compared to an operating loss of $70,297 thousand in 2021.

The operating loss was driven by the cost of standing up a new organization, including growing headcount and back-office support, increased costs to advance our electric vehicle systems, and increased product development costs to deliver our S2 platform in 2023.

Refer to the Electric Motorcycles segment analysis below for further discussion.

The STACYC segment operating income for 2022 was $4,150 thousand, as compared to $2,115 thousand in 2021.

The improvement in operating income was driven by increased revenue and margin mix.

Refer to the STACYC segment analysis below for further discussion.

Recent Developments

Business Combination

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See Note 4, Business Combination, in the Consolidated financial statements for further detail related to the Business Combination.

For 2023, LiveWire's focus continues to be on our investment into product development, including advancing the technologies, platforms and products that will further our position as pioneers of the industry.

LiveWire plans to expand the LiveWire brand globally in 2023 with the introduction of the LiveWire ONE electric motorcycle to the European market and the launch of the S2 platform.

Overview and 2023 Highlights

LiveWire is an industry-leading all-electric vehicle brand with a mission to pioneer the growing two-wheel electric motorcycle space.

The Company operates in two segments:

Electric Motorcycles and STACYC.

LiveWire’s Electric Motorcycles segment sells electric motorcycles, related parts and accessories and apparel in the United States and certain international markets, while the STACYC segment sells electric balance bikes for kids, related parts and accessories and apparel in the United States and certain international markets.

In 2019, H-D acquired STACYC Inc.

and began selling electric balance bikes for kids.

Electric motorcycles are sold at wholesale to a network of Independent Retail Partners, at retail through a Company-owned dealership and through online sales, and direct to customers through select international partners primarily in Europe.

Electric balance bikes are sold at wholesale to independent dealers and independent distributors, as well as direct to consumers online.

LiveWire is focused on innovating and developing technology in the electric vehicle market.

As discussed below, on September 26, 2022 as part of the

Business Combination, LiveWire, which included LiveWire branded electric motorcycles and STACYC, became a separate, publicly traded company.

LiveWire’s net loss for the year ended December 31, 2023 was $109,550 thousand compared to $78,938 thousand for the year ended December 31, 2022.

LiveWire’s net losses reflect the early-stage nature of LiveWire’s business including investments in product development as LiveWire continues to focus on technological innovation that it expects will support future products and growth, and investments in talent and capabilities to support the new company.

The Electric Motorcycles segment operating loss for the year ended December 31, 2023 was $116,611 thousand, compared to an operating loss of $89,105 thousand for the year ended December 31, 2022.

The increased operating loss was driven by a provision for excess inventory components held by H-D that the Company expects to be obligated to reimburse H-D under the terms of Contract Manufacturing Agreement, increased selling, administrative and engineering expense for product development costs relating to the S2 platform, delivery of Del Mar, and the cost of standing up a new organization, including growing headcount and back-office support.

Refer to the Electric Motorcycles segment analysis below for further discussion.

The STACYC segment operating income for the year ended December 31, 2023 was $622 thousand, as compared to $4,150 thousand for the year ended December 31, 2022.

The decrease in operating income was driven by lower volumes from our independent distributors and independent dealers and increased selling, administrative and engineering expense related to personnel costs and increased marketing initiatives.

Refer to the STACYC segment analysis below for further discussion.

For 2024, LiveWire's focus continues to be on our investment into product development and product innovation, including additional models on the S2 platform, market expansion and continued cost improvements.

LiveWire plans to continue to expand globally in 2024 with the introduction of the S2 platform to the European market.

Basis of Presentation

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• Wholesale Motorcycle Unit Sales – LiveWire defines Wholesale Motorcycle Unit Sales as the number of electric motorcycles sold by LiveWire to independent dealers for which LiveWire recognized revenue during the period.

• Company retail motorcycle unit sales – LiveWire defines Company retail motorcycle unit sales as the number of new electric motorcycles sold at retail by LiveWire through its Company-owned dealer or through online sales for which LiveWire recognized revenue during the period.

• Company Retail Motorcycle Unit Sales – LiveWire defines Company Retail Motorcycle Unit Sales as the number of new electric motorcycles sold at retail by LiveWire through its Company-owned dealership, through online sales or direct to customers through select international partners for which LiveWire recognized revenue during the period.

LiveWire began selling electric motorcycles direct to retail consumers in the third quarter of 2021.

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• Retail Motorcycle Unit Sales – LiveWire defines Retail Motorcycle Unit Sales as the sum of Company Retail Motorcycle Unit Sales and Independent Retail Motorcycle Unit Sales.

• Company-owned dealer – Dealer owned and operated by LiveWire to sell electric motorcycles, related products, and services.

• Company-owned dealership – Dealership owned and operated by LiveWire to sell electric motorcycles, related products, and services.

• Independent Retail Partners (Electric Motorcycles) – Retail Partners owned and operated by independent entities under contract with LiveWire to sell LiveWire electric motorcycles, related products and services.

• Electric Balance Bike Unit Sales (STACYC) – LiveWire defines Electric Balance Bike Unit Sales as the number of electric balance bikes sold by LiveWire for which LiveWire recognized revenue during the period.

• Independent retail partners (STACYC) – Retail partners owned and operated by independent entities under contract with LiveWire to sell STACYC electric balance bikes, related products and services.

• Independent Retail Partners (STACYC) – Retail Partners owned and operated by independent entities under contract with STACYC to sell electric balance bikes, related products and services.

The following table details the key business metric amounts for the periods indicated:

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Total Wholesale Motorcycle Unit Sales 533 444

Company retail motorcycle unit sales – US 153 29

Company Retail Motorcycle Unit Sales:

International 32 —

Total Company Retail Motorcycle Unit Sales 127 153

Total LiveWire Motorcycle Unit Sales 660 597

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32,113 48,091

(1) International wholesale motorcycle unit sales represent sales of H-D branded LiveWire motorcycles prior to the Business Combination.

(1) International Wholesale Motorcycle Unit Sales represent sales of H-D branded LiveWire motorcycles prior to the Business Combination for the year ended December 31, 2022.

(2) Data source for Company Retail Motorcycle Unit Sales figures shown above is LiveWire’s records.

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Electric Motorcycles

Company-owned dealer 1 1

Company-owned dealership 1 1

Independent Retail Partners:

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The Electric Motorcycles retail partners shown above include those that have been contracted by LiveWire to sell LiveWire motorcycles.

As of December 31, 2022 and December 31, 2021, this total includes 13 and 27 partners, respectively, that were actively working to complete the licensing required to sell LiveWire motorcycles as of the end of the period.

As of December 31, 2023 and 2022, this total includes 4 and 13 partners, respectively, that were actively working to complete the licensing required to sell LiveWire motorcycles as of the end of the period.

LiveWire intends to grow this network as it expands its distribution capabilities.

The Harley-Davidson LiveWire motorcycles produced in 2019 and 2020 have been or will be retailed through the H-D dealership network until the remaining inventory of H-D branded LiveWire motorcycles is depleted.

After the Business Combination, any remaining inventory of H-D branded LiveWire motorcycles is owned by H-D, and any related sales are recognized by H-D.

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Wholesale motorcycle unit shipments and Company Retail Motorcycle Unit Sales are key drivers of revenue and profit for the Electric Motorcycles segment.

Retail motorcycle unit sales made through both the Company-owned dealer and independent retail partners are a key measure of consumer demand and market share for LiveWire’s electric motorcycles.

Retail Motorcycle Unit Sales made through both the Company-owned dealership and Independent Retail Partners are a key measure of consumer demand and market share for LiveWire’s electric motorcycles.

Total Electric Balance Bike Unit Sales is a key driver of revenue and profit for STACYC.

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Interest income 10,537 1,191 9,346 nm

Change in fair value of warrant liabilities 5,033 — 5,033 nm

Change in fair value of warrant liabilities (4,020) 5,033 (9,053) (179.9) %

Loss before income taxes (109,472) (78,971) (30,501) 38.6 %

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Other Income, Net

Other income, net for the year ended December 31, 2022 was $235 thousand compared to $302 thousand for the year ended December 31, 2021.

The change was primarily driven by a reduction in net periodic benefit plan income.

Other income, net for the year ended December 31, 2023 was zero compared to $235 thousand for the year ended December 31, 2022.

The change was driven by net periodic benefit plan income as subsequent to the Business Combination the Company did not have similar allocations of net periodic benefit plan income from H-D and the Company does not sponsor a qualified pension plan or postretirement healthcare plan.

Interest Expense Related Party

Interest expense related party for the year ended December 31, 2022 increased by $182 thousand, to $475 thousand from $293 thousand for the year ended December 31, 2021 due to an increase in related party notes payable prior to their settlement on June 24, 2022.

Interest expense related party for the year ended December 31, 2023 was zero compared to $475 thousand for the year ended December 31, 2022.

The change was driven by settlement of the related party notes payable on June 24, 2022.

Interest Income

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Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the year ended December 31, 2022 was $5,033 thousand.

The warrant liabilities were recorded as part of the Business Combination and therefore did not exist in the prior year results for LiveWire.

The income recognized was due to the decrease in the estimated fair value of the warrants between September 26, 2022, the closing date of the Business Combination, and December 31, 2022, due to fluctuations in the market price of the warrants.

Change in fair value of warrant liabilities for the year ended December 31, 2023 was a loss of $4,020 thousand compared to income of $5,033 thousand for the year ended December 31, 2022.

The loss recognized of $4,020 thousand for the year ended December 31, 2023 was due to the increase in the estimated fair value of the warrants related to fluctuations in the market price of the warrants.

The income recognized of $5,033 thousand was due to the decrease in the estimated fair value of the warrants between September 26, 2022, the closing date of the Business Combination, and December 31, 2022, related to fluctuations in the market price of the warrants.

The warrant liabilities were recorded as part of the Business Combination and therefore did not exist prior to September 26, 2022.

See Note 10, Warrant Liabilities, in the Consolidated financial statements for further discussion.

Income Tax (Benefit) Provision

The income tax benefit for the year ended December 31, 2022 was $33 thousand, as compared to income tax expense of $138 thousand for the year ended December 31, 2021.

The tax benefit was driven by the reduction in the net deferred tax liability position.

The reduction of the net deferred tax liability was the result of the requirement to capitalize research and experimental expenditures starting in tax years beginning after December 31, 2021.

The capitalization of these expenditures for the year ended December 31, 2022 resulted in a deferred tax asset that will reverse and offset additional deferred tax liabilities in future periods.

The income tax provision for the year ended December 31, 2023 was $78 thousand, as compared to an income tax benefit of $33 thousand for the year ended December 31, 2022.

The income tax provision in 2023 was driven by the change in deferred tax liability associated with the amortization of the taxable temporary difference related to indefinite lived intangibles that are not amortized for book purposes.

The 2022 taxable income benefit was driven by the reduction of the net deferred tax liability as a result of the requirement to capitalize research and experimental expenditures starting in tax years beginning after December 31, 2021.

Segment Results

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Operating loss $ (116,611) $ (89,105) $ (27,506) 30.9 %

Revenue for the year ended December 31, 2022 increased by $4,294 thousand, or 44.2%, to $13,999 thousand from $9,705 thousand for the year ended December 31, 2021.

The increase was primarily due to higher revenue from electric motorcycles of $4,465 thousand, and was partially offset by decreases in parts and accessories and apparel revenues.

The increase in revenues from electric motorcycles was primarily driven by an increase of 30% in unit sales volumes along with a $2,917 thousand decrease in sales promotions.

Revenue for the year ended December 31, 2023 decreased by $2,451 thousand, or 17.5%, to $11,548 thousand from $13,999 thousand for the year ended December 31, 2022.

Unit sales increased 11% to 660 in 2023 from 597 in 2022 driven by increased unit sales from Del Mar which was launched in the third quarter of 2023.

The increase in unit sales was offset by product mix as the Del Mar selling price is lower than the LiveWire ONE selling price resulting in a decrease of overall revenue of $2,451 thousand in 2023 compared to 2022.

Cost of Goods Sold

Cost of goods sold for the year December 31, 2023 increased by $4,029 thousand, or 17.3%, to $27,297 thousand from $23,268 thousand for the year ended December 31, 2022.

The increase was primarily due to increased shipments of electric motorcycles, in alignment with the increased revenue described above, partially offset by prior year non-cash reserve adjustments on the H-D branded motorcycles.

The increase was primarily due to a provision for excess inventory components held by H-D that the Company is obligated to reimburse H-D under the terms of Contract Manufacturing Agreement and related costs of approximately $6,715 thousand offset by a decrease in Cost of Goods Sold related to product mix.

Selling, Administrative and Engineering Expense

Selling, administrative and engineering expense for the year ended December 31, 2023 increased by $21,026 thousand, or 26.3%, to $100,862 thousand from $79,836 thousand for the year ended December 31, 2022.

The increase was primarily due to increases in product development costs incurred to deliver our S2 platform in 2023 and advance our electric vehicle systems, and increases in personnel costs primarily related to higher headcount to support the stand-up of the new LiveWire organization.

The increase was primarily due to product development costs relating to the S2 platform, costs incurred related to the delivery of Del Mar, and increases in personnel costs primarily related to higher headcount to support the stand-up of the new LiveWire organization.

The following table presents consolidated results of operations for the STACYC segment for the years ended December 31, 2023 and 2022 (in thousands):

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Operating income $ 622 $ 4,150 $ (3,528) (85.0) %

Revenue for the year ended December 31, 2022 increased by $6,733 thousand, or 25.8%, to $32,834 thousand from $26,101 thousand for the year ended December 31, 2021.

The increase was primarily due to higher revenue from electric balance bikes of $6,539 thousand and parts, accessories and apparel of $194 thousand.

The increase in revenue from electric balance bikes was driven by a shift in product mix from the launch of new 18- and 20-inch electric balance bikes and higher pricing of $6,862 thousand, which was partially offset by lower shipment volumes of $323 thousand.

The increase in revenue from parts, accessories and apparel was driven by higher shipment volumes of $674 thousand, which was partially offset by an increase in promotional discounts on batteries in 2022.

Revenue for the year ended December 31, 2023 decreased by $6,359 thousand, or 19.4%, to $26,475 thousand from $32,834 thousand for the year ended December 31, 2022.

The decrease was primarily due to lower revenue from electric balance bikes of $6,804 thousand.

The decrease in revenue from electric balance bikes was driven by lower shipment volumes of $6,229 primarily to our independent distributors and independent dealers, along with a decrease of $575 thousand due to product mix and promotions for the year ended December 31, 2023.

Cost of Goods Sold

Cost of goods sold for the year December 31, 2022 increased by $4,287 thousand, or 26.2%, to $20,661 thousand from $16,374 thousand for the year ended December 31, 2021.

The increase was primarily due to a shift in product mix from the launch of new 18- and 20-inch electric balance bike, which was partially offset by slightly lower shipment volumes, in alignment with the increased revenue described above.

Cost of goods sold for the year December 31, 2023 decreased by $4,163 thousand, or 20.1%, to $16,498 thousand from $20,661 thousand for the year ended December 31, 2022.

The decrease was primarily due to lower volumes in alignment with the decreased revenue described above.

Selling, Administrative and Engineering Expense

Selling, administrative and engineering expense for the year ended December 31, 2023 increased by $1,332 thousand, or 16.6%, to $9,355 thousand from $8,023 thousand for the year ended December 31, 2022.

The increase was primarily due to an increase in advertising costs online and at motocross races to support increased revenue.

The increase was primarily due to increases in personnel costs and increases in marketing spend to promote domestic brand and initiatives to support growth of the business.

Results of Operations 2022 Compared to 2021

Refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations” within our final prospectus filed on December 16, 2022 with the SEC pursuant to Rule 424(b) under the Securities Act for a detailed discussion of the results of operations for 2021 compared to 2020.

Refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 6, 2023 with the SEC for a detailed discussion of the results of operations for 2022 compared to 2021.

Liquidity and Capital Resources

As of December 31, 2023 and 2022, LiveWire’s cash and cash equivalents were $167,904 thousand and $265,240 thousand, respectively.

LiveWire historically managed liquidity risk by effectively managing its working capital, capital expenditures and cash flows.

As an early growth company, LiveWire does not expect to generate positive cash flow from operations over the next twelve months.

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Following the Business Combination, LiveWire received net proceeds of approximately $293.7 million as more fully described below.

On September 26, 2022, LiveWire consummated the Merger with ABIC resulting in net proceeds of approximately $293.7 million, including a $100 million investment from H-D and a $100 million investment from KYMCO through a PIPE.

On September 26, 2022, LiveWire consummated the Business Combination with ABIC resulting in net proceeds of approximately $293.7 million, including a $100 million investment from H-D and a $100 million investment from KYMCO through a PIPE.

Additionally, LiveWire received ABIC’s cash held in trust account of $13.6 million and the $100 million equity backstop provided by the H-D Backstop Amount in exchange for 10,000,000 shares of Common Stock for a purchase price of $10.00 per share pursuant to the terms of the Business Combination Agreement.

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LiveWire instead currently expects to rely on the sources of funding described below, if available on reasonable terms or at all.

Management believes that cash on hand, including the proceeds received from the Business Combination, will provide sufficient liquidity to meet LiveWire’s projected obligations, including those related to existing contractual obligations, for at least the next twelve months.

LiveWire plans to use its current cash on hand, including the financing raised through the Business Combination and PIPE Financing, to support its core business operations and strategic plan, invest in new product development, and enhance its global manufacturing and distribution capabilities.

On February 14, 2024, the Company entered into a Convertible Delayed Draw Term Loan Agreement (the “Convertible Term Loan”) with H-D providing for term loans from H-D to the Company in one or more advances up to an aggregate principal amount of $100 million.

The outstanding principal under the Convertible Term Loan bears interest at a floating rate per annum, as calculated by H-D as of the date of each advance and as of each June 1 and December 1 thereafter, equal to the sum of (i) the forward-looking term rate based on SOFR (i.e., the secured overnight financing rate published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate)) for a six-month interest period, plus (ii) 4.00%.

The Convertible Term Loan does not include affirmative covenants impacting the operations of the Company.

The Convertible Term Loan includes negative covenants restricting the ability of the Company to incur indebtedness, create liens, sell assets, make investments, make fundamental changes, make dividends or other restricted payments and enter into affiliate transactions.

The Convertible Term Loan has a maturity date of the earlier of (i) 24 months from the date of the first draw on the loan or (ii) October 31, 2026.

In the event that the Convertible Term Loan cannot be settled in cash by the Company at maturity, unless otherwise agreed between the Company and H-D, the Convertible Term Loan will be converted to equity of Company at a conversion price per share of common stock of the Company equal to 90% of the volume weighted average price per share of Common Stock for the 30 trading days immediately preceding the conversion date.

Management believes that cash on hand, including the proceeds received from the Business Combination, and the Convertible Term Loan, will provide sufficient liquidity to meet LiveWire’s projected obligations, including those related to existing contractual obligations, for at least the next twelve months.

LiveWire plans to use its current cash on hand, including the financing raised through the Business Combination and PIPE Financing, and available funds under the Convertible Term Loan to support its core business operations and strategic plan, invest in new product development, and enhance its global manufacturing and distribution capabilities.

LiveWire expects its capital expenditures and working capital requirements to increase substantially in the near future, as it grows the business, develops its customer support and marketing infrastructure and expands its research and product development efforts.

LiveWire had $20,517 thousand of purchase order commitments related to capital expenditures as of December 31, 2022 to be purchased in fiscal year 2023.

LiveWire had $20,861 thousand of purchase order commitments related to capital expenditures and other spending to support its business operations and strategic plan as of December 31, 2023 related to fiscal year 2024.

The Company enters into purchase orders with vendors and other parties in the ordinary course of business.

During the year ended December 31, 2023, the Company entered into a long-term commitment with a vendor to provide certain inventory components.

As of December 31, 2023, the Company’s estimated payments are $2,836 thousand, $2,431 thousand, and $506 thousand for fiscal years 2024, 2025, and 2026, respectively, and no estimated payments thereafter.

During the year ended December 31, 2023, the Company recorded a liability of $6,309 thousand for excess inventory components held by H-D that the Company expects to be obligated to reimburse H-D under the terms of the Contract Manufacturing Agreement.

Refer to Note 16, Related Party Transactions, for discussion of commitments with H-D.

Otherwise, there have been no material changes in the Company’s cash obligations and commitments since the end of fiscal year 2023.

LiveWire’s material contractual operating cash commitments at December 31, 2023 relate to leases as discussed further in Note 9, Leases, in the Consolidated financial statements.

In addition, as a result of the Business Combination completed on September 26, 2022, LiveWire may be subject to certain payments in the event minimum purchase commitments under the Contract Manufacturing Agreement with H-D are not met beginning in the year 2024.

In addition, as a result of the Business Combination completed on September 26, 2022, LiveWire will be subject to certain payments in the event minimum purchase commitments under the Contract Manufacturing Agreement with H-D are not met beginning in the year 2025.

Cash Flow Activity

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Net cash used by investing activities (13,462) (14,081)

Net cash provided by financing activities 366,334 84,757

Net increase in cash, cash equivalents and restricted cash $ 262,572 $ 267

The overall increase in cash during the year ended December 31, 2022 was due primarily to an increase in cash resulting from the Business Combination.

Net cash (used) provided by financing activities (412) 366,334

Net increase in cash and cash equivalents $ (97,336) $ 262,572

The overall decrease in cash during the year ended December 31, 2023 was due primarily to a decrease in net cash provided by financing activities.

There was an increase in cash in the year ended December 31, 2022 as a result of the Business Combination.

Operating Activities

LiveWire had negative cash flow from operating activities during 2022 and 2021.

Net cash used in operating activities increased by $15,142 thousand to $89,681 thousand for the year ended December 31, 2022 compared to $74,539 thousand for the year ended December 31, 2021.

The increase in negative cash flow from operating activities was primarily driven by increases in product development costs and costs to advance our electric vehicle systems, and increases in personnel costs primarily related to higher headcount to support the stand-up of the new LiveWire organization.

The overall growth of the business also resulted in increases in net operating assets, primarily inventory, and offsetting increases in operating liabilities, primarily payables and accrued expenses.

The Company had negative cash flow from operating activities during the years ended December 31, 2023 and 2022.

Net cash used in operating activities decreased by $6,219 thousand to $83,462 thousand for the year ended December 31, 2023 compared to $89,681 thousand for the year ended December 31, 2022.

The decrease in negative cash flow from operating activities was primarily driven by favorable changes in inventories, accounts payable to related party, and other current assets offset by unfavorable changes in other working capital amounts, including accounts receivable, accounts receivable from related party, and accounts payable and accrued liabilities and the increase in net loss of $30,612 thousand.

Investing Activities

Net cash used in investing activities increased by $4,130 thousand to $14,081 thousand for the year ended December 31, 2022 compared to $9,951 thousand for the year ended December 31, 2021.

The decrease was due to higher capital expenditures related to investments to support the product development and engineering of future products.

LiveWire expects to fund future cash flows used in investing activities with the financing raised through the Business Combination and PIPE Financing.

Net cash used in investing activities decreased by $619 thousand to $13,462 thousand for the year ended December 31, 2023 compared to $14,081 thousand for the year ended December 31, 2022.

The decrease was due to lower capital expenditures in 2023.

LiveWire expects to fund future cash flows used in investing activities with the financing raised through the Business Combination, PIPE Financing and the Convertible Term Loan.

LiveWire estimates capital expenditures to be between $15 million and $20 million in 2024.

Financing Activities

Net cash provided by financing activities increased by $281,577 thousand to $366,334 thousand for the year ended December 31, 2022 compared to $84,757 thousand for the year ended December 31, 2021.

The increase was primarily due to an increase in cash from the Business Combination of $293.7 million and an increase in proceeds from borrowing on notes payable to related party of $13,233 thousand.

This was partially offset by decreased cash transfers from H-D prior to the separation of $26,442 thousand.

Net cash provided by financing activities decreased by $366,746 thousand to $412 thousand net cash used by financing activities for the year ended December 31, 2023 compared to $366,334 thousand net cash provided by financing activities for the year ended December 31, 2022.

The decrease was primarily due to cash received in the prior year from the Business Combination of $293,717 thousand, proceeds from borrowing on notes payable to related party of $15,333 thousand, and cash transfers from H-D related to services and funding for operations of $59,051 thousand.

Commitments and Contingencies

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Management believes that the following are some of the more critical judgment areas in the application of accounting policies that currently affect LiveWire’s financial condition and results of operations.

Revenue Recognition - Revenue from the sale of LiveWire One electric motorcycles, electric balance bikes as well as parts and accessories and apparel are recorded when control is transferred to the customer, generally at the time of shipment to independent dealers and distributors or at the time of delivery to retail customers.

S2 electric motorcycles contain two performance obligations, which is the sale of the electric motorcycle and a stand ready obligation to transfer Firmware Over The Air (“FOTA”) software updates to the electric motorcycle, when-and-if available, to the customer.

Revenue on the sale of the S2 electric motorcycle is recorded at a point-in-time when control is transferred to the customer.

As the unspecified FOTA software updates to the S2 electric motorcycles are provided when-and-if they become available, revenue related to these updates is recognized ratably over the period the updates will be provided, estimated by management to be five years, commencing when control of the electric motorcycle is transferred to the customer.

The standalone selling prices of performance obligations are estimated by considering costs to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available.

The Company allocates the transaction price among the performance obligations in proportion to the standalone selling price of the Company’s performance obligations.

Product Warranty and Recalls - LiveWire provides a limited warranty on the new electric motorcycles for a period of two years, except for the battery which is covered for five years.

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Estimated warranty costs are recorded at the time of sale and are based primarily on historical LiveWire claim and industry information.

In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.

Additionally, LiveWire may from time to time initiate certain voluntary recall campaigns.

The estimated costs associated with voluntary recalls are recorded when the liability is both probable and estimable.

This generally occurs when LiveWire’s management approves and commits to a recall.

The accrued cost of a recall is based on an estimate of the cost to repair each affected vehicle and the number of vehicles expected to be repaired based on historical data concerning the percentage of affected customers that take advantage of recall offers.

Additionally, LiveWire may from time-to-time initiate certain voluntary recall campaigns or field actions.

The estimated costs associated with voluntary recalls or field actions are recorded when the liability is both probable and estimable.

This generally occurs when LiveWire’s management approves and commits to a recall or field action.

The accrued cost of a recall or field action is based on an estimate of the cost to repair each affected vehicle and the number of vehicles expected to be repaired based on historical data concerning the percentage of affected customers that take advantage of recall or field action offers.

In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.

The factors affecting actual warranty and recall costs can be volatile.

As a result, actual warranty claims experience and recall costs may differ from estimates, which could lead to material changes in our accrued warranty and recall costs.

LiveWire’s warranty and recall liabilities are discussed further in Note 12, Product Warranty and Recall Campaigns, in the Consolidated financial statements.

Income Taxes - LiveWire’s income taxes as presented are calculated on a separate tax return basis.

LiveWire’s operations have historically been and continue to be included in H-D’s U.S.

federal and state tax returns or non-U.S.

jurisdictions tax returns.

LiveWire accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”).

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

LiveWire reviews its deferred income tax asset valuation allowances on a quarterly basis or whenever events or changes in circumstances indicate that a review is required.

In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred income tax asset is considered, along with any positive or negative evidence including tax law changes.

Since future financial results and tax law may differ from previous estimates, periodic adjustments to LiveWire’s valuation allowances may be necessary.

LiveWire has generated operating losses in each of the years presented, however, any hypothetical net operating loss attributes generated (and related valuation allowances) utilized by H-D are not recorded on the balance sheet.

LiveWire is subject to income taxes in the U.S.

and potentially other jurisdictions.

These tax laws and regulations are complex and significant judgment is required in determining LiveWire’s provision for income taxes and recording the related deferred tax assets and liabilities.

In the ordinary course of LiveWire’s business, there are transactions and calculations where the ultimate tax determination is uncertain.

Accruals for unrecognized tax benefits are provided for in accordance with the requirements of ASC 740.

An unrecognized tax benefit represents the difference between the recognition of benefits related to items for income tax reporting purposes and financial reporting purposes.

Any unrecognized tax benefit is not included within the combined balance sheets as any benefit would reside with H-D.

H-D is regularly audited by tax authorities as a normal course of business.

Although the outcome of tax audits is always uncertain, LiveWire believes that it has appropriate support for the positions taken had LiveWire filed its own tax returns and that its annual tax provision includes amounts sufficient to pay any assessments.

Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year and would be the obligation of H-D.

Refer to Note 5, Income Taxes, in the Consolidated financial statements for further discussion regarding LiveWire’s income taxes.

The factors affecting actual warranty and recall or field action costs can be volatile.

As a result, actual warranty claims experience and recall or field action costs may differ from estimates, which could lead to material changes in our accrued warranty and recall or field actions costs.

LiveWire’s warranty and recall or field action liabilities are discussed further in Note 12, Product Warranty and Recall Campaigns, in the Consolidated financial statements.

Corporate Allocations - Historically, prior to the Business Combination, LiveWire had been managed and operated in the normal course of business by H-D.

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This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our Consolidated statements of operations and comprehensive loss.

The fair value of the Public Warrants was determined using the quoted market price as of the valuation date.

The fair value of the Private Placement Warrants was determined by using the quoted market price of the Public Warrants as the Private Warrants have terms and provisions that impact the fair value assessment that are identical to those of the Public Warrants, including the exercise price, exercisability and exercise period.

The fair value of the Public Warrants is determined using the quoted market price as of the valuation date.

The fair value of the Private Placement Warrants is determined by using the quoted market price of the Public Warrants as the Private Warrants have terms and provisions that impact the fair value assessment that are identical to those of the Public Warrants, including the exercise price, exercisability and exercise period.

See Note 10, Warrant Liabilities, in the Consolidated financial statements for more information concerning accounting for the Warrant liabilities.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis