What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-03-06 · 243 added, 339 removed, 793 unchanged (42% of the section changed)

14 unchanged sentences

Product Warranty and Recall Campaigns

Employee Benefit Plans and Other Postretirement Benefits

Employee Benefit Plans

Commitments and Contingencies

2 unchanged sentences

Reportable Segments and Geographic Information

Restatement of Unaudited Interim Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of LiveWire Group, Inc.

To the Shareholders and the Board of Directors of LiveWire Group, Inc.

Opinion on the Financial Statements

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Milwaukee, Wisconsin

March 6, 2023

February 23, 2024

LIVEWIRE GROUP, INC.

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Costs and expenses:

Cost of goods sold 43,929 38,380 55,819

Selling, administrative and engineering expense 87,859 65,608 52,099

Total costs and expenses 131,788 103,988 107,918

Cost of goods sold (including related party amounts of $ 23,433 and $ 1,685 in 2023 and 2022, respectively, as described in Note 16)

43,795 43,929 38,380

Selling, administrative and engineering expense (including related party amounts of $ 14,993 and $ 3,485 in 2023 and 2022, respectively, as described in Note 16)

110,217 87,859 65,608

Total operating costs and expenses 154,012 131,788 103,988

Operating loss ( 115,989 ) ( 84,955 ) ( 68,182 )

Other income (expense), net 235 302 ( 30 )

Other income, net — 235 302

Interest expense related party — ( 475 ) ( 293 )

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Accrued liabilities 21,189 20,343

Current portion of contingent consideration liability — 2,180

Current portion of notes payable to related party — 103

Current portion of lease liabilities 1,152 1,312

Total current liabilities 46,266 34,443

Long-term supplier liability — 5,330

Long-term portion of lease liabilities 792 1,913

Deferred tax liabilities 93 15

Long-term portion of notes payable to related party — 5,699

Warrant liabilities 12,319 8,388

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20,000 shares authorized;

no shares issued and outstanding as of December 31, 2022

no shares issued and outstanding as of December 31, 2023 and 2022

Common Stock, $ 0.0001 par value;

800,000 shares authorized;

202,403 issued and outstanding as of December 31, 2022

203,210 issued and 203,030 outstanding as of December 31, 2023 and 202,403 issued and outstanding as of December 31, 2022

Treasury Stock, at cost:

2023 - 180 shares, 2022 - no shares

Additional paid-in-capital 339,783 329,218

1 unchanged sentence

Accumulated other comprehensive income 17 —

Net Parent company investment — 19,780

Total shareholders' equity 205,863 306,800

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Cash flows from financing activities:

Repurchase of common stock ( 1,969 ) — —

Proceeds received from sale of warrants 1,557 — —

Borrowings on notes payable to related party (Note 16) — 15,333 2,100

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Transfers from Parent (Note 16) — 59,051 85,493

Net cash provided by financing activities 366,334 84,757 58,304

Net increase in cash and cash equivalents $ 262,572 $ 267 $ 1,347

Net cash provided (used) by financing activities ( 412 ) 366,334 84,757

Net increase (decrease) in cash and cash equivalents $ ( 97,336 ) $ 262,572 $ 267

Cash and cash equivalents:

Cash and cash equivalents—beginning of period $ 265,240 $ 2,668 $ 2,401

Net increase in cash and cash equivalents 262,572 267 1,347

Net increase (decrease) in cash and cash equivalents ( 97,336 ) 262,572 267

Cash and cash equivalents—end of period $ 167,904 $ 265,240 $ 2,668

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

(In thousands, except share amounts)

Common Stock Additional

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comprehensive

income (loss) Net Parent company investment Total

income (loss) Net Parent company investment Treasury Stock Total

shares Balance

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Balance, December 31, 2021 — — — — 145 19,780 19,925

Net loss — — — — — ( 68,292 ) ( 68,292 )

Other comprehensive loss, net of tax — — — — ( 85 ) — ( 85 )

Net contribution from H-D — — — — — 86,279 86,279

Balance, December 31, 2021 — — — — 145 19,780 19,925

Net loss prior to the Business Combination — — — — — ( 56,500 ) ( 56,500 )

7 unchanged sentences

Issuance of common stock upon KYMCO PIPE 10,000 1 99,999 — — — 100,000

Share-based compensation expense — — 565 — — — 565

Share-based compensation — — 565 — — — 565

Balance, December 31, 2022 202,403 20 329,218 ( 22,438 ) — — 306,800

Net loss — — — ( 109,550 ) — — — ( 109,550 )

Other comprehensive loss, net of tax — — — — 17 — — 17

Share-based compensation 672 — 8,926 — — — — 8,926

Shareholder warrants exercised 135 — 1,639 — — — — 1,639

Repurchase of common stock — — — — — — ( 1,969 ) ( 1,969 )

Balance, December 31, 2023 203,210 $ 20 $ 339,783 $ ( 131,988 ) $ 17 $ — $ ( 1,969 ) $ 205,863

The accompanying notes are integral to the Consolidated financial statements.

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Description of Business and Basis of Presentation

LiveWire Group, Inc., a Delaware corporation, and its consolidated subsidiaries are referred to in these Consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “LiveWire.” The Company is focused on pioneering the rapidly growing two wheel electric motorcycle market.

We design and sell electric motorcycles and electric balance bikes with related electric motorcycle parts, accessories, and apparel.

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Pursuant to investment agreements entered into in connection with the Business Combination Agreement, Kwang Yang Motor Co., Ltd., KYMCO Capital Fund I Co., Ltd., SunBright Investment Co., Ltd., CycleLoop Co., Ltd.

and Kwang Yang Holdings

Limited (collectively, “KYMCO Group”) agreed to subscribe for an aggregate of 10,000,000 newly-issued shares of Common Stock at a purchase price of $ 10.00 per share for an aggregate purchase price of $ 100 million (the “KYMCO PIPE Investment”).

and Kwang Yang Holdings Limited (collectively, “KYMCO Group”) agreed to subscribe for an aggregate of 10,000,000 newly-issued shares of Common Stock at a purchase price of $ 10.00 per share for an aggregate purchase price of $ 100 million (the “KYMCO PIPE Investment”).

Pursuant to the Business Combination Agreement, and an investment agreement entered into prior to the Closing, the Legacy LiveWire Equityholder agreed to subscribe for an aggregate of 10,000,000 newly-issued shares of Common Stock at a purchase price of $ 10.00 per share for an aggregate purchase price of $ 100 million (the “Legacy LiveWire Equityholder PIPE Investment” and, together with the KYMCO PIPE Investment, the “PIPE Investments”).

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Operating results for the periods presented prior to the consummation of the Business Combination represent those of Legacy LiveWire.

Subsequent to the Business Combination, based upon management reporting changes, including reviewing the financial information of the Electric Motorcycles and STACYC businesses separately, the Company assessed that it has two reportable segments:

LiveWire Electric Motorcycles (“Electric Motorcycles”) and STACYC.

The Company's reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.

The Electric Motorcycles segment primarily focuses on the designing and selling of electric motorcycles and also sells motorcycle parts, accessories, and apparel.

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

Electric Motorcycles are sold at wholesale to a network of independent dealers and at retail through a Company-owned dealership and through online sales.

The STACYC segment primarily focuses on the designing and selling of electric balance bike for kids.

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However, the Consolidated financial statements may not be indicative of the consolidated financial position, results of operations, and cash flows of the Company in the future or if it had operated independently from H-D.

Actual costs that would have been incurred if the Company had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, primarily including technology support, marketing, finance, engineering, usage of shared assets, and other general corporate and administrative costs, such as treasury, human

resources, and others.

The Company also may incur additional costs associated with being a standalone, publicly listed company that were not included in the expense allocations and, therefore, may result in additional costs that are not reflected in the historical results of operations, financial position, and cash flows.

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At times, the Company’s cash and cash equivalents may exceed federally insured limits.

Concentrations of credit risk with respect to receivables are limited due to our large number of customers and their dispersion across geographic areas.

We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral.

We perform periodic credit evaluations of our customers’ financial condition

and generally do not require collateral.

At December 31, 2023, and 2022, 56.2 % and 36.2 %, respectively, of our net accounts receivable balance was due from the KTM customer group, driven by sales through the STACYC segment.

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(“HDFS”), a wholly owned subsidiary of H-D.

therefore, accounts receivable related to these sales are recorded in Accounts receivable from related party on the Consolidated balance sheets.

Sales to online and retail customers may also be financed by HDFS.

Accounts receivable related to these sales are recorded in Accounts receivable from related party on the Consolidated balance sheets.

The allowance for doubtful accounts deducted from total accounts receivable was $ 140 thousand and $ 211 thousand as of December 31, 2023, and 2022, respectively.

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Implementation costs incurred during the application development stage are capitalized and amortized over the term of the hosting arrangement on a straight-line basis.

The Company capitalized $ 4,930 thousand of costs during 2022 to implement cloud computing arrangements.

The Company capitalized $ 1,312 thousand and $ 4,930 thousand of costs during 2023 and 2022, respectively, to implement cloud computing arrangements.

Capitalized cloud computing arrangement costs are included within Other long-term assets on the Consolidated balance sheets.

Amortization expense totaled $ 35 thousand for 2022 and is presented within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.

There were no cloud computing arrangement costs capitalized and no amortization expense incurred in 2021 and 2020.

Amortization expense totaled $ 839 thousand and $ 35 thousand for the years ended December 31, 2023 and 2022, respectively, and is presented within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.

There were no cloud computing arrangement costs capitalized and no amortization expense incurred in 2021.

Impairment of Long-Lived Assets – The Company periodically evaluates the carrying value of long-lived assets, which consist of property, plant and equipment, intangible assets, and cloud computing arrangements, to be held and used when events and circumstances indicate the carrying amount may not be recoverable.

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The Company also reviews the useful life of its long-lived assets when events and circumstances indicate that the actual useful life may be shorter than originally estimated.

In the event the actual useful life is deemed to be shorter than the original useful life, depreciation is adjusted prospectively so that the remaining book value is depreciated over the revised useful life.

In the event the actual useful life is deemed to be shorter than the original useful life,

depreciation or amortization is adjusted prospectively so that the remaining book value is depreciated or amortized over the revised useful life.

Research and Development Expenses – Expenditures for research activities relating to product development are charged against income as incurred.

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Advertising costs relate to the Company’s efforts to promote its products and brands through the use of media and other means.

During 2022, 2021 and 2020, the Company incurred $ 7,940 thousand, $ 5,344 thousand and $ 2,602 thousand in advertising costs, respectively.

Shipping and Handling Costs – The Company classifies shipping and handling costs as a component of Cost of goods sold.

During the years ended December 31, 2023, 2022 and 2021, the Company incurred $ 4,671 thousand, $ 7,940 thousand and $ 5,344 thousand in advertising costs, respectively.

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

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New Accounting Standards

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07).

ASU 2023-07 is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

The main provisions of ASU 2023-07 require a public entity to disclose on an annual and interim basis:

(i) significant segment expenses provided to the chief operating decision maker, (ii) an amount representing the difference between segment revenue less segment expenses disclosed under the significant segment expense principle and each reported measure of segment profit or loss and a description of its composition, (iii) provide all annual disclosures about a reportable segment's profit or loss and assets currently required under Topic 280 in interim periods, (iv) clarify that if the chief operating decision maker uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit, (v) the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) all disclosures required by ASU 2023-07 and all existing segment disclosures under Topic 280 for an entity with a single reportable segment.

The new guidance is effective for the fiscal years beginning after December 15, 2023 and for interim periods within fiscal years

beginning after December 15, 2024.

Early adoption is permitted.

The Company is still evaluating the impact ASU 2023-07 will have on the Company's consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures.

The main provisions of ASU 2023-09 require a public entity to disclose on an annual basis (i) specific prescribed categories in the rate reconciliation, (ii) provide additional information for reconciling items that meet a quantitative threshold, (iii) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, (iv) the amount of income taxes paid, net of refunds received, disaggregated by individual jurisdictions in which income taxes paid is equal to greater than 5 percent of total income taxes paid, (v) income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (vi) income tax expense or benefit from continuing operations disaggregated by federal, state, and foreign.

ASU 2023-09 also removes certain disclosure requirements related to unrecognized tax benefits and cumulative unrecognized temporary differences.

The new guidance is effective for the fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is still evaluating the impact ASU 2023-09 will have on the Company's consolidated financial statement disclosures.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer.

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Total Revenue, net $ 38,023 $ 46,833 $ 35,806

(1) Prior year amounts have been reclassified to conform to current year presentation.

Revenue from the sale of 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.

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 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.

The Company offers sales incentive programs to independent dealers and retail customers designed to promote the sale of its products.

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The Company accounts for consideration payable to a customer as part of its sales incentives as a reduction of revenue, which is accrued at the later of the date the related sale is recorded or the date the incentive program is both approved and communicated.

During 2020, the Company made a sales concession to certain of its independent dealers related to retail store investments they had made for the sale and service of Harley-Davidson branded electric motorcycles.

At the end of 2020, the Company was in the process of re-evaluating its long-term strategic direction for its electric vehicle operations, including the distribution strategy.

Given the critical importance of the relationship between the Company and its dealers, the Company made a one-time concession payment, which was based on the investments the dealers had made.

There were no commitments for future purchases from the dealers in exchange for the payment.

As a result of this concession, the Company recorded a reduction to revenue of $ 15,271 thousand during 2020 for the change in the transaction consideration on previously recognized revenue related to electric vehicles sold by the Company to independent dealers through December 31, 2020.

The Company has not historically offered similar concessions, did not offer similar concessions during 2022 or 2021, and it does not anticipate similar concessions in the future.

The Company offers the right to return eligible parts and accessories and apparel.

When the Company offers a right to return, it estimates returns based on an analysis of historical trends and records revenue on the initial sale only in the amount that it expects to be entitled.

The Company offers the right to return eligible parts and accessories and apparel and, in limited circumstances, on electric motorcycles.

The Company estimates returns based on an analysis of historical trends and probability of returns and records revenue on the initial sale only in the amount that it expects to be entitled.

The remaining consideration is deferred in a refund liability account.

The refund liability is remeasured for changes in the estimate at each reporting date with a corresponding adjustment to revenue.

The Company had a refund asset of $ 299 thousand and zero at December 31, 2023 and December 31, 2022, respectively.

The Company had a refund liability of $ 327 thousand and zero at December 31, 2023 and December 31, 2022, respectively.

Variable consideration related to sales incentives and rights to return is adjusted at the earliest of when the amount of consideration the Company expects to receive changes, or the consideration becomes fixed.

Adjustments for variable consideration related to previously recognized sales were not material during 2022, 2021 and 2020.

Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment.

Adjustments for variable consideration related to previously recognized sales were not material for the years ended December 31, 2023, 2022 and 2021.

Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment costs in Cost of goods sold.

The Company accrues for the shipping and handling in the same period that the related revenue is recognized.

The Company offers standard, limited warranties on its motorcycles, electric balance bikes, and parts and accessories.

The Company offers standard, limited warranties on its electric motorcycles, electric balance bikes, and parts and accessories.

These warranties provide assurance that the product will function as expected and are not separate performance obligations.

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Contract Liabilities

The Company maintains certain deferred revenue balances related to payments received at contract inception in advance of the Company’s performance under the contract that generally relates to customer deposits for electric balance bikes and electric motorcycles.

Deferred revenue is recognized as revenue once the Company performs under the contract.

Deferred revenue of $ 163 thousand and $ 1,644 thousand was included in Accrued liabilities in the Company's Consolidated balance sheets as of December 31, 2022 and December 31, 2021, respectively.

The Company maintains certain contract liability balances related to payments received at contract inception in advance of the Company’s performance under the contract that generally relates to customer deposits for electric balance bikes and electric motorcycles and consideration received upon transfer of control of the S2 motorcycle for FOTA software updates.

Contract liabilities are recognized as revenue once the Company performs under the contract.

The current portion of contract liabilities of $ 214 thousand and $ 163 thousand were included in Accrued liabilities and the long-term portion of contract liabilities of $ 245 thousand and zero were included in Other long-term liabilities in the Company's Consolidated balance sheets as of December 31, 2023 and December 31, 2022, respectively.

The Company expects to recognize all $ 214 thousand of the current portion of unearned revenue in 2024.

The Company expects to recognize $ 245 thousand included in Other long-term liabilities over the next five years.

Previously deferred revenue recognized as revenue in 2023 and 2022 was $ 163 thousand and $ 1,644 thousand, respectively.

The Company expects to recognize all $ 163 thousand of the remaining unearned revenue in 2023.

Business Combination

As discussed in Note 1, Description of Business and Basis of Presentation, the Company completed the previously announced Business Combination on September 26, 2022.

The Business Combination is accounted for as a reverse recapitalization, in accordance with GAAP.

Under this method of accounting, ABIC has been treated as the acquired company for financial reporting purposes.

As discussed in Note 1, Description of Business and Basis of Presentation, the Company completed the Business Combination on September 26, 2022.

The Business Combination was accounted for as a reverse recapitalization, in accordance with GAAP.

Under this method of accounting, ABIC was treated as the acquired company for financial reporting purposes.

The net assets of ABIC were stated at carrying value, with no goodwill or other intangible assets recorded.

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and (ii) a one-time issuance of 6,250,000 Earn Out Shares if the VWAP of Common Stock is greater than or equal to $ 18.00 over any 20 trading days within any 30 consecutive trading-day period ((i) and (ii) each, a “Triggering Event”), in each case, during a period beginning 18 months from the Closing Date and expiring five years thereafter (the “Earn Out Period”).

Event that has not occurred will be deemed to have occurred, LiveWire will issue the applicable Earn Out Shares to H-D and H-D will be eligible to participate in such change of control.

Additionally, if there is a change of control of the Company prior to the expiration of the Earn Out Period that will result in the holders of Common Stock receiving a price per share equal to or in excess of the applicable share price of LiveWire in connection with a Triggering Event, then immediately prior to the consummation of such change of control, any Triggering Event that has not occurred will be deemed to have occurred, LiveWire will issue the applicable Earn Out Shares to H-D and H-D will be eligible to participate in such change of control.

The total number of shares of the Company’s common stock outstanding immediately following the Business Combination was comprised as follows:

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The most significant assets retained by the Parent included materials that relate to the manufacture of LiveWire One electric motorcycles.

The most significant liabilities retained and settled by the Parent included employee liabilities related to service

rendered prior to the closing of the business combination, accounts payable outstanding for amounts owed to suppliers to manufacture electric motorcycles, a supplier liability for an excess firm purchase commitment, and certain warranty liabilities associated with the Harley-Davidson branded LiveWire motorcycle (see disclosure in Note 12, Product Warranty and Recall Campaigns).

The most significant liabilities retained and settled by the Parent included employee liabilities related to service rendered prior to the closing of the business combination, accounts payable outstanding for amounts owed to suppliers to manufacture electric motorcycles, a supplier liability for an excess firm purchase commitment, and certain warranty liabilities associated with the Harley-Davidson branded LiveWire motorcycle (see disclosure in Note 12, Product Warranty and Recall Campaigns).

The income tax (benefit) provision has been calculated using the separate return method, which is meant to reflect how taxes would have been recorded, had the Company filed its own tax return.

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2023 2022 2021

Federal $ 3 $ — $ —

State ( 10 ) — 56

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Foreign rate differential 3 5 8

Nondeductible expenses 43 420 —

Nondeductible (benefits) expenses ( 293 ) 43 420

Unrecognized tax benefits including interest and penalties — — 6

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Change in value of warrants 844 ( 1,144 ) —

Research & Development Tax Credit ( 4,057 ) — —

Other ( 314 ) 35 5

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The Company generated operating losses in each of the years presented.

The income tax benefit recognized related to these losses was zero for each of the years ended December 31, 2022, 2021, and 2020 due to the recognition of a valuation allowance.

Operating results of the Company are included in the consolidated federal and combined state tax returns of H-D and the resulting tax attributes have been fully utilized by H-D and are no longer available to the Company for future use.

Future income tax (benefits) provisions may be impacted by future changes in the realizability of the hypothetical net operating loss deferred tax assets.

The income tax benefit recognized related to these losses was zero for each of the years ended December 31, 2023, 2022, and 2021.

Operating results of the U.S.

entities are included in the consolidated U.S.

federal and combined state tax returns of H-D and these tax attributes have been fully utilized by H-D and are no longer available to the Company for future use.

Future income tax (benefits) provisions may be impacted by future changes in the utilization of LiveWire attributes by H-D.

The difference between the benefit at the statutory rate and the income tax (benefit) provision related to these operating losses is reflected in the table above as unbenefited losses.

After an assessment of the positive and negative evidence regarding the realizability of the separate state NOLs reflected in the financials, it was determined a valuation allowance was required.

After an assessment of the positive and negative evidence regarding the realizability of the separate state NOLs reflected in the financials, it was determined a valuation allowance continues to be required on separate state NOLs.

Additionally, it was necessary to assess the positive and negative evidence of the realizability of the U.S.

federal and consolidated state net deferred tax asset balance for the periods ended December 31, 2022 and 2021.

After such an assessment, it was determined a valuation allowance was required.

federal and consolidated state net deferred tax asset balance remaining after H-D utilization of LiveWire attributes for the periods ended December 31, 2023 and 2022.

After such an assessment, it was determined a valuation allowance continues to be required.

The difference between the benefit at the statutory rate and the income tax (benefit) provision related to these valuation allowances is reflected in the table above as valuation allowance.

The Company’s Non-US entities generated both income tax and operating losses for a net income tax provision of $ 7 thousand.

Non-US operating losses cannot be utilized by H-D, therefore a deferred tax asset was recorded.

After assessment of the positive and negative evidence regarding realizability of the Non-US deferred tax assets, it was determined the deferred tax assets are more likely than not to be realized and no valuation allowance was recorded.

The principal components of the Company’s deferred income tax assets and liabilities as of December 31, include the following (in thousands):

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Net deferred tax liability $ ( 89 ) $ ( 15 )

The net deferred tax liability balance decreased from December 31, 2021 to December 31, 2022 primarily due to an increase in the deferred tax asset balance related to capitalized research and experimental expenses, which will reverse in future periods against a significant portion of the deferred tax liabilities.

The net deferred tax liability balance increased from December 31, 2022 to December 31, 2023 primarily due to an increase in the deferred tax liability balance related to tax basis amortizable goodwill that is not amortized for book purposes.

The tax operating loss and tax credit carryforwards, calculated on the separate return method for allocating tax expense, have been utilized by H-D in the consolidated tax return, and therefore are not available to the Company in future periods.

Under the terms of the Company’s Tax Matters Agreement with H-D, LiveWire will receive no compensation from H-D for the use of such attributes.

Under the terms of the Company’s Tax Matters Agreement with H-D, LiveWire will receive no compensation from H-D for the use of such attributes, but they may be used to offset any future liabilities that may be owed by LiveWire to H-D under the Tax Matters Agreement.

In addition, these tax loss and credit carryforwards would not have been realized on a separate return basis.

As a result, consistent with prior periods, neither the deferred tax assets nor the full valuation allowances have been recorded for these hypothetical attributes.

The realizability of the hypothetical attributes will continue to be monitored on a separate return basis.

Any change to the realizability of these hypothetical attributes on a separate return basis will be booked as a deferred income tax benefit or expense with an offset to equity.

For the period from the close of the Business Combination and effective date of the Tax Matters agreement, the tax net operating loss and tax credit carryforward, and offsetting full valuation allowance, was $ 3,764 thousand.

For the period from the close of the Business Combination and effective date of the Tax Matters Agreement, the unrecorded tax net operating loss and tax credit carryforward, unbenefited by LiveWire, was $ 32,014 thousand.

The Company recognizes interest and penalties related to unrecognized tax benefits in the income tax (benefit) provision.

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Unrecognized tax benefits, beginning of period $ 162 $ —

Increase in unrecognized tax benefits for tax positions take in prior period 162 —

Increase (decrease) in unrecognized tax benefits for tax positions take in prior period ( 162 ) 162

Unrecognized tax benefits, end of period $ — $ 162

There were no unrecognized tax benefits as of December 31, 2022 and 2021, respectively, that, if recognized, would affect the effective tax rate, due to the NOL and valuation allowance positions.

There were zero gross benefits related to interest and penalties associated with unrecognized tax benefits recognized in the Consolidated statements of operations and comprehensive loss during 2022, 2021, and 2020, respectively, due to the NOL and valuation allowance positions.

There were no unrecognized tax benefits as of December 31, 2023 and 2022 that, if recognized, would affect the effective tax rate due to the NOL and valuation allowance positions.

There was zero interest and penalties associated with unrecognized tax benefits recognized in the Consolidated statements of operations and comprehensive loss during 2023, 2022, and 2021.

There were zero gross interest and penalties associated with unrecognized tax benefits recognized in the Consolidated balance sheets at December 31, 2023 and 2022, respectively, due to the NOL and valuation allowance positions.

The Company expects the total amount of unrecognized tax benefits, related to continuing operations during the fiscal year ending December 31, 2023, to reduce to zero.

The current year reserve will reverse when the Company files a method change in 2023.

The Company did not make any income tax payments for the years ended December 31, 2023, 2022, and 2021.

LiveWire and its subsidiaries are currently members of H-D’s consolidated, combined, unitary and other similar groups for federal, state and local income tax purposes.

The consolidated group files U.S.

federal and various state income tax returns which are no longer subject to examination before 2020.

LiveWire has separate state and non-US filing requirements that will remain open to tax authority examination through 2029.

Earnings Per Share

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Diluted EPS is computed using the weighted average number of shares of common stock, plus the effect of potentially dilutive securities.

The Company applies the treasury method to calculate the dilution impact of share-based awards —restricted stock units, and performance share units.

Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the potentially dilutive shares were antidilutive in those periods.

The Company applies the treasury method to calculate the dilution impact of share-based awards —restricted stock units, performance share units, and warrants.

Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the potentially dilutive shares were anti-dilutive in those periods.

Computation of basic and diluted earnings per share for the years ended December 31, was as follows (in thousands, except per share amounts):

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Effect of dilutive securities – Warrants — — —

Effect of dilutive securities – employee stock compensation plan — — —

Effect of dilutive securities – employee stock compensation awards — — —

Diluted weighted-average shares outstanding 202,504 172,003 161,000

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Diluted $ ( 0.54 ) $ ( 0.46 ) $ ( 0.42 )

Prior to the Business Combination date, LiveWire did not have any issued and outstanding common stock or any common share equivalents.

Accordingly, for 2021 and 2020, the net loss per share was calculated based on the 161,000,000 shares of Common Stock distributed to H-D in exchange for the membership interests of Legacy LiveWire.

At the time of the Business Combination, additional shares of Common Stock were issued, which are reflected in the weighted-average shares outstanding as of December 31, 2022.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, to the extent dilutive, including unvested restricted stock units (“RSUs”), unvested performance share units (“PSUs”), and Warrants.

(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding

Prior to the Business Combination date, the Company did not have any issued and outstanding common stock or any common share equivalents.

Accordingly, for 2021, the net loss per share was calculated based on the 161,000,000 shares of Common Stock distributed to H-D in exchange for the membership interests of Legacy LiveWire.

At the time of the Business Combination, additional shares of Common Stock were issued, which are reflected in the weighted-average shares outstanding as of December 31, 2023 and 2022.

Potential shares of common stock are excluded from the computation of diluted net loss per share if their effect would have been anti-dilutive for the periods presented or if the issuance of shares is contingent upon events that did not occur by the end of the period.

For 2022, employee stock compensation plan awards representing 19 thousand underlying common shares were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive.

For 2022, warrants representing 51,788 thousand underlying common shares were excluded from the computation of diluted net loss per share because the effect would have been antidilutive.

There were no anti-dilutive employee stock compensation awards or warrants for 2021 and 2020.

Additionally, the Company has not included the impact of the Earn-Out Shares, discussed in Note 1, Description of Business and Basis of Presentation, in the calculation EPS as the triggering events have not occurred.

For the years ended December 31, 2023 and 2022, 2,617 thousand and 2,495 thousand employee stock compensation plan awards, respectively, were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive.

For the years ended December 31, 2023 and 2022, 30,365 thousand and 30,500 thousand warrants, respectively, were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive.

There were no anti-dilutive employee stock compensation awards or warrants for 2021.

Additionally, the Company has not included the impact of the Earn-Out Shares, discussed in Note 1, Description of Business and Basis of Presentation, in the calculation of EPS as the triggering events have not occurred.

Additional Balance Sheet Information

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Inventory valuation reserves deducted from cost were $ 3,539 thousand and $ 1,320 thousand as of December 31, 2023 and 2022, respectively.

Other current assets primarily include prepaid expenses of $ 3,700 thousand as of December 31, 2022.

As of December 31, 2021, Other current assets included $ 3,025 thousand of prepaid supplier deposits relating to future inventory purchases.

Other current assets primarily include prepaid expenses of $ 1,905 thousand and $ 3,700 thousand as of December 31, 2023 and 2022, respectively.

Property, plant and equipment, net consisted of the following as of December 31, (in thousands):

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Software, net of accumulated amortization, included in Property, plant and equipment, net, was $ 14,395 thousand and $ 1,309 thousand as of December 31, 2023 and 2022, respectively.

The Company had $ 7,748 thousand related to purchases of property, plant and equipment included in Accrued liabilities as of December 31, 2022, and $ 3,651 thousand and $ 2,461 thousand related to purchases of property, plant and equipment included in Accounts payable as of December 31, 2021 and 2020, respectively.

The Company had $ 4,933 thousand and $ 7,748 thousand related to purchases of property, plant and equipment included in Accrued liabilities as of December 31, 2023 and December 31, 2022, respectively.

The Company had $ 3,651 thousand related to purchases of property, plant and equipment included in Accounts payable as of December 31, 2021.

Other long-term assets consisted primarily of capitalized implementation costs incurred in connection with cloud computing arrangements that do not include a license to internal-use software in accordance with Accounting Standards Update 2018-15.

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Accrued liabilities $ 21,189 $ 20,343

Prior to consummation of the Business Combination, the Company has a liability related to an excess firm purchase commitment to a supplier on a carve-out accounting basis.

This liability remained with H-D as part of the Separation Agreement in connection with the Business Combination.

The total obligation was $ 5,330 thousand as of December 31, 2021, all recorded as a non-current liability in Long-term supplier liability on the Consolidated balance sheets.

The Company did not have any excess firm purchase commitment liabilities as of December 31, 2022.

Goodwill and Other Intangible Assets

Goodwill includes the cost of acquired businesses in excess of the fair value of the tangible and other intangible net assets acquired.

The carrying amount of goodwill was $ 8,327 thousand as of both December 31, 2022 and 2021.

The carrying amount of goodwill was $ 8,327 thousand as of December 31, 2023 and 2022.

Intangible assets, net, excluding goodwill, consisted of trademarks, patents, distributor relationships, and non-compete agreements with estimated remaining useful lives ranging from 5 to 10 years.

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Our assessment for impairment of goodwill utilized a discounted cash flow analysis and a guideline public company market approach to determine the fair value of the reporting unit for comparison to the corresponding carrying value, and a reconciliation of the Company’s concluded values for each reporting unit to the Company’s market capitalization.

Based upon the Company’s fiscal year 2022 annual goodwill impairment analysis, the Company concluded that it is more likely than not that the fair value of goodwill exceeded its carrying value and there were no impairments to goodwill for any periods presented.

Based upon the Company’s annual goodwill impairment analyses, the Company concluded there were no impairments to goodwill for any periods presented.

The Company determines if an arrangement is or contains a lease at contract inception.

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The Company has operating lease arrangements for real estate.

The Company’s leases have a remaining lease term of 1 to 5 years.

The Company’s leases have a remaining lease term of one to four years .

The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

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ROU assets obtained in exchange for lease obligations 109 910 3,940

Lease modifications $ — $ — $ ( 83 )

Weighted-average remaining lease term (in years) 2.10 2.80 3.26

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Warrant Liabilities

Upon consummation of the Business Combination (see Note 4, Business Combination), the Company assumed 30,499,990 Warrants to purchase LiveWire's Common Stock, comprised of 19,999,990 public warrants, originally issued by ABIC as part of ABIC’s IPO of units (the “Public Warrants”) and 10,500,000 of outstanding warrants originally issued in a private placement in connection with the IPO of ABIC (the “Private Placement Warrants”).

Upon consummation of the Business Combination, the Company assumed 30,499,990 Warrants to purchase the Company's Common Stock, comprised of 19,999,990 public warrants, originally issued by ABIC as part of ABIC’s IPO of units (the “Public Warrants”) and 10,500,000 of outstanding warrants originally issued in a private placement in connection with the IPO of ABIC (the “Private Placement Warrants”), collectively with the Public Warrants, the “Warrants”).

The Warrants expire five years from the completion of the Business Combination.

At December 31, 2022, there were 19,999,990 Public Warrants and 10,500,000 Private Warrants outstanding.

There were 19,865,207 and 19,999,990 Public Warrants outstanding as of December 31, 2023 and 2022, respectively, and 10,500,000 Private Warrants outstanding as of both December 31, 2023 and 2022.

Each Warrant entitles the registered holder to purchase one share of Common Stock at a price of $ 11.50 per share.

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• in whole and not in part;

• at a price equal to a number of the Company's Common Stock to be determined, based on the redemption date and the fair market value of the Company’s Common Stock;

• upon a minimum of 30 days’ prior written notice of redemption;

• if, and only if, the last reported sale price of the Company’s Common Stock equals or exceeds $ 10.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders;

• if, and only if, the Private Placement Warrants are also concurrently exchanged at the same price (equal to a number of Class A ordinary shares) as the outstanding Public Warrants

• can be exercised on a cashless basis

• at $ 0.10 per Warrant upon a minimum 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the agreed table, based on the redemption date and the “fair market value” of Common Stock;

• if, and only if, the closing price of the shares of Common Stock equals or exceeds $ 10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant) for any 20 trading days within the 30 -trading day period ending three trading days before we send the notice of redemption to the Warrant holders;

• if the closing price of the shares of Common Stock for any 20 trading days within a 30 -trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders is less than $ 18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Warrants, as described above.

Private Placement Warrants

The Private Placement Warrants have terms and provisions that are similar to those of the Public Warrants, including as to the exercise price, exercisability and exercise period.

The Private Placement Warrants will not be redeemable by the Company so long as they are held by the initial purchasers of the Private Placement Warrants or its permitted transferees and the reference value exceeds $ 18.00 per share.

The initial Private Placement Warrant purchasers, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis if the reference value is between $ 10.00 and $ 18.00 .

If the Private

Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.

There were no exercises or redemptions of the Public or Private Warrants during the year ended December 31, 2022.

The Company recognized income of $ 5,033 thousand as a change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss for year ended December 31, 2022.

The Private Placement Warrants will not be redeemable by the Company so long as they are (i) held by the initial purchasers of the Private Placement Warrants or its permitted transferees and (ii) the reference value exceeds $ 18.00 per share.

The initial Private Placement Warrant purchasers, or its permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis if the reference value is between $ 10.00 and $ 18.00 .

If the Private Placement Warrants are held by holders other than the AEA-Bridges Impact Sponsor, LLC (the “Sponsor”) or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.

During the year ended December 31, 2023, there were no redemptions and 135 thousand exercises of the Public Warrants and no redemptions or exercises of the Private Warrants.

There were no redemptions or exercises of the Public or Private Warrants during in the period subsequent to the Business Combination in 2022.

The Company recognized expense of $ 4,020 thousand and income of $ 5,033 thousand as a change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss for years ended December 31, 2023 and 2022, respectively.

The Company determined the Public Warrants and Private Placement Warrants do not meet the criteria to be classified in stockholders’ equity and the fair value of the warrants should be classified as a liability.

At December 31, 2022, the Company’s Warrant liability was $ 8,388 thousand.

At December 31, 2023 and 2022, the Company’s Warrant liability was $ 12,319 thousand and $ 8,388 thousand, respectively.

The Company assesses the inputs used to measure fair value using a three-tier hierarchy.

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Level 1 Level 2 Level 3 Total

Contingent consideration liability $ — $ — $ 2,180 $ 2,180

Money market funds $ 257,000 $ — $ — $ 257,000

Public Warrants $ 5,500 $ — $ — $ 5,500

Private Placement Warrants — 2,888 — 2,888

Share-based awards settled in cash 1,618 — — 1,618

$ 7,118 $ 2,888 $ — $ 10,006

There were no significant assets or liabilities on the Company’s Consolidated balance sheets measured at fair value on a nonrecurring basis.

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The Warrants were accounted for as liabilities in accordance with ASC 815 and are presented within Warrant liabilities in the accompanying Consolidated balance sheets.

The Warrant liabilities are measured at fair value at inception and on a recurring

basis, with changes in fair value presented within Change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss.

The Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within Change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss.

The Public Warrants are publicly traded under the symbol “LVWR WS”, and the fair value of the Public Warrants at a specific date is determined by the closing price of the Public Warrants as of that date.

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Share-based awards settled in cash represent grants of share-based awards that will be settled with employees in cash and are presented within Accrued liabilities and Other long-term liabilities in the Consolidated balance sheets.

They are valued using the market price of the Company’s stock and are remeasured at each balance sheet date, and are classified under Level 1 under the fair value hierarchy.

They are valued using the market price of the Company’s and Parent’s stock and are remeasured at each balance sheet date and are classified under Level 1 under the fair value hierarchy.

Contingent Consideration Liability

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The final payment in 2022 of $ 2,180 thousand settled the Company’s contingent consideration obligation related to acquisition of STACYC.

The following table presents the changes in the contingent consideration liability during the years ended December 31, 2022, 2021 (in thousands):

Balance as of December 31, 2020 $ 4,311

Remeasurement of contingent consideration liability 49

Cash payment ( 2,180 )

Balance as of December 31, 2021 $ 2,180

Remeasurement of contingent consideration liability —

Cash payment ( 2,180 )

Balance as of December 31, 2022 $ —

The change in fair value recognized in net loss is recorded in Selling, administrative and engineering expense in the Consolidated statements of operations and comprehensive loss.

During 2021 and 2020, the Company remeasured the contingent consideration liability and recorded an increase of $ 49 thousand and $ 788 thousand, respectively, due to an increased likelihood of the actual achievement for milestones being reached.

Other Fair Value Measurements

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The warranty coverage for the retail customer generally begins when the product is sold to the retail customer.

The Company accrues for future warranty claims at the time of sale using an estimated cost based primarily on historical Company claim information.

The Company accrues for future warranty claims at the time of sale by the Company using an estimated cost based primarily on historical Company claim information.

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

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(1) In connection with the Separation and Business Combination, $ 787 thousand of warranties and recall liabilities were retained by H-D related to pre-transaction claims for certain H-D branded electric motorcycles.

The liability for recall campaigns was $ 269 thousand at December 31, 2021.

There was no liability for recall campaigns as of December 31, 2022, as the liability related to pre-transaction recall campaigns related to certain H-D branded electric motorcycles and was retained by H-D.

Employee Benefit Plans and Other Postretirement Benefits

Defined Benefit Plans and Other Postretirement Benefit Plans

H-D sponsors a qualified pension plan and a postretirement healthcare plan which cover certain eligible Company employees and retirees.

These defined benefit plans include both Company eligible employees and other employees of H-D (“Shared” plans) and are accounted for as multiemployer benefit plans and the related net benefit plan assets and obligations are not included in the Company’s Consolidated balance sheets.

Prior to the Separation and Business Combination, a portion of the related net periodic benefit plan cost has been allocated to the Company based on an estimated cost per plan participant and allocations of corporate and other shared functional personnel.

The Company recorded expense of $ 45 thousand, income of $ 11 thousand, and expense of $ 123 thousand for the years ended December 31, 2022, 2021 and 2020, respectively, for the Company’s allocation of net periodic pension and healthcare plan costs related to the Company’s employees.

In 2021, the allocation of net periodic pension costs includes a curtailment gain recorded in connection with H-D’s decision to cease benefit accruals for salaried employees after December 31, 2022.

The Company is not required to make any contributions to the plans sponsored by H-D.

Subsequent to the Business Combination, the Company does not have any expense allocation related to H-D’s qualified pension plan and a postretirement healthcare plan.

There was no liability for recall campaigns as of December 31, 2023 and 2022 as the liability related to pre-transaction recall campaigns related to certain H-D branded electric motorcycles and was retained by H-D.

Employee Benefit Plans

Defined Contribution Plans

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Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter.

Refer to Note 7, Additional Balance Sheet Information, for a discussion of a supplier liability and Note 12, Product Warranty and Recall Campaigns, for a discussion of warranty and recall liabilities.

Refer to Note 12, Product Warranty and Recall Campaigns, for a discussion of warranty and recall liabilities.

The Company had no product liability claims as of December 31, 2023 and 2022.

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The expense recognized reflects the number of awards that are ultimately expected to vest based on the service and, if applicable, performance requirements of each award.

Total compensation expense related to LiveWire share-based awards was $ 579 thousand for the year ended December 31, 2022 and zero for both the years ended December 31, 2021 and 2020.

Total compensation expense related to LiveWire share-based awards was $ 9,378 thousand, $ 579 thousand, and zero for the years ended December 31, 2023, 2022, and 2021, respectively.

See separate discussion below related to historical H-D Share-Based Awards for description of awards and related expense.

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Time-Based RSUs for directors vest over a one -year period.

The Company recognized $ 416 thousand for the year ended December 31, 2022 in share-based compensation expense related to the Time-Based RSUs.

There were no Time-Based RSUs outstanding prior to fiscal year 2022 and therefore no share-based compensation expense was recorded in 2021 and 2020 related to the Time-Based RSUs.

The Company recognized $ 7,305 thousand and $ 416 thousand for the years ended December 31, 2023 and 2022, respectively, in share-based compensation expense related to the Time-Based RSUs.

There were no Time-Based RSUs outstanding prior to fiscal year 2022 and therefore no share-based compensation expense was recorded in 2021 related to the Time-Based RSUs.

During the year ended December 31, 2022, the Company granted Performance RSUs to certain executive officers and other eligible employees.

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The grant date fair value of the Performance RSUs was estimated using a Monte-Carlo simulation.

The Company recognized $ 163 thousand of share-based compensation expense for the year ended December 31, 2022 for the Performance RSUs.

There were no Performance RSUs outstanding prior to fiscal year 2022 and therefore no share-based compensation expense was recorded in 2021 and 2020 related to the Performance RSUs.

The Company recognized $ 2,073 thousand and $ 163 thousand of share-based compensation expense for the year ended December 31, 2023 and 2022 respectively, for the Performance RSUs.

There were no Performance RSUs granted in 2023.

There were no Performance RSUs outstanding prior to fiscal year 2022 and therefore no share-based compensation expense was recorded in 2021 related to the Performance RSUs.

Restricted Stock Units - Settled in Stock – The fair value of the Time-Based RSUs settled in stock is determined based on the market price of the Company’s stock on the grant date.

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RSUs Performance RSUs Total

RSUs Weighted-Average Fair Value Per Share

RSUs Weighted-Average Grant Date Fair Value Per Share

Nonvested, beginning of period 1,870 625 2,495 $ 7.34

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Nonvested, end of period 1,992 625 2,617 $ 7.56

The activity for these awards for the year ended December 31, 2022 was as follows (in thousands, expect for per share amounts):

RSUs Performance RSUs Total

RSUs Weighted-Average Grant Date Fair Value Per Share

Nonvested, beginning of period — — — $ —

Granted 1,870 625 2,495 $ 7.34

Vested — — — $ —

Forfeited — — — $ —

Nonvested, end of period 1,870 625 2,495 $ 7.34

As of December 31, 2023, there was $ 16,230 thousand of unrecognized compensation cost related to RSUs settled in stock that is expected to be recognized over a weighted-average period of 2.00 years.

Restricted Stock Units - Settled in Cash – Time-Based RSUs and Performance RSUs settled in cash are recorded in the Consolidated balance sheets as a liability until vested.

Restricted Stock Units - Settled in Cash – The current portion of Time-Based RSUs and Performance RSUs settled in cash are recorded in Accrued liabilities and the long-term portion is recorded in Other long-term liabilities in the Consolidated balance sheets until vested.

The fair value is determined based on the market price of the Company’s stock and is remeasured at each balance sheet date.

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RSUs Performance RSUs Total

RSUs Weighted-Average Fair Value Per Share

RSUs Weighted-Average Grant Date Fair Value Per Share

Nonvested, beginning of period 64 24 88 $ 7.52

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Nonvested, end of period 71 24 95 $ 7.01

The activity for these awards for the year ended December 31, 2022 was as follows (in thousands, except for per share amounts):

RSUs Performance RSUs Total

RSUs Weighted-Average Grant Date Fair Value Per Share

Nonvested, beginning of period — — — $ —

Granted 64 24 88 $ 7.52

Vested — — — $ —

Forfeited — — — $ —

Nonvested, end of period 64 24 88 $ 7.52

During the year ended December 31, 2023, there were cash payments of $ 233 thousand related to these awards.

As of December 31, 2023, there was $ 864 thousand of unrecognized compensation cost related to RSUs settled in cash that is expected to be recognized over a weighted-average period of 1.97 years.

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Prior to consummation of the Business Combination, as employees transferred from H-D to the Company, any outstanding share-based awards previously granted have been retained by the employees and have been transferred to the Company.

All awards granted under the plans are based on H-D’s common shares and, as such, were reflected in the Consolidated balance sheets as Net Parent company investment and Accrued liabilities for equity-classified awards and liability-classified awards, respectively.

Share-based compensation included in the Consolidated statements of operations and comprehensive loss includes expense attributable to the Company based on the awards and terms previously granted to the Company’s employees.

Total share-based award compensation expense recognized by the Company for the years ended

December 31, 2022, 2021 and 2020 was $ 1,694 thousand, $ 786 thousand and $ 188 thousand, respectively.

The cost of each equity-classified award is based on the fair value as of the grant date.

The cost of each liability-classified award is based on the fair value at the grant date, subsequently remeasured at each reporting date until the date of settlement.

Share-based award expense is recognized on a straight-line basis over the service periods.

The expense recognized reflects the number of awards that are ultimately expected to vest based on service.

Total share-based award compensation expense recognized by the Company for the Historical H-D Share-Based Awards for the years ended December 31, 2023, 2022 and 2021 was $ 1,119 thousand, $ 1,694 thousand and $ 786 thousand, respectively.

During 2022, the Company elected to cancel and convert outstanding RSUs held by 91 of the Company's employees into the right to receive cash payments (each, an “RSU Payment”) on the date which the RSU award would otherwise become vested in accordance with the vesting schedule applied to such award immediately prior to cancellation of the award.

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The incremental compensation cost resulting from the modification of the RSUs was immaterial.

As of December 31, 2022, the accrued liability for the cash awards was $ 1,603 thousand.

As of December 31, 2023 and 2022, the accrued liability for the cash awards was $ 1,017 thousand and $ 1,603 thousand, respectively.

Each RSU Payment is a liability-classified award, which will (i) be in amount equal to (x) the number of shares of H-D's common stock subject to such RSU award that would have otherwise become vested on the applicable RSU vesting date in accordance with the applicable RSU vesting schedule, multiplied by (y) the closing trading price of a share of H-D's common stock on such RSU vesting date and (ii) be paid to the applicable employee of the Company on or within 30 days following the applicable RSU vesting date, subject to and conditioned upon such employee's continued employment or service as applicable, to the Company through the applicable vesting date.

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Nonvested, beginning of period 73 $ 38

Granted — $ —

Vested ( 40 ) $ 38

Forfeited ( 5 ) $ 36

Nonvested, end of period 28 $ 37

During the year ended December 31, 2023, there were $ 1,705 thousand of cash payments related to these awards.

As of December 31, 2023, there was $ 731 thousand of unrecognized compensation cost related to liability-classified awards that is expected to be recognized over a weighted-average period of 0.62 years.

The activity for these awards for the year ended December 31, 2022 was as follows (in thousands, except for per share amounts):

Shares & Units Weighted-Average Fair Value Per Share

Nonvested, beginning of period — $ —

Awards transferred to cash payment 76 $ 33

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Nonvested, end of period 73 $ 38

As of December 31, 2022, there was $ 1,941 thousand of unrecognized compensation cost related to liability-classified awards, net of estimated forfeitures, that is expected to be recognized over a weighted-average period of 1.14 years.

The total income tax benefit associated with share-based compensation recorded in the Company's Consolidated statements of operations and comprehensive loss was $ 670 thousand for the year ended December 31, 2022 and zero for both the years ended December 31, 2021 and 2020.

The total income tax benefit associated with share-based compensation recorded in the Company's Consolidated statements of operations and comprehensive loss was $ 2,201 thousand, $ 670 thousand, and zero for the years ended December 31, 2023, 2022, and 2021, respectively.

Treasury Stock

The Company retained $ 1,969 thousand, or 180 thousand shares of common stock, to satisfy withholding taxes in connection with the vesting of restricted stock units during the twelve months ended December 31, 2023.

These retained shares were recorded at cost as Treasury Stock.

There were no shares of common stock retained by the Company to satisfy withholding taxes in connection with the vesting of restricted stock units for the twelve months ended December 31, 2022 and 2021.

Related Party Transactions

In connection with the Business Combination, we entered into a number of agreements with H-D to govern the Separation and provide a framework for the relationship between the parties going forward pursuant to which we and/or H-D have continuing obligations to each other .

In connection with the Business Combination, the Company entered into a number of agreements with H-D to govern the Separation and provide a framework for the relationship between the parties going forward pursuant to which the Company and/or H-D have continuing obligations to each other .

All transactions with H-D subsequent to the Business Combination are considered related party transactions.

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The charges for the services are on a cost-plus basis (with a mark-up to reflect the management and administrative cost of providing the services).

The services generally commenced on the date of the Separation and are intended to terminate between six and twelve months of the date of the Separation.

The services generally commenced on the date of the Separation and were intended to terminate between six and twelve months of the date of the Separation.

We generally have the ability to (i) extend the term that a service is provided for by up to six months , subject to a maximum aggregate service term of 18 months;

and (ii) terminate any or all

services early subject to a 45-day notice period.

and (ii) terminate any or all services early subject to a 45 -day notice period.

H-D has the right to terminate the Transition Services Agreement for our non-payment of charges.

As of December 31, 2023, we have extended certain of the services from the original termination date, which will now terminate in 2024, and may, in the future, convert a minimal number of these services to longer term under the Master Service Agreement, if needed.

Master Services Agreement

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The Contract Manufacturing Agreement may also be terminated, in whole or part, by either party upon the other party’s material, uncured breach, inability to perform its obligations for more than six months due to a force majeure event, bankruptcy or insolvency, or change of control.

On February 14, 2024, the Contract Manufacturing Agreement was amended to extend the period of which H-D is the exclusive manufacturer from five years as described above to six years .

Beginning for calendar year 2025, LiveWire will be subject to a minimum annual volume commitment for each product and pay a deficit fee for failure to meet the minimum under the Contract Manufacturing Agreement.

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H-D will procure, on our behalf, equipment and materials that are used in both H-D’s and our products, and we will procure all other equipment and materials, as well as tooling, needed to manufacture the products.

During the period subsequent to the Business Combination, the Company purchased $ 1,935 thousand of inventory from H-D, all of which was payable as of December 31, 2022.

Joint Development Agreement

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With respect to state and local income tax returns for any taxable period in which LiveWire or any of its subsidiaries are included in H-D’s combined, consolidated or unitary group for state or local income tax purposes, the amount of taxes to be paid by LiveWire is determined, subject to certain adjustments using principles analogous to the principles used to compute LiveWire’s separate federal tax liability, as if LiveWire and each of its subsidiaries included in such combined, consolidated or unitary group filed its own combined, consolidated or unitary group state or local income tax return.

LiveWire’s inclusion in H-D’s consolidated group may result in H-D utilizing certain tax attributes that LiveWire generates, including net operating losses, and LiveWire will receive no compensation from H-D for the use of such attributes, but they may be used to offset any future liabilities that may be owed by LiveWire to H-D under the Tax Matters Agreement.

The Tax Matters Agreement applies as of the closing of the Business Combination, which is the date that H-D’s ownership of LiveWire met the applicable minimum threshold required to file either a combined return or a consolidated return and will remain in effect unless the parties agree in writing to terminate the agreement.

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Transactions Associated with Service Agreements with H-D

For the period subsequent to the Business Combination, there were $ 3,485 thousand in expenses associated with services rendered in conjunction with the various service agreements with H-D identified above, which are presented within Selling, administrative and engineering on the Consolidated statements of operations and comprehensive loss.

As of December 31, 2022, there is $ 5,733 thousand due to H-D and presented as Accounts payable to related party on the Consolidated balance sheets.

Of the amount outstanding to H-D, $ 1,942 thousand is associated with inventory purchased under the Contract Manufacturing Agreement and $ 3,791 thousand is associated with services under the various Separation Agreements with H-D.

Cost of goods sold - There are $ 23,433 thousand and $ 1,685 thousand of Cost of goods sold with H-D related to purchases from H-D on the Consolidated statements of operations and comprehensive loss for the year ended December 31, 2023 and the period subsequent to the Business Combination in 2022, respectively, of which $ 17,053 thousand and $ 1,585 thousand, respectively, are related to purchases from H-D, primarily motorcycles, under the terms of the Contract Manufacturing Agreement.

These purchases of motorcycles from H-D are sold to the Company’s customers resulting in Cost of goods sold.

Also included in the total Cost of goods sold with H-D for 2023 is a provision of $ 6,309 thousand, of which $ 2,552 thousand was recorded in the fourth quarter of 2023, related to a liability 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.

This amount represents the Company’s best estimate of liability as of December 31, 2023 and is subject to adjustment based on final negotiations with H-D regarding amounts owed under the terms of the Contract Manufacturing Agreement.

Selling, administrative and engineering - During the year ended December 31, 2023, and for the period subsequent to the Business Combination in 2022, there were $ 14,993 thousand and $ 3,485 thousand, respectively, in expenses associated with services rendered in conjunction with the various service agreements with H-D, which are presented within Selling, administrative and engineering on the Consolidated statements of operations and comprehensive loss.

Account payable to related party - As of December 31, 2023 and 2022, there is $ 20,371 thousand and $ 5,733 thousand, respectively, due to H-D and presented as Accounts payable to related party on the Consolidated balance sheets.

Of the amount outstanding to H-D as of December 31, 2023 and 2022, $ 10,020 thousand and $ 1,942 thousand, respectively, is associated with inventory purchased under the Contract Manufacturing Agreement and $ 4,042 thousand and $ 3,791 thousand, respectively, is associated with services under the various Separation Agreements with H-D and $ 6,309 thousand as of December 31, 2023 is associated with the obligation to reimburse H-D for excess inventory components held by H-D as discussed above.

Financing from Business Combination

1 unchanged sentence

The Business Combination further resulted in adjustments for assets and liabilities, and the related currency translation adjustments, which will remain with H-D in accordance with the separation agreement.

As of the year ended December 31,2022 the adjustments resulted in a net increase of $ 5,183 thousand to Additional paid-in capital.

As of the year

ended December 31, 2022 the adjustments resulted in a net increase of $ 5,183 thousand to Additional paid-in capital.

For additional information around the Business Combination, refer to FN 4 Business Combination.

Other transactions

Sales of electric motorcycles and related products to independent dealers are primarily financed through HDFS, a wholly owned subsidiary of H-D;

Sales of electric motorcycles and related products to independent dealers and customers are primarily financed through Harley Davidson Financial Services (“HDFS”), a wholly owned subsidiary of H-D;

therefore, the Company’s accounts receivable related to these sales are recorded in Accounts receivable from related party on the Consolidated balance sheets .

Amounts financed through HDFS, not yet remitted to the Company by HDFS are generally settled within 30 days.

As of December 31, 2022, there is $ 388 thousand due from HDFS, which is presented as Accounts receivable from related party on the Consolidated balance sheets.

During the period subsequent to the Business Combination, the Company recorded $ 141 thousand in related party sales between the Company and H-D with $ 100 thousand in cost of sales.

As of December 31, 2023 and 2022, there is $ 3,351 thousand and $ 388 thousand, respectively, due from HDFS and other related receivables due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets.

During the year ended December 31, 2023 and for the period subsequent to the Business Combination in 2022, the Company recorded $ 113 thousand and $ 141 thousand in related party sales between the Company and H-D with $ 71 thousand and $ 100 thousand in cost of sales, respectively.

All sales were for the STACYC segment who sells balance bikes to H-D dealers.

As of December 31, 2022, there is $ 137 thousand due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets.

As of December 31, 2023 and 2022, there is $ 51 thousand and $ 137 thousand, respectively, due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets.

On September 26, 2022, the Company entered into a lease agreement with H-D to sublease a Product Development Center.

This was classified as an operating lease and resulted in balances of $ 398 thousand, $ 140 thousand, and $ 258 thousand for right of use asset, short term lease liability, and long term lease liability, respectively, in the Consolidated balance sheets as of December 31, 2022.

In addition, the Company incurred $ 45 thousand in rent expense for period subsequent to the Business Combination, which is included within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.

Additionally, on August 28, 2023, the Company amended a lease agreement with H-D for office space to extend the term of the lease to a 12-month period expiring on September 26, 2024.

These are classified as operating leases.

As of December 31, 2023, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $ 274 thousand, $ 162 thousand, and $ 112 thousand, respectively.

As of December 31, 2022, the right of use asset included within Lease assets, short-term lease liability included within Current portion of lease liabilities, and long-term lease liability included within Long-term portion of lease liabilities in the Consolidated balance sheets were $ 398 thousand, $ 140 thousand, and $ 258 thousand, respectively.

In addition, the Company incurred $ 176 thousand and $ 45 thousand, respectively, in rent expense during the year ended December 31, 2023, and for the period subsequent to the Business Combination in 2022, respectively, which is included within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.

Prior to the Separation, the Company did not operate as a standalone business and the Consolidated financial statements were derived from the Consolidated financial statements and accounting records of H-D.

The following disclosure summarizes activity between the Company and H-D prior to the Business Combination.

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.

Allocation of Expenses and Related Party Activity Prior to the Separation

Prior to the Business Combination, certain costs have been allocated to the Company and are reflected as expenses in the Consolidated statements of operations and comprehensive loss.

The Company considers the allocation methodologies used to be reasonable, such that the allocations appropriately reflect H-D’s historical expenses attributable to the Company for purposes of the Consolidated financial statements.

However, the expenses reflected in the Consolidated financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if the Company had historically operated as a stand-alone independent entity.

Manufacturing cost of sales

Prior to the Business Combination, certain costs were allocated to the Company and are reflected as expenses in the Consolidated statements of operations and comprehensive loss.

The Company considers the allocation methodologies used to be reasonable, such that the allocations appropriately reflected H-D’s historical expenses attributable to the Company for purposes of the Consolidated financial statements.

Manufacturing cost of goods sold

The Company’s electric motorcycles are produced in manufacturing facilities shared with H-D.

Certain costs of goods sold for shared facilities and shared manufacturing of $ 3,402 thousand, $ 4,442 thousand and $ 4,536 thousand for the period prior to the Business Combination, and the twelve months ended December 31, 2021 and 2020, respectively, were specifically identified or allocated, mainly based on standard cost of production.

Certain costs of goods sold for shared facilities and shared manufacturing of $ 3,402 thousand and $ 4,442 thousand for the period prior to the Business Combination, and the twelve months ended December 31, 2021, respectively, were specifically identified or allocated, mainly based on standard cost of production.

Operating expense allocation

H-D provided technology support, marketing, engineering, shared assets, finance, and other corporate and administrative services such as treasury, human resources, and legal, to the Company.

These expenses of $ 2,702 thousand, $ 2,166 thousand and $ 6,454 thousand for the period prior to the Business Combination, and the twelve months ended December 31, 2021 and 2020, respectively, have been allocated to the Company and are included in Selling, administrative and engineering expense in the Consolidated statements of operations and comprehensive loss, where direct assignment of costs incurred by H-D was not possible or practical.

These expenses of $ 2,702 thousand and $ 2,166 thousand for the period prior to the Business Combination and the twelve months ended December 31, 2021, respectively, have been allocated to the Company and are included in Selling, administrative and engineering expense in the Consolidated statements of operations and comprehensive loss, where direct assignment of costs incurred by H-D was not possible or practical.

These costs were allocated using related drivers associated with the nature of the business, such as gross revenue and wholesale motorcycle shipments.

As a result, the allocations of these costs will fluctuate based on changes in these drivers.

As a result, the allocations of these costs fluctuated based on changes in these drivers.

Other cost allocation metrics, such as headcount and square footage, were not deemed appropriate given the Company’s reliance on facilities and personnel that are shared with H-D.

Cash management and financing

Prior to the Business Combination, the Company’s treasury function was maintained by H-D.

Accordingly, no cash, cash equivalents, or marketable securities have been attributed to the Consolidated financial statements, except for certain cash accounts.

Certain cash accounts and the notes payable to related party are retained by the Company because they were legally held by the Company.

H-D utilized a centralized approach to cash management and the financing of its operations.

Prior to the Business Combination, the Company’s treasury function maintained by H-D utilized a centralized approach to cash management and the financing of its operations.

Under this centralized cash management approach, H-D provided funds to the Company.

Cash transfers from H-D related to services and funding for operations provided by H-D were $ 59,051 thousand, $ 85,493 thousand and $ 56,176 thousand for the nine months ended September 25, 2022 and years ended December 31, 2021 and 2020, respectively.

Cash transfers from H-D related to services and funding for operations provided by H-D were $ 59,051 thousand and $ 85,493 thousand for the nine months ended September 25, 2022 and year ended December 31, 2021, respectively.

Net contributions from H-D are included within Net Parent company investment in the Consolidated statements of shareholders' equity.

For the 9 months ended For the 12 months ended For the 12 months ended

Net contribution from H-D reconciliation to transfers from H-D September 25, 2022 December 31, 2021 December 31, 2020

For the 9 months ended For the 12 months ended

Net contribution from H-D reconciliation to transfers from H-D September 25, 2022 December 31, 2021

Net contribution from H-D $ 79,922 $ 86,279

1 unchanged sentence

Transfer of assets to H-D 568 —

Net change in unbenefited losses remaining with H-D — — ( 1,198 )

Stock compensation expense 171 ( 786 )

Transfers from H-D per cash flow statement $ 59,051 $ 85,493

Notes payable to related party on the Consolidated balance sheets related to three lines of credit agreements with H-D, two of which were entered into on December 23, 2020 and the third was entered into on July 6, 2021.

Prior to the Business Combination, there were three lines of credit agreements with H-D, two of which were entered into on December 23, 2020 and the third was entered into on July 6, 2021.

There were no financial covenants associated with these lines of credit.

5 unchanged sentences

The Company’s second line of credit agreement had a maximum borrowing limit of $ 10,000 thousand with an interest rate of 6.6 %.

This line of credit agreement limited the use of proceeds to the payment of contingent consideration related to the Company’s purchase agreement for the acquisition of STACYC on March 4, 2019.

This line of credit agreement limited the use of proceeds to the payment of contingent consideration related to the

Company’s purchase agreement for the acquisition of STACYC on March 4, 2019.

The Company had $ 5,333 thousand outstanding under this line of credit at December 31, 2021.

2 unchanged sentences

The Company had $ 100 thousand outstanding under this line of credit at December 31, 2021.

The Notes payable to related party presented on the Consolidated balance sheets included the following accrued interest amounts (in thousands):

For the 12 months ended For the 12 months ended

December 31, 2022 December 31, 2021

Current portion of notes payable to related party $ — $ 3

Long-term portion of notes payable to related party — 366

Interest paid on the notes payable to related party was $ 0 thousand , $ 59 thousand and $ 51 thousand for the for the nine months ended September 25, 2022, and the twelve months ended December 31, 2021 and 2020, respectively.

All related party notes payable were not in default as of December 31, 2022, December 31, 2021 and December 31, 2020.

Interest paid on the notes payable to related party was $ 0 thousand and $ 59 thousand for the for the nine months ended September 25, 2022, and the twelve months ended December 31, 2021, respectively.

During the twelve months ended December 31, 2022, the Company borrowed $ 15,333 thousand under the lines of credit agreements prior to their final settlement on June 24, 2022.

8 unchanged sentences

The Electric Motorcycles segment also sells electric motorcycle parts, accessories, and apparel.

The Company’s products are sold at wholesale to a network of independent dealers and at retail through a Company-owned dealer and through online sales, primarily in the United States.

The Company’s products are sold at wholesale to a network of independent dealers and at retail through a Company-owned dealership and through online sales, and direct to customers through select international partners primarily in Europe.

The STACYC segment consists of the business activities related to the design and sales of the STACYC brand of electric balance bikes for kids.

The STACYC segment also sells electric balance bike parts, accessories and apparel.

STACYC products are in the U.S., Canada, Australia and Europe.

The STACYC segment products are sold through independent retail partners in the U.S., including powersports dealers, H-D dealers, bicycle retailers and direct to consumer online.

STACYC products are sold in the U.S., Canada, Australia and Europe.

The STACYC segment products are sold through independent retail partners in the U.S.

and Canada, including powersports dealers, H-D dealers, bicycle retailers and direct to customers online.

In Australia and Europe, STACYC sells its products through independent distributors.

Prior to the Business Combination, the Company had one operating and reportable segment, based upon the manner in which H-D monitored and managed the business.

Subsequent to the Business Combination based upon management reporting changes, including reviewing the financial information of the two businesses separately, the Company assessed that it has two operating and reporting segments.

As a result, Electric Motorcycles and STACYC were reported as separated reportable segments.

The Company has restated its historical segment results below based on the new segment determination.

Selected segment information is set forth below for the years ended December 31, (in thousands):

8 unchanged sentences

Selling, administrative and engineering expense 9,355 8,023 7,612

Operating income (loss) 4,150 2,115 ( 2,599 )

Operating income 622 4,150 2,115

Operating loss $ ( 115,989 ) $ ( 84,955 ) $ ( 68,182 )

19 unchanged sentences

United States $ 30,457 $ 36,256 $ 24,633

International 10,577 11,173 9,401

Austria 4,585 4,975 $ 815

Other countries 2,981 5,602 $ 10,358

$ 38,023 $ 46,833 $ 35,806

5 unchanged sentences

(2) Long-lived assets include all long-term assets except those specifically excluded under ASC Topic 280, Segment Reporting , such as deferred income taxes.

Restatement of Unaudited Interim Financial Statements

During finalization of the Company’s 2022 Consolidated financial statements, the Company discovered that it had prematurely recognized revenue related to deliveries to a customer of STACYC electric balance bikes without batteries, which were shipped separately a short time later.

As a result, the Company had prematurely recognized revenue during financial reporting periods prior to the completion of the Business Combination on those semi-finished units at the time of delivery of the bikes in the first and second quarters of 2022, respectively, with a related understatement of revenue in the third quarter of 2022.

The batteries were completely delivered by the end of the third quarter of 2022, which was required for the Company to be able to recognize revenue for the bikes as a finished unit.

On February 22, 2023, the Audit Committee of the Company’s Board of Directors (the “Audit Committee”), in consultation with members of the Company’s management, concluded that the Company’s previously issued unaudited quarterly financial

statements for the three months ended March 27, 2022, the three and six months ended June 26, 2022, and the three months ended September 25, 2022 should no longer be relied upon due to the premature revenue recognition error in those financial statements.

The correction of these errors and the restatement adjustments for these changes to the Company’s previously issued Consolidated financial statements are shown in the table below, collectively the “Restatement.” Amounts depicted with the title "As Restated" throughout this footnote include the impact of the Restatement.

Impact of the Restatement

A reconciliation from the previously issued financial statements to the restated amounts as of March 27, 2022, and for the three months ended March 27, 2022, as of June 26, 2022, and for the three and six months ended June 26, 2022, and for the three months and nine months ended September 25, 2022 is included below.

The Company’s previously issued financial statements are labeled as “As Previously Reported” in the tables below.

The amounts labeled “Adjustment” represent the effects of this restatement described below.

Also included in the amounts labeled “Adjustment” are the correction of certain other previously identified immaterial adjustments as of March 27, 2022, and for the three months ended March 27, 2022, as of June 26, 2022, and for the three and six months ended June 26, 2022, as of September 25, 2022, and for the three and nine months ended September 25, 2022.

The effects of the Restatement did not impact the Company’s reported revenue or cash flow for the nine months ended September 25, 2022, as a result of the premature recognition of revenue.

The impacts of the premature revenue recognition are reflected in the restatement tables below as indicated by reference (a) throughout this note.

The Company also corrected previously uncorrected misstatements that were not material, individually or in the aggregate, in the Restatement, which were only recorded in conjunction with correcting the misstatement related to the premature revenue recognition discussed above.

The impacts of other adjustments are reflected in the restatement tables below as indicated by reference (b) throughout this note.

Description of Misstatements

An error was identified with respect to the application of the Company’s revenue recognition accounting policy within the STACYC segment for which the Company prematurely recognized revenue before the performance obligation to a certain customer was fully satisfied, resulting in revenue being recognized in the improper period.

For this customer, there were two shipments of goods to fulfill the performance obligation, with lag time in between the shipments.

The goods included within the separate shipments are not considered to be “distinct” individually under ASC 606, Revenue from Contracts with Customers, and were determined to be a single performance obligation.

During certain periods in 2022, the Company delivered bikes to this customer without the associated batteries, which were required to be delivered in order for the Company to fulfill its performance obligation and recognize revenue for the sale of the bikes.

The shipping delays associated with the batteries resulted in an overstatement of Revenue, net and related Cost of goods sold of $ 1,013 thousand and $ 640 thousand for the first quarter of 2022, respectively, $ 1,742 thousand and $ 1,047 thousand for the second quarter of 2022, respectively, and a corresponding understatement of Revenue, net and related Cost of goods sold of $ 2,755 thousand and $ 1,687 thousand for the third quarter of 2022, respectively, when the batteries were completely delivered and therefore the revenue recognition criteria for the bikes were satisfied.

The Restatement adjusts Revenue, net and the related Cost of goods sold between interim periods to properly reflect revenue recognition in the period in which the performance obligation was fulfilled.

For the nine months ended September 25, 2022, there was no change to the Company’s total reported Revenue, net, Cost of goods sold, or cash flow.

Effects of adjustments on the restated unaudited interim financial statements

The tables below show the effects of correction of the above mentioned adjustments in the Company’s previously issued unaudited quarterly financial statements.

The tax effect of the restated adjustments was de minimis for the 2022 quarterly interim periods.

The impact on the interim Consolidated statements of cash flows has resulted in reclassifications within the operating activities for all periods presented and no impact to total operating activities within the interim Consolidated statements of cash flows.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

For the three months ended March 27, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Revenue, net $ 11,414 $ ( 1,013 ) a $ 10,401

Cost of goods sold $ 10,488 $ ( 140 ) a,b $ 10,348

Selling, administrative and engineering expense $ 16,112 $ ( 360 ) b $ 15,752

Operating loss $ ( 15,186 ) $ ( 513 ) a,b $ ( 15,699 )

Loss before income taxes $ ( 15,398 ) $ ( 513 ) a,b $ ( 15,911 )

Net loss $ ( 15,466 ) $ ( 513 ) a,b $ ( 15,979 )

Comprehensive loss $ ( 15,566 ) $ ( 513 ) a,b $ ( 16,079 )

CONSOLIDATED BALANCE SHEETS

(in thousands)

As of March 27, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Accounts receivable, net $ 9,379 $ ( 858 ) a $ 8,521

Inventories, net $ 17,703 $ 640 a $ 18,343

Total current assets $ 42,358 $ ( 218 ) a $ 42,140

Property, plant and equipment, net $ 19,466 $ 134 b $ 19,600

Total assets $ 75,756 $ ( 84 ) a,b $ 75,672

Accrued liabilities $ 13,595 $ ( 70 ) a,b $ 13,525

Total current liabilities $ 40,738 $ ( 70 ) a,b $ 40,668

Total liabilities $ 52,845 $ ( 70 ) a,b $ 52,775

Net Parent company investment $ 22,866 $ ( 14 ) a,b $ 22,852

Total shareholders’ equity $ 22,911 $ ( 14 ) a,b $ 22,897

Total liabilities and shareholders’ equity $ 75,756 $ ( 84 ) a,b $ 75,672

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

For the three months ended June 26, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Revenue, net $ 14,248 $ ( 1,742 ) a $ 12,506

Cost of goods sold $ 14,699 $ ( 1,803 ) a,b $ 12,896

Selling, administrative and engineering expense $ 19,169 $ ( 203 ) b $ 18,966

Operating loss $ ( 19,620 ) $ 264 a,b $ ( 19,356 )

Loss before income taxes $ ( 19,747 ) $ 264 a,b $ ( 19,483 )

Net loss $ ( 19,842 ) $ 264 a,b $ ( 19,578 )

Comprehensive loss $ ( 19,836 ) $ 264 a,b $ ( 19,572 )

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

For the six months ended June 26, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Revenue, net $ 25,662 $ ( 2,755 ) a $ 22,907

Cost of goods sold $ 25,187 $ ( 1,943 ) a,b $ 23,244

Selling, administrative and engineering expense $ 35,281 $ ( 563 ) b $ 34,718

Operating loss $ ( 34,806 ) $ ( 249 ) a,b $ ( 35,055 )

Loss before income taxes $ ( 35,145 ) $ ( 249 ) a,b $ ( 35,394 )

Net loss $ ( 35,308 ) $ ( 249 ) a,b $ ( 35,557 )

Comprehensive loss $ ( 35,402 ) $ ( 249 ) a,b $ ( 35,651 )

CONSOLIDATED BALANCE SHEETS

(in thousands)

As of June 26, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Accounts receivable, net $ 5,339 $ ( 1,658 ) a $ 3,681

Inventories, net $ 25,834 $ 1,687 a $ 27,521

Total current assets $ 39,445 $ 29 a $ 39,474

Property, plant and equipment, net $ 22,817 $ 249 b $ 23,066

Total assets $ 76,929 $ 278 a,b $ 77,207

Accrued liabilities $ 13,353 $ 784 a,b $ 14,137

Total current liabilities $ 33,102 $ 784 a,b $ 33,886

Total liabilities $ 39,038 $ 784 a,b $ 39,822

Net Parent company investment $ 37,840 $ ( 506 ) a,b $ 37,334

Total shareholders’ equity $ 37,891 $ ( 506 ) a,b $ 37,385

Total liabilities and shareholders’ equity $ 76,929 $ 278 a,b $ 77,207

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

For the three months ended September 25, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Revenue, net $ 11,953 $ 2,755 a $ 14,708

Cost of goods sold $ 11,800 $ 1,943 a,b $ 13,743

Selling, administrative and engineering expense $ 22,111 $ ( 123 ) b $ 21,988

Operating loss $ ( 21,958 ) $ 935 a,b $ ( 21,023 )

Loss before income taxes $ ( 21,882 ) $ 935 a,b $ ( 20,947 )

Net loss $ ( 21,878 ) $ 935 a,b $ ( 20,943 )

Comprehensive loss $ ( 21,938 ) $ 935 a,b $ ( 21,003 )

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

For the nine months ended September 25, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Selling, administrative and engineering expense $ 57,392 $ ( 686 ) b $ 56,706

Operating loss $ ( 56,764 ) $ 686 b $ ( 56,078 )

Loss before income taxes $ ( 57,027 ) $ 686 b $ ( 56,341 )

Net loss $ ( 57,186 ) $ 686 b $ ( 56,500 )

Comprehensive loss $ ( 57,340 ) $ 686 b $ ( 56,654 )

CONSOLIDATED BALANCE SHEETS

(in thousands)

As of September 25, 2022

As Previously Reported Adjustments Adjustment Reference As Restated

Property, plant and equipment, net $ 26,111 $ 383 b $ 26,494

Total assets $ 182,379 $ 383 b $ 182,762

Accrued liabilities $ 15,538 $ ( 303 ) b $ 15,235

Total current liabilities $ 134,255 $ ( 303 ) b $ 133,952

Total liabilities $ 139,872 $ ( 303 ) b $ 139,569

Net Parent company investment $ 42,516 $ 686 b $ 43,202

Total shareholders’ equity $ 42,507 $ 686 b $ 43,193

Total liabilities and shareholders’ equity $ 182,379 $ 383 b $ 182,762

(3) Prior year amounts have been reclassified to confirm to current year presentation.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data