Nxu (NXUR) Risk Analysis

After the completion of the Merger, the current stockholders of Nxu will generally own a smaller percentage of the combined company than their ownership of the Company prior to the Merger. Immediately after the Merger, our stockholders as of immediately prior to the Merger are expected to own approximately 5% of the outstanding shares of capital stock of the combined company and former Verde stockholders are expected to own approximately 95% of the outstanding shares of capital stock of the combined company, in each case, on a fully-diluted and as-converted basis. Our assumed aggregate enterprise value will be reduced by the excess of certain lease payments remaining unpaid at the Closing over our cash balance at the Closing, and any such reduction will decrease the ownership percentage interest of pre-Merger Nxu stockholders in the combined company. Furthermore, all dilution from the PIPE, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders. As a result, some stockholders will hold a smaller pro rata share and, therefore, a lower percentage of the voting stock of the combined company than such stockholder currently holds in Nxu or Verde as a stand-alone company, respectively. In addition, Nxu registered for resale by the selling stockholders in the PIPE up to 114,503,816 shares of Nxu Class A common stock, consisting of (1) 6,800,000 PIPE Purchased Shares, (2) 5,200,000 shares of Nxu Class A common stock issuable upon exercise of the Pre-Funded PIPE Warrants, (3) up to 57,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series A PIPE Warrants, and (4) up to 45,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series B PIPE Warrants. The number of shares of Nxu Class A common stock ultimately offered for resale by the selling stockholders is dependent on the issued number of (i) PIPE Purchased Shares, (ii) the Pre-Funded PIPE Warrants and (iii) shares of Nxu Class A common stock issuable upon exercise of the PIPE Warrants. Depending on a variety of factors, including market liquidity of the Nxu Class A common stock, the issuance of shares to the selling stockholders may cause the trading price of Nxu Class A common stock to decline.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Nxu stockholders and Verde stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints have been and may be filed against us, our board of directors and/or our officers in connection with the transactions contemplated by the Merger Agreement. The outcome of any litigation is uncertain, and we may not be successful in defending against any such future claims. We may incur significant costs in connection with any such litigation, including costs associated with the indemnification of our directors and officers. Lawsuits filed against us, our board of directors and/or our officers and could delay or prevent the Merger, divert the attention of our management and employees from day-to-day business and otherwise adversely affect our business and financial condition. On January 28, 2025, an action captioned Mark Stevens v. Nxu, Inc., et al., Case No. 650533/2025 and an action captioned Michael Lewis v. Nxu, Inc., et al., Case No. 650541/2025 were filed in the Supreme Court of the State of New York (the "Complaints"). The Complaints claim that the proxy statement/prospectus filed by Nxu on January 27, 2025 contains materially misleading and incomplete information concerning, among other things: (i) the financial projections for Verde and Nxu, (ii) the financial analysis of Lake Street Capital Markets, LLC ("Lake Street"), financial advisor to Nxu in connection with the Merger, and (iii) the alleged potential conflicts of interest faced by Lake Street and Nxu's Chief Executive Officer and Nxu's President. The Complaints also seek to enjoin the transaction, rescind the transaction should it be consummated or an award of damages if the transaction is consummated, and an award of fees and expenses. As of March 13, 2025, Nxu has, to its knowledge, received thirteen letters from purported Nxu stockholders alleging certain disclosure deficiencies in our proxy statement/prospectus filed on November 12, 2024 and our prospectus filed pursuant to Rule 424(b)(3) on January 27, 2025, three of which also sought to inspect certain books and records of Nxu related to the Merger and related matters pursuant to Section 220 of the DGCL. The outcome of the matters described above cannot be predicted with certainty. Additional demands may be received or additional complaints may be filed in connection with the Merger and the transactions contemplated by the Merger Agreement and our prospectus filed on January 27, 2025. If such additional demands are made or additional complaints are filed, absent new or different allegations that are material, we will not necessarily announce such additional demands or complaints. Furthermore, one of the conditions to the consummation of the Merger is the absence of any governmental order or law preventing the consummation of the Merger or making the consummation of the Merger illegal. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the consummation of the Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at all.

The principal purposes of the contemplated reverse stock split are to (i) increase the per-share market price of Nxu's common stock above the minimum bid price requirement under the Nasdaq rules so that the listing of Nxu as the combined company and the shares of Nxu common stock being issued in the Merger on Nasdaq will be approved and (ii) increase the number of authorized and unissued shares available for future issuance in connection with the Merger. It cannot be assured, however, that the contemplated reverse stock split will accomplish any increase in the per-share market price of the combined company's common stock for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of the combined company's common stock, it cannot be assured that the contemplated reverse stock split will increase the market price of its common stock by a multiple of the contemplated reverse stock split ratio mutually agreed by Nxu and Verde, or result in any permanent or sustained increase in the market price of Nxu's common stock, which is dependent upon many factors, including the combined company's business and financial performance, general market conditions and prospects for future success. Thus, while the stock price of the combined company might meet the listing requirements for Nasdaq initially after the contemplated reverse stock split, it cannot be assured that it will continue to do so.

Although Nxu believes that the anticipated increase in the market price of the combined company's common stock resulting from the contemplated reverse stock split could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the contemplated reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company's common stock. In addition, the contemplated reverse stock split may not result in an increase in the combined company's stock price necessary to satisfy Nasdaq's initial listing requirements for the combined company.

Should the market price of the combined company's common stock decline after the contemplated reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the contemplated reverse stock split. The contemplated reverse stock split may be viewed negatively by the market and, consequently, can lead to a decrease in the combined company's overall market capitalization. If the per share market price does not increase in proportion to the contemplated reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company's common stock will remain the same after the contemplated reverse stock split is effected, or that the contemplated reverse stock split will not have an adverse effect on the combined company's stock price due to the reduced number of shares outstanding after the contemplated reverse stock split.

Nxu's business is currently entirely dependent on the success of the NxuOne™ Charging Network and related products. Nxu does not have any other lines of business or other sources of revenue if it is unable to compete effectively in the marketplace. Nxu cannot guarantee that the NxuOne™ Charging Network will be able to achieve profitability alone. Nxu's ability to be profitable will depend on a number of factors, many of which are beyond Nxu's control. This lack of business diversification could cause you to lose all or some of your investment if Nxu is unable to generate revenues since Nxu does not expect to have any other lines of business or alternative revenue sources.

Nxu cannot predict whether its dual class structure will result in a lower or more volatile market price of its Class A common stock or in adverse publicity or other adverse consequences. For example, because of its dual class structure, Nxu will likely be excluded from certain indexes, and Nxu cannot assure you that other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make its Class A common stock less attractive to other investors. As a result, the market price of Nxu's Class A common stock could be adversely affected.

The market price of the Nxu Class A common stock has fluctuated, and may continue to fluctuate, significantly and Nxu's stockholders may lose all or part of their investment. The market prices for securities of startup companies have historically been highly volatile, and the market has from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. The market price of Nxu's Class A common stock has fluctuated, and may continue to fluctuate, significantly in response to numerous factors, some of which are beyond its control, such as: - actual or anticipated adverse results or delays in its research and development efforts;- its failure to commercialize its Nxu Platform and Nxu Truck;- unanticipated serious safety concerns related to the use of its products;- adverse regulatory decisions;- legal disputes or other developments relating to proprietary rights, including patents, litigation matters and its ability to obtain patent protection for its intellectual property, government investigations and the results of any proceedings or lawsuits, including patent or stockholder litigation;- changes in laws or regulations applicable to the EV industry;- Nxu's dependence on third party suppliers;- announcements of the introduction of new products by its competitors;- market conditions in the EV industry;- announcements concerning product development results or intellectual property rights of others;- future issuances of Nxu's common stock or other securities;- the addition or departure of key personnel;- actual or anticipated variations in quarterly operating results;- announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by Nxu or Nxu's competitors;- its failure to meet or exceed the estimates and projections of the investment community;- issuances of debt or equity securities;- trading volume of Nxu common stock;- sales of Nxu's Class A common stock by Nxu or its stockholders in the future;- overall performance of the equity markets and other factors that may be unrelated to its operating performance or the operating performance of its competitors, including changes in market valuations of similar companies;- failure to meet or exceed any financial guidance or expectations regarding development milestones that Nxu may provide to the public;- ineffectiveness of Nxu's internal controls;- general political and economic conditions;- effects of natural or man-made catastrophic events;- scarcity of raw materials necessary for battery production; and - other events or factors, many of which are beyond Nxu's control. Further, price and volume fluctuations may result in volatility in the price of Nxu's Class A common stock, which could cause a decline in the value of Nxu's common stock. Price volatility of Nxu's Class A common stock might worsen if the trading volume of its shares is low. The realization of any of the above risks or any of a broad range of other risks, including those described in these "Risk Factors", could have a dramatic and material adverse impact on the market price of Nxu's Class A common stock.

Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards. On April 2, 2024, Nxu received a notice from Nasdaq stating that Nxu is not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on Nasdaq (the "Minimum Bid Requirement"). On October 1, 2024, Nxu received a second notice from Nasdaq confirming that Nxu is still not in compliance with the Minimum Bid Requirement as of September 30, 2024 and granting Nxu an additional 180 days, or until March 31, 2025, to regain compliance. Nasdaq's determination is based on Nxu meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and Nxu's written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. On September 4, 2024, Nxu received a notice from Nasdaq notifying Nxu that, due to Ms. Nightengale not standing for re-election as a director of Nxu at Nxu's 2024 annual meeting of stockholders held on August 14, 2024, Nxu was no longer in compliance with Nasdaq's audit committee requirements as set forth in Nasdaq Listing Rule 5605. On January 13, 2025, Nxu's board of directors elected Erin Essenmacher to serve as an independent director of Nxu, effective immediately, to fill the vacancy on Nxu's board of directors. Nxu's board of directors also appointed Ms. Essenmacher to fill the existing vacancy on the audit committee of Nxu' board of directors. No assurances can be provided that Nxu will regain compliance with the minimum bid price requirement within the required compliance period. If Nxu's Class A common stock ultimately were to be delisted for any reason, it could negatively impact Nxu by (i) reducing the liquidity and market price of Nxu's Class A common stock; (ii) reducing the number of investors willing to hold or acquire Nxu's Class A common stock, which could negatively impact Nxu's ability to raise equity financing; (iii) limiting Nxu's ability to use a registration statement to offer and sell freely tradable securities, thereby preventing Nxu from accessing the public capital markets; and (iv) impairing Nxu's ability to provide equity incentives to its employees.

Nxu will continue to monitor the closing bid price of its Class A common stock and seek to maintain compliance with all applicable Nasdaq requirements within the allotted compliance periods and may, if appropriate, consider available options, including implementation of an additional reverse stock split, to regain compliance with the Minimum Bid Requirement. On December 27, 2023, Nxu completed a reverse stock split at a ratio of 1-for-150. If Nxu does not maintain compliance with the Minimum Bid Requirement, Nxu may be forced to complete another reverse stock split, which could negatively affect the price of its Nxu's Class A common stock. Further, while Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the Minimum Bid Requirement, Nasdaq has stated that a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq. Accordingly, Nasdaq may determine that it is not in the public interest to maintain Nxu's listing, even if Nxu regains compliance with the Minimum Bid Requirement. In addition, Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that if a listed company that fails to meet the Minimum Bid Requirement after effecting one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for a compliance period. Nxu has effected a reverse stock split with a cumulative ratio of 150 shares to one. A subsequent reverse stock split could cause Nxu to exceed the 1-for-250 ratio. If such ratio is exceeded, Nxu would no longer be eligible for a compliance period and may be subject to an immediate delisting notification in the event it cannot comply with the Minimum Bid Requirement in the future. Any future non-compliance may be costly, divert management's time and attention, and could have a material adverse effect on Nxu's business, reputation, financing, and results of operation. A delisting could substantially decrease trading in Nxu's Class A common stock, adversely affect the market liquidity of Nxu's Class A common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws, materially adversely affect its ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. Additionally, the market price of Nxu's Class A common stock may decline further and stockholders may lose some or all of their investment.

Nxu's Charter limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any: - breach of their duty of loyalty to Nxu or its stockholders;- act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;- unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or - transactions for which the directors derived an improper personal benefit. These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission. Nxu's Bylaws provide that Nxu will indemnify its directors, officers and employees to the fullest extent permitted by law. Nxu's Bylaws also provide that Nxu is obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding. Nxu believes that its Bylaw provisions are necessary to attract and retain qualified persons as directors and officers. The limitation of liability in Nxu's Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to Nxu and its stockholders. Nxu's results of operations and financial condition may be harmed to the extent Nxu pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

Nxu is an "emerging growth company" within the meaning of the Exchange Act, as modified by the JOBS Act, and Nxu may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, Nxu's stockholders may not have access to certain information they may deem important. Nxu could be an emerging growth company for up to five years, although circumstances could cause Nxu to lose that status earlier, including if the market value of Nxu's Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case Nxu would no longer be an emerging growth company as of the following December 31. Nxu cannot predict whether investors will find its securities less attractive because Nxu will rely on these exemptions. If some investors find Nxu's securities less attractive as a result of its reliance on these exemptions, the trading prices of its securities may be lower than they otherwise would be, there may be a less active trading market for its securities and the trading prices of its securities may be more volatile. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. Nxu has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, Nxu, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Nxu's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used. Additionally, Nxu is a "smaller reporting company" as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. Nxu will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of Nxu's common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) Nxu's annual revenues exceeded $100 million during such completed fiscal year and the market value of Nxu's common stock held by non-affiliates exceeds $700 million as of the prior June 30th. To the extent Nxu takes advantage of such reduced disclosure obligations, it may also make the comparison of Nxu's financial statements with other public companies difficult or impossible.

Nxu's Bylaws require that, unless Nxu consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of its business, (ii) any action asserting a claim of breach of a duty owed by any director, officer, employee, agent or stockholder of Nxu to Nxu or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal affairs doctrine. In addition, Nxu's Bylaws require that, unless Nxu consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in shares of Nxu's capital stock is deemed to have notice of and consented to the foregoing provisions. These forum selection provisions in Nxu's Bylaws may limit its stockholders' ability to obtain a favorable judicial forum for disputes with Nxu, which may discourage such lawsuits against Nxu. Nxu cannot be certain as to whether a court would enforce these provisions, and if a court were to find the forum selection provisions contained in Nxu's Bylaws to be inapplicable or unenforceable in an action, Nxu may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, operating results and financial condition. Furthermore, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Nxu may use equity incentives for employees, advisors, directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options and/or incentive rights, including settlement or exercise of incentive awards prior to or concurrently with the Merger, will result in the dilution of the ownership interests of its existing stockholders.

If Nxu's stockholders sell, or the market perceives that Nxu's stockholders intend to sell for various reasons, substantial amounts of Nxu's Class A common stock in the public market, including shares issued in connection with the exercise of outstanding options, the market price of its shares could fall. Sales of a substantial number of shares of Nxu's Class A common stock may make it more difficult for Nxu to sell equity or equity-related securities in the future at a time and price that Nxu deems reasonable or appropriate. Nxu may become involved in securities class action litigation that could divert management's attention and harm its business. The stock markets have from time-to-time experienced significant price and volume fluctuations that have affected the market prices for the common stock of automotive companies. These broad market fluctuations may cause the market price of Nxu's Class A common stock to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of a company's securities. Nxu may become involved in this type of litigation in the future. Litigation often is expensive and diverts management's attention and resources, which could adversely affect its business.