Aptera Motors (SEV) risk factors, FY2025 10-K

Other

1. 01The following summarizes key risks and uncertainties that could materially adversely affect us. You should read this summary together with the more detailed description of each risk factor contained below

Risk Related to Our Business

1. 02We have a limited operating history upon which you can evaluate our performance, and have not yet generated any profits. Accordingly, our prospects must be considered in light of the risks that any new company encounters
2. 03Our auditor has issued a “going concern” opinion
3. 04The Company plans to raise significantly more capital and future fundraising rounds, which may include offering equity at a significant discount to the price offered in this offering, which could result in dilution to investors in this offering
4. 05We will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all
5. 06We anticipate that we will initially depend on revenue generated from a single vehicle model and in the foreseeable future will be significantly dependent on a limited number of models
6. 07Tariffs and related trade barriers could materially adversely affect our business, results of operations and financial condition
7. 08We have not yet commenced production of our vehicles and have limited experience in high volume manufacture of our vehicles
8. 09If our vehicles fail to perform as expected, our ability to develop, market and sell or lease our products could be harmed
9. 10Vehicle reservations may not result in actual sales, and because all reservations are fully refundable, our forecasted revenues and cash flows could be adversely affected
10. 11The Company operates in a capital-intensive industry
11. 12We may incur indebtedness in the future which could reduce our financial flexibility and adversely impact our operations and our costs
12. 13Aptera operates in a highly competitive market
13. 14We face significant technological and legal barriers to entry
14. 15Our success is dependent upon consumers’ willingness to adopt energy-efficient, solar-powered vehicles
15. 16Developments and improvements in alternative technologies such as hybrid engine or full electric vehicles, or in the internal combustion engine, or continued low retail gasoline prices may materially and adversely affect the demand for our energy-efficient, solar-powered vehicles
16. 17Our vehicles face several regulatory hurdles
17. 18Passenger vehicles, like those produced by the Company, are highly regulated and are subject to regulatory changes
18. 19Demand in the passenger vehicle industry is highly volatile
19. 20We may be affected by uncertainty over government purchase incentives
20. 21We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims
21. 22Limited intellectual property protection may cause us to lose our competitive advantage and adversely affect our business
22. 23There is currently pending litigation against the Company
23. 24The Company is aware that it is the subject of an investigation from the Securities and Exchange Commission
24. 25Our failure to obtain or maintain the right to use certain intellectual property may negatively affect our business
25. 26The Company’s insurance may not be sufficient
26. 27Aptera depends on a small management team and may need to hire more people to be successful
27. 28The Company relies on outside parties to provide technological and manufacturing expertise
28. 29A global economic recession, government closures of banks and liquidity concerns at other financial institutions, or other downturn may have a material adverse impact on our business, prospects, results of operations and financial condition

Risks Related to Our Existence as Public Benefit Corporation

1. 30Our status as a public benefit corporation may not result in the benefits that we anticipate
2. 31Accordingly, being a public benefit corporation and complying with our related obligations could negatively impact our ability to provide the highest possible return to our stockholders
3. 32As a public benefit corporation, our duty to balance a variety of interests may result in actions that do not maximize stockholder value
4. 33As a public benefit corporation, we may be subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interests, the occurrence of which may have an adverse impact on our financial condition and results of operations

Risks Related to Ownership of our Class B Common Stock

1. 34We do not intend to pay dividends on our capital stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class B common stock
2. 35The Class B common stock has no voting rights
3. 36Our Amended Charter contains exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees
4. 37Delaware law and provisions in our Amended Charter and Bylaws could make a merger, tender offer, or proxy contest difficult or more expensive, thereby negatively impacting the trading price of our Class B common stock
5. 38The uncertainty associated with the fact that few companies have undertaken direct listings to date may lead to increased volatility and pricing challenges for our Class B common stock
6. 39Market volatility may affect the value of an investment in our Class B common stock and could subject us to litigation
7. 40None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Sales of substantial amounts of our Class B common stock in the public markets, or the perception that sales might occur, could cause the trading price of our Class B common stock to decline
8. 41The dual class structure of our common stock may adversely affect the trading market for our Class B common stock
9. 42If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class B common stock and trading volume could decline
10. 43We are an “emerging growth company” and intend to take advantage of the reduced disclosure requirements applicable to emerging growth companies which may make our Class B common stock less attractive to investors

Risks Related to Being a Public Company

1. 44The requirements of being a public company, including maintaining adequate internal control over our financial and management systems, may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members
2. 45During the year ended December 31, 2023, and continuing into 2024, we identified two material weaknesses in our internal control over financial reporting (ICFR)
3. 46We are undertaking these remediation efforts to improve our ICFR and disclosure controls and procedures to meet Sarbanes-Oxley Act standards. These efforts are expected to require significant financial resources and management oversight
4. 47We have previously restated our financial statements and may be required to restate our financial statements in the future, which could materially and adversely affect our business, financial condition, results of operations and the trading price of our securities
5. 48Our management team has limited experience managing a public company
6. 49Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States
7. 50If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected
8. 51We are not currently in compliance with Nasdaq’s requirements for a majority-independent board and an audit committee composed of three independent directors, which could create additional risks until we achieve compliance