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Is last-mile startup ELMS on its last legs?

SEC filing says former CEO failed to return stock from insider trading

Startup delivery van maker Electric Last Mile Solutions appears on its last legs financial ly based on its most recent filings with the Securities and Exchange Commission. (Photo: ELMS)

Electric delivery van startup Electric Last Mile Solutions (ELMS) appears near the end of the line with only enough cash to last through the end of the month, according to a Securities and Exchange Commission filing.

The ongoing struggles of the company importing bodies from China to marry with electric chassis built in the former General Motors Hummer plant in Indiana continue to worsen.

ELMS is one of many “de-SPACed” startups struggling to survive as investors abandon young companies they enthusiastically backed in 2020 and 2021. It is among several transportation SPACs facing SEC inquiries over its business practices before and after going public.

ELMS could run out of money this month

“The Company expects that, without obtaining additional financing, it has sufficient cash to continue operations into June 2022,” according to a May 26 SEC filing. “The Company’s current projections reflect, among other things, increases in professional service fees, employee retention costs and payments to suppliers.”

ELMS is “actively pursuing potential sources of liquidity and is working to extend its cash runway during this process to the extent possible.”

Earlier this year, ELMS laid off 50 employees — about 24% of its workforce — and withdrew guidance on its business projections. It missed filing deadlines for its Q1 and full-year 2021 financial reports, putting it out of compliance with the Nasdaq.

ELMS deferring land contract payments

On Thursday ELMS told the SEC it had reached an agreement to defer half of the payments on a land contract with the Chinese company from which it is acquiring the plant in Mishawaka, Indiana. Monthly payments through July would be 50% of what it owes, about $1.6 million. In August, the payments would rise to about $4.7 million a month through November.

If it survives, ELMS plans to build a Class 1 delivery van. It had 45,000 reservations for the van. It also planned a Class 3 urban utility vehicle for later in 2023.  

ELMS faces an ongoing SEC investigation disclosed in March following the resignation of Jason Luo, the company’s chairman, and James Taylor, president and CEO, who the company accused of insider trading.

ELMS terminates consulting deal with former CEO

In the late May SEC filing, ELMS said Taylor failed to return stock valued at $3.3 million. ELMS told the SEC that Taylor had returned shares in March under a settlement agreement. But it said he missed an April 11 deadline to return 1.8 million additional  shares. 

Taylor requested but was denied additional time to surrender the shares. ELMS also terminated on May 10 a two-year consulting contract with Taylor that was part of a March settlement.

Taylor, a former GM executive and former CEO of Workhorse Group, and Luo, the former president of Ford Motor Co.’s China operations, resigned in February following an internal investigation. 

ELMS discovered Taylor and Luo made deeply discounted stock purchases before completion of a merger with a special purpose acquisition company in December 2020. 

Luo also sold shares before the business combination with Forum Merger III Corp., which was valued at $1.4 billion. He agreed in February to surrender 6 million shares of ELMS common stock and repay an additional $10 million in cash within 120 days. 

Company shares have nose-dived since the revelations, closing Friday at 52 cents. 

LMS stock chart showing a fall from a 52-week high of $12 to just over 50 cents. (Barchart)

Cowen Inc. said Friday it was discontinuing coverage “due to additional uncertainty around its cash position disclosed in the recent 8K filing. Our previous investment rating, price target and earnings estimates are no longer in effect and should not be relied upon.”

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Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.