Nine months after detailing a series of potential disclosure violations, material misstatements, and contract breaches at Romeo Power (RMO), a battery pack maker targeting commercial vehicles, shares have plunged 85.1%. Within three months of publication, Romeo’s CEO and CFO were replaced.

Now, Romeo’s 2022 10-K, confirms a major tenet of our report, which detailed how Romeo deceived investors by knowingly inflating its backlog. Nearly half of Romeo’s inflated backlog hinged on Nikola, an EV truck maker under investigation for fraud. We reported Romeo would never recognize all of its backlog and now the company acknowledges the same.

In the latest annual report, Romeo confirmed the Nikola backlog will not be realized in full and revealed it’s now renegotiating the Nikola deal after learning Nikola may no longer use Romeo’s battery cells:

“As a result of Nikola receiving a supply commitment from a tier-one battery cell manufacturer, we expect that Nikola will directly procure and then consign cells to us for the manufacture of battery modules we sell to them.If and when adopted, this new arrangement will remove the value of battery cells, which are the most significant portion of the product bill-of-material, from both product revenues and cost of product revenues with respect to our business with Nikola.”

Later in the filing, Romeo quantified the impact, estimating the changes being negotiated with Nikola will cut its backlog by $146.9 million, or 26.4%.

Romeo also extended the time it’ll take to recognize the bulk of its backlog by as much as a year. The company now expects $357 million of its $392.2 million backlog will be recognized between 2023-25, instead of 2022-24 as previously stated.

Our report also detailed how founder & ex-Chief Sales Officer Michael Patterson abruptly quit as CEO but not until after secretly founding a new company the day after Romeo went public, in part, to funnel purchase orders to Romeo and prop up the crumbling backlog. In doing so, we documented what appear to be undisclosed conflicts of interest and related party transactions.

We also produced evidence Romeo and Patterson intentionally obscured the timeline of a key acquisition— Patterson’s new company Battle Motors acquired trash truck manufacturer Crane Carrier— to hide the disclosure violations.

Under Patterson, Crane Carrier is converting trash trucks into battery electric vehicles (BEVs) that require Romeo battery packs. Now, Romeo’s annual report confirms our initial thesis; Patterson’s new company is placing orders with his old company:

“As of December 31, 2021, we had a receivable of $1.5 million from Mr. Patterson included in prepaid expenses and other current assets, which was subsequently collected in 2022.”

Since Patterson didn't officially quit as CEO until months after we documented he launched Battle Motors, it appears he violated his employment agreement and Romeo may have violated its fiduciary duty to investors if it knew Patterson wasn’t focusing all of his attention on Romeo. Patterson was also a consultant to Romeo in 2021, while the deal between Romeo and Battle Motors-Crane Carrier was being negotiated.

The latest filing indicates Patterson owns 8.65% of Romeo’s common stock.

It does not, to our knowledge, tell us whether Patterson used his stake in Romeo as collateral for a loan to purchase Crane Carrier.

Patterson got special permission to pledge 6 million Romeo shares as collateral for a personal loan right before he purchased Crane Carrier. To our knowledge Patterson has not disclosed whether he pledged his shares, as required by law, if they were used as loan collateral.

Likewise, Romeo’s 2022 10-K is revealing new details regarding the company’s statements to investors after coming public via a special purpose acquisition company (SPAC) merger. In its 2021 10-K, Romeo provided the following total addressable market (TAM) estimate:

“....TAM for the same vehicles is estimated to be approximately $225 billion…”

In its 2022 10-K, Romeo significantly revised down its TAM:

“...battery electric commercial vehicles represents an estimated $82 billion TAM…”

Though the estimates aren’t an apples-to-apples comparison, we note the 63.5% reduction in TAM estimate in the context of the SEC’s probe into public statements and forecasts provided by SPAC companies.

Our report also illustrated how six weeks after telling investors the company had long term agreements with two top battery cell manufacturers, Romeo’s CEO Lionel Selwood Jr. revealed there were none. Selwood made the claim— just before contradicting it— on March 30, 2021. That’s the same day— and same topic— Romeo now says the SEC is probing:

“We have received a subpoena from the SEC for the production of documents and information primarily relating to the Company’s March 30, 2021 announcement of possible or actual supply disruption relating to battery cells.”

Selwood was out as CEO five months later but not before inking a lucrative consulting agreement with Romeo, pocketing nearly $1 million, and keeping more than 1.3 million stock options (the equivalent of approximately 1% of the company) that vested and were exercisable in the first two months of 2020.

Separately, and not apparently a focus of the SEC subpoena, Romeo also revealed it recently discovered an accounting error that resulted in a misstatement of the company’s 2020 financials. The accounting error— which involved options— resulted in Romeo understating its 2020 net loss by 53.9%.

Romeo considers the correction immaterial.