Lilium N : 2021 Q3 Letter to Shareholders

Letter to Shareholders

Q3 2021

November 15, 2021

Dear Shareholders,

At Lilium, we are building radically better ways of moving. Our goal is to transform the way people and goods move by creating a sustainable and accessible mode of high-speed, regional transportation. With our unique, electric vertical takeoff and landing jet technology, Lilium is working to accelerate the decarbonization of air travel and realize a massive new market opportunity.

We have an outstanding team of leaders with proven experience in aerospace program management, technological development, finance and product commercialization. Our route to market launch is further supported by a robust ecosystem of commercial partners, leading aerospace suppliers and global investors.

In mid-September of this year, our company took an important step in its growth and development. With your support, we were able to become a publicly traded company and raise significant capital by completing a business combination with Qell Acquisition Corp. ("Qell"), a related private placement financing (the "PIPE Financing") and listing on Nasdaq. This has created a strong foundation for the development of the Lilium Jet, an all-electric vertical takeoff and landing aircraft, offering leading capacity to move people and things, low noise and high performance with zero operating emissions. Following completion of the business combination, listing and PIPE Financing, gross proceeds to the company amounted to approximately $584 million. On October 27, 2021, our registration statement on Form F-1, which among other things registers the shares issued pursuant to the PIPE Financing, was declared effective by the Securities and Exchange Commission.

Research analysts from three investment banks have already initiated coverage on the Company (Piper Sandler, Oppenheimer and Barclays). Additional analyst coverage is expected.

In terms of cash utilization, we are on track to achieve our communicated budget target for fiscal year 2021. Spending on business operations for the year through September 30 was on budget at $141.5 million¹, and for Q3 2021 amounted to $56.6 million. As of September 30, we had approximately $529 million of cash on hand. In the coming fiscal quarter, we expect cash spending will increase as we progress through the preliminary design review ("PDR") milestone, our engineering and flight-testing activities accelerate, and we ramp up activities with our aerospace suppliers. We expect the total cash spend for fiscal year 2021 to be in line with our previously communicated estimate of $221 million.

At this time, we are finalizing our 2022 budget. We are closely monitoring the COVID situation, supply chain disruption and the broader inflationary environment, which could put pressure on both our unit costs in the future, as well as the non-recurring payments to our supply chain for tooling and engineering services.

• Excluding transaction-related costs incurred in connection with our completed business combination with Qell, the PIPE Financing and a minority investment into enabling technology.

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Looking on the commercial side, our aircraft and the prospect of emission-free regional aviation continues to advance. In Florida, Lilium's network plans recently received a further boost, with Palm Beach County's decision to approve the development of a Vertiport to be built by Ferrovial at Palm Beach International Airport for the exclusive use of Lilium. To our knowledge, this is the first permitted Vertiport by a local government in the United States. Lilium and Ferrovial continue to expand our partnership outside of Florida. Ferrovial, a Lilium investor and global leader in the development and operation of transportation infrastructure, recently announced plans to deploy a network of 25 Vertiports in the United Kingdom and more than 20 Vertiports across Spain. Ferrovial intends to design their Vertiports in the UK and Spain for the specifications of the Lilium Jet and for use by Lilium's future operating partners and customers. The expanded partnership and development is expected to give Lilium access to two additional key European markets - the UK and Spain - representing millions of potential customers. Meanwhile, Lilium's planned German eVTOL network continues to grow, with Stuttgart airport announcing plans this October to join Munich and Nuremberg airports as part of the planned southern German network.

The recent collaboration announcement with ABB on charging infrastructure as well as the planned $1 billion commercial agreement announced earlier with Azul Brazilian Airlines for the sale of 220 of our jets and the establishment of a co-branded network in Brazil further validate our strong business plan and global reach.

The Lilium Jet is now entering into an important development phase, with PDR under way. In this letter, we will be giving you an update on the progress we have made over the last quarter while also looking ahead to some of the macroeconomic and aircraft development challenges we expect to manage in the coming months.

Update on Program Status and Certification - Preliminary Design Review

Since 2015, Lilium has developed and flown five generations of technology demonstrators based on the proprietary Ducted Electric Vectored Thrust architecture of the Lilium Jet. Since 2017, Lilium has been in dialogue with regulators at the European Union Aviation Safety Agency ("EASA") and the Federal Aviation Authority ("FAA") to ensure that our program aligns with certification requirements. We started our formal aircraft development program in 2019 and have been applying rigorous aerospace programmatic standards throughout. Lilium is one of only a handful of eVTOL companies that has received a certification basis (CRI-A01), which was granted to us by EASA, in 2020. The certification basis lays out the specific airworthiness requirements to which the Lilium Jet must comply to be viable for commercial operation.

Ducted Electric Vectored Thrust

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This November, we entered the PDR phase. During this phase, we seek to gain sufficient confidence that the aircraft architecture will meet airworthiness requirements, deliver performance and operating requirements assumed in the business cases, and be produced at the right quality. External aviation experts participate in the PDR.

What comes next? Completion of PDR gives the green light for engineering to launch detailed design activities and for procurement to make significant financial commitments to suppliers. Additionally, we will accelerate selection and contracting of suppliers, with the goal of engaging with established Tier 1 aerospace suppliers wherever possible in order to further reduce program risk, since each subsystem will need to meet aerospace quality standards to complete certification. As detailed design progresses, we will progressively enter into formal supply contracts for the majority of the bill of material.

In summary, completing PDR is a meaningful milestone in the aircraft product development program. Subsequent milestones on the road to certification, such as the critical design review (CDR), are outlined in detail in the Development Blog we recently posted on our Investor Relations website and which is accessible here.

Supplier contracting, cooperation and digitalization

In recent months, we have ramped up our contracting of suppliers for the Lilium Jet program. We are in negotiations with suppliers for various key components and have already secured under contract critical components, including avionics and flight controls with Honeywell, fuselage and wings with Aciturri, and carbon composites with Toray.

As we head into 2022, we will be working towards securing further supplier contracts that will support initial aircraft production and progress towards First Flight (FF) of a fully conforming aircraft. We are also working actively to mitigate supply chain disruption and inflation, which we are seeing in several areas of the supply chain, including raw materials and electronics components.

As announced in July this year, we have signed an agreement with Germany-based Customcells for the production of Lithium-ion batteries and preparations for a series production ramp-up are already progressing. The major requirements for the cells' production are agreed, and production processes are currently being defined with a special focus on meeting aerospace quality standards. We expect delivery of the first battery cells from Customcells' series production line next year to support the development program at Lilium.

In developing our battery system, safety remains our top priority. We are performing safety tests at cell and module level. Mastering the challenges associated with the current and next generation of high-energy cells is an essential precondition for Type Certification. In a forthcoming blog, we will be explaining our approach to battery safety in greater detail.

Meanwhile, we are preparing to introduce state-of-the-art digital solutions for key activities. Our close collaboration with Palantir enables us to develop powerful and dedicated data analytics to gain insights and optimize processes. This includes data analytics solutions to enable or de-risk the development and production of our Lilium Jet. For example, our flight test campaign has become more efficient, with tighter feedback loops, by leveraging Palantir's enterprise operating system, Foundry.

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Flight testing progress

Our latest 5th generation technology demonstrator continues to progress in its test campaign. First flight took place in July 2021 and the aircraft has since completed around 25 flights. The aircraft has proved to be extremely reliable for a demonstrator at this stage. These flights have so far tested multiple aspects of the flight envelope, including full exploration of the GPS position-controlled hover envelope at 12 mph (19 km/h) ground speed (forward, backward, lateral); airspeed envelope expansion up to 46 mph (74 km/h) with full maneuverability (climb and descent at 350ft/min, 30° bank angle, acceleration and deceleration at 0.2g); and combined input flights up to 46 mph (74 km/h) (climb and acceleration, descent and turn).

To watch one of our latest test flights with the demonstrator completing a combined inputs maneuvering flight at 46 mph (74 km/h), please follow thislink.

We plan to take the test campaign to Spain, which will permit us to expand the flight envelope in more reliable weather conditions and test full / cruising speeds and full transition from vertical to horizontal wing-borne flight. We expect to receive the permit to fly in Spain in early to mid-2022.

Organizational evolution

We have further developed our organization in order to drive coordination across our engineering and development activities and strengthen both Commercial and Procurement activities.

As part of our organizational evolution, Yves Yemsi has been appointed Chief Operating Officer, overseeing Program Management, Procurement, and Manufacturing. Yves brings to the role a wealth of experience in aerospace program quality, operations, supply chain and procurement. Prior to joining Lilium in 2019, Yves spent 16 years at Airbus, where he held various leadership roles, most recently as Head of Quality for the successful Airbus A350 program and as Senior Vice President Procurement at Airbus' Defence and Space Division. The new COO organization, alongside the strengthened Engineering function, will further integrate important activities which are necessary to drive the development of our first Lilium Jet aircraft.

Lilium N.V. | Letter to Shareholders | Q3 2021

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The Procurement organization has been further enhanced with the appointment of Martin Schübel as SVP Procurement. Over the last 25 years, Martin has held several leadership roles in the procurement organizations of BMW Group and Airbus.

Alex Asseily, an early investor in Lilium and previously Chief Strategy Officer, was appointed Vice Chairman, overseeing commercialization, marketing, culture and organizational design. In this expanded role, Alex will further leverage his expertise as an entrepreneur, founder and innovator in the area of consumer technology. Alex brings two decades of entrepreneurial experience, during which time he founded and developed several successful companies, including tech pioneer Jawbone and women's health technology innovator Elvie.

We have also strengthened our supporting functions where necessary to adapt to the requirements of a listed company. Within our Finance organization, for example, controlling and accounting functions have been strengthened, in particular with the appointment of Oliver Vogelgesang as Senior Vice President Finance and Controlling. Oliver brings more than twenty-five years of aerospace experience to this role, having served at Airbus in various finance leadership roles, most recently as Senior Vice President Controlling for the A320 Program & Managing Director Finance, Airbus Germany. In addition, our capital market orientation has been enhanced with the appointment of Björn Scheib as our Head of Investor Relations and Capital Markets. Björn brings a wealth of capital markets, entrepreneurial and ESG experience to this role, having founded Fyncon, a capital market advisory, and served for over 20 years at Daimler AG, where he led the Investor Relations function during their multiple stages of transformation.

As of today, the company has a workforce of around 750 people, of which roughly two thirds are working in areas related to program design and program development, with the remainder in supporting functions. We are approaching the point at which we believe we have the required headcount and competences in our organization to deliver on our game-changing program. We attracted and recruited more than 150 employees, many for key roles, in the first three quarters of 2021, having received tens of thousands of applications. We are pleased with the evolution of our organization and will begin to decelerate headcount growth as we move towards around 1,000 employees. Nevertheless, we will continue to target world-class talent from aerospace, automotive and technology.

Lilium N.V. | Letter to Shareholders | Q3 2021

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