NIKOLA CORPORATION This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "anticipate," "believe," "expect," "estimate," "intend," "plan," "will", and similar expressions are intended to identify forward looking statements. These are statements that relate to future periods and include our financial and business performance; expected timing with respect to the buildout of our manufacturing facilities, joint venture with Iveco and production and attributes of our BEV and FCEV trucks; expectations regarding our hydrogen fuel station rollout plan and hydrogen strategy; timing of completion of prototypes, validation testing, volume production and other milestones; securing components for our trucks on acceptable terms and in a timely manner, or at all; changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; planned collaboration with our business partners; our future capital requirements and sources and uses of cash; the potential outcome of investigations, litigation, complaints, product liability claims and/or adverse publicity, including any settlement with theSEC ; the implementation, market acceptance and success of our business model; developments relating to our competitors and industry; the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto; our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others; our ability to obtain funding for our operations; the outcome of any known and unknown regulatory proceedings; our business, expansion plans and opportunities; changes in applicable laws or regulations; and anticipated trends and challenges in our business and the markets in which we operate. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Item 1A of this report, as well as our ability to execute our business model, including market acceptance of our planned products and services; changes in applicable laws or regulations; risks associated with the outcome of any legal, regulatory, or judicial proceeding; the effect of the COVID-19 pandemic on our business; our ability to raise capital; our ability to compete; the success of our business collaborations; regulatory developments inthe United States and foreign countries; the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and our history of operating losses. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to update any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In this report, all references to "Nikola ," "we," "us," or "our" meanNikola Corporation . Nikola™ is a trademark ofNikola Corporation . We also refer to trademarks of other corporations and organizations in this report. The below discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and notes thereto for the year endedDecember 31, 2020 included in our Annual Report on Form 10-K/A for the year endedDecember 31, 2020 . Overview We are a technology innovator and integrator, working to develop innovative energy and transportation solutions. We are pioneering a business model that will enable corporate customers to integrate next-generation truck technology, hydrogen fueling infrastructure, and related maintenance. By creating this ecosystem, we and our strategic business partners and suppliers hope to build a long-term competitive advantage for clean technology vehicles and next generation fueling solutions. Our expertise lies in design, innovation, and software and engineering. We assemble, integrate, and commission our vehicles in collaboration with our business partners and suppliers. Our approach includes leveraging strategic partnerships to help lower cost, increase capital efficiency and increase speed to market. We operate in two business units: Truck and Energy. The Truck business unit is developing and commercializing BEV and FCEV Class 8 trucks that provide environmentally friendly, cost effective solutions to the short, medium and long haul trucking sector. The Energy business unit is primarily developing a hydrogen fueling ecosystem and charging stations to support our BEV and FCEV customers. 32 -------------------------------------------------------------------------------- Our planned hydrogen fueling ecosystem is expected to include hydrogen production and/or hydrogen procurement, hydrogen distribution, and hydrogen storage and dispensing. As part of our hydrogen strategy, onJune 22, 2021 , we entered into a purchase agreement ("Offtake Agreement") withWabash Valley Resources LLC ("WVR"), pursuant to which WVR agreed to sell to us, and we agreed to purchase from WVR, hydrogen to be produced from the hydrogen production facility being developed by WVR inWest Terre Haute, Indiana (the "Plant"), once completed. During 2020, we established a joint venture with Iveco, a subsidiary of CNHI,Nikola Iveco Europe GmbH . Our joint venture with Iveco provides us with the manufacturing infrastructure to build BEV trucks for the North American market in addition to that of our greenfield manufacturing facility inCoolidge, Arizona . The operations of the joint venture commenced during the fourth quarter of 2020. During the second quarter of 2021, the joint venture completed the construction of the manufacturing facility and started trial production for the Nikola Tre BEV on the assembly line in Ulm,Germany . We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we: • construct manufacturing facilities and purchase related equipment; • commercialize our heavy-duty trucks and other products; • develop hydrogen fueling stations; • continue to invest in our technology; • increase our investment in marketing and advertising, sales, and distribution infrastructure for our products and services; • maintain and improve our operational, financial and management information systems; • hire additional personnel; • obtain, maintain, expand, and protect our intellectual property portfolio; and • operate as a public company. Recent Developments •We have completed assembly of eight Tre BEV Gamma trucks and have started pre-series truck production inOctober 2021 . Pre-series trucks are expected to begin testing for high mileage accumulation by the end of 2021. •We have completed the assembly of our Tre FCEV Alpha trucks and expect to begin road trials by the end of 2021. •We have completed construction of Phase 0.5 at ourCoolidge manufacturing facility. We continue to assemble pre-series trucks and concurrently are expanding our Phase 1 area to enable production capacity of 2,400 trucks in 2022. Phase 1 is expected to be completed in the first quarter of 2022. •The operation of the Iveco manufacturing plant in Ulm,Germany was inaugurated inSeptember 2021 and once completed, the plant is expected to have a production capacity of 2,000 trucks per year. •We continued to expand our sales and service network with the additions of network partners with coverage in theNortheast United States and throughout Central andSouthern California . •We entered into a Second Purchase Agreement withTumim Stone Capital LLC ("Tumim") that will allow us, at our sole discretion, to sell up to an additional$300 million of shares of our common stock to Tumim. •We entered into a memorandum of understanding withOPAL Fuels LLC on the development, construction, and operation of hydrogen refueling stations inNorth America and the use of renewable natural gas in hydrogen production. 33 -------------------------------------------------------------------------------- •We signed a joint development agreement with TC Energy for co-development of large-scale production hubs. A key objective of the collaboration is to establish hubs near highly traveled truck corridors to serve our planned need for hydrogen to fuel our FCEVs within the next five years. •OnOctober 20, 2021 , we entered into a long term supply agreement withLG Energy Solution, LTD. This supply agreement will provide additional battery cells for our trucks beginning in 2022 through 2029. •The Company and the Staff of theDivision of Enforcement have been engaged in discussions regarding a resolution to the Staff's investigation. Based on the advancement of those discussions inOctober 2021 , the Company reserved a$125 million loss as its best estimate of the contingency in accrued liabilities as ofSeptember 30, 2021 , and in selling, general, and administrative expenses for the three and nine months endedSeptember 30, 2021 , on the consolidated financial statements. While any resolution cannot be finalized until voted upon by the full Commission, if approved, this resolution is expected to include a$125 million civil penalty paid over time and findings of violations by the Company of Section 10(b) and Rule 10b-5 of the Securities Exchange Act. The Company continues to cooperate with theDivision of Enforcement to fully resolve the matter. There can be no assurance as to the timing or final terms of any resolution, and the Company may not be able to reach a resolution at all. Final resolution of this matter is subject to documentation satisfactory to all the parties, and completion of any settlement is contingent on a vote of the Commissioners of theSEC . The Company intends to seek reimbursement fromMr. Milton for costs and damages arising from the actions that are the subject of the government and regulatory investigations. Comparability of Financial Information Our results of operations and statements of assets and liabilities may not be comparable between periods as a result of the Business Combination and becoming a public company. As a consequence of the Business Combination, we became a Nasdaq-listed company, which has and will continue to require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to continue to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees. Key Factors Affecting Operating Results We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled "Risk Factors." Commercial launch of heavy duty trucks and other products While we expect pre-series Tre BEV trucks to be completed late in the fourth quarter of 2021 and begin accumulating mileage on public roads with customers, we do not expect to derive revenue from our Tre BEV trucks until 2022. We expect to derive revenue from our Tre FCEV trucks in the second half of 2023. Before commercialization or start-of-production, we must complete modification or construction of required manufacturing facilities, purchase and integrate related systems, components, and software, and achieve validation and testing milestones. Presently, we are experiencing supply chain shortages, including but not limited to battery cells, integrated circuits, vehicle control chips, and displays. Certain production ready components such as chipsets and displays may not arrive at our facilities until the first quarter of 2022, which has and may continue to cause delays in validation and testing for these components. This would mean a delay in the availability of saleable Tre BEV trucks. We also require substantial additional capital to develop our products and services and fund operations for the foreseeable future. Until we can generate sufficient revenue, we expect to finance our operations through a combination of existing cash on hand, follow-on public offerings, private placements, debt financings, strategic partnerships, and licensing arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We expect that any delays in the successful completion of our manufacturing facility, delays in critical parts availability, and in validation and testing will impact our ability to generate revenue. Customer Demand 34 -------------------------------------------------------------------------------- While not yet commercially available, we have received significant interest in our trucks from potential customers. Going forward, we expect contractual orders from customers to be an important indicator of our future performance. Basis of Presentation Currently, we conduct business through one reportable and one operating segment. See Note 2 in our Annual Report on Form 10-K/A for the year endedDecember 31, 2020 for more information. Components of Results of Operations Revenues Prior to 2021, we primarily generated revenue from services related to solar installation projects that were completed in one year or less. Solar installation projects are not a part of our primary operations and were concluded in 2020. Following the anticipated introduction of our products to the market, we expect the significant majority of our revenue to be derived from our BEV trucks starting in 2022 and from bundled leases, or other alternative structures, for our FCEV trucks beginning in 2023. We intend for our bundled lease offering to be inclusive of the cost of the truck, hydrogen fuel and regularly scheduled maintenance. Cost of Revenues Prior to 2021, our cost of revenue included materials, labor, and other direct costs related to solar installation projects. Once we have reached commercial production, cost of revenue will include direct parts, material and labor costs, manufacturing overhead, including amortized tooling costs and depreciation of our greenfield manufacturing facility, depreciation of our hydrogen fueling stations, cost of hydrogen production, shipping and logistics costs and reserves for estimated warranty expenses. Research and Development Expense Research and development expenses consist primarily of costs incurred for the discovery and development of our vehicles, which include: • Fees paid to third parties such as consultants and contractors for outside development; • Expenses related to materials, supplies and third-party services, including prototype tooling and non-recurring engineering; • Personnel related expenses, including salaries, benefits, and stock-based compensation expense, for personnel in our engineering and research functions; • Depreciation for prototyping equipment and R&D facilities; and •Expenses related to operating theCoolidge manufacturing facility until the start of commercial production. During the three and nine months endedSeptember 30, 2021 , our research and development expenses have primarily been incurred in the development of our BEV and FCEV trucks. As a part of its in-kind investment, Iveco agreed to provide us with$100.0 million in advisory services (based on pre-negotiated hourly rates), including project coordination, drawings, documentation support, engineering support, vehicle integration, and product validation support. During the three and nine months endedSeptember 30, 2021 , we utilized$12.5 million and$40.2 million , respectively, of advisory services which were recorded as research and development expense. As ofSeptember 30, 2021 , we have$6.0 million of prepaid in-kind advisory services remaining which is expected to be consumed during the remainder of 2021 and will be recorded as research and development expense until we reach commercial production. We expect our research and development costs to increase for the foreseeable future as we continue to invest to achieve our technology and product roadmap goals. 35 -------------------------------------------------------------------------------- Selling, General, and Administrative Expense Selling, general, and administrative expenses consist of personnel related expenses for our corporate, executive, finance, and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, depreciation, amortization, travel, and marketing costs. Personnel related expenses consist of salaries, benefits, and stock-based compensation. We expect our selling, general, and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of operating as a public company. Interest Income (Expense), net Interest income consists primarily of interest received or earned on our cash and cash equivalents balances. Interest expense consists of interest on our finance lease liability and term loan. Loss on Forward Contract Liability The loss on forward contract liability includes losses from the remeasurement of the Series D redeemable convertible preferred stock forward contract liability. InApril 2020 , we fulfilled the forward contract liability and, therefore, subsequent toJune 30, 2020 , there is no impact from the remeasurement of the forward contract liability. Revaluation of Warrant Liability The revaluation of warrant liability includes net gains and losses from the remeasurement of the warrant liability. Warrants recorded as liabilities are recorded at their fair value and remeasured at each reporting period. Other Income (Expense), net Other income (expense), net consists primarily of other miscellaneous non-operating items, such as government grants, subsidies, merchandising, revaluation gains and losses on the derivative liability, foreign currency gains and losses, and unrealized gains and losses on investments. Income Tax Expense Our income tax provision consists of an estimate forU.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against ourU.S. and state deferred tax assets. Equity in Net Loss of Affiliates Equity in net loss of affiliates consists of our portion of losses from equity method investments. Results of Operations Comparison of Three Months EndedSeptember 30, 2021 to Three Months EndedSeptember 30, 2020 The following table sets forth our historical operating results for the periods indicated: 36 --------------------------------------------------------------------------------
Three Months Ended September 30, $ %
2021 2020 Change Change
(dollar amounts in thousands)
Operating expenses:
Research and development $ 78,896 $ 51,496 $ 27,400 53.2%
Selling, general, and administrative 192,929 65,782 127,147 193.3%
Total operating expenses 271,825 117,278 154,547 131.8%
Loss from operations (271,825) (117,278) (154,547) 131.8%
Other income (expense):
Interest income (expense), net (118) 171 (289) NM
Revaluation of warrant liability 4,467 37,745 (33,278) (88.2)%
Other income (expense), net 1,057 (340) 1,397 NM
Loss before income taxes and equity in net (186,717)
loss of affiliates (266,419) (79,702) 234.3%
Income tax expense 1 2 (1) NM
Loss before equity in net loss of affiliates (266,420) (79,704) (186,716) 234.3%
Equity in net loss of affiliates (1,147) - (1,147) NM
Net loss $ (267,567) $ (79,704) $ (187,863) 235.7%
Net loss per share:
Basic $ (0.67) $ (0.21) $ (0.46) NM
Diluted $ (0.68) $ (0.31) $ (0.37) NM
Weighted-average shares outstanding:
Basic 400,219,585 377,660,477 22,559,108 NM
Diluted 400,230,669 378,286,678 21,943,991 NM
Research and Development
Research and development expenses increased by $27.4 million , or 53.2%, from
$51.5 million during the three months ended September 30, 2020 to $78.9 million
during the three months ended September 30, 2021 . This increase was primarily
due to $12.7 million in higher spend on purchased components and tooling as we
focus on the development, building, and testing and validation of our Tre BEV
truck, as well as continuing the development of our FCEV truck platform. In
addition, personnel costs increased $9.4 million , freight related to the
transportation of prototype parts and components increased $3.2 million , and
stock-based compensation expense increased $1.9 million , driven by growth in our
in-house engineering headcount. The remaining increase was driven by
depreciation and occupancy costs related to capital equipment and software
dedicated to research and development activities, and an increase in travel due
to easing of travel restrictions imposed during the prior year related to
COVID-19, partially offset by a decrease in outside development spend.
Selling, General, and Administrative
Selling, general, and administrative expenses increased by $127.1 million , or
193.3%, from $65.8 million during the three months ended September 30, 2020 to
$192.9 million during the three months ended September 30, 2021 . The increase
was primarily related to a $125 million loss contingency regarding a potential
resolution to the SEC investigation. Additionally, there was an increase in
legal expenses of $4.4 million , an increase in personnel expenses of
$3.5 million driven by growth in headcount, an increase of $2.9 million for the
non-cash commitment share issuance costs related to the second equity line of
credit with Tumim, and higher general corporate expenses, including IT equipment
and depreciation of our headquarters. These increases were partially offset by a
decrease of $3.0 million for professional services due to registration filing
fees and other general corporate expenses in the prior year and a decrease of
$5.1 million in stock compensation driven by the modification of the former
Executive Chairman's stock awards recognized in the prior year.
Interest Income (Expense), net
Interest income (expense), net was immaterial for the three months ended
September 30, 2021 and 2020.
Revaluation of Warrant Liability
37
--------------------------------------------------------------------------------
The revaluation of warrant liability decreased $33.3 million , from $37.7 million
during the three months ended September 30, 2020 to $4.5 million during the
three months ended September 30, 2021 , resulting from changes in fair value of
our warrant liability.
Other Income (Expense), net
Other income (expense), net increased by $1.4 million from $0.3 million net
expense during the three months ended September 30, 2020 to $1.1 million net
income during the three months ended September 30, 2021 . The increase is
primarily related to gains from foreign currency translation and a gain from the
revaluation of the derivative liability.
Income Tax Expense
Income tax expense was immaterial for the three months ended September 30, 2021
and 2020. We have accumulated net operating losses at the federal and state
level and maintain a full valuation allowance against our net deferred taxes.
Equity in Net Loss of Affiliates
Equity in net loss of affiliates for the quarter ended September 30, 2021 , was
$1.1 million which relates to the net loss of our joint venture with Iveco and
our equity investment in WVR.
Comparison of Nine Months Ended September 30, 2021 to Nine Months Ended
September 30, 2020
The following table sets forth our historical operating results for the periods
indicated:
38
--------------------------------------------------------------------------------
Nine Months Ended September 30, $ %
2021 2020 Change Change
(dollar amounts in thousands)
Solar revenues $ - $ 94 $ (94) NM
Cost of solar revenues - 73 (73) NM
Gross profit - 21 (21) NM
Operating expenses:
Research and development 201,785 118,098 83,687 70.9%
Selling, general, and administrative 329,028 117,821 211,207 179.3%
Total operating expenses 530,813 235,919 294,894 125.0%
Loss from operations (530,813) (235,898) (294,915) 125.0%
Other income (expense):
Interest income (expense), net (219) 255 (474) NM
Loss on forward contract liability - (1,324) 1,324 NM
Revaluation of warrant liability 2,907 8,588 (5,681) (66.2)%
Other income (expense), net 174 (249) 423 NM
Loss before income taxes and equity in net loss (299,323)
of affiliate (527,951) (228,628) 130.9%
Income tax expense 4 4 - NM
Loss before equity in net loss of affiliate (527,955) (228,632) (299,323) 130.9%
Equity in net loss of affiliate (3,067) - (3,067) NM
Net loss (531,022) (228,632) (302,390) 132.3%
Premium paid on repurchase of redeemable
convertible preferred stock - (13,407) 13,407 (100.0)%
Net loss attributable to common stockholders
(242,039) $ (288,983) 119.4%
Net loss per share attributable to common
stockholders:
Basic $ (1.34) $ (0.76) $ (0.58) NM
Diluted $ (1.35) $ (0.79) $ (0.56) NM
Weighted-average shares outstanding:
Basic 395,691,795 318,315,891 77,375,904 NM
Diluted 395,860,876 318,976,447 76,884,429 NM
Solar Revenues and Cost of Solar Revenues
Solar revenues and cost of solar revenues for the nine months ended
September 30, 2020 were related to solar installation service projects. Solar
installation projects were legacy projects that were not related to our primary
operations and were concluded in 2020.
Research and Development
Research and development expenses increased by $83.7 million , or 70.9%, from
$118.1 million during the nine months ended September 30, 2020 to $201.8 million
during the nine months ended September 30, 2021 . This increase was primarily due
to $31.0 million in higher spend on purchased components, outside engineering
services, and tooling as we focus on the development, building, and testing and
validation of our Tre BEV truck, as well as continuing the development of our
FCEV truck platform. In addition, personnel costs increased $23.2 million and
stock-based compensation increased $19.2 million , driven by growth in our
in-house engineering headcount. We also incurred $4.3 million in higher freight
costs related to the transportation of prototype parts and components. The
remaining increase was driven by higher depreciation and occupancy costs related
to equipment and software dedicated to research and development activities, as
well as an increase in travel due to easing of travel restrictions imposed
during the prior year related to COVID-19.
Selling, General, and Administrative
39
--------------------------------------------------------------------------------
Selling, general, and administrative expenses increased by $211.2 million , or
179.3%, from $117.8 million during the nine months ended September 30, 2020 to
$329.0 million during the nine months ended September 30, 2021 . The increase was
primarily related to a $125 million loss contingency regarding a potential
resolution to the SEC investigation. Additionally, we incurred higher
stock-based compensation expense of $41.0 million and higher legal expenses of
$30.6 million primarily related to regulatory and legal matters incurred in
connection with the Hindenburg article. Further, there was an increase of $10.1
million in personnel expenses driven by growth in headcount and an increase of
$5.6 million related to the non-cash commitment share issuance costs related to
the equity line of credit with Tumim.
Interest Income (Expense), net
Interest income (expense), net was immaterial for the nine months ended
September 30, 2021 and 2020.
Loss on Forward Contract Liability
Loss on the forward contract liability represents loss recognized from a
$1.3 million change in fair value of the forward contract liability as of
September 30, 2020 . The forward contract was settled in April 2020 .
Revaluation of Warrant Liability
The revaluation of warrant liability decreased $5.7 million , from $8.6 million
during the nine months ended September 30, 2020 to $2.9 million during the nine
months ended September 30, 2021 resulting from changes in fair value of our
warrant liability.
Other Income (Expense), net
Other income (expense), net was immaterial for the nine months ended
September 30, 2021 and 2020.
Income Tax Expense
Income tax expense was immaterial for the nine months ended September 30, 2021
and 2020. We have accumulated net operating losses at the federal and state
level and maintain a full valuation allowance against our net deferred taxes.
Equity in Net Loss of Affiliates
Equity in net loss of affiliates for the nine months ended September 30, 2021 ,
was a $3.1 million loss which relates to the net loss of our joint venture with
Iveco and our equity investment in WVR.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the
following non-GAAP measures are useful in evaluating operational performance. We
use the following non-GAAP financial information to evaluate ongoing operations
and for internal planning and forecasting purposes. We believe that non-GAAP
financial information, when taken collectively, may be helpful to investors in
assessing operating performance.
EBITDA and Adjusted EBITDA
"EBITDA" is defined as net loss before interest income or expense, income tax
expense or benefit, and depreciation and amortization. "Adjusted EBITDA" is
defined as EBITDA adjusted for stock-based compensation and other items
determined by management. Adjusted EBITDA is intended as a supplemental measure
of our performance that is neither required by, nor presented in accordance
with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an
additional tool for investors to use in evaluating ongoing operating results and
trends and in comparing our financial measures with those of comparable
companies, which may present similar non-GAAP financial measures to investors.
However, you should be aware that when evaluating EBITDA and Adjusted EBITDA we
may incur future expenses similar to those excluded when calculating these
measures. In addition, our presentation of these measures should not be
construed as an inference that our future results will be unaffected by unusual
or non-recurring items. Our computation of Adjusted EBITDA may not be comparable
to other similarly titled measures computed by other companies, because all
companies may not calculate Adjusted EBITDA in the same fashion.
40
--------------------------------------------------------------------------------
Because of these limitations, EBITDA and Adjusted EBITDA should not be
considered in isolation or as a substitute for performance measures calculated
in accordance with GAAP. We compensate for these limitations by relying
primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a
supplemental basis. You should review the reconciliation of net loss to EBITDA
and Adjusted EBITDA below and not rely on any single financial measure to
evaluate our business.
The following table reconciles net loss to EBITDA and Adjusted EBITDA for the
three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(in thousands)
Net loss $ (267,567) $
(79,704)
118 (171) 219 (255)
Income tax expense 1 2 4 4
Depreciation and amortization 2,249 1,498 5,959 4,424
EBITDA (265,199) (78,375) (524,840) (224,459)
Stock-based compensation 49,047 52,196 151,983 91,736
Loss on forward contract liability - - - 1,324
Revaluation of warrant liability (4,467) (37,745) (2,907) (8,588)
Revaluation of derivative liability (319) - (319) -
Equity in net loss of affiliates 1,147 - 3,067 -
Regulatory and legal matters (1) 9,771 5,173 35,657 5,173
Legal loss contingency(2) 125,000 - 125,000 -
Adjusted EBITDA $ (85,020) $ (58,751) $ (212,359) $ (134,814)
(1) Regulatory and legal matters include legal, advisory, and other professional
service fees incurred in connection with the Hindenburg article from September
2020 , and investigations and litigation related thereto.
(2) Reserved loss contingency from discussions with the Staff of the Division of
Enforcement regarding a potential resolution to the SEC investigation.
Non-GAAP Net Loss and Non-GAAP Net Loss Per Share, Basic and Diluted
Non-GAAP net loss and non-GAAP net loss per share, basic and diluted are
presented as supplemental measures of our performance. Non-GAAP net loss is
defined as net loss attributable to common stockholders, basic and diluted
adjusted for stock compensation expense and other items determined by
management. Non-GAAP net loss per share, basic and diluted, is defined as
non-GAAP net loss divided by weighted average shares outstanding, basic and
diluted.
41
--------------------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(in thousands, except share and per share data)
Net loss attributable to common
stockholders $ (267,567)
49,047 52,196 151,983 91,736
Premium paid on repurchase of redeemable
convertible preferred stock - - - 13,407
Revaluation of warrant liability (4,467) (37,745) (2,907) (8,588)
Revaluation of derivative liability (319) - (319) -
Regulatory and legal matters(1) 9,771 5,173 35,657 5,173
Legal loss contingency(2) 125,000 - 125,000 -
Non-GAAP net loss $ (88,535) $ (60,080) $ (221,608) $ (140,311)
Non-GAAP net loss per share:
Basic $ (0.22) $ (0.16) $ (0.56) $ (0.44)
Diluted $ (0.22) $ (0.16) $ (0.56) $ (0.44)
Weighted average shares outstanding:
Basic 400,219,585 377,660,477 395,691,795 318,315,891
Diluted 400,230,669 378,286,678 395,860,876 318,976,447
(1) Regulatory and legal matters include legal, advisory, and other professional
service fees incurred in connection with the Hindenburg article from September
2020 , and investigations and litigation related thereto.
(2) Reserved loss contingency from discussions with the Staff of the Division of
Enforcement regarding a potential resolution to the SEC investigation.
Liquidity and Capital Resources
Since inception, we financed our operations primarily from the sales of
redeemable convertible preferred stock and common stock, the Business
Combination, proceeds from the Stock Purchase Agreement, and redemption of
warrants. As of September 30, 2021 , our principal sources of liquidity were our
cash and cash equivalents in the amount of $587.0 million , which are primarily
invested in money market funds.
Short-Term Liquidity Requirements
As of the date of this Quarterly Report on Form 10-Q, we have yet to generate
revenue from our core business operations. As of September 30, 2021 , our current
assets were $610.0 million consisting primarily of cash and cash equivalents of
$587.0 million , and our current liabilities were $253.1 million primarily
comprised of accrued expenses and accounts payables. During the second quarter
of 2021, we entered into a Purchase Agreement with Tumim allowing us to issue
shares of our common stock to Tumim for proceeds of up to $300 million . As of
September 30, 2021 we have issued 6,270,740 shares of common stock to Tumim
under the terms of the Purchase Agreement for gross proceeds of $72.9 million ,
excluding the 155,703 commitment shares issued to Tumim as consideration for its
irrevocable commitment to purchase shares of our common stock under the Purchase
Agreement. As of September 30, 2021 , the remaining commitment available under
the Purchase Agreement is $227.1 million .
During the third quarter of 2021, we entered into a Second Purchase Agreement
with Tumim allowing us to issue shares of our common stock to Tumim for proceeds
of up to an additional $300 million , provided that certain conditions have been
met. These conditions include effectiveness of a registration statement covering
the resale of shares of common stock that have been and may be issued under the
Second Purchase Agreement and termination of the Purchase Agreement. As of
September 30, 2021 , we have not sold any shares of common stock to Tumim under
the terms of the Second Purchase Agreement and have a remaining commitment of
$300 million available.
We believe our cash and cash equivalents will be sufficient to continue to
execute our business strategy over the next twelve month period by (i)
completing the development and industrialization of the BEV truck, (ii)
completing phase one
42
--------------------------------------------------------------------------------
construction of our greenfield manufacturing facility, (iii) completing the
construction of a pilot commercial hydrogen station and (iv) hiring of
personnel.
However, actual results could vary materially and negatively as a result of a
number of factors, including:
•the costs of our greenfield manufacturing facility construction and equipment;
•the timing and the costs involved in bringing our vehicles to market, mainly
the BEV truck;
•our ability to manage the costs of manufacturing the BEV trucks;
•the scope, progress, results, costs, timing and outcomes of our research and
development for our FCEV trucks;
•the costs of maintaining, expanding and protecting our intellectual property
portfolio, including potential litigation costs and liabilities;
•revenue received from sales of our BEV trucks;
•the costs of additional general and administrative personnel, including
accounting and finance, legal and human resources, as well as costs related to
litigation, investigations, or settlements;
•our ability to collect revenue; and
•other risks discussed in the section entitled "Risk Factors."
Long-Term Liquidity Requirements
Until we can generate sufficient revenue from truck sales and leases to cover
operating expenses, working capital and capital expenditures, we expect to fund
cash needs through a combination of equity and debt financing, including lease
securitization, strategic collaborations, and licensing arrangements. If we
raise funds by issuing equity securities, dilution to stockholders may result.
Any equity securities issued may also provide for rights, preferences or
privileges senior to those of holders of our common stock. If we raise funds by
issuing debt securities, these debt securities may have rights, preferences and
privileges senior to those of holders of our common stock. The terms of debt
securities or borrowings could impose significant restrictions on our
operations. If we raise funds through collaborations and licensing arrangements,
we might be required to relinquish significant rights to our technologies or
products, or grant licenses on terms that are not favorable to us. The credit
market and financial services industry have in the past, and may in the future,
experience periods of upheaval that could impact the availability and cost of
equity and debt financing.
While we intend to raise additional capital in the future, if adequate funds are
not available, we will need to curb our expansion plans or limit our research
and development activities, which would have a material adverse impact on our
business prospects and results of operations.
The following table provides a summary of cash flow data:
Nine Months Ended September 30,
2021 2020
(in thousands)
Net cash used in operating activities $ (195,369) $ (84,598)
Net cash used in investing activities (138,480) (15,195)
Net cash provided by financing activities 71,557
932,443
Cash Flows from Operating Activities
Our cash flows from operating activities are significantly affected by the
growth of our business primarily related to research and development activities.
Our operating cash flows are also affected by our working capital needs to
support growth in personnel related expenditures and fluctuations in accounts
payable and other current assets and liabilities.
43
--------------------------------------------------------------------------------
Net cash used in operating activities was $195.4 million for the nine months
ended September 30, 2021 . The most significant component of our cash used during
this period was net loss of $531.0 million , which included non-cash expenses of
$152.0 million related to stock-based compensation, $40.2 million expense for
in-kind services, other non-cash charges of $12.4 million and net cash inflows
of $131.1 million from changes in operating assets and liabilities primarily
driven an increase in accounts payable and accrued expenses.
Net cash used in operating activities was $84.6 million for the nine months
ended September 30, 2020 . The largest component of our cash used during this
period was a net loss of $228.6 million , which included non-cash charges of
$91.7 million related to stock-based compensation, $28.6 million expense for
in-kind services, $8.6 million gain for the revaluation of warrant liability,
other non-cash charges of $5.8 million , and net cash inflows of $26.5 million
from changes in operating assets and liabilities primarily driven by an increase
in accounts payable and accrued expenses and customer deposits.
Cash Flows from Investing Activities
We continue to experience negative cash flows from investing activities as we
expand our business and build out infrastructure. Cash flows from investing
activities primarily relate to capital expenditures to support our growth. Net
cash used in investing activities is expected to continue to increase
substantially as we build out and tool our manufacturing facility in Coolidge,
Arizona , finance operations of our joint venture in Ulm, Germany , and develop
the network of hydrogen fueling stations. As of September 30, 2021 , we
anticipate our capital expenditures for the remainder of fiscal year 2021 to be
between $75 million to $85 million , of which a significant portion is related to
the construction of our truck manufacturing facility and purchases of related
equipment in Coolidge, Arizona .
Net cash used in investing activities was $138.5 million for the nine months
ended September 30, 2021 , which was primarily due to $113.7 million in costs of
construction for our Coolidge manufacturing facility and purchases of and
deposits for capital equipment and supplier tooling and our $25.0 million cash
investment in WVR.
Net cash used in investing activities was $15.2 million for the nine months
ended September 30, 2020 , which was primarily due to purchases and deposits on
capital equipment related to the construction of our headquarters.
Cash Flows from Financing Activities
Through September 30, 2021 , we have financed our operations through proceeds
from sales of redeemable convertible preferred stock and common stock, the
Business Combination, and redemption of warrants.
Net cash provided by financing activities was $71.6 million for the nine months
ended September 30, 2021 , which was primarily due to proceeds from the Tumim
Purchase Agreement of approximately $72.9 million , proceeds from the exercises
of stock options of $4.2 million , partially offset by a $4.1 million payment of
our term loan and other finance payments of $1.4 million .
Net cash provided by financing activities was $932.4 million for the nine months
ended September 30, 2020 , which was primarily due to net proceeds of
$616.7 million from the Business Combination and the PIPE, proceeds from
exercise of common stock warrants of $263.1 million , proceeds from the issuance
of Series D redeemable convertible preferred stock of $50.3 million , net of
issuance costs, proceeds from the exercises of stock options of $2.2 million and
proceeds from tenant allowances for the construction of our headquarters of
$0.9 million , offset by payments on our finance lease of $0.8 million .
Contractual Obligations and Commitments
During the third quarter of 2021, we entered into a FCPM license, payable in
2022 and 2023 and as of September 30, 2021 , the Company accrued $11.6 million in
accrued expenses and other current liabilities and $34.7 million in other
long-term liabilities on the consolidated balance sheets. For the three and nine
months ended September 30, 2021 , there have been no other material changes to
our significant contractual obligations as previously disclosed in our Annual
Report on Form 10-K/A for the year ended December 31, 2020 .
Off Balance Sheet Arrangements
Since the date of our incorporation, we have not engaged in any off balance
sheet arrangements, as defined in the rules and regulations of the Securities
and Exchange Commission (the "SEC").
44
--------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. These principles require us to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities, as
of the balance sheet date, as well as reported amounts of revenue and expenses
during the reporting period. Our most significant estimates and judgments
involve valuation of our stock-based compensation, including the fair value of
common stock, the valuation of warrant liabilities, the valuation of the
redeemable convertible preferred stock tranche liability, estimates related to
our lease assumptions, and contingent liabilities, including litigation
reserves. Management bases its estimates on historical experience and on various
other assumptions believed to be reasonable, the results of which form the basis
for making judgments about the carrying values of assets and liabilities. Actual
results could differ from those estimates.
There have been no substantial changes to these estimates, or the policies
related to them during the three and nine months ended September 30, 2021 . For a
full discussion of these estimates and policies, see "Critical Accounting
Estimates" in Item 7 of our Annual Report on Form 10-K/A for the year ended
December 31, 2020 .
Recent Accounting Pronouncements
See Note 2 to our Unaudited Consolidated Financial Statements included elsewhere
in this Quarterly Report on Form 10-Q for more information about recent
accounting pronouncements, the timing of their adoption, and our assessment, to
the extent we have made one, of their potential impact on our financial
condition and our results of operations.
45--------------------------------------------------------------------------------
© Edgar Online, source
