NIKOLA CORPORATION You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this Annual Report on Form 10-K.
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 has always been to leverage 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 and constructing a network of hydrogen fueling stations to meet hydrogen fuel demand for our FCEV customers. 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 stated 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 protects our intellectual property portfolio; and
•operate as a public company, including incurring costs related to directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees.
Recent Developments
•InDecember 2021 , we delivered the first Nikola Tre BEVs to TTSI inCalifornia as part of a three month pilot program. Since placing the trucks into service with TTSI, the trucks have hauled multiple loads per day and logged over 4,500 miles. 56
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•InJanuary 2022 , the first two Nikola Tre FCEV alpha trucks were driven from our headquarters to AB, a journey of approximately 350 miles. These trucks are being used in daily service within AB'sSouthern California distribution network during a three month pilot. This pilot program will be used to refine the production specifications and features of the Tre FCEV. •Our joint venture manufacturing plant in Ulm,Germany , in Iveco's industrial complex has been completed with a production capacity of up to 2,000 trucks per year. In 2022, we expect to build and deliver up to 25 trucks to theHamburg Port Authority for use in port operations. •OnJanuary 13, 2022 , we announced that the Nikola Tre BEV has been deemed eligible for the Hybrid and Zero Emissions Truck and Bus Voucher Incentive Program (HVIP) program by theCalifornia Air Resources Board . With this approval, purchasers of the Nikola Tre BEV can now qualify for an incentive valued at$120,000 per truck, or$150,000 per truck for drayage operations, helping reduce the total cost of ownership for qualified purchasers operating in theState of California . •InJanuary 2022 , we announced a multiyear strategic partnership with Proterra to supply us with battery packs for both Nikola BEVs and FCEVs, providing a dual source strategy. The first Proterra powered Nikola Tre BEVs are expected to be produced in the fourth quarter of 2022.
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 requires that we continue to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect 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 set forth in the section entitled "Risk Factors."
We completed pre-series Tre BEV trucks in the fourth quarter of 2021 and began accumulating mileage on public roads with customers, but do not expect to derive revenue from our Tre BEV trucks until the second quarter of 2022. We expect to derive revenue from our Tre FCEV trucks in the second half 2023. Before start-of-production for the Tre BEV, we will be completing road mileage accumulation with pilot customers. 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 be delayed in arriving at our facilities, which has and may continue to cause delays in road mileage accumulation, validation, and testing for these components. This has resulted in delays and may continue to delay the availability of saleable Tre BEV trucks. We also require substantial 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 cash on hand, debt and equity 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 critical parts availability, and in validation and testing will impact our ability to generate revenue.
Basis of Presentation
Currently, we conduct business through one operating segment. See Note 2 in the accompanying audited consolidated financial statements for more information.
Components of Results of Operations
Revenues
Prior to 2021, we primarily generated revenue from services related to solar
installation projects that are 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 direct sales or
leases of BEV trucks starting in the second quarter of 2022 and from bundled
leases, or other
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alternative structures, for 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 revenues included materials, labor, and other direct costs related to solar installation projects.
Once we have reached commercial production, cost of revenues 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 the
During the years ended
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 years endedDecember 31, 2021 , 2020, and 2019 we utilized$46.3 million ,$45.7 million , and$8.0 million , respectively, of advisory services which were recorded as research and development expense. As ofDecember 31, 2021 , the full amount of advisory services had been consumed. As ofDecember 31, 2020 we had$46.3 million of prepaid in-kind advisory services remaining. 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.
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.
Impairment Expense
Impairment expense consists of charges related to our Powersports business unit that was discontinued in the fourth quarter of 2020.
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 paid on our promissory note and finance lease liabilities.
Revaluation of Series A Redeemable Convertible Preferred Stock Warrant Liability
The revaluation of Series A redeemable convertible preferred stock warrant liability includes gains and losses from the remeasurement of our redeemable convertible preferred stock warrant liability. As ofDecember 31, 2019 , all of our outstanding 58
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redeemable convertible preferred stock warrants were exercised, therefore, subsequent to 2019, there is no impact from the remeasurement of redeemable convertible preferred stock warrants.
Loss on Forward Contract Liability
The loss on forward contract liability includes losses from the remeasurement of the Series D redeemable convertible preferred share forward contract liability. InApril 2020 , we fulfilled the forward contract liability and, therefore, subsequent toDecember 31, 2020 , there is no impact from the remeasurement of the forward contract liability.
Revaluation of Warrant Liability
The revaluation of warrant liability includes the 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 (Benefit)
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 againstU.S. and state deferred tax assets. Cash paid for income taxes, net of refunds during the years endedDecember 31, 2021 , 2020, and 2019 was not material.
Equity in Net Loss of Affiliates
Equity in net loss of affiliates consists of our net portion of gains and losses from equity method investments.
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Results of Operations
Comparison of Year Ended
The following table sets forth our historical operating results for the periods
indicated:
Years Ended December 31,
2021 2020 $ Change % Change
( in thousands, except share and per share data)
Solar revenues $ - $ 95 $ (95) NM
Cost of solar revenues - 72 (72) NM
Gross profit - 23 (23) NM
Operating expenses:
Research and development 292,951 185,619 107,332 58 %
Selling, general, and administrative 400,575 182,724 217,851 119 %
Impairment expense - 14,415 (14,415) NM
Total operating expenses 693,526 382,758 310,768 81 %
Loss from operations (693,526) (382,735) (310,791) 81 %
Other income (expense):
Interest income (expense), net (481) 202 (683) (338) %
Loss on forward contract liability - (1,324) 1,324 NM
Revaluation of warrant liability 3,051 13,448 (10,397) (77) %
Other income (expense), net 4,102 (846) 4,948 (585) %
Loss before income taxes and equity in net loss
of affiliates (686,854) (371,255) (315,599) 85 %
Income tax expense (benefit) 4 (1,026) 1,030 NM
Loss before equity in net loss of affiliates (686,858) (370,229) (316,629) 86 %
Equity in net loss of affiliates (3,580) (637) (2,943) NM
Net loss (690,438) (370,866) (319,572) 86 %
Premium paid on repurchase of redeemable
convertible preferred stock - (13,407) 13,407 (100) %
Net loss attributable to common stockholders $ (690,438) $ (384,273) $ (306,165) 80 %
Net loss per share attributable to common
stockholders:
Basic $ (1.73) $ (1.15) $ (0.58) NM
Diluted $ (1.74) $ (1.18) $ (0.56) NM
Weighted-average shares outstanding:
Basic 398,655,081 335,325,271 63,329,810 NM
Diluted 398,784,392 335,831,033 62,953,359 NM
Solar Revenues and Cost of Solar Revenues
Solar revenues and cost of solar revenues for the year endedDecember 31, 2020 were related to solar installation service projects. Solar installation projects were not related to our primary operations and were concluded in 2020. Solar revenues and costs of solar revenues were immaterial for the year endedDecember 31, 2020 .
Research and Development
Research and development expenses increased by$107.3 million , or 58%, from$185.6 million during the year endedDecember 31, 2020 to$293.0 million during the year endedDecember 31, 2021 . This increase was primarily due to$40.9 million in higher spend on purchased components and tooling as we focus primarily on building and testing our BEV truck platform, as well as continuing the development of our FCEV truck platform. In addition, personnel costs increased$31.2 million and stock-based compensation expense increased$20.6 million driven by growth in our in-house engineering headcount. Additionally, freight related to the transportation of prototype parts and components increased$7.6 million . The remaining increase was driven by depreciation and occupancy costs related to capital equipment and software dedicated to 60
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research and development activities, professional services related to engineering 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$217.9 million , or 119%, from$182.7 million during the year endedDecember 31, 2020 to$400.6 million during the year endedDecember 31, 2021 . The increase was primarily related to a$125.0 million loss related to theSEC settlement. Additionally, there was an increase in stock based compensation of$47.1 million , an increase in legal expenses of$22.3 million , and increases in personnel expenses of$14.2 million driven by growth in headcount,$5.6 million for the non-cash commitment share issuance costs related to the equity lines of credit withTumim Stone Capital LLC , or Tumim, and higher general corporate expenses, including IT equipment, marketing and depreciation of our headquarters. These increases were partially offset by a decrease of$1.8 million for public relations and professional services and other general corporate expenses.
Impairment Expense
Impairment expense of
Interest Income (Expense), net
Interest income (expense), net decreased by$0.7 million , or 338%, from$0.2 million of income during the year endedDecember 31, 2020 to$0.5 million of expense during the year endedDecember 31, 2021 . The decrease is primarily due to a lower average interest rate earned on deposits and an increase in interest expense related to finance lease liabilities and the promissory note.
Loss on Forward Contract Liability
Our loss on the forward contract liability represents recognized loss from a
Revaluation of Warrant Liability
The revaluation of warrant liability decreased$10.4 million , from$13.4 million during the year endedDecember 31, 2020 to$3.1 million during the year endedDecember 31, 2021 , resulting from changes in fair value of our warrant liability.
Other Income (Expense), net
Other income (expense), net increased by$4.9 million , from$0.8 million of expense during the year endedDecember 31, 2020 to$4.1 million of income during the year endedDecember 31, 2021 . The increase was driven primarily by government grant income of$3.4 million , gains on foreign currency exchange and unrealized gains on investments, partially offset by a loss on sale of equipment of$1.0 million . Income Tax Expense (Benefit) Income tax expense (benefit) for the year endedDecember 31, 2021 was immaterial. Income tax expense (benefit) for the year endedDecember 31, 2020 was a$1.0 million benefit primarily related to changes in deferred tax liabilities to our indefinite-lived intangible which was impaired in 2020. We have cumulative 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 decreased by$2.9 million , from$0.6 million for the year endedDecember 31, 2020 to$3.6 million for the year endedDecember 31, 2021 . The decrease was driven by additional losses in excess of gains of$3.3 million in the current period related toNikola Iveco Europe GmbH , partially offset by a gain of$0.3 million related to WVR. 61
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Comparison of Year Ended
The following table sets forth our historical operating results for the periods
indicated:
Years Ended December 31,
2020 2019 $ Change % Change
( in thousands, except share and per share data)
Solar revenues $ 95 $ 482 $ (387) NM
Cost of solar revenues 72 271 (199) NM
Gross profit 23 211 (188) NM
Operating expenses:
Research and development 185,619 67,514 118,105 175 %
Selling, general, and administrative 182,724 20,692 162,032 783 %
Impairment expense 14,415 - 14,415 NM
Total operating expenses 382,758 88,206 294,552 334 %
Loss from operations (382,735) (87,995) (294,740) 335 %
Other income (expense):
Interest income, net 202 1,456 (1,254) (86) %
Revaluation of Series A redeemable convertible
preferred stock warrant liability - (3,339) 3,339 NM
Loss on forward contract liability (1,324) - (1,324) NM
Revaluation of warrant liability 13,448 - 13,448 NM
Other income (expense), net (846) 1,373 (2,219) (162) %
Loss before income taxes and equity in net loss
of affiliates (371,255) (88,505) (282,750) 319 %
Income tax expense (benefit) (1,026) 151 (1,177) NM
Loss before equity in net loss of affiliates (370,229) (88,656) (281,573) 318 %
Equity in net loss of affiliates (637) - (637) NM
Net loss (370,866) (88,656) (282,210) 318 %
Premium paid on repurchase of redeemable
convertible preferred stock (13,407) (16,816) 3,409 NM
Net loss attributable to common stockholders $ (384,273) $ (105,472) $ (278,801) 264 %
Net loss per share attributable to common
stockholders:
Basic $ (1.15) $ (0.40) $ (0.75) NM
Diluted $ (1.18) $ (0.40) $ (0.78) NM
Weighted-average shares outstanding:
Basic 335,325,271 262,528,769 72,796,502 NM
Diluted 335,831,033 262,528,769 73,302,264 NM
Solar Revenues and Cost of Solar Revenues
Solar revenues and cost of solar revenues for the years endedDecember 31, 2020 and 2019 were related to solar installation service projects. Solar installation projects were not related to our primary operations and were concluded in 2020. Solar revenues and costs of solar revenues were immaterial for the years endedDecember 31, 2020 and 2019. Research and Development Research and development expenses increased by$118.1 million , or 175%, from$67.5 million during the year endedDecember 31, 2019 to$185.6 million in the year endedDecember 31, 2020 . The increase was primarily due to an increase of$77.4 million in higher spend on purchased prototype components and outside engineering services as we focus primarily on the development, build, and testing of our BEV truck platform, as well as continuing development of our FCEV truck platform. In addition, we incurred increased personnel costs of$21.4 million driven by growth in our in-house engineering headcount, and higher stock-based compensation expense of$15.2 million primarily in connection with the Business Combination, higher headcount, and RSU grants made to employees during 2020. We also incurred higher depreciation and occupancy costs associated with our headquarters inPhoenix, Arizona and related capital equipment and software. 62
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Selling, General, and Administrative
Selling, general, and administrative expenses increased by$162.0 million , or 783%, from$20.7 million during the year endedDecember 31, 2019 to$182.7 million during the year endedDecember 31, 2020 . The increase was primarily related to higher stock-based compensation expense of$117.9 million for RSU grants to executive officers in connection with the Business Combination and increased headcount. In addition, there was an increase in legal expenses of$27.5 million primarily related to regulatory and legal matters incurred in connection with the short-seller analyst report fromSeptember 2020 . Further, there was an increase in personnel expenses of$7.3 million driven by growth in headcount and higher general corporate expenses, professional services, travel, and depreciation of our headquarters. This was partially offset by a decrease in marketing costs due to theNikola World event held in 2019, which was not held in 2020. Impairment Expense
Impairment expense of
Interest Income, net
Interest income, net decreased by$1.3 million , or 86%, from$1.5 million of income during the year endedDecember 31, 2019 to$0.2 million of income during the year endedDecember 31, 2020 . The decrease is primarily due to an increase in interest expense from our finance lease liability and a lower average interest rate earned on deposits. This was partially offset by a higher cash and cash equivalents balance in 2020.
Loss on Forward Contract Liability
Our loss on the forward contract liability represents recognized loss from a
Revaluation of Warrant Liability
The revaluation of warrant liability represents a net remeasurement gain of$13.4 million resulting from the change in fair value of our warrant liability. The remeasurement gain includes a$12.4 million gain for the change in fair value of our warrant liability for warrants not yet exercised as ofDecember 31, 2020 , and a$1.0 million remeasurement gain for warrants exercised during 2020.
Other Income (Expense), net
Other income (expense), net decreased by$2.2 million , from$1.4 million of income during the year endedDecember 31, 2019 to$0.8 million of expense during the year endedDecember 31, 2020 . The decrease was driven primarily by one-time grant income received during 2019, losses on foreign currency exchange and unrealized losses on investments during 2020.
Income Tax Expense (Benefit)
Income tax expense (benefit) for the year endedDecember 31, 2020 was a$1.0 million benefit, primarily related to changes in deferred tax liabilities related to our indefinite-lived intangible which was impaired in 2020. Income tax expense was immaterial for the year endedDecember 31, 2019 . We have cumulative 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 affiliate for the year endedDecember 31, 2020 was$0.6 million as operations of our joint venture commenced in the fourth quarter of 2020. Non-GAAP Financial Measures In addition to our results determined in accordance withU.S. Generally Accepted Accounting Principles, or 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
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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.
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
periods indicated:
Three Months Ended December 31, Years Ended December 31,
2021 2020 2021 2020 2019
(in thousands)
Net loss $ (159,416) $
(142,236)
262 53 481 (202) (1,456)
Income tax expense (benefit) - (1,030) 4 (1,026) 151
Depreciation and amortization 2,272 1,753 8,231 6,008 2,323
EBITDA (156,882) (141,460) (681,722) (366,086) (87,638)
Stock-based compensation 53,728 46,255 205,711 137,991 4,858
Revaluation of Series A redeemable
convertible preferred stock warrant
liability - - - - 3,339
Loss on forward contract liability - - - 1,324 -
Revaluation of warrant liability (144) (4,860) (3,051) (13,448) -
Revaluation of derivative liability 215 - (104) - -
Equity in net loss of affiliates 513 637 3,580 637 -
Regulatory and legal matters(1) 12,185 19,510 47,842 24,683 -
Impairment expense - 14,415 - 14,415 -
SEC settlement - - 125,000 - -
Adjusted EBITDA $ (90,385) $ (65,503) $ (302,744) $ (200,484) $ (79,441)
(1) Regulatory and legal matters include legal, advisory and other professional
service fees incurred in connection with the short-seller article from September
2020 , and investigations and litigation related thereto.
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.
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The following table reconciles net loss and net loss per share to non-GAAP net loss and non-GAAP net loss per share for the periods indicated:
Three Months Ended December 31, Years Ended December 31,
2021 2020 2021 2020 2019
(in thousands, except share and per share data)
Net loss attributable to common
stockholders $ (159,416) $
(142,236)
53,728 46,255 205,711 137,991 4,858
Premium paid on repurchase of
redeemable convertible preferred stock - - - 13,407 16,816
Revaluation of warrant liability (144) (4,860) (3,051) (13,448) -
Revaluation of derivative liability 215 - (104) - -
Regulatory and legal matters(1) 12,185 19,510 47,842 24,683 -
Impairment expense - 14,415 - 14,415 -
SEC settlement - - 125,000 - -
Non-GAAP net loss $ (93,432) $ (66,916) $ (315,040) $ (207,225) $ (83,798)
Non-GAAP net loss per share:
Basic $ (0.23) $ (0.17) $ (0.79) $ (0.62) $ (0.32)
Diluted $ (0.23) $ (0.17) $ (0.79) $ (0.62) $ (0.32)
Weighted average shares outstanding:
Basic 407,448,311 385,983,645 398,655,081 335,325,271 262,528,769
Diluted 407,448,311 386,323,048 398,784,392 335,831,033 262,528,769
(1) Regulatory and legal matters include legal, advisory and other professional
service fees incurred in connection with the short-seller article from September
2020 , and investigations and litigation related thereto.
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, a private placement with investors (the "PIPE"), proceeds from the Tumim Purchase Agreements, and redemption of warrants. As ofDecember 31, 2021 , our principal sources of liquidity were our cash and cash equivalents in the amount of$497.2 million , which are primarily invested in money market funds. During the second quarter of 2021, we entered into a purchase agreement with Tumim (the" First Tumim Purchase Agreement") allowing us to issue shares of our common stock to Tumim for proceeds of up to$300.0 million . As ofDecember 31, 2021 we have issued 14,213,498 shares of common stock to Tumim under the terms of the First Tumim Purchase Agreement for gross proceeds of$163.8 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 First Tumim Purchase Agreement. As ofDecember 31, 2021 , there were 3,643,644 registered shares remaining and a remaining commitment available under the First Tumim Purchase Agreement of$136.2 million . During the third quarter of 2021, we entered into a second purchase agreement with Tumim (the "Second Tumim Purchase Agreement" and, together with the First Tumim Purchase Agreement, the "Tumim Purchase Agreements") allowing us to issue shares of our common stock to Tumim for proceeds of up to an additional$300.0 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 Tumim Purchase Agreement and termination of the First Tumim Purchase Agreement. As ofDecember 31, 2021 , we have not sold any shares of common stock to Tumim under the terms of the Second Tumim Purchase Agreement with 28,790,787 registered shares remaining and a remaining commitment of$300.0 million available.
Short-Term Liquidity Requirements
As of the date of this Annual Report on Form 10-K, we have yet to generate revenue from our core business operations. As ofDecember 31, 2021 , our current assets were$524.7 million consisting primarily of cash and cash equivalents of$497.2 million , and our current liabilities were$180.6 million comprised of accounts payable and accrued expenses. 65
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We believe our cash and cash equivalents balance will be sufficient to continue to execute our business strategy over the next twelve month period including (i) completing the development and industrialization of the BEV truck, (ii) expanding theCoolidge manufacturing facility, (iii) completing the construction of a pilot commercial hydrogen station, (iv) validation and on-road testing of the FCEV truck and (v) hiring of additional 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 expansion 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 would 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. 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 will need 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.
Summary of Cash Flows
The following table provides a summary of cash flow data:
Years Ended December 31,
2021 2020 2019
(in thousands)
Net cash used in operating activities
(39,302)
Net cash provided by financing activities 187,598 941,120
35,805
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 and selling, general, and administrative 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. Net cash used in operating activities was$307.2 million for the year endedDecember 31, 2021 . The most significant component of our cash used during this period was a net loss of$690.4 million , which included non-cash expenses of$205.7 million related to stock-based compensation,$46.3 million for in-kind services,$8.2 million related to depreciation and 66
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amortization, and$5.6 million for the issuance of commitment shares to Tumim, and net cash inflows of$110.4 million from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and liabilities were the result of an increase in accounts payable and accrued expenses of$96.1 million , primarily related to the liability for theSEC settlement, and increased spend on the development of our BEV and FCEV trucks, along with an increase in other long-term liabilities of$48.6 million related to theSEC settlement, partially offset by an increase in inventory and prepaid expenses and other current assets. Net cash used in operating activities was$150.5 million for the year endedDecember 31, 2020 . The most significant component of our cash used during this period was a net loss of$370.9 million , which included non-cash expenses of$138.0 million related to stock-based compensation, a gain of$13.4 million related to the change in fair value of our warrant liability,$45.7 million for in-kind services,$6.0 million related to depreciation and amortization,$14.4 million for impairment charges, and a loss of$1.3 million related to the change in fair value of our forward contract liability, and net cash inflows of$28.7 million from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and liabilities were primarily the result of an increase in accounts payable and accrued expenses of$29.7 million , primarily related accrued expenses related to regulatory and legal matters, and increased spend on the development of our BEV and FCEV trucks, partially offset by an increase in accounts receivable, net and prepaid expenses and other current assets. Net cash used in operating activities was$80.6 million for the year endedDecember 31, 2019 . The most significant component of our cash used during this period was a net loss of$88.7 million , which included non-cash charges of$8.0 million for in-kind services,$4.9 million related to stock-based compensation, loss of$3.3 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability, and$2.3 million related to depreciation and amortization expense, and net cash outflows of$10.6 million from changes in operating assets and liabilities. The net cash outflows from changes in operating assets and liabilities were primarily the result of a decrease in accounts payable and accrued expenses and other current liabilities of$9.4 million , primarily related to the completion of certain outside development projects and settlement of related liabilities.
Cash Flows from Investing Activities
We continue to experience negative cash flows from investing activities as we expand our business and build our 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 North American truck manufacturing facility inCoolidge, Arizona , finance initial operations of our joint venture in Ulm,Germany , and develop the network of hydrogen fueling stations.
Net cash used in investing activities was
Net cash used in investing activities was$31.1 million for the year endedDecember 31, 2020 , which was primarily due to purchases and deposits for property and equipment, including construction for ourCoolidge manufacturing facility and purchases of capital equipment of$22.3 million and$8.8 million in cash paid for investment in the joint venture. Net cash used in investing activities was$39.3 million for the year endedDecember 31, 2019 , which was primarily due to purchases and deposits on capital equipment of$21.1 million , and$18.2 million related to the construction of our headquarters.
Cash Flows from Financing Activities
ThroughDecember 31, 2021 , we have financed our operations through proceeds from sales of redeemable convertible preferred stock, the Business Combination, the PIPE, and redemption of warrants. Net cash provided by financing activities was$187.6 million for the year endedDecember 31, 2021 , which was primarily due to proceeds from the First Tumim Purchase Agreement of approximately$163.8 million , net proceeds from issuance of the promissory note for$24.6 million , proceeds from the exercises of stock options of$4.8 million , partially offset by a$4.1 million payment of our term loan. Net cash provided by financing activities was$941.1 million for the year endedDecember 31, 2020 , which was primarily due to net proceeds of$616.7 million from the Business Combination and the PIPE, the proceeds from the exercise of public and private warrants of$264.5 million , proceeds from the issuance of Legacy Nikola's Series D redeemable convertible preferred stock, net of issuance costs, of$50.3 million , proceeds from the exercises of stock options of$9.7 million and proceeds from tenant allowances for the construction of our headquarters of$0.9 million , offset by payments on our finance lease liability of$1.0 million . 67
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Net cash provided by financing activities was$35.8 million for the year endedDecember 31, 2019 , which was primarily due to proceeds from the issuance of Series D redeemable convertible preferred stock of$65.0 million and proceeds from the exercise of the Series A redeemable convertible preferred stock warrants of$2.2 million , offset by the repurchase of Series B redeemable convertible preferred stock of$31.4 million .
Contractual Obligations and Commitments
For a description of our contractual obligations such as debt, leases, purchase and other contractual obligations, see Note 5, Leases, Note 9, Debt and Finance Lease Liabilities, and Note 14, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
Since the date of incorporation, we have not engaged in any off-balance sheet
arrangements, as defined in the rules and regulations of the
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 and market-based restricted stock units, the valuations of warrant liabilities, derivative liabilities, the WVR Put Right and Price Differential and redeemable convertible preferred stock tranche liability, estimates related to our lease assumptions, contingent liabilities, including litigation reserves, and inventory valuation. 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. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following accounting policies are most critical to understanding our financial condition and historical and future results of operations.
Stock-Based Compensation
We recognize the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. We recognize stock-based compensation costs and reverse previously recognized costs for unvested awards in the period forfeitures occur. We determine the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the following assumptions:
•Expected Term-We use the simplified method when calculating the expected term due to insufficient historical exercise data.
•Expected Volatility-As our shares have limited history, the volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.
•Expected Dividend Yield-The dividend rate used is zero as we have never paid any cash dividends on common stock or Legacy Nikola common stock and do not anticipate doing so in the foreseeable future.
•Risk-Free Interest Rate-The interest rates used are based on the implied yield available onU.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.
Common Stock Valuations
The grant date fair value of Legacy Nikola common stock was determined by LegacyNikola's board of directors with the assistance of management and an independent third-party valuation specialist. The grant date fair value of Legacy Nikola common stock was determined using valuation methodologies which utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of 68
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marketability (Level 3 inputs). Based on our early stage of development and
other relevant factors, we determined that an Option Pricing Model ("OPM") was
the most appropriate method for allocating our enterprise value to determine the
estimated fair value of Legacy Nikola common stock. Application of the OPM
involves the use of estimates, judgment, and assumptions that are highly complex
and subjective, such as those regarding our expected future revenue, expenses,
and cash flows, discount rates, market multiples, the selection of comparable
companies, and the probability of future events. Specifically, we have
historically used the OPM backsolve method to estimate the fair value of Legacy
Nikola common stock, which derives the implied equity value for one type of
equity security from a contemporaneous transaction involving another type of
security, shares of our redeemable convertible preferred stock in this instance.
As of
Market-Based RSUs The fair value of market based RSU awards is determined using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market condition stipulated in the award to calculate the fair value of the award. Significant judgment is required in determining the expected volatility of our common stock. Due to the limited history of trading of our common stock, we determined expected volatility based on a peer group of publicly traded companies.
Common Stock Warrants
Common stock warrants issued with debt, equity or as standalone financial instruments are recorded as either liabilities or equity in accordance with the applicable accounting guidance. Warrants recorded as equity are recorded at their fair value determined at the issuance date and are not remeasured after that. Warrants recorded as liabilities are recorded at their fair value and remeasured on each reporting date with changes in estimated fair value of common stock warrant liability in the consolidated statement of operations. We, with the assistance of third party valuations, utilize the Black-Scholes valuation model to estimate the fair value of private warrants at each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including volatility. Significant judgment is required in determining the expected volatility of our common stock. Due to the limited history of trading of our common stock, we determined expected volatility based on a peer group of publicly traded companies. Increases (decreases) in the assumptions result in a directionally similar impact to the fair value of the common stock warrant liability.
Recent Accounting Pronouncements
Note 2 to our consolidated financial statements and notes thereto, contained elsewhere in this Annual Report on the Form 10-K, provides 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 results of operations.
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