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/A. 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/A. 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. In 2019, we partnered with Iveco, a subsidiary of CNHI, a leading European industrial vehicle manufacturing company. Together, we are jointly developing cab over BEV and FCEV trucks for sale in the European market which will be manufactured through a 50/50 owned joint venture inEurope . InApril 2020 , we entered into a series of agreements with Iveco which established the joint venture,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. 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. 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. 55 -------------------------------------------------------------------------------- Table of Contents Business Combination and Public Company Costs OnJune 3, 2020 , we consummated the merger contemplated by the Business Combination Agreement with VectoIQ, with Legacy Nikola surviving the merger as a wholly-owned subsidiary of VectoIQ. Immediately prior to the closing of the Business Combination, all shares of outstanding redeemable convertible preferred stock of Legacy Nikola were automatically converted into shares of VectoIQ's common stock. Upon the consummation of the Business Combination, each share of Legacy Nikola common stock issued and outstanding was canceled and converted into the right to receive the Per Share Merger Consideration. Upon the closing of the Business Combination, VectoIQ's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 750,000,000 shares, of which 600,000,000 shares were designated common stock,$0.0001 par value per share, and of which 150,000,000 shares were designated preferred stock,$0.0001 par value per share. In connection with the execution of the Business Combination Agreement, VectoIQ entered into separate subscription agreements with a number of investors, pursuant to which the Subscribers agreed to purchase, and VectoIQ agreed to sell to the Subscribers, an aggregate of 52,500,000 PIPE Shares, for a purchase price of$10.00 per share and an aggregate purchase price of$525.0 million , in the PIPE. The PIPE investment closed simultaneously with the consummation of the Business Combination. Prior to the closing of the Business Combination, Legacy Nikola repurchased 2,850,930 shares of Legacy Nikola's Series B redeemable convertible preferred stock at the price of$8.77 per share for an aggregate purchase price of$25.0 million pursuant to the Nimbus Repurchase Agreement. The repurchase is retrospectively adjusted in the statement of stockholders' equity to reflect our equity structure for all periods presented.
Immediately following the Business Combination, pursuant to a redemption
agreement,
The Business Combination is accounted for as a reverse merger in accordance withU.S. Generally Accepted Accounting Principles ("GAAP"). While VectoIQ was the legal acquirer, because Legacy Nikola was deemed the accounting acquirer, the historical financial statements of Legacy Nikola became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a consequence of the Business Combination, we became a Nasdaq-listed company, which will require 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." Commercial Launch ofNikola heavy duty trucks and other products We expect to derive revenue from our BEV trucks in late 2021 and FCEV trucks in the second half 2023. Prior to commercialization, we must complete modification or construction of required manufacturing facilities, purchase and integrate related equipment and software, and achieve several research and development milestones. As a result, we will require substantial additional capital to develop our products and services and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales and hydrogen FCEV leases, we expect to finance our operations through a combination of existing cash on hand, public offerings, private placements, debt financings, collaborations, 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. Any delays in the successful completion of our manufacturing facility will impact our ability to generate revenue. Customer Demand While our products are not yet commercially available, we have received significant interest from potential customers. Going forward, we expect the size of our committed reservations to be an important indicator of our future performance. 56 -------------------------------------------------------------------------------- Table of Contents Basis of Presentation Currently, we conduct business through one reportable and one operating segment. See Note 2 in the accompanying audited consolidated financial statements for more information. Components of Results of Operations Revenues To date, we have 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 of BEV trucks starting in 2021 and from the bundled leases of FCEV trucks beginning in 2023. Our bundled lease offering is inclusive of the cost of the truck, hydrogen fuel and regularly scheduled maintenance. We expect the bundled leases to qualify for the sales type lease accounting under GAAP, with the sale of the truck recognized upon the transfer of the title, and hydrogen fuel and maintenance revenues recognized over time as they are being provided to the customer. Cost of Revenues To date, our cost of revenues has 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. During the years endedDecember 31, 2020 , 2019, and 2018 our research and development expenses were primarily incurred in the development of the BEV and FCEV trucks. As a part of its in-kind investment, Iveco is providing 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, 2020 and 2019, we utilized$45.7 million and$8.0 million , respectively, of advisory services which were recorded as research and development expense. As ofDecember 31, 2020 , we have$46.3 million of prepaid in-kind advisory services remaining which is expected to be consumed in 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. 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
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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, including compliance with the rules
and regulations of the Securities Exchange Commission , legal, audit, additional
insurance expenses, investor relations activities, and other administrative and
professional services.
Impairment Expense
Impairment expense consists of charges related to our Powersports business unit
that was discontinued in the fourth quarter of 2020, including intangible assets
consisting of in-process R&D and trademarks, and long-lived assets.
Interest Income, net
Interest income, net consists primarily of interest received or earned on our
cash and cash equivalents balances. Interest expense consists of interest paid
on our term loan and finance lease liability.
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 of December 31, 2019 , all of
our outstanding 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.
In April 2020 , the forward contract liability was fulfilled and, therefore,
subsequent to June 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,
foreign currency gains and losses, and unrealized gains and losses on
investments.
Income Tax Expense (Benefit)
Our income tax provision consists of an estimate for U.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 U.S. and state deferred tax assets. Cash paid for
income taxes, net of refunds during the years ended December 31, 2020 , 2019, and
2018 was not material.
Equity in Net Loss of Affiliate
Equity in net loss of affiliate consists of our portion of losses from our joint
venture, Nikola Iveco Europe, Gmbh .
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Results of Operations
Comparison of Year Ended December 31, 2020 to Year Ended December 31, 2019
The following table sets forth our historical operating results for the periods
indicated:
Years Ended December 31,
2020
(As Restated) 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 affiliate (371,255) (88,505) (282,750) 319 %
Income tax expense (benefit) (1,026) 151 (1,177) NM
Loss before equity in net loss of affiliate (370,229) (88,656) (281,573) 318 %
Equity in net loss of affiliate (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 (20) %
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 shared used to compute net
loss per share attributable to common
stockholders:
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 ended December 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 ended
December 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 ended December 31, 2019 to $185.6 million during the
year ended December 31, 2020 . This increase was primarily due to $77.4 million
in higher spend on purchased prototype components and outside engineering
services as we focus primarily on the
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development, build, and testing of our BEV truck platform, as well as continuing
the 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 in Phoenix, Arizona and related
capital equipment and software.
Selling, General, and Administrative
Selling, general, and administrative expenses increased by $162.0 million or
783% from $20.7 million during the year ended December 31, 2019 to $182.7
million during the year ended December 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 from September 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 the Nikola World event held in 2019, which was not held
in 2020.
Impairment Expense
Impairment expense of $14.4 million during the year ended December 31, 2020
resulted from the discontinuation of the Powersports business unit in the fourth
quarter of 2020, which resulted in an impairment charge on in-process R&D,
trademarks and certain long-lived assets.
Interest Income, net
Interest income, net decreased by $1.3 million or 86%, from $1.5 million of
income during the year ended December 31, 2019 to $0.2 million of income during
the year ended December 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
$1.3 million change in fair value as of the settlement date. The forward
contract liability was settled in April 2020 .
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 of December 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 ended December 31, 2019 to $0.8 million of expense during
the year ended December 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 ended December 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 ended December 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 Affiliate
Equity in net loss of affiliate for the year ended December 31, 2020 was $0.6
million as operations of our joint venture commenced in the fourth quarter of
2020.
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Comparison of Year Ended December 31, 2019 to Year Ended December 31, 2018
The following table sets forth our historical operating results for the periods
indicated:
Years Ended December 31,
2019 2018 $ Change % Change
( in thousands, except share and per share data)
Solar revenues $ 482 $ 173 $ 309 NM
Cost of solar revenues 271 50 221 NM
Gross profit 211 123 88 NM
Operating expenses:
Research and development 67,514 58,374 9,140 16 %
Selling, general, and administrative 20,692 12,238 8,454 69 %
Total operating expenses 88,206 70,612 17,594 25 %
Loss from operations (87,995) (70,489) (17,506) 25 %
Other income (expense):
Interest income, net 1,456 686 770 112 %
Revaluation of Series A redeemable convertible
preferred stock warrant liability (3,339) 3,502 (6,841) NM
Other income, net 1,373 6 1,367 NM
Loss before income taxes and equity in net loss
of affiliate (88,505) (66,295) (22,210) 34 %
Income tax expense (benefit) 151 (2,002) 2,153 NM
Loss before equity in net loss of affiliate (88,656) (64,293) (24,363) 38 %
Equity in net loss of affiliate - - - NM
Net loss (88,656) (64,293) (24,363) 38 %
Premium paid on repurchase of redeemable
convertible preferred stock (16,816) (166) (16,650) NM
Net loss attributable to common stockholders,
basic and diluted $ (105,472) $ (64,459) $ (41,013) 64 %
Net loss per share attributable to common
stockholders, basic and diluted $ (0.40) $ (0.28) $ (0.12) NM
Weighted average shared used to compute net loss
per share attributable to common stockholders,
basic and diluted 262,528,769 226,465,041 36,063,728 NM
Solar Revenues and Cost of Solar Revenues
Solar revenues and cost of solar revenues for the years ended December 31, 2019
and 2018 were related to solar installation service projects. Solar installation
projects are related to legacy projects that were not related to our primary
operations and were concluded in 2020. Solar revenues and costs of solar
revenues were immaterial for the years ended December 31, 2019 and 2018.
Research and Development
Research and development expenses increased by $9.1 million or 16% from $58.4
million during the year ended December 31, 2018 to $67.5 million in the year
ended December 31, 2019 . The increase was primarily due to an increase of $13.3
million in personnel related expenses, offset by a $4.4 million decrease in
outside development expenses.
The increase in personnel costs was primarily driven by our increased
engineering headcount year over year as we continue to advance the development
and design of our vehicles and invest in our in-house engineering capabilities.
Outside development and materials expenses were higher in the year ended
December 31, 2018 to support the development and build of the FCEV trucks, along
with other vehicles. Additionally, in the year ended December 31, 2019 , we
managed our outside research and development spend by building our internal
engineering team and expect to continue to do so going forward.
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Selling, General, and Administrative
Selling, general, and administrative expenses increased by $8.5 million or 69%
from $12.2 million during the year ended December 31, 2018 to $20.7 million
during the year ended December 31, 2019 , primarily due to a one-time payment of
$2.1 million related to consulting services on future manufacturing site
selection, and higher marketing expenses of $2.7 million primarily related to
the Nikola World event held in April 2019 . The remaining $3.7 million increase
is attributed to higher personnel expenses driven by growth in headcount and
higher general corporate expenses, including depreciation of our headquarters in
Phoenix, Arizona .
Interest Income, net
Interest income, net increased by $0.8 million or 112%, from $0.7 million during
the year ended December 31, 2018 to $1.5 million during the year ended
December 31, 2019 . The increase was primarily due to the substantial portion of
cash and cash equivalents on hand being moved to a higher interest-bearing
investment account in the second quarter of 2019.
Revaluation of Series A Redeemable Convertible Preferred Stock Warrant Liability
The revaluation of Series A redeemable convertible preferred stock warrant
liability decreased $6.8 million due to a $3.5 million gain recorded during the
year ended December 31, 2018 on 3.0 million Series A redeemable convertible
preferred warrants which expired in March 2018 as opposed to a $3.3 million loss
recorded during the year ended December 31, 2019 on 720 thousand Series A
warrants which were exercised in December 2019 .
Other Income, net
Other income, net increased by $1.4 million , from $6 thousand during the year
ended December 31, 2018 to $1.4 million during the year ended December 31, 2019 .
The increase was primarily related to grants received from the state of Arizona ,
as well as subcontracting work performed on government contracts.
During the year ended December 31, 2019 , we entered into a $3.5 million grant
agreement with Arizona Commerce Authority to relocate our headquarters to
Arizona , build manufacturing and research and development operations, create
jobs, and enter into capital investments within the state. We met the first
milestone of the agreement in the fourth quarter of 2019 and received the
initial payment of $1.0 million from the state. We will record future payments
in other income as they are received.
Income Tax Expense (Benefit)
Income tax expense (benefit) increased by $2.2 million , from a benefit of $2.0
million during the year ended December 31, 2018 to an expense of $0.2 million
during the year ended December 31, 2019 . The increase in tax expense is
primarily related to changes in deferred tax liabilities recorded for our
intangible assets and goodwill.
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.
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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,
2020 2020
(As Restated) 2019 (As Restated) 2019 2018
(in thousands)
Net loss $ (142,236) $ (26,279)
53 (374) (202) (1,456) (686)
Income tax expense (benefit) (1,030) 1 (1,026) 151 (2,002)
Depreciation and amortization 1,753 1,219 6,008 2,323 625
EBITDA (141,460) (25,433) (366,086) (87,638) (66,356)
Stock-based compensation 46,255 1,086 137,991 4,858 3,843
Revaluation of Series A redeemable
convertible preferred stock warrant
liability - - - 3,339 (3,502)
Loss on forward contract liability - - 1,324 - -
Revaluation of warrant liability (4,860) - (13,448) - -
Equity in net loss of affiliate 637 - 637 - -
Regulatory and legal matters(1) 19,510 - 24,683 - -
Impairment expense 14,415 - 14,415 - -
Adjusted EBITDA $ (65,503) $ (24,347) $ (200,484) $ (79,441) $ (66,015)
(1) Regulatory and legal matters include legal, advisory and other professional
service fees incurred in connection with the short-seller analyst article from
September 2020 , and investigations and litigation related thereto.
EBITDA and Adjusted EBITDA (As Restated)
The following table reconciles net loss to EBITDA and Adjusted EBITDA (as
restated) for the three and six months ended
Three Months Nine Months
Three Months Six Months Ended Ended
Ended Ended September 30, September 30,
June 30, 2020 June 30, 2020 2020 2020
(As Restated)
Net loss $ (115,782) $
(148,928)
(22) (84) (171) (255)
Income tax expense (benefit) 1 2 2 4
Depreciation and amortization 1,518 2,926 1,498 4,424
EBITDA $ (114,285) $
(146,084)
38,227 39,540 52,196 91,736
Loss on forward contract liability - 1,324 - 1,324
Revaluation of warrant liability 29,157 29,157 (37,745) (8,588)
Regulatory and legal matters (1) - - 5,173 5,173
Adjusted EBITDA $ (46,901) $ (76,063) $ (58,751) $ (134,814)
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(1) Regulatory and legal matters include legal, advisory and other professional service fees incurred in connection with the short-seller analyst article fromSeptember 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, is defined as non-GAAP net loss divided by weighted average shares outstanding, basic. Non-GAAP net loss per share, diluted, is defined as non-GAAP net loss divided by weighted average shares outstanding, diluted, which has been adjusted for the dilutive effect of shares of common stock equivalents resulting from the assumed exercise of the warrants.
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,
2020 2020
(As Restated) 2019 (As Restated) 2019 2018
(in thousands, except share and per share data)
Net loss attributable to common
stockholders $ (142,236) $
(43,095)
46,255 1,086 137,991 4,858 3,843
Premium paid on repurchase of
redeemable convertible preferred
stock - 16,816 13,407 16,816 166
Regulatory and legal matters(1) 19,510 - 24,683 - - Impairment expense 14,415 - 14,415 - - Revaluation of warrant liability (4,860) - (13,448) - - Non-GAAP net loss $ (66,916)$ (25,193) $ (207,225) $ (83,798) $ (60,450) Non-GAAP net loss per share: Basic $ (0.17)$ (0.09) $ (0.62) $ (0.32) $ (0.27) Diluted $ (0.17)$ (0.09) $ (0.62) $ (0.32) $ (0.27) Weighted average shares outstanding: Basic 385,983,645 268,698,455 335,325,271 262,528,769 226,465,041 Diluted 386,323,048 268,698,455 335,831,033 262,528,769 226,465,041 (1) Regulatory and legal matters include legal, advisory and other professional service fees incurred in connection with the short-seller analyst article fromSeptember 2020 , and investigations and litigation related thereto.
Non-GAAP Net Loss and Non-GAAP Net Loss Per Share, Basic and Diluted (As restated)
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, is defined as non-GAAP net loss divided by weighted average shares outstanding, basic. Non-GAAP net loss per share, diluted, is defined as non-GAAP net loss divided by weighted average shares outstanding, diluted, which has been adjusted for the dilutive effect of shares of common stock equivalents resulting from the assumed exercise of the warrants. 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 three and six months endedJune 30, 2020 and for the three and nine months endedSeptember 30, 2020 . 64
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Nine Months
Three Months Ended
Ended Six Months Ended Three Months Ended September 30,
June 30, 2020 June 30, 2020 September 30, 2020 2020
(As Restated)
Net loss attributable to common
shareholders $ (129,189) $
(162,335) $ (79,704)
38,227 39,540 52,196 91,736
Premium paid on repurchase of
redeemable convertible preferred
stock 13,407 13,407 - 13,407
Regulatory and legal matters(1) - - 5,173 5,173
Revaluation of warrant liability 29,157 29,157 (37,745) (8,588)
Non-GAAP net loss $ (48,398) $ (80,231) $ (60,080) $ (140,311)
Non-GAAP net loss per share:
Basic $ (0.16) $ (0.28) $ (0.16) $ (0.44)
Diluted $ (0.16) $ (0.28) $ (0.16) $ (0.44)
Weighted average shares
outstanding
Basic 303,785,616 287,822,558 377,660,477 318,315,891
Diluted 303,785,616 287,822,558 378,286,678 318,976,447
(1) Regulatory and legal matters include legal, advisory and other professional
service fees incurred in connection with the short-seller analyst article from
September 2020 , and investigations and litigation related thereto.
Liquidity and Capital Resources
Since inception, Legacy Nikola financed its operations primarily from the sales
of redeemable convertible preferred stock and common stock and redemption of
public warrants. As of December 31, 2020 , our principal sources of liquidity
were our cash and cash equivalents in the amount of $840.9 million , which are
primarily invested in money market funds.
Short-Term Liquidity Requirements
As of the date of this Annual Report on Form 10-K/A, we have yet to generate
revenue from our core business operations. As of December 31, 2020 , our current
assets were $896.9 million consisting primarily of cash and restricted cash of
$845.3 million , and our current liabilities were $52.3 million primarily
comprised of accounts payable, accrued expenses, and a $4.1 million term note.
We believe our cash and cash equivalents balance 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 construction of the 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;
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•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 future revenue; and
•other risks discussed in the section entitled "Risk Factors".
Long-Term Liquidity Requirements
Our current capital will not be sufficient to cover forecasted capital needs and
operating expenditures starting in the second half of fiscal year 2022. Until we
can generate sufficient revenue from BEV truck sales and FCEV 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. 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.
The following table provides a summary of cash flow data:
Years Ended December 31,
2020 2019 2018
(in thousands)
Net cash used in operating activities
(15,410)
Net cash provided by financing activities 941,120 35,805
211,732
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$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 the result of an increase in accounts payable and accrued expenses of$29.7 million , primarily related to 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 expenses 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, 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 of$9.4 million , primarily related to the completion of certain outside development projects and settlement of related liabilities. Net cash used in operating activities was$54.0 million for the year endedDecember 31, 2018 . The largest component of our cash used during this period was a net loss of$64.3 million , which included non-cash charges of$3.8 million related to 66 -------------------------------------------------------------------------------- Table of Contents stock-based compensation, gain of$3.5 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability, a benefit of$2.0 million related to deferred income taxes, and$0.6 million related to depreciation and amortization expense, and net cash inflows of$11.6 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 and other current liabilities of$15.1 million . 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$31.1 million for the year endedDecember 31, 2020 , which was primarily due to purchases and deposits for property and equipment, including costs of 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. Net cash used in investing activities was$15.4 million for the year endedDecember 31, 2018 , which was primarily due to purchases and deposits on capital equipment of$9.2 million ,$3.4 million related to the construction of our headquarters, and the issuance of a note receivable to a related party of$2.5 million . Cash Flows from Financing Activities ThroughDecember 31, 2020 , 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$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 , the 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 . 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 . Net cash provided by financing activities was$211.7 million for the year endedDecember 31, 2018 , which was primarily due to net proceeds from the issuance of Series C redeemable convertible preferred stock of$209.0 million and proceeds from borrowings of$4.1 million related to the term note, offset by the retirement of Series B redeemable convertible preferred stock of$1.4 million . 67 -------------------------------------------------------------------------------- Table of Contents Contractual Obligations and Commitments The following table summarizes our contractual obligations and other commitments as ofDecember 31, 2020 , and the years in which these obligations are due: Payments Due By period Less than 1 - 3 3 - 5 More than Total 1 Year Years Years 5 Years (in thousands) Contractual obligations: Finance lease liability$ 19,057 $ 1,797 $ 3,756 $ 3,972 $ 9,532 Purchase obligations 31,161 21,758 9,403 - -$ 50,218 $ 23,555 $ 13,159 $ 3,972 $ 9,532 Purchase obligations include purchase orders and agreements with a total term exceeding one year, to purchase goods or services that are enforceable, legally binding, and where the significant terms and minimum purchase obligations are stipulated. In addition, we enter into agreements in the normal course of business with vendors for research and development services and outsourced services, which are generally cancellable upon written notice. These payments are not included in this table of contractual obligations. As part of our arrangement with Iveco, once we commence commercial production, we are obligated to pay Iveco a royalty of 1.0% on BEV truck revenues and 1.25% on FCEV truck revenues over a period of seven years. We have not included royalty payments with respect to the licensed Iveco technology in the table above as the timing and amount of such obligations are uncertain. 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 theSEC . 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 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. 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 68 -------------------------------------------------------------------------------- Table of Contents 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 the Company's 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 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 LegacyNikola 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 ofJune 3, 2020 , our stock is publicly traded and the fair value of our common stock is based on the closing price of our common stock on or around the date of grant. 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 change 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/A, 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. 69
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