NIKOLA CORPORATION This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "anticipate," "believe," "expect," "estimate," "intend," "plan," and similar expressions are intended to identify forward looking statements. These are statements that relate to future periods and include our financial and business performance; expected timing with respect to the buildout of our manufacturing facilities, joint venture with Iveco and production of our BEV and FCEV trucks; expectations regarding our hydrogen fuel station rollout plan; timing of completion of prototypes, validation testing, volume production and other milestones; the planned collaboration with General Motors; changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; our future capital requirements and sources and uses of cash; the potential outcome of investigations, litigation, complaints, product liability claims and/or adverse publicity; the implementation, market acceptance and success of our business model; developments relating to our competitors and industry; the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto; our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others; our ability to obtain funding for our operations; the outcome of any known and unknown regulatory proceedings; our business, expansion plans and opportunities; changes in applicable laws or regulations; and anticipated trends and challenges in our business and the markets in which we operate. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Item 1A of this report, as well as our ability to execute our business model, including market acceptance of our planned products and services; changes in applicable laws or regulations; risks associated with the outcome of any legal proceeding; the effect of the COVID-19 pandemic on our business; our ability to raise capital; our ability to compete; the success of our collaborations; the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and our history of operating losses. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to update any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
In this report, all references to "Nikola," "we," "us," or "our" mean
Nikola™ is a trademark of
Overview
We are a vertically integrated zero emissions transportation systems provider that designs and manufactures state of the art battery electric and hydrogen electric vehicles, electric vehicle drivetrains, energy storage systems, and hydrogen fueling stations. To date, we have been primarily focused on delivering zero emission Class 8 trucks to the commercial transportation sector in theU.S. and inEurope . Our core product offering includes battery electric and hydrogen fuel cell electric trucks and hydrogen fuel. We operate in three business units: Truck, Energy and Powersports. The Truck business unit is developing and commercializing BEV and FCEV Class 8 trucks that provide environmentally friendly, cost effective solutions to the short haul and long haul trucking sector. The Energy business unit is developing and constructing a network of hydrogen fueling stations to meet hydrogen fuel demand for our FCEV customers. The Powersports business unit is developing electric vehicle solutions for military and outdoor recreational applications. In 2019, we partnered with Iveco, a subsidiary of CNHI, a leading European industrial vehicle manufacturing company. Together, Nikola and Iveco 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 B.V. 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. 27 -------------------------------------------------------------------------------- We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we: • construct manufacturing facilities and purchase related equipment; • commercialize our heavy duty trucks and other products; • develop hydrogen fueling stations; • continue to invest in our technology; • increase our investment in marketing and advertising, sales, and distribution infrastructure for our products and services; • maintain and improve our operational, financial and management information systems; • hire additional personnel; • obtain, maintain, expand, and protect our intellectual property portfolio; and • operate as a public company.
Recent Developments
•During the third quarter of 2020, we began assembling the first five Nikola Tre BEV prototypes at Iveco's industrial complex in Ulm,Germany , and have recently completed the assembly of the firstNikola Tre . The first truck is undergoing systems commissioning and is being prepared for validation testing in the first quarter of 2021. We anticipate that the remaining fourNikola Tre prototypes will be completed by the end of 2020. The second batch of prototype assembly is expected to begin in the first quarter of 2021. •During the third quarter of 2020, Nikola and Iveco made progress in refurbishing the joint venture manufacturing facility dedicated to the Nikola Tre at Iveco's Ulm,Germany campus. The civil works and building infrastructure have been completed, including the floor, heating system, and walls. •InJuly 2020 , we broke ground on Phase 1 of our greenfield manufacturing facility inCoolidge, Arizona and Iveco will contribute technical engineering and production support. The manufacturing facility's master site plan has been completed and approved by theCity of Coolidge . Site construction, permitting, and manufacturing process engineering activities are ongoing, and the facility is expected to manufacture trial volume production starting in 2021, and may be as early as mid-2021. The full completion of Phase 1 is expected by the end of 2021, followed by a ramp up to a full production volume for the BEV in 2022 and FCEV in 2023.
•In
•In November, 2020, members of our board of directors, executive officers, their affiliates and certain entities associated with those individuals voluntarily agreed to extend the lock-up provision on an aggregate of approximately 136,500,000 shares of our common stock, including vested stock options and warrants, throughApril 30, 2021 . 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. Business Combination and Public Company Costs 28 -------------------------------------------------------------------------------- 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, Nikola redeemed 7,000,000 shares of common stock from M&M Residual at
a purchase price of
The Business Combination is accounted for as a reverse merger in accordance with
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 us 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 discussed below and in the section titled "Risk
Factors."
Commercial launch of 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
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While not yet commercially available, we have received significant interest from
potential customers. Going forward, we expect the size of our committed backlog
to be an important indicator of our future performance.
Basis of Presentation
Currently, we conduct business through one operating segment. All long-lived
assets are maintained in, and all losses are attributable to, the United States
of America .
Components of Results of Operations
Revenue
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 Revenue
To date, our cost of revenue has included materials, labor, and other direct
costs related to solar installation projects.
Once we have reached commercial production, cost of revenue will include direct
parts, material and labor costs, manufacturing overhead, including amortized
tooling costs and depreciation of our greenfield manufacturing facility,
depreciation of our hydrogen fueling stations, cost of hydrogen production,
shipping and logistics costs and reserves for estimated warranty expenses.
Research and Development Expense
Research and development expenses consist primarily of costs incurred for the
discovery and development of our vehicles, which include:
• Fees paid to third parties such as consultants and contractors for outside
development;
• Expenses related to materials, supplies and third party services;
• 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 nine months ended September 30, 2020 , our research and development
expenses have primarily been incurred in the development of the BEV and FCEV
trucks.
As a part of its in-kind investment, Iveco agreed to provide us with $100.0
million in advisory services (based on pre negotiated hourly rates), including
project coordination, drawings, documentation support, engineering support,
vehicle integration, and product validation support. During the nine months
ended September 30, 2020 , we utilized $28.6 million of advisory services which
were recorded as research and development expense. As of September 30, 2020 , we
have $63.4 million of prepaid in-kind advisory services remaining which is
expected to be consumed primarily in 2020 and 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 in research and develop activities to achieve
our technology and product roadmap goals.
Selling, General, and Administrative Expense
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Selling, general, and administrative expenses consist of personnel related
expenses for our corporate, executive, finance, and other administrative
functions, expenses for outside professional services, including legal, audit
and accounting services, as well as expenses for facilities, depreciation,
amortization, travel, and marketing costs. Personnel related expenses consist of
salaries, benefits, and stock-based compensation.
We expect our selling, general, and administrative expenses to increase for the
foreseeable future as we scale headcount with the growth of our business, and as
a result of operating as a public company, 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.
Interest Income (Expense), net
Interest income (expense) 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 financing lease.
Loss on Forward Contract Liability
The loss on forward contract liability includes losses from the remeasurement of
Legacy Nikola's Series D redeemable convertible preferred stock forward contract
liability. In April 2020 , we fulfilled the forward contract liability and,
therefore, subsequent to June 30, 2020 , there will not be any impact from the
remeasurement of the forward contract liability.
Other Income, net
Other income consists primarily of other miscellaneous non-operating items, such
as government grants, subsidies, solar installations and merchandising.
Income Tax Expense
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 our U.S. and state deferred tax assets. Cash paid
for income taxes, net of refunds during the nine months ended September 30, 2020
and 2019 was not material.
Results of Operations
Comparison of Three Months Ended September 30, 2020 to Three Months Ended
September 30, 2019
The following table sets forth our historical operating results for the periods
indicated:
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Three Months Ended September 30, $ %
2020 2019 Change Change
(dollar amounts in thousands)
Solar revenues $ - $ 296 (296) NM
Cost of solar revenues $ - 141 (141) NM
Gross profit - 155 (155) NM
Operating expenses:
Research and development $ 51,473 9,482 41,991 442.8%
Selling, general, and administrative $ 65,826 3,693 62,133 1682.5%
Total operating expenses 117,299 13,175 104,124 790.3%
Loss from operations (117,299) (13,020) (104,279) 800.9%
Other income (expense):
Interest income, net $ 172 411 (239) (58.1)%
Revaluation of Series A redeemable
convertible preferred stock warrant
liability $ - (2,844) 2,844 NM
Other income (expense), net $ (340) 85 (425) NM
Loss before income taxes (117,467) (15,368) (102,099) NM
Income tax expense $ 2 146 (144) NM
Net loss $ (117,469) $ (15,514) (101,955) NM
Net loss attributable to common
stockholders, basic and diluted $ (117,469) $ (15,514) $ (101,955) NM
Net loss per share attributable to common
stockholders, basic and diluted $ (0.31) $ (0.06) $ (0.25) NM
Weighted-average shares used to compute net
loss per share attributable to common
stockholders, basic and diluted 377,660,477 260,534,724 117,125,753 NM
Solar Revenues and Cost of Solar Revenues
Revenues and cost of revenues for the three months endedSeptember 30, 2020 and 2019 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 three months endedSeptember 30, 2020 .
Research and Development
Research and development expenses increased by$42.0 million , or 442.8%, from$9.5 million during the three months endedSeptember 30, 2019 to$51.5 million during the three months ended inSeptember 30, 2020 . This increase was primarily due to$30.8 million in higher spend on purchased components and outside engineering services as we focus primarily on the development, build, and testing of our BEV truck platform, as well as continuing the development of our FCEV truck platform. In addition, we incurred higher stock-based compensation expense of$4.5 million and increased personnel costs of$5.6 million driven by growth in our in-house engineering headcount. We also had an increase in depreciation and occupancy costs associated with our new headquarters and R&D facility and related capital equipment and software. This was partially offset by a reduction in travel due to COVID-19. Selling, General, and Administrative Selling, general, and administrative expenses increased by$62.1 million , or 1682.5%, from$3.7 million during the three months endedSeptember 30, 2019 to$65.8 million during the three months endedSeptember 30, 2020 . The increase was primarily related to higher stock-based compensation expense of$46.6 million for grants to executive officers in connection with the Business Combination and increased headcount. In addition, there was an increase in legal expenses of$5.9 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 driven by growth in headcount and higher general corporate expenses, professional services, marketing, and depreciation of our headquarters. 32 --------------------------------------------------------------------------------
Interest Income, net
Interest income, net decreased by$0.2 million , or 58.1%, from$0.4 million during the three months endedSeptember 30, 2019 to$0.2 million during the three months endedSeptember 30, 2020 . The decrease was primarily due to interest expense from the financing lease on our headquarters and a decrease in average interest rate earned on cash and cash equivalents. This was offset by an increase in average cash and cash equivalents during the period. Other Income (Expense), net Other income (expense) was immaterial for the three months endedSeptember 30, 2020 and 2019. Income Tax Expense Income tax expense was immaterial for the three months endedSeptember 30, 2020 and 2019. We have accumulated net operating losses at the federal and state level and maintain a full valuation allowance against our net deferred taxes. Comparison of Nine Months EndedSeptember 30, 2020 to Nine Months EndedSeptember 30, 2019 The following table sets forth our historical operating results for the periods indicated: Nine Months Ended September 30, $ % 2020 2019 Change Change (dollar amounts in thousands) Solar revenues $ 95 $ 433 (338) NM Cost of solar revenues $ 72 227 (155) NM Gross profit 23 206 (183) NM Operating expenses: Research and development 118,092 44,733 73,359 164.0% Selling, general, and administrative 117,886 15,538 102,348 658.7% Total operating expenses 235,978 60,271 175,707 291.5% Loss from operations (235,955) (60,065) (175,890) 292.8% Other income (expense): Interest income, net 259 1,082 (823) NM 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 Other income (expense), net (251) 95 (346) NM Loss before income taxes (237,271) (62,227) (175,044) (281.3)% Income tax expense 4 150 (146) NM Net loss$ (237,275) $ (62,377) $ (174,898) (280.4)% Premium paid on repurchase of redeemable convertible preferred stock (13,407) - (13,407) NM Net loss attributable to common stockholders, basic and diluted$ (250,682) $ (62,377) $ (188,305) NM Net loss per share attributable to common stockholders, basic and diluted $ (0.79)$ (0.24) $ (0.55) NM Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 318,315,891 260,449,607 57,866,284 NM
Solar Revenues and Cost of Solar Revenues
Revenues and cost of revenues for the nine months endedSeptember 30, 2020 and 2019 were related to solar installation service projects. Solar installation projects are related to legacy projects that were not related to our primary 33 --------------------------------------------------------------------------------
operations and were concluded in 2020. Solar revenues and costs of solar
revenues were immaterial for the nine months ended
Research and Development Research and development expenses increased by$73.4 million , or 164.0%, from$44.7 million during the nine months endedSeptember 30, 2019 to$118.1 million during the nine months endedSeptember 30, 2020 . This increase was primarily due to$49.7 million in higher spend on purchased components and outside engineering services as we focus primarily on the development, build, and testing of our BEV truck platform, as well as continuing the development of our FCEV truck platform. We have incurred higher stock-based compensation of$7.4 million primarily in connection with the Business Combination and additional headcount and increased personnel costs of$14.0 million driven by growth in our in-house engineering headcount. In addition, we incurred increased depreciation and occupancy costs associated with our new headquarters and R&D facility and related capital equipment and software. This was partially offset by a reduction in travel due to COVID-19. Selling, General, and Administrative Selling, general, and administrative expenses increased by$102.3 million , or 658.7%, from$15.5 million during the nine months endedSeptember 30, 2019 to$117.9 million during the nine months endedSeptember 30, 2020 . The increase was primarily related to higher stock-based compensation expense of$80.6 million in connection with the Business Combination, grants to executive officers inJune 2020 , and higher headcount. In addition, there was an increase in legal expenses of$7.2 million primarily related to regulatory and legal matters incurred in connection with the short-seller analyst report fromSeptember 2020 . Further, we incurred higher personnel expenses driven by growth in headcount and higher general corporate expenses, including professional services and depreciation of our headquarters. Those increases were partially offset by lower marketing costs due to theNikola World event held inApril 2019 . Interest Income, net Interest income, net decreased by$0.8 million from$1.1 million during the nine months endedSeptember 30, 2019 to$0.3 million during the nine months endedSeptember 30, 2020 . The decrease is primarily due to interest expense from our financing lease that started in the fourth quarter of 2019 and a decrease in average interest rate earned on cash deposits. This was offset by an increase in average cash and cash equivalents during the period. Loss on Forward Contract Liability The loss on the forward contract liability represents a loss from a$1.3 million change in fair value through the settlement date. The forward contract liability was settled inApril 2020 . Other Income (Expense), net Other income, net was immaterial for the nine months endedSeptember 30, 2020 and 2019. Income Tax Expense Income tax expense was immaterial for the nine months endedSeptember 30, 2020 and 2019. We have cumulative net operating losses at the federal and state level and maintain a full valuation allowance against our net deferred taxes. Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our operational performance. We use the following non-GAAP financial information to evaluate our 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 our 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 special items determined by management. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither 34 -------------------------------------------------------------------------------- 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 three and nine months endedSeptember 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (in thousands) Net loss$ (117,469) $ (15,514) $ (237,275) $ (62,377) Interest income, net (172) (411) (259) (1,082) Income tax expense (benefit) 2 146 4 150 Depreciation and amortization 1,498 657 4,255 1,104 EBITDA (116,141) (15,122) (233,275) (62,205) Stock-based compensation 52,196 1,185 91,736 3,772 Revaluation of Series A redeemable convertible preferred stock warrant liability - 2,844 - 3,339 Loss on forward contract liability - - 1,324 - Regulatory and legal matters (1)$ 5,173 $ -$ 5,173 $ - Adjusted EBITDA$ (58,772) $ (11,093) $ (135,042) $ (55,094) (1)Regulatory and legal matters include legal, advisory and other professional service fees incurred in connection with the short-seller analyst report 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 and diluted, is defined as Non-GAAP net loss divided by weighted average shares outstanding, basic and diluted.
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Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(in thousands)
Net loss attributable to common stockholders,
basic and diluted $ (117,469)
52,196 1,185 91,736 3,772
Premium paid on repurchase of redeemable
convertible preferred stock - - 13,407 -
Regulatory and legal matters(1) 5,173 - 5,173 $ -
Non-GAAP net loss $ (60,100)
(0.16) $ (0.05) $ (0.44) $ (0.23)
Weighted average shares outstanding, basic and
diluted 377,660,477 260,534,724 318,315,891 260,449,607
(1)Regulatory and legal matters include legal, advisory and other professional
service fees incurred in connection with the short-seller analyst report 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. As of September 30,
2020 , our principal sources of liquidity were our cash and cash equivalents in
the amount of $907.5 million , which are primarily invested in money market
funds.
On July 22, 2020 we issued a redemption notice to the warrant holders for a
redemption of all of the outstanding warrants, on a cash basis. As a result, we
received net cash proceeds of $263.1 million during the third quarter of 2020.
Short-Term Liquidity Requirements
As of the date of this Quarterly Report on Form 10-Q, we have yet to generate
revenue from our core business operations. As of September 30, 2020 , our current
assets were $985.9 million consisting primarily of cash and restricted cash of
$918.5 million , and our current liabilities were $43.9 million primarily
comprised of accrued expenses, accounts payables, customer deposits 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 to eighteen month period
by (i) completing the development and industrialization of the Nikola Tre 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 building Phase 1 of our greenfield manufacturing facility and
equipment;
•the timing and the costs involved in bringing our vehicles to market, mainly
the Nikola Tre BEV truck;
•our ability to manage the costs of manufacturing the Nikola Tre BEV trucks;
•the scope, progress, results, costs, timing and outcomes of our research and
development for our fuel cell trucks;
•the costs of maintaining, expanding and protecting our intellectual property
portfolio, including potential litigation costs and liabilities;
•revenue received from sales of our Nikola Tre BEV trucks in 2021;
•the costs of additional general and administrative personnel, including
accounting and finance, legal and human resources, as a result of becoming a
public company;
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•our ability to collect revenue; and
•other risks discussed in the section entitled "Risk Factors".
Long-Term Liquidity Requirements
The capital raised in the Business Combination will not be sufficient to cover
forecasted capital needs and operating expenditures in fiscal year 2022 through
fiscal year 2024. 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.
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 (in thousands):
Nine Months Ended September 30,
2020 2019
(in thousands)
Net cash used in operating activities $ (84,902) $ (64,948)
Net cash used in investing activities (15,195) (32,649)
Net cash provided by financing activities 932,747
65,000
Cash Flows from Operating Activities Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities was$84.9 million for the nine months endedSeptember 30, 2020 . The most significant component of our cash used during this period was net loss of$237.3 million , which included non-cash expenses of$91.7 million related to stock-based compensation,$28.6 million expense for in-kind services,$4.3 million related to depreciation and amortization, and a loss of$1.3 million related to the change in fair value of the forward contract liability, and net cash sources of$26.4 million from changes in operating assets and liabilities primarily driven by increases in accounts payable and accrued expenses and customer deposits. Net cash used in operating activities was$64.9 million for the nine months endedSeptember 30, 2019 . The largest component of our cash used during this period was a net loss of$62.4 million , which included non-cash charges of$3.8 million related to stock-based compensation, loss of$3.3 million related to the revaluation of our Series A redeemable convertible preferred stock warrant liability, and$1.1 million related to depreciation and amortization expense, and net cash outflows of$10.9 million from changes in operating assets and liabilities primarily driven by a decrease in accounts payable and accrued expenses. 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 37 -------------------------------------------------------------------------------- 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$15.2 million for the nine months endedSeptember 30, 2020 , which was due to purchases of and deposits on capital equipment primarily related to vehicle tooling and testing, as well as purchases of licenses for engineering software. Net cash used in investing activities was$32.6 million for the nine months endedSeptember 30, 2019 , which was primarily due to purchases and deposits on capital equipment of$14.5 million and$18.2 million related to the construction of our headquarters and R&D facility. Cash Flows from Financing Activities ThroughSeptember 30, 2020 , we have financed our operations through proceeds from sales of redeemable convertible preferred stock, the Business Combination, the PIPE, and redemption of public warrants. Net cash provided by financing activities was$932.7 million for the nine months endedSeptember 30, 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 warrants of$263.1 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$2.2 million and proceeds from tenant allowances for the construction of our headquarters of$0.9 million , offset by payments on our financing lease of$0.5 million . Net cash provided by financing activities was$65.0 million for the nine months endedSeptember 30, 2019 , which was due to proceeds from the issuance of Legacy Nikola's Series D redeemable convertible preferred stock, net of issuance costs. Contractual Obligations and Commitments InApril 2020 , we entered into a series of agreements which established a joint venture inEurope with Iveco. We will make an initial cash contribution of approximately7.4 million Euros (approximately$8.7 million ) for a 50% interest in the joint venture. See Note 6 "Investments" to our Unaudited Consolidated Financial Statements for further information. During the second quarter of 2020, we entered into a firm purchase order for hydrogen equipment for approximately$32 million through 2022. During the third quarter of 2020, we entered into a series of agreements withGM . See Note 12 "Commitments and Contingencies" to our Unaudited Consolidated Financial Statements for further information. For the three and nine months endedSeptember 30, 2020 , there have been no other material changes to our significant contractual obligations as previously disclosed in the Prospectus. Waitlist and Reservations OnAugust 10, 2020 , we announced that Republic Services, Inc. agreed to order from us 2,500 electrified refuse trucks, with the ability to increase the order to up to 5,000 units. For the three and nine months endedSeptember 30, 2020 , there have been no other material changes to our waitlist and reservations for our BEV, FCEV, Badger and Powersports vehicles from that previously disclosed.
Off Balance Sheet Arrangements
Since the date of our incorporation, we have not engaged in any off balance
sheet arrangements, as defined in the rules and regulations of the
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Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. These principles require us to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities, as
of the balance sheet date, as well as reported amounts of revenue and expenses
during the reporting period. Our most significant estimates and judgments
involve valuation of our stock-based compensation, including the fair value of
common stock, the valuation of warrant liabilities, the valuation of the
redeemable convertible preferred stock tranche liability, estimates related to
our build-to-suit lease, and contingent liabilities, including litigation
reserves. Management bases its estimates on historical experience and on various
other assumptions believed to be reasonable, the results of which form the basis
for making judgments about the carrying values of assets and liabilities. Actual
results could differ from those estimates.
There have been no substantial changes to these estimates, or the policies
related to them during the three and nine months ended September 30, 2020 . For a
full discussion of these estimates and policies, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in the
Prospectus.
Emerging Growth Company Status
We are an EGC, as defined in the JOBS Act. The JOBS Act permits companies with
EGC status to take advantage of an extended transition period to comply with new
or revised accounting standards, delaying the adoption of these accounting
standards until they would apply to private companies. We have elected to use
this extended transition period to enable us to comply with new or revised
accounting standards that have different effective dates for public and private
companies until the earlier of the date we (i) are no longer an emerging growth
company or (ii) affirmatively and irrevocably opt out of the extended transition
period provided in the JOBS Act. As a result, our financial statements may not
be comparable to companies that comply with the new or revised accounting
standards as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting
requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not
required to, among other things: (i) provide an auditor's attestation report on
our system of internal controls over financial reporting pursuant to Section
404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"); (ii)
provide all of the compensation disclosure that may be required of non-emerging
growth public companies under the Dodd Frank Wall Street Reform and Consumer
Protection Act; (iii) comply with any requirement that may be adopted by the
Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the financial statements (auditor discussion and
analysis); and (iv) disclose certain executive compensation related items such
as the correlation between executive compensation and performance and
comparisons of the Chief Executive Officer's compensation to median employee
compensation.
We will remain an EGC under the JOBS Act until the earliest of (i) the last day
of our first fiscal year following the fifth anniversary of the closing of the
first sale of common stock in our initial public offering, (ii) the last date of
our fiscal year in which we have total annual gross revenue of at least $1.07
billion , (iii) the date on which we are deemed to be a "large accelerated filer"
under the rules of the SEC with at least $700.0 million of outstanding
securities held by non-affiliates, or (iv) the date on which we have issued more
than $1.0 billion in non-convertible debt securities during the previous three
years. We expect to become a large accelerated filer on the last day of our
fiscal year 2020.
Recent Accounting Pronouncements
See Note 2 to our Unaudited Consolidated Financial Statements included elsewhere
in this Quarterly Report on Form 10-Q for more information about recent
accounting pronouncements, the timing of their adoption, and our assessment, to
the extent we have made one, of their potential impact on our financial
condition and our results of operations.
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