424B3 1 d191957d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration Statement File No. 333-257229

 

PROSPECTUS

 

 

18,012,845 Shares

Nikola Corporation

Common Stock

 

 

This prospectus relates to the offer and sale of up to 18,012,845 shares of our common stock, $0.0001 par value per share (“Common Stock”), by Tumim Stone Capital, LLC (“Tumim” or the “Selling Stockholder”).

The shares of common stock being offered by the Selling Stockholder have been and may be issued pursuant to the purchase agreement dated June 11, 2021 that we entered into with Tumim (the “Purchase Agreement”). We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of our Common Stock by the Selling Stockholder. However, we may receive up to $300.0 million in aggregate gross proceeds from sales of our Common Stock to Tumim that we may make under the Purchase Agreement, from time to time after the date of this prospectus. On June 11, 2021, we issued 155,703 shares of our Common Stock (the “Commitment Shares”) to Tumim as consideration for its irrevocable commitment to purchase shares of our Common Stock under the Purchase Agreement. See the sections titled “The Tumim Transaction” for a description of the transaction contemplated by the Purchase Agreement and “Selling Stockholder” for additional information regarding Tumim.

The Selling Stockholder may sell the shares of Common Stock included in this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Stockholder may sell the shares in the section entitled “Plan of Distribution.” The Selling Stockholder is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”).

The Selling Stockholder will pay all brokerage fees and commissions and similar expenses in connection with the offer and sale of the shares by the Selling Stockholder pursuant to this prospectus. We will pay the expenses (except brokerage fees and commissions and similar expenses) incurred in registering under the Securities Act the offer and sale of the shares included in this prospectus by the Selling Stockholder, including legal and accounting fees. See “Plan of Distribution.”

Our Common Stock is listed on the Nasdaq Global Select Market under the symbol “NKLA”. On June 30, 2021, the closing price of our Common Stock was $18.06.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

Investing in our common stock involves a high degree of risk. See the section entitled “Risk Factors” beginning on page 11 and in the documents incorporated by reference in this prospectus. You should carefully consider these risk factors, as well as the other information contained in this prospectus, before you invest.

 

 

The date of this prospectus is July 1, 2021.


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Neither we, nor the Selling Stockholder, have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus. We and the Selling Stockholder do not take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front of this prospectus only, regardless of the time of delivery of this prospectus or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

This prospectus includes industry and market data that we obtained from third-party studies and surveys, filings of public companies in our industry and internal company surveys. These sources may include government and industry sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and market data to be reliable as of the date of this prospectus, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein.

On June 3, 2020, or the Closing Date, VectoIQ Acquisition Corp., our predecessor company, or VectoIQ, consummated the previously announced merger pursuant to that certain Business Combination Agreement, dated March 2, 2020, or the Business Combination Agreement, by and among VectoIQ, VCTIQ Merger Sub Corp., a wholly-owned subsidiary of VectoIQ incorporated in the State of Delaware, or Merger Sub, and Nikola Corporation, a Delaware corporation, or Legacy Nikola. Pursuant to the terms of the Business Combination Agreement, a business combination between the company and Legacy Nikola was effected through the merger of Merger Sub with and into Legacy Nikola, with Legacy Nikola surviving as the surviving company and as a


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wholly-owned subsidiary of VectoIQ, or the Merger and, collectively with the other transactions described in the Business Combination Agreement, the Business Combination. On the Closing Date, and in connection with the closing of the Business Combination, VectoIQ Acquisition Corp. changed its name to Nikola Corporation.

Unless the context indicates otherwise, references in this prospectus to the “company,” “Nikola,” “we,” “us,” “our” and similar terms refer to Nikola Corporation (f/k/a VectoIQ Acquisition Corp.) and its consolidated subsidiaries, including Legacy Nikola. References to “VectoIQ” refer to our predecessor company prior to the consummation of the Business Combination.


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial plans or performance. When used in this prospectus, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “project,” “forecast,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “seeks,” “scheduled,” “will,” and similar expressions are intended to identify forward-looking statements, and include but are not limited to:

 

   

our financial and business performance;

 

   

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;

 

   

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; and

 

   

changes in applicable laws or regulations.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements, including the following:

 

   

our ability to execute our business model, including market acceptance of our planned products and services;

 

   

changes in applicable laws or regulations;

 

   

the effect of the COVID-19 pandemic on our business;

 

   

our ability to raise capital;

 

   

the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and

 

   

other risks and uncertainties described in the registration statement of which this prospectus forms a part, including those under the section entitled “Risk Factors.”

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as required under the federal securities laws and rules and regulations of the Securities and Exchange Commission, or SEC, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to 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.

You should read this prospectus completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

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PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our Common Stock. Because it is a summary, it may not contain all of the information that may be important to you. To understand this offering fully, you should read this entire prospectus carefully, including the sections entitled “Risk Factors,” “Unaudited Pro Forma Condensed Financial Information,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

Nikola Corporation

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.

Summary Risk Factors

Investing in our Common Stock involves substantial risk, as more fully described in “Risk Factors” and elsewhere in this prospectus. You should read these risks before you invest in our Common Stock. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. Some of the more significant risks associated with our business include the following:

 

   

We are an early stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future.

 

   

We may be unable to adequately control the costs associated with our operations.

 

   

Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

 

   

Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.

 

   

We will need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our operations and prospects could be negatively affected.

 

   

If we fail to manage our future growth effectively, we may not be able to market and sell our vehicles successfully.

 

   

Our bundled lease model may present unique problems that may have an adverse effect on our operating results and business and harm our reputation.

 

   

We may face legal challenges in one or more states attempting to sell directly to customers which could materially adversely affect our costs.


 

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We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.

 

   

Our success will depend on our ability to economically manufacture our trucks at scale and build our hydrogen fueling stations to meet our customers’ business needs, and our ability to develop and manufacture trucks of sufficient quality and appeal to customers on schedule and at scale is unproven.

 

   

We may experience significant delays in the design, manufacture, launch and financing of our trucks, including in the build out of our manufacturing plant, which could harm our business and prospects.

Background

Our company was originally known as VectoIQ Acquisition Corp. On June 3, 2020, VectoIQ consummated the Business Combination with Legacy Nikola pursuant to the Business Combination Agreement dated as of March 2, 2020 among VectoIQ, Legacy Nikola and Merger Sub. In connection with the closing of the Business Combination, VectoIQ changed its name to Nikola Corporation. Legacy Nikola was deemed to be the accounting acquirer in the Merger. While VectoIQ was the legal acquirer in the Merger, 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 Merger.

Immediately prior to the effective time of the Merger, each issued and outstanding share of Legacy Nikola preferred stock converted into an equal number of shares of Legacy Nikola common stock. At the effective time of the Merger, each share of Legacy Nikola common stock issued and outstanding immediately prior to the effective time, including the converted Legacy Nikola preferred stock, converted into the right to receive 1.901 shares of our common stock.

Our Common Stock is currently listed on the Nasdaq Global Select Market under the symbol “NKLA.”

Corporate Information

We are a Delaware corporation and were incorporated as VectoIQ Acquisition Corp., a special purpose acquisition company, in January 2018. VectoIQ completed its initial public offering in May 2018. On June 3, 2020, VectoIQ consummated the Business Combination and, in connection therewith, (i) VectoIQ’s wholly-owned subsidiary merged with and into Legacy Nikola, whereby Legacy Nikola survived the Merger and was deemed the accounting predecessor of the Merger and will be the successor registrant for SEC purposes and (ii) we changed our name to “Nikola Corporation.” Upon consummation of the foregoing transactions, Legacy Nikola became our wholly-owned subsidiary.

Our principal executive offices are located at 4141 E Broadway Road, Phoenix, Arizona 85040. Our telephone number is (480) 666-1038. Our website address is www.nikolamotor.com. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.


 

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THE OFFERING

On June 11, 2021, we entered into the Purchase Agreement with Tumim, pursuant to which Tumim has committed to purchase up to $300 million of Common Stock, or the Total Commitment, at our direction from time to time after the date of this prospectus, subject to the satisfaction of the conditions in the Purchase Agreement. Also on June 11, 2021, we entered into a registration rights agreement with Tumim, or the Registration Rights Agreement, pursuant to which we have filed with the SEC the registration statement that includes this prospectus to register for resale under the Securities Act, the shares of Common Stock that have been and may be issued to Tumim under the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement and the Registration Rights Agreement, we issued 155,703 Commitment Shares to Tumim as consideration for its irrevocable commitment to purchase shares of our Common Stock under the Purchase Agreement. The 155,703 Commitment Shares are also covered by this prospectus.

The sales of Common Stock by us to Tumim under the Purchase Agreement, if any, will be subject to certain limitations and may occur, from time to time at our sole discretion, over the approximately 36-month period commencing upon the initial satisfaction of all conditions to Tumim’s purchase obligations set forth in the Purchase Agreement, or the Commencement, and the date on which the Commencement occurs, or the Commencement Date, including that the registration statement that includes this prospectus covering the resale by Tumim of shares of Common Stock that have been and may be issued under the Purchase Agreement is declared effective by the SEC. From and after the Commencement Date, we will have the right, but not the obligation, from time to time at our sole discretion, to direct Tumim to purchase certain amounts of our Common Stock, subject to certain limitations in the Purchase Agreement, that we specify in purchase notices that we deliver to Tumim under the Purchase Agreement, or each such purchase, a Purchase. The purchase price of the shares of Common Stock that we may direct Tumim to purchase in a Purchase will be equal to 97% of the arithmetic average of the three daily volume weighted average prices of the Common Stock, or VWAPs, on Nasdaq during the three consecutive trading day-period commencing on the trading day on which Tumim has received, prior to 8:30 a.m., New York City time, the applicable purchase notice for such Purchase, or each such period, a Purchase Valuation Period. There is no upper limit on the price per share that Tumim could be obligated to pay for the Common Stock under the Purchase Agreement. The purchase price per share of Common Stock to be sold in a Purchase will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the applicable Purchase Valuation Period for such Purchase.

Tumim has no right to require us to sell any shares of Common Stock to Tumim, but Tumim is obligated to make purchases as directed by us, subject to the satisfaction of conditions set forth in the Purchase Agreement at Commencement and thereafter at each time that we may direct Tumim to purchase shares of our Common Stock under the Purchase Agreement. Actual sales of shares of Common Stock to Tumim will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of our Common Stock and determinations by us as to the appropriate sources of funding for us and our operations.

Under applicable rules of The Nasdaq Global Select Market, or Nasdaq, in no event may we issue or sell to Tumim under the Purchase Agreement shares of our Common Stock in excess of 78,769,697 shares, or the Exchange Cap, which is 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement, unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of our Common Stock to Tumim under the Purchase Agreement equals or exceeds $16.8066 (which represents the average official closing price of the Common Stock on Nasdaq for the five consecutive trading days immediately preceding the execution of the Purchase Agreement, plus an incremental amount to take into account our issuance of the Commitment Shares to Tumim as consideration for its commitment to purchase shares of Common Stock under the Purchase Agreement, rather than in exchange for cash), in which case, under applicable Nasdaq rules, the Exchange Cap


 

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limitation will not apply to issuances and sales of our Common Stock under the Purchase Agreement. In any event, the Purchase Agreement specifically provides that we may not issue or sell any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable Nasdaq rules.

The Purchase Agreement also prohibits us from directing Tumim to purchase any shares of our Common Stock if those shares, when aggregated with all other shares of our Common Stock then beneficially owned by Tumim (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder), would result in Tumim beneficially owning more than 4.99% of the outstanding Common Stock, or the Beneficial Ownership Cap.

The net proceeds under the Purchase Agreement to us will depend on the frequency and prices at which we sell shares of our stock to Tumim. We expect that any proceeds received by us from such sales to Tumim will be used for working capital and general corporate purposes.

There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement, other than a prohibition on entering into certain types of “dilutive” equity transactions during a pending purchase and prior to the full settlement thereof under the Purchase Agreement, as more specifically described in the section of this prospectus entitled “The Tumim Transaction.” Tumim has agreed not to cause, or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock during the term of the Purchase Agreement.

The Purchase Agreement will automatically terminate upon the earliest of (i) the expiration of the 36-month period following the date of execution of the Purchase Agreement, (ii) Tumim’s purchase of the Total Commitment worth of Common Stock under the Purchase Agreement, or (iii) the occurrence of certain other events set forth in the Purchase Agreement. We have the right to terminate the Purchase Agreement at any time after Commencement, at no cost or penalty, upon one trading day’s prior written notice to Tumim. Neither we nor Tumim may assign or transfer its rights and obligations under the Purchase Agreement, and no provision of the Purchase Agreement or the Registration Rights Agreement may be modified or waived by the parties.

As consideration for Tumim’s commitment to purchase shares of our Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, we issued 155,703 Commitment Shares to Tumim.

The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

We do not know what the purchase price for our Common Stock will be and therefore cannot be certain as to the number of shares we might issue to Tumim under the Purchase Agreement after the Commencement Date. As of June 15, 2021, there were 395,278,689 shares of our Common Stock outstanding, of which 220,041,142 shares were held by non-affiliates. Although the Purchase Agreement provides that we may sell up to $300 million of our Common Stock to Tumim, only 18,012,845 shares of our Common Stock are being registered for resale by the Selling Stockholder under this prospectus, which represents (i) the 155,703 Commitment Shares that we issued to Tumim on June 11, 2021 under the Purchase Agreement and (ii) up to 17,857,142 shares of Common Stock that may be issued to Tumim from and after the Commencement Date, if and when we elect to sell shares to Tumim under the Purchase Agreement. Depending on the market prices of our Common Stock at the time we elect to issue and sell shares to Tumim under the Purchase Agreement, we may need to register for resale under the Securities Act additional shares of our Common Stock in order to


 

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receive aggregate gross proceeds equal to the $300,000,000 Total Commitment available to us under the Purchase Agreement. If all of the 18,012,845 shares offered by Tumim for resale under this prospectus were issued and outstanding as of the date hereof (without taking into account the 19.99% Exchange Cap limitation), such shares would represent approximately 4.36% of the total number of shares of our Common Stock outstanding and approximately 7.57% of the total number of outstanding shares held by non-affiliates, in each case as of the date hereof. If we elect to issue and sell more than the 18,012,845 shares offered under this prospectus to Tumim, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered for resale by Tumim is dependent upon the number of shares we may elect to sell to Tumim under the Purchase Agreement from and after the Commencement Date.

There are substantial risks to our stockholders as a result of the sale and issuance of Common Stock to Tumim under the Purchase Agreement. These risks include substantial dilution, significant declines in our stock price and our inability to draw sufficient funds when needed. See “Risk Factors.” Issuances of our Common Stock in this offering will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number of shares of Common Stock that our existing stockholders own will not decrease, the shares owned by our existing stockholders will represent a smaller percentage of our total outstanding shares after any such issuance to Tumim.

Securities Offered

 

Shares of Common Stock Offered by the Selling Stockholder

155,703 Commitment Shares issued to Tumim upon execution of the Purchase Agreement. We have not and will not receive any cash proceeds from the issuance of these Commitment Shares.

 

  Up to 17,857,142 shares, or the Purchase Shares, we may sell to Tumim under the Purchase Agreement from time to time after the Commencement Date.

 

Shares of Common Stock Outstanding prior to this offering

395,278,689 shares of Common Stock.

 

Shares of Common Stock outstanding after this
offering

413,135,831 shares of Common Stock, assuming the sale of a total of 17,857,142 shares of Common Stock to Tumim and including the 155,703 Commitment Shares previously issued to Tumim. The actual number of shares issued will vary depending upon the actual sales prices under this offering.

 

Use of proceeds

We will not receive any proceeds from the sale of shares of Common Stock included in this prospectus by the Selling Stockholder. We may receive up to $300 million aggregate gross proceeds under the Purchase Agreement from sales of Common Stock that we elect to make to Tumim pursuant to the Purchase Agreement, if any, from time to time in our sole discretion, from and after the Commencement Date.

 

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  Any proceeds that we receive from sales of our Common Stock to Tumim under the Purchase Agreement will be used for working capital and general corporate purposes. See “Use of Proceeds.”

 

Risk factors

See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our Common Stock.

 

The Nasdaq Global Select Market trading symbol

“NKLA.”

The number of shares of Common Stock to be outstanding immediately prior to and after this offering is based on 395,278,689 shares of Common Stock outstanding as of June 15, 2021 and excludes:

 

   

29,651,195 shares of Common Stock issuable upon the exercise of outstanding options granted under Legacy Nikola’s 2017 Stock Option Plan, or our 2017 Option Plan, with a weighted-average exercise price of $1.27 per share;

 

   

18,374,524 shares available for future issuance under our 2020 Stock Incentive Plan, or 2020 Stock Plan;

 

   

4,000,000 shares available for future issuance under our 2020 Employee Stock Purchase Plan, or 2020 ESPP;

 

   

23,290,034 shares underlying restricted stock units, or RSUs, granted pursuant to our 2020 Stock Plan; and

 

   

760,915 shares issuable upon the exercise of outstanding private warrants to purchase Common Stock, with an exercise price of $11.50 per share.


 

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary consolidated financial information set forth below should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and the related notes thereto contained elsewhere in this prospectus.

The summary consolidated financial information and other data presented below for the three months ended March 31, 2021 and 2020, and as of March 31, 2021, have been derived from our unaudited financial statements included in this prospectus. The summary consolidated financial information for the years ended December 31, 2020, 2019 and 2018, and the summary consolidated balance sheet as of December 31, 2020 and 2019 have been derived from our audited consolidated financial statements included in this prospectus. Our unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and reflect, in the opinion of our management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of this data. Our historical results are not necessarily indicative of the results that may be expected in the future and our results for any interim period are not necessarily indicative of results that may be expected for any full fiscal year.

 

    Three Months Ended March 31,     Years Ended December 31,  
            2021                     2020             2020     2019     2018  
    (in thousands)     (in thousands)  

Statement of Operations Data:

         

Loss from operations

    (120,590     (31,997     (382,735     (87,995     (70,489

Other income (expense):

         

Interest income (expense), net

    (9     62       202       1,456       686  

Revaluation of Series A redeemable convertible preferred stock warrant liability

                      (3,339     3,502  

Loss on forward contract liability

          (1,324     (1,324            

Revaluation of warrant liability

    951             13,448              

Other income (expense), net

    219       114       (846     1,373       6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations before income taxes and equity in net loss of affiliate

    (119,429     (33,145     (371,255     (88,505     (66,295

Income tax expense (benefit)

    1       1       (1,026     151       (2,002

Equity in net loss of affiliate

    (794           (637            
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (120,224     (33,146     (370,866     (88,656     (64,293

Premium paid on repurchase of redeemable convertible preferred stock

                (13,407     (16,816     (166
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (120,224   $ (33,146   $ (384,273   $ (105,472   $ (64,459
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     As of March 31,      As of December 31,  
     2021      2020      2019  
     (in thousands)      (in thousands)  

Balance Sheet Data:

        

Cash and cash equivalents

   $ 763,750      $ 840,913      $ 85,688  

Working capital

     733,424        844,644        74,343  

Total assets

     1,003,318        1,053,713        229,430  

Total liabilities

     91,035        73,572        33,922  

Total stockholders’ equity

     912,283        980,141        195,508  

 

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     Three Months Ended March 31,     Years Ended December 31,  
             2021                     2020                     2020                     2019                     2018          
     (in thousands)     (in thousands)  

Statement of Cash Flows Data:

          

Net cash used in operating activities

   $ (59,249   $ (21,897   $ (150,533   $ (80,627   $ (54,019

Net cash used in investing activities

     (24,521     (1,439     (31,141     (39,302     (15,410

Net cash (used in) provided by financing activities

     (1,758     13,151       941,120       35,805       211,732  

 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial data, or the summary pro forma data, gives effect to the Business Combination described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with generally accepted accounting principles, or GAAP. Under this method of accounting, VectoIQ has been treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination has been treated as the equivalent of Legacy Nikola issuing stock for the net assets of VectoIQ, accompanied by a recapitalization. The net assets of VectoIQ are stated at historical cost, with no goodwill or other intangible assets recorded. The summary unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2020 give pro forma effect to the Business Combination as if it had occurred on January 1, 2020.

The summary pro forma data have been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information of the combined company appearing elsewhere in this prospectus and the accompanying notes. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements of VectoIQ and Legacy Nikola and related notes included in this prospectus. The summary pro forma data have been presented for informational purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Business Combination and the other transactions contemplated by the Business Combination Agreement been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of the combined company.

The following table presents summary pro forma data after giving effect to the Business Combination:

 

     (in thousands, except
per share data)
 

Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data Year Ended December 31, 2020

  

Revenue

   $ 95  

Net loss per share—basic

   $ (1.14

Net loss per share—diluted

   $ (1.17

Weighted-average shares outstanding—basic

     371,420,779  

Weighted-average shares outstanding—diluted

     371,926,541  

 

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RISK FACTORS

Investing in our Common Stock involves a high degree of risk. Before you make a decision to buy our Common Stock, in addition to the risks and uncertainties discussed above under “Forward-Looking Statements,” you should carefully consider the risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our Common Stock could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

Risks Related to Our Business and Industry

We are an early stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future.

We incurred net losses of $370.9 million and $120.2 million for the year ended December 31, 2020 and for the three months ended March 31, 2021, respectively, and have incurred net losses of approximately $680.4 million from Legacy Nikola’s inception through March 31, 2021. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of our trucks, which is not expected to begin at least until 2022 for our battery electric vehicle, or BEV, truck and the second half of 2023 and 2024 for our Tre hydrogen fuel cell electric vehicle, or FCEV, truck and Two FCEV truck, respectively, and may occur later. Even if we are able to successfully develop and sell or lease our trucks, there can be no assurance that they will be commercially successful. Our potential profitability is dependent upon the successful development and successful commercial introduction and acceptance of our trucks and our hydrogen station platform, which may not occur.

We expect the rate at which we will incur losses to be significantly high in future periods as we:

 

   

design, develop and manufacture our trucks;

 

   

construct and equip our manufacturing plant to produce our trucks in Arizona;

 

   

modify and equip the Iveco manufacturing plant in Germany to produce our trucks in Europe;

 

   

build up inventories of parts and components for our trucks;

 

   

manufacture an available inventory of our trucks;

 

   

develop and deploy our hydrogen fueling stations;

 

   

expand our design, development, maintenance and repair capabilities;

 

   

increase our sales and marketing activities and develop our distribution infrastructure; and

 

   

increase our general and administrative functions to support our growing operations.

Because we will incur the costs and expenses from these efforts before we receive any incremental revenue with respect thereto, our losses in future periods will be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenue, which would further increase our losses.

We may be unable to adequately control the costs associated with our operations.

We will require significant capital to develop and grow our business, including developing and manufacturing our trucks, building our manufacturing plant and building our brand. We expect to incur significant expenses which will impact our profitability, including research and development expenses, raw

 

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material procurement costs, leases, sales and distribution expenses as we build our brand and market our trucks and bundled leasing model, and general and administrative expenses as we scale our operations. In addition, we may incur significant costs in connection with our services, including building our hydrogen fueling stations and honoring our maintenance commitments under our bundled lease model. Our ability to become profitable in the future will not only depend on our ability to successfully market our vehicles and other products and services, but also to control our costs. If we are unable to cost efficiently design, manufacture, market, sell, distribute and service our trucks and services, our margins, profitability and prospects would be materially and adversely affected.

Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of establishing or entering new markets, organizing operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business plan will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenue to cover expenditures. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.

Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.

You must consider the risks and difficulties we face as an early stage company with a limited operating history. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed. We have a very limited operating history on which investors can base an evaluation of our business, operating results and prospects. We intend to derive substantially all of our revenue from the sale and lease of our vehicle platforms, which are still in the early stages of development. Our revenue will also depend on the sale of hydrogen fuel at our planned hydrogen fueling stations which we do not expect to be operational until 2023 or later. There are no assurances that we will be able to secure future business with the major trucking companies or with independent truck drivers.

It is difficult to predict our future revenue and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.

We will need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our operations and prospects could be negatively affected.

The design, manufacture, lease, sale and servicing of vehicles and related hydrogen fueling stations is capital-intensive. We expect that we will have sufficient capital to fund our planned operations for the next 12 months. We will need to raise additional capital to scale our manufacturing and roll out our hydrogen fueling stations. We may raise additional funds through the issuance of equity, equity related or debt securities, or through obtaining credit from government or financial institutions. This capital will be necessary to fund our

 

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ongoing operations, continue research, development and design efforts, improve infrastructure, introduce new vehicles and build hydrogen fueling stations. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially adversely affected.

If we fail to manage our future growth effectively, we may not be able to market and sell our vehicles successfully.

Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We intend to expand our operations significantly. Our future expansion will include:

 

   

training new personnel;

 

   

forecasting production and revenue;

 

   

controlling expenses and investments in anticipation of expanded operations;

 

   

establishing or expanding design, manufacturing, sales and service facilities; and

 

   

implementing and enhancing administrative infrastructure, systems and processes.

We intend to continue to hire a significant number of additional personnel, including design and manufacturing personnel and service technicians for our trucks. Because our trucks are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in alternative fuel and electric vehicles may not be available to hire, and as a result, we will need to expend significant time and expense training the employees we do hire.

Our bundled lease model may present unique problems that may have an adverse effect on our operating results and business and harm our reputation.

Our bundled lease model, which, as currently planned, will provide customers with the FCEV truck, hydrogen fuel, and regularly scheduled maintenance for a fixed price per mile, is reliant on our ability to achieve a minimum hydrogen fuel efficiency in our FCEV trucks. If we are unable to achieve or maintain this fuel efficiency, we may be forced to provide our bundled lease customers with fuel at prices below-cost or risk damaging our relationships with our customers. Any such scenario would put our bundled lease model in jeopardy and may have a material adverse effect on our business, prospects, operating results and financial condition.

We may face legal challenges in one or more states attempting to sell directly to customers, which could materially adversely affect our costs.

Our business plan includes the direct sale of vehicles to business customers, and potentially, to individual customers. Most, if not all, states require a license to sell vehicles within the state. Many states prohibit manufacturers from directly selling vehicles to customers. In other states, manufacturers must operate a physical dealership within the state to deliver vehicles to customers. As a result, we may not be able to sell directly to customers in each state in the United States.

We are currently not registered as a dealer in any state. In many states, it is unclear if, as a manufacturer, we will be able to obtain permission to sell and deliver vehicles directly to customers. For customers residing in states in which we will not be allowed to sell or deliver vehicles, we may have to arrange alternate methods of delivery of vehicles. This could include delivering vehicles to adjacent or nearby states in which we are allowed to directly sell and ship vehicles, and arranging for the customer to transport the vehicles to their home states. These workarounds could add significant complexity and, as a result, costs, to our business.

 

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We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.

We are subject to, and may become a party to, a variety of litigation, other claims, suits, regulatory actions and government investigations and inquiries. For example, in September 2020, Nikola and our officers and employees received subpoenas from the SEC as part of a fact-finding inquiry related to aspects of our business as well as certain matters described in an article issued on September 10, 2020 by Hindenburg Research LLC, or the Hindenburg article. The SEC issued subpoenas to our directors on September 30, 2020. In addition, Nikola and Trevor R. Milton also received grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York and the N.Y. County District Attorney’s Office in September 2020. We have cooperated, and will continue to cooperate, with these and any other regulatory or governmental requests. We have incurred significant expenses as a result of the regulatory and legal matters relating to the Hindenburg article. The total cost associated with these matters will depend on many factors, including the duration of these matters and any related finding.

Additionally, six putative class action lawsuits were filed against us and certain of our current and former officers and directors, asserting violations of federal securities laws under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, or the Exchange Act, and, in one case, violations of the Unfair Competition Law under California law, alleging that Nikola and certain of our officers and directors made false and/or misleading statements in press releases and public filings regarding our business plan and prospects. These lawsuits have been consolidated. Separately, three purported Nikola stockholder derivative actions were filed in the United States District Court, against certain of our current and former directors, alleging breaches of fiduciary duties, violations of Section 14(a) of the Exchange Act, and gross mismanagement, among other claims. We are unable to estimate the potential loss or range of loss, if any, associated with these lawsuits.

In addition, from time to time, we may also be involved in legal proceedings and investigations arising in the ordinary course of business, including those relating to employment matters, relationships with collaboration partners, intellectual property disputes, and other business matters. Any such claims or investigations may be time-consuming, costly, divert management resources, or otherwise have a material adverse effect on our business or result of operations.

The results of litigation and other legal proceedings, including the other claims described under Legal Proceedings in Note 14, Commitments and Contingencies, to our audited consolidated financial statements included elsewhere in this prospectus and Note 12, Commitments and Contingencies, to our unaudited consolidated financial statements included elsewhere in this prospectus and incorporated by reference herein, are inherently uncertain and adverse judgments or settlements in some or all of these legal disputes may result in materially adverse monetary damages or injunctive relief against us. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future. The litigation and other legal proceedings described under Note 14 and Note 12 are subject to future developments and management’s view of these matters may change in the future.

Our success will depend on our ability to economically manufacture our trucks at scale and build our hydrogen fueling stations to meet our customers’ business needs, and our ability to develop and manufacture trucks of sufficient quality and appeal to customers on schedule and at scale is unproven.

Our future business depends in large part on our ability to execute our plans to develop, manufacture, market and sell our BEV and FCEV trucks and to deploy the associated hydrogen fueling stations for our FCEV trucks at sufficient capacity to meet the transportation demands of our business customers. We plan to initially commence manufacturing our trucks in Europe through our joint venture with CNH Industrial N.V., or CNHI, and Iveco S.p.A., or Iveco, which commenced operations in the fourth quarter of 2020, and in the future at our manufacturing plant in Arizona.

 

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Our continued development of our truck platforms is and will be subject to risks, including with respect to:

 

   

our ability to secure necessary funding;

 

   

the equipment we plan to use being able to accurately manufacture the vehicles within specified design tolerances;

 

   

long-and short-term durability of our hydrogen fuel cell and electric drivetrain technology related components in the day-to-day wear and tear of the commercial trucking environment;

 

   

compliance with environmental, workplace safety and similar regulations;

 

   

securing necessary components on acceptable terms and in a timely manner;

 

   

delays in delivery of final component designs to our suppliers;

 

   

our ability to attract, recruit, hire and train skilled employees;

 

   

quality controls, particularly as we plan to commence manufacturing in-house;

 

   

delays or disruptions in our supply chain; and

 

   

other delays and cost overruns.

We have no experience to date in high volume manufacturing of our trucks. We do not know whether we will be able to develop efficient, automated, low-cost manufacturing capabilities and processes, and reliable sources of component supply, that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market our trucks. Even if we are successful in developing our high volume manufacturing capability and processes and reliably source our component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors, or in time to meet our vehicle commercialization schedules or to satisfy the requirements of customers. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines could have a material adverse effect on our business, prospects, operating results and financial condition.

We may experience significant delays in the design, manufacture, launch and financing of our trucks, including in the build out of our manufacturing plant, which could harm our business and prospects.

Any delay in the financing, design, manufacture and launch of our trucks, including in the build out of our manufacturing plant in Arizona, could materially damage our brand, business, prospects, financial condition and operating results. Vehicle manufacturers often experience delays in the design, manufacture and commercial release of new products. To the extent we delay the launch of our trucks, our growth prospects could be adversely affected as we may fail to grow our market share. Furthermore, we rely on third party suppliers for the provision and development of many of the key components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing necessary components, we could experience delays in delivering on our timelines.

We will rely on complex machinery for our operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.

We will rely heavily on complex machinery for our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Our truck manufacturing plant will consist of large-scale machinery combining many components. The manufacturing plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to,

 

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scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.

Once completed, if our manufacturing plant in Arizona becomes inoperable, we will be unable to produce our trucks and our business will be harmed.

We expect to begin assembly of our trucks at our manufacturing plant in Arizona after completion of the initial phase of the plant in 2021, at the earliest. We expect to produce all of our trucks at our manufacturing plant in Arizona after completion of the second phase of the plant in 2022, at the earliest. Our plant and the equipment we use to manufacture our trucks would be costly to replace and could require substantial lead time to replace and qualify for use. Our plant may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, or by health epidemics, such as the COVID-19 pandemic, which may render it difficult or impossible for us to manufacture our trucks for some period of time. The inability to produce our trucks or the backlog that could develop if our manufacturing plant is inoperable for even a short period of time may result in the loss of customers or harm our reputation. Although we maintain insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.

Our plan to build a network of hydrogen fueling stations will require significant cash investments and management resources and may not meet our expectations with respect to additional sales of our electric vehicles. In addition, we may not be able to open stations in certain states.

Our plan to build a network of hydrogen fueling stations in the United States will require significant cash investments and management resources and may not meet our expectations with respect to additional sales of our FCEV trucks. This planned construction of hydrogen stations is essential to persuading customers to pay a higher premium for our trucks.

While we have constructed a demo station, we have very limited experience in the actual provision of our refueling solutions to users, and providing these services is subject to challenges, which include the logistics of rolling out our network of refueling stations and teams in appropriate areas, inadequate capacity or over capacity in certain areas, security risks, risk of damage to vehicles during charging or refueling, and the potential for lack of customer acceptance of our services. We will need to ensure compliance with any regulatory requirements applicable in jurisdictions where our fueling stations will be located, including obtaining any required permits and land use rights, which could take considerable time and expense and is subject to the risk that government support in certain areas may be discontinued or subject to conditions that we may be unable to meet in a cost-efficient manner or at all. In addition, given our lack of experience building and operating fueling stations, there could be unanticipated challenges, which may hinder our ability to provide our bundled lease model to customers or make the provision of our bundled leases costlier than anticipated. If we are unable to build, or experience delays in building, our network of hydrogen fueling stations, we may be unable to meet our fueling commitments under our bundled lease arrangements with customers and experience decreased sales or leases of our vehicles, which may negatively impact our business, prospects, financial condition and operating results.

We may not be able to produce or source the hydrogen needed to establish our planned hydrogen fueling stations.

As a key component of our business model, we intend to establish a series of hydrogen fueling stations, and we intend to include the cost of hydrogen in the purchase price of our trucks. Where electricity can be procured

 

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in a cost-effective manner, we expect that hydrogen fuel will be produced on-site, via electrolysis. In other cases, we expect that hydrogen fuel will be produced off-site and delivered to fueling stations under a supply “hub and spoke” structure. On June 22, 2021, we entered into a Hydrogen Purchase Agreement, or the Hydrogen Purchase Agreement, with Wabash Valley Resources LLC, or WVR, to purchase hydrogen produced at the hydrogen production facility being developed by WVR. WVR has yet to break ground on its hydrogen production facility. Consequently, there is no guarantee WVR will be able to meet its development timeline with regard to the facility or successfully produce hydrogen at scale. To the extent we are unable to produce or obtain the hydrogen, we may be unable to establish these fueling stations and severely limit the usefulness of our trucks, or, if we are still able to establish these stations, we may be forced to sell hydrogen at a loss in order to maintain our commitments. We believe that this hydrogen incentive will be a significant driver for purchases of our trucks, and therefore, the failure to establish and roll out these hydrogen fueling stations in accordance with our expectations would materially adversely affect our business.

Our inability to cost-effectively source the energy requirements to conduct electrolysis at our fueling stations may impact the profitability of our bundled lease model by making our hydrogen uneconomical compared to other vehicle fuel sources.

Our ability to economically produce hydrogen for our FCEV trucks requires us to secure a reliable source of electricity for each of our on-site gaseous stations and large scale production hubs at a price per kilowatt hour that is similar to wholesale rates in the geographic areas we target. During our initial hydrogen station roll-out, we intend to source power based on the most economical power mix available at each hydrogen production site, including power from the grid that is sourced from non-renewable sources. An increase in the price of energy used to generate hydrogen through electrolysis would likely result in a higher cost of fuel for our FCEV trucks as well as increase the cost of distribution, freight and delivery. We may not be able to offset these cost increases or pass such cost increases onto customers in the form of price increases, because of our bundled lease model for FCEV trucks, which could have an adverse impact on our results of operations and financial condition.

Reservations for our trucks are cancellable.

Reservations for our Nikola FCEV trucks are subject to cancellation by the customer until the customer enters into a lease agreement or, in the case of Anheuser-Busch LLC, or AB, to the extent our trucks do not meet the vehicle specifications and delivery timelines specified in the contract with AB, as discussed further below. Because all of our reservations are cancellable, it is possible that a significant number of customers who submitted reservations for our trucks may cancel those reservations. In addition, our non-binding FCEV reservations include reservations from individuals or small fleets with orders of 100 trucks or less, which collectively represent approximately 47% of our total FCEV reservations as of December 31, 2020. These individuals or small fleets may not receive FCEV trucks until the density of the hydrogen station network is sufficient for their refueling needs, which may not occur until approximately 2030 or later.

Given the anticipated lead times between customer reservation and delivery of our trucks, there is a heightened risk that customers that have made reservations may not ultimately take delivery of vehicles due to potential changes in customer preferences, competitive developments and other factors. As a result, no assurance can be made that reservations will not be cancelled, or that reservations will ultimately result in the purchase or lease of a vehicle. Any cancellations could harm our financial condition, business, prospects and operating results.

In addition, any projected revenue is based on a number of assumptions, including a projected purchase price for our trucks. If the purchase price of the trucks ends up being different than anticipated, we may not achieve the anticipated level of projected revenue, even if all of the trucks subject to reservations are sold or leased.

While we currently have a contract with AB to lease up to 800 Nikola Two FCEV trucks, if we are unable to deliver our trucks according to the vehicle specifications and delivery timelines set forth in the contract, AB has

 

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the right to cancel its order for trucks. Moreover, the AB contract specifies lease terms and rental rates that may be hard for us to meet depending on our ability to develop our trucks and hydrogen network according to current design parameters and cost estimates. Any of these adverse actions related to the AB order could harm our financial condition, business, prospects and operating results.

While we do not currently have any leasing arrangements finalized, in the future we intend to offer a bundled lease or other alternative structures to customers, which would expose us to credit risk.

While we currently intend to offer bundled leasing of our trucks or other alternative structures to potential customers through a third-party financing partner, we currently have no agreement in place with any potential financing partner. We can provide no assurance that a third-party financing partner would be able or willing to provide the leasing services on terms that we have stated in our published materials, or to provide financing at all. Furthermore, offering a leasing alternative to customers will expose us to risks commonly associated with the extension of credit. Credit risk is the potential loss that may arise from any failure in the ability or willingness of the customer to fulfill its contractual obligations when they fall due. Competitive pressure and challenging markets may increase credit risk through leases to financially weak customers, extended payment terms and leases into new and immature markets. This could have a material adverse effect on our business, prospects, financial results and results of operations.

We face significant barriers to produce our trucks, and if we cannot successfully overcome those barriers our business will be negatively impacted.

The trucking industry has traditionally been characterized by significant barriers to entry, including large capital requirements, investment costs of designing and manufacturing vehicles, long lead times to bring vehicles to market from the concept and design stage, the need for specialized design and development expertise, regulatory requirements, establishing a brand name and image and the need to establish sales, leasing, fueling and service locations. If we are not able to overcome these barriers, our business, prospects, operating results and financial condition will be negatively impacted and our ability to grow our business will be harmed.

Our future growth is dependent upon the trucking industry’s willingness to adopt BEV and FCEV trucks.

Our growth is highly dependent upon the adoption by the trucking industry of alternative fuel and electric trucks. If the market for our BEV and FCEV trucks does not develop at the rate or to the extent that we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel and electric trucks is new and untested and is characterized by rapidly changing technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.

Factors that may influence the adoption of alternative fuel and electric vehicles include:

 

   

perceptions about BEV or FCEV truck quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of alternative fuel or electric vehicles;

 

   

perceptions about vehicle safety in general, including the use of advanced technology, such as vehicle electronics, hydrogen fueling and storage and regenerative braking systems;

 

   

the decline of vehicle efficiency resulting from deterioration over time in the ability of the battery to hold a charge;

 

   

concerns about the availability of hydrogen stations, including those we plan to develop and deploy, which could impede our present efforts to promote FCEV trucks as a desirable alternative to diesel trucks;

 

   

improvements in the fuel economy of internal combustion engines;

 

   

the availability of service for alternative fuel or electric trucks;

 

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volatility in the cost of energy, oil, gasoline and hydrogen;

 

   

government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;

 

   

the availability of tax and other governmental incentives to purchase and operate alternative fuel and electric trucks or future regulation requiring increased use of nonpolluting trucks;

 

   

our ability to sell or lease trucks directly to business or customers dependent on state by state unique regulations and dealership laws;

 

   

the availability of tax and other governmental incentives to sell hydrogen;

 

   

perceptions about and the actual cost of alternative fuel; and

 

   

macroeconomic factors.

Additionally, we may become subject to regulations that may require us to alter the design of our trucks, which could negatively impact customer interest in our products.

If our trucks fail to perform as expected, our ability to develop, market and sell or lease our alternative fuel and electric trucks could be harmed.

Once production commences, our trucks may contain defects in design and manufacture that may cause them not to perform as expected or may require repair. We currently have no frame of reference by which to evaluate the performance of our trucks upon which our business prospects depend. For example, our trucks will use a substantial amount of software to operate which will require modification and updates over the life of the vehicle. Software products are inherently complex and often contain defects and errors when first introduced.

There can be no assurance that we will be able to detect and fix any defects in the trucks’ hardware or software prior to commencing customer sales. We may experience recalls in the future, which could adversely affect our brand in our target markets and could adversely affect our business, prospects and results of operations. Our trucks may not perform consistent with customers’ expectations or consistent with other vehicles which may become available. Any product defects or any other failure of our trucks to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.

Although we hope to be among the first to bring BEV and FCEV Class 8 trucks to market, competitors have and may continue to enter the market before our trucks, which could have an adverse effect on our business.

We face intense competition in trying to be among the first to bring our BEV and FCEV truck platforms to market, including from companies in our target markets with greater financial resources, more extensive development, manufacturing, marketing and service capabilities, greater brand recognition and a larger number of managerial and technical personnel. If competitor’s trucks are brought to market before our trucks, we may experience a reduction in potential market share.

Many of our current and potential competitors, particularly international competitors, have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products.

We compete in a rapidly evolving and highly competitive industry, and a number of private and public companies have announced plans to offer BEV and/or FCEV trucks, including companies such as Daimler, Hyliion, Hyundai, Lion, Tesla, Hyzon, Toyota and Volvo. Based on publicly available information, a number of these competitors have displayed prototype trucks and have announced target availability and production

 

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timelines, while others have launched pilot programs in some markets. In addition, we are aware that one potential competitor, BYD, is currently manufacturing and selling a Class 8 BEV truck. While some competitors may choose to offer BEV trucks, others such as Hyundai have announced they plan to offer FCEV trucks and invest in hydrogen stations for refueling. In addition, our principal competition for our trucks will also come from manufacturers of trucks with internal combustion engines powered by diesel fuel.

We expect competition in our industry to intensify in the future in light of increased demand and regulatory push for alternative fuel and electric vehicles. We cannot provide assurances that our trucks will be among the first to market, or that competitors will not build hydrogen fueling stations. Even if our trucks are among the first to market, we cannot assure you that customers will choose our vehicles over those of our competitors, or over diesel powered trucks.

Developments in alternative technology improvements in the internal combustion engine may adversely affect the demand for our trucks.

Significant developments in alternative technologies, such as advanced diesel, ethanol, or compressed natural gas or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Other fuels or sources of energy may emerge as customers’ preferred alternative to our truck platform. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced alternative fuel and electric trucks, which could result in the loss of competitiveness of our trucks, decreased revenue and a loss of market share to competitors. Our research and development efforts may not be sufficient to adapt to changes in alternative fuel and electric vehicle technology. As technologies change, we plan to upgrade or adapt our trucks and introduce new models in order to continue to provide trucks with the latest technology, in particular battery cell technology.

We have no experience servicing our vehicles. If we are unable to address the service requirements of our customers, our business will be materially and adversely affected.

Because we do not plan to begin production of our trucks until mid-2021 at the earliest, we have no experience servicing or repairing our vehicles. Servicing alternative fuel and electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. We may decide to partner with a third party to perform some or all of the maintenance on our trucks, and there can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider. If we are unable to successfully address the service requirements of our customers, our business and prospects will be materially and adversely affected.

In addition, the motor vehicle industry laws in many states require that service facilities be available to service vehicles physically sold from locations in the state. While we anticipate developing a service program that would satisfy regulators in these circumstances, the specifics of our service program are still in development, and at some point may need to be restructured to comply with state law, which may impact our business, financial condition, operating results and prospects.

Future product recalls could materially adversely affect our business, prospects, operating results and financial condition.

Any product recall in the future may result in adverse publicity, damage our brand and materially adversely affect our business, prospects, operating results and financial condition. In the future, we may voluntarily or involuntarily, initiate a recall if any of our vehicles or electric powertrain components (including the fuel cell or batteries) prove to be defective or noncompliant with applicable federal motor vehicle safety standards. Such recalls involve significant expense and diversion of management attention and other resources, which could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results of operations.

 

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Insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and operating results.

Once our trucks are in production, we will need to maintain warranty reserves to cover warranty-related claims. If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be materially and adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

If we are unable to attract and retain key employees and hire qualified management, technical and engineering personnel, our ability to compete could be harmed.

Our success depends, in part, on our ability to retain our key personnel. The unexpected loss of or failure to retain one or more of our key employees could adversely affect our business.

Our success also depends, in part, on our continuing ability to identify, hire, attract, train and develop other highly qualified personnel, including management, technical and engineering personnel. Qualified individuals are in high demand, particularly in the vehicle technology industry. Competition for individuals with experience designing, manufacturing and servicing electric vehicles is intense, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel in the future. Competition for these employees can be intense, and our ability to hire, attract and retain them may depend on our ability to provide competitive compensation. We use equity awards to attract talented employees, but if the value of our Common Stock declines significantly, as it has in the recent past, and remains depressed, it may prevent us from recruiting and retaining qualified employees. We may not be able to attract, integrate, train or retain qualified personnel in the future. Additionally, we may not be able to hire new employees quickly enough to meet our needs. Our failure to do so could adversely affect our business and prospects, including the execution of our global business strategy.

Increases in costs, disruption of supply or shortage of raw materials, particularly lithium-ion battery cells, could harm our business.

Once we begin commercial production of vehicles, we may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials, including battery cells and semiconductors. Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. We use various raw materials including aluminum, steel, carbon fiber, non-ferrous metals (such as copper), and cobalt. The prices for these raw materials fluctuate depending on market conditions and global demand and could adversely affect our business and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for lithium-ion cells. These risks include:

 

   

the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to support the growth of the electric vehicle industry as demand for such cells increases;

 

   

disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and

 

   

an increase in the cost of raw materials, such as cobalt, used in lithium-ion cells.

Any disruption in the supply of battery cells or semiconductors could temporarily disrupt production of the BEV truck until a different supplier is fully qualified. Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are not sufficiently safe. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials would increase our operating costs and could reduce our margins if the increased costs cannot be recouped through increased electric vehicle prices. There can be no assurance that we will be able to recoup increasing costs of raw materials by increasing vehicle prices.

 

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Collaboration with strategic partners is subject to risks.

In 2019, we partnered with Iveco, a subsidiary of CNHI, to manufacture the BEV truck at the Iveco manufacturing plant in Ulm, Germany through a joint venture with CNHI, which commenced operations in the fourth quarter of 2020. We currently intend to begin production of the BEV truck at the Iveco plant in 2021, with deliveries beginning late in the same year. We currently expect that approximately 40 million Euros will be invested in total by Iveco and Nikola into the manufacturing plant to prepare it for assembly, of which 14.8 million Euros was funded through March 31, 2021. Future funding may be partially financed through debt obtained by the joint venture.

In addition to entering into the Hydrogen Purchase Agreement, on June 22, 2021, we also acquired a 20% equity interest in WVR and entered into that certain Second Amended and Restated Limited Liability Company Agreement of WVR, pursuant to which, among other things, we, in our sole discretion, obtained the right, or the Offtake Right, to own up to 20% of the entity to which WVR will transfer ownership of the hydrogen gas turbine to be part of the business of the project, without further consideration paid therefore, subject to certain conditions. Exercising this Offtake Right will likely require us to make significant capital expenditures to build liquefaction, storage, and transportation services.

We have announced planned collaborations with various parties, including with respect to hydrogen production and sourcing, providing service and maintenance and deployment of hydrogen fueling stations. Discussions with our strategic partners are ongoing, are subject to the parties’ entry into definitive documentation, and terms of the agreements are subject to change. Consequently, there can be no assurance that we will enter into agreements on the terms initially contemplated, if at all.

Collaboration with third parties is subject to risks with respect to operations that are outside our control. We could experience delays if our partners do not meet agreed upon timelines or experience capacity constraints. There are risks of potential disputes, disagreements or fallouts with partners and failure to perform under contracts or enforce contracts against the other party, and/or the potential terminations of such contracts, and the production of our trucks could be disrupted as a result. We could be affected by adverse publicity related to our partners, whether or not such publicity is related to their collaboration with us, or adverse publicity related to our relationships with our partners. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our partners’ products. In addition, although we are involved in each step of the supply chain and manufacturing process, because we also rely on our partners and third parties to meet our quality standards, there can be no assurance that we will successfully maintain quality standards.

We may be unable to enter into new agreements or extend existing agreements with manufacturers on terms and conditions acceptable to us and therefore may need to contract with other third parties or significantly add to our own production capacity. There can be no assurance that in such event we would be able to engage other third parties or establish or expand our own production capacity to meet our needs on acceptable terms or at all. The expense and time required to complete any transition, and to assure that vehicles manufactured at facilities of new manufacturers comply with our quality standards and regulatory requirements, may be greater than anticipated. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.

We are or may be subject to risks associated with strategic alliances or acquisitions.

We have entered into, and may in the future enter into additional, strategic alliances, including joint ventures or minority equity investments with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

 

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When appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. In addition to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail to do so. Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

We are dependent on our suppliers, a significant number of which are single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our vehicles at prices and volumes acceptable to us would have a material adverse effect on our business, prospects and operating results.

While we plan to obtain components from multiple sources whenever possible, many of the components used in our vehicles will be purchased by us from a single source, especially with respect to hydrogen fuel cells and batteries. We refer to these component suppliers as our single source suppliers. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are favorable to us.

A significant benefit of our collaborations with external manufacturing partners is the ability to leverage their respective existing assortment of parts, thereby decreasing our purchasing expenses. While these relationships give us access to use an existing supplier base with the hopes of accelerating procurement of components at favorable prices, there is no guarantee that this will be the case. In addition, we could experience delays if our suppliers do not meet agreed upon timelines or experience capacity constraints.

The battery efficiency of electric trucks will decline over time, which may negatively influence potential customers’ decisions whether to purchase our trucks.

We anticipate the ranges of our Nikola Tre BEV, Nikola Tre FCEV and Nikola Two FCEV vehicles to be up to 350, 500 and 900 miles per day, respectively, before needing to recharge or refuel depending on the type of vehicle, but that range will decline over time as the battery deteriorates. Other factors such as usage, time and stress patterns may also impact the battery’s ability to hold a charge, which would decrease our trucks’ range before needing to recharge or refuel. Such battery deterioration and the related decrease in range may negatively influence potential customer decisions.

Our trucks will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.

The battery packs within our trucks will make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, once our trucks are commercially available, a field or testing failure of our vehicles or other battery packs that we produce could occur, which could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve our trucks, could seriously harm our business and reputation.

In addition, once we begin manufacturing our trucks, we will need to store a significant number of lithium-ion cells at our facility. Any mishandling of battery cells may cause disruption to the operation of our

 

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facility. While we have implemented safety procedures related to the handling of the cells, a safety issue or fire related to the cells could disrupt our operations. Such damage or injury could lead to adverse publicity and potentially a safety recall. Moreover, any failure of a competitor’s electric vehicle or energy storage product may cause indirect adverse publicity for us and our products. Such adverse publicity could negatively affect our brand and harm our business, prospects, financial condition and operating results.

Any unauthorized control or manipulation of our vehicles’ systems could result in loss of confidence in us and our vehicles and harm our business.

Our trucks contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. We have designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks, our trucks and related systems. However, hackers may attempt to gain unauthorized access to modify, alter and use such networks, trucks and systems to gain control of or to change our trucks’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the truck. Future vulnerabilities could be identified and our efforts to remediate such vulnerabilities may not be successful. Any unauthorized access to or control of our trucks or their systems, or any loss of customer data, could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our trucks, systems or data, as well as other factors that may result in the perception that our trucks, systems or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects, financial condition and operating results.

Interruption or failure of our information technology and communications systems could impact our ability to effectively provide our services.

We plan to outfit our trucks with in-vehicle services and functionality that utilize data connectivity to monitor performance and timely capture opportunities for cost-saving preventative maintenance. The availability and effectiveness of our services depend on the continued operation of information technology and communications systems, which we have yet to develop. Our systems will be vulnerable to damage or interruption from, among others, fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. Our data centers could also be subject to break-ins, sabotage and intentional acts of vandalism causing potential disruptions. Some of our systems will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any problems at our data centers could result in lengthy interruptions in our service. In addition, our trucks are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in our business or the failure of our systems.

We are subject to substantial regulation and unfavorable changes to, or failure by us to comply with, these regulations could substantially harm our business and operating results.

Our alternative fuel and electric trucks, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving and we face risks associated with changes to these regulations, including but not limited to:

 

   

increased subsidies for corn and ethanol production, which could reduce the operating cost of vehicles that use ethanol or a combination of ethanol and gasoline; and

 

   

increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote alternative fuel vehicles.

To the extent the laws change, our trucks may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be

 

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burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in building our manufacturing facilities.

Our operations will be subject to international, federal, state, and/or local environmental laws and regulations, including laws relating to the use, handling, storage, disposal and human exposure to hazardous materials. Environmental and health and safety laws and regulations can be complex, and we expect that we will be affected by future amendments to such laws or other new environmental and health and safety laws and regulations which may require us to change our operations, potentially resulting in a material adverse effect on our business, prospects, financial condition, and operating results. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury and fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages, suspension of production or a cessation of our operations.

Contamination at properties we will own and operate, we formerly owned or operated or to which hazardous substances were sent by us, may result in liability for us under environmental laws and regulations, including, but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating results. We may face unexpected delays in obtaining the required permits and approvals in connection with our manufacturing facilities that could require significant time and financial resources and delay our ability to operate these facilities, which would adversely impact our business prospects and operating results.

We are subject to evolving laws, regulations, standards, policies, and contractual obligations related to data privacy and security, and any actual or perceived failure to comply with such obligations could harm our reputation and brand, subject us to significant fines and liabilities, or otherwise adversely affect our business.

In the course of our operations, we collect, use, store, disclose, transfer and otherwise process personal information from our consumers, employees and third parties with whom we conduct business, including names, accounts, user IDs and passwords, and payment or transaction related information. Additionally, we intend to use our trucks’ electronic systems to log information about each vehicle’s use in order to aid us in vehicle diagnostics, repair and maintenance. Our customers may object to the use of this data, which may increase our vehicle maintenance costs and harm our business prospects. Accordingly, we are subject to or affected by a number of federal, state, local and international laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security and govern our collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal information including that of our employees, customers and other third parties with whom we conduct business. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material and adverse impact on our business, financial condition and results of operations.

The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We may not be able to monitor and react to all developments in a timely manner. The European Union adopted the General Data Protection Regulation, or GDPR, which became effective in May 2018, and California adopted the California Consumer Privacy Act of 2018, or CCPA, which became effective in January 2020. Both the GDPR and the CCPA impose additional

 

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obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is collected. Compliance with existing, proposed and recently enacted laws and regulations (including implementation of the privacy and process enhancements called for under the GDPR and CCPA) can be costly, and any failure to comply with these regulatory standards could subject us to legal and reputational risks.

Specifically, the CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California consumers. The CCPA includes a framework with potentially severe statutory damages for violations and a private right of action for certain data breaches. The CCPA requires covered businesses to provide California consumers with new privacy-related disclosures and new ways to opt-out of certain uses and disclosures of personal information. As we expand our operations, the CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Additionally, effective starting on January 1, 2023, the California Privacy Rights Act, or CPRA, will significantly modify the CCPA, including by expanding California consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.

Other states have begun to propose similar laws. Compliance with applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms to comply with such laws and regulations, which could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business. In particular, certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation and application. Failure to comply with applicable laws or regulations or to secure personal information could result in investigations, enforcement actions and other proceedings against us, which could result in substantial fines, damages and other liability as well as damage to our reputation and credibility, which could have a negative impact on revenues and profits.

We post public privacy policies and other documentation regarding our collection, processing, use and disclosure of personal information. Although we endeavor to comply with our published policies and other documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, contractors, service providers, vendors or other third parties fail to comply with our published policies and documentation. Such failures could carry similar consequences or subject us to potential local, state and federal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Claims that we have violated individuals’ privacy rights or failed to comply with data protection laws or applicable privacy notices could, even if we are not found liable, be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and other third parties of security breaches involving certain types of data. Such laws may be inconsistent or may change or additional laws may be adopted. In addition, our agreements with certain customers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, penalties or fines, litigation and our customers losing confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach. Any of the foregoing could materially adversely affect our business, prospects, operating results and financial condition.

We face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.

We face risks associated with our international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm our business. We anticipate having international operations

 

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and subsidiaries in Germany and Italy that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. Additionally, as part of our growth strategy, we intend to expand our sales, maintenance and repair services internationally. However, we have no experience to date selling and servicing our vehicles internationally and such expansion would require us to make significant expenditures, including the hiring of local employees and establishing facilities, in advance of generating any revenue. We are subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell our alternative fuel and electric trucks and require significant management attention. These risks include:

 

   

conforming our trucks to various international regulatory requirements where our trucks are sold, or homologation;

 

   

development and construction of our hydrogen refueling network;

 

   

difficulty in staffing and managing foreign operations;

 

   

difficulties attracting customers in new jurisdictions;

 

   

foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United States;

 

   

fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities we undertake;

 

   

United States and foreign government trade restrictions, tariffs and price or exchange controls;

 

   

foreign labor laws, regulations and restrictions;

 

   

changes in diplomatic and trade relationships;

 

   

political instability, natural disasters, war or events of terrorism; and

 

   

the strength of international economies.

If we fail to successfully address these risks, our business, prospects, operating results and financial condition could be materially harmed.

Our ability to use net operating losses to reduce future tax payments may be limited by provisions of the Internal Revenue Code and may be subject to further limitation as a result of future transactions.

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, contain rules that limit the ability of a company that undergoes an ownership change, which is generally any cumulative change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards and certain built-in losses recognized in the years after the ownership change. These rules generally operate by focusing on ownership changes involving stockholders who directly or indirectly own 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit carryforwards is equal to the product of the applicable long-term tax exempt rate and the value of our stock immediately before the ownership change. As a result, we may be unable to offset our taxable income with net operating losses, or our tax liability with credits, before these losses and credits expire.

In addition, it is possible that future transactions (including issuances of new shares of our Common Stock and sales of shares of our Common Stock) will cause us to undergo one or more additional ownership changes. In that event, we may not be able to use our net operating losses from periods prior to this ownership change to offset future taxable income in excess of the annual limitations imposed by Sections 382 and 383.

 

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We face risks related to health epidemics, including the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the pandemic of respiratory illness caused by a novel coronavirus known as COVID-19. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, and has led to a global decrease in vehicle sales in markets around the world.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. These measures may adversely impact our employees and operations and the operations of our customers, suppliers, vendors and business partners, and may negatively impact our sales and marketing activities, the construction schedule of our hydrogen fueling stations and our manufacturing plant in Arizona, and the production schedule of our trucks. For example, the headquarters of our partner, Iveco, located in Italy, was shut down for two months due to COVID-19, and as a result, pilot builds for the BEV truck were delayed. In addition, various aspects of our business, manufacturing plant and hydrogen fueling station building process, cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect our manufacturing and building plans, sales and marketing activities, business and results of operations.

The spread of COVID-19 has caused us to modify our business practices (including employee travel, recommending that all non-essential personnel work from home and cancellation or reduction of physical participation in sales activities, meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, suppliers, vendors and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, our operations will be impacted.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, including vaccination efforts, and how quickly and to what extent normal economic and operating activities can resume. The COVID-19 pandemic could limit the ability of our customers, suppliers, vendors and business partners to perform, including third party suppliers’ ability to provide components and materials used in our trucks. We may also experience an increase in the cost of raw materials used in our commercial production of trucks. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as reduced spending by businesses, could have a material adverse effect on the demand for our trucks. Under difficult economic conditions, potential customers may seek to reduce spending by forgoing our trucks for other traditional options, and cancel reservations for our trucks. Decreased demand for our trucks, particularly in the United States and Europe, could negatively affect our business.

There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of COVID-19’s impact on

 

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our business, our operations, or the global economy as a whole. However, the effects could have a material impact on our results of operations, and we will continue to monitor the situation closely.

The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.

We currently, and expect to continue to, benefit from certain government subsidies and economic incentives that support the development and adoption of our vehicles, particularly our BEV and FCEV trucks. Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or other reasons may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our BEV and FCEV trucks in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results.

These incentives include tax credits, rebates and other incentives for alternative energy production, alternative fuel and electric vehicles, including greenhouse gas, or GHG, emissions credits under the U.S. Environmental Protection Agency’s GHG Rule and the California Air Resources Board. While these benefits have been available in the past, there is no guarantee these programs will be available in the future. If these tax incentives and other benefits are not available or are reduced or otherwise limited in the future, our financial position could be harmed.

We may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which we may apply. As a result, our business and prospects may be adversely affected.

We anticipate applying for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies, as well as the sale of hydrogen. For example, we intend to initially build our hydrogen fueling stations in California, in part because of the incentives that are available. We anticipate that in the future there will be new opportunities for us to apply for grants, loans and other incentives from the United States, state and foreign governments. Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives. If we are not successful in obtaining any of these additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.

Further, accepting funding from governmental entities or in-licensing patent rights from third parties that are co-owned with governmental entities may result in the U.S. government having certain rights, including so-called march-in rights, to such patent rights and any products or technology developed from such patent rights. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a nonexclusive license authorizing the U.S. government to use the invention for noncommercial purposes. These rights may permit the U.S. government to disclose our confidential information to third parties and to exercise march-in rights to use or to allow third parties to use our licensed technology. The U.S. government can exercise its march-in rights if it determines that action is necessary because we fail to achieve the practical application of government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the U.S. government of such rights could harm our competitive position, business, financial condition, results of operations and prospects.

 

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We may need to defend ourselves against patent or trademark infringement, or other intellectual property claims, which may be time-consuming and cause us to incur substantial costs.

Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop or sell our vehicles or components, which could make it more difficult for us to operate our business. We may receive inquiries from patent or trademark owners inquiring whether we infringe their proprietary rights. Companies owning patents or other intellectual property rights relating to battery packs, electric motors, fuel cells or electronic power management systems may allege infringement of such rights. In response to a determination that we have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

 

   

cease development, sales, or use of vehicles that incorporate the asserted intellectual property;

 

   

pay substantial damages;

 

   

obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all; or

 

   

redesign one or more aspects or systems of our trucks.

A successful claim of infringement against us could materially adversely affect our business, prospects, operating results and financial condition. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources.

We also plan to license patents and other intellectual property from third parties, including suppliers and service providers, and we may face claims that our use of this in-licensed technology infringes the intellectual property rights of others. In such cases, we will seek indemnification from our licensors. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses.

We may also face claims challenging our use of open source software and our compliance with open source license terms. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose or license our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred. Any breach of such open source license or requirement to disclose or license our proprietary source code could harm our business, financial condition, results of operations and prospects.

Our business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third parties.

Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage, and a decrease in our revenue which would adversely affect our business, prospects, financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we will rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyright, trademarks, intellectual property licenses and other contractual rights to establish and protect our rights in our technology. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary information, including our technology and processes. In connection with our collaboration, partnership and license agreements, our rights to use licensed or jointly owned technology and intellectual property under such agreements may be subject to the continuation of and compliance with the terms of those agreements. In some cases, we may not control the prosecution, maintenance or filing of licensed or jointly owned patent rights, or the enforcement of such patents against third parties.

 

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The protection of our intellectual property rights will be important to our future business opportunities. However, the measures we take to protect our intellectual property from unauthorized use by others may not be effective for various reasons, including the following:

 

   

any patent applications we submit may not result in the issuance of patents;

 

   

the scope of our issued patents may not be broad enough to protect our proprietary rights;

 

   

our issued patents may be challenged and/or invalidated by our competitors;

 

   

the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make aggressive enforcement impracticable;

 

   

current and future competitors may circumvent our patents; and

 

   

our in-licensed patents may be invalidated, or the owners of these patents may breach our license arrangements.

For example, we are currently enforcing certain of our issued U.S. patents and other intellectual property rights against Tesla. Such litigation could result in such patents being challenged and/or invalidated, expose us to counterclaims of intellectual property infringement and result in a substantial diversion of our management’s attention and resources.

Patent, trademark, and trade secret laws vary significantly throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Further, policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States.

Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.

We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application to the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition or operating results.

We may be subject to risks associated with autonomous driving technology.

Our trucks can be designed with connectivity for future installation of an autonomous hardware suite and we plan to partner with a third-party software provider in the future to potentially implement autonomous capabilities. However, we cannot guarantee that we will be able to identify a third party to provide the necessary hardware and software to enable driverless Level 4 or Level 5 autonomy in an acceptable timeframe, on terms satisfactory to us, or at all. Autonomous driving technologies are subject to risks, and there have been accidents and fatalities associated with such technologies. The safety of such technologies depends in part on user interaction and users, as well as other drivers on the roadways, may not be accustomed to using or adapting to such technologies. To the extent accidents associated with our autonomous driving systems occur, we could be subject to liability, negative publicity, government scrutiny and further regulation. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.

 

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The evolution of the regulatory framework for autonomous vehicles is outside of our control, and we cannot guarantee that our trucks will achieve the requisite level of autonomy to enable driverless systems within our projected timeframe, if ever.

There are currently no federal U.S. regulations pertaining to the safety of self-driving vehicles. However, the National Highway Traffic and Safety Administration has established recommended guidelines. Certain states have legal restrictions on self-driving vehicles, and many other states are considering them. This patchwork increases the difficulty in legal compliance for our vehicles. In Europe, certain vehicle safety regulations apply to self-driving braking and steering systems, and certain treaties also restrict the legality of certain higher levels of self-driving vehicles. Self-driving laws and regulations are expected to continue to evolve in numerous jurisdictions in the U.S. and foreign countries and may restrict autonomous driving features that we may deploy.

Unfavorable publicity, or a failure to respond effectively to adverse publicity, could harm our reputation and adversely affect our business.

As an early stage company, maintaining and enhancing our brand and reputation is critical to our ability to attract and retain employees, partners, customers and investors, and to mitigate legislative or regulatory scrutiny, litigation and government investigations.

Recent significant negative publicity has adversely affected our brand and reputation and our stock price. Negative publicity may result from allegations of fraud, improper business practices, employee misconduct, unfair employment practices or any other matters that could give rise to litigation and/or governmental investigations. Unfavorable publicity relating to us or those affiliated with us, including our former executive chairman, has and may in the future adversely affect public perception of the entire company. Adverse publicity and its effect on overall public perceptions of our brand, or our failure to respond effectively to adverse publicity, could have a material adverse effect on our business.

In September 2020, an entity published an article containing certain allegations against us. This article and the public response to such article, as well as other negative publicity, have adversely affected our brand and reputation as well as our stock price, which makes it more difficult for us to attract and retain employees, partners and customers, reduces confidence in our products and services, harms investor confidence and the market price of our securities, invites legislative and regulatory scrutiny and has resulted in litigation and governmental investigations. As a result, customers, potential customers, partners and potential partners have failed to award us additional business, cancelled or sought to cancel existing contracts, and directed future business to our competitors, and may in the future take similar actions, and investors may invest in our competitors instead of us. See Legal Proceedings in Note 14, Commitments and Contingencies, to our audited consolidated financial statements included elsewhere in this prospectus and Note 12, Commitments and Contingencies, to our unaudited consolidated financial statements included elsewhere in this prospectus for additional information.

The successful rehabilitation of our brand will depend largely on regaining a good reputation, meeting our vehicle commercialization schedules, satisfying the requirements of customers, meeting our fueling commitments under our future bundled lease arrangements or other customer arrangements, maintaining a high quality of service under our future bundled lease arrangements, improving our compliance programs and continuing our marketing and public relations efforts. Expenses related to our brand promotion, reputation building, and media strategies have been significant and our efforts may not be successful. We anticipate that other competitors and potential competitors will expand their offerings, which will make maintaining and enhancing our reputation and brand increasingly more difficult and expensive. If we fail to successfully rehabilitate our brand in the current or future competitive environment or if events similar to the negative publicity occur in the future, our brand and reputation would be further damaged and our business may suffer.

Although we maintain insurance for the disruption of our business and director and officer liability insurance, these insurance policies may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.

 

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Social media platforms present risks and challenges that could cause damage to our brand and reputation, and which could subject us to liability, penalties and other restrictive sanctions.

Social media platforms present risks and challenges that have resulted, and may in the future result, in damage to our brand and reputation, and which could subject us to liability, penalties and other restrictive sanctions. Our internal policies and procedures regarding social media have not been, and may not in the future be, effective in preventing the inappropriate use of social media platforms, including blogs, social media websites and other forms of Internet-based communications. These platforms allow individuals access to a broad audience of consumers, investors and other interested persons. The considerable expansion in the use of social media over recent years has increased the volume and speed at which negative publicity arising from these events can be generated and spread, and we may be unable to timely respond to, correct any inaccuracies in, or adequately address negative perceptions arising from such coverage. The use of such platforms by our officers and other employees and former employees has adversely impacted, and could in the future adversely impact, our costs and our brand and reputation, and has resulted, and could in the future result, in the disclosure of confidential information, litigation and regulatory inquiries. Any such litigation or regulatory inquiries may result in significant penalties and other restrictive sanctions and adverse consequences. In addition, negative or inaccurate posts or comments about us on social media platforms could damage our reputation, brand image and goodwill, and we could lose the confidence of our customers and partners, regardless of whether such information is true and regardless of any number of measures we may take to address them. We are currently party to litigation and regulatory proceedings related in part to social media statements. See Legal Proceedings in Note 14, Commitments and Contingencies, to our audited consolidated financial statements included elsewhere in this prospectus and Note 12, Commitments and Contingencies, to our unaudited consolidated financial statements included elsewhere in this prospectus for additional information about those proceedings.

Risks Related to this Offering and Ownership of Our Common Stock

It is not possible to predict the actual number of shares we will sell under the Purchase Agreement to the Selling Stockholder, or the actual gross proceeds resulting from those sales.

On June 11, 2021, we entered into the Purchase Agreement with Tumim, pursuant to which Tumim has committed to purchase up to $300 million in shares of our Common Stock, subject to certain limitations and conditions set forth in the Purchase Agreement. The shares of our Common Stock that may be issued under the Purchase Agreement may be sold by us to Tumim at our discretion from time to time over an approximately 36-month period commencing on the Commencement Date.

We generally have the right to control the timing and amount of any sales of our shares of Common Stock to Tumim under the Purchase Agreement. Sales of our Common Stock, if any, to Tumim under the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Tumim all, some or none of the shares of our Common Stock that may be available for us to sell to Tumim pursuant to the Purchase Agreement.

Because the purchase price per share to be paid by Tumim for the shares of Common Stock that we may elect to sell to Tumim under the Purchase Agreement, if any, will fluctuate based on the market prices of our Common Stock during the applicable Purchase Valuation Period for each Purchase made pursuant to the Purchase Agreement, if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number of shares of Common Stock that we will sell to Tumim under the Purchase Agreement, the purchase price per share that Tumim will pay for shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Tumim under the Purchase Agreement, if any.

Moreover, although the Purchase Agreement provides that we may sell up to an aggregate of $300 million of our Common Stock to Tumim, only 18,012,845 shares of our Common Stock are being registered for resale by Tumim under the registration statement that includes this prospectus, consisting of (i) the 155,703 Commitment Shares that we previously issued to Tumim upon execution of the Purchase Agreement as consideration for its

 

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commitment to purchase our Common Stock under the Purchase Agreement and (ii) up to 17,857,142 shares of Common Stock that we may elect to sell to Tumim, in our sole discretion, from time to time from and after the Commencement Date under the Purchase Agreement. If after the Commencement Date we elect to sell to Tumim all of the 17,857,142 shares of Common Stock being registered for resale under this prospectus that are available for sale by us to Tumim in Purchases under the Purchase Agreement, depending on the market prices of our Common Stock during the applicable Purchase Valuation Period for each Purchase made pursuant to the Purchase Agreement, the actual gross proceeds from the sale of all such shares may be substantially less than the $300 million Total Commitment available to us under the Purchase Agreement, which could materially adversely affect our liquidity.

If it becomes necessary for us to issue and sell to Tumim under the Purchase Agreement more than the 18,012,845 shares being registered for resale under the registration statement that includes this prospectus in order to receive aggregate gross proceeds equal to the Total Commitment of $300 million under the Purchase Agreement, we must file with the SEC one or more additional registration statements to register under the Securities Act the resale by Tumim of any such additional shares of our Common Stock we wish to sell from time to time under the Purchase Agreement, which the SEC must declare effective and we will need to obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules, unless the average per share purchase price paid by Tumim for all shares of Common Stock sold under the Purchase Agreement equals or exceeds $16.8066, in which case, under applicable Nasdaq rules, the Exchange Cap limitation will not apply to issuances and sales of Common Stock under the Purchase Agreement, in each case, before we may elect to sell any additional shares of our Common Stock to Tumim under the Purchase Agreement. Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of Common Stock in addition to the 18,012,845 shares of Common Stock being registered for resale by Tumim under this prospectus could cause additional substantial dilution to our stockholders. The number of shares of our Common Stock ultimately offered for sale by Tumim is dependent upon the number of shares of Common Stock, if any, we ultimately sell to Tumim under the Purchase Agreement.

Investors who buy shares at different times will likely pay different prices.

Pursuant to the Purchase Agreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to Tumim. If and when we do elect to sell shares of our Common Stock to Tumim pursuant to the Purchase Agreement, after Tumim has acquired such shares, Tumim may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Tumim in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Tumim in this offering as a result of future sales made by us to Tumim at prices lower than the prices such investors paid for their shares in this offering.

We may require additional financing to sustain our operations and without it we will not be able to continue operations.

Subject to the terms and conditions of the Purchase Agreement, we may, at our discretion, direct Tumim to purchase up to $300 million of Common Stock under the Purchase Agreement from time-to-time over an approximately 36-month period beginning on the Commencement Date. Although the Purchase Agreement provides that we may sell up to an aggregate of $300 million of our Common Stock to Tumim, only 18,012,845 shares of our Common Stock are being registered for resale by Tumim under this prospectus, consisting of (i) the 155,703 Commitment Shares that we previously issued to Tumim upon execution of the Purchase Agreement as consideration for its commitment to purchase our Common Stock under the Purchase Agreement and (ii) up to 17,857,142 shares of Common Stock that we may elect to sell to Tumim, in our sole discretion, from time to time from and after the Commencement Date under the Purchase Agreement. The purchase price per share for the

 

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shares of Common Stock that we may elect to sell to Tumim under the Purchase Agreement, if any, will fluctuate based on the market prices of our Common Stock during the applicable Purchase Valuation Period for each Purchase made pursuant to the Purchase Agreement, if any. Accordingly, it is not currently possible to predict the number of shares that will be sold to Tumim, if any, the actual purchase price per share to be paid by Tumim for those shares, or the actual gross proceeds to be raised in connection with those sales.

Assuming a purchase price of $15.60 per share (which represents the closing price of our Common Stock on Nasdaq on June 15, 2021), the purchase by Tumim of all of the 17,857,142 shares of Common Stock being registered for resale under this prospectus that are available for sale by us to Tumim in Purchases under the Purchase Agreement from and after the Commencement Date would result in aggregate gross proceeds to us of approximately $278.6 million, which is substantially less than the $300 million Total Commitment available to us under the Purchase Agreement.

The extent to which we rely on Tumim as a source of funding will depend on a number of factors, including the prevailing market price of our Common Stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from Tumim were to prove unavailable or prohibitively dilutive, we may need to secure another source of funding in order to satisfy our working capital needs. Even if we were to sell to Tumim all of the shares of Common Stock available for sale to Tumim under the Purchase Agreement, we will still need additional capital to fully implement our business plan. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences would be a material adverse effect on our business, operating results, financial condition and prospects.

Future sales and issuances of our Common Stock or other securities might result in significant dilution and could cause the price of our Common Stock to decline.

To raise capital, we may sell Common Stock, convertible securities or other equity securities in one or more transactions other than those contemplated by the Purchase Agreement, at prices and in a manner we determine from time to time. We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our Common Stock, or securities convertible or exchangeable into Common Stock, in future transactions may be higher or lower than the price per share paid by investors in this offering. Any sales of additional shares will dilute our stockholders.

Sales of a substantial number of shares of our Common Stock in the public market or the perception that these sales might occur could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our Common Stock. In addition, the sale of substantial amounts of our Common Stock could adversely impact its price.

Management will have broad discretion as to the use of the proceeds from the Offering, and uses may not improve our financial condition or market value.

Because we have not designated the amount of net proceeds from the offering to be used for any particular purpose, our management will have broad discretion as to the application of such net proceeds and could use them for purposes other than those contemplated hereby. Our management may use the net proceeds for corporate purposes that may not improve our financial condition or advance our business objectives.

Concentration of ownership among our executive officers and directors and their affiliates may prevent new investors from influencing significant corporate decisions.

As of March 31, 2021, Mark A. Russell, our President, Chief Executive Officer and director, beneficially owns, directly or indirectly, approximately 12.4%, of our outstanding Common Stock, and our directors and

 

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executive officers as a group beneficially own approximately 22.5% of our outstanding Common Stock. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, any amendment of our second amended and restated certificate of incorporation, or our Certificate of Incorporation, and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

As of September 20, 2020, Trevor R. Milton, our founder and former executive chairman, beneficially owned, directly or indirectly, approximately 23.9% of our outstanding Common Stock. In connection with his departure in September 2020, for a period of three years from September 20, 2020, Mr. Milton has agreed to certain standstill provisions, including, among other things, agreeing not to (i) acquire ownership (beneficial or otherwise) of more than 19 million shares of our outstanding Common Stock in the aggregate, together with shares held by his affiliates and associates, (ii) propose or effect any extraordinary transaction with respect to us, (iii) solicit any proxy or consent with respect to the election or removal of directors or any other proposal, (iv) seek representation on our board of directors or the removal of any member of our board of directors, or (v) submit any stockholder proposal. In addition, for a period of three years from September 20, 2020, Mr. Milton has agreed to vote his shares of our Common Stock (x) in favor of the slate of directors recommended by our board of directors at any meeting of our stockholders and (y) against the election of any nominee for director not recommended and nominated by our board of directors for election at such meeting. These standstill and voting restrictions could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of our executive officers and directors and their affiliates.

Sales of a substantial number of shares of our Common Stock in the public market could cause the price of our Common Stock to decline.

As of June 15, 2021, we had approximately 395.3 million shares of Common Stock outstanding and outstanding warrants to purchase approximately 0.8 million shares of Common Stock. All of the shares of our Common Stock are freely transferable, subject to compliance with Rule 144 by affiliates, without additional registration under the Securities Act, except for the Commitment Shares being registered on the Registration Statement of which this prospectus forms a part.

We have also registered shares of Common Stock that we have issued, and may in the future issue, under our employee equity incentive plans. These shares may be sold freely in the public market upon issuance, subject to relevant vesting schedules and applicable securities laws.

Sales of a substantial number of shares of our Common Stock in the public market or the perception that these sales might occur could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our Common Stock. In addition, the sale of substantial amounts of our Common Stock could adversely impact its price.

We have never paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future.

We have never paid dividends on any of our capital stock and currently intend to retain any future earnings to fund the growth of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors, and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

 

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Our stock price is volatile, and you may not be able to sell shares of our common stock at or above the price you paid.

The trading price of our Common Stock is volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. For example, the trading price of our Common Stock declined recently following the release of the Hindenburg article, which contains certain allegations against us. These factors include, but are not limited to:

 

   

our progress on achievement of business milestones and objectives;

 

   

actual or anticipated fluctuations in operating results;

 

   

failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

 

   

issuance of new or updated research or reports by securities analysts or changed recommendations for our stock or the transportation industry in general;

 

   

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

 

   

operating and share price performance of other companies that investors deem comparable to us;

 

   

our focus on long-term goals over short-term results;

 

   

the timing and magnitude of our investments in the growth of our business;

 

   

actual or anticipated changes in laws and regulations affecting our business;

 

   

additions or departures of key management or other personnel;

 

   

disputes or other developments related to our intellectual property or other proprietary rights, including litigation;

 

   

our ability to market new and enhanced products and technologies on a timely basis;

 

   

sales of substantial amounts of our Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur;

 

   

changes in our capital structure, including future issuances of securities or the incurrence of debt; and

 

   

general economic, political and market conditions.

In addition, the stock market in general, and The Nasdaq Stock Market LLC in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

The closing price of our Common Stock on Nasdaq ranged from $9.65 to $79.73 following the closing of the Business Combination on June 3, 2020 through May 31, 2021. In September 2020, an entity published an article containing certain allegations against us that we believe has negatively impacted the trading price of our Common Stock. The price of our Common Stock also decreased substantially following public announcements made by us. In addition, broad market and industry factors, including COVID-19, may seriously affect the market price of our Common Stock, regardless of our actual operating performance.

Any investment in our Common Stock is subject to extreme volatility and could result in the loss of your entire investment. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, which has and may in the future be instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. See Legal Proceedings in Note 14, Commitments and Contingencies, to our audited consolidated financial statements included elsewhere in this prospectus and Note 12, Commitments and Contingencies, to our unaudited consolidated financial statements included elsewhere in this prospectus for additional information about those proceedings.

 

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We will continue to incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.

We face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require us to carry out activities we have not done previously. For example, we created new board committees and have adopted new internal controls and disclosure controls and procedures. In addition, we will continue to incur expenses associated with SEC reporting requirements. Furthermore, if any issues in complying with those requirements are identified (for example, if our independent auditors identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation, our stock price, or investor perceptions of us. In addition, we have obtained director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

Our failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business.

As a public company, we will be required to provide management’s attestation on internal controls. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those that were required of us as a private company. We will need to continue to implement additional finance, accounting, and business operating systems, procedures, and controls as we grow our business and organization and to satisfy existing reporting requirements. If we fail to maintain or implement adequate controls, if we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting in future Form 10-K filings, or if our independent registered public accounting firm is unable to provide us with an unqualified report as to the effectiveness of our internal control over financial reporting in future Form 10-K filings, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC, the Nasdaq or other regulatory authorities, which could require additional financial and management resources.

We recently identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective which has, and if not remediated, may again result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

On April 12, 2021, the SEC Staff released a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) or the SEC Staff Statement. The SEC Staff Statement clarified guidance for all SPAC-related companies regarding the accounting and reporting for their warrants that could result in the warrants issued by SPACs being classified as a liability measured at fair value, with non-cash fair value adjustments recorded in earnings at each reporting period. After considering the SEC Staff Statement, we re-evaluated our historical accounting for warrants and determined the need to change

 

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the accounting treatment of the private warrants issued in connection with the initial public offering of VectoIQ and recorded in our consolidated financial statements as a result of our merger with VectoIQ, and the reverse recapitalization that occurred on June 3, 2020. We previously recorded the private warrants as equity. Based on management’s evaluation, the audit committee of our board of directors, in consultation with management, determined that the private warrants should have been classified as liabilities measured at fair value on the Closing Date of the merger with VectoIQ, with subsequent changes in fair value reported in our consolidated statements of operations each reporting period.

Prior to the SEC Staff Statement, we believed that our warrant accounting was consistent with generally accepted accounting principles. Our belief was supported by the fact that most other SPACs and parties who have merged with SPACs similarly interpreted the warrant accounting principles at issue. However, based on the clarifications expressed in the SEC Staff Statement, which resulted in the restatement to our audited consolidated financial statements included elsewhere in this prospectus, management concluded there was a material weakness in our internal control over financial reporting as of December 31, 2020.

Our controls to evaluate the accounting for complex financial instruments, such as for warrants issued by VectoIQ, did not operate effectively to appropriately apply the provisions of ASC 815-40. This material weakness resulted in a material error in our accounting for warrants related to the private warrants recorded as part of the Business Combination and a restatement of our previously issued financial statements more fully described in Note 1 to our audited consolidated financial statements included elsewhere in this prospectus. Based on the material weakness, management concluded that, as of December 31, 2020 and March 31, 2021, our internal control over financial reporting was not effective and our disclosure controls and procedures were not effective.

To remediate the material weakness in our internal control over financial reporting, management implemented additional review procedures, and additional training and enhancements to the accounting policy related to the accounting for equity and liability instruments (including those with warrants) to determine proper accounting in accordance with GAAP.

Although our remediation plan has been implemented and is expected to be completed as of the filing date of our Quarterly Report on Form 10-Q for the quarter ending June 30, 2021, the material weakness cannot be considered remediated until the controls operate for a sufficient period and management has concluded, through testing, that our internal controls are operating effectively. While management believes that the remedial efforts will resolve the identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be sufficient or that additional remedial actions will not be necessary.

In addition, there can be no assurance that additional material weaknesses will not be identified in the future. If we are unsuccessful in remediating our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or disclosure controls and procedures, investors may lose confidence in our financial reporting and the accuracy and timing of our financial reporting and disclosures and our business, reputation, results of operations, financial condition, ability to access the capital markets, perceptions of our creditworthiness, and stock price could be adversely affected. In addition, we may be unable to maintain or regain compliance with applicable securities laws or stock market listing requirements. We also face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weakness in our internal control over financial reporting and the preparation of our financial statements. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.

 

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Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

In connection with the restatement described above, our warrants are classified as liabilities. Under this accounting treatment, we are required to measure the fair value of the warrants at the end of each reporting period and recognize changes in the fair value from the prior period in our operating results for the current period. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors which are outside our control. We expect that we will recognize non-cash gains or losses due to the quarterly fair valuation of our warrants and that such gains or losses could be material.

Our management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company. Mark A. Russell, who joined us in February 2019 and assumed the responsibilities of the Chief Executive Officer in June 2020, is the only member of our management team who has substantial prior experience as an executive officer of a public company. Our management team may not successfully or effectively manage our transition to a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the company. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for the company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company which will increase our operating costs in future periods.

Our Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Certificate of Incorporation. In addition, our Certificate of Incorporation and our amended and restated bylaws, or our Bylaws, will provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act.

In March 2020, the Delaware Supreme Court issued a decision in Salzburg et al. v. Sciabacucchi, which found that an exclusive forum provision providing for claims under the Securities Act to be brought in federals court is facially valid under Delaware law. It is unclear whether this decision will be appealed, or what the final outcome of this case will be. We intend to enforce this provision, but we do not know whether courts in other jurisdictions will agree with this decision or enforce it.

 

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This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

If securities or industry analysts issue an adverse recommendation regarding our stock or do not publish research or reports about our company, our stock price and trading volume could decline.

The trading market for our Common Stock will depend in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts or the content and opinions included in their reports. Securities analysts may elect not to provide research coverage of our company and such lack of research coverage may adversely affect the market price of our Common Stock. The price of our Common Stock could also decline if one or more equity research analysts downgrade our Common Stock, change their price targets, issue other unfavorable commentary or cease publishing reports about us or our business. For example, in September 2020, an entity published an article containing certain allegations against us that we believe has negatively impacted the trading price of our Common Stock. If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

The unaudited pro forma financial information included herein is not indicative of what our actual financial position or results of operations would have been.

The unaudited pro forma financial information included herein is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated.

 

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THE TUMIM TRANSACTION

On June 11, 2021, we entered into the Purchase Agreement and the Registration Rights Agreement with Tumim, pursuant to which Tumim has committed to purchase up to $300 million of our Common Stock, at our direction from time to time after the date of this prospectus, subject to the satisfaction of the conditions in the Purchase Agreement.

Under the terms and subject to the conditions of the Purchase Agreement, we have the right, but not the obligation, to sell to Tumim, and Tumim is obligated to purchase up to $300 million of our Common Stock. Such sales of Common Stock, if any, will be subject to certain limitations, and may occur from time to time at our sole discretion, over the approximately 36-month period commencing on the Commencement Date, provided, that the registration statement that includes this prospectus covering the resale by Tumim of shares of Common Stock that have been and may be issued under the Purchase Agreement, is declared effective by the SEC and the other conditions set forth in the Purchase Agreement are satisfied.

Tumim has no right to require us to sell any shares of Common Stock to Tumim, but Tumim is obligated to make purchases at our direction subject to certain conditions. There is no upper limit on the price per share that Tumim could be obligated to pay for the Common Stock under the Purchase Agreement. Actual sales of shares of Common Stock to Tumim will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of our Common Stock and determinations by us as to the appropriate sources of funding for us and our operations.

We do not know what the purchase price for our Common Stock will be and therefore cannot be certain as to the number of shares we might issue to Tumim under the Purchase Agreement after the Commencement Date. As of June 15, 2021, there were 395,278,689 shares of our Common Stock outstanding, of which 220,041,142 shares were held by non-affiliates. Although the Purchase Agreement provides that we may sell up to $300 million of our Common Stock to Tumim, only 18,012,845 shares of our Common Stock are being registered under the Securities Act for resale by the Selling Stockholder under this prospectus, which represent the (i) 155,703 Commitment Shares that we issued to Tumim on June 11, 2021 as consideration of its irrevocable commitment to purchase shares of Common Stock under the Purchase Agreement and (ii) up to 17,857,142 shares of Common stock that may be issued to Tumim from and after the Commencement Date, if and when we elect to sell shares which have been or may be issued to Tumim in the future under the Purchase Agreement, if and when we sell shares to Tumim under the Purchase Agreement. Depending on the market prices of our Common Stock at the time we elect to issue and sell shares to Tumim under the Purchase Agreement, we may need to register for resale under the Securities Act additional shares of our Common Stock in order to receive aggregate gross proceeds equal to the $300,000,000 total commitment available to us under the Purchase Agreement. If all of the 18,012,845 shares offered by Tumim under this prospectus were issued and outstanding as of the date hereof (without taking into account the 19.99% Exchange Cap limitation), such shares would represent approximately 4.36% of the total number of shares of our Common Stock outstanding and approximately 7.57% of the total number of outstanding shares held by non-affiliates, in each case as of the date hereof. If we elect to issue and sell more than the 18,012,845 shares offered under this prospectus to Tumim, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered for resale by Tumim is dependent upon the number of shares we may elect to sell to Tumim under the Purchase Agreement from and after the Commencement Date.

Under applicable rules of the Nasdaq Global Select Market, in no event may we issue or sell to Tumim under the Purchase Agreement shares of our Common Stock in excess of the Exchange Cap, unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of our Common Stock to Tumim under the Purchase Agreement equals or exceeds $16.8066 (which represents the average closing price of our Common Stock for the five trading days ending on June 10, 2021, the trading day immediately preceding the date the Purchase Agreement was executed) plus an incremental

 

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amount, such that issuances and sales of our Common Stock to Tumim under the Purchase Agreement would be exempt from the Exchange Cap limitation under applicable Nasdaq rules. In any event, the Purchase Agreement specifically provides that we may not issue or sell any shares of our Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable Nasdaq rules.

The Purchase Agreement also prohibits us from directing Tumim to purchase any shares of Common Stock if those shares, when aggregated with all other shares of our Common Stock then beneficially owned by Tumim and its affiliates, would result in Tumim and its affiliates having beneficial ownership, at any single point in time, of more than the Beneficial Ownership Limitation.

The net proceeds under the Purchase Agreement to us will depend on the frequency and prices at which we sell shares of our stock to Tumim. We expect that any proceeds received by us from such sales to Tumim will be used for working capital and general corporate purposes.

As consideration for Tumim’s irrevocable commitment to purchase shares of our Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, we issued 155,703 Commitment Shares to Tumim.

Purchase of Shares Under the Purchase Agreement

Upon the Commencement we have the right, but not the obligation, from time to time at our sole discretion over the approximately 36-month period from and after Commencement Date, to direct Tumim to purchase amounts of our Common Stock, or the Purchase Share Amount, under the Purchase Agreement, that we specify in Purchase notices that we deliver to Tumim under the Purchase Agreement on any trading day. The maximum number of shares that may be purchased pursuant to a Purchase is equal to a number of shares of Common Stock equal to the lesser of, or the Purchase Maximum Amount:

 

   

the quotient obtained by dividing (A) $35,000,000 by (B) the last closing trade price of our Common Stock on the Nasdaq on the trading day immediately preceding the applicable day Tumim receives a valid Purchase notice for such Purchase, and

 

   

the product obtained by multiplying (A) the daily trading volume in the Common Stock on the Nasdaq on the trading day immediately preceding the applicable day Tumim receives a valid Purchase notice for such Purchase and (B) 0.20.

Tumim is obligated to accept each Purchase notice prepared and timely delivered on the trading day immediately prior to the applicable Purchase Valuation Period, or each, a Purchase Exercise Date, by us in accordance with the terms of and subject to the satisfaction of the conditions contained in the Purchase Agreement; provided that, Tumim shall not be obligated to purchase any shares of Common Stock set forth in a valid Purchase notice in excess of the Purchase Maximum Amount. We may deliver a Purchase notice on a Purchase Exercise Date, provided that (i) we may not deliver more than one Purchase notice to Tumim on any single trading day, (ii) we may not deliver a Purchase notice to Tumim on any trading day during the period commencing on the Purchase Exercise Date on which a prior Purchase notice has previously been delivered by us to Tumim under the Purchase Agreement, and ending on the applicable trading day immediately following the last trading day of the applicable Purchase Valuation Period, or each such date, a Purchase Settlement Date, or such later trading day on which Tumim shall have received all of the Purchase Shares subject to such prior Purchase notice in electronic form as “DWAC Shares” (as defined in the Purchase Agreement), and (iii) all Purchase Shares subject to all prior Purchase notices previously delivered by us to Tumim have in fact been received by Tumim as DWAC Shares prior to our delivery of such Purchase notice to Tumim on such Purchase Exercise Date.

The purchase price of the shares of Common Stock that we may direct Tumim to purchase pursuant to a Purchase under the Purchase Agreement will be equal to 97% of the arithmetic average of the three VWAPs during the Purchase Valuation Period as set forth in the Purchase Agreement.

 

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The payment for, against simultaneous delivery of, shares in respect of each Purchase under the Purchase Agreement will be settled on the applicable Purchase Settlement Date immediately following the applicable Purchase Valuation Period for such Purchase, as set forth in the Purchase Agreement.

Initial Purchase

We have agreed to deliver to Tumim, no later than June 11, 2022, at least one Purchase notice directing Tumim to purchase an amount of shares that we will determine, in our sole discretion, at the time we elect to deliver such notice to Tumim, subject to the limitations and satisfaction of the conditions set forth in the Purchase Agreement.

Conditions to Commencement and Delivery of Purchase Notices

Our ability to deliver Purchase notices to Tumim under the Purchase Agreement are subject to the satisfaction, both at the time of Commencement and at the time of delivery by the Company of any Purchase notice to Tumim, of certain conditions, all of which are entirely outside of Tumim’s control, including, among other things, the following:

 

   

the accuracy in all material respects of our representations and warranties included in the Purchase Agreement;

 

   

us having performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Purchase Agreement to be performed, satisfied or complied with by us;

 

   

the effectiveness of the registration statement that includes this prospectus (and any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by us to Tumim under the Purchase Agreement);

 

   

the SEC shall not have issued any stop order suspending the effectiveness, prohibiting or suspending the use of the registration statement that includes this prospectus (or any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by us to Tumim under the Purchase Agreement);

 

   

there shall not have occurred any event and there shall not exist any condition or state of facts, which makes any statement of a material fact made in the registration statement that includes this prospectus (or in any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by us to Tumim under the Purchase Agreement) untrue or which requires the making of any additions to or changes to the statements contained therein in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of this prospectus or the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement, in light of the circumstances under which they were made) not misleading;

 

   

this prospectus, in final form, shall have been filed with the SEC under the Securities Act, and all reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Exchange Act, shall have been filed with the SEC;

 

   

trading in our Common Stock shall not have been suspended by the SEC or the Nasdaq, we shall not have received any final and non-appealable notice that the listing or quotation of the Common Stock on the Nasdaq shall be terminated on a date certain (unless, prior to such date, the Common Stock is listed or quoted on the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange or the NYSE American (or any nationally recognized successor to any of the foregoing), or each, an Eligible Market), and there shall be no suspension of, or restriction on, accepting additional deposits of the Common Stock, electronic trading or book-entry services by DTC with respect to the Common Stock;

 

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we shall have complied with all applicable federal, state and local governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of the Purchase Agreement and the Registration Rights Agreement;

 

   

the absence of any statute, regulation, order, decree, writ, ruling or injunction by any court or governmental authority of competent jurisdiction which prohibits the consummation of or that would materially modify or delay any of the transactions contemplated by the Purchase Agreement or the Registration Rights Agreement;

 

   

the absence of any action, suit or proceeding before any arbitrator or any court or governmental authority seeking to restrain, prevent or change the transactions contemplated by the Purchase Agreement or the Registration Rights Agreement, or seeking material damages in connection with such transactions;

 

   

all of the shares of Common Stock that may be issued pursuant to the Purchase Agreement shall have been approved for listing or quotation on the Nasdaq Global Select Market (or if the Common Stock is not then listed on the Nasdaq Global Select Market, on any Eligible Market);

 

   

no condition, occurrence, state of facts or event constituting a material adverse effect shall have occurred and be continuing;

 

   

any voluntary or involuntary participation or threatened participation in insolvency or bankruptcy proceedings by or against us; and

 

   

the receipt by Tumim of the opinions, bring-down opinions and negative assurances from outside counsel to us in the forms mutually agreed to by us and Tumim prior to the date of the Purchase Agreement.

No Short-Selling or Hedging by Tumim

Tumim has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of our shares.

Prohibition on Variable Rate Transactions

Subject to specified exceptions included in the Purchase Agreement, we are limited in our ability to enter into specified “dilutive issuances” during the period of time between the time we deliver a Purchase notice to Tumim under the Purchase Agreement and the final settlement of such Purchase. Such transactions include, the issuance of Common Stock, or securities convertible into or exercisable for Common Stock, at a price (or with with a conversion or exercise price) that is less than the per share purchase price Tumim is required to pay for the Purchase Shares that are subject to such pending Purchase notice.

From and after the date of the Purchase Agreement until the termination of the Purchase Agreement, we have also agreed not to enter into any “equity line of credit” or other substantially similar continuous offering in which we may offer, issue or sell Common Stock or Common Stock equivalents (or any combination of units thereof) at a future determined price.

Termination of the Purchase Agreement

Unless earlier terminated as provided in the Purchase Agreement, the Purchase Agreement will terminate automatically on the earliest to occur of:

 

   

the first day of the month next following the 36-month anniversary of the Commencement Date;

 

   

the date on which Tumim shall have purchased shares of Common Stock under the Purchase Agreement for an aggregate gross purchase price equal to its $300 million Total Commitment under the Purchase Agreement;

 

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the date on which the Common Stock shall have failed to be listed or quoted on the Nasdaq Global Select Market or any other Eligible Market; and

 

   

the date on which we commence a voluntary bankruptcy case or any third party commences a bankruptcy proceeding against us, a custodian is appointed for us in a bankruptcy proceeding for all or substantially all of its property, or we make a general assignment for the benefit of its creditors.

We have the right to terminate the Purchase Agreement at any time after Commencement, at no cost or penalty, upon one trading day’s prior written notice to Tumim. We and Tumim may also terminate the Purchase Agreement at any time by mutual written consent.

Tumim also has the right to terminate the Purchase Agreement upon 10 trading days’ prior written notice to us, but only upon the occurrence of certain events, including:

 

   

the occurrence of a Material Adverse Effect (as defined in the Purchase Agreement);

 

   

the occurrence of a Fundamental Transaction (as defined in the Purchase Agreement) involving us;

 

   

our failure to file with the SEC the registration statement that includes this prospectus or any additional registration statement we file with the SEC pursuant to the Registration Rights Agreement, within the time periods set forth in the Registration Rights Agreement;

 

   

the effectiveness of the registration statement that includes this prospectus or any additional registration statement we file with the SEC pursuant to the Registration Rights Agreement lapses for any reason (including the issuance of a stop order by the SEC), or this prospectus or the prospectus included in any additional registration statement we file with the SEC pursuant to the Registration Rights Agreement otherwise becomes unavailable to Tumim for the resale of all of the shares of Common Stock included therein, and such lapse or unavailability continues for a period of 30 consecutive trading days or for more than an aggregate of 120 trading days in any 365-day period, other than due to acts of Tumim; or

 

   

trading in the Common Stock on the Nasdaq Global Select Market (or if the Common Stock is then listed on an Eligible Market, trading in the Common Stock on such Eligible Market) has been suspended for a period of three consecutive trading days.

No termination of the Purchase Agreement by us or by Tumim will become effective prior to the first Trading Day immediately following the applicable settlement date related to any pending Purchase that has not been fully settled in accordance with the terms and conditions of the Purchase Agreement, and will not affect any of our respective rights and obligations under the Purchase Agreement with respect to any pending Purchase, and both we and Tumim have agreed to complete our respective obligations with respect to any such pending Purchase under the Purchase Agreement. Furthermore, no termination of the Purchase Agreement will affect the Registration Rights Agreement, which will survive any termination of the Purchase Agreement.

Effect of Performance of the Purchase Agreement on our Stockholders

All shares of Common Stock that have been or may be issued or sold by us to Tumim under the Purchase Agreement that are being registered under the Securities Act for resale by Tumim in this offering are expected to be freely tradable. The shares of Common Stock being registered for resale in this offering (excluding the 155,703 Commitment Shares we already issued to Tumim) may be issued and sold by us to Tumim from time to time at our discretion over a period of up to 36 months commencing on the date of execution of the Purchase Agreement. The resale by Tumim of a significant amount of shares registered for resale in this offering at any given time, or the perception that these sales may occur, could cause the market price of our Common Stock to decline and to be highly volatile. Sales of our Common Stock, if any, to Tumim under the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Tumim all, some or none of the shares of our Common Stock that may be available for us to sell to Tumim pursuant to the Purchase Agreement.

 

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Pursuant to the terms of the Purchase Agreement, we have the right, but not the obligation, to direct Tumim to purchase up to $300 million of our Common Stock, subject to certain limitations. We have registered only a portion of the shares that may be issuable under the Purchase Agreement and, therefore, we may seek to issue and sell to Tumim under the Purchase Agreement more shares of our Common Stock than are offered under this prospectus in order to receive the aggregate gross proceeds equal to the $300 million Total Commitment available to us under the Purchase Agreement. If we choose to do so, we must first register for resale under the Securities Act any such additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered for resale under this prospectus is dependent upon the number of shares we direct Tumim to purchase under the Purchase Agreement.

The following table sets forth the amount of gross proceeds we would receive from Tumim from our sale of shares to Tumim under the Purchase Agreement at varying purchase prices:

 

Assumed
Average
Purchase Price
Per Share

   Number of
Registered Shares
to be Issued
if Full  Purchase(1)
     Percentage of
Outstanding Shares
After Giving Effect
to the Issuance to
Tumim(2)
    Gross Proceeds
from the
Sale of Shares to
Tumim Under the
Purchase
Agreement
 

$14.00

     17,857,142        4.36   $ 249,999,988  

$15.00

     17,857,142        4.36   $ 267,857,130  

$15.60(3)

     17,857,142        4.36   $ 278,571,415  

$16.00

     17,857,142        4.36   $ 285,714,272  

$16.80

     17,857,142        4.36   $ 300,000,000  

 

(1)

Although the Purchase Agreement provides that we may sell up to $300 million of our Common Stock to Tumim, we are only registering 18,012,845 shares under this prospectus which represents: (i) 155,703 Commitment Shares that we already issued to Tumim as a commitment fee for making the commitment under the Purchase Agreement; and (ii) an additional 17,857,142 shares which may be issued to Tumim in the future under the Purchase Agreement, if and when we sell shares to Tumim under the Purchase Agreement, and which may or may not cover all the shares we ultimately sell to Tumim under the Purchase Agreement, depending on the purchase price per share. As a result, we have included in this column only those shares that we are registering in this offering. If we seek to issue shares of our Common Stock, including shares from other transactions that may be aggregated with the transactions contemplated by the Purchase Agreement under the applicable rules of the Nasdaq Global Select Market, in excess of 78,769,697 shares, or 19.99% of the total Common Stock outstanding immediately prior to the execution of the Purchase Agreement, we may be required to seek stockholder approval in order to be in compliance with the rules of the Nasdaq Capital Market.

(2)

The denominator is based on 395,278,689 shares outstanding as of June 15, 2021, which includes the 155,703 Commitment Shares issued to Tumim upon execution of the Purchase Agreement and adjusted to include the number of shares set forth in the adjacent column which we would have sold to Tumim, assuming the purchase price in the first column. The numerator is based on the number of shares issuable under the Purchase Agreement at the corresponding assumed purchase price set forth in the first column.

(3)

The closing sale price of our Common Stock on June 15, 2021.

 

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USE OF PROCEEDS

This prospectus relates to shares of our Common Stock that may be offered and sold from time to time by Tumim. All of the Common Stock offered by the Selling Stockholder pursuant to this prospectus will be sold by the Selling Stockholder for its own account. We will not receive any of the proceeds from these sales. We may receive up to $300 million aggregate gross proceeds under the Purchase Agreement from any sales we make to Tumim pursuant to the Purchase Agreement. We estimate that the net proceeds to us from the sale of our Common Stock to Tumim pursuant to the Purchase Agreement will be up to $299,700,000 over an approximately 36-month period, assuming that we sell the full amount of our Common Stock that we have the right, but not the obligation, to sell to Tumim under the Purchase Agreement, and after estimated fees and expenses. See “Plan of Distribution” elsewhere in this prospectus for more information.

We expect to use any proceeds that we receive under the Purchase Agreement for working capital and general corporate purposes, which may include providing funding to complete our Arizona manufacturing facility, develop commercial scale BEV and FCEV Class 8 trucks and develop hydrogen station infrastructure. As of the date of this prospectus, we cannot specify with certainty all of the particular uses, and the respective amounts we may allocate to those uses, for any net proceeds we receive. Accordingly, we will retain broad discretion over the use of these proceeds. Pending our use of the net proceeds as described above, we intend to invest the net proceeds pursuant to the Purchase Agreement in interest-bearing, investment-grade instruments.

 

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DIVIDEND POLICY

We have not paid any cash dividends on our Common Stock to date. We may retain future earnings, if any, for future operations, and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends in the foreseeable future.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 present our combined audited historical statement of operations for the year ended December 31, 2020 with the unaudited historical condensed statement of operations of VectoIQ for the period from January 1, 2020 to June 3, 2020, the date we consummated the transactions contemplated in the Business Combination, adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 combine the historical statements of operations of us and VectoIQ for such periods on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2020, the beginning of the earliest period presented:

 

   

the merger of Legacy Nikola with and into Merger Sub, a wholly owned subsidiary of VectoIQ, with Legacy Nikola surviving the merger as a wholly-owned subsidiary of VectoIQ;

 

   

the issuance and sale of 52,500,000 shares of our common stock for a purchase price of $10.00 per share and an aggregate purchase price of $525.0 million in a private placement pursuant to the Subscription Agreements, or the PIPE; and

 

   

the redemption of 7,000,000 shares of common stock from M&M Residual, LLC, or M&M Residual, at a purchase price of $10.00 per share.

The unaudited pro forma condensed combined financial information does not include an unaudited pro forma consolidated balance sheet as of December 31, 2020 as the Business Combination and related transactions are already reflected in our historical audited consolidated balance sheet as of December 31, 2020, included elsewhere in this prospectus.

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events that are: (i) directly attributable to the Business Combination and related transactions; (ii) factually supportable; and (iii) expected to have a continuing impact on our results following the completion of the Business Combination and related transactions.

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

 

   

the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

   

our historical audited financial statements as of and for the year ended December 31, 2020 and the related notes, included elsewhere in this prospectus; and

 

   

other information relating to VectoIQ and Legacy Nikola contained in this prospectus, including the Business Combination Agreement.

Pursuant to our amended and restated certificate of incorporation, the holders of shares of common stock prior to the completion of the Business Combination were offered the opportunity to redeem, upon the closing of the Business Combination, shares of common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing) in the Trust Account (as defined in the section entitled “Description of Our Securities”). The unaudited condensed combined pro forma financial statements reflect actual redemption of 2,702 shares of common stock at $10.37 per share.

Notwithstanding the legal form of the Business Combination pursuant to the Business Combination Agreement, the Business Combination is accounted for as a reverse recapitalization in accordance with GAAP.

 

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Under this method of accounting, VectoIQ is treated as the acquired company and Legacy Nikola is treated as the acquirer for financial reporting purposes. Legacy Nikola has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

Legacy Nikola’s existing stockholders have the greatest voting interest in the combined entity with over 77% voting interest;

 

   

the largest minority voting stockholder of the combined entity is an existing stockholder of Legacy Nikola;

 

   

Legacy Nikola’s directors represent eight of the nine board seats for the combined company’s board of directors;

 

   

Legacy Nikola’s existing stockholders have the ability to control decisions regarding election and removal of directors and officers of the combined entity’s executive board of directors; and

 

   

Legacy Nikola’s senior management is the senior management of the combined company.

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination and related transactions occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project our future operating results or financial position following the completion of the Business Combination and related transactions. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2020

(in thousands, except share and per share data)

 

     Period
January 1,
2020 through
June 3, 2020
    Year Ended
December 31,
2020
    Pro Forma
Adjustments
          Year Ended
December 31,
2020
 
     VectoIQ
Acquisition
Corp.
(Historical)(1)
 
    Nikola
Corporation
(Historical)
    Pro Forma
Combined
 

Revenues

   $     $ 95     $       $ 95  

Costs and expenses:

          

Cost of goods sold

           72               72  

Operating expenses:

          

Research and development

           185,619               185,619  

Selling, general, and administrative

     1,025       182,724       52,660       (A     236,409  

Impairment expense

           14,415               14,415  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total costs and expenses

     1,025       382,830       52,660         436,515  
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss from operations

     (1,025     (382,735     (52,660       (436,420

Other income (expense):

          

Investment income in Trust account

     782             (782     (D      

Interest income

           202               202  

Loss on forward contract liability

           (1,324     1,324       (E      

Revaluation of warrant liability

           13,448 (2)              13,448  

Other expense, net

           (846             (846
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income taxes and equity in net loss of affiliate

     (243     (371,255     (52,118       (423,616

Income tax expense (benefit)

     185       (1,026             (841
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss before equity in net loss of affiliate

     (428     (370,229     (52,118       (422,775

Equity in net loss of affiliate

           (637             (637
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

     (428     (370,866     (52,118       (423,412

Premium paid on repurchase of redeemable convertible preferred stock

           (13,407     13,407       (F      
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss attributable to common stockholders

   $ (428   $ (384,273   $ (38,711     $ (423,412
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss per share attributable to common shareholders:

          

Basic

   $ (0.01         $ (1.14

Diluted

   $ (0.01         $ (1.17

Weighted average shares used to compute net loss per share attributable to common shareholders:

          

Basic

     29,640,000             371,420,779  

Diluted

     29,640,000             371,926,541  

 

(1)

The historical financial statements of VectoIQ have not been restated to reflect the remeasurement of warrant liabilities.

(2)

The gain on remeasurement of warrant liability of $13.4 million in 2020 results from the changes in fair value of the warrants following consummation of the Business Combination on June 3, 2020. The remeasurement of warrant liabilities for VectoIQ historical financials were not included as the value as of the Business Combination is the most representative as if the transaction occurred on January 1, 2020.

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Basis of Presentation

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 give pro forma effect to the Business Combination as if it had been consummated on January 1, 2020.

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2020 does not reflect the income tax effects of the pro forma adjustments as based on the statutory rate in effect for the period presented. Management believes that income tax adjustments in the unaudited pro forma consolidated statement of operations for the year ended December 31, 2020 to not be meaningful given the combined entity incurred a significant loss during the period presented and we recognize a full valuation allowance.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination and is not necessarily indicative of what actual results of operations would have been. The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information. They should be read in conjunction with the historical financial statements and notes thereto included elsewhere in this prospectus.

2. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only. VectoIQ and Legacy Nikola have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 are as follows:

 

(A)   Represents pro forma adjustment to selling, general, and administrative expenses to reflect the following:

 

     Year ended
December 31,
2020
       

Salary and stock-based compensation expense related to amended and restated employment agreements

   $ 52,710       (B

Elimination of VectoIQ’s historical office space and general administrative services

     (50     (C
  

 

 

   
   $ 52,660       (A

 

(B)   Effective as of the Closing Date, we entered into individual amended and restated employment agreements with certain executive officers. The executive officers agreed to an annual salary of $1 and were granted:

 

   

1,420,000 time-vested stock awards consisting of RSUs for shares of common stock, with a value of $48.2 million, subject to continued employment during a three-year cliff vesting schedule.

 

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11,497,000 market based awards consisting of RSUs for shares of common stock, with a value of $328.0 million, subject to a stock price index milestones and continued employment during a three-year cliff vesting schedule.

Excluded from the amounts above are 600,000 time-vested and 4,859,000 market based awards issued to our former executive chairman. Upon the former executive chairman’s departure in September 2020, the time-vested awards were modified to fully vest in September 2020 and the market-based awards were forfeited. The historical financial statements reflect the impact of the modification and forfeiture.

 

(C)   Represents pro forma adjustment to eliminate historical expenses related to VectoIQ’s office space and general administrative services, which terminated upon consummation of the Merger.

 

(D)   Represents pro forma adjustment to eliminate investment income related to the investment held in the Trust Account.

 

(E)   Reflects the elimination of the loss on the forward contract liability. We settled the liability in April 2020 with the issuance of Series D redeemable convertible preferred stock, which ceased to exist upon the conversion into common stock as part of the Business Combination.

 

(F)   Reflects the elimination of the premium paid on repurchase of redeemable convertible preferred stock, which ceased to exist upon the conversion into common stock as part of the Business Combination.

3. Loss per Share

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination and related transactions, assuming the shares were outstanding since January 1, 2020. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and related transactions have been outstanding for the entire period presented.

 

     Year ended
December 31,
2020
 

Pro forma net loss (in thousands):

  

Basic

   $ (423,412

Diluted(1)

   $ (436,860

Weighted average shares outstanding:

  

Basic

     371,420,779  

Diluted

     371,926,541  

Net loss per share:

  

Basic

   $ (1.14

Diluted

   $ (1.17

Weighted average shares outstanding

  

VectoIQ Public Stockholders

     22,983,872  

Holders of VectoIQ Founder Shares

     6,640,000  

PIPE Investors

     52,500,000  

Legacy Nikola stockholders(2)

     278,780,606  

Post Business Combination common stock issuances(3)

     10,516,301  
  

 

 

 

Weighted average shares outstanding—basic

     371,420,779  
  

 

 

 

Dilutive effect of assumed exercise of private warrants(4)

     505,762  
  

 

 

 

Weighted average shares outstanding—diluted

     371,926,541  
  

 

 

 

 

(1)

The pro forma net loss, diluted has been adjusted for the revaluation of warrant liability related to common stock equivalents.

 

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(2)

The pro forma shares attributable to Legacy Nikola stockholders is calculated by applying the exchange ratio of 1.901 to the historical Legacy Nikola common stock and preferred stock that was exchanged in the Business Combination. Pro forma shares attributable to Legacy Nikola stockholder was further adjusted for the redemption of 7.0 million shares of common stock from M&M Residual as described elsewhere in this Prospectus.

(3)

This amount includes weighted averages shares of stock options exercised, restricted stock unit distributions, and warrant redemptions that occurred subsequent to the closing of the Business Combination.

(4)

Dilutive effect of shares of common stock equivalents resulting from the assumed exercise of private warrants. The treasury stock method was used to calculate the potential dilutive effect of these common stock equivalents.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read together with “Prospectus Summary—Summary Consolidated Financial Information” and the consolidated financial statements and related notes that are included elsewhere in this prospectus. The discussion and analysis should also be read together with our pro forma financial information for the year ended December 31, 2020. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” This discussion and analysis contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in or implied by the forward-looking statements contained in the following discussion and analysis as a result of various factors, including those set forth under “Risk Factors” or in other parts of this prospectus.

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 in Europe. In April 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 in Coolidge, Arizona. The operations of the joint venture commenced during the fourth quarter of 2020.

We expect both our capital and operating expenditures to 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;

 

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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.

Business Combination and Public Company Costs

On June 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 1.901 shares of common stock. 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, each, a Subscriber, pursuant to which the Subscribers agreed to purchase, and VectoIQ agreed to sell to the Subscribers, an aggregate of 52,500,000 shares of common stock, or the 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 a Series B preferred stock repurchase agreement, or the Nimbus Repurchase Agreement, with Nimbus Holdings LLC, or Nimbus. 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 $10.00 per share.

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 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.”

 

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Commercial Launch of Nikola 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. We expect that 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 contractual orders from customers to be an important indicator of our future performance.

Basis of Presentation

Currently, we conduct business through one reportable and one operating segment. See Note 2 in the accompanying audited consolidated financial statements for more information.

Components of Results of Operations

Revenues

Prior to 2021, we primarily generated revenue from services related to solar installation projects that were completed in one year or less. Solar installation projects are not a part of our primary operations and were concluded in 2020.

Following the anticipated introduction of our products to the market, we expect the significant majority of our revenue to be derived from our BEV trucks starting in late 2021 and from bundled leases, or other alternative structures, for our FCEV trucks beginning in 2023. As currently planned, our bundled lease model will be inclusive of the cost of the truck, hydrogen fuel, and regularly scheduled maintenance.

Cost of Revenues

Prior to 2021, our cost of revenue included materials, labor, and other direct costs related to solar installation projects.

Once we have reached commercial production, cost of revenue will include direct parts, material and labor costs, manufacturing overhead, including amortized tooling costs and depreciation of our greenfield manufacturing facility, depreciation of our hydrogen fueling stations, cost of hydrogen production, shipping and logistics costs and reserves for estimated warranty expenses.

Research and Development Expense

Research and development expenses consist primarily of costs incurred for the discovery and development of our vehicles, which include:

 

   

Fees paid to third parties such as consultants and contractors for outside development;

 

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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; and

 

   

Depreciation for prototyping equipment and R&D facilities.

During the three months ended March 31, 2021 and years ended December 31, 2020, 2019, and 2018, 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 three months ended March 31, 2021, we utilized $12.9 million of advisory services, which were recorded as research and development expense. As of March 31, 2021, we have $33.4 million of prepaid in-kind advisory services remaining which is expected to be consumed during 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 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 SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.

Interest Income (Expense), net

Interest income consists primarily of interest received or earned on our cash and cash equivalents balances. Interest expense consists of interest on our finance lease liability and term loan.

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 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.

 

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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 or upon settlement.

Other Income, net

Other income 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

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 three months ended March 31, 2021 and 2020 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 Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020

The following table sets forth our historical operating results for the periods indicated:

 

     Three Months Ended March 31,     $     %  
     2021     2020     Change     Change  
     (dollar amounts in thousands)  

Solar revenues

           58       (58     NM  

Cost of solar revenues

           43       (43     NM  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

           15       (15     NM  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     55,163       24,077       31,086       129

Selling, general, and administrative

     65,427       7,935       57,492       725
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     120,590       32,012       88,578       277
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (120,590     (31,997     (88,593     277

Other income (expense):

        

Interest income (expense), net

     (9     62       (71     (115 )% 

Loss on forward contract liability

           (1,324     1,324       NM  

Revaluation of warrant liability

     951             951       NM  

Other income, net

     219       114       105       NM  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes and equity in net loss of affiliate

     (119,429     (33,145     (86,284     260

Income tax expense

     1       1             NM  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before equity in net loss of affiliate

     (119,430     (33,146     (86,284     260

Equity in net loss of affiliate

     (794           (794     NM  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (120,224   $ (33,146   $ (87,078     263
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share:

        

Basic

   $ (0.31   $ (0.12   $ (0.19     NM  

Diluted

   $ (0.31   $ (0.12   $ (0.19     NM  

Weighted-average shares outstanding:

        

Basic

     392,189,851       271,896,258       120,293,593       NM  

Diluted

     392,489,761       271,896,258       120,593,503       NM  

Solar Revenues and Cost of Solar Revenues

Solar revenues and cost of solar revenues for the three months ended March 31, 2020 were related to solar installation service projects. Solar installation projects were legacy projects that were not related to our primary operations and were concluded in 2020.

Research and Development

Research and development expenses increased by $31.1 million, or 129.1%, from $24.1 million during the three months ended March 31, 2020 to $55.2 million during the three months ended in March 31, 2021. This increase was primarily due to $12.8 million in higher spend on purchased components and outside engineering services as we focus on the development, building, and testing and validation of our Tre BEV truck, as well as continuing the development of our FCEV truck platform. In addition, we incurred higher stock-based compensation expense of $10.0 million, and increased personnel costs of $6.8 million driven by growth in our in-house engineering headcount. We also had an increase in depreciation and occupancy costs related to additional capital equipment and software dedicated to R&D activities.

 

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Selling, General, and Administrative

Selling, general, and administrative expenses increased by $57.5 million, or 724.5%, from $7.9 million during the three months ended March 31, 2020 to $65.4 million during the three months ended March 31, 2021. The increase was primarily related to higher stock-based compensation expense of $39.0 million. In addition, there was an increase in legal expenses of $14.5 million primarily related to regulatory and legal matters incurred in connection with the Hindenburg article from September 2020. Further, there was an increase in personnel expenses driven by growth in headcount.

Interest Income (Expense), net

Interest income (expense), net was immaterial the three months ended March 31, 2021 and 2020.

Loss on Forward Contract Liability

Loss on the forward contract liability represents loss recognized from a $1.3 million change in fair value of the forward contract liability as of March 31, 2020. The forward contract was settled in April 2020.

Revaluation of Warrant Liability

The revaluation of warrant liability represents a net remeasurement gain of $1.0 million resulting from the change in fair value of our warrant liability during the quarter.

Other Income, net

Other income, net increased by $0.1 million from $0.1 million during the three months ended March 31, 2020 to $0.2 million during the three months ended March 31, 2021. The increase is primarily related to unrealized gains and losses from foreign currency translation.

Income Tax Expense

Income tax expense was immaterial for the three months ended March 31, 2021 and 2020. We have accumulated net operating losses at the federal and state level and maintain a full valuation allowance against our net deferred taxes.

Equity in Net Loss of Affiliate

Equity in net loss of affiliate for the quarter ended March 31, 2021, was $0.8 million which relates to the net loss of our joint venture. The joint venture commenced operations in the fourth quarter of 2020.

 

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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     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 shares 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.

 

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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 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 Hindenburg article 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.

 

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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.

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     43
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

     262,528,769       226,465,041       36,063,728       NM  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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.

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.

 

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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.

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.

 

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The following table reconciles net loss to EBITDA and Adjusted EBITDA for the periods indicated:

 

     Three Months Ended March 31,     Years Ended December 31,  
             2021                     2020             2020     2019     2018  
     (in thousands)     (in thousands)  

Net loss

   $ (120,224   $ (33,146   $ (370,866   $ (88,656   $ (64,293

Interest (income) expense, net

     9       (62     (202     (1,456     (686

Income tax expense (benefit)

     1       1       (1,026     151       (2,002

Depreciation and amortization

     1,805       1,408       6,008       2,323       625  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     (118,409     (31,799     (366,086     (87,638     (66,356

Stock-based compensation

     50,266       1,313       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       1,324              

Revaluation of warrant liability

     (951           (13,448            

Equity in net loss of affiliate

     794             637              

Regulatory and legal matters(1)

     14,866             24,683              

Impairment expense

                 14,415              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (53,434   $ (29,162   $ (200,484   $ (79,441   $ (66,015
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Regulatory and legal matters include legal, advisory, and other professional service fees incurred in connection with the Hindenburg article from September 2020, and investigations and litigation related thereto.

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.

 

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The following table reconciles net loss and net loss per share to non-GAAP net loss and non-GAAP net loss per share for the periods indicated:

 

     Three Months Ended March 31,     Years Ended December 31,  
     2021     2020     2020     2019     2018  
     (in thousands, except share and
per share data)
    (in thousands, except share and per share data)  

Net loss attributable to common stockholders

   $ (120,224   $ (33,146   $ (384,273   $ (105,472   $ (64,459

Stock-based compensation

     50,266       1,313       137,991       4,858       3,843  

Premium paid on repurchase of redeemable convertible preferred stock

                 13,407       16,816       166  

Regulatory and legal matters(1)

     14,866             24,683              

Impairment expense

                 14,415              

Revaluation of warrant liability

     (951           (13,448            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net loss

   $ (56,043   $ (31,833   $ (207,225   $ (83,798   $ (60,450
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net loss per share

          

Basic

   $ (0.14   $ (0.12   $ (0.62   $ (0.32   $ (0.27

Diluted

   $ (0.14   $ (0.12   $ (0.62   $ (0.32   $ (0.27

Weighted average shares outstanding:

          

Basic

     392,189,851       271,896,258       335,325,271       262,528,769       226,465,041  

Diluted

     392,489,761       271,896,258       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 Hindenburg article from September 2020, and investigations and litigation related thereto.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily from the sales of redeemable convertible preferred stock and common stock, the Business Combination and redemption of warrants. As of March 31, 2021, our principal sources of liquidity were our cash and cash equivalents in the amount of $763.8 million, which are primarily invested in money market funds.

Short-Term Liquidity Requirements

As of the date of this prospectus, we have yet to generate revenue from our core business operations. As of March 31, 2021, our current assets were $804.4 million, consisting primarily of cash and cash equivalents of $763.8 million, and our current liabilities were $71.0 million, primarily comprised of accounts payable and accrued expenses.

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;

 

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the timing and the costs involved in bringing our vehicles to market, mainly the BEV truck;

 

   

our ability to manage the costs of manufacturing the BEV trucks;

 

   

the scope, progress, results, costs, timing and outcomes of our research and development for our FCEV trucks;

 

   

the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities;

 

   

revenue received from sales of our BEV trucks;

 

   

the costs of additional general and administrative personnel, including accounting and finance, legal and human resources, as well as costs related to litigation, investigations, or settlements;

 

   

our ability to collect 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 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 may have rights, preferences and privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. 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:

 

     Three Months Ended March 31,     Year Ended December 31,  
           2021                 2020               2020             2019             2018      
     (in thousands)     (in thousands)  

Net cash used in operating activities

   $ (59,249   $ (21,897   $ (150,533   $ (80,627   $ (54,019

Net cash used in investing activities

     (24,521     (1,439     (31,141     (39,302     (15,410

Net cash (used in) provided by financing activities

     (1,758     13,151       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 $59.2 million for the three months ended March 31, 2021. The most significant component of our cash used during this period was a net loss of $120.2 million, which included non-cash expenses of $50.3 million related to stock-based compensation, $12.9 million expense for in-kind

 

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services, $1.8 million related to depreciation and amortization, $0.8 million equity in net loss of affiliate and $1.0 million gain on revaluation of our warrant liability, and net cash outflows of $3.8 million from changes in operating assets and liabilities primarily driven by increases in long-term deposits and prepaid expenses and other current assets, partially offset by an increase in accounts payable and accrued expenses.

Net cash used in operating activities was $21.9 million for the three months ended March 31, 2020. The largest component of our cash used during this period was a net loss of $33.1 million, which included non-cash charges of $1.3 million related to stock-based compensation, $6.7 million expense for in-kind services, a loss of $1.3 million related to the change in fair value of the forward contract liability, and $1.4 million related to depreciation and amortization expense, and net cash inflows of $0.5 million from changes in operating assets and liabilities primarily driven by a decrease in accounts receivable, net and prepaid expenses and other current assets.

Net cash used in operating activities was $150.5 million for the year ended December 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 ended December 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 ended December 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 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 in Coolidge, Arizona, finance initial operations of our joint venture in Ulm, Germany, and develop the network of hydrogen fueling stations. As of March 31, 2021, we anticipate our capital expenditures for the remainder of fiscal year 2021 to be between $185 million to $205 million, of which a significant portion is related to the construction of our truck manufacturing facility and purchases of related equipment in Coolidge, Arizona.

 

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Net cash used in investing activities was $24.5 million for the three months ended March 31, 2021, which was primarily due to costs of construction for our Coolidge manufacturing facility, purchases and deposits for capital equipment and supplier tooling.

Net cash used in investing activities was $1.4 million for the three months ended March 31, 2020, which was due to purchases and deposits on capital equipment related to the construction of our headquarters and R&D facility.

Net cash used in investing activities was $31.1 million for the year ended December 31, 2020, which was primarily due to purchases and deposits for property and equipment, including costs of construction for our Coolidge 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 ended December 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 ended December 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

Through March 31, 2021, we have financed our operations through proceeds from sales of redeemable convertible preferred stock and common stock, the Business Combination, and redemption of warrants.

Net cash used in financing activities was $1.8 million for the three months ended March 31, 2021, which was primarily due to $4.1 million term note repayment and payments on our financing lease of $0.3 million, partially offset by proceeds from the exercises of stock options of $2.6 million.

Net cash provided by financing activities was $13.2 million for the three months ended March 31, 2020, which was primarily due to proceeds from the issuance of Series D redeemable convertible preferred stock of $13.0 million and proceeds from tenant allowances for the construction of our headquarters of $0.9 million, offset by payments made for future stock issuance costs of $0.4 million and payments on our financing lease of $0.3 million.

Net cash provided by financing activities was $941.1 million for the year ended December 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 ended December 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 ended December 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.

 

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations and other commitments as of December 31, 2020, and the years in which these obligations are due:

 

     Payments Due By Period  
     Total      Less than
1 Year
     1 - 3
Years
     3 - 5
Years
     More than
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.

For the three months ended March 31, 2021, there have been no material changes to our significant contractual obligations.

Off-Balance Sheet Arrangements

Since the date of incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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.

 

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While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following accounting policies are most critical to understanding our financial condition and historical and future results of operations.

Stock-Based Compensation

We recognize the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. We recognize stock-based compensation costs and reverse previously recognized costs for unvested awards in the period forfeitures occur. We determine the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the following assumptions:

 

   

Expected Term—We use the simplified method when calculating the expected term due to insufficient historical exercise data.

 

   

Expected Volatility—As our shares of common stock have limited public trading 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 on U.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 Legacy Nikola’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, or OPM, was the most appropriate method for allocating our enterprise value to determine the estimated fair value of Legacy Nikola common stock. Application of the OPM involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of future events. Specifically, we have historically used the OPM backsolve method to estimate the fair value of Legacy Nikola common stock, which derives the implied equity value for one type of equity security from a contemporaneous transaction involving another type of security, shares of our redeemable convertible preferred stock in this instance.

As of June 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.

 

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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 subsequently remeasured. Warrants recorded as liabilities are recorded at their fair value and remeasured on each reporting date, and upon settlement, 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 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 prospectus, 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.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as well as risks to the availability of funding sources, hazard events, and specific asset risks.

Interest Rate Risk

The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of March 31, 2021, December 31, 2020, and December 31, 2019, we had cash and cash equivalents of $763.8 million, $840.9 million, and $85.7 million, respectively, consisting of interest-bearing money market accounts for which the fair market value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities and the low-risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents.

Foreign Currency Risk

For the three months ended March 31, 2021 and 2020, we recorded $0.1 million and $0.03 million, respectively, of foreign currency gains. For the year ended December 31, 2020, we recorded $0.8 million in foreign currency losses. There was no material foreign currency loss for the years ended December 31, 2019 or 2018.

 

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BUSINESS

Company Overview

Who We Are

Our vision is to be the zero-emissions transportation industry leader. We plan to realize this vision through world-class partnerships, groundbreaking research and development, and a revolutionary business model.

According to the Environmental Protection Agency, or EPA, and the European Environment Agency, or EEA, the transportation industry causes an estimated 25% to 30% of U.S. and EU greenhouse gas, or GHG, emissions. While heavy-duty trucking represents less than 10% of the transportation industry, it is responsible for approximately 40% of transportation industry GHG according to the International Council on Clean Transportation, or ICCT. With ever-expanding e-commerce freight demands, zero-emission vehicles are believed to be one of the only viable options for a sustainable future.

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. To date, we believe we have assembled world-class partners and we plan to continue to use this approach.

We operate in two business units: Truck and Energy. The Truck business unit is developing and commercializing battery electric vehicles, or BEV, and hydrogen fuel cell electric vehicles, or FCEV, Class 8 trucks that provide environmentally friendly, cost-effective solutions to the short-haul, medium-haul, and long-haul trucking sector. The Energy business unit is focused on developing and constructing a hydrogen fueling ecosystem to meet hydrogen fuel demand for our FCEV and other FCEV customers. We expect that our energy unit will also work to provide BEV charging solutions for BEV customers.

We believe the key differentiator of our business model is our planned hydrogen fueling ecosystem, which includes (1) hydrogen production and/or hydrogen procurement, (2) hydrogen distribution, and (3) hydrogen storage and dispensing. Historically, investing in alternative fuel vehicles represented a high risk for both original equipment manufacturers, or OEMs, and customers due to the uncertainty of the fueling infrastructure. Existing fuel providers have limited incentive to deploy the required resources and capital to develop an alternative fuel infrastructure due to a lack of known demand. The inability to tackle both sides of this equation has prohibited hydrogen from reaching its full potential to date. Our approach aims to solve this ‘‘chicken or the egg’’ problem.

For FCEV customers, we are currently planning to offer a bundled lease model, which will be inclusive of the cost of the truck, hydrogen fuel, and maintenance. We expect that our go-to-market strategy will be offering a fixed price per mile through a 7 year or 700,000 mile lease to our customers, although alternative structures may be available, especially in the early stages of the FCEV roll-out. Our bundled lease model has the potential to de-risk infrastructure development by locking in fuel demand from our dedicated route customers. This locked in demand is designed to ensure high station utilization.

We believe our hydrogen fueling ecosystem will provide a competitive advantage and help accelerate the adoption of our FCEV. We believe our product portfolio and hydrogen fueling ecosystem provide a key strategic advantage that differentiates us from competitors and will allow us to provide significant and valuable innovation to the estimated $600 billion global heavy-duty commercial vehicle and the related fueling and maintenance total addressable market, or TAM.

 

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Market

Total Addressable Market

We believe our bundled lease model, which, as currently planned, will be inclusive of the cost of the FCEV truck, fuel, and regularly scheduled maintenance, will allow us to expand our TAM significantly when compared to traditional OEMs.

Globally, the TAM, is estimated to be a $600 billion per year, with steady growth expected to continue as e-commerce and global economic growth fuel the need for more heavy-duty trucks.

Based on data provided by ACT Research, the estimated $600 billion TAM is as follows:

 

   

Global Class 8 Truck Sales Market: Approximately $118 billion ($36 billion U.S. market, $32 billion EU market, $50 billion rest of world or ROW)

 

   

Global Fueling Market: Approximately $367 billion ($63 billion U.S. market, $93 billion EU market, $211 billion ROW)

 

   

Global Service and Maintenance Market: Approximately $112 billion ($29 billion U.S. market, $26 billion EU market, $57 billion ROW)

According to ACT Research, the active Class 8 truck population is expected to grow by approximately 5.0% annually from 2019 to 2023.

Class 8 Market Segmentation

Private Fleet vs. For-Hire Fleet Segmentation

ACT Research segments the on-highway Class 8 freight market between private and for-hire fleets, representing 53% and 47% of the Class 8 market, respectively. According to ACT Research, private fleets, such as PepsiCo or Sysco, are almost all regular route operations or ‘‘dedicated’’ routes running point-to-point. ACT Research further breaks down the for-hire market, such as JB Hunt or XPO Logistics, into: contract 32%, spot 12%, and dedicated 3%. According to ACT Research, dedicated for-hire fleets are mostly outsourced by shippers to run point-to-point.

Length of Haul Segmentation

ACT Research breaks down the Class 8 truck market by the length-of-haul. The length-of-haul refers to the distance of an outbound load and does not account for a return trip.

 

   

Short-haul less than 100 miles: applications include agricultural and drayage operations.

 

   

Medium-haul 100-250 miles: applications include private fleet distribution, less than truckload operations, and regional for-hire fleets.

 

   

Long-haul over 250 miles: applications include regular and irregular for-hire fleets and private fleet regular route operations.

E-commerce Driving Expansion of Freight Moved by Trucks

According to the Freight Analysis Framework and the U.S. Department of Transportation Statistics, in 2017, approximately 40% of all freight was moved by trucks in the U.S. and that amount is expected to continue to grow. According to Eurostat, in Europe, approximately 52% of all freight in 2017 was moved by trucks. That number is expected to grow approximately 30% through 2030. According to ACT Research, globally, the active Class 8 truck population is expected to increase from 7.3 million in 2018 to 9.2 million in 2023 as emerging markets drive volume growth.

 

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Shift to Zero-Emission Vehicles

According to EPA and the EEA reports as of 2017, the transportation industry causes an estimated 25% to 30% of U.S. and European GHG emissions. While heavy-duty trucking represents less than 10% of the vehicle population, the ICCT estimates it is responsible for approximately 40% of emissions from the transportation industry, making them disproportionate contributors to pollution. Diesel vehicles are a major source of harmful air pollutants and GHG emissions. The associated local air pollution, particulates of oxides of nitrogen and particulate matter emissions, negatively impacts health and quality of life. Additionally, diesel exhaust has been classified as a potential human carcinogen by the EPA and the International Agency for Research on Cancer. Studies done on exposure to high levels of diesel exhaust indicate a greater risk of lung cancer.

A significant share of global GHG emissions stem from heavy-duty vehicle transportation. We believe zero-emission vehicles are one of the viable options to reduce emissions in the transportation sector to meet climate, ozone, and regulatory targets. According to the U.S. Emissions Center for Climate and Energy Solutions, in 2017, U.S. GHG emissions totaled 6,457 million metric tons, or MMT, of CO2 equivalents. Medium and heavy-duty vehicles accounted for 7% of total emissions, equal to 431 MMT of CO2 equivalents. The EEA’s report on GHG in Europe found that in 2017, EU GHG emissions totaled 4,481 MMT of CO2 equivalents. Heavy-duty vehicles accounted for 5% of total emissions, equal to 224 MMT of CO2 equivalents.

A strong consensus among the largest governments calls for a global push to shift to zero-emission vehicles and the eventual elimination of internal combustion engine, or ICE, vehicles. According to the Center for Climate Protections ‘‘Survey on Global Activities to Phase Out ICE Vehicles’’ report, actions being taken by national and local governments include:

 

   

The following cities signed the C40 Fossil-Fuel-Free Streets Declaration: Electric buses by 2025, ICE vehicles banned by 2030: Athens, Auckland, Barcelona, Cape Town, Copenhagen, Heidelberg, London, Los Angeles, Madrid, Milan, Mexico City, Paris, Quito, and Rome.

 

   

Additionally, Delhi, Hamburg, Oslo, Oxford, and Tokyo have all began to implement and propose plans to move towards all zero-emissions vehicles.

Countries Phasing Out ICE Vehicles (specific actions vary by country):

 

   

Austria: No new ICE vehicles sold after 2020;

 

   

China: End production and sales of ICE vehicles by 2040;

 

   

Denmark: 5,000 electric vehicles, or EVs, on the road by 2019, tax incentive in place;

 

   

France: Ban the sale of petrol and diesel cars by 2040;

 

   

Germany: No registration of ICE vehicles by 2030 (passed by legislature); cities can ban diesel cars;

 

   

India: Target of no new ICE vehicles sold after 2030;

 

   

Ireland: No new ICE vehicles sold after 2030; Incentive program in place for EV sales;

 

   

Israel: No new ICE vehicle imports after 2030;

 

   

Japan: Incentive program in place for EV sales;

 

   

Netherlands: No new ICE vehicles sold after 2030; Phase out begins 2025;

 

   

Norway: Sell only electric and hybrid vehicles starting in 2025;

 

   

Portugal: Official target and incentive in place for EV sales;

 

   

Scotland: No new ICE vehicles sold after 2032;

 

   

South Korea: EVs account for 30% of auto sales by 2020;

 

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Spain: Incentive package to promote sales of alternative energy vehicles;

 

   

Sweden: Ban of new ICE vehicle sales in 2030;

 

   

Taiwan: Phase out fossil fuel-powered motorcycles by 2035 and fossil fuel-powered vehicles by 2040. Additionally, the replacement of all government vehicles and public buses with electric versions by 2030;

 

   

United Kingdom: Ban the sale of petrol and diesel cars starting in 2030

With such strong sentiment to reduce global GHG emissions from leading governments, OEMs will have to spend significant additional research and development on existing models to remain compliant in the near term, or they will face heavy fines. In Europe, there will be a mandatory 15% reduction in CO2 emissions by 2025 and a 30% reduction target by 2030. There will be a financial penalty for failure to achieve these targets. The level of the penalties is 4,250 Euros and 6,800 Euros per gCO2 / tonne-kilometre, or tkm, in 2025 and 2030, respectively. Conventional diesel technology will most likely not be able to meet the European targets set for 2025 and 2030. These ambitious CO2 targets are likely ‘‘technology-forcing’’ towards alternative powertrains such as battery-electric and hydrogen fuel cell.

In early 2021, the Biden administration has established measurable steps and metrics with the purpose of limiting global climate change. Changes already enacted to accomplish this goal include re-joining the Paris Climate Agreement, an international treaty designed to reduce climate change and promising to replace the U.S. government’s existing vehicle fleet with “net zero emission” electric vehicles.

In addition to the steps already taken, we expect that the U.S. government will enact stricter vehicle emissions standards while offering incentives that drive vehicle owners and manufacturers to zero emission solutions. This market shift to clean energy transportation, backed by the Biden administration, offers a background in which we believe we are well-positioned to succeed.

In addition, consumers are increasingly demanding that corporations take action to reduce their carbon footprint. An article by Nielsen from 2018 cited that nearly half (48%) of U.S. consumers said they would ‘‘definitely’’ or ‘‘probably’’ change their consumption habits to reduce their impact on the environment, placing reducing emissions high on the agenda for large corporations. For example:

 

   

Amazon has pledged to become carbon neutral by 2040;

 

   

BP has pledged to become carbon neutral by 2050;

 

   

DB Schenker plans to make its transport activities in European cities emission-free by 2030;

 

   

DHL set a goal to reduce all logistics-related emissions to zero by 2050;

 

   

UPS has committed to sourcing 40% of its ground fuel from low carbon or alternative fuels by 2025;

 

   

Walmart set a goal of an 18% emissions reduction in their own operations by 2025 and to work with suppliers to reduce emissions by 1 gigaton by 2030; and

 

   

Microsoft has committed to be carbon negative by 2030 and that by 2050 it hopes will have sequestrated enough carbon to account for all direct emissions it has ever made.

U.S. Market Policy Trends

 

   

Major shift and greater alignment on climate change policy—federal government and increasing numbers of states moving in similar policy directions (i.e., electric vehicles, infrastructure, roadmaps).

 

   

Federal government advancing aggressive executive actions to move the U.S. to transportation electrification and decarbonization; California is advancing comprehensive zero-emissions market development strategy.

 

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More state legislatures and regulatory agencies moving to consider transportation electrification planning and funding programs—key regions are emerging.

 

   

Hydrogen and fuel cell technology receiving increased attention as a zero-emission and low carbon fuel type, spurring hydrogen production and hydrogen marketplace discussions are emerging at national level and in multiple states.

 

   

National hydrogen coalition development—11 companies have partnered to form Hydrogen Forward—an initiative focused on advancing hydrogen development in the U.S. Founding members include—Air Liquide, Anglo American, Bloom Energy, CF Industries, Chart Industries, Cummins Inc., Hyundai, Linde, McDermott, Shell, and Toyota.

 

   

Increasing numbers of states focusing on grid modernization efforts, including energy storage targets, innovative pilot programs, advanced rate design pilots, electric grid resilience, and battery storage deployments.

Federal Policy Update—Biden Administration Executive Orders

Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis

 

   

Directs federal agencies to consider revising vehicle fuel economy and emissions standards to ensure that such standards cut pollution.

 

   

Establishes an Interagency Working Group on the Social Cost of GHG to account for the benefits of reducing climate pollution to address GHG.

Tackling the Climate Crisis at Home and Abroad, Create Jobs, and Restore Scientific Integrity Across Federal Government

 

   

Center the Climate Crisis in U.S. Foreign Policy and National Security Considerations

 

   

Take a Whole-of-Government Approach to the Climate Crisis

 

   

Leverage the Federal Government’s Footprint and Buying Power to Lead by Example

 

   

Directs the federal agencies to procure carbon pollution-free electricity and clean, zero-emission vehicles to create good-paying, union jobs and stimulate clean energy industries.

 

   

Directs federal agencies to eliminate fossil fuel subsidies as consistent with applicable law and identify new opportunities to spur innovation, commercialization, and deployment of clean energy technologies and infrastructure.

 

   

Rebuild Our Infrastructure for a Sustainable Economy

 

   

The order catalyzes the creation of jobs in construction, manufacturing, engineering, and the skilled-trades by directing steps to ensure that every federal infrastructure investment reduces climate pollution and that steps are taken to accelerate clean energy and transmission projects under federal siting and permitting processes in an environmentally sustainable manner.

 

   

Advance Conservation, Agriculture, and Reforestation

 

   

Revitalize Energy Communities

 

   

Secure Environmental Justice and Spur Economic Opportunity

Hydrogen Fuel Cell and Battery Technology Momentum

With the global push to eliminate ICE vehicles, battery-electric and fuel cell technologies currently stand out as the best alternatives to diesel. Both battery costs, a key cost competent of a BEV, and electricity prices, a key cost component in hydrogen fuel production, have decreased significantly over the past decade, and prices continue to decrease. These cost reductions significantly improve the economics of BEV and FCEV trucks.

 

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A January 2020 report published by the Hydrogen Council highlighted how policy and economic forces are converging, creating unprecedented momentum in the hydrogen sector. This momentum is buoyed by:

 

   

66 countries having announced net zero-emissions as a target by 2050;

 

   

Approximately 80% decrease in global average renewable energy prices since 2010; and

 

   

Expected 55 times growth in electrolysis capacity by 2025 compared to 2015.

Zero-Emission Vehicles Enabled by Significant Reduction in Battery Cost and Renewable Electricity Prices

The majority of the cost of production of a BEV truck, and a major cost component of a FCEV truck, lie in the cost of the battery. As illustrated in a 2019 report by Bloomberg NEF, from 2010 to 2018, lithium-ion battery prices have fallen from $1,160 per kilowatt-hour, or kWh, to $176 per kWh, representing an 85% cost reduction. As investment in battery technology continues to increase as a result of OEMs allocating more capital to next-generation powertrain technology, this trend in battery cost reduction is expected to continue. Conversely, vehicles that run on lithium-ion battery-electric power can experience battery capacity and performance loss over time, depending on the use and age of the battery.

For hydrogen production, we expect electricity costs to account for approximately 75% to 85% of the total cost. Per Lazard’s November 2019 Levelized Cost of Energy Analysis, the cost of producing renewable energy has dropped significantly since 2009. In 2009, the global average solar and wind levelized cost of energy was $359 per megawatt-hour, or MWh, and $135 per MWh, respectively. In 2019, these costs were $40 per MWh for solar and $41 per MWh for wind, representing a cost reduction of 89% and 70%, respectively.

Renewable energy prices are expected to continue to fall as production capacity is set to expand by 50% between 2019 to 2024. This trend will further reduce renewable energy prices, which will drive the cost of hydrogen production even lower.

According to Wood Mackenzie, in the U.S., the world’s second-largest solar market, power purchase agreements, or PPAs, are now trending between $20 to $30 per MWh, and on a global scale, prices have been observed as low as $17 per MWh. Lower solar energy production cost is expected to allow us to produce renewable hydrogen at a cost that is competitive with existing diesel solutions.

Industry Focused on TCO

In the highly competitive trucking industry, when choosing between truck models that meet their technical and safety requirements, customers mainly base their purchasing decision on total cost of ownership, or TCO. TCO is the total cost of owning the truck through its lifecycle, including lease cost or purchase payment, fuel cost, service, and maintenance. According to ACT Research, traditionally, TCO for diesel trucks (excluding driver wages, benefits, and insurance), is typically broken down into cost of fuel (approximately 50%), purchase or lease payments on truck (approximately 22%), and repairs and maintenance (approximately 28%).

According to ACT Research, historically, diesel fuel comprises 40% to 60% of TCO, depending on prevailing diesel fuel prices. With the incumbent ICE technology, fleet operators are also forced to accept volatility in their largest cost component, creating risk and uncertainty. We expect that our bundled lease model will provide customers TCO clarity for the first time in the industry’s history.

Industry and Competition

Competition in the Class 8 heavy-duty truck industry is intense and new regulatory requirements for vehicle emissions, technological advances, and shifting customer demands are causing the industry to evolve towards

 

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zero-emission solutions. We believe the primary competitive factors in the Class 8 market include, but are not limited to:

 

   

vehicle safety;

 

   

total cost of ownership (TCO);

 

   

product performance and uptime;

 

   

availability of charging or re-fueling network;

 

   

emissions profile;

 

   

vehicle quality and reliability;

 

   

technological innovation;

 

   

improved vehicle operational visibility;

 

   

ease of autonomous capability development; and

 

   

service options.

Similar to traditional OEMs in the passenger vehicle market, incumbent commercial transportation OEMs are burdened with legacy systems and the need to generate sufficient return on existing infrastructure, which historically created a reluctance to embrace new zero-emission drivetrain technology. This reluctance created an opportunity for us.

However, we believe the global push for lower emissions combined with vast technological improvements in fuel cell and battery-electric powertrain technologies has awakened well-established OEMs to begin investing in zero-emission vehicle platforms.

BEV Competition

Tesla, Daimler, Volvo, as well as other automotive manufactures, have announced their plans to bring Class 8 BEV trucks to the market over the coming years. Tesla announced its concept vehicle, the Tesla Semi, in November 2017. Daimler announced its plans for the eCascadia, which is the electric version of their flagship Freightliner Cascadia, in June 2018. Volvo announced plans to commercialize its BEV heavy-duty truck, the VNR Electric, in December 2018. Other competitors include BYD, who we believe is currently selling Class 8 BEV trucks, Peterbilt, XOS, Lion, Volvo, Hyliion, and potentially Cummins. We believe all of these competitors are in various stages of rolling out their vehicles, including pilot programs and providing test vehicles to customers.

FCEV Competition

Due to higher barriers to entry, there are fewer competitors in the FCEV Class 8 market. However, Hyundai and Toyota have chosen to focus their efforts on FCEV as the powertrain of the future. Hyundai intends to enter the European market for heavy-duty vehicles with their FCEV truck, the Hyundai Xcient. In addition, others such as Hyundai have announced they plan to offer FCEV trucks and invest in hydrogen stations for refueling. Toyota is collaborating with Kenworth, an American manufacturer for medium and heavy-duty trucks, to jointly develop an FCEV heavy-duty truck, and Daimler and Volvo recently announced a proposed joint venture to develop fuel cell systems for heavy-duty trucks. Other potential competitors include Navistar, Hino and Hyzon.

Competitors in Context

Most of our current and potential competitors have greater financial, technical, manufacturing, marketing, and other resources than we do. They may be able to deploy greater resources to the design, development,

 

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manufacturing, distribution, promotion, sales, marketing and support of their BEV and FCEV truck programs. Additionally, many of our competitors also have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships, and greater resources than we do.

Although our competitors may have certain advantages we do not possess, we believe we are positioned to compete favorably. Although we do not have the same name recognition, or operating history as most of our competition, we are free from the burden of legacy infrastructure and design. We believe we have the benefit of a head start and the advantage of beginning from a blank slate, which is critical when introducing new technology.

Products

As the commercial transportation sector transitions towards zero-emission solutions, we believe there will be a need to offer tailored solutions that meet the needs of each customer. Unlike the passenger vehicle market, where users typically return home each day, the commercial vehicle market contains multiple use cases often requiring vehicles to be out on the road for days, or weeks at a time. By offering both BEV (for short and medium-haul, city, regional, and drayage deliveries) and FCEV (for medium and long-haul) solutions, we believe we are positioned to disrupt the commercial transportation sector by providing solutions that address the full range of customer needs.

The electrical propulsion of our BEV and FCEV trucks has a modular design which allows the batteries and associated controls to be configured to either a BEV or FCEV propulsion. Our architecture inside the centralized e-axle is configured for the appropriate power needs for the BEV and FCEV for a wide range of applications. Our cab-over design allows us to address both the European and North American markets, which provides engineering and manufacturing synergies.

 

 

 

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We have developed a portfolio of proprietary electrified architectures and associated technologies that are embedded and integrated into our BEV and FCEV vehicles. Our principal vehicle offerings include:

Nikola’s Class 8 BEV—Nikola Tre

 

 

The Nikola Tre Class 8 truck is based on the S-WAY platform from Iveco and integrates our electrified propulsion, technology, controls and infotainment. In addition, we redesigned the majority of the high-visibility components and body panels of the S-WAY truck, and added several new interior features including a digital cockpit with an infotainment screen, instrument screen and panel, redesigned steering wheel, and new seats. The cab-over design is desirable for city center applications due to shorter vehicle length, improved maneuverability, and better visibility. We plan to market the Nikola Tre BEV for short and medium-haul applications in North America and Europe.

We expect that the BEV version of Nikola Tre will be the first to market, addressing the near-term market opportunity as this version does not require a roll-out of charging infrastructure. BEVs run on a fully electric drivetrain powered by rechargeable batteries. Our BEV has an estimated range of 250 to 350 miles and is designed to address the short and medium-haul market. During the initial roll-out, customers will be responsible for their own charging needs.

Sales of the Nikola Tre BEV are currently expected to begin in late 2021 in North America.

Nikola’s Class 8 FCEV’s—Nikola Tre and Nikola Two

 

 

FCEVs use fuel cells on-board to convert hydrogen into electricity to power the electric motors, which transmit power to the wheels. The fuel cell generates electricity through a chemical reaction, supplied from on-board tanks, and oxygen from the atmosphere. A much smaller battery (compared to our BEV) provides supplemental power to the drivetrain, and stores energy recovered during regenerative braking. The voltage and charge of the battery are maintained through a combination of power supplied from the fuel cell and energy captured through regenerative braking.

 

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In North America, we plan to develop and launch two FCEV truck platforms.

The Nikola Tre FCEV is targeted for medium and long-haul missions ranging from 300 to 500 miles per day. Its scalable architecture is expected to handle the majority of the North American day-cab market. The Tre FCEV leverages the Tre BEV platform with modifications for hydrogen fuel cell operation, improved aerodynamics, and lightweighting. The Nikola Tre FCEV is currently expected to launch in 2023.

The Nikola Two Sleeper Cab is targeted for long-haul missions with an operational range up to approximately 900 miles. This configuration allows for longer operation between fueling and is specifically designed for long-haul applications and extended highway operation. The Nikola Two FCEV is currently expected to launch in the second half of 2024.

We expect that in the longer term, as autonomous technologies relieve hours of service restrictions, FCEVs will be an ideal option for longer continuous hauls.

Our FCEVs are designed to allow us to address the longer-term opportunity by combining our fuel cell technology and a network of hydrogen stations across North America.

Hydrogen Fueling Ecosystem Overview

We are developing a hydrogen fueling ecosystem and charging stations in North America and Europe to support our BEV and FCEV customers and to help capture first mover advantage with respect to next generation fueling infrastructure. We plan to seek partners throughout the hydrogen ecosystem to help increase speed to market and reduce capital expenditures related to next generation fueling infrastructure.

 

 

We view the hydrogen fueling ecosystem in three main segments: (1) hydrogen production/procurement, (2) hydrogen distribution, and (3) hydrogen storage and dispensing, each with the potential to generate separate margins for us and our hydrogen ecosystem partners.

Hydrogen Production/Procurement

We expect to source hydrogen by leveraging multiple hydrogen production models including on-site production, large-scale “hub” production, or other alternative hydrogen production/procurement. We expect the hydrogen solution utilized will depend on the unique characteristics near each potential station location.

We intend to produce or procure the lowest carbon content hydrogen available while also ensuring a hydrogen supply that is safe, reliable, and economical. In certain cases where electricity can be procured in a cost-effective manner, we plan to produce hydrogen fuel on-site, via electrolysis. In other cases, we expect hydrogen fuel will be produced off-site at a large-scale production “hub” and distributed to nearby fueling stations under a supply “hub and spoke” structure. When on-site or hub-and-spoke production is used, the electricity input for hydrogen fuel production is expected to be purchased via long-term supply agreements.

 

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On June 22, 2021 we entered into a Hydrogen Sale and Purchase with Wabash Valley Resources LLC, or WVR, pursuant to which WVR agreed to sell us, and we agreed to purchase from WVR, hydrogen produced from the hydrogen production facility being developed by WVR in West Terre Haute, Indiana, or the Plant. The Plant plans to use solid waste byproducts such as petroleum coke combined with biomass to produce clean, sustainable hydrogen for transportation fuel and base-load electricity generation while capturing CO2 emissions for permanent underground sequestration. WVR expects to break ground on the Plant in early 2022 and expects completion of the Plant to take approximately two years. In connection with the Hydrogen Purchase Agreement, on June 22, 2021, we also entered into a Membership Interests Purchase Agreement, or the MIPA, with WVR and the sellers party thereto or, collectively, the WVR Sellers, pursuant to which, subject to the terms and conditions therein, we purchased a 20% equity interest in WVR in exchange for $25 million in cash and $25 million of our Common Stock.

Where practical, we and our partners may also source hydrogen via alternative methods, including third-party purchases, liquefaction, steam-methane-reformation with carbon capture.

Hydrogen Distribution

We expect hydrogen distribution will play a key role in the hydrogen fueling ecosystem when on-site hydrogen production is not utilized. We intend to collaborate with strategic partners or develop distribution capabilities to enhance value through the hydrogen fueling ecosystem. The hydrogen distribution network can include over-the-road, rail, or distribution via existing pipeline infrastructure. We and our partners will likely leverage multiple hydrogen distribution models to ensure efficient hydrogen distribution throughout the ecosystem.

Hydrogen Dispensing and Storage

We intend to collaborate with strategic partners and to develop hydrogen storage and dispensing stations. Each dispensing site is expected to contain ample on-site hydrogen storage and to be capable of dispensing up to 8,000 kgs of hydrogen per day. Depending on the amount of land available at the dispensing site, the hydrogen storage and dispensing can be scaled up in increments of 8,000 kgs, as needed. Each 8,000 kg per day dispensing station could support approximately 200 FCEV trucks per day.

Our base stations are expected to contain at least eight heavy-duty (for commercial trucks) and up to four light-duty (for vehicles) hydrogen fueling dispensers. We also plan to install electric fast charging to support BEV trucks.

We plan to design each fueling and charging station to maximize the utilization and to generate future revenue and cash flow, which may be used to fund the development of future stations.

Test Station Installed at Nikola’s Phoenix HQ

Through our partnership with Nel ASA, a Norwegian hydrogen company, or Nel, we have initiated the development of the hydrogen station infrastructure by completing our 1,000 kg demo station, which is capable of fueling up to 875 bar, or approximately 1 kg, per minute at our corporate headquarters in Phoenix, Arizona. The technology we use at this station is currently utilized for non-commercial applications. The demo station provides our engineers with the ability to test the fueling systems for our future FCEV trucks as well as fueling the two prototype Nikola Two FCEV trucks that are used for testing operations and demonstrations. We have gathered substantial data from this station, including fueling station operations in hot ambient temperatures, station permitting and construction, onsite storage pressurization, and station and systems operations. The demo station is utilized on an ad-hoc basis, and we believe it will provide us with the experience we will need to troubleshoot and improve on our larger commercial stations.

 

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Overall Fueling Station Rollout Strategy

Given the anticipated minimum range of up to 500 miles for our FCEV trucks and our desire to rapidly expand hydrogen fueling infrastructure across North America to promote the decarbonization of the freight industry, we are conceptually planning on deploying fueling stations at intervals of no more than 250 miles apart to accommodate less efficient driving styles, heavy payloads, climbing steep grades, and local travel within a metropolitan area.

We plan to locate our stations to coincide with the greatest volumes of existing truck traffic, existing population centers and freight hubs, major freeway intersections, and available incentives. We envision our early station rollout as seeking to cover as broad of a geographic range as possible across the freight routes that are likely to see the greatest volumes of FCEV adoption.

Following deployment of a broad fueling station network, we envision increasing the density of the fueling station locations based upon customer demand for fuel and satisfying the needs of secondary routes within the network.

First Stations to Support Customers with Dedicated Routes

Initially, we expect to build our fueling and charging stations to support carefully selected fleet customers who have dedicated routes along major interstate corridors. For example, we have partnered with Anheuser-Busch, LLC, or AB, as a launch customer because they have dedicated freight routes between their twelve breweries and six distribution centers. We plan to build stations in Southern California and in Phoenix, Arizona to support AB’s freight movements along Interstate 10 from their brewery in Van Nuys, California to their distribution center in Chandler, Arizona.

On April 22, 2021, Nikola and Travel Centers of America, or TA, announced an agreement to collaborate on the installation of heavy-duty hydrogen fueling stations, subject to execution of definitive agreements. The agreement includes the development of two stations with the option to expand nationwide.

The first two stations are planned to be constructed at existing TA-Petro locations in California and are targeted to be commercially operational by the first quarter of 2023. These stations are expected to accelerate adoption of hydrogen fuel-cell-powered commercial electric trucks. Paired with the expected 500-mile range of the previously-announced Nikola Tre fuel-cell electric vehicle, the launch stations are expected to enable operations of next generation fueling technology in and around the greater Los Angeles region and north through California’s Central Valley.

The two hydrogen fueling stations under consideration for development by Nikola and TA-Petro are expected to provide for an open fueling network available to any truck customer, and we intend to follow a common industry standard for heavy-duty fueling protocols, ensuring compatibility across all hydrogen fuel-cell truck manufacturers.

California Hydrogen Station Strategy

In addition to the first two launch stations mentioned above, our plan is to build up to approximately eight additional stations in California. We expect these stations will supply fuel for our launch customers in those geographies that have dedicated routes in California. California is offering incentives to build out our hydrogen fueling infrastructure, including opportunities for funding along major freeway corridors. We currently expect to begin securing sites in 2021 and then to proceed to build in phases to support customer demand.

After the California station build-out, we plan to strategically target other states offering incentives.

Single-Station Dedicated Route Strategy

After maximizing incentives offered by states, our strategy is to build hydrogen fueling stations along dedicated routes according to the needs of strategically selected customers. We anticipate the need for up to 700

 

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stations in North America. This overall strategy is designed to enable a capital-efficient roll-out of hydrogen stations, ensuring high utilization and predictability of demand, while allowing us to also sell hydrogen to third-party purchasers.

The layout and freight movement along our interstate system provides ample opportunities to expand our hydrogen station network in the U.S., as road freight is concentrated along the relatively few and significant corridors that form the National Highway Freight Network.

European Station Network Strategy

We expect to build a European hydrogen station network following a similar strategy. Several highly trafficked freight corridors exist in Europe, with logistics hubs in proximity to consumption centers, freight ports, and corridor crossroads. We plan to strategically deploy hydrogen stations along the key corridors and logistical hubs to maximize the efficiency of station deployment. We expect that our ultimate station roll-out strategy and timing will also consider potential local incentives offered in Europe to ensure the most economically favorable station roll-out. We believe that a network of 70 to 90 hydrogen stations will provide approximately 85% coverage of Western European freight corridors.

On April 14, 2021, Nikola and Iveco announced a hydrogen fueling infrastructure collaboration with OGE Energy Corp., or OGE, one of Europe’s leading pipeline operators, subject to execution of definitive agreements. OGE owns and operates approximately 12,000 kilometers of natural gas pipeline infrastructure in Germany. This collaboration is expected to enable cost-effective distribution of hydrogen from production to storage and fueling locations in Germany. This collaboration has the potential to accelerate the hydrogen economy in Europe by providing an efficient hydrogen distribution network within OGE’s service area.

Power Sourcing Strategy, and Over Time, 100% Zero-Emission Goal, if Feasible

During our initial hydrogen station roll-out, we intend to source power based on the most economical power mix available at each hydrogen production site, including power from the grid that is sourced from non-renewable sources. Over time, our goal is to support each fueling station with 100% zero-emission power whenever feasible.

Our energy business unit has established what we believe is a strong team with deep energy industry experience, to provide focus and expertise in the key areas required to establish a comprehensive, low cost, safe, reliable, and efficient hydrogen delivery system to our customers.

In January 2021, we secured approval of an innovative electricity rate schedule with Arizona Public Service Company, or APS, which accelerates our goal to develop and provide hydrogen fuel at price parity with diesel to the commercial transportation industry. By facilitating low-cost production of hydrogen, the Arizona Corporation Commission’s approval of this rate schedule paves the way for the curtailment of GHG in the transportation sector, while also providing benefits to key constituents via novel grid-balancing solutions.

We believe APS’s competitive electric rate will help lead the creation of the hydrogen economy in Arizona. We estimate that under the rate structure, we will be able to deliver hydrogen at market leading prices and within the ranges required for us to offer competitive lease rates for our trucks customers.

Additionally, the rate structure with APS could be utilized to support both on-site production and hub-and-spoke production models within the APS service territory. A large-scale production “hub” within the service territory would be ideally suited to serve dispensing stations located in Southern California.

Playing a Key Role in The Future of Energy Generation and Storage

We believe that the steady off-peak demand load of our hydrogen stations, and our ability to have our power supply temporarily interrupted during peak power demand, will make us an attractive customer for utilities, grid

 

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operators and other power providers. Our station model can also provide us with the advantage of being able to take excess power generated during periods of low power demand. Given this power demand profile and our ability to help optimize the energy grid, we believe we will have the opportunity to source power at prices below prevailing market rates.

Given our ability to level out demand and store night-time and other off-peak energy that might otherwise go unused, we believe our hydrogen strategy will provide critical solutions to the future of electric energy generation, transmission, and storage and help usher in the next generation of power supply.

Service, Maintenance, and Parts

Our proposed bundled lease model includes the required maintenance and parts for our Class 8 vehicles. Service and maintenance of an electric vehicle is expected to be lower than the traditional ICE vehicle which has been proven thus far in the electric passenger vehicle market as well as in early development of Class 7 and 8 trucks. We believe that fewer moving parts, no emissions compliance requirements and considerably reduced complexity of certain key drivetrain components in our trucks should result in fewer breakdowns and less preventative maintenance. We anticipate that these factors should lead to better uptime, lower costs for operators, and positive feedback from drivers. We expect the asset utilization, productivity, and reduced downtime should favorably impact fleet operating margins.

A key requirement for our fleet customers is knowing there is an available service infrastructure for the maintenance, repair, and availability of parts for our vehicles. We are building a strong network of maintenance providers, a robust preventative maintenance program, as well as several levels of service to support fleet complexity, application, and duty cycles.

We have assembled what we believe is a nimble and adaptable service, maintenance, and parts solutions for our vehicles, which is expected to include the following options:

 

   

Electric vehicles have a system of sensors and controls that allow for precise monitoring of the vehicle and component operation performance. We intend to use this data to provide smart predictive maintenance, which will decrease downtime and costs by identifying a potential problem before it results in a breakdown. Preventative maintenance will be customized to match duty cycle and fleet applications.

 

   

We plan to have the ability to provide over the air updates and software fixes when the vehicles are stopped. This can significantly reduce the time for repair, improve uptime, and continually monitor performance, efficiency, and overall utilization.

 

   

In cases where a customer has their own maintenance expertise and infrastructure, we plan to identify and provide certification of technicians and procedures for items that can be maintained at their shops. This could include procedures such as tire changes, wearable parts, chassis, and brake services.

 

   

In cases where the customer does not have a maintenance infrastructure or for more complex items, we plan to utilize a dealer network for maintenance and warranty work. The network will monitor day to day trip activity and incorporate support at the origin and destination for our truck routes. We also intend to support our partners with the latest diagnostic technologies like augmented reality and web-enabled video to support technicians for complex tasks or newly identified issues.

 

   

If a vehicle requires maintenance of a complex system or component such as the fuel cell, e-axle, or battery-pack, some of those items can be removed and replaced with limited downtime. This should allow us to repair the downed component in the background and minimize vehicle downtime. We are also planning to develop a network of trained technicians that can travel to a customer or service partner as necessary. We also expect to have dedicated vendor agreements to service and maintain a specific fleet on premises or very close in proximity to the truck’s domicile location.

 

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Additionally, we will procure replacement parts, components, and all aftermarket support supplies. These components and materials will be inventoried, warehoused and distributed by third party logistic providers currently engaged in supplying the Class 8 truck industry.

In addition, on April 8, 2021, Nikola and RIG360 Service Network, or RIG360, announced a sales and service dealer network spanning more than 65 service center locations. RIG360 service centers are located in key metropolitan areas and at major intersections of the interstate highway system throughout the southeast, northeast, and midwestern regions. The agreement, once finalized, is expected to provide a service and maintenance network covering an expansive geographic area and a reputable sales channel for our customers. The dealer network includes a company for which our director, DeWitt C. Thompson, V, serves as Chief Executive Officer.

Customers and Reservations

Target Customers

We target large Class 8 fleet customers with established sustainability goals, as well as fleets operating along dedicated routes that are located in regions offering strong incentives for developing hydrogen infrastructure and/or delivering zero-emission vehicles.

BEV Customer Strategy

The BEV truck is designed for short and medium-haul applications, making it ideal for urban metro, inner-city, local delivery, port operations, and drayage applications. Our goal is to first target large corporate customers to establish early market share and strengthen brand identity.

For BEVs, we expect that some early U.S. sales will be in states such as California or New York where incentive programs already exist.

FCEV Customer Strategy

For the FCEV truck, we are planning to develop and construct initial hydrogen stations in Arizona and California. Therefore, early customers will likely be located in these states, or have extensive transportation routes within or between them.

We also intend to target dedicated fleets with either nationwide or significant regional distribution networks and dedicated route networks (i.e., where trucks operate between two fixed points, e.g., production plant and distribution hub) along highly trafficked freight corridors. This strategy allows for gradual, strategic, and capital-efficient development of the hydrogen infrastructure required to support FCEV trucks in operation. We intend to expand the FCEV offering to the entire Class 8 truck market once the fueling infrastructure is sufficiently developed.

Customer Reservations

Our FCEV reservation book was frozen in late 2019, in order for us to focus on negotiating with strategic fleet partners to convert reservations to binding contracts. At that time, our list of non-binding cancelable reservations potentially represented more than two years of production. This list included reservations from individuals or small fleets with orders of 100 trucks or less, which represent approximately 47% of our total FCEV reservations. These individuals or small fleets may not receive FCEVs until the density of the hydrogen station network is sufficient for their re-fueling needs, which may not occur until approximately 2030 or later.

We intend to convert existing reservations into binding orders once we have fixed production dates for FCEV trucks. We anticipate requiring a significant deposit to secure binding orders at least six months prior to delivery.

 

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We are working to select our initial BEV customers strategically and are in dialogue with several customers. We expect to select one or two launch customers to participate in fleet testing and the initial production of the BEV truck.

On May 6, 2021, we announced a letter of intent with Total Transportation Services, one of Southern California’s prominent port trucking companies, to expedite zero-emission transportation at the Port of Los Angeles/Long Beach. The collaboration includes vehicle trials and a letter of intent to order 100 Nikola Class 8 BEV and FCEV trucks, subject to execution of definitive agreements.

First Ever Zero-Emission Beer Run

In November 2019, we completed AB’s first ever zero-emissions beer-run. The Nikola Two prototype FCEV delivered six pallets of Bud Light weighing approximately 15,000 pounds. The total load hauled, including the trailer, was approximately 27,000 pounds. The delivery was made on city streets where the beer was delivered to one of AB’s distributors. The distributor then delivered the beer to the St. Louis Blues arena for consumption at that night’s game.

Partnerships and Suppliers

We believe that our business model is validated and supported by world-class strategic partnerships that significantly reduce execution risk, improve commercialization timeline, and provide a long-term competitive advantage. These world-class partners have accelerated our internal development, growth, and learning and have positioned us to revolutionize the transportation sector. We believe our partnerships help increase the depth and breadth of our competitive advantage as well.

Our partnership philosophy is a recognition that the world’s toughest challenges require bold solutions and a collaborative effort from multiple parties. Our goal is to provide zero-emission solutions to the transportation sector and to usher in next-generation grid solutions. With the help of our partners, we believe our chances of success are greatly improved. We are inspired by the knowledge that if we are successful, the whole world wins.

The following is a list of the partners who have chosen to embark upon this journey with us. With their help, we plan to drive out emissions from the transportation sector.

Co-Development Partners

Iveco

Iveco is a subsidiary of CNH Industrial, which designs, manufactures and distributes under the Iveco brand a wide range of light, medium and heavy commercial vehicles and off-road trucks with over 163,000 units and 146,000 units sold in 2019 and 2020, respectively. Iveco with its affiliates and joint ventures has significant manufacturing presence in Europe, as well as production facilities in Asia, Africa and Latin America, where it produces vehicles equipped with the latest technologies. Iveco can provide technical support in close proximity to their customers, the world over. Iveco is the European market leader in CNG/LNG alternative propulsion technologies for trucks.

During fiscal year 2019, we entered into an agreement with Iveco under which it will provide advisory services, including project coordination, drawings and documentation support, engineering support, vehicle integration, product validation support, purchasing, and the implementation of the Iveco World Class Manufacturing Methodology.

Iveco and its affiliate, FPT Industrial, S.p.A., will provide engineering and manufacturing expertise to industrialize our BEV and FCEV trucks. In Europe, we established a joint venture with Iveco, and together, we are jointly developing cab-over BEV and FCEV trucks for sale in the European market. In North America, we will be responsible for manufacturing and production at our greenfield facility in Coolidge, Arizona.

 

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North America Engineering and Production Alliance: Iveco agreed to provide $100.0 million of engineering and production support and access to intellectual property valued at $50.0 million to help bring our trucks to the North American market. We believe this alliance significantly de-risks our operational execution by leveraging the expertise and capabilities of one of the world’s leading commercial vehicle manufacturers, and we retain 100% of the North American business as a result.

 

   

Europe Joint Venture: Our 50/50 joint venture with Iveco will leverage Iveco’s engineering expertise and existing production and sales/service footprint. We believe this joint venture allows us to accelerate penetration into the attractive European market while minimizing execution risk and optimizing capital allocation and our management bandwidth.

In addition to the manufacturing and production expertise, one of the benefits of this partnership is our ability to leverage Iveco’s existing assortment of parts, thereby decreasing our purchasing expenses, and accelerating the vehicle validation process.

Bosch

Bosch is a leading global supplier of technology and services to automotive, industrial, energy, building technology, and consumer end-markets with approximately 394,500 employees and sales of approximately 71.6 billion euros in 2020.

Working with Bosch, we have re-imagined the commercial vehicle powertrain from the ground up. Bosch will supply their latest design rotors and stators for our electric truck e-axles as well as state-of-the-art inverters. We are also working with Bosch on the fuel cell assembly utilizing Bosch components.

Other Key Industry Partners and Suppliers

Hanwha

Hanwha is a world leader in renewable energy and solar panel manufacturing and is partnering with us to assist in obtaining clean energy for our hydrogen fueling network. Hanwha Q Cells is our exclusive solar panel provider (to third-party solar farm developers), which will help generate the clean electricity that is critical to the production of renewable hydrogen.

Nel

We have partnered with Nel for the build out of our on-site gaseous hydrogen production and fuel dispensing stations. Nel is an industry leader in the manufacturing of electrolyzers.

Romeo Power

Romeo is an energy storage technology company focused on designing and manufacturing lithium-ion battery modules and packs for commercial electric vehicles. Romeo provides us with battery modules for the battery pack designed by Nikola and integrated into our trucks.

EDAG

EDAG is a global engineering service provider to the commercial vehicle industry. EDAG provides support for our cab and chassis engineering services.

WABCO

WABCO is a leading global supplier of braking control components and air management systems to medium- and heavy-duty trucks. WABCO provides us with industry-leading safety technologies including electronic braking systems, as well as traction and stability control technologies.

 

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MAHLE

Mahle is a leading global supplier of thermal management systems for heavy-duty trucks. Mahle provides us with industry leading thermal management system technologies.

Manufacturing and Production

Leveraging Iveco’s Capacity for Initial Units

We plan to produce and sell BEV and FCEV trucks in North America and Europe. Our joint venture with Iveco provides us with manufacturing capacity to build trucks for the North American market before the completion of our manufacturing plant in Coolidge, Arizona. During the fourth quarter of 2020, we made significant progress at our joint venture manufacturing facility on Iveco’s campus in Ulm, Germany. The building dismantling and building refurbishment, including the civil works (floor, heating, system, and walls), have been completed. The assembly and installation of the customized Automatic Guided Vehicle Systems, or AGVs has begun. The crane and subgroup infrastructure has also been installed and completed. The logistics warehouse, internal logistics, end of line, finishing, enterprise resource planning system implementation, and the ordering and installation of tools and equipment are all on pace for completion by the end of May 2021, with trial production set to begin in June 2021.

We have also completed assembling the first five BEV prototype trucks at the Ulm, Germany facility and expect to assemble the next nine in the first half of 2021. In the second half of 2021, we expect to begin production of the BEV truck for North America delivery at the joint venture manufacturing facility. These first trucks will be imported into North America to fulfill launch customer orders. We also plan to build both the BEV and FCEV trucks for the European market in Iveco’s Ulm, Germany facility.

U.S. Production Facility

In 2019, we acquired an approximately 400-acre parcel of real property in Coolidge, Arizona, which is located about 50 miles south of Phoenix, Arizona. We believe the parcel is well suited for our planned greenfield manufacturing facility due to its proximity to the Interstate 10 highway, the Interstate 8 highway, and a railway spur that abuts the parcel.

In July 2020, we broke ground on phase one of the U.S. manufacturing facility in Coolidge, Arizona. In a benchmark example of cooperation and collaboration between us, the City of Coolidge, Pinal County, and our general contractor, Walbridge, the facility’s master site plan has been completed, submitted, and approved by the City of Coolidge. Currently, the construction of the assembly shop is on track to be completed towards the end of 2021.

Based on our current rate of construction, we have decided to advance our truck build plan and have scheduled production trials starting second half of 2021. The full completion of the assembly shop is planned to continue through 2021, followed by a ramp up to a full production volume.

In January 2021, we entered into a master utility agreement with Global Water Resources, Inc., a pure-play water resource management company, to provide water and wastewater services to our manufacturing plant in Coolidge, Arizona. This agreement helps with our goal of creating the smallest environmental footprint possible in the design and construction of our manufacturing site. The engagement of Global Water reflects a shared commitment to a sustainable future for Arizona and beyond.

Our production targets include:

Phase 1—Low Volume Production—up to 5,000 units per year:

 

   

Warehouse space (approximately 100,000—150,000 square feet)

 

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Low-volume production capacity (approximately 5,000 units per year)

 

   

Trial production to begin in the second half of 2021

 

   

Expect to complete construction by the end of 2021

 

   

Expect commissioning and start-up with the BEV truck in production in the first quarter of 2022

Phase 2—High Volume Production—up to 30,000 units per year:

 

   

Expect to begin construction in early-2022

 

   

Expect to complete manufacturing facility

 

   

High-volume production capacity (approximately 30,000 units per year)

 

   

Expect to complete construction by the end of 2022

 

   

Expect commissioning and start-up with Nikola Tre FCEV in production in the second half of 2023 and Nikola Two FCEV in late 2024

In addition, phase 3 of construction is expected to begin in early 2023 and be completed by the end of 2023.

European Production

We expect to utilize Iveco’s excess capacity for the foreseeable future, giving us the ability to produce 10,000 units per year. The joint venture may seek to build a greenfield manufacturing facility, once we have sufficient hydrogen station network density in Europe to facilitate sales over 10,000 units per year. We anticipate national and local grants and loan support may be available to help fund a greenfield development in Europe.

Development Timeline

The development timeline for our trucks has accelerated upon entering a production alliance with Iveco. This partnership provides us the benefit of leveraging Iveco’s expertise, and the Class 8 S-WAY truck platform in the design, development, testing and validation of the BEV truck. By focusing initial development efforts on the BEV truck, we were able to accelerate our go-to-market strategy by approximately 1-2 years.

BEV Development

Upcoming key milestones in the commercialization of the Nikola Tre BEV truck are as follows:

 

   

Start of trial production at Iveco’s facility in Ulm, Germany in the second quarter of 2021

 

   

Start of trial production at our facility in Coolidge, Arizona in the second half of 2021

FCEV Development

Key milestones in the commercialization of the Nikola Tre FCEV (North America) trucks are as follows:

 

   

Nikola Tre FCEV start of alpha builds in Coolidge, Arizona and Ulm, Germany in the second quarter of 2021

 

   

Testing of Nikola Tre alpha trucks in the U.S. in the fourth quarter of 2021

 

   

Alpha customer fleet and on-road validation in the second quarter of 2022

 

   

Testing of beta trucks in U.S. in the third quarter of 2022

 

   

Beta customer fleet and on-road validation and mile accumulation in the fourth quarter of 2022

 

   

Start of production in Coolidge, Arizona for sale into North American market in the second half of 2023

 

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Key milestones in the commercialization of the Nikola Two FCEV (North America) is as follows:

 

   

Alpha customer fleet and on-road validation and mile accumulation in the fourth quarter of 2022

 

   

Beta customer fleet and on-road validation and mile accumulation in the fourth quarter of 2023

 

   

Start of production in Coolidge, Arizona for sale into the North American market in the second half of 2024

Key milestones in the commercialization of the Nikola Tre FCEV (Europe) is as follows:

 

   

Nikola Tre FCEV start of production at Iveco’s facility in Ulm, Germany for sale into the European market in 2024

Strategy

Management Team Focused on Execution and Efficient Capital Allocation

Given the capital-intensive nature of our business model, we believe that efficient capital allocation will be an important determinant of our long-term success. We believe our disciplined and creative approach to optimize capital allocation will allow us to execute on our ambitious business plan.

Capital optimization measures include:

 

   

Our strategic partnerships with world-class automotive suppliers to develop leading next-generation powertrain technology. Our ability to leverage expertise from OEM and top-tier supplier brands has allowed us to accelerate the production of our product portfolio while decreasing development costs. Our joint venture with Iveco allows us to manufacture trucks, gain market share, and start generating revenue prior to building a greenfield manufacturing facility by utilizing Iveco’s excess capacity.

 

   

Our multi-phased approach to building our greenfield production plant in the U.S., which we expect will allow us to produce up to approximately 5,000 units a year and generate revenue one full year before the completion of our fully scaled manufacturing facility.

 

   

Our hydrogen fueling ecosystem, partnership approach and hydrogen station roll-out plans, which we expect will allow us to build stations in coordination with FCEV truck deliveries. We believe these plans can reduce the amount of outside capital needed during the buildout of our hydrogen station network.

Capture Early Mover Advantage

Given the speed at which the BEV and FCEV truck market is transforming, we have accelerated the production of our BEV truck to be early to market and we expect to generate revenue by late 2021. By being one of the first movers in the North American market, we expect to capture customers and any applicable zero-emission vehicle related incentives, including incentives available to those that are early adopters of BEV technology.

Maintain Strategic Partnership Focus to Drive Execution

Our position as a pioneer in the market has attracted global leaders across our supply chain, creating an extensive network for us to leverage. Our key partners include Iveco, Bosch, Romeo, WABCO, EDAG, Mahle, Nel, Hanwha, and others. We believe the expertise and know-how of these partners broaden our executional capability, reduce time to market, and solidify our technological leadership. In addition, these leading suppliers and partners will also allow us to manufacture and deliver our products with high quality standards. For example, our partnership with Iveco provides us with flexibility, scalability, and speed to market, while product design, supply chain management, and quality control are managed by our engineering team. Additionally, this partnership has allowed us to enter the European market in a capital efficient manner and years earlier than we

 

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originally anticipated. By entering into strategic partnerships, we believe we can reduce execution risk and increase speed to market, which provides a critical advantage as we look to execute upon our vision.

Leverage Hydrogen Station Dynamics to Transition Energy Future

We believe that the hydrogen station network and the production and distribution of hydrogen will provide a competitive advantage that drives sustained profitability and stockholder value over the long term. We believe that hydrogen-powered Class 8 trucks will be the product of choice in the medium- and long-haul markets. As OEMs begin to widely adopt hydrogen fuel cell technology, there will be a greater need for hydrogen distribution along key transportation routes, and we expect to be in a strong position to be the leading provider of hydrogen to commercial transportation companies. By enabling the world’s leading heavy-duty hydrogen station network, we anticipate playing a major role in the energy transformation of the future.

Continued Focus on Technological Innovations

We intend to continue to attract top talent to further enhance our talent pool and drive technological innovations. Additionally, we plan to further enhance our battery and fuel cell related technology to achieve better performance and shorten charging and fueling time, while increasing the range of our product portfolio.

Future Market Opportunities

Autonomous Driving

Our trucks can be designed with autonomous driving in mind, which may provide revenue to us in the future as well as potential cost savings to customers. Given the nature of our dedicated route customers, operating point-to-point interstate routes between our hydrogen stations, we believe our trucks provide the perfect testing environment for further development and advancement of autonomous technology. When the various regulatory agencies have approved some level of autonomy, we will consider a partnership with one of the autonomous software leaders to deploy its technology on our vehicles.

Autonomous driving represents significant incremental revenue opportunities for us as we could charge customers an additional fee for each mile driven autonomously. According to the U.S. Federal Motor Carrier Safety Association, in the U.S., truck drivers face total hours restrictions that do not allow them to operate their vehicles more than 11 hours a day. In Europe, drivers are generally restricted to 9 hours a day, according to the European Parliament. Autonomous driving will help achieve higher utilization by removing the limitations on how long a truck driver can operate.

In addition to the incremental revenue opportunity for us and the potential cost savings available to fleet operators as a result of autonomous technology, we believe autonomy will significantly improve safety and asset utilization which would increase the revenue generating potential for both us and our customers.

Energy Optimization

The global energy mix is in transition with more than 60% of new capacity coming from renewable energy sources, based on the Global Market Outlook for Solar Power provided by SolarPower Europe. The transition away from fossil fuel-based energy generation, such as coal or natural gas, is beneficial to the environment, but is not without its challenges. As renewable energy makes up a greater share of the energy mix, daily energy production becomes more volatile, and the energy production curve becomes less predictable.

With fossil-fuel based energy, demand peaks are typically addressed by burning natural gas in turbine-based power plants. With certain types of renewable energy, one does not have similar control over energy production, and instead the production curve is determined based on the daily solar cycle and weather patterns, which means daily energy production becomes more volatile. This increased volatility creates a distorted energy production curve, resulting in both predictable (e.g., the sun comes out every day) and unpredictable (e.g., the wind blows

 

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stronger on some days compared to others) surplus energy production capacity. This surplus energy typically goes unused, and in extreme cases must be traded away at zero or even negative revenue to the utility provider.

 

Hydrogen production can be used to balance the grid by taking excess energy production and storing it for future use. We believe we can also help balance the grid by allowing utilities and power providers to interrupt hydrogen station electricity consumption during peak demand. Our ability to turn excess energy into hydrogen may offer operators and energy providers the ability to increase revenue by selling us otherwise wasted off-peak generating capacity. Additionally, the ability to store unused energy in the form of hydrogen reduces the need for peak power generating plants that are typically costly to build and operate, and that historically are heavily underutilized. Instead, we could potentially build excess hydrogen storage on-site, then sell excess hydrogen back to the grid during periods of peak demand.

 

Sales and Marketing

We take an insight-driven, strategic approach to our go-to-market strategy. Across the product portfolio, we are commissioning studies, conducting focus groups and gaining insight intended to focus sales and marketing efforts in a customer and partner-centric way and grounded on a foundation of zero-emissions. Our primary brand awareness is generated through traditional and social media.

Research and Development

Our research and development activities take place out of our headquarters facility in Phoenix, Arizona and at our development partners’ facilities located around the world.

 

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The primary areas of focus for research and development by us and our partners include, but are not limited to:

 

   

fuel cell;

 

   

battery pack and battery management systems, or BMS;

 

   

vehicle controls;

 

   

infotainment;

 

   

e-axle and inverter;

 

   

functional safety;

 

   

energy storage; and

 

   

hydrogen production, storage, and dispensing.

Most of our current activities are focused on the research and development of our BEV and FCEV trucks. We work closely with our partners, including without limitation, Iveco and Bosch to develop truck platforms and bring them to market.

We have purchased equipment that will aid in the development, validation and testing of our powertrain, battery and fuel cell related technology. We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities to expand our product offering for both the North American and the European markets.

Intellectual Property

Our success depends in part upon our ability to protect our core technology and intellectual property. We protect our intellectual property rights, both in the U.S. and abroad, through a combination of patent, trademark, copyright and trade secret protection, as well as confidentiality and invention assignment agreements with our employees and consultants. We seek to control access to, and distribution of, our proprietary information through non-disclosure agreements with our vendors and business partners. Unpatented research, development, know-how, and engineering skills make a vital contribution to our business, and we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property.

As of March 31, 2021, we own or co-own approximately 23 issued U.S. utility patents, 10 issued U.S. design patents, 16 issued foreign patents and 45 pending or allowed foreign and U.S. patent applications. In addition, we have approximately 2 registered U.S. trademarks, 18 registered foreign trademarks, 30 pending U.S. trademark applications, and 12 pending foreign trademark applications. Our patents and patent applications are directed to, among other things, vehicle and vehicle powertrain (including battery and fuel cell technology), hydrogen fueling, off-road vehicle, and personal watercraft technologies.

Headquarters and R&D Facility

In June 2019, we moved into our headquarters and R&D facility in Phoenix, Arizona, which consists of more than 150,000 square feet.

Our People

Overview

Our strategy requires the development and integration of advanced technologies and their successful commercialization in North America and in Europe. Execution of this strategy depends on our ability to attract, develop and retain key employees and members of our management team. The skills, experience and knowledge of our employees equip us to achieve our operational and strategic objectives.

 

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Governance

Our board of directors and its compensation committee oversee our workforce policies, programs and initiatives. As noted in its charter, our compensation committee is responsible for periodically reviewing and approving employee programs and initiatives, including retention and succession strategies, which ensures that our board of directors and its committees guide how we manage our workforce in a way that aligns with our values.

Our management team designs and administers all employment matters, such as recruiting and hiring, onboarding and training, compensation and rewards, performance management and professional development. We continuously evaluate and enhance our internal policies, processes and practices to increase employee engagement and productivity.

Workforce

We have a highly skilled and experienced workforce with nearly 90% of our product development team having relevant automotive and technology experience and over 80% of our senior leaders each having over 20 years of experience in their respective fields.

As of March 31, 2021, we had approximately 530 employees, the majority of whom are located in the Phoenix, Arizona metropolitan area. During fiscal year 2020 we doubled the number of employees while maintaining a voluntary turnover rate of less than 7%, well below competitive norms. We actively seek to manage internal talent mobility through promotions and new assignments to create a high-performing employee base with diverse experiences. 23% of our employees assumed larger responsibilities in connection with a promotion last year, thereby enhancing their skills, growing their careers and celebrating their performance.

We are committed to developing our people to meet our business needs and provide significant on the job experiences to develop and equip them to design and manufacture innovative and technologically advanced vehicles and products. We have implemented methodologies to manage individual performance, development and feedback. Additionally, we hold regular team and company-wide townhalls to provide employees with ongoing exposure to leaders across the company, key business developments, and status of product and project milestones. These forums enable employees to learn more about our business beyond their immediate day to day roles while providing an opportunity for them to ask questions and seek answers to any concerns.

Approximately 50% of our workforce is ethnically or gender diverse and we value and appreciate the distinct contributions every member of our community makes to our growth. We strive to cultivate a shared culture and mission that celebrates each individual at every level. We embrace the diversity of our team members, customers, stakeholders and consumers, including their unique backgrounds, experiences, perspectives and talents. We are committed to providing an environment where human dignity prevails. Every person has an equal opportunity for hire, assignment, and advancement without regard to race, color, religion or belief, national origin, sex, childbirth or pregnancy related conditions, age, genetic information, sexual orientation, gender identity and/or expression, disability, covered military or veteran status, or any other status protected by applicable federal, state, or local law at all times from recruitment through employment and promotion.

Culture

We invest considerable time and resources to see that our values permeate all aspects of our operations and decision-making, and that our policies and practices reflect our commitment to them. Any employee with concerns related to our ethics and integrity, or who wishes to report incidents of fraud or abuse, may call an external hotline to register those concerns anonymously without fear of attribution or retribution.

We are also committed to the health, safety and wellbeing of those who work for us. We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness

 

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programs, including benefits that provide protection and security so they can have peace of mind with events that may require time away from work or that may impact their financial well-being, and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families. Additionally, we commit significant time and resources to a broad range of safety training, beginning with an employee’s initial onboarding to ensure that she or he is equipped to meet the requirements of her or his position. We strive to provide reasonable accommodation for qualified employees with disabilities and employees whose religious belief, practice, or observance conflicts with a workplace requirement.

We provide a robust and holistic rewards program to meet the needs of our employees and drive results in our business. We have designed, and will modify as necessary, our compensation and benefits program to attract, retain, incent and reward deeply talented and qualified employees who share our philosophy and desire to work towards achieving our strategic and operational goals. In addition to salary, our program provides stock awards, a 401(k) plan with employer match, heavily subsidized healthcare and insurance benefits, health savings accounts, paid time off, family leave, family care resources, flexible work schedules, employee assistance programs, and on-site services such as a fitness center and cafe. Beyond our broad-based stock award programs, we have used targeted equity-based grants with vesting conditions to facilitate the future performance and retention of key people with critical roles, skills and experience.

None of our employees are represented by an external employee organization such as a union, works council or employee association and we believe our relations with our employees are favorable.

We actively seek to comply with all local, state and federal employment laws and we monitor current and emerging labor and human capital management risks and mitigate exposure to those risks.

Government Regulation

We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which we are subject govern, among others, water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the protection of the environment, natural resources and endangered species; and the remediation of environmental contamination. We have been required to obtain and comply with the terms and conditions of multiple environmental permits, many of which are difficult and costly to obtain and could be subject to legal challenges. Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue our operations.

Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, standards adopted by regulatory agencies and the permits and licenses. Each of these sources is subject to periodic modifications and increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, and possibly orders to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses.

Vehicle Safety and Testing Regulation

Our vehicles are subject to, and are designed to comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration, or NHTSA, including applicable U.S. federal motor vehicle safety standards, or FMVSS. As a manufacturer, we must self-certify that the vehicles meet or are exempt from all applicable FMVSS before a vehicle can be imported into or sold in the U.S.

There are numerous FMVSS that apply to our vehicles. Examples of these requirements include:

 

   

Electronic Stability Control—performance and equipment requirements on heavy-duty vehicles to reduce crashes caused by rollover or by directional loss-of-control;

 

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Air Brake Systems—performance and equipment requirements of air brake systems on heavy-duty vehicles to ensure safe braking performance under normal and emergency conditions;

 

   

Electric Vehicle Safety—limitations on electrolyte spillage, battery retention, and avoidance of electric shock following specified crash tests;

 

   

Flammability of Interior Materials—burn resistance requirements for materials used in the occupant compartment; and

 

   

Seat Belt Assemblies and Anchorages—performance and equipment requirements to provide effective occupant protection by restraint and reducing the probability of failure.

The following FMVSS do not apply to our vehicles, but we are incorporating the applicable components of the standards for additional safety performance:

 

   

Tire Pressure Monitoring System—performance requirements to warn the driver of significant under-inflation of tires resulting in safety problems;

 

   

Roof Crush Resistance—strength requirements for the occupant roof to prevent crushing of the roof into the occupant compartment in rollover crashes;

 

   

Minimum Sound Requirements for Hybrid and Electric Vehicles—performance requirements for sound to alert pedestrians that a commercial vehicle is in the immediate area; and

 

   

Crash Tests for High-Voltage and Hydrogen Fuel System Integrity—preventing electric shock from high voltage systems and fires that result from fuel spillage during and after motor vehicle crashes.

In addition to the FMVSS requirements for heavy-duty vehicles, we also design our vehicles to meet the requirements of the Federal Motor Carrier Safety Administration, or FMCSA, which has requirements for the truck and fleet owners. We also design to meet the requirements set forth in the Federal Motor Carrier Safety Regulations, or FMCSR, pertaining to the safety of the driver during operation of the vehicle.

There are numerous FMCSR that apply to our vehicles. Examples of these requirements include:

 

   

Step, Handhold and Deck Requirements—performance and equipment requirements to enhance the safety for entry, egress, and back of cab access of a heavy-duty vehicle.

 

   

Auxiliary Lamps—performance and placement requirements for lamps in addition to lamps that meet the requirements of FMVSS 108 Lamps, Reflective Devices and Associated Equipment.

 

   

Speedometer—performance and accuracy requirement for equipment indicating the vehicle speed. This includes both digital and analog displays.

We are also required to comply with other NHTSA requirements and federal laws administered by NHTSA, including early warning reporting requirements regarding warranty claims, field reports, death and injury reports, foreign recalls, and owner’s manual requirements.

The vehicles we will offer for sale in Europe are subject to United Nations Economic Commission Europe, or UNECE, safety testing regulations. Many of those regulations, referred to as European Union Whole Vehicle Type Approval, or WVTA, are different from the federal motor vehicle safety standards applicable in the U.S. and may require redesign and/or retesting. Our BEV and FCEV trucks are designed to meet specific NHTSA type approvals and we will commence with testing our vehicles for the WVTA and following European type approval-process to assure compliance with the UNECE requirements.

We have found there are UNECE compliance requirements and UN Global Technical Regulations, or GTR, applicable to heavy-duty vehicles in Europe, which have not been developed for heavy-duty vehicles by NHTSA or FMCSA. We have implemented the UNECE standards for additional safety during driving operation. The following are some UNECE standards and GTR applied to our BEV and FCEV trucks.

 

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Electromagnetic Compatibility & Interference—performance requirements for the prevention and interference of electromagnetic radiation which may cause disturbances in the drivability of the vehicles and other vehicles in the area.

 

   

Lane Departure Warning System—performance and testing requirements for a system that warns the driver of an unintentional drift of the vehicle out of its travel lane.

 

   

Electric Vehicle Safety—performance and testing requirements for BEVs during in-use and post-crash.

 

   

Hydrogen Fuel Cell Vehicle Safety—performance and testing requirements for FCEV during in-use and post-crash.

Our BEV and FCEV trucks consist of many electronic and automated components and systems. Our vehicles are designed to comply with the International Standards Organization’s, or ISO, Functional Safety Standard. This standard addresses the integration of electrical systems and software and identifies the possible hazards caused by malfunctioning behavior of the safety-related electrical or electronic systems, including the interaction of these systems.

EPA and CARB GHG Emissions & Agency Approvals

The U.S. Clean Air Act requires that we obtain a Certificate of Conformity issued by the EPA and a California Executive Order issued by the California Air Resources Board, or CARB, concerning emissions for our vehicles. A Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act’s standards and an Executive Order is required for vehicles sold in states that have sought and received a waiver from the EPA to utilize California standards. CARB sets the California standards for emissions control for certain regulated pollutants for new vehicles and engines sold in California. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of vehicles. There are currently four states which have adopted the California standard for heavy-duty vehicles.

The GHG Rule was incorporated into the Clean Air Act on August 9, 2011. Since our vehicles have zero-emissions, we are required to seek an EPA Certificate of Conformity for the GHG Rule, and a CARB Executive Order for the CARB Heavy Duty Zero Emissions Vehicle Rule. We expect to receive the Certificate of Conformity followed by an Executive Order for sales of our BEV in May 2021.

Battery Safety and Testing Regulation

Our vehicles are designed to ISO standards for electrically-propelled vehicles in vehicle operational safety specifications and connecting to an external power supply. Additionally, we are incorporating other ISO battery system standards in our vehicles.

Some of these standards include:

 

   

Conductive Charging—for on board charge electromagnetic requirements;

 

   

Battery Pack Enclosure Protection—degrees of protection of the electrical equipment within an enclosure from the effects due to the ingress of water; and

 

   

Testing Lithium-ion Traction Battery Packs and Systems—safety performance requirements during a variety of testing, such as vibration, thermal cycling, overcharge, and loss of thermal control.

Our battery pack conforms with mandatory regulations governing the transport of “dangerous goods,” which includes lithium-ion batteries that may present a risk in transportation. The governing regulations, which are issued by the Pipeline and Hazardous Materials Safety Administration, or PHMSA, are based on the UN Recommendations on the Safe Transport of Dangerous Goods Model Regulations, and related UN Manual Tests and Criteria. The regulations vary by mode of transportation when these items are shipped by ocean vessel, rail, truck, or by air.

 

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We are designing our battery packs to meet the compliance requirements of the UN Manual of Tests and Criteria demonstrating our ability to ship the vehicles and battery packs by any transportation method.

These tests include:

 

   

Altitude simulation—simulating air transport;

 

   

Thermal cycling—assessing cell and battery seal integrity;

 

   

Vibration—simulating vibration during transport;

 

   

Shock—simulating possible impacts during transport;

 

   

External short circuit—simulating an external short circuit; and

 

   

Overcharge—evaluating the ability of a rechargeable battery to withstand overcharging. The cells in our battery packs are composed mainly of lithium-ion.

In addition, our battery packs include packaging for the lithium-ion cells. This packaging includes trace amounts of various hazardous chemicals whose use, storage and disposal is regulated under federal law.

GHG Emissions Credits—U.S. Environmental Protection Agency

In connection with the delivery and placement into service of our vehicles under the GHG Rule, we will earn tradable credits that under current laws and regulations can be sold. Under the EPA’s GHG Rule, each BEV earns a credit multiplier of 4.5 and each FCEV earns a credit multiplier of 5.5 for use in the calculation of emission credits. Commercial vehicle manufacturers are required to ensure they meet the nitrogen oxide emission standard for each type of vehicle produced. This emission standard continues to lower the emission requirement over time, increasing the difficulty for conventional diesel vehicles to meet the standard. Until technology catches up for commercial vehicles, manufacturers of diesel trucks will need to purchase GHG credits to cover their emission deficit. The GHG Rule provides the opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these regulatory requirements. Furthermore, the regulation does not limit the number of BEV and FCEV credits sold within the same commercial vehicle categories.

GHG Emissions Credits—California Air Resources Board

California also has a GHG emissions standard which follows very closely to the EPA GHG Emissions Standard. The delivery and placement into service of our zero-emission vehicles in California under the GHG Rule will earn us tradable credits that can be sold. Under CARB GHG regulations, each BEV will also earn a credit multiplier of 4.5 and each FCEV will earn a credit multiplier of 5.5 for use in the calculation of emission credits. Commercial vehicle manufacturers are required to ensure they meet the nitrogen oxide emission standard for each type of vehicle produced. This emission standard continues to lower the emission requirement over time, increasing the difficulty for conventional diesel vehicles to meet the standard.

Until technology catches up for commercial vehicles, manufacturers of diesel trucks will need to purchase GHG credits to cover their emission deficit. The California timeline for reaching very low GHG emissions is more aggressive than the EPA. Commercial vehicle manufacturers will look to cover their emission deficits first for California. The GHG Rule provides an opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these regulatory requirements. Furthermore, the regulation does not limit the number of BEV and FCEV credits sold within the same commercial vehicle categories.

Examples of other potential incentive and grant programs that either we or our customers can apply for include:

 

   

Low Carbon Fuel StandardThe Low Carbon Fuel Standard was initially developed in California and is quickly gaining traction in other jurisdictions around the world. The goal is to reduce the well-to-wheel carbon intensity of fuels by providing both mandated reduction targets as well as tradeable/sellable credits.

 

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Purchase IncentivesBoth California and New York have active programs that provide “cash on the hood” incentives to customers that purchase zero-emission vehicles. In California, the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project incentives reach as high as $165,000 for a Class 8 BEV and $315,000 for a Class 8 FCEV, and for the New York Truck Voucher Incentive Program NYTVIP, as high as $185,000 for a Class 8 BEV. Other states are considering developing similar programs.

 

   

Grant ProgramsGovernment entities at all levels from federal, including DOE, state, (for example, CARB), local (for example, North Texas Council of Governments), have grant programs designed to increase and accelerate the development and deployment of zero-emission vehicles and infrastructure technologies.

Strategic Collaborations

Commercial Letter with Nimbus, a Bosch entity

On March 2, 2020, we entered into a Commercial Letter Agreement with Nimbus, or the Nimbus Commercial Letter Agreement. Under the Nimbus Commercial Letter Agreement, we may select an autonomous driving software and hardware package to be used on our trucks from any company, but we agreed to use Nimbus’ affiliates’ autonomous driving components on our autonomy-equipped trucks, subject to certain pricing, quality, functionality, reliability deliverability and availability conditions.

Pursuant to the Nimbus Commercial Letter Agreement, we are obligated to receive a quantity of services, including inverter and fuel cell power module development and system integration services, that result in a minimum payment to Nimbus and its affiliates. We also agreed to negotiate in good faith toward a supply agreement with Nimbus, or an affiliate of Nimbus, for inverter development, fuel cell power module development and part supply. If Nimbus is not able to meet certain product specifications, delivery timelines, production quantities, efficiencies, pricing and prototypes within 30 days of receipt of a project proposal from us, after which time, we may source inverters from other suppliers.

European Alliance Agreement with CNHI/Iveco

On February 28, 2020, we entered into the Amended and Restated European Alliance Agreement with Iveco and, solely with respect to sections 9.5 and 16.18, CNHI, or the European Alliance Agreement, whereby us and CNHI/Iveco agreed to establish an entity for the purposes of developing and manufacturing BEV and FCEV trucks in Europe. Pursuant to the European Alliance Agreement, we will each contribute equal amounts of cash and in kind contributions necessary for each party to subscribe to 50% of the capital stock of the entity contemplated by the agreement, and the entity will be funded in accordance with the business plan through the contributions made by each party. CNHI shall also have the right to negotiate a license to use certain of our intellectual property in Europe for applications outside the entity.

Such entity, Nikola Iveco Europe Gmbh, or Nikola Iveco JV, was established in April 2020. On April 9, 2020, a series of agreements was entered into among us, Iveco and Nikola Iveco JV, including an Iveco Technology License Agreement, a Nikola Technology License Agreement, a European Supply Agreement and a North America Supply Agreement. Under the Iveco Technology License Agreement, Iveco granted Nikola Iveco JV a nonexclusive, royalty-free license under Iveco IP to deploy, through the term of the European Alliance Agreement, BEV and FCEV trucks in Europe. Under the Nikola Technology License Agreement, we granted Nikola Iveco JV a nonexclusive, royalty-bearing license under our intellectual property to deploy, through the term of the European Alliance Agreement, BEVs and FCEVs in Europe.

Under the European Supply Agreement, Nikola Iveco JV was granted certain exclusive rights by Iveco to produce and supply BEVs and FCEVs to Iveco in Europe, and under the North American Supply Agreement, Nikola Iveco JV was granted certain exclusive rights by us to produce and supply BEVs and FCEVs to us in North America. The European Supply Agreement runs concurrent with the term of the European Alliance

 

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Agreement. The North America Supply Agreement terminates upon the earlier of December 31, 2024 or the occurrence of certain other events, including two years following the date we begin manufacturing BEVs and FCEVs in North America.

The initial term of the European Alliance Agreement expires on December 31, 2030, with automatic renewals of ten year periods unless terminated by either party with written notice received by the non-terminating party no later than December 31, 2029 for the initial term and no later than the end of the 7th year of any subsequent term.

CNHI Services Agreement with CNHI/Iveco

On September 3, 2019, we entered into the CNHI Services Agreement with CNHI and Iveco in conjunction with our Series D preferred stock financing. As a result of this agreement, we issued to Iveco 25,661,448 shares of Series D preferred stock in exchange for a license valued at $50.0 million pursuant to an S-WAY Platform and Product Sharing Agreement, $100.0 million in in-kind services, pursuant to a Technical Assistance Service Agreement, or the Technical Assistance Service Agreement, and $100.0 million in cash. The CNHI Services Agreement may be terminated by mutual agreement of the parties, or at the election of a non-breaching party upon the breach by the other of the CNHI Services Agreement, the S-WAY Platform Product Sharing Agreement, or the Technical Assistance Service Agreement if such breach has not been cured within thirty days of receipt of written notice. The CNHI Services Agreement may be also be terminated upon bankruptcy or insolvency proceedings against us or CNHI/Iveco. Under the S-WAY Platform and Product Sharing Agreement, we were granted a nonexclusive license to Iveco’s intellectual property, technology and designs related to its latest European heavy-duty truck platform, or the S-WAY. The license does not contain any power train related components, as we plan to use our proprietary electric drive system, but does include access to the semi-articulated and articulated versions of the S-WAY in the 4x2, 6x2 and 6x4 variants. The license also gives us access to Iveco’s parts and suppliers list related to the S-WAY and bears a seven-year royalty from the start of production of 1.25% on FCEVs and 1.00% on BEVs that incorporate a material portion of such licensed technology. This license agreement will continue in effect until terminated by mutual agreement of the parties, a non-curable breach has occurred or a bankruptcy related event of either party.

Master Agreement with Anheuser-Busch

On February 22, 2018, we entered into the Master Agreement—Tractors with AB, or the Master Agreement, whereby AB agreed to lease from us hydrogen fueled tractors and related equipment to be used by AB for transportation and related services at certain AB locations. Pursuant to the Master Agreement, we will provide maintenance and repairs for the leased equipment. The term of the Master Agreement commenced January 1, 2018, and remains available to cover future leases between the parties unless terminated by either party if either party defaults and fails to cure such default within thirty days, or unless terminated by AB with three hundred sixty days prior written notice to us.

Supply Agreement with Nel

On June 28, 2018, we entered into the Supply Agreement for electrolyzers with Nel, or the Supply Agreement, whereby we agreed to purchase electrolyzers from Nel. Pursuant to the Supply Agreement, we will source electrolyzers and station equipment exclusively from Nel in connection with the development and implementation of on-site hydrogen production and dispensing stations. Our obligation to source electrolyzers from Nel expires on the date upon which enough electrolyzers have been ordered to produce a specified amount of hydrogen per day; the terms of the Supply Agreement remain in effect for five years following that date, unless terminated for default by either party (with such default subject to cure within sixty days).

Commercial Framework Agreement with Green Nikola Holdings

On November 9, 2018, we entered into the Commercial Framework Agreement, or the Framework Agreement, with Green Nikola Holdings LLC, or GNH, in connection with GNH’s subscription for and purchase

 

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of our shares. Pursuant to the Framework Agreement, GNH agreed to provide services to us and we agreed to make certain commitments to GNH, or Projects, pursuant to statements of work. The Framework Agreement is in effect until the expiration or termination of all Projects, or GNH reducing its equity position in us below 50% percent of the number of shares acquired in November 2018. The Framework Agreement may be terminated by either party for cause (with thirty days to cure such breach), bankruptcy, or GNH may terminate the Framework Agreement if we fail to render any payment due to GNH for more than sixty days or undergoes a change of control without the prior written consent of GNH.

Memorandum of Understanding with General Motors

On November 29, 2020, we entered into a non-binding memorandum of understanding, or MOU, with General Motors for a global supply agreement related to the integration of GM’s Hydrotec fuel-cell system into our commercial semi-trucks. Under the terms of the MOU, we will have an ability to work with GM to integrate GM’s Hydrotec fuel-cell technology into our Class 7 and Class 8 zero-emission semi-trucks for the medium- and long-haul trucking sectors. The MOU also contemplates the parties considering a potential supply arrangement related to GM’s Ultium batteries for use in our Class 7 and Class 8 trucks. The terms of any definitive agreement are subject to the negotiation and execution of definitive documentation.

Purchase Agreement with WVR

On June 22, 2021 we entered into the Hydrogen Purchase Agreement with WVR pursuant to which we agreed to purchase hydrogen from the Plant being developed by WVR. The Hydrogen Purchase Agreement has an initial term ending on the later of (i) twelve years after the construction of the Plant or (ii) ten years after the commercial operation date, which is the date the Plant has completed all construction, testing, permitting and start-up as is required to be available, without restrictions, to produce and deliver hydrogen meeting the specifications provided in the Hydrogen Purchase Agreement on a commercial basis. The Hydrogen Purchase Agreement automatically renews for five year terms ending on December 31 of each year, unless terminated by either party with 180 days’ prior written notice.

In connection with the Hydrogen Purchase Agreement, on June 22, 2021, we also entered into a Membership Interests Purchase Agreement with WVR and the WVR Sellers, pursuant to which, subject to the terms and conditions therein, we purchased a 20% equity interest in WVR in exchange for $25 million in cash and $25 million of our Common Stock. Pursuant to the MIPA, we will also pay the WVR Sellers an amount equal to the total economic benefit (as defined in the MIPA) received by us, minus the economic benefit actually received or realized by us that is greater than an agreed-upon threshold in the event any environmental, clean energy, low-carbon, production, or similar tax credits newly created pursuant to any federal or state legislation is adopted between the closing date and the first anniversary of the closing date and arising from the generation or production of hydrogen or hydrogen power in the manner contemplated by WVR for the designing, developing, building and operation of the Plant results in an economic benefit us as a member of WVR.

In addition, on June 22, 2021, we and the WVR Sellers entered into a Second Amended and Restated Limited Liability Company Agreement of WVR, pursuant to which, among other things, we, in our sole discretion, obtained the right to own up to 20% of the entity to which WVR will transfer ownership of the hydrogen gas turbine to be part of the business of the project, without further consideration paid therefore, subject to mutual agreement among us and the WVR Sellers with respect to the terms of governance and restrictions on transfer of equity.

Legal Proceedings

On September 10, 2020, Hindenburg Research LLC reported on certain aspects of our business and operations. We and our board of directors retained Kirkland & Ellis LLP to conduct an internal review in connection with the Hindenburg article, or the Internal Review, and Kirkland & Ellis promptly contacted the

 

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Division of Enforcement of the U.S. Securities and Exchange Commission to make it aware of the commencement of the Internal Review. We subsequently learned that the staff of the Division of Enforcement had previously opened an investigation. On September 14, 2020, we and five of our officers and employees, including Mark A. Russell, our Chief Executive Officer, received subpoenas from the Staff of the Division of Enforcement as a part of a fact-finding inquiry related to aspects of our business as well as certain matters described in the Hindenburg article. The Staff of the Division of Enforcement issued additional subpoenas to another three of our officers and employees, including Kim Brady, our Chief Financial Officer, on September 21, 2020 and to our current and former directors on September 30, 2020.

We and Mr. Milton also received grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York, or the SDNY, on September 19, 2020. On September 20, 2020, Mr. Milton offered to voluntarily step down from his position as executive chairman, as a member of our board of directors, including all committees thereof, and from all positions as an employee and officer. The board accepted his resignation and appointed Stephen Girsky as Chairman of the board of directors. We subsequently have appointed three new board members, Steve M. Shindler, Bruce L. Smith and Mary L. Petrovich.

We also received a grand jury subpoena from the N.Y. County District Attorney’s Office on September 21, 2020. On October 16, 2020, the N.Y. County District Attorney’s Office agreed to defer its investigation; it has not withdrawn its subpoena issued to us, but has informed us that no further productions are necessary at this time.

On October 28, 2020, we received an information request from The Nasdaq Stock Market LLC, seeking an update on the status of the Staff of the Division of Enforcement and SDNY inquiries, which we provided.

On March 24, 2021, the Staff of the Division of Enforcement issued an additional subpoena related to our

projected 2021 cash flow and anticipated use of funds from potential 2021 capital raises.

We are committed to cooperating fully with the Staff of the Division of Enforcement and the SDNY investigations, which are ongoing. As such, our counsel frequently engages with the Staff of the Division of Enforcement and the SDNY. Further, we have made voluminous productions of information and made witnesses available for interviews. We will continue to comply with the requests of the Staff of the Division of Enforcement and the SDNY and expect to make additional productions in the future. The documents and information requested in the subpoenas include materials concerning Mr. Milton’s and our statements regarding our business operations and our future.

As part of the Internal Review, which has been substantially completed, Kirkland & Ellis had full access to our data, emails and documents for collection and review. No request by Kirkland & Ellis for information from us was denied. Kirkland & Ellis was also given access to data contained on personal devices for over three dozen of our employees. Kirkland & Ellis, including with the assistance of contract attorneys, reviewed relevant documents in the legal, investor relations, finance, and human resources areas as well as our emails from January 1, 2016 through December 31, 2020, employee text messages, documents found in our data room and other corporate documents. The Internal Review also included targeted interviews of over thirty (30) Company personnel. Additionally, as part of the Internal Review, Kirkland & Ellis retained automotive experts at a well-known consulting firm to conduct an independent assessment of the current state of our technology development.

The Hindenburg article alleged that Mr. Milton or Nikola made a number of statements, which it asserted were inaccurate, including but not limited to the following:

 

  1.   in July 2016, we stated that we owned rights to natural gas wells, and in August 2016 that the wells were used as a backup to solar hydrogen production;

 

  2.   in August 2016, Mr. Milton and we stated that we had engineered a zero emissions truck;

 

  3.   in December 2016, Mr. Milton stated that the Nikola One was a fully functioning vehicle;

 

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  4.   that an October 2017 video released by us gave the impression the Nikola One was driven;

 

  5.   in April 2019, Mr. Milton stated that solar panels on the roof of our headquarters produce approximately 18 megawatts of energy per day;

 

  6.   in December 2019 and July 2020, Mr. Milton stated that we “can produce” over 1,000 kg of hydrogen at the Company’s demo stations and that we were “down below” $3/kg at that time;

 

  7.   in July 2020, Mr. Milton stated that “all major components are done in house”; he made similar statements in June 2020;

 

  8.   in July 2020, Mr. Milton stated that the inverter software was the most advanced in the world and that other OEMs had asked to use it; and

 

  9.   in July 2020, Mr. Milton stated that five trucks were “coming off the assembly line” in Ulm, Germany.

The statements listed above were inaccurate in whole or in part, when made. In other respects, the Hindenburg article’s statements about us were inaccurate. For example, the Automotive Experts determined that: (1) our workforce is led by technical and engineering leads that have deep industry experience and expertise; (2) our technological contributions and development are consistent with other OEMs at similar stages of development; and (3) our maturity level is consistent with that of an emerging OEM. These findings are inconsistent with the main conclusion of the Hindenburg article that we were an “intricate” or “massive fraud”.

In connection with its Internal Review, Kirkland & Ellis has not issued any conclusions, as of the date of this prospectus, as to whether any statements that may have been inaccurate when made violated any statute. Analysis is ongoing to assess, among other matters, whether any such statements were intentional, material, not corrected by other public statements, or harmful to our stockholders, either before or after our business combination and subsequent public listing in June 2020. Kirkland & Ellis further continues to assess the accuracy of other statements made by us, including in our current SEC filings.

The legal and other professional costs we incurred during the first quarter of 2021 and fiscal year 2020 in connection with the Internal Review and disclosed elsewhere in this prospectus include approximately $3.0 million and $8.1 million, respectively, expensed for Mr. Milton’s attorneys’ fees under his indemnification agreement. As of March 31, 2021 and December 31, 2020, we accrued approximately $3.9 million and $6.6 million, respectively, in legal and other professional costs for Mr. Milton’s attorneys’ fees under his indemnification agreement. We expect to incur additional costs associated with the Staff of the Division of Enforcement and the SDNY investigations and the Internal Review in fiscal year 2021, which will be expensed as incurred and which could be significant in the periods in which they are recorded.

We cannot predict the ultimate outcome of the Staff of the Division of Enforcement and the SDNY investigations, nor can we predict whether any other governmental authorities will initiate separate investigations. The outcome of the Staff of the Division of Enforcement and the SDNY investigations and any related legal and administrative proceedings could include a wide variety of outcomes, including the institution of administrative, civil injunctive or criminal proceedings involving us and/or current or former employees, officers and/or directors, the imposition of fines and other penalties, remedies and/or sanctions, modifications to business practices and compliance programs and/or referral to other governmental agencies for other appropriate actions. It is not possible to accurately predict at this time when matters relating to the Staff of the Division of Enforcement and the SDNY investigations will be completed, the final outcome of the Staff of the Division of Enforcement and the SDNY investigations, what if any actions may be taken by the Staff of the Division of Enforcement, the SDNY or by other governmental agencies, or the effect that such actions may have on our business, prospects, operating results and financial condition, which could be material.

The Staff of the Division of Enforcement and the SDNY investigations, including any matters identified in the Internal Review, could also result in (1) third-party claims against us, which may include the assertion of claims for monetary damages, including but not limited to interest, fees, and expenses, (2) damage to our

 

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business or reputation, (3) loss of, or adverse effect on, cash flow, assets, goodwill, results of operations, business, prospects, profits or business value, including the possibility of certain of our existing contracts being cancelled, (4) adverse consequences on our ability to obtain or continue financing for current or future projects and/or (5) claims by directors, officers, employees, affiliates, advisors, attorneys, agents, debt holders or other interest holders or constituents of ours or our subsidiaries, any of which could have a material adverse effect on our business, prospects, operating results and financial condition.

Further, to the extent that these investigations and any resulting third-party claims yield adverse results over time, such results could jeopardize our operations and exhaust our cash reserves, and could cause stockholders to lose their entire investment.

For a description of our other material pending legal proceedings, see Legal Proceedings in Note 14, Commitments and Contingencies, to our audited consolidated financial statements included elsewhere in this prospectus and Note 12, Commitments and Contingencies, to our unaudited consolidated financial statements included elsewhere in this prospectus and incorporated herein by reference.

 

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MANAGEMENT

Executive Officers and Directors

Our directors and executive officers and their ages as of May 19, 2021 are as follows:

 

Name

   Age     

Position

Executive Officers

     

Mark A. Russell

     58      President, Chief Executive Officer and Director

Kim J. Brady

     57      Chief Financial Officer

Joseph R. Pike

     39      Chief Human Resources Officer

Britton M. Worthen

     47      Chief Legal Officer and Secretary

Pablo M. Koziner

     48      President, Energy & Commercial

Non-Employee Directors

     

Stephen J. Girsky(3)

     59      Chairman of the Board

Sooyean Jin (a.k.a. Sophia Jin)(1)

     42      Director

Michael L. Mansuetti(1)

     55      Director

Gerrit A. Marx(2)

     45      Director

Mary L. Petrovich(3)

     58      Director

Steven M. Shindler(1)

     58      Director

Bruce L. Smith(2)

     58      Director

DeWitt C. Thompson, V(2)

     48      Director

Jeffrey W. Ubben(3)

     59      Director

 

(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Executive Officers

Mark A. Russell. Mr. Russell has served as our President and Chief Executive Officer and a member of our board of directors since June 2020. Prior to that, Mr. Russell served as President of Legacy Nikola from February 2019 to June 2020 and as a member of Legacy Nikola’s board of directors from July 2019 to June 2020. From August 2018 to February 2019, Mr. Russell explored new opportunities. Prior to that, Mr. Russell served as President and Chief Operating Officer of Worthington Industries (NYSE: WOR), a diversified metals manufacturing company, from August 2012 to August 2018. Mr. Russell received a B.I.S. in integrated studies from Weber State University and a juris doctor from Brigham Young University. We believe Mr. Russell is qualified to serve on our board of directors due to his extensive leadership and management experience at various public and private companies, including his experience serving as our President and Chief Executive Officer.

Kim J. Brady. Mr. Brady has served as our Chief Financial Officer since June 2020, and prior to that, served as Chief Financial Officer and Treasurer of Legacy Nikola from November 2017 to June 2020. Prior to joining Legacy Nikola, Mr. Brady served as senior managing director and partner of Solic Capital Management, LLC, a middle market financial advisory and principal investment firm, from 2012 to October 2017. Mr. Brady was co-head of Solic’s Special Situations Fund that invested across all levels of capital structure. Mr. Brady received a bachelor of science degree in management, finance and accounting from Brigham Young University and an MBA from Northwestern University’s Kellogg Graduate School of Management.

Joseph R. Pike. Mr. Pike has served as our Chief Human Resources Officer since June 2020, and prior to that, served as Legacy Nikola’s Chief Human Resources Officer from January 2018 to June 2020. Prior to joining Legacy Nikola, Mr. Pike served in various human resources positions at Vista Outdoor Inc. (NYSE: VSTO), an outdoor sports and recreational products company, including as senior director of talent and as director of leadership and organizational development from June 2015 to January 2018. At H.J. Heinz Company, a food

 

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processing company which is now a part of Kraft Heinz Co (Nasdaq: KHC), Mr. Pike served in various capacities from March 2013 to June 2015, including as human resources business partner, head of talent management and organizational effectiveness and associate director of performance. Mr. Pike received a bachelor’s degree in communications from Brigham Young University and a master’s degree in public administration from the Brigham Young University Marriott School of Management.

Britton M. Worthen. Mr. Worthen has served as our Chief Legal Officer and Secretary since June 2020, and prior to that, served as Legacy Nikola’s Chief Legal Officer and Secretary from October 2015 to June 2020. Prior to joining Legacy Nikola, Mr. Worthen was a partner at Beus Gilbert McGroder PLLC, a law firm, from May 2000 to September 2015. Mr. Worthen received a bachelor’s degree in Asian studies from Brigham Young University and a juris doctor from University of Michigan Law School.

Pablo M. Koziner. Mr. Koziner has served as our President of Energy & Commercial since June 2020. Prior to joining us, Mr. Koziner served in various capacities at Caterpillar Inc., a leading manufacturer of construction and mining equipment, from July 2001 to March 2020, including as President of Solar Turbines, Vice President of Electric Power, and in various roles in North and South America leading dealer relations. Mr. Koziner received a bachelor’s degree in political science and a juris doctor from Boston College.

Non-Employee Directors

Stephen J. Girsky. Mr. Girsky served as VectoIQ’s President, Chief Executive Officer and a director of VectoIQ from January 2018 to June 2020 and continues to serve on our board of directors following the completion of the Business Combination. Mr. Girsky is a Managing Partner of VectoIQ, LLC, an independent advisory and investment firm based in New York. Mr. Girsky served in a number of capacities at General Motors Company (NYSE: GM), a vehicle manufacturer, or General Motors, from November 2009 until July 2014, including Vice Chairman, having responsibility for global corporate strategy, new business development, global product planning and program management, global connected consumer/OnStar, and GM Ventures LLC, global research & development and global purchasing and supply chain. Mr. Girsky also served on General Motors’ board of directors following its emergence from bankruptcy in June 2009 until June 2016. Mr. Girsky currently serves on the board of directors of Brookfield Business Partners Limited, the general partner of Brookfield Business Partners, L.P. (NYSE: BBU; TSX BBU.UN), a private equity company. Mr. Girsky received a bachelor of science degree in mathematics from the University of California, Los Angeles and an M.B.A. from Harvard University. We believe Mr. Girsky is qualified to serve on our board of directors based on his extensive leadership and business experience, including his experience as a director of numerous public companies, together with his background in finance and public company governance.

Sooyean (Sophia) Jin. Ms. Jin has served as a member of our board of directors since June 2020, and prior to that, a member of Legacy Nikola’s board of directors from May 2019 to June 2020. Ms. Jin has served as senior director of venture investments of Hanwha Holdings USA, an investment-supporting organization for Hanwha affiliates pursuing strategic investments and M&A activities within North America, since January 2019, and served as director of venture investment of Hanwha Holdings USA from January 2018 to December 2018. Prior to that, Ms. Jin held various positions at Hanwha Q CELLS America Inc., a global solar cell and module manufacturer, including director of corporate planning from July 2013 to June 2015 and director and head of marketing from July 2015 to December 2017. Ms. Jin received a bachelor’s degree in business administration from Seoul National University and an M.B.A. from the Stanford University Graduate School of Business. We believe Ms. Jin is qualified to serve on our board of directors due to her extensive experience with renewable energy companies.

Michael L. Mansuetti. Mr. Mansuetti has served as a member of our board since June 2020, and prior to that, a member of Legacy Nikola’s board of directors from September 2019 to June 2020. Since July 2012, Mr. Mansuetti has been the President of Robert Bosch LLC, an automotive component supply company. Mr. Mansuetti received a bachelor of science degree in mechanical engineering from Clemson University. We

 

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believe Mr. Mansuetti is qualified to serve on our board of directors due to his expertise in advanced manufacturing, operations, and management and extensive leadership experience.

Gerrit A. Marx. Mr. Marx has served as a member of our board of directors since June 2020, and prior to that, a member of Legacy Nikola’s board of directors from September 2019 to June 2020. Mr. Marx has served as Chief Executive Officer of Iveco, a commercial goods manufacturing company, since March 2019 and as President of commercial and specialty vehicles of CNHI (Nasdaq: CNHI), an industrial goods manufacturing company, since January 2019. Prior to joining CNHI, Mr. Marx served as an operating partner at Bain Capital, a global private equity firm, from December 2012 to December 2018. Mr. Marx served as interim Chief Executive Officer of Wittur Holding GmbH, an elevator component manufacturing company, from May 2017 to March 2018 and as interim President of power tools of Apex Tool Group, LLC, a hand and power tool manufacturing company, from November 2014 to April 2015. Mr. Marx received a master of engineering equivalent in mechanical engineering and an M.B.A. equivalent from RWTH Aachen University, Germany, and a doctorate in business administration from Cologne University, Germany. We believe Mr. Marx is qualified to serve on our board of directors due to his extensive experience in the automobile industry as well as his experience in finance.

Steven M. Shindler. Mr. Shindler has served as a member of our board of directors since September 2020. He served as Chief Financial Officer of VectoIQ from January 2018 through the completion of the Business Combination. Mr. Shindler is a director of NII Holdings, Inc., a holding company that previously owned providers of wireless communication services under the Nextel brand in Latin America. Mr. Shindler served as Chief Executive Officer of NII from 2012 to August 2017 as well as from 2000 to 2008. Mr. Shindler served as Executive Vice President and Chief Financial Officer of Nextel Communications, Inc., a wireless service operator, from 1996 to 2000. Prior to joining Nextel, Mr. Shindler was Managing Director of Communications Finance at The Toronto Dominion Bank. Mr. Shindler is also a founding partner of RIME Communications Capital, a firm that has invested in early stage media, tech and telco companies. Mr. Shindler received a bachelor of arts degree in economics from the University of Michigan and an M.B.A. from Cornell University. We believe Mr. Shindler is qualified to serve on our board of directors due to his corporate financial management and strategic planning experience, including financial and operational knowledge and experience.

DeWitt C. Thompson, V. Mr. Thompson has served as a member of our board of directors since June 2020, and prior to that, a member of Legacy Nikola’s board of directors from July 2017 to June 2020. Mr. Thompson has served as Chairman and Chief Executive Officer of Thompson Machinery Commerce Corporation, a Caterpillar distributor in Tennessee and Mississippi, servicing heavy machinery, on-highway trucks, and power systems, since 1995. He has also served as Chairman for Aries Clean Energy since April 2010. Mr. Thompson founded PureSafety in 1999 and served as Chairman until the purchase of that company by Underwriters Laboratories in 2011. Mr. Thompson is also an owner and director of the Nashville Predators and sits on the board of directors for Wealth Access. He received a bachelor of science degree from the engineering school at Vanderbilt University. We believe Mr. Thompson is qualified to serve on our board of directors due to his extensive experience in renewable energy and machinery.

Jeffrey W. Ubben. Mr. Ubben has served as a member of our board of directors since June 2020, and prior to that, a member of the board of directors of Legacy Nikola from September 2019 to June 2020. Mr. Ubben founded Inclusive Capital Partners, L.P., a financial services company, in July 2020, and is a Managing Partner and member of the Management Committee. As of June 2020, Mr. Ubben retired from his positions at ValueAct Capital Management, L.P., a financial services company which he founded in 2000, where he served as Chief Executive Officer, member of the Management Committee, Chief Investment Officer, and Portfolio Manager. Mr. Ubben also founded Inclusive Capital Partners Spring Master Fund, L.P., an investment fund formerly known as ValueAct Spring Master Fund, L.P. in 2018, and currently serves as Portfolio Manager. Mr. Ubben has served as a member of the boards of directors of numerous public and private companies, including: Exxon Mobil Corporation (NYSE: XOM), an energy company, where he has served since February 2021; AppHarvest, Inc. (Nasdaq: APPH), an agricultural technology company, where he has served since March 2019, and is a member of the nominating and corporate governance committee; The AES Corporation (NYSE: AES), an

 

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electrical power distribution company, where he has served since January 2018, and is a member of the compensation and financial and audit committees; Enviva Partners, LP (NYSE: EVA), an industrial wood pellet production company, where he has served since June 2020, and is a member of the compensation and health, safety, sustainability and environmental committees; Twenty-First Century Fox, Inc. (Nasdaq: TFCF and TFCFA), a multinational mass media corporation which was acquired by Walt Disney Co (NYSE: DIS) in March 2019, from November 2015 to April 2018; and Willis Towers Watson plc (NYSE: WSH), a multinational risk management, insurance brokerage and advisory company, or Willis Towers, from January 2016 to November 2017, and Willis Group Holding plc, a subsidiary of Willis Towers, from July 2013 to January 2016. Mr. Ubben received a bachelor of arts degree in economics and political science from Duke University and an M.B.A. from the Kellogg School of Management at Northwestern University. We believe Mr. Ubben is qualified to serve on our board of directors due to his extensive background in finance and experience with numerous public company boards.

Bruce L. Smith. Mr. Smith has served as a member of our board of directors since November 2020. He has served as chairman and chief executive officer of Detroit Manufacturing Systems LLC, a Tier 1 component manufacturer for global automotive brands, since July 2018. Prior to joining Detroit Manufacturing Systems LLC, Mr. Smith served as President and Chief Executive Officer of BTM Company, a global leader of precision engineered tooling and production equipment, from July 2015 to July 2018. Mr. Smith also served as President and Chief Executive Officer of Elyria & Hodge Foundries, a company that produces complex gray and ductile iron castings, from April 2009 to July 2015, President and Chief Operating Officer of Guilford Mills, a high-tech performance fabrics supplier, from May 2005 to April 2009, President and Chief Executive Officer of Piston Group, an automotive supplier, from 2003 to 2005, and President and Chief Operating Officer of United Plastics Group, an international plastics manufacturer, from 2001 to 2003. Mr. Smith received a bachelor’s degree in mechanical engineering from Carnegie Mellon University, and an M.B.A. from Harvard University. We believe Mr. Smith is qualified to serve on our board of directors due to his extensive experience in the manufacturing industry.

Mary L. Petrovich. Ms. Petrovich has served as a member of our board of directors since December 2020. She has served as an operating executive at the Carlyle Group, a global asset management company, since June 2011, and as an advisor to American Security Partners, a private equity firm, since September 2013. Ms. Petrovich served in various capacities at AxleTech International, a supplier of off-highway and specialty vehicle drive train systems and components, as Executive Chair from December 2014 through July 2019, following its acquisition by General Dynamics, as General Manager from 2008 to 2011, and as Chairman and Chief Executive Officer, from 2001 to 2008. Ms. Petrovich has served on the board of directors of Woodward, Inc. (Nasdaq: WWD), a designer, manufacturer, and service provider of control solutions for the aerospace and industrial markets, since 2002. Ms. Petrovich served as a director of WABCO Holdings Inc. (NYSE: WBC), a global supplier of electronic, mechanical, electro-mechanical and aerodynamic products for manufacturers of commercial trucks, buses and trailers, and passenger cars, from November 2011 to December 2018. Ms. Petrovich also serves as chairman of the board of DealerShop, North America’s largest buying group for car dealers and a private company, and Traxen, a private company focused on developing useful combination of technologies to promote safe driving, efficient fuel use and to provide beneficial and actionable big data to heavy-duty trucking industry. Ms. Petrovich received a bachelor’s degree in engineering from the University of Michigan, and an M.B.A. from Harvard University. We believe Ms. Petrovich is qualified to serve on our board of directors due to her extensive experience in the automotive industry, and in particular, the trucking industry.

Board Composition

Our business and affairs are organized under the direction of our board of directors. Our board of directors consists of ten members. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling, and direction to management. Our board meets on a regular basis and additionally as required.

 

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Our board of directors was previously divided into three classes, each serving a staggered, three-year term. Pursuant to an amendment to our Bylaws approved by our board of directors in April 2021, our board of directors was declassified. Our board of directors consists of, Mark A. Russell, Stephen J. Girsky, Sooyean (Sophia) Jin, Michael L. Mansuetti, Gerrit A. Marx, Mary M. Petrovich, Steven M. Shindler, Bruce L. Smith, DeWitt Thompson, V and Jeffrey W. Ubben, each of who shall serve until the next annual meeting of stockholders, or until their successors are duly elected and qualified. Mr. Girsky serves as Chairman of our board of directors.

At each annual meeting of stockholders, ten directors will be elected to serve from the time of election and qualification until the next annual meeting of stockholders, or thereafter until their successors are duly elected and qualified. Our directors may be removed for cause by the affirmative vote of the holders of at least a majority of our voting stock.

Director Independence

Our board of directors determined that each of our directors, other than Mark A. Russell, qualifies as an independent director, as defined under the listing rules of Nasdaq, or the Nasdaq listing rules, and our board consists of a majority of “independent directors,” as defined under the rules of the SEC and the Nasdaq listing rules relating to director independence requirements. There are no family relationships among any of our directors or executive officers. In addition, our board of directors considered the fact that Messrs. Girsky and Shindler served as President and Chief Executive Officer and Chief Financial Officer, respectively, of VectoIQ, our predecessor company prior to the business combination with Legacy Nikola on June 3, 2020, and in such respective capacities, participated in the preparation of financial statements of VectoIQ, but did not participate in the preparation of Legacy Nikola’s financial statements. Based on advice from Nasdaq, our board of directors determined that Messrs. Girsky and Shindler qualify as independent directors.

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee in 2020 was at any time during 2020 or at any other time an officer or employee of ours, and none had or have any relationships with us that are required to be disclosed under Item 404 of Regulation S-K. None of our executive officers currently serve, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Role of the Board in Risk Oversight/Risk Committee

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board as a whole, as well as through various standing committees of the board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and the audit committee has the responsibility to consider and discuss major financial risk exposures and the steps our management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Our compensation committee also assesses and monitors whether our compensation plans, policies and programs comply with applicable legal and regulatory requirements.

Board Committees

In connection with the closing of the Business Combination, our board of directors established an audit committee, a compensation committee, and a nominating and corporate governance committee and adopted a charter for each of these committees, which complies with the applicable requirements of the Nasdaq listing rules. We intend to comply with future requirements to the extent they will be applicable to us. Copies of the charters for each committee are available on the investor relations portion of our website.

 

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Audit Committee

Our audit committee consists of Steven M. Shindler, Sooyean (Sophia) Jin and Michael L. Mansuetti. Our board of directors has determined that each of the members of the audit committee satisfies the independence requirements of Nasdaq and Rule 10A-3 under the Exchange Act. Each member of the audit committee can read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements. In arriving at this determination, our board examined each audit committee member’s scope of experience and the nature of their prior and/or current employment.

Mr. Shindler serves as the chair of the audit committee. Our board of directors determined that Mr. Shindler qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq listing rules. In making this determination, the board considered Mr. Shindler’s formal education and previous experience in financial roles. Both our independent registered public accounting firm and management periodically will meet privately with our audit committee.

The functions of this committee include, among other things:

 

   

evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors;

 

   

reviewing our financial reporting processes and disclosure controls;

 

   

reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;

 

   

reviewing the adequacy and effectiveness of our internal control policies and procedures, including the effectiveness of our internal audit function;

 

   

reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and practices to be used by us;

 

   

obtaining and reviewing at least annually a report by our independent auditors describing the independent auditors’ internal quality control procedures and any material issues raised by the most recent internal quality-control review;

 

   

monitoring the rotation of our independent auditor’s lead audit and concurring partners and the rotation of other audit partners as required by law;

 

   

prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditor;

 

   

reviewing our annual and quarterly financial statements and reports, including the disclosures contained in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management;

 

   

reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of our financial controls and critical accounting policies;

 

   

reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;

 

   

establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, auditing or other matters;

 

   

preparing the report that the SEC requires in our annual proxy statement;

 

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reviewing and providing oversight of any related party transactions in accordance with our related party transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of ethics;

 

   

reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; and

 

   

reviewing and evaluating the audit committee charter biennially and recommending any proposed changes to the board.

The composition and function of the audit committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC rules and regulations. We will comply with future requirements to the extent they become applicable to us.

Compensation Committee

Our compensation committee consists of Gerrit A. Marx, DeWitt C. Thompson, V and Bruce L. Smith. Mr. Marx serves as the chair of the compensation committee. Our board of directors has determined that each of the members of the compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act and satisfies the independence requirements of Nasdaq. The functions of the committee include, among other things:

 

   

reviewing and approving the corporate objectives that pertain to the determination of executive compensation;

 

   

reviewing and approving the compensation and other terms of employment of our executive officers;

 

   

reviewing and approving performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives;

 

   

making recommendations to the board regarding the adoption or amendment of equity and cash incentive plans and approving amendments to such plans to the extent authorized by the board;

 

   

reviewing and making recommendations to the board regarding the type and amount of compensation to be paid or awarded to our non-employee board members;