This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "anticipate," "believe," "expect," "estimate," "intend," "plan," "will", and similar expressions are intended to identify forward looking statements. These are statements that relate to future periods and include our financial and business performance; expected timing with respect to the buildout of our manufacturing facilities, joint venture with Iveco and production and attributes of our BEV and FCEV trucks; expectations regarding our hydrogen fuel station rollout plan; timing of completion of prototypes, validation testing, volume production and other milestones; changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; planned collaboration with our business partners; our future capital requirements and sources and uses of cash; the potential outcome of investigations, litigation, complaints, product liability claims and/or adverse publicity; the implementation, market acceptance and success of our business model; developments relating to our competitors and industry; the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto; our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others; our ability to obtain funding for our operations; the outcome of any known and unknown regulatory proceedings; our business, expansion plans and opportunities; changes in applicable laws or regulations; and anticipated trends and challenges in our business and the markets in which we operate. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Item 1A of this report, as well as our ability to execute our business model, including market acceptance of our planned products and services; changes in applicable laws or regulations; risks associated with the outcome of any legal, regulatory, or judicial proceeding; the effect of the COVID-19 pandemic on our business; our ability to raise capital; our ability to compete; the success of our business collaborations; regulatory developments inthe United States and foreign countries; the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and our history of operating losses. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to update any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
In this report, all references to "
Nikola™ is a trademark of
The below discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and notes thereto for the year endedDecember 31, 2020 included in our Annual Report on Form 10-K/A for the year endedDecember 31, 2020 . Overview We are a technology innovator and integrator, working to develop innovative energy and transportation solutions. We are pioneering a business model that will enable corporate customers to integrate next-generation truck technology, hydrogen fueling infrastructure, and related maintenance. By creating this ecosystem, we and our strategic business partners and suppliers hope to build a long-term competitive advantage for clean technology vehicles and next generation fueling solutions. Our expertise lies in design, innovation, and software and engineering. We assemble, integrate, and commission our vehicles in collaboration with our business partners and suppliers. Our approach 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. 26 -------------------------------------------------------------------------------- During 2020, we established a joint venture with Iveco, a subsidiary of CNHI,Nikola Iveco Europe Gmbh . Our joint venture with Iveco provides us with the manufacturing infrastructure to build BEV trucks for the North American market in addition to that of our greenfield manufacturing facility inCoolidge, Arizona . The operations of the joint venture commenced during the fourth quarter of 2020. We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we: • construct manufacturing facilities and purchase related equipment; • commercialize our heavy-duty trucks and other products; • develop hydrogen fueling stations; • continue to invest in our technology; • increase our investment in marketing and advertising, sales, and distribution infrastructure for our products and services; • maintain and improve our operational, financial and management information systems; • hire additional personnel; • obtain, maintain, expand, and protect our intellectual property portfolio; and • operate as a public company. Comparability of Financial Information Our results of operations and statements of assets and liabilities may not be comparable between periods as a result of the Business Combination and becoming a public company. As a consequence of the Business Combination, we became a Nasdaq-listed company, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees. Key Factors Affecting Operating Results We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled "Risk Factors." Commercial launch of heavy duty trucks and other products We expect to derive revenue from our BEV trucks in late 2021 and FCEV trucks in the second half 2023. Prior to commercialization, we must complete modification or construction of required manufacturing facilities, purchase and integrate related equipment and software, and achieve several research and development milestones. As a result, we will require substantial additional capital to develop our products and services and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales and hydrogen FCEV leases, we expect to finance our operations through a combination of existing cash on hand, public offerings, private placements, debt financings, collaborations, and licensing arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. Any delays in the successful completion of our manufacturing facility will impact our ability to generate revenue. Customer Demand While not yet commercially available, we have received significant interest from potential customers. Going forward, we expect the size of our reservations to be an important indicator of our future performance. Basis of Presentation 27 -------------------------------------------------------------------------------- Currently, we conduct business through one reportable and one operating segment. See Note 2 in the accompanying 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. Our bundled lease offering 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; • 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 endedMarch 31, 2021 , 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 endedMarch 31, 2021 , we utilized$12.9 million of advisory services which were recorded as research and development expense. As ofMarch 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. 28 -------------------------------------------------------------------------------- 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 theSecurities Exchange Commission , 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. Loss on Forward Contract Liability The loss on forward contract liability includes losses from the remeasurement of the Series D redeemable convertible preferred stock forward contract liability. InApril 2020 , we fulfilled the forward contract liability and, therefore, subsequent toJune 30, 2020 , there will not be any impact from the remeasurement of the forward contract liability. Revaluation of Warrant Liability The revaluation of warrant liability includes net gains and losses from the remeasurement of the warrant liability. Warrants recorded as liabilities are recorded at their fair value and remeasured at each reporting period. Other Income, 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 forU.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against ourU.S. and state deferred tax assets. Cash paid for income taxes, net of refunds during the three months endedMarch 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 Venture Europe, Gmbh . Results of Operations Comparison of Three Months EndedMarch 31, 2021 to Three Months EndedMarch 31, 2020 The following table sets forth our historical operating results for the periods indicated: 29 --------------------------------------------------------------------------------
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 31,086 129.1% Selling, general, and administrative 65,427 7,935 57,492 724.5% Total operating expenses 120,590 32,012 88,578 276.7% Loss from operations (120,590) (31,997) (88,593) 276.9% Other income (expense): Interest income (expense), net (9) 62 (71) (114.5)% 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 (86,284) of affiliate (119,429) (33,145) 260.3% Income tax expense 1 1 - NM Loss before equity in net loss of affiliate (119,430) (33,146) (86,284) 260.3% Equity in net loss of affiliate (794) - (794) NM Net loss$ (120,224) $ (33,146) $ (87,078) 262.7% 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 revenues for the three months endedMarch 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 endedMarch 31, 2020 to$55.2 million during the three months ended inMarch 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. 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 endedMarch 31, 2020 to$65.4 million during the three months endedMarch 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 30 --------------------------------------------------------------------------------
Interest income (expense), net was immaterial the three months ended
Loss on Forward Contract Liability
Loss on the forward contract liability represents loss recognized from a
Revaluation of Warrant Liability
The revaluation of warrant liability represents a gain of
Other Income, net Other income, net increased by$0.1 million from$0.1 million during the three months endedMarch 31, 2020 to$0.2 million during the three months endedMarch 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 endedMarch 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 endedMarch 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. 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 31 -------------------------------------------------------------------------------- our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business. The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three months endedMarch 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 (in thousands) Net loss$ (120,224) $ (33,146)
Interest (income) expense, net 9 (62) Income tax expense 1 1 Depreciation and amortization 1,805 1,408 EBITDA (118,409)
(31,799)
Stock-based compensation 50,266 1,313 Loss on forward contract liability - 1,324 Revaluation of warrant liability (951) - Equity in net loss of affiliate 794 - Regulatory and legal matters (1) 14,866 - Adjusted EBITDA$ (53,434) $ (29,162) (1) Regulatory and legal matters include legal, advisory, and other professional service fees incurred in connection with the short-seller analyst article fromSeptember 2020 , and investigations and litigation related thereto.
Non-GAAP Net Loss and Non-GAAP Net Loss Per Share, Basic and Diluted
Non-GAAP net loss and Non-GAAP net loss per share, basic and diluted are presented as supplemental measures of our performance. Non-GAAP net loss is defined as net loss attributable to common stockholders, basic and diluted adjusted for stock compensation expense and other items determined by management. Non-GAAP net loss per share, basic and diluted, is defined as Non-GAAP net loss divided by weighted average shares outstanding, basic and diluted.
Three Months EndedMarch 31, 2021 2020 (in
thousands, except share and per
share data) Net loss$ (120,224) $ (33,146) Stock-based compensation 50,266 1,313 Revaluation of warrant liability (951) - Regulatory and legal matters(1) 14,866 - Non-GAAP net loss$ (56,043) $ (31,833) Non-GAAP net loss per share: Basic$ (0.14) $ (0.12) Diluted$ (0.14) $ (0.12) Weighted average shares outstanding: Basic 392,189,851 271,896,258 Diluted 392,489,761 271,896,258 (1) Regulatory and legal matters include legal, advisory, and other professional service fees incurred in connection with the short-seller analyst article fromSeptember 2020 , and investigations and litigation related thereto. 32 -------------------------------------------------------------------------------- Liquidity and Capital Resources Since inception, we financed our operations primarily from the sales of redeemable convertible preferred stock and common stock, the Business Combination, and redemption of warrants. As ofMarch 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 Quarterly Report on Form 10-Q, we have yet to generate revenue from our core business operations. As ofMarch 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 accrued expenses and accounts payables. We believe our cash and cash equivalents balance will be sufficient to continue to execute our business strategy over the next twelve month period by (i) completing the development and industrialization of the BEV truck, (ii) completing phase one construction of the greenfield manufacturing facility, (iii) completing the construction of a pilot commercial hydrogen station and (iv) hiring of personnel. However, actual results could vary materially and negatively as a result of a number of factors, including: •the costs of our greenfield manufacturing facility construction and equipment; •the timing and the costs involved in bringing our vehicles to market, mainly the BEV truck; •our ability to manage the costs of manufacturing the BEV trucks; •the scope, progress, results, costs, timing and outcomes of our research and development for our FCEV trucks; •the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities; •revenue received from sales of our BEV trucks; •the costs of additional general and administrative personnel, including accounting and finance, legal and human resources, as well as costs related to litigation, investigations, or settlements; •our ability to collect revenue; and •other risks discussed in the section entitled "Risk Factors." Long-Term Liquidity Requirements Our current capital will not be sufficient to cover forecasted capital needs and operating expenditures starting in the second half of fiscal year 2022. Until we can generate sufficient revenue from truck sales and leases to cover operating expenses, working capital and capital expenditures, we expect to fund cash needs through a combination of equity and debt financing, including lease securitization. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing. While we intend to raise additional capital in the future, if adequate funds are not available, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations. The following table provides a summary of cash flow data (in thousands): 33 --------------------------------------------------------------------------------
Three Months Ended March 31, 2021 2020 (in thousands) Net cash used in operating activities$ (59,249) $ (21,897) Net cash used in investing activities (24,521) (1,439) Net cash (used in) provided by financing activities (1,758) 13,151 Cash Flows from Operating Activities Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities was$59.2 million for the three months endedMarch 31, 2021 . The most significant component of our cash used during this period was 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 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 endedMarch 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. Cash Flows from Investing Activities We continue to experience negative cash flows from investing activities as we expand our business and build out infrastructure. Cash flows from investing activities primarily relate to capital expenditures to support our growth. Net cash used in investing activities is expected to continue to increase substantially as we build out and tool our manufacturing facility inCoolidge, Arizona , finance operations of our joint venture in Ulm,Germany , and develop the network of hydrogen fueling stations. Net cash used in investing activities was$24.5 million for the three months endedMarch 31, 2021 , which was primarily due to costs of construction for ourCoolidge 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 endedMarch 31, 2020 , which was due to purchases and deposits on capital equipment related to the construction of our headquarters and R&D facility. Cash Flows from Financing Activities ThroughMarch 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 endedMarch 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 endedMarch 31, 2020 , which was primarily due to proceeds from the issuance of Series D redeemable convertible preferred stock of$13.0 million and proceeds 34 -------------------------------------------------------------------------------- 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 and payments on our financing lease of$0.3 million . Contractual Obligations and Commitments For the three months endedMarch 31, 2021 , there have been no material changes to our significant contractual obligations as previously disclosed in our Annual Report on Form 10-K/A for the year endedDecember 31, 2020 . Off Balance Sheet Arrangements Since the date of our incorporation, we have not engaged in any off balance sheet arrangements, as defined in the rules and regulations of theSEC . Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments involve valuation of our stock-based compensation, including the fair value of common stock, the valuation of warrant liabilities, the valuation of the redeemable convertible preferred stock tranche liability, estimates related to our lease assumptions, and contingent liabilities, including litigation reserves. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates. There have been no substantial changes to these estimates, or the policies related to them during the three months endedMarch 31, 2021 . For a full discussion of these estimates and policies, see "Critical Accounting Estimates" in Item 7 of our Annual Report on Form 10-K/A for the year endedDecember 31, 2020 . Recent Accounting Pronouncements See Note 2 to our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations. 35
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