Lightning eMotors, Inc. (Form: 8-K/A, Received: 05/17/2021 17:13:08)

Lightning eMotors, Inc.

Dated: May 17, 2021

/s/ Timothy Reeser

Chief Executive Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

UNDER

THE SECURITIES ACT OF 1933

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 6, 2021

Lightning eMotors, Inc.

(Exact name of registrant as specified in its charter)

Delaware

001-39283

84-4605714

(State or other jurisdiction

of incorporation or organization)

(Commission

File Number)

(IRS Employer

Identification No.)

815 14^th Street SW, Suite A100

Loveland, Colorado 80537

(Address of principal executive offices, including zip code)

1-800-223-0740

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	ZEV	New York Stock Exchange
Redeemable Warrants, each full warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	ZEV.WS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

EXPLANATORY NOTE

On May 12, 2021, Lightning eMotors, Inc. (f/k/a GigCapital3, Inc. (“GigCapital3”)) (the “Company” or “Lightning eMotors”) filed a Current Report on Form 8-K with the Securities and Exchange Commission (the “SEC”) (the “Original Current Report”) to report various matters related to the consummation of its business combination (the “Business Combination”) with Lightning Systems, Inc. (“Lightning Systems”) pursuant to that certain Business Combination Agreement, dated as of December 10, 2020, by and among GigCapital3, Project Power Merger Sub, Inc. (“Merger Sub”), and Lightning Systems (the “Business Combination Agreement”). The Company is filing this Amended Current Report on Form 8-K/A (the “Amended Current Report”) to amend and restate Items 2.01, 4.01, 5.02, add additional disclosure in Item 2.02 and provide additional exhibits to Item 9.01. Certain terms used in this Current Report on Form 8-K have the same meaning as set forth in the Original Current Report and the final proxy statement/prospectus (the “Final Proxy Statement/Prospectus”) filed with the SEC on March 26, 2021 by GigCapital3.

Item 2.01. Completion of Acquisition of Disposition of Assets.

As previously reported in the Current Report on Form 8-K filed with the SEC on April 22, 2021, on April 21, 2021, GigCapital3 held a special meeting of its stockholders (the “Special Meeting”). At the Special Meeting, the GigCapital3 stockholders considered and adopted, among other matters, the Business Combination Agreement. On May 6, 2021, the parties to the Business Combination Agreement consummated the Business Combination (such consummation, the “Closing”).

Prior to the Special Meeting, the holders of 5,816,664 shares of GigCapital3’s common stock sold in its initial public offering (“Public Shares”) exercised their right to redeem those shares for cash at a price of $10.1019 per share, for an aggregate of approximately $58.8 million, which redemption occurred concurrent with the consummation of the Business Combination. Immediately after giving effect to the Business Combination (including as a result of the redemptions described above and the automatic separation of GigCapital3 units into Lightning eMotors common stock and warrants), there were (i) 73,229,705 shares of Lightning eMotors’ issued and outstanding common stock, (ii) assumed Lightning Systems equity awards exercisable for 3,615,773 shares of Company common stock and (iii) 16,463,096 shares of common stock reserved for issuance to equity holders of Lightning Systems as contingent consideration upon satisfaction of the earnout conditions set forth in the Business Combination Agreement. Upon the Closing, GigCapital3’s units ceased trading, and Lightning eMotors’ common stock began trading on the New York Stock Exchange (“NYSE”) under the symbol “ZEV.” Furthermore, also on May 7, 2021, Lightning eMotors’ warrants began trading on the NYSE as “ZEV.WS.” As of the date of Closing, our directors and executive officers and affiliated entities beneficially owned approximately 16.1% of Lightning eMotors’ outstanding shares of common stock, and the former stockholders of GigCapital3 beneficially owned approximately 27.4% of Lightning eMotors’ outstanding shares.

As noted above, the per share redemption price of $10.1019 for holders of Public Shares electing redemption was paid out of GigCapital3’s trust account, which after taking into account the redemptions, had a balance immediately prior to the Closing of approximately $143.3 million. In addition, approximately $53,000 remained in GigCapital3’s operating account immediately prior to the Closing.

FORM 10 INFORMATION

Item 2.01(f) of Form 8-K states that if the predecessor registrant was a shell company, as GigCapital3 was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company is providing the information below that would be included in a Form 10 if the Company were to file a Form 10. Please note that the information provided below relates to the Company following the consummation of the Business Combination, unless otherwise specifically indicated or the context otherwise requires.

Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Examples of forward-looking statements in this Current Report on Form 8-K include, but are not limited to, statements regarding the Company’s disclosure concerning the Company’s operations, cash flows, financial position and dividend policy. The risks and uncertainties include, but are not limited to:

•

the financial and business performance of the Company, including financial projections and business metrics and any underlying assumptions thereunder;

•

changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

•

the Company’s product development timeline and expected start of production;

•

the implementation, market acceptance and success of the Company’ business model;

•

the Company’s ability to scale in a cost-effective manner;

•

developments and projections relating to the Company’s competitors and industry;

•

the impact of health epidemics, including the COVID-19 pandemic, on Lightning Systems’ business and the actions the Company may take in response thereto;

•

the Company’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

•

expectations regarding the time during which the Company will be an emerging growth company under the JOBS Act;

•

the Company’s future capital requirements and sources and uses of cash;

•

the Company’s ability to obtain funding for its operations;

•

the Company’s business, expansion plans and opportunities; and

•

the outcome of any known and unknown litigation and regulatory proceedings.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in “Risk Factors” in this Current Report on Form 8-K. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. The Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Current Report on Form 8-K or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks that the Company describes in the reports it will file from time to time with the SEC after the date of this Current Report on Form 8-K.

In addition, statements that “the Company believes” and similar statements reflect the Company’s beliefs and opinions on the relevant subject. These statements are based on information available to the Company as of the date of this Current Report on Form 8-K. And while the Company believes that information provides a reasonable basis for these statements, that information may be limited or incomplete. The Company’s statements should not be read to indicate that it has conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.

Although the Company believes the expectations reflected in the forward-looking statements were reasonable at the time made, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward looking statements contained in this Current Report on Form 8-K and any subsequent written or oral forward-looking statements that may be issued by the Company or persons acting on the Company’s behalf.

Business

The business of the Company is described in the Final Proxy Statement/Prospectus in the section titled “Information About Lightning Systems” and that information is incorporated herein by reference.

Risk Factors

The risks associated with the Company’s business are described in the Final Proxy Statement/Prospectus in the section titled “Risk Factors” and are incorporated herein by reference.

Selected Historical Financial Information

The selected historical financial information of the Company and related discussion and analysis by the management of the Company is contained in the Final Proxy Statement/Prospectus in the section titled “Selected Historical Financial and Other Information of Lightning Systems” and is incorporated herein by reference.

Unaudited Financial Statements

The unaudited consolidated financial statements as of and for the three months ended March 31, 2021 of Lightning Systems set forth in Exhibit 99.2 hereto have been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the regulations of the SEC. The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of Lightning Systems’ financial position, results of operations and cash flows for the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year.

These unaudited consolidated financial statements should be read in conjunction with the historical audited consolidated financial statements of Lightning Systems as of and for the year ended December 31, 2020 and the related notes included in the Final Proxy Statement/Prospectus, the section entitled “Lightning Systems’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of the financial condition and results of operation of Lightning Systems prior to the Business Combination is included in the Final Proxy Statement/Prospectus in the section entitled “Lightning Systems’ Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which is incorporated herein by reference.

Management’s discussion and analysis of the financial condition and results of operation of the Company as of and for the three months ended March 31, 2021 is set forth below.

The following discussion and analysis provides information which the Company’s management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read together with the financial statements and related notes and unaudited pro forma condensed financial information that are included elsewhere or incorporated by reference in this Current Report on Form 8-K. The discussion and analysis should also be read together with the Company’s audited financial statements and notes thereto included in the Company’s 2020 annual financial statements included in the Final Proxy Statement/Prospectus.

LIGHTNING SYSTEMS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that Lightning Systems’ management believes is relevant to an assessment and understanding of Lightning Systems’ results of operations and financial condition. The discussion and analysis should be read in conjunction with the condensed financial statements of Lightning Systems, Inc. (“Lightning Systems,” “we,” “us,” “our,” and “the Company” are intended to mean the business and operations of Lightning Systems, Inc.) and the related notes attached to this Amended Current Report on Form 8-K/A as Exhibit 99.2. The discussion below contains forward-looking statements about Lightning Systems’ business, operations and industry that are based upon current expectations that involve risks and uncertainties and unknown or changed circumstances. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of the Final Proxy Statement/Prospectus filed with the U.S. Securities and Exchange Commission on March 26, 2021 pursuant to Rule 424(b)(3). We assume no obligation to update the forward-looking statements or such risk factors.

This Amended Current Report on Form 8-K/A and the documents incorporated herein by reference include forward-looking statements within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are also made in reliance upon the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to Lightning Systems’ beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

Overview

Lightning Systems, which also does business as Lightning eMotors, is a leading electric vehicle designer and manufacturer, providing complete electrification solutions for commercial fleets – from Class 3 cargo and passenger vans to Class 6 work trucks, Class 7 city buses, and Class A motor coaches which we believe represents a significant total addressable market of approximately $67 billion. Lightning Systems is committed to eradicating commercial fleet emissions, the main cause of urban air pollution, by providing zero emission Class 3 to 7 Battery Electric Vehicles, Fuel Cell Electric Vehicles and charging infrastructure solutions to commercial fleet customers. Our ongoing focus has been on reducing emissions and improving energy efficiency. As of the date of this Amended Current Report on Form 8-K/A, Lightning Systems is the market leader in the Class 3 to Class 6 Electric Vehicles (“EV”) segment, with 31 vehicles and 1 powertrain kit sold in the first quarter of 2021 compared to 1 vehicle and 5 powertrain kits sold in the first quarter of 2020. Lightning Systems sold 9 Class 3, 17 Class 4, and 5 Class 5 vehicles during the first quarter. We believe that Lightning Systems is the only company in the United States that has delivered fully functional Class 3 to 7 EV’s to end customers that are in use today, with 129 units sold by us since 2019.

We started in 2008 as a manufacturer of hybrid systems for commercial vehicles. In 2017, realizing that hybrid solutions did not adequately address the growing issue of urban air pollution from commercial vehicle fleets, we directed our efforts to focus exclusively on the attractive market opportunity in Zero Emission Vehicles (“ZEV”). We leveraged nearly 10 years of unparalleled knowledge developing and implementing hybrid commercial vehicles to successfully adapt to zero emission vehicles. As of the date of this Amended Current Report on Form 8-K/A, all Lightning eMotors platforms currently in production have been fully certified as zero emission vehicles by the California Air Resource Board, the clean air agency that defines vehicle emissions standards. We currently maintain 6 Executive Orders, which is a requirement to sell ZEV vehicles in California as well as various other states.

We are the only full-range manufacturer of Class 3 to 7 Battery electric Vehicles (“BEV”) and Fuel Cell Electric Vehicles (“FCEV”) in the United States and provide end-to-end electrification solutions including advanced analytics software, mobile charging solutions, or Energy-as-a-Service, and financing which we refer to as EV-as-a-Service for custom fleet vehicles. We combine an internally developed, proprietary, optimized modular software with Lightning eMotors hardware designs that allow us to address the diverse opportunities in the markets in which we operate in a cost-effective manner with a significant time-to-market advantage. We have also built an extensive ecosystem of supply-chain partners and specialty vehicle partners which are instrumental to our growth. Lightning eMotors offers electric vehicles and powertrain solutions for 10 commercial vehicle markets including: school buses, transit buses, ambulances, motor coaches, delivery trucks, food trucks, utility trucks, refrigerated trucks, airport & campus shuttles and Recreational Vehicles (“RV”).”

Business Combination and Public Company Costs

Lightning Systems entered into the Business Combination Agreement with GigCapital3, Inc. (“GigCapital3”) and its wholly-owned subsidiary, Project Power Merger Sub, Inc. (“Merger Sub”), on December 10, 2020. Pursuant to the Business Combination Agreement, the stockholders of GigCapital3 approved the transaction on April 21, 2021, and the deal was consummated on May 6, 2021. As a result, Merger Sub, a newly formed subsidiary of GigCapital3, was merged with and into Lightning Systems and the separate corporate existence of Merger Sub ceased, and Lightning Systems continued as the Surviving Corporation of the Merger. Lightning Systems was deemed the accounting predecessor and the combined entity became the successor SEC registrant, meaning that Lightning Systems’ financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, GigCapital3 was treated as the acquired company for financial statement reporting purposes. The most significant change in the successor’s future reported financial position and results is the increase in cash (as compared to Lightning Systems’ balance sheet at March 31, 2021) of approximately $268.3 million, after stockholder redemptions of $58.5 million permitted under the Business Combination Agreement and prior to the payment of non-recurring transaction costs and other payments that totaled approximately $51.5 million.

As a result of the Business Combination, GigCapital3 was renamed as Lightning eMotors, Inc., and Lightning Systems became a wholly-owned subsidiary of Lightning eMotors, Inc, which is a NYSE-listed company with common stock registered under the Exchange Act. Lightning eMotors will be required to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Lightning eMotors expects 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 and legal and administrative resources, including increased audit and legal fees.

Recent Developments and the Covid-19 Pandemic

On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 have included restrictions on travel, quarantines in certain areas, work-from-home orders and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which Lightning Systems operates. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to, among other provisions, provide emergency assistance for individuals, families and businesses affected by the COVID-19 pandemic.

As the COVID-19 pandemic continues, the extent of the impact to Lightning Systems’ business operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the COVID-19 pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. Those primary drivers are beyond Lightning Systems’ knowledge and control and, as a result, at this time, Lightning Systems is unable to predict the cumulative impact, both in terms of severity and duration, that the COVID-19 pandemic will have on Lightning Systems’ business, operating results, cash flows and financial condition, but such impact could be material if the current circumstances continue to exist for a prolonged period of time. Although Lightning Systems has made its best estimates based upon current information, actual results could materially differ from the estimates and assumptions developed by management. Accordingly, it is reasonably possible that the estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, and if so, Lightning Systems may be subject to future impairment losses related to long-lived assets as well as changes to valuations.

Possible Impairments. No impairments were recorded for three months ended March 31, 2021 or 2020, as no triggering events or changes in circumstances had occurred as of such dates. However, due to significant uncertainty surrounding the continued effects of the COVID-19 pandemic, Lightning Systems’ results of operations, cash flows, and financial condition could be impacted, and the extent of such impact cannot be reasonably estimated.

Partial Shutdowns and Slow-Downs. Lightning Systems is adhering to CDC guidelines that oblige us to shut down any department in which an employee tests positive for COVID-19 for 14 days. In November 2020, Lightning Systems closed our material handling department for two weeks after an employee tested positive. We have also regularly had employees absent from work or working from home on suspected COVID-19 infections. While there have been cases of employees testing positive for COVID-9 in the three months ended March 31, 2021, this has not resulted in complete department shutdowns as in the past. The CDC guidelines offer three options for employers to follow when an employee tests positive for COVID-19: 1) a 14-day quarantine before returning to work; 2) a 10-day quarantine before returning to work if the employee is asymptomatic; and 3) a 7-day quarantine if the employee can provide a negative test result taken within 48 hours before returning to work. The Company is currently utilizing the 7-day quarantine.

Supply-Chain Delays. Also, as a result of the COVID-19 pandemic, we have been experiencing significant delivery delays from our suppliers since April 2020. Within our capital constraints, we increased our raw material inventories to attempt to manage and mitigate this risk. However, several key suppliers have informed us of delivery delays ranging from four to sixteen weeks, that have impacted production in the first quarter of 2021 and may affect the remainder of the year. Although we are working with our suppliers to minimize the impact, we expect supply chain delays will have a significant impact on our 2021 revenue and possibly thereafter.

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 of the Final Proxy Statement/Prospectus filed with the SEC on March 26, 2021 pursuant to Rule 424(b)(3) titled “Risk Factors.”

Commercial Launch of medium-duty trucks and other products

In 2020, Lightning Systems attained revenue commercialization of its ZEVs, with 72 customer-ordered Class 3 to Class 7 Commercial vehicles delivered during the year ended December 31, 2020. In the three months ended March 31, 2021 we delivered 31 Class 3 to 7 Commercial vehicles. We will require substantial additional capital to develop our products and services, including those for orders in our revenue backlog, fund the growth and scaling of our manufacturing facilities, and fund operations for the foreseeable future. Until we can generate sufficient cash flow from operations, we expect to finance our operations through a combination of merger proceeds from the Business Combination, the PIPE Investment, the Convertible Note Investment, secondary public offerings, debt financings, collaborations, and licensing arrangements. The amount and timing of our future funding requirements depend on many factors, including the pace and results of our development efforts and our ability to scale our operations. Any delays in the successful completion of our manufacturing facility will impact our ability to generate revenue.

Customer Demand

While still in early stages of commercialization, we have received significant interest from potential customers, and repeat orders from more than 10 commercial fleet customers. On March 31, 2021, and March 31, 2020, Lightning Systems’ had a backlog (as defined below) of 1,590 and 284, respectively, of electric commercial vehicles and electric powertrains.

Basis of Presentation

Currently, we conduct business through one operating segment, the zero-emission electric vehicle market. All long-lived assets are maintained in, and all losses are attributable to, the United States of America. See Note 2 in the unaudited financial statements attached to this Amended Current Report on Form 8-K/A as Exhibit 99.2 for more information about our operating segment.

Components of Results of Operations

Revenues

Our revenue generation has evolved over time along with our business model. During the three months ended March 31, 2021, revenue was derived from the installation and integration of all-electric powertrains within commercial vehicles, the sale of our all-electric powertrain kits, and the sales of chargers, an ancillary product. During the three-month ended March 31, 2020, our revenue was primarily derived from selling vehicles with our all-electric powertrains, telematics and analytic systems along with the sales of chargers.

We anticipate deriving future revenue from the following business lines.

•

Direct Sales of Commercial ZEVs: The sales of electric vehicles in Classes 3 to 7, and with all-electric powertrain kits for vehicles in Classes 3 to 7.

•

Systems for OEMs: The sales of electric powertrains to our OEM partners, including technology licenses, and training the OEM technicians how to install the powertrains within the OEMs’ manufacturing facilities.

•

Telematics Analytics: Our proprietary analytics platform, which is installed in each vehicle and powertrain sold, allows us to collect and optimize drive cycle and vehicle performance data. This data provides drivers and fleet operators meaningful real-time recommendations about how to improve vehicle performance, routes, and charging strategies. Our analytics offering will be offered on a subscription basis, with high uptake rates and very limited churn.

•

Energy-as-a-Service: Lightning Systems, sells charging systems today and in the future, plans on owning and renting chargers to customers. The company will plan, build, and install charging infrastructure at a client’s location and will charge the customer on a recurring basis. This service will facilitate LCFS monetization, reduce customers upfront capital investment for charging, and deepen our customer’s relationship with both a vehicle and charging partnership.

•

EV-as-a-Service: For customers that are just entering the ZEV space, transitioning to ZEVs and building out a charging strategy can be quite complex. Lightning Systems, in the future, plans on offering EV-as-a-Service which will be a packaged offering that includes the vehicle, charging, maintenance, insurance, and ongoing support, for customers new to ZEV or those that desire a full-service solution. We believe this is an efficient way for customers to be early adopters of ZEVs and validate vehicle operating and total cost of ownership (“TCO”) benefits of ZEV without large upfront investments and infrastructure.

Cost of Revenues

Cost of revenues includes direct costs (parts, material, and labor), indirect manufacturing costs (manufacturing overhead, depreciation, plant operating lease expense, and rent), shipping, field services, and logistics costs, and provision for estimated warranty expenses.

Research and Development Expense

Research and development expenses consist primarily of costs incurred for the discovery and development of Lightning Systems’ electrified powertrain solutions and the production thereof, which principally include personnel-related expenses including salaries, benefits, travel and stock-based compensation, for personnel performing research and development activities and expenses related to materials and supplies.

Lightning Systems expects its research and development expense to increase for the foreseeable future as Lightning Systems continues to invest in research and development activities to achieve its operational and commercial goals.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses consist of personnel-related expenses for Lightning Systems’ corporate, executive, engineering, finance, sales, marketing, program management support, and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for information technology, facilities, depreciation, amortization, travel, and sales and marketing costs. Personnel-related expenses consist of salaries, payroll taxes, benefits, and stock-based compensation.

Lightning Systems expects its selling, general, and administrative expenses to increase for the foreseeable future as Lightning Systems scales headcount and expenses with the growth of its business, buildout of the manufacturing facilities, refinement of its production processes, drive for productivity improvements, acquisition of new and retention of existing customers and the additional costs of a public company.

Interest Expense

Interest expense consists of interest paid on our notes payable and the amortization of debt issue costs, debt discounts attributable to the bifurcation of warrants issued, and a beneficial conversion feature embedded in certain convertible notes. The notes payable included, over the periods presented, a term loan and working capital facility, a facilities agreement, and various convertible notes payable, as described in more detail below. For a description and terms of the notes payable, see the financial statements and the related notes thereto attached to this Amended Current Report on Form 8-K/A as Exhibit 99.2.

Results of Operations

Three Months Ended March 31, 2021 Compare to the 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)
Revenues	$	4,591		$	695		$	3,896			560.6	%
Cost of revenues		5,318			852			4,466			524.2	%

Gross loss		(727	)		(157	)		(570	)		363.1	%

Operating expenses
Research and development		648			243			405			166.7	%
Selling, general, and administrative		3,920			2,249			1,671			74.3	%

Total operating expenses		4,568			2,492			2,076			83.3	%

Loss from operations		(5,295	)		(2,649	)		(2,646	)		99.9	%
Other expenses
Interest expense		1,611			334			1,277			382.3	%
Loss (gain) from change in fair value of warrant liabilities		20,539			(166	)		20,705			-12,472.9	%
Other expense (income), net		(9	)		(1	)		(8	)		800.0	%

Total other expenses		22,141			167			21,974			13,158.1	%

Net loss	$	(27,436	)	$	(2,816	)	$	(24,620	)		874.3	%

Revenues

Our total revenue increased by $3.9 million, or 561%, from $0.7 million during the three months ended March 31, 2020 to $4.6 million during the three months ended March 31, 2021. The increase in the revenues was primarily due to the sale of 31 complete commercial electric vehicles and 1 powertrain kit during the three months ended March 31, 2021 as compared to the sale of 1 complete commercial electric vehicle and 5 powertrain kits during the three months ended March 31, 2020. In addition, the increase in revenues was partially offset by supply chain delays.

Cost of Revenues

Cost of revenues increased by $4.5 million, or 524%, from $0.9 million during the three months ended March 31, 2020 to $5.3 million during the three months ended March 31, 2021. The increase in the cost of revenues was primarily related to the increase in revenue during the three months ended March 31, 2021 and additional headcount to support the current period production, as compared to the prior year period in 2020, in addition to certain production inefficiencies related to supply chain delays

Research and Development

Research and development expenses increased by $0.4 million, or 167%, from $0.2 million during the three months ended March 31, 2020 to $0.6 million during the three months ended March 31, 2021. The increase was primarily due to an increase in our engineering headcount year-over-year, as we continue to advance the development and design of our vehicles, develop additional vehicle platform offerings and, refine and improve our production process, and test our in-house engineering capabilities.

Selling, General, and Administrative

Selling, general, and administrative expenses increased by $1.7 million or 74%, from $2.2 million during the three months ended March 31, 2020 to $3.9 million during the three months ended March 31, 2021, primarily due to the increase in headcount in administration and sales to support the growing sales, backlog and production, and an increase in professional services associated with the Business Combination process and being a public company

Interest Expense

Interest expense increased by $1.3 million, or 382%, from $0.3 million during the three months ended March 31, 2020 to $1.6 million during the three months ended March 31, 2021. The increase was primarily due to the increase of $14.1 million in the average notes payable outstanding during each period from $7.8 million during the three months ended March 31, 2020 to $21.9 million during the three months ended March 31, 2021 and the amortization of debt discount of $1.0 million resulting from a beneficial conversion feature associated with the 2020 short term convertible debt loans.

Change in Fair Value of Warrant Liabilities

The loss from change in fair value of warrant liabilities increased by $20.7 million, from a gain of $0.2 million in the three months ended March 31, 2020 to a loss of $20.5 million in the three months ended March 31, 2021. The change reflected the impact of the marking-to-market of the outstanding common and preferred warrants underlying the warrant liabilities. The significant increase reflects the increase in market value of Lightning Systems’ common and preferred stock subsequent to the signing the Business Combination Agreement and continued progress toward its consummation. For a description of the methodology used by Lightning Systems to determine the market value of the common and preferred stock, please see Fair Value significant accounting policy contained within this Management Discussion and Analysis or Note 2 to the financial statements attached to this Amended Current Report on Form 8-K/A as Exhibit 99.2.

Liquidity and Capital Resources

Since inception, Lightning Systems has financed its operations primarily from debt financing and the sales of common and convertible preferred shares.

As of March 31, 2021, our principal sources of liquidity were our cash and cash equivalents in the amount of $1.8 million.

The following table provides a summary of cash flow data:


	Three Months Ended March 31,
	2021			2020
	(dollar amounts in thousands)
Net cash used in operating activities	$	(6,321	)	$	(3,203	)
Net cash used in investing activities		(560	)		(453	)
Net cash from financing activities		8,195			3,215

Net increase (decrease) in cash	$	1,314		$	(441	)

Cash Flows Used In Operating Activities

Net cash used in operating activities for the three months ended March 31, 2021 and 2020 totaled $6.3 million and $3.2 million, respectively. Cash flows from operating activities are significantly affected by the revenue levels, mix of products and services, and investments in the business in research and development and selling, general, and administrative costs in order to develop products and services, improve manufacturing capacity and efficiency, and support revenue growth. The increase in net cash used in operating activities was driven by increases in cost of revenues, selling, general, and administrative expenses, and research and development expenses, as described in more detail above.

Cash Flows Used In Investing Activities

Net cash used in investing activities for the three months ended March 31, 2021 and 2020 totaled $0.6 million and $0.5 million, respectively. Cash flows from investing activities relate to capital expenditures to support revenue growth as we invest in and expand our business and infrastructure.

Cash Flows from Financing Activities

Net cash from financing activities for the three months ended March 31, 2021 and 2020 was $8.2 million and $3.2 million, respectively.

Lightning Systems has primarily financed its activities through a combination of debt and the issuance of Series C preferred convertible stock, net of the repayment of a certain note payable. In connection with these transactions, Lightning Systems issued common and preferred warrants. For a detail discussion of these activities, see the see the financial statements and the related notes thereto attached to this Amended Current Report on Form 8-K/A as Exhibit 99.2.

A summary of Lightning Systems’ financing transactions for the periods presented are summarized below:


	Three Months Ended March 31
	2021			2020
	(dollar amounts in thousands)
Notes payable activities
Proceeds from term loan and working capital facility warrants	$	7,000		$	—
Proceeds from short-term convertible notes payable		—			3,000
Redeemable convertible preferred stock activities
Proceeds from issuance of Series C redeemable convertible preferred stock		—			225
Proceeds for the exercise of Series C warrants		1,500			—
Lease activities
Payments on operating lease obligations		(309	)		—
Payments on finance lease obligations		(6	)		(10	)
Equity activities
Proceeds from exercise of stock options		10			—

Cash flows from financing activities	$	8,195		$	3,215

Based on approximately $1.8 million in the Company’s cash accounts as of March 31, 2021, and taking into account the gross proceeds of approximately $25.0 million from the PIPE Investment and approximately $100.0 million from the Convertible Note Investment, and the net proceeds of approximately $91.8 million received from the Trust Account (after redemptions of 5,816,664 shares of Common Stock in the amount of $58.8 million and Closing transaction and other payments of approximately $51.5 million) at the Closing of the Business Combination, we expect we will have sufficient capital to fund our planned operations for the next 12 months.

The design, manufacture, sale and servicing of Lightning Systems’ ZEVs and electric powertrains is capital intensive. As the Business Combination has been consummated, Lightning Systems’ capital will be deployed for the projected operating expenses to execute on Lightning Systems’ business plan, to provide necessary working capital for accounts receivable and inventory, to finance Lightning Systems’ anticipated capital expenditures to expand the manufacturing capacity to meet revenue forecasts and to fund Lightning Systems’ EV-as-a-Service and Energy-as-a-Service initiatives. There can be no assurance, however, that our business will generate positive cash flows and Lightning Systems may need to raise additional capital to scale its manufacturing. In addition, Lightning Systems may raise capital earlier on an opportunistic basis. These additional funds may be raised through the issuance of equity, equity related or debt securities, or through obtaining credit from government or financial institutions. Additional capital will be necessary in the future to fund ongoing operations, continue research, development and design efforts and improve infrastructure.

Contractual Obligations and Commitments

The following table summarizes our long-term contractual obligations of Lightning Systems as of March 31, 2021, and the years in which these obligations are due:


	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
			(dollar amounts in thousands)
Notes payable
Term loan and revolving working capital facility	$	13,000	$	10,000	$		$	3,000	$	—
Short term convertible notes payable		9,679		9,679		—		—		—
Unsecured facility agreement		1,500		1,500		—		—		—
Purchase obligations (1)		15,300		15,300
Lease
Operating leases		12,906		2,327		7,853		2,726		—
Financing leases		48		48		—		—		—

	$	52,433	$	38,854	$	7,853	$	5,726	$	—

(1)	Consists of all cancelable purchase orders as of March 31, 2021

Backlog

Backlog is comprised of non-binding agreements and purchase orders from customers. Although the backlog does not constitute a legal obligation, Lightning Systems believes the amounts included in backlog are firm, even though these non-binding orders may be cancelled or delayed by customers without penalty, and Lightning Systems may elect to permit cancellation of orders without penalty where management believes it is in Lightning Systems’ best interest to do so. Lightning Systems, on a case-by-case basis and in our sole discretion, holds deposits for purchase orders from customers. Accordingly, revenue estimates and the amount and timing of work we expected to be performed at the time the estimate of backlog is developed is subject to change. It is possible that the methodology for determining bookings and backlog may not be comparable to methods used by other companies.

Backlog may not be indicative of future sales and can vary significantly from period to period.

A summary of Lightning Systems’ backlog as of each of the reporting periods is as follows:


	March 31,
	2021		2020
	(dollar amounts in thousands)
Units		1,590		284
Dollars (weighted value)	$	168,607	$	28,013

Off-Balance Sheet Arrangements

Lightning Systems has not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

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

•

Redeemable convertible preferred stock—Due to the contingently redeemable nature of the preferred stock, Lightning Systems classifies the preferred stock as temporary equity in the mezzanine section of the balance sheet. In addition, Lightning Systems does not currently believe that the related contingent events and the redemption of the preferred stock is probable to occur. Therefore, Lightning Systems is not currently accreting the preferred stock to redemption value and will only do so if the preferred stock becomes probable of redemption in the future.

•

Revenue recognition - The Company develops and produces Powertrain Kits for urban medium and heavy-duty vehicles, such as delivery trucks and buses. Powertrain Kits can either be sold direct to customers or installed and integrated by us into a vehicle. The Company transfers control and recognizes revenue for Powertrain Kits sold direct to customers when the product is shipped “FOB Shipping Point.” When we are responsible for Vehicle Conversions, revenue is recognized upon completion of the conversion and the vehicle is made available to the customer. For Vehicle Conversions, the components are highly interdependent and interrelated, and conversion requires both the components and their installation and integration, which collectively represent the combined output to the customer. The Company also provides chargers as an ancillary supporting product to customers. Revenue for chargers is recognized when the product is drop shipped directly to the customer from the manufacturer. The Company, who controls the customer relationship and product pricing for chargers, is the principal in such transactions and revenue is recognized on a gross basis. From time to time we also sell services associated with the Powertrain Kits, revenue from which is recognized as the service is transferred to the customer. Service revenue for the three months ended March 31, 2021 and 2020 represented less than 10% of total revenue.

The Company accounts for shipping and handling costs arranged on behalf of customers as fulfillment costs and records these costs within “Cost of revenues” in the accompanying Statements of Operations. Shipping and handling billed to customers is included in revenues and is not significant.

•

Fair Value—U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). Lightning Systems’ financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows:

•

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that Lightning Systems can access at the measurement date.

•

Level 2: Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

•

Level 3: Significant unobservable inputs that reflect Lightning Systems’ own assumptions about the assumptions that market participants would use in pricing an asset or liability.

We categorize fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC 820, Fair Value Measurement:

•

Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities

•

Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost)

•

Income approach: Techniques to convert future amounts to a single present value amount based upon market expectations (including present value techniques, option pricing and excess earnings models)

Lightning Systems believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Lightning Systems’ financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, convertible notes payable, and warrant liabilities. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates fair value because of the short-term nature of those instruments. Lightning Systems estimates that the current value of the notes approximates fair value based on prevailing market rates.

The common and preferred stock warrants issued in connection with the issuance of debt, the conversion of debt to preferred stock, and the issuance of preferred stock are recorded at their fair market value as of the date of each transaction. These common and preferred stock warrants are classified as warrant liabilities and are adjusted to their fair market value as of each reporting period.

Lightning Systems estimated the value of Lightning Systems Common Stock, Lightning Systems Series C preferred stock, and Lightning Systems Series C preferred stock warrants, which value was used in the determination of the value of warrants issued in connection with certain debt and preferred stock transactions and when marking to market at the end of each reporting period. Lightning Systems considers such liability-classified warrants in Level 3 due to significant unobservable inputs in its valuation.

The key period end valuation milestones for Lightning Systems through March 31, 2021 were December 31, 2019, June 30, 2020, September 30, 2020, December 31, 2020, February 23, 2021 and March 31, 2021

The valuations through June 30, 2020 were based on Lightning Systems being a private company and a combination of the income and market approach allocated to stockholders using an Option Pricing Model and applying a Discount for Lack of Marketability judgement based on the Finnerty put-option model. The key inputs to the valuation models that were utilized to estimate the fair value of the warrant liabilities included volatility, risk free rate, probability of subsequent funding, and discounts for lack of marketability.

Beginning in September 2020, the valuations are based on Lightning Systems being a private company and determined using a Probability Weighted Expected Return Method (“PWERM”) and a combination of several income and market approaches to determine the enterprise value of Lightning Systems. The enterprise value is adjusted for the probabilities of various scenarios/liquidity events occurring to create an overall weighted value of common stock as each valuation date. Each liquidity scenario has unique probabilities based on management’s opinion, which is based on various management discussions with potential investors, advisors, and market participants, and unique facts and circumstances as of the valuation dates. The scenarios included early liquidation, a private merger and acquisition (“M&A”) transaction, staying a privately held company, and a special purpose acquisition company (“ SPAC”) transaction/merger.

Each scenario was based on a different valuation methodology based on the unique risks, opportunities and a likely investor’s or market participant’s perspective. These included (a) Early liquidation: based on an Asset Approach using the existing equity value as of the valuation date; (b) Private M&A: based on a guideline transaction (market) approach using an assembled group of comparable transactions and trailing revenue metric/multiples; (c) Stay private: based on a discounted cash flow (income) approach using Lightning Systems’ non-SPAC forecast and a market-based discount rate; and (d) SPAC transaction: based on a guideline public company (market) approach using an assembled peer group of comparable companies and forward revenue metrics/multiples. Value was allocated to all outstanding securities through the PWERM using capitalization tables unique to each liquidity scenario.

The preliminary valuation was then discounted by applying a Discount for Lack of Marketability (“DOLM”) based on a Finnerty put-option model to determine a non-marketable, minority value of one share of common stock and one Series C preferred share.

These private company valuations will differ from a public company market valuation principally due to the private company discount for the lack of marketability and probability of various scenarios/liquidity events.

The Board of Directors determined the value of the Lightning Systems’ common stock as follows:

•

At December 31, 2019, the Lightning Systems board of directors determined that the value of Lightning Systems’ common stock was $32.2 million on an equity value basis or $0.05 per share and the Lightning Systems board of directors subsequently did not determine any change to the December 31, 2019 valuation as of March 31, 2020.

•

At June 30, 2020, the Lightning Systems board of directors determined that the value of Lightning Systems’ common stock had decreased to $20.3 million or $0.03 per share. The income and market approaches used to determine Lightning Systems’ valuation at June 30, 2020 were influenced by the negative impacts of the COVID-19 pandemic on the business and the short-term effects of transitioning from electric powertrains to EVs, including a decrease in backlog.

•

At September 30, 2020, the Lightning Systems board of directors determined that the value per share of Lightning Systems’ common stock had increased to $2.06 per share, reflecting a weighted average of the enterprise value assuming several potential liquidity event scenarios. In particular, the September 30, 2020 valuation was impacted by the signing of a letter of intent with

GigCapital3 on September 23, 2020, as well as increased pipeline and backlog. At that point in time, the Lightning Systems board of directors, viewed the probability of success of the Business Combination transaction at approximately 25%, with all other remaining scenarios estimated at a combined probability of occurring of 75% (15% for a liquidation, 40% for a private merger transaction and 20% for Lightning Systems remaining a privately held independent company), for purpose of Lightning Systems’ valuation.

•

At December 31, 2020, the Lightning Systems Board of Directors determined that the value per share of Lightning Systems’ common stock had increased to $3.51 per share, reflecting a weighted average of the enterprise value assuming several potential liquidity event scenarios. In particular, the December 31, 2020 valuation was impacted by increased pipeline and backlog. At that point in time, the Lightning Systems Board of Directors, viewed the probability of success of the Business Combination transaction at approximately 45%, with all other remaining scenarios estimated at a combined probability of occurring of 55% (15% for a liquidation, 30% for a private merger transaction and 10% for Lightning Systems remaining a privately held independent company), for purpose of Lightning Systems’ valuation.

•

At February 23, 2021, the Lightning Systems Board of Directors determined that the value per share of Lightning Systems’ common stock had increased to $6.18 per share, reflecting a weighted average of the enterprise value assuming several potential liquidity event scenarios. In particular, the February 23, 2021 valuation was impacted by continued progress in connection with the Business Combination transaction and the strength of its pipeline and backlog. At that point in time, the Lightning Systems Board of Directors, viewed the probability of success of the Business Combination transaction at approximately 75 %, with all other remaining scenarios estimated at a combined probability of occurring of 25% (10% for a liquidation, 10% for a private merger transaction and 5% for Lightning Systems remaining a privately held independent company), for purpose of Lightning Systems’ valuation.

•

At March 31, 2021, the Lightning Systems Board of Directors determined that the value per share of Lightning Systems’ common stock had increased to $7.02 per share, reflecting a weighted average of the enterprise value assuming several potential liquidity event scenarios. In particular, the March 31, 2021 valuation was impacted by continued progress in connection with the Business Combination transaction and the strength of its pipeline and backlog. At that point in time, the Lightning Systems Board of Directors, viewed the probability of success of the Business Combination transaction at approximately 85%, with all other remaining scenarios estimated at a combined probability of occurring of 15% (5% for a liquidation, 5% for a private merger transaction and 5% for Lightning Systems remaining a privately held independent company), for purpose of Lightning Systems’ valuation.

Based on the per share merger consideration to be paid by the Company pursuant to the Business Combination Agreement, the implied fully diluted share price for Lightning Systems’ common stock immediately prior Closing would be $10.00 per share. The private company valuations of the Lightning Systems board of directors differ from the public company valuation of Lighting Systems by GigCapital3, the PIPE Investors and the Convertible Note Investors; principally due to the private company discount for the lack of marketability and probability of various scenarios/liquidity events at various points in time. Lightning Systems’ non-financial assets, which primarily consist of property and equipment, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable, these along with other non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value.

•

Beneficial Conversion Features – Lightning Systems follows beneficial conversion feature guidance in ASC 470-20, Debt – Debt with Conversion and Other Options, which applies to convertible stock and convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

•

Warrants and Warrant liabilities – Lightning Systems accounts for common and preferred warrants in accordance with the authoritative guidance which requires that free-standing financial instruments with certain cash settlement features and / or associated with preferred stock, which is classified as temporary equity, to be recorded at their fair value. All outstanding common (with the exception of certain warrants issued to vendors in 2021) and preferred warrants are recorded as “Warrant liabilities” based on their fair value on the date of the transaction. See the “Fair value” significant accounting policy for a description of the determination of fair value. Any changes in the fair value of these instruments are reported as “Loss (Gain) from change in fair value of warrant liabilities.”

Warrants are separated from the host contract and reported at fair value when the warrant is a freestanding financial instrument that may ultimately require the issuer to settle the obligation by transferring assets. Under certain circumstances, most notably in the case of a deemed liquidation, the warrants issued in conjunction with Lightning Systems’ debt and preferred stock transactions may be ultimately required to settle by a transfer of assets, and as a result the warrants are reported as liabilities at fair value each reporting period.

Based on the terms of the common and preferred warrant agreements, Lightning Systems has determined that warrants (with the exception of certain warrants issued to vendors in 2021) are liabilities, as such, are included in “Warrant liabilities” on the Balance Sheets and recorded at fair value each reporting period.

For certain common warrants issued to vendors in 2021 in exchange for services provided, the warrants were deemed to be equity instruments under ASC 480, Distinguishing Liabilities from Equity. The fair value of the warrants was expensed to “selling, general and administrative” expense, and offset to “Additional paid-in-capital.”

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by standard setting bodies that are adopted by Lightning Systems as of the specified effective date. Unless otherwise discussed, Lightning Systems believes that the impact of recently issued standards that are not yet effective will not have a material impact on Lightning Systems’ financial position or results of operations under adoption.

Internal Control Over Financial Reporting

In connection with the audit of Lightning Systems’ financial statements for the year ended December 31, 2020, Lightning Systems’ management identified material weaknesses in Lightning Systems’ internal controls. These material weaknesses remain at March 31, 2021. See the section in the Final Proxy Statement/Prospectus filed with the SEC on March 26, 2021 pursuant to Rule 424(b)(3) titled “Risk Factors — Lightning Systems and its independent registered public accounting firm have identified material weaknesses in its internal control over financial reporting. If Lightning Systems is unable to remedy these material weaknesses, or if Lightning Systems fails to establish and maintain effective internal controls, Lightning Systems may be unable to produce timely and accurate financial statements, and Lightning Systems may conclude that its internal control over financial reporting is not effective, which could adversely impact its investors’ confidence and New Lightning eMotors’ stock price.”

Emerging Growth Company Status

We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.

In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

We will remain an EGC under the JOBS Act until the earliest of (i) December 31, 2025, which is the last day of our first fiscal year following the fifth anniversary of the initial public offering of GigCapital3, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years.

Properties

The facilities of the Company are described in the Final Proxy Statement/Prospectus in the section titled “Information About Lightning – Manufacturing and Production; Headquarters and Facilities” and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of shares of Common Stock of the Company upon the Closing of the Business Combination by:

•

each person known by GigCapital3 to be the beneficial owner of more than 5% of the common stock of the Company upon the Closing of the Business Combination;

•

each of the Company’s officers and directors; and

•

all officers and directors of the Company, as a group upon the Closing of the Business Combination.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.

Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock of the Company beneficially owned by them.


Name and Address of Beneficial Owner(1)	Number of Shares		% of Class
Dr. Avi Katz(2)		6,122,500		8.3	%
Dr. Raluca Dinu		—		*
Neil Miotto		—		*
GigAcquisitions3, LLC(2)		6,122,500		8.3	%
Robert Fenwick-Smith(3)		4,962,984		6.8	%
Timothy Reeser(4)		1,389,405		1.9	%
Teresa Covington		—		*
William Kelley(5)		484,993		*
Thaddeus Senko		—		*
Meghan Sharp		—		*
Diana Tremblay		—		*
Bruce Coventry		—		*
Aravaipa Venture Fund(6)		4,598,976		6.3	%
BP Technology Ventures Inc. / BP Lubricants USA Inc.(7)		22,925,496		31.3	%
Rosella Holdings Ltd.(8)		11,170,688		15.6	%
All directors and officers as a group (11 individuals)		12,959,881		17.6	%

*	Less than one percent.

(1)

Unless otherwise indicated, the business address of GigAcquisitions3, LLC and each of Dr. Avi S. Katz, Dr. Raluca Dinu and Neil Miotto is 1731 Embarcadero Rd., Suite 200, Palo Alto, CA 94303. The address for BP Technology Ventures Inc. is 501 Westlake Park Blvd., Houston, TX 77079. The address for Rosella Holdings Ltd. is Trafalgar Court, 3rd Floor, West Wing, Les Banques, St. Peter Port, Guernsey, GYI 2JA. The address for all of the other individuals is c/o Lightning eMotors, Inc., 319 Foxtail Court Boulder, CO 80305.

(2)

Consists of (i) 5,635,000 shares of common stock and (ii) 487,500 shares of common stock underlying warrants, all held by the Company’s sponsor. The securities held by the Company’s sponsor are beneficially owned by Dr. Avi S. Katz, the Co-Chairman of the Company’s board of directors, and the manager of the Company’s sponsor, who has sole voting and dispositive power over the shares held by the Company’s sponsor.

(3)

Consists of (i) 243,495 shares of common stock and (ii) 120,513 shares of common stock issuable upon the exercise of options within 60 days of May 6, 2021. In addition, Mr. Fenwick-Smith is a co-founding partner and member of Aravaipa Venture Fund, LLC and the managing member of Aravaipa Ventures, LLC and may be deemed to beneficially own the shares held by Aravaipa Venture Fund, LLC. Mr. Fenwick-Smith disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(4)	Consists of (i) 937,395 shares of common stock, (ii) 49,319 shares of common stock held by Mr. Reeser’s spouse and (iii) 402,691 shares of common stock issuable upon the exercise of options within 60 days of May 6, 2021.

(5)	Consists of (i) 329,208 shares of common stock and (ii) 155,786 shares of common stock issuable upon the exercise of options within 60 days of May 6, 2021.

(6)

The managing member of Aravaipa Venture Fund, LLC is Aravaipa Ventures, LLC. Robert Fenwick-Smith is a co-founding partner and member of Aravaipa Venture Fund, LLC and the managing member of Aravaipa Ventures, LLC and may be deemed to beneficially own the shares held by Aravaipa Venture Fund, LLC. Mr. Fenwick-Smith disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(7)

The 22,925,496 shares of common stock are held by BP Technology Ventures, Inc., an investment holding vehicle incorporated in Guernsey. BP Technology Ventures, Inc. is owned 100% by BP Corporation North America Inc., which is owned 100% by BP America Inc., which is owned 100% by BP America Ltd., which is owned 100% by BP Holdings North America Ltd., which is owned 100% by BP P.L.C.

(8)

The 11,170,688 shares of common stock are held by Rosella Holdings Limited, an investment holding vehicle incorporated in Guernsey. The shareholders and members of the board of directors of Rosella Holdings Limited are International Company Management Limited and Portman Welbeck Limited, both of which are wholly owned by the administrator Rawlinson and Hunter Limited and hold their interest in Rosella Holdings Limited as nominees for the Trustees of three Guernsey discretionary trusts each of which beneficially own one third of Rosella Holdings Limited. In addition, Rosella Holdings Limited owns an indirect and non-controlling interest in Aravaipa Ventures.

Directors and Executive Officers

The Company’s directors and executive officers after the Closing are described in the Final Proxy Statement/Prospectus in the section titled “Management After the Business Combination” and is incorporated herein by reference.

Executive Compensation

The executive compensation of the Company’s executive officers and directors is described in the Final Proxy Statement/Prospectus in the section titled “Management After the Business Combination—Post-Combination Company Executive Compensation” and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence

The certain relationships and related party transactions of the Company are described in the Final Proxy Statement/Prospectus in the section titled “Certain Relationships and Related Transactions” and are incorporated herein by reference. Director independence is described in the Final Proxy Statement/Prospectus in the section titled “Management After The Business Combination—Committees of the Board of Directors” and that information is incorporated herein by reference.

Legal Proceedings

The Company’s legal proceedings are described in the Final Proxy Statement/Prospectus in the sections titled “Information about the Company Prior to the Business Combination—Legal Proceedings” and “Information About Lightning Systems—Legal Proceedings” and are incorporated herein by reference.

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock and warrants began trading on the NYSE under the symbols “ZEV” and “ZEV.WS”, on May 7, 2021, subject to ongoing review of the Company’s satisfaction of all listing criteria post-Business Combination. The Company has not paid any cash dividends on shares of its common stock to date and does not intend to pay cash dividends. The payment of cash dividends in the future will be dependent upon the Company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of the Company’s board of directors. It is the present intention of the Company’s board of directors to retain all earnings, if any, for use in the Company’s business operations and, accordingly, the Company’s board does not anticipate declaring any dividends in the foreseeable future.

Information regarding GigCapital3’s common stock, units and warrants and related stockholder matters are described in the Final Proxy Statement/Prospectus in the section titled “PRICE RANGE OF SECURITIES AND DIVIDENDS” and such information is incorporated herein by reference.

Recent Sales of Unregistered Securities

Reference is made to the disclosure set forth under Item 3.02 of this Current Report on Form 8-K concerning the sale and issuance of unsecured convertible notes, warrants to purchase common stock and shares of common stock.

Description of Registrant’s Securities

The description of the Company’s securities is contained in the Final Proxy Statement/Prospectus in the section titled “DESCRIPTION OF SECURITIES” and is incorporated herein by reference.

Indemnification of Directors and Officers

Reference is made to the disclosure set forth under Item 5.02 of this Current Report on Form 8-K concerning indemnification agreements entered into with each of the Company’s directors and executive officers.

Financial Statements and Supplementary Data

Reference is made to the disclosure set forth under Item 9.01 of this Current Report on Form 8-K concerning the financial statements and supplementary data of Lightning Systems and GigCapital3.

Financial Statements and Exhibits

Reference is made to the disclosure set forth under Item 9.01 of this Report concerning the financial information of Lightning Systems and GigCapital3.

Item 2.02

Results of Operation and Financial Condition.

On May 17, 2021, the Company issued a press release announcing the financial results of Lightning Systems for the quarter ended March 31, 2021. A copy of the Company’s press release is attached as Exhibit 99.3 to this Current Report and is incorporated herein by reference.

The information contained in this Item 2.02, including Exhibit 99.3 attached hereto, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

Item 4.01.

Changes in Registrant’s Certifying Accountants.

On May 11, 2021, the Audit Committee of the Company’s board of directors approved the appointment of Grant Thornton LLP (“Grant Thornton”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ended December 30, 2021. The Company engaged Grant Thornton on May 17, 2021. Grant Thornton served as the independent registered public accounting firm of Lightning Systems prior to the Business Combination. Accordingly, BPM LLP (“BPM”), the independent registered public accounting firm of GigCapital3 was informed on May 11, 2021 that it would be replaced by Grant Thornton as the Company’s independent registered public accounting firm following its completion of the Company’s review of the quarter ended March 31, 2021, which consist only of the accounts of the pre-Business Combination special purpose acquisition company, GigCapital3. BPM’s services to the Company concluded on May 17, 2021 upon the filing with the SEC of the Form 10-Q for the quarter ended March 31, 2021.

The report of BPM on GigCapital3’s balance sheet as of December 31, 2020 and the statements of operations and comprehensive loss, stockholders’ equity and cash flows for the period from February 3, 2020 (inception) through December 31, 2020, did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainties, audit scope or accounting principles, except that such audit report contained an explanatory paragraph in which BPM expressed substantial doubt about the Company’s ability to continue as a going concern.

During the period from February 3, 2020 (inception) through December 31, 2020, and the subsequent interim period through the date of BPM’s dismissal, there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) between the Company and BPM on any matter of accounting principles or practices, financial disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of BPM would have caused it to make reference to the subject matter of the disagreements in its reports on the Company’s financial statements for such periods.

During the period from February 3, 2020 (inception) through December 31, 2020, and the subsequent interim period through the date of BPM’s dismissal, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act).

During the period from February 3, 2020 (inception) through December 31, 2020, and the subsequent interim period through the date of BPM’s dismissal, the Company did not consult with Grant Thornton regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the financial statements of GigCapital3 or the Company, and no written report or oral advice was provided that Grant Thornton concluded was an important factor considered by us in reaching a decision as to the accounting, auditing, or financial reporting issue; or (ii) any matter that was either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K under the Exchange Act) or a “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act).

The Company has provided BPM with a copy of the foregoing disclosures and has requested that BPM furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the Company set forth above. A copy of BPM’s letter, dated May 12, 2021, is filed as Exhibit 16.1 to this Current Report on Form 8-K.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Directors and Officers

The following persons are serving as executive officers and directors of the Company upon the Closing, with Timothy Reeser, Teresa Covington, William Kelly and Robert Fenwick-Smith having been named as executive officers effective upon the Closing on May 6, 2021 and each of the directors having been elected by the GigCapital3 stockholders to the board also upon the Closing on May 6, 2021. For biographical and current compensatory information concerning the executive officers and directors, see the disclosure in the Final Proxy Statement/Prospectus in the sections titled “Management After the Business Combination” which is incorporated herein by reference.


Name	Age	Position
Timothy Reeser	50	Chief Executive Officer and Director
Teresa Covington	57	Chief Financial Officer
William Kelley	64	Chief Technology Officer and Chief Operating Officer
Robert Fenwick-Smith	58	Co-Chairman of the Board of Directors
Dr. Avi Katz	63	Co-Chairman of the Board of Directors
Dr. Raluca Dinu	47	Director
Neil Miotto	74	Director
Thaddeus Senko	64	Director
Meghan Sharp	49	Director
Diana Tremblay	61	Director
Bruce Coventry	68	Director

Effective upon the Closing on May 6, 2021, Dr. Avi S. Katz and Brad Weightman resigned as executive officers of GigCapital3, and each of Andrea Betti-Berutto, John Mikulsky and Peter Wang, following their not standing for re-election to the Board, resigned as directors of GigCapital3.

On May 11, 2021, the board of directors reclassified four directors, such that Dr. Avi S. Katz and Dr. Raluca Dinu were made Class I directors, Bruce Coventry was made a Class II director and Thaddeus Senko was made a Class III director.

Also on May 11, 2021, the board of directors named Kash Sethi and Stephen Ivsan as additional executive officers of the Company, with Mr. Sethi serving as the Company’s Chief Revenue Officer and Mr. Ivsan serving as the Company’s Chief Procurement Officer. Mr. Sethi, age 36, was appointed as Lightning Systems’ Chief Revenue Officer effective February 8, 2021. Prior to that, he served as Vice President of Sales from October 2019 to January 2021 and Director of Sales from February 2017 to October 2019 at Motiv Power Systems, an EV technology provider for commercial vehicles. From October 2015 to February 2017, Mr. Sethi served as National Sales Manager and Head of Sales USA at Siemens Energy’s medium and high voltage electric substation equipment division. Mr. Sethi has earned an M.B.A. from Queen’s University, and a B.S. in Electrical Engineering from the University of Windsor. Pursuant to the Amended Executive Employment Agreement dated February 24, 2021, by and between Lightning Sytems and Mr. Sethi (the “Amended Executive Employment Agreement”), Mr. Sethi is (i) to receive an initial annual base salary of $260,000, (ii) eligible to participate in a bonus plan with a target bonus amount of 40% of his base salary upon achievement of targets determined by the Compensation Committee of the Company’s board of directors, (iii) to receive a stock option award for 60,880 shares of common stock at an exercise price of $6.57 per share (such numbers adjusted for the exchange ratio), (iv) four weeks of paid vacation and (v) a severance payment equal to six months of base salary, target bonus and COBRA coverage in the event Mr.

Sethi’s employment is terminated without cause. Mr. Sethi’s stock option was granted pursuant to the terms of the Lightning Systems 2019 Equity Incentive Plan (the “2019 EIP”) and the Lightning Systems, Inc. Form of Notice of Stock Option Grant and Stock Option Agreement (the “2019 Form of Grant and Option Agreement”), which are included as Exhibits 10.16 and 10.17 to this Current Report and the terms thereof are incorporated herein by reference.

Mr. Ivsan, age 48, was appointed as Lightning Systems’ Chief Procurement Officer effective February 24, 2021. From December 2019 to July 2020, Mr. Ivsan served as Executive Vice President of Outrider, Inc., an autonomous yard operations logistics company. Mr. Ivsan served as Chief Procurement Officer at Rivian, LLC, an electric vehicle automaker, from March 2018 to July 2018. Prior to that, Mr. Ivsan served as Chief Procurement Officer from March 2017 to December 2017 and Vice President of Supply Chain from May 2016 to March 2017 at Byton Limited, an electric vehicle company. Mr. Ivsan served as Director of Vehicle Purchasing from September 2014 to April 2016 and Senior Purchasing Manager from January 2013 to September 2014 at Tesla, Inc., an electric vehicle and clean energy company. Mr. Ivsan has earned a Masters in Electrical Engineering from University of Michigan and a B.S. in Mechanical Engineering from Kettering University. Pursuant to the Executive Employment Agreement dated February 24, 2021, by and between Lightning Systems and Mr. Ivsan (the “Executive Employment Agreement”), Mr. Ivsan is (i) to receive an initial annual base salary of $300,000, (ii) eligible to participate in a bonus plan with a target bonus amount of 40% of his base salary upon achievement of targets determined by the Compensation Committee of the Company’s board of directors, (iii) to receive a stock option award for 76,100 shares of common stock at an exercise price of $6.57 per share (such numbers adjusted for the exchange ratio), (iv) four weeks of paid vacation and (v) a severance payment equal to six months of base salary, target bonus and COBRA coverage in the event Mr. Sethi’s employment is terminated without cause. Mr. Sethi’s stock option was granted pursuant to the terms of the 2019 EIP and the 2019 Form of Grant and Option Agreement and the terms thereof are incorporated herein by reference.

There is no arrangement or understanding between either Mr. Sethi or Mr. Ivsan and any other person pursuant to which either of them was selected as an officer of the Company and there are no family relationships between Mr. Sethi or Mr. Ivsan and any of the Company’s directors or executive officers. There are no transactions to which the Company is a party and in which Mr. Sethi or Mr. Ivsan has a direct or indirect material interest that would be required to be disclosed under Item 404(a) of Regulation S-K.

The foregoing descriptions of Mr. Sethi’s Amended Executive Employment Agreement and Mr. Ivsan’s Executive Employment Agreement are not complete and are subject to, and qualified in their entirety by reference to the text of Mr. Sethi’s Amended Executive Employment Agreement, which is included as Exhibit 10.14 to this Current Report on Form 8-K, and to the text of Mr. Ivsan’s Executive Employment Agreement, which is included as Exhibit 10.15 to this Current Report on Form 8-K.

2021 Equity Incentive Plan

As previously reported in the Current Report on Form 8-K filed with the SEC on April 22, 2021, at the Special Meeting, the GigCapital3 stockholders considered and approved the Lightning eMotors, Inc. 2021 Incentive Plan (the “Incentive Plan”), and reserved 14,041,107 shares of common stock for issuance thereunder. The Incentive Plan was previously approved, subject to stockholder approval, by the Board of GigCapital3 on December 30, 2020. The Incentive Plan became effective immediately upon the Closing of the Business Combination. The number of shares of common stock reserved for issuance under the Incentive Plan will automatically increase on January 1 of each year, beginning on January 1, 2022 and continuing through January 1, 2032, by 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the board of directors.

In conjunction with the approval of the Incentive Plan, the Board of GigCapital3 also adopted a form of Restricted Stock Units Agreement (the “RSU Agreement”) and a form of Stock Option Agreement (the “Stock Option Agreement”) that the Company will use for grants under its Incentive Plan. The RSU Agreement provides that restricted stock units will vest over a fixed period and be paid as shares of common stock, and unvested restricted stock units will expire upon certain terminations of the grantees’ employment or relationship with the Company. The Stock Option Agreement provides that stock options will vest over a fixed period and unvested options will expire upon certain terminations of the grantees’ employment or relationship with the Company.

A more complete summary of the terms of the Incentive Plan is set forth in the Final Proxy Statement/Prospectus in the section titled “Proposal No. 5—Incentive Plan Proposal”. That summary and the foregoing description of the Incentive Plan are qualified in their entirety by reference to the text of the Incentive Plan, which is filed as Exhibit 10.7 hereto and incorporated herein by reference. The summary of the form of RSU Agreement and form of Stock Option Agreement is qualified in its entirety by reference to the form of RSU Agreement and form of Stock Option Agreement, which are attached hereto as Exhibit 10.8 and Exhibit 10.9, respectively.

Indemnification Agreements for Company Directors and Officers

In connection with the closing of the Business Combination, the Company entered into indemnification agreements with each of its directors and officers (the “Indemnification Agreements”). The Indemnification Agreements provide the directors and executive officers with contractual rights to indemnification and expense advancement. The foregoing description of the Indemnification Agreements is not complete and is subject to, and qualified in its entirety by reference to the text of the form of Indemnification Agreement, which is included as Exhibit 10.5 to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(a)-(b) Financial Statements.

The audited balance sheet of GigCapital3, Inc., as of December 31, 2020, and the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes thereto and report of independent registered public accounting firm, in the Final Proxy Statement/Prospectus in the section titled “INDEX TO FINANCIAL STATEMENTS— GigCapital3, Inc. –Financial Statements” are incorporated herein by reference.

The audited consolidated balance sheets of Lightning Systems, Inc. as of December 31, 2020 and 2019, the related consolidated statements of operations, other comprehensive income loss, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes thereto and report of independent registered public accounting firm, in the Final Proxy Statement/Prospectus in the section titled “INDEX TO FINANCIAL STATEMENTS— Lightning Systems Inc. –Financial Statements” are incorporated herein by reference.

The unaudited pro forma condensed combined financial statements as of December 31, 2020 and for the year ended December 31, 2020 are filed with this Current Report on Form 8-K as Exhibit 99.1 and incorporated herein by reference.

The unaudited financial statements of GigCapital3, Inc. as of March 31, 2021 and for the quarter ended March 31, 2021 are filed with this Current Report on Form 8-K as Exhibit 99.2 and incorporated herein by reference.

(d) Exhibits.


Exhibit		Description

2.1†		Business Combination Agreement, dated as of December 10, 2020, by and among GigCapital3, Inc., Project Power Merger Sub, Inc. and Lightning Systems, Inc. (included as Annex A to the Final Proxy Statement/Prospectus filed under Rule 424(b)(3) on March 26, 2021)

3.1		Second Amended and Restated Certificate of Incorporation of Lightning eMotors, Inc. (incorporated by reference to Exhibit 3.1 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

3.2		Amended and Restated Bylaws of Lightning eMotors, Inc. (incorporated by reference to Exhibit 3.2 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.1		Registration Rights and Lock-Up Agreement, dated May 6, 2021, by and among Lightning eMotors, Inc. and certain stockholders (incorporated by reference to Exhibit 10.1 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.2		Form of Convertible Note Subscription Agreement (incorporated by reference to Exhibit 10.4 filed on GigCapital3, Inc.’s Current Report on Form 8-K, filed by the Registrant on December 11, 2020)

10.3		Indenture dated May 6, 2021, by and between Lightning eMotors, Inc. and Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder (incorporated by reference to Exhibit 10.3 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.4		Amended and Restated Warrant Agreement, dated May 6, 2021, by and between GigCapital3, Inc. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 10.4 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)


10.5#		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.5 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.6		Subscription Agreement, dated as of December 10, 2020, by and between GigCapital3, Inc. and BP Technology Ventures, Inc. (incorporated by reference to Exhibit 10.3 filed on GigCapital3, Inc.’s Current Report on Form 8-K, filed by the Registrant on December 11, 2020)

10.7#		2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.8#		Form of Restricted Stock Units Agreement (incorporated by reference to Exhibit 10.8 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.9#		Form of Stock Option Agreement (incorporated by reference to Exhibit 10.9 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.10#		Amended Executive Employment Agreement dated February 24, 2021, by and between Lightning Systems, Inc. and Teresa Covington (incorporated by reference to Exhibit 10.10 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.11#		Promotion Letter dated April 25, 2019, by and between Lightning Systems, Inc. and William Kelley (incorporated by reference to Exhibit 10.11 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.12		Office Lease dated November 22, 2019, by and between Lightning Systems, Inc. and Rocky Mountain Center for Innovation & Technology, LLC (incorporated by reference to Exhibit 10.12 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.13		Office Lease dated November 10, 2020, by and between Lightning Systems, Inc. and RMCIT LLC (incorporated by reference to Exhibit 10.13 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

10.14#		Amended Executive Employment Agreement dated February 24, 2021, by and between Lightning Systems, Inc., and Kash Sethi

10.15#		Executive Employment Agreement dated February 24, 2021, by and between Lightning Systems, Inc. and Stephen Ivsan

10.16#		Lightning Systems, Inc. 2019 Equity Incentive Plan

10.17#		Lightning Systems, Inc. Form of Notice of Stock Option Grant and Stock Option Agreement

16.1		Letter from BPM dated May 12, 2021 (incorporated by reference to Exhibit 16.1 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

99.1		Unaudited Pro Forma Condensed Combined Financial Information as of December 31, 2020 and for the twelve months ended December 31, 2020 (incorporated by reference to Exhibit 99.1 filed on the Company’s Current Report on Form 8-K, filed by the Registrant on May 12, 2021)

99.2		Unaudited consolidated financial statements of GigCapital3, Inc. as of and for the three months ended March 31, 2020

99.3		Press Release dated May 17, 2021

#	Indicates a management contract or compensatory plan, contract or arrangement.

†	Schedules and similar attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of such omitted materials to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 10.14

AMENDED EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) dated as of February 24, 2021, is between LIGHTNING SYSTEMS. INC., dba Lightning eMotors (the “Company”) and Kash Sethi (the “Executive” and together with the Company, the “Parties”).

WITNESSETH:

WHEREAS:

The Parties wish to enter the arrangements set forth herein with respect to the terms and conditions of the Executive’s employment with the Company.

NOW, THEREFORE, in consideration of the promises and covenants contained herein, the Parties agree as follows:

AGREEMENT

1. Employment and Term. The Company agrees to, and does hereby, employ the Executive, and the Executive agrees to, and does hereby accept, such employment, upon the terms and subject to the conditions set forth in this Agreement. The Executive’s employment will begin on January 11, 2021 (the “Start Date”) and continue at will, which means that the Executive or the Company may terminate the Executive’s employment at any time for any reason, or for no reason, with or without cause (the “Term”). If the Company terminates this Agreement and the Executive’s employment, the Company shall provide the Executive with notice and reason for the termination at least ten (10) calendar days prior to the effective date of such termination.

2. Position and Duties.

(a) During the Term, the Company shall employ the Executive as Chief Revenue Officer. The Executive shall perform the duties and have the responsibilities customarily associated with the position of Chief Revenue Officer, which shall include, without limitation, managing the commercialization of all revenue generating streams of the Company, including but not limited to Company’s current portfolio of Zero Emission Vehicles and Electric Vehicle Charging Systems, , and assume such other responsibilities, as may be directed to the Executive by the Chief Executive Officer or such other person as may be designated by the Board of Directors of the Company.

(b) The Executive shall devote his best efforts and his full business time and attention to the business and affairs of the Company.

(c) The Executive acknowledges and agrees that (i) the Executive owes the Company a duty of loyalty as a fiduciary of the Company, and (ii) the obligations described in this Agreement are in addition to, and not in lieu of, the obligations the Executive owes the Company under the common law.

3. Base Salary, Bonus, Equity/Options, and Benefits.

(a) Base Salary. During the Term, the Executive’s base salary shall be $260,000.00 per annum (“Base Salary”), which salary shall be payable in regular installments in accordance with the Company’s general payroll practices. The Base Salary will be subject to review on an annual basis and may be adjusted in accordance with the procedures set forth by the Company’s Compensation Committee.

(b) Annual Bonus. During the Term, provided that the Executive is employed by the Company on December 31st of the applicable year, the Executive will be eligible to participate in a bonus plan pursuant to which he will be entitled to receive an annual target bonus in the amount of 40 percent (40%) of his Base Salary for the applicable year, prorated for any partial year (the “Target Bonus”), upon achievement by the Executive and the Company of certain targets as determined solely in the discretion of the Company’s Compensation Committee (the “Annual Bonus”). The Target Bonus, may change in any given year as determined by the Company’s Compensation Committee, and the Annual Bonus actually paid, if any, will depend on the actual performance of the Company and the Executive as determined by the Compensation Committee. In all events the Annual Bonus, if earned, will be paid no later than March 15th following the applicable year for which it is earned. Notwithstanding the foregoing, effective as of the date the Company is public, the Annual Bonus shall be paid in the calendar year following the applicable service year as soon as practicable after completion of the annual audit.

(c) Options. Effective as of February 24. 2021 the Company shall grant the Executive 64,725 ISOs with a strike price of $6.18 (equal to the fair market value of one share of the Company’s common stock on 2/24/21) representing an option to purchase an aggregate value of $400,000 worth of the Company’s common stock. The Initial Options shall vest in three equal annual installments on the first, second and third anniversaries of the Start Date, and the Subsequent Options shall vest in three equal annual installments on the first, second and third anniversaries of the applicable grant date (each, a “Vesting Date”), provided in each case that the Executive is employed by the Company on the applicable Vesting Date. The Vesting Date shall be accelerated and all outstanding options shall become fully vested upon a Change in Control of the Company. The Initial Options and the Subsequent Options (collectively, the “Stock Options”) shall have a ten-year term (subject to earlier termination upon termination of employment as described herein and in the applicable option agreement) and shall be subject to the terms and conditions of the Company’s Long-Term Incentive Plan and option agreements, all of which shall be consistent with the Executive’s rights set forth in this Section 3(c). The Executive may receive additional stock options or other equity compensation grants in the future in the sole discretion of the Company’s Compensation Committee.

(d) Employee Benefits. During the Term, the Executive shall be entitled to participate in the Company’s various employee benefit plans that are, from time to time, made generally available to the Company’s employees, as such plans are established and pursuant to the terms and conditions of such plans.

(e) Vacation. The Executive shall be entitled to 4 weeks paid vacation time per calendar year, pro-rated for any partial year of employment, in accordance with the Company’s vacation time policy.

(f) Expense Reimbursement. The Executive shall receive reimbursement for direct and reasonable out-of-pocket expenses, including continuing professional education and membership in National and State Professional Associations, incurred by him in connection with the performance of his duties hereunder, according to the policies of the Company. All requests for reimbursement of business-related expenses shall be subject to the Company’s travel policy and requirements with respect to reporting and documentation of expenses.

4. Compensation Upon Termination, Resignation, Disability or Death.

(a) Termination without Cause. If the Executive’s employment is terminated by the Company without Cause, the Company shall pay the Executive any Base Salary and Annual Bonus from the preceding calendar year to the extent accrued but unpaid as of the effective date of the Executive’s termination; accrued but unused vacation in accordance with Company policy; and all business expenses that were incurred and not reimbursed but eligible for reimbursement (collectively, the “Accrued Obligations”). In addition, subject to Section 19, the Company will pay the Executive an amount equal to three (3) months of the Executive’s Base Salary and Target Bonus at the rate in effect on the date of termination, plus a pro rata portion of the Target Bonus equal to number of months of completed employment during the year in which termination occurs divided by twelve (12) (“Pro Rata Bonus”), all payable in a lump sum within sixty (60) calendar days of the date of termination. Provided the Executive timely elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall also pay, on the Executive’s behalf, the portion of monthly premiums for the Executive’s group health insurance, including coverage for the Executive’s dependents, that the Company paid immediately prior to the date of termination, during the three (3) month period following the date of termination, subject to the Executive’s continued eligibility for COBRA coverage. The Company will pay for such COBRA coverage for eligible dependents only for those dependents who were enrolled immediately prior to the date of termination. The Executive will continue to be required to pay that portion of the premium for the Executive’s health coverage, including coverage for the Executive’s eligible dependents, that the Executive was required to pay as an active employee immediately prior to the date of termination. Notwithstanding the foregoing, in the event that under applicable guidance the reimbursement of COBRA premiums causes the Company’s group health plan to violate any applicable nondiscrimination rule, the parties agree to negotiate in good faith a mutually agreeable alternative arrangement. Upon termination under this Section 4(a), (i) the Initial Options, to the extent unvested, shall immediately vest, (ii) the Subsequent Options shall cease vesting and (iii) all vested Stock Options shall remain exercisable until the earlier of (x) the date one hundred eighty(180) calendar days following termination of employment or (y) the expiration of the original option term.

(b) Resignation for Good Reason. If the Executive resigns for Good Reason, the Company shall pay the Executive the same sums and in the same manner, and his rights to the Stock Options shall be the same, as to which the Executive would be entitled if he had been terminated by the Company without Cause, as set forth in subsection (a) above. The Executive shall provide 30 days’ prior written notice to the Company of his decision to resign for Good Reason subject to the ability of the Company to cure such basis for Good Reason during such notice period.

(c) Termination for Cause. If the Executive’s employment is terminated by the Company for Cause, the Company shall pay the Executive the Accrued Obligations. Upon termination under this Section 4(c), any outstanding Stock Options shall cease to be exercisable and will be forfeited.

(d) Resignation without Good Reason. If the Executive resigns without Good Reason, the Company shall pay the Executive the Accrued Obligations. The Executive shall provide 30 days’ prior written notice to the Company of his decision to resign without Good Reason. The Stock Options, to the extent exercisable at the Executive’s termination of employment, shall remain exercisable until the earlier of (i) the date ninety (90) calendar days following termination of employment under this Section 4(d) or (ii) the expiration of the original option term.

(e) Disability. Subject to any state or federal law or regulation governing employees with disabilities, the Company may terminate the Executive’s employment upon the Disability of the Executive. In the event the Executive is terminated under this Section 4(e), the Company shall pay the Executive the Accrued Obligations and the Pro Rata Bonus. In addition, subject to Section 19, the Company will pay the Executive an amount equal to three (3) months of the Executive’s Base Salary at the rate in effect on the date of termination, payable in a lump sum within sixty (60) calendar days of the date of termination. In addition, in such event, the Company shall cause Executive to fully vest in all Stock Options referred to in Section 3(c) of this Agreement, and the Stock Options shall remain exercisable until the earlier of (i) the date one (1) year following termination of employment under this Section 4(e) or (ii) the expiration of the original option term.

(f) Death. If the Executive’s employment is terminated due to the Executive’s death, the Company shall pay the Executive’s estate the Accrued Obligations and the Pro Rata Bonus. In addition, in such event, the Company, shall cause Executive’s estate to fully vest in all Stock Options referred to in Section 3(c) of this Agreement, and the Stock Options shall remain exercisable until the earlier of (i) the date one (1) year following termination of employment under this Section 4(f) or (ii) the expiration of the original option term.

(g) For purposes of this Agreement:

(i) “Cause” means the Executive’s (a) conviction of, guilty plea to or confession of guilt of, or plea of nolo contendere to a felony, or an act involving moral turpitude which could have a material adverse effect on the Company; (b) material willful dishonesty, fraud or conduct that constitutes a felony or an act involving moral turpitude or a breach of fiduciary duty or any material misrepresentation in connection with the Executive’s employment; (c) intentional negligent action that exposes the Company to a material risk of legal liability or public disgrace or disrepute including, without limitation, violation of any law, rule or regulation that could expose the Company to a material legal or monetary fine or penalty; (d) gross neglect of his duties or substantial failure to perform duties as reasonably directed by the Chief Executive Officer and/or Board of Directors; (e) gross negligence or willful misconduct with respect to Company affairs or the Executive’s obligations hereunder; or (f) any other material breach of this or any other agreement with

the Company or any material Company policy, which breach in each case listed above where cure is possible, is not cured within at least fifteen (15) calendar days after receipt by the Executive of written notice from the Company of such breach.

(ii) “Good Reason” means: (a) a material diminution in the Executive’s Base Salary, except where such reduction occurs as part of and is commensurate in amount with an across-the-board reduction in salary affecting all senior executives of the Company; (b) a material change in the geographic location of the Executive’s principal business office; in order for a change to be material hereunder, the Executive’s principal business office must be moved to a location more than fifty (50) miles from the Company’s office as of the Start Date, except for required travel on Company business; or (c) any other action or inaction by the Company that constitutes a material breach of this Agreement. The foregoing shall constitute Good Reason only if (i) the Executive provides written notice to the Company of any event(s) alleged to constitute Good Reason within ninety (90) calendar days of the initial occurrence of the event, with such notice providing a detailed description of the circumstances constituting Good Reason (a “Good Reason Notice”), (ii) any such reduction, change, or breach is not remedied or cured within thirty (30) calendar days after the Company’s receipt of a written Good Reason Notice from the Executive (the “Cure Period”) and (iii) the Executive actually terminates employment within thirty (30) calendar days following the expiration of the Cure Period.

(iii) “Disability” shall mean that the Executive is disabled within the meaning of the Company’s group long-term disability insurance policy. If no long term disability insurance is in place, then Disability shall mean that the Executive, due to illness, accident, or other physical or mental incapacity, has been substantially unable to perform his duties under this Agreement for a period of at least six (6) consecutive months during the Term as established by the written opinion of a licensed independent physician selected by the Company.

(h) Deemed Resignation. Unless otherwise agreed to in writing by the Company and the Executive prior to the termination of the Executive’s employment, any termination of the Executive’s employment shall constitute an automatic resignation of the Executive as an officer of the Company, and an automatic resignation of the Executive from the board of directors or similar governing body of the Company or any affiliate of the Company and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which the Company or any affiliate holds an equity interest and with respect to which board or similar governing body the Executive serves as the Company’s or such affiliate’s designee or other representative.

(i) Clawback. The Executive agrees and acknowledges that any and all compensation the Executive receives pursuant to this Agreement shall be subject to clawback by the Company in the event of a financial restatement or in such other circumstances as may be required by applicable law or as may be provided in any clawback policy that is adopted by the Company and is generally applicable to senior executives of the Company.

5. Confidentiality and Non-Solicitation.

(a) For purposes of this Agreement, “Confidential Information” means (i) communications, data, formulae and related concepts, business plans (both current and under development), profit and loss statements, spreadsheets, contact or distribution lists, non-public personnel lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, trading, investments, sales activities, promotions, credit and financial data, financing methods, research, plans or the business and affairs of the Company; (ii) any other information which is to be treated as confidential or non-public because of any duty of confidentiality owed by the Company to a third party; and (iii) any other information which the Company shall, in the ordinary course, use and not release externally, except subject to restrictions on use and disclosure. Notwithstanding the foregoing, Confidential Information does not include information that (A) is or becomes generally publicly available other than as a result, directly or indirectly, of the Executive’s disclosure or (B) is or becomes available to the Executive on a non-confidential basis from a source other than through the Company or its representatives, provided that such source is not bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to the Executive by a contractual or legal obligation.

(b) The Executive acknowledges the trade secret status of the Confidential Information and that the Confidential Information constitutes a protectable business interest of the Company. The Executive agrees (i) not to use or allow or help another to use or access (whether for compensation or not) any Confidential Information for himself or others (other than the Company); and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company’s offices at any time during or after the Executive’s employment by the Company, except as required in the execution of the Executive’s duties to the Company and then conditioned upon the prompt return of all originals and reproductions thereof (in whatever form).

(c) During the Term and for a period of one (1) year thereafter, the Executive shall not, directly or indirectly, on behalf of himself or any other person or entity, without the prior written consent of the Company solicit or induce any employee of or consultant or service provider to the Company (each, a “Service Provider”) to leave the employ of or cease performing services for the Company, or engage in any plan or coordinate with any Service Provider to leave the employ of or cease performing services for the Company, or hire, participate with or attempt to participate with in any venture for any purpose any Service Provider or any Service Provider who has left the employment of or ceased to perform services for the Company within one year of the termination of such Service Provider’s services for the Company.

(d) The Executive acknowledges that any breach of his obligations under this Section 5 cannot be adequately compensated by damages in an action at law and may cause the Company great and irreparable injury and damage. Accordingly, in the event

that the Executive breaches or threatens to breach any provisions of this Section 5, then in addition to any other rights which the Company may have, the Company shall be entitled, without the necessity of (i) proving irreparable harm, (ii) establishing that monetary damages are inadequate or (iii) posting any bond or other security with respect thereto, to the remedies of injunction, specific performance and other equitable relief to redress any breach, and no proof of special damages shall be necessary for the enforcement of or for any action for breach of the Executive’s obligations. In the event that a proceeding is brought in equity to enforce the provisions of this Section 5, the Executive shall not urge as a defense that there is an adequate remedy at law nor shall the Company be prevented from seeking any other remedies which may be available. Nothing contained in this Section 5(d) shall be construed as a waiver by the Company of any other rights, including, without limitation, rights to damages or profits.

(e) The Executive agrees that the period during which the covenants contained in this Section 5 shall be effective shall be computed by excluding from such computation any time during which the Executive is in violation of any provision of this Section 5.

(f) The Company and the Executive agree that it was their intent to enter into a valid and enforceable agreement. The Executive and the Company thereby acknowledge the reasonableness of the restrictions set forth in this Section 5, including the reasonableness of the duration as to time and the scope of activity restrained. The Executive agrees that if any covenant contained in Section 5 of this Agreement is found by a court of competent jurisdiction to contain limitations as to time or scope of activity that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interests of the Company, then the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill and other business interests of the Company and to enforce the covenants as reformed.

(g) If the Executive’s employment with the Company is terminated for any reason, the Executive agrees to advise the Company of the name of the Executive’s new employer if reemployed during the one (1) year period following executive’s termination with the Company. The Executive further agrees that the Company may notify any person or entity employing the Executive or evidencing an intention of employing the Executive during such one year period of the existence and provisions of this Agreement.

6. The Executive’s Representations. The Executive represents to the Company that:

(a) the execution, delivery and performance of this Agreement by the Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which he is bound;

(b) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable against her in accordance with its terms.

(c) as of the Start Date, the Executive will not be a party to any agreement with any person, other than an agreement with the Company, restricting the use of another person’s confidential information or restricting the Executive from providing future employment, consulting or other service;

(d) no prior or pending litigation, arbitration, investigation or other proceeding of any kind will prevent or hinder the Executive from performing his duties under this Agreement; and

(e) the Executive has consulted with independent legal counsel regarding her rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

7. Change in Control.

(a) Definitions.

(i) For purposes of this Section 7, “Change in Control” means (I) any merger or consolidation of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than a controlling interest in the surviving entity immediately after such consolidation, merger or reorganization; (II) any transaction or series of related transactions in which control of the Company is acquired by a person or group of persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended or any successor provisions thereto; or (III) a sale or other disposition of all or substantially all of the assets of the Company; provided that in no event will a Change in Control include any of the following transactions: (A) any consolidation, merger or similar transaction effected exclusively to change the domicile of the Company; (B) any transaction or series of transactions in which voting securities of the Company are issued principally for bona fide financing purposes or any successor or indebtedness or equity securities of the Company are cancelled or converted or a combination thereof, including, without limitation, an initial public offering or other offering of the Company’s capital stock; or (C) any acquisition of such voting power by an individual or entity that, directly or indirectly, controls, is controlled by, or is under common control with, the Company.

(ii) “Control” (including its correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) means, with respect to any person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the beneficial ownership of voting securities, by contract or otherwise.

(b) Change in Control Severance Benefits. If there is a Change in Control, and within one (1) year of such Change in Control, the Executive’s employment is terminated

under the circumstances described in Sections 4(a) or 4(b) above, the Company shall pay the Executive the compensation as set forth in subsection 4(a) above and all outstanding Initial Options and Subsequent Options shall be fully vested as of the date of such termination and shall remain exercisable until the earlier of (x) the date one hundred eighty(180) calendar days following termination of employment or (y) the expiration of the original option term.

(c) Termination Preceding Change in Control. Notwithstanding the provisions of the above subsection 7(b), if the Executive’s employment with the Company is terminated by the Company without Cause within three (3) months preceding the occurrence of a Change in Control and such termination without Cause occurred in anticipation of a Change in Control, the Executive shall be entitled to the payments and benefits described in the above subsection 7(b).

8. Taxes. The Company shall be entitled to withhold from any payment or benefit provided under this Agreement an amount sufficient to satisfy all federal, state and local income and employment tax withholding requirements.

9. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

Notices to the Executive:

Kash Sethi

Notices to the Company:

Attention: Tim Reeser

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement shall be deemed to have been given when so delivered, sent or mailed.

10. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any action in any other jurisdiction, but this Agreement shall be reformed construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

activities following termination. This Agreement supersedes all prior agreements and understandings, whether written or oral, between the Parties with respect to the terms and conditions of the Executive’s employment with the Company and activities following termination. This Agreement may not be changed or modified except by an instrument in writing, signed by the Executive and a duly authorized officer of the Company.

12. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

13. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive, the Company and their respective heirs, personal representatives, executors and administrators, successors and assigns, except that the Executive may not assign his rights or delegate his duties or obligations hereunder without the prior written consent of the Company.

14. Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Colorado and the federal laws of the United States of America, without giving effect to any choice of law or conflict of law rules or provisions that would cause the application of the laws of any jurisdiction other than the State of Colorado and the federal laws of the United States of America.

15. Dispute Resolution and Arbitration. Subject to Section 5(d), the Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation. If the matter has not been resolved within thirty (30) calendar days of a Party’s request for negotiation, either Party may initiate proceedings or arbitration only as provided herein. Subject to Section 5(d), if any dispute arising out of or relating to this Agreement or the breach, termination or validity thereof has not been resolved by negotiation, such dispute shall be settled by binding arbitration in accordance with the then current rules of JAMS by a single independent and impartial arbitrator who is located in Denver, Colorado. The arbitrator selected must have an expertise in the matter(s) in dispute. Each party shall bear his/its own fees and costs; the fees, costs and all administrative expenses of arbitration shall be borne equally by the Company and the Executive. The Parties understand and agree that the arbitration is subject to the rules of JAMS; that the arbitrator’s decision and award shall be final and binding as to all claims that were, or could have been, raised in arbitration; and that judgment upon the award rendered by the arbitrator may be entered in any court having competent jurisdiction. Any award rendered hereunder may include an award of attorneys’ fees and costs but shall not include punitive damages. The statute of limitations of the state of Colorado applicable to the commencement of a lawsuit shall apply to the commencement of an arbitration.

16. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and the Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.

17. Survival. In the event of the Executive’s termination of, or resignation from, employment, Sections 4, 5, 8, 9, 10, 13, 14, 15 and 16 shall survive and continue in full force to the extent necessary to enforce their terms.

18. Jobs Act Compliance.

(a) This Agreement is intended to provide payments that are exempt from or compliant with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and related regulations and Treasury pronouncements (“Section 409A”), and the Agreement shall be interpreted accordingly. Each payment under this Agreement is intended to be excepted from Section 409A, including, but not limited to, by compliance with the short-term deferral exception as specified in Treasury Regulation § 1.409A-l(b)(4), and the provisions of this Agreement will be administered, interpreted and construed accordingly (or disregarded to the extent such provision cannot be so administered, interpreted, or construed).

(b) All reimbursements or provision of in-kind benefits pursuant to this Agreement shall be made in accordance with Treasury Regulation § l.409A-3(i)(l)(iv) such that the reimbursement or provision will be deemed payable at a specified time or on a fixed schedule relative to a permissible payment event. Specifically, the amount reimbursed, or in-kind benefits provided under this Agreement during the Executive’s taxable year may not affect the amounts reimbursed or provided in any other taxable year (except that total reimbursements may be limited by a lifetime maximum under a group health plan), the reimbursement of an eligible expense shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred, and the right to reimbursement or provision of in-kind benefit is not subject to liquidation or exchange for another benefit.

(c) For all purposes of this Agreement, the Executive shall be considered to have terminated employment with the Company when the Executive incurs a “separation from service” with the Company within the meaning of Code Section 409A(a)(2)(A)(i).

(d) Notwithstanding any provision of this Agreement to the contrary, the parties agree that any benefit or benefits under this Agreement that the Company determines are subject to the suspension period under Code Section 409A(a)(2)(B) shall not be paid or commence until the first business day next following the earlier of (i) the date that is six months and one day following the date of the Executive’s termination of employment, (ii) the date of the Executive’s death or (iii) such earlier date as complies with the requirements of Section 409A.

19. Release. Any and all amounts payable and benefits or additional rights provided pursuant to Sections 4 and 7, other than (i) compensation accrued but unpaid as of the effective date of the Executive’s termination; (ii) accrued but unused vacation in accordance with Company policy; and (iii) all business expenses that were incurred but not reimbursed, shall only be payable if the Executive executes and delivers to the Company, within 60 days after termination of employment, in the Company’s standard form, a general release of all claims of the Executive up to the date of such release in substantially the form attached hereto as Exhibit A.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

LIGHTNING SYSTEMS, INC.


By:		/s/ Tim Reeser
Name:		Tim Reeser
Title:		CEO

EXECUTIVE


By:		/s/ Kash Sethi
Name:		Kash Sethi Feb 25 2021

Exhibit 10.15

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) dated as of February 24th, 2021, is between LIGHTNING SYSTEMS, INC., dba Lightning eMotors (the “Company”) and Stephen Ivsan (the “Executive” and together with the Company, the “Parties”).

WITNESSETH:

WHEREAS:

The Parties wish to enter the arrangements set forth herein with respect to the terms and conditions of the Executive’s employment with the Company.

NOW, THEREFORE, in consideration of the promises and covenants contained herein, the Parties agree as follows:

AGREEMENT

1. Employment and Term. The Company agrees to, and does hereby, employ the Executive, and the Executive agrees to, and does hereby accept, such employment, upon the terms and subject to the conditions set forth in this Agreement. The Executive’s employment will begin on February 24th, 2021 (the “Start Date”) and continue at will, which means that the Executive or the Company may terminate the Executive’s employment at any time for any reason, or for no reason, with or without cause (the “Term”). If the Company terminates this Agreement and the Executive’s employment, the Company shall provide the Executive with notice and reason for the termination at least ten (10) calendar days prior to the effective date of such termination.

2. Position and Duties.

(a) During the Term, the Company shall employ the Executive as Chief Procurement Officer (“CPO”). The Executive shall report to the Company CEO. The Executive shall perform the duties and have the responsibilities customarily associated with the position of CPO, which shall include, without limitation, managing and developing the supply chain and manufacturing teams and activities for the Company’s portfolio of Zero Emission Vehicles and Electric Vehicle Charging Systems, and assume such other responsibilities, as may be directed to the Executive by the Chief Executive Officer or such other person as may be designated by the Board of Directors of the Company.

(b) The Executive shall devote his best efforts and his full business time and attention to the business and affairs of the Company.

(c) The Executive acknowledges and agrees that (1) the Executive owes the Company a duty of loyalty as a fiduciary of the Company, and (ii) the obligations described in this Agreement are in addition to, and not in lieu of, the obligations the Executive owes the Company under the common law.

3. Base Salary, Bonus, and Benefits.

(a) Base Salary. During the Term, the Executive’s base salary shall be $300,000.00 per annum (“Base Salary”), which salary shall be payable in regular installments in accordance with the Company’s general payroll practices. The Base Salary will be subject to review on an annual basis and may be adjusted in accordance with the procedures set forth by the Company’s Compensation Committee.

(b) Annual Bonus. During the Term, provided that the Executive is employed by the Company on December 31st of the applicable year, the Executive will be eligible to participate in a bonus plan pursuant to which he will be entitled to receive an annual target bonus in the amount of 40 percent (40%) of his Base Salary for the applicable year, pro-rated for any partial year (the “Target Bonus”), upon achievement by the Executive and the Company of certain targets as determined solely in the discretion of the Company’s Compensation Committee (the “Annual Bonus”). The Target Bonus may change in any given year as determined by the Company’s Compensation Committee, and the Annual Bonus actually paid, if any, will depend on the actual performance of the Company and the Executive as determined by the Compensation Committee. In all events the Annual Bonus, if earned, will be paid no later than April 15th following the applicable year for which it is earned.

(c) Options. Effective as of February 24, 2021 the Company shall grant the Executive 80,906 ISOs with a strike price of $6.18 (equal to the fair market value of one share of the Company’s common stock on 2/24/2 1) representing an option to purchase an aggregate value of $500,000 worth of the Company’s common stock. The Initial Options shall vest in three equal annual installments on the first, second and third anniversaries of the Start Date, and the Subsequent Options shall vest in three equal annual installments on the first, second and third anniversaries of the applicable grant date (each, a “Vesting Date”), provided in each case that the Executive is employed by the Company on the applicable Vesting Date. The Vesting Date shall be accelerated and all outstanding options shall become frilly vested upon a Change in Control of the Company. The Initial Options and the Subsequent Options (collectively, the “Stock Options”) shall have a ten-year term (subject to earlier termination upon termination of employment as described herein and in the applicable option agreement) and shall be subject to the terms and conditions of the Company’s Long-Term Incentive Plan and option agreements, all of which shall be consistent with the Executive’s rights set forth in this Section 3(c). The Executive may receive additional stock options or other equity compensation grants in the future in the sole discretion of the Company’s Compensation Committee.

For purposes of vesting, the vesting start date of the equity offering will be retroactive to Executive’s start date with the Company. The Executive may receive additional stock option or other equity compensation grants in the future in the sole discretion of the Company’s Compensation Committee.

(e) Vacation. The Executive shall be entitled to 4 weeks paid vacation time per calendar year, pro-rated for any partial year of employment, in accordance with the Company’s vacation time policy.

4. Compensation Upon Termination. Resignation. Disability or Death.

(a) Termination without Cause. If the Executive’s employment is terminated by the Company without Cause, the Company shall pay the Executive any Base Salary and Annual Bonus from the current and preceding calendar year to the extent accrued but unpaid as of the effective date of the Executive’s termination; accrued but unused vacation in accordance with Company policy; and all business expenses that were incurred and not reimbursed but eligible for reimbursement (collectively, the “Accrued Obligations”). In addition, subject to Section 19, the Company will pay the Executive an amount equal to six (6) months of the Executive’s Base Salary and Target Bonus at the rate in effect on the date of termination, plus a pro rata portion of the Target Bonus equal to number of months of completed employment during the year in which termination occurs divided by twelve (12) (“Pro Rata Bonus”), all payable in a lump sum within sixty (60) calendar days of the date of termination. Provided the Executive timely elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall also pay, on the Executive’s behalf, the portion of monthly premiums for the Executive’s group health insurance, including coverage for the Executive’s dependents, that the Company paid immediately prior to the date of termination, during the six (6) month period following the date of termination, subject to the Executive’s continued eligibility for COBRA coverage. The Company will pay for such COBRA coverage for eligible dependents only for those dependents who were enrolled immediately prior to the date of termination. The Executive will continue to be required to pay that portion of the premium for the Executive’s health coverage, including coverage for the Executive’s eligible dependents, that the Executive was required to pay as an active employee immediately prior to the date of termination. Notwithstanding the foregoing, in the event that under applicable guidance the reimbursement of COBRA premiums causes the Company’s group health plan to violate any applicable nondiscrimination rule, the parties agree to negotiate in good faith a mutually agreeable alternative arrangement. Upon termination under this Section 4(a), (i) Initial Stock Options, to the extent unvested, shall immediately vest, (ii) the Subsequent Options shall cease vesting and (iii) all vested Stock Options shall remain exercisable until the earlier of (x) the date one hundred eighty (180) calendar days following termination of employment or (y) the expiration of the original option term.

(e) Disability. Subject to any state or federal law or regulation governing employees with disabilities, the Company may terminate the Executive’s employment upon the Disability of the Executive. In the event the Executive is terminated under this Section 4(e), the Company shall pay the Executive the Accrued Obligations and the Pro Rata Bonus. In addition, subject to Section 19, the Company will pay the Executive an amount equal to six (6) months of the Executive’s Base Salary at the rate in effect on the date of termination, payable in a lump sum within sixty (60) calendar days of the date of termination. In addition, in such event, the Company shall cause Executive to fully vest in all Stock Options referred to in Section 3(c) of this Agreement, and the Stock Options shall remain exercisable until the earlier of (1) the date one (1) year following termination of employment under this Section 4(e) or (ii) the expiration of the original option term.

(g) For purposes of this Agreement:

(b) a material change in the geographic location of the Executive’s principal business office; in order for a change to be material hereunder, the Executive’s principal business office must be moved to a location more than fifty (50) miles from the Company’s office as of the Start Date, except for required travel on Company business; or (c) any other action or inaction by the Company that constitutes a material breach of this Agreement. The foregoing shall constitute Good Reason only if (i) the Executive provides written notice to the Company of any event(s) alleged to constitute Good Reason within ninety (90) calendar days of the initial occurrence of the event, with such notice providing a detailed description of the circumstances constituting Good Reason (a “Good Reason Notice”), (ii) any such reduction, change, or breach is not remedied or cured within thirty (30) calendar days after the Company’s receipt of a written Good Reason Notice from the Executive (the “Cure Period”) and (iii) the Executive actually terminates employment within thirty (30) calendar days following the expiration of the Cure Period.

(iii) “Disability” shall mean that the Executive is disabled within the meaning of the Company’s group long-term disability insurance policy. If no long-term disability insurance is in place, then Disability shall mean that the Executive, due to illness, accident, or other physical or mental incapacity, has been substantially unable to perform his duties under this Agreement for a period of at least six (6) consecutive months during the Term as established by the written opinion of a licensed independent physician selected by the Company.

5. Confidentiality and Non-Solicitation.

the Executive on a non-confidential basis from a source other than through the Company or its representatives, provided that such source is not bound by a confidentiality agreement with the Company or otherwise prohibited from transmitting the information to the Executive by a contractual or legal obligation.

(c) During the Term and for a period of one (1) year thereafter, the Executive shall not, directly or indirectly, on behalf of himself or any other person or entity, without the prior written consent of the Company solicit or induce any employee of or consultant or contractor ~~service provider~~ to the Company (each, a “Service Provider”) to leave the employ of or cease performing services for the Company, or engage in any plan or coordinate with any Service Provider to leave the employ of or cease performing services for the Company, or hire, participate with or attempt to participate with in any venture for any purpose any Service Provider or any Service Provider who has left the employment of or ceased to perform services for the Company within six (6) months of the termination of such Service Provider’s services for the Company.

(d) The Executive agrees that the period during which the covenants contained in this Section 5 shall be effective shall be computed by excluding from such computation any time during which the Executive is in violation of any provision of this Section 5.

(e) The Company and the Executive agree that it was their intent to enter into a valid and enforceable agreement. The Executive and the Company thereby acknowledge the reasonableness of the restrictions set forth in this Section 5, including the reasonableness of the duration as to time and the scope of activity restrained. The Executive agrees that if any covenant contained in Section 5 of this Agreement is found by a court of competent jurisdiction to contain limitations as to time or scope of activity that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interests of the Company, then the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill and other business interests of the Company and to enforce the covenants as reformed.

6. The Executive’s Representations. The Executive represents to the Company that:

(b) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable against her in accordance with its terms.

(d) no prior or pending litigation, arbitration, investigation or other proceeding of any kind will prevent or hinder the Executive from performing his duties under this Agreement; and

(e) the Executive has consulted with independent legal counsel regarding her rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

7. Change in Control.

(a) Definitions.

(i) for purposes of this Section 7, “Change in Control” means (I) any merger or consolidation of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than a controlling interest in the surviving entity immediately after such consolidation, merger or reorganization; (II) any transaction or series of related transactions in which control of the Company is acquired by a person or group of persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended or any successor provisions thereto; or (III) a sale or other disposition of all or substantially all of the assets of the Company; provided that in no event will a Change in Control include any of the following transactions: (A) any consolidation, merger or similar transaction effected exclusively to change the domicile of the Company; (B) any transaction or series of transactions in which voting securities of the Company are issued principally for bona fide financing purposes or any successor or indebtedness or equity securities of the Company are cancelled or converted or a combination thereof, including, without limitation, an initial public offering or other offering of the Company’s capital stock; or (C) any acquisition of such voting power by an individual or entity that, directly or indirectly, controls, is controlled by, or is under common control with, the Company.

(b) Change in Control Severance Benefits. If there is a Change in Control, and within one (1) year of such Change in Control, the Executive’s employment is terminated under the circumstances described in Sections 4(a) or 4(b) above, the Company shall pay the Executive the compensation as set forth in subsection 4(a) above and all outstanding Initial Options and Subsequent Options shall be fully vested as of the date of such termination and shall remain exercisable until the earlier of (x) the date one hundred eighty (l80) calendar days following termination of employment or (y) the expiration of the original option term.

Notices to the Executive:

Stephen Ivsan

Notices to the Company:

Lightning eMotors

815 14^th Street SW, Suite Al00

Loveland, CO 80537

Attention: Tim Reeser

11. Complete Agreement. This Agreement, together with the agreements referred to herein in Section 3(d), contains the entire agreement of the Parties hereto with respect to the terms and conditions of the Executive’s employment with the Company and activities following termination. This Agreement supersedes all prior agreements and understandings, whether written or oral, between the Parties with respect to the terms and conditions of the Executive’s employment with the Company and activities following termination. This Agreement may not be changed or modified except by an instrument in writing, signed by the Executive and a duly authorized officer of the Company.

12. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

18. Jobs Act Compliance.

(d) Notwithstanding any provision of this Agreement to the contrary, the parties agree that any benefit or benefits under this Agreement that the Company determines are subject to the suspension period under Code Section 409A(a)(2)(B) shall not be paid or commence until the first business day next following the earlier of (1) the date that is six months and one day following the date of the Executive’s termination of employment, (ii) the date of the Executive’s death or (iii) such earlier date as complies with the requirements of Section 409A.

19. Insurance and Indemnification. The Company agrees to maintain during the term of Executive’s employment with the Company a policy or policies of directors and officers liability insurance having premiums, coverage and liability limits, and other terms that are commercially reasonable and generally consistent with prevailing practices in the industry. In the event that Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, administrative or investigative (a “Proceeding”) (other than any criminal Proceeding or Proceeding initiated by the Executive or the Company (or an Affiliate thereof) arising out of or related to this Agreement or Executive’s employment hereunder) by reason of the fact that Executive is or was providing duties as set forth herein to the Company and/or an Affiliate thereof, Executive shall be indemnified and held harmless by the Company to the fullest extent allowed by law and the applicable liability insurance policy agreement, from and against any recoverable liabilities, costs, claims and expenses, including all such costs and expenses incurred in defense of any Proceeding (including attorneys’ fees).

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

LIGHTNING SYSTEMS, INC.


By:		/s/ Tim Reeser
Name:		Tim Reeser
Title:		CEO

EXECUTIVE


By:		/s/ Stephen R Ivsan
Name:		Stephen R Ivsan

Exhibit 10.16

LIGHTNING SYSTEMS, INC.

2019 EQUITY INCENTIVE PLAN

Effective Date: December 31, 2019

Approved by the Board of Directors on December 31, 2019

Approved by the Stockholders on December 31, 2019

Table of Contents


		Page
ARTICLE I INTRODUCTION			1
1.1	Establishment		1
1.2	Purpose		1

ARTICLE II DEFINITIONS			1
2.1	Definitions		1
2.2	Gender and Number		4

ARTICLE III PLAN ADMINISTRATION			5
3.1	General		5
3.2	Delegation by Committee		5
3.3	Contractual Limitations		6

ARTICLE IV STOCK SUBJECT TO THE PLAN			6
4.1	Number of Shares		6
4.2	Incentive Stock Option Limitation		6
4.3	Capitalization Adjustments		6
4.4	Other Distributions and Changes in the Stock		7
4.5	General Adjustment Rules		7
4.6	Determination by the Committee, Etc		7

ARTICLE V CHANGE IN CONTROL			7
5.1	Change in Control Provisions		7
5.2	Company Actions		8
5.3	Dissolution or Liquidation		8

ARTICLE VI PARTICIPATION			9

ARTICLE VII OPTIONS			9
7.1	Grant of Options		9
7.2	Stock Option Agreements		9
7.3	Restrictions on Incentive Stock Options		13
7.4	Transferability		13
7.5	Stockholder Privileges		13
7.6	Non-Exempt Employees		14

ARTICLE VIII RESTRICTED STOCK AWARDS			14
8.1	Grant of Restricted Stock Awards		14
8.2	Restrictions		14
8.3	Privileges of a Stockholder, Transferability		14
8.4	Enforcement of Restrictions		14

ARTICLE IX OTHER GRANTS			15

ARTICLE X RIGHTS OF PARTICIPANTS			15
10.1	Employment or Service		15
10.2	Nontransferability of Awards		15
10.3	No Plan Funding		15



ARTICLE XI GENERAL RESTRICTIONS		15
11.1	Investment Representations	15
11.2	Compliance with Securities Laws	16
11.3	Changes in Accounting or Tax Rules	16
11.4	Stockholder Agreements	16
11.5	Change in Time Commitment	16
11.6	Right of Repurchase	16
11.7	Right of First Refusal	17
11.8	No Obligation to Notify	17

ARTICLE XII AMENDMENT, MODIFICATION AND TERMINATION		17

ARTICLE XIII WITHHOLDING		17
13.1	Withholding Requirement	17
13.2	Withholding With Stock	18

ARTICLE XIV REQUIREMENTS OF LAW		18
14.1	Requirements of Law	18
14.2	Federal Securities Law Requirements	18
14.3	Section 409A	18
14.4	Governing Law	19

ARTICLE XV DURATION OF THE PLAN		19

LIGHTNING SYSTEMS, INC.

2019 EQUITY INCENTIVE PLAN

ARTICLE I

INTRODUCTION

1.1 Establishment. Lightning Systems, Inc., a Delaware corporation, adopts this 2019 Equity Incentive Plan (the “Plan”) effective as of the Effective Date. The Plan is established for Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors. The Plan permits the grant of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, and other Awards.

1.2 Purpose. The purpose of the Plan is to provide financial incentives for selected employees, consultants and advisors, and non-employee directors of the Company and its Affiliates, thereby promoting the long-term growth and financial success of the Company by (a) attracting and retaining the most qualified officers, directors, key employees, and other persons, (b) strengthening the capability of the Company and its Affiliates to develop, maintain and direct a competent management team, (c) providing an effective means for selected employees, consultants and advisors and non-employee directors to acquire and maintain a direct proprietary interest in the operations and future success of the Company, (d) motivating employees to achieve long-range performance goals and objectives, and (e) providing incentive compensation opportunities competitive with those of other organizations.

ARTICLE II

DEFINITIONS

2.1 Definitions. The following terms shall have the meanings set forth below:

(a) “Affiliate” means, with respect to the Company, (i) any Subsidiary of the Company, and (ii) any other corporation or entity that is affiliated with the Company through stock ownership or otherwise and is designated as an “Affiliate” by the Board; provided, however, that for purposes of Incentive Stock Options granted pursuant to the Plan, an “Affiliate” means any parent or subsidiary of the Company as defined in Section 424 of the Code.

(b) “Award” means an Option, a Restricted Stock Award, grants of Stock pursuant to Article IX or other issuances of Stock hereunder.

(c) “Award Agreement” means an Option Agreement, Restricted Stock Agreement or a written agreement evidencing any other Award under this Plan.

(d) “Board” means the Board of Directors of the Company.

(e) “Cause” means (i) if there is an employment agreement between the Participant and the Company and the agreement contains a definition of “Cause”, the definition contained therein or (ii) in the absence of an employment agreement between the Participant and the Company, (A) the Participant’s commission of any felony involving fraud, dishonesty or moral turpitude; (B) the Participant’s attempted commission of or participation in a fraud or act of dishonesty against the Company that results in (or might have reasonably resulted in) material harm to the business of the Company; (C) the Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or any statutory duty that the Participant owes to the Company; or (D) the Participant’s conduct that constitutes gross insubordination, incompetence or habitual neglect of duties

and that results in (or might have reasonably resulted in) material harm to the business of the Company. However, the action or conduct described in clauses (iii) and (iv) above will constitute “Cause” only if such action or conduct continues after the Company has provided the Participant with written notice thereof and thirty (30) days to cure the same.

(f) “Change in Control” means the following:

(i) Any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the voting power of the surviving or successor entity immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred, excluding (A) any consolidation or merger effected exclusively to change the domicile of the Company and (B) any transaction or series of transactions principally for bona fide equity financing purposes (including, but not limited to, the sale of securities pursuant to an effective registration statement filed with the Securities and Exchange Commission) in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof; or

(ii) A sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

Notwithstanding the foregoing, if necessary for compliance with Section 409A of the Code, a Change in Control shall not occur unless such transaction meets the foregoing and constitutes a change in the ownership of the Company, a change in the effective control of the Company, or a change in the ownership of a substantial portion of the Company’s assets under Section 409A of the Code.

(g) “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.

(h) “Committee” means the Board, or if so delegated by the Board, a committee consisting of not less than two members of the Board who are empowered hereunder to take actions in the administration of the Plan. If applicable, the Committee shall be so constituted at all times as to permit the Plan to comply with Rule 16b-3 or any successor rule promulgated under the Exchange Act. Except as provided in Section 3.2, the Committee shall select Participants from Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors of the Company and its Affiliates and shall determine the Awards to be made pursuant to the Plan and the terms and conditions thereof.

(i) “Company” means Lightning Systems, Inc., a Delaware corporation.

(j) “Disabled” or “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(k) “Domestic Relations Order” means any judgment, decree, or order (including approval of a property settlement agreement) that is made pursuant to a state domestic relations law and that relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a Participant.

(l) “Effective Date” means the original effective date of the Plan as noted on the cover page hereto.

(m) “Eligible Consultants” means those consultants and advisors to the Company or an Affiliate who are determined, by the Committee, to be individuals (i) whose services are important to the Company or an Affiliate and who are eligible to receive Awards, other than Incentive Stock Options, under the Plan, and (ii) who meet the conditions for eligibility under Rule 701 promulgated under the Securities Act or such other exemptions from registration under the Securities Act as may be applicable.

(n) “Eligible Employees” means those employees (including, without limitation, officers and directors who are also employees) of the Company or any Affiliate, upon whose judgment, initiative and efforts the Company is, or will become, largely dependent for the successful conduct of its business.

(o) “Eligible Non-Employee Director” means any person serving on the Board who is not an employee of the Company or any Affiliate.

(p) “Exchange Act” means the Securities Exchange Act of 1934, as it may be amended from time to time.

(q) “Fair Market Value” means, as of a given date, (i) the closing price of a Share on the principal stock exchange on which the Stock is then trading, if any (or as reported on any composite index that includes such principal exchange) on such date, or if Shares were not traded on such date, then on the next preceding date on which a trade occurred; or (ii) if the Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, the mean between the closing representative bid and asked prices for the Stock on such date as reported by NASDAQ or such successor quotation system; or (iii) if the Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a Share shall be determined by the Committee acting in good faith in accordance with the requirements of Code Section 409A.

(r) “Forfeiture Restrictions” shall have the meaning given to that term in Section 8.2 hereof.

(s) “Incentive Stock Option” means an Option designated as such and granted in accordance with Section 422 of the Code.

(t) “Non-Qualified Stock Option” means any Option other than an Incentive Stock Option.

(u) “Option” means a right to purchase Stock at a stated or formula price for a specified period of time. Options granted under the Plan shall be either Incentive Stock Options or Non-Qualified Stock Options.

(v) “Option Agreement” shall have the meaning given to that term in Section 7.2 hereof.

(w) “Option Holder” means a Participant who has been granted one or more Options under the Plan.

(x) “Option Period” means the period of time, determined by the Committee, during which an Option may be exercised by the Option Holder.

(y) “Option Price” shall have the meaning given to that term in Section 7.2(b) hereof.

(z) “Participant” means an Eligible Employee, Eligible Consultant, or Eligible Non-Employee Director designated by the Committee from time to time during the term of the Plan to receive one or more of the Awards available under the Plan.

(aa) “Repurchase Rights” shall have the meaning given to that term in Section 7.2(c) hereof.

(bb) “Restricted Stock Agreement” shall have the meaning given to that term in Section 8.1 hereof.

(cc) “Restricted Stock Award” means an award of Stock granted to a Participant pursuant to Article VIII that is subject to certain restrictions imposed by the Committee in accordance with the provisions thereof.

(dd) “Section 16” shall have the meaning given to that term in Section 13.2(c) hereof

(ee) “Securities Act” means the Securities Act of 1933, as it may be amended from time to time.

(ff) “Service” means service to the Company or an Affiliate as an employee, a non-employee director or a consultant or advisor, except to the extent otherwise specifically provided in an Award Agreement. The Committee determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan. Further, unless otherwise determined by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in capacity in which the Participant provides Service to the Company or an Affiliate or a transfer between the Company and its Affiliates; provided there is no interruption or other termination of Service.

(gg) “Share” means one whole share of Stock.

(hh) “Stock” means the common stock of the Company.

(ii) “Subsidiary” means any corporation more than 50% of the outstanding voting securities of which are owned by the Company or any other Subsidiary, directly or indirectly, or a partnership or limited liability company in which the Company or any Subsidiary is a general partner or manager or holds interests entitling it to receive more than 50% of the profits or losses of the partnership or limited liability company.

(jj) “Successor” shall have the meaning given to that term in Section 5.1(a) hereof.

(kk) “Tax Date” shall have the meaning given to that term in Section 13.2 hereof.

2.2 Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.

ARTICLE III

PLAN ADMINISTRATION

3.1 General. The Plan shall be administered by the Committee. In accordance with the provisions of the Plan, the Committee shall have the power to take the following actions, subject to and within the limitations of the express provisions of the Plan:

(a) select the Participants from among the Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors;

(b) determine the Awards to be made pursuant to the Plan, or Shares to be issued thereunder and the time at which such Awards are to be made;

(d) establish the duration and nature of Restricted Stock Award restrictions;

(e) establish the terms and conditions applicable to, and establish such other terms and requirements of the various compensation incentives under the Plan as the Committee may deem necessary or desirable, and consistent with the terms of the Plan;

(f) determine the form or forms of the agreements with Participants that shall evidence the particular provisions, terms, conditions, rights and duties of the Company and the Participants with respect to Awards granted pursuant to the Plan, which provisions need not be identical except as may be provided herein;

(g) adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company;

(h) effect, with the consent of any adversely affected Participant, the reduction of the exercise, purchase or strike price of any outstanding Award;

(i) approve such supplements or amendments to the Plan (including sub-plans) as it may consider necessary or appropriate to grant Awards to Participants who are foreign nationals or who are employed by the Company or its Affiliates outside of the United States; provided, however, that any such supplements or amendments shall be consistent with the terms of the Plan; and

(j) correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement entered into hereunder in the manner and to the extent it shall deem expedient and it shall be the sole and final judge of such expediency.

The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or its Affiliates or the Company’s auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or its Affiliates acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. The determinations, interpretations and other actions of the Committee pursuant to the provisions of the Plan shall be binding and conclusive for all purposes and on all persons.

3.2 Delegation by Committee. The Committee may, from time to time, delegate, to specified officers of the Company, the power and authority to grant Awards under the Plan to specified groups of Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors, subject to such restrictions and conditions as the Committee, in its sole discretion, may impose. The delegation shall be

as broad or as narrow as the Committee shall determine. To the extent that the Committee has delegated the authority to determine certain terms and conditions of an Award, all references in the Plan to the Committee’s exercise of authority in determining such terms and conditions shall be construed to include the officer or officers to whom the Committee has delegated the power and authority to make such determination. The power and authority to grant Awards to any Eligible Employee, Eligible Consultant or Eligible Non-Employee Director who is covered by Section 16(b) of the Exchange Act shall not be delegated by the Committee.

3.3 Contractual Limitations. The Committee shall in exercising its discretion under the Plan comply with all contractual obligations of the Company in effect from time to time, whether contained in the Company’s Certificate of Incorporation, Bylaws or other binding contract.

ARTICLE IV

STOCK SUBJECT TO THE PLAN

4.1 Number of Shares. The maximum aggregate number of Shares that may be issued under the Plan pursuant to Awards is 5,000,000 Shares (the “Share Reserve”). Any Shares that are (i) subject to an Option that expires or for any reason is terminated unexercised, (ii) subject to an Award (other than an Option) and that are forfeited, or (iii) withheld for the payment of taxes or received by the Company as payment of the exercise price of an Option, shall automatically become available for use under the Plan. Notwithstanding anything to the contrary contained herein, no Award granted hereunder shall become void or otherwise be adversely affected solely because of a change in the number of Shares of the Company that are issued and outstanding from time to time, provided that changes to the issued and outstanding Shares may result in adjustments to outstanding Awards in accordance with the provisions of this Article IV. The Shares may be either authorized and unissued Shares or previously issued Shares acquired by the Company on the open market or otherwise. The maximum number of Shares may be increased from time to time by approval of the Board and by the stockholders of the Company if, in the opinion of counsel for the Company, stockholder approval is required. During the terms of the Awards, the Company shall keep available at all times the number of Shares reasonably required to satisfy such Awards.

4.2 Incentive Stock Option Limitation. The maximum number of Shares that may be issued under Incentive Stock Options is 5,000,000 Shares.

4.3 Capitalization Adjustments. If the Company shall at any time increase or decrease the number of its outstanding Shares or change in any way the rights and privileges of such Shares by means of the payment of a stock dividend or any other distribution upon such Shares payable in Stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the Stock, then in relation to the Stock that is affected by one or more of the above events, the numbers, exercise price, rights and privileges of the following shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the Shares as to which Awards may be granted under the Plan, (ii) the Shares then included in each outstanding Award granted hereunder, (iii) the maximum number of Shares available for grant pursuant to Incentive Stock Options, and (iv) the number of Shares subject to a delegation of authority under Section 3.2 of this Plan.

4.4 Other Distributions and Changes in the Stock.

(a) In the event that:

(i) If the Company shall at any time distribute with respect to the Stock assets or securities of persons other than the Company (excluding (i) cash or (ii) distributions referred to in Section 4.3), or

(ii) if the Company shall at any time grant to the holders of its Stock rights to subscribe pro rata for additional shares thereof or for any other securities of the Company, or

(iii) if there shall be any other change (except as described in Section 4.3) in the number or kind of outstanding Shares or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged,

the Committee may, in its discretion, determine that such event equitably requires an adjustment in the number or kind of Shares subject to an Option or other Award, an adjustment in the Option Price or the taking of any other action by the Committee, including without limitation, the setting aside of any property for delivery to the Participant upon the exercise of an Option or the full vesting of an Award. If the Committee makes such a determination, then such adjustments shall be made, or other action shall be taken, by the Committee and shall be effective for all purposes of the Plan and on each outstanding Option or Award that involves the particular type of stock for which a change was effected. Notwithstanding the foregoing provisions of this Section 4.4, pursuant to Section 8.3 below, a Participant holding Stock received as a Restricted Stock Award shall have the right to receive all amounts, including cash and property of any kind, distributed with respect to the Stock after such Restricted Stock Award was granted upon the Participant’s becoming a holder of record of the Stock.

4.5 General Adjustment Rules. No adjustment or substitution provided for in this Article IV shall require the Company to sell a fractional Share under any Option, or otherwise issue a fractional Share, and the total substitution or adjustment with respect to each Option and other Award shall be limited by deleting any fractional Share. In the case of any such substitution or adjustment, the aggregate Option Price for the total number of Shares then subject to an Option shall remain unchanged but the Option Price per Share under each such Option shall be equitably adjusted by the Committee to reflect the greater or lesser number of Shares or other securities into which the Stock subject to the Option may have been changed, and appropriate adjustments shall be made to other Awards to reflect any such substitution or adjustment.

4.6 Determination by the Committee, Etc. Adjustments under this Article IV shall be made by the Committee, whose determinations with regard thereto shall be final and binding upon all parties thereto.

ARTICLE V

CHANGE IN CONTROL

5.1 Change in Control Provisions. The following provisions shall apply to Awards in the event of a Change in Control unless otherwise provided in the instrument evidencing the Award or any other written agreement between the Company or any Affiliate and the holder of the Award or unless otherwise expressly provided by the Committee at the time of grant of the Award. Except as otherwise stated in the Award Agreement, in the event of a Change in Control, then, notwithstanding any other provision of the Plan, the Committee shall take one or more of the following actions with respect to Awards, contingent upon the closing or completion of the Change in Control:

(a) arrange for the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent company) to assume or continue the Award or to substitute a similar stock award for the Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Change in Control);

(b) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Stock issued pursuant to the Award to the surviving entity or acquiring entity (or the surviving or acquiring entity’s parent company);

(c) accelerate the vesting, in whole or in part, of the Award (and, if applicable, the time at which the Award may be exercised) to a date prior to the closing of such Change in Control as the Committee shall determine (or, if the Committee shall not determine such a date, to the date that is five (5) days prior to the closing of the Change in Control), with such Award terminating if not exercised (if applicable) at or prior to the closing of the Change in Control;

(d) arrange for the lapse of any reacquisition or repurchase rights held by the Company with respect to the Award;

(e) cancel or arrange for the cancellation of the Award, to the extent not vested or not exercised prior to the closing of the Change in Control, in exchange for such cash consideration, if any, as the Committee, in its sole discretion, may consider appropriate; and

(f) make a payment, in such form as may be determined by the Committee, equal to the excess, if any, of (A) the value of the property the holder of the Award would have received upon the exercise of the Award, over (B) any exercise price payable by such holder in connection with such exercise. For the avoidance of doubt, such payment may be zero if the fair market value of the property is equal to or less than the exercise price.

The Committee need not take the same action with respect to all Awards or with respect to all Participants. To the extent permitted under Section 409A of the Code, the Committee may provide that payments under this provision may be delayed to the same extent that payment of consideration to the holders of Stock in connection with the Change in Control is delayed as the result of escrows, earnouts, holdbacks or other contingencies. In addition, the Committee may provide that such payments made over time will remain subject to substantially the same vesting schedule as the Award, including any performance-based metrics that applied to the Award immediately prior to the closing of the Change in Control.

5.2 Company Actions. The grant of Awards under the Plan shall in no way affect the right of the Company or any Affiliate to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

5.3 Dissolution or Liquidation. Except as otherwise provided in the Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Awards (other than Awards consisting of vested and outstanding Shares not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the Shares subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Award is providing Service, provided, however, that the Committee may, in its sole discretion, cause some or all Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

ARTICLE VI

PARTICIPATION

Participants in the Plan shall be those Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors determined by the Committee. Participants may be granted from time to time one or more Awards; provided, however, that the grant of each such Award shall be separately approved by the Committee and receipt of one such Award shall not result in automatic receipt of any other Award. Upon determination by the Committee that an Award is to be granted to a Participant, written notice shall be given to such person, specifying the terms, conditions, rights and duties related thereto. Each Participant shall, if required by the Committee, enter into an agreement with the Company, in such form as the Committee shall determine and which is consistent with the provisions of the Plan, specifying such terms, conditions, rights and duties. Awards shall be deemed to be granted as of the date specified in the grant resolution of the Committee, which date shall be the date of any related agreement with the Participant. In the event of any inconsistency between the provisions of the Plan and any such agreement entered into hereunder, the provisions of the Plan shall govern.

ARTICLE VII

OPTIONS

7.1 Grant of Options. Coincident with or following designation for participation in the Plan, a Participant may be granted one or more Options. The Committee in its sole discretion shall designate whether an Option is an Incentive Stock Option or a Non-Qualified Stock Option; provided, however, that only Non-Qualified Stock Options may be granted to Eligible Consultants and Eligible Non-Employee Directors. The Committee may grant both an Incentive Stock Option and a Non-Qualified Stock Option to an Eligible Employee at the same time or at different times. Incentive Stock Options and Non-Qualified Stock Options, whether granted at the same time or at different times, shall be deemed to have been awarded in separate grants and shall be clearly identified, and in no event shall the exercise of one Option affect the right to exercise any other Option or affect the number of Shares for which any other Option may be exercised. An Option shall be considered as having been granted on the date specified in the grant resolution of the Committee. In no event shall the Company have any obligation or liability to a Participant if an Option is determined not to qualify as an Incentive Stock Option.

7.2 Stock Option Agreements. Each Option granted under the Plan shall be evidenced by a written stock option agreement (an “Option Agreement”). An Option Agreement shall be issued by the Company in the name of the Participant to whom the Option is granted (the “Option Holder”) and in such form as may be approved by the Committee. The Option Agreement shall incorporate and conform to the conditions set forth in this Section 7.2 as well as such other terms and conditions that are not inconsistent as the Committee may consider appropriate in each case.

(a) Number of Shares. Each Option Agreement shall state that it covers a specified number of Shares, as determined by the Committee.

(b) Price. The price at which each Share covered by an Option may be purchased (the “Option Price”) shall be determined in each case by the Committee and set forth in the Option Agreement. With respect to Options that are intended to be Incentive Stock Options, in no event shall the Option Price be less than 100 percent of the Fair Market Value of one Share of Stock on the date the Option is granted (or 110 percent of such Fair Market Value, to the extent provided in Section 7.3).

(c) Duration of Options; Vesting. Each Option Agreement shall state the Option Period applicable to the Option, which must end, in all cases, not more than ten years from the date the Option is granted (or five years, to the extent provided in Section 7.3). Each Option Holder shall become vested in the Shares underlying the Option in such installments and over such period or periods of time, if any, or upon such events, as are determined by the Committee in its discretion and set forth in the Option Agreement.

(d) Vesting; Early Exercise. The Option shall generally become exercisable, in whole or in part, at the same time or times as the Shares underlying the Option vest; provided, however, that the Committee may grant Options that are immediately exercisable in whole or in part. Any unvested Shares received by the Option Holder upon early exercise of the Option in accordance with the preceding sentence shall be subject to the Company’s right of repurchase, as follows:

(i) Should the Option Holder cease Service while holding unvested Shares, the Company shall have such right to repurchase any or all of those unvested Shares at a price per share equal to the lesser of the then-Fair Market Value of a Share and the Option Price (the “Repurchase Rights”).

(ii) The Company shall be entitled to exercise its right to repurchase such unvested Shares by written notice to the Option Holder sent within ninety (90) days after the time of Option Holder’s cessation of Service, or (if later) during the ninety (90)-day period following the execution date of any written stock purchase agreement executed by the Company and the Option Holder.

(iii) The notice shall indicate the number of unvested Shares to be repurchased, the repurchase price to be paid per share (which shall be a price per share equal to the Option Price) and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice.

(e) Termination of Services, Death, Disability, Etc. The Committee may specify the period, if any, during which an Option may be exercised following termination of the Option Holder’s Service. The effect of this subsection 7.2(e) shall be limited to determining the consequences of a termination and nothing in this subsection 7.2(e) shall restrict or otherwise interfere with the Company’s discretion with respect to the termination of any individual’s Service. If the Committee does not otherwise specify, the following shall apply:

(i) If the Service of the Option Holder is terminated within the Option Period for Cause, the Option shall thereafter be void for all purposes.

(ii) Unless otherwise provided in an Award Agreement, if the Option Holder becomes Disabled while still in Service of the Company or an Affiliate, the Option may be exercised by the Option Holder within one year following the Option Holder’s termination of Service on account of Disability (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Shares that had become vested on or before the date of the Option Holder’s termination of Service because of Disability.

(iii) Unless otherwise provided in an Award Agreement, if the Option Holder dies during the Option Period while still in Service of the Company or an Affiliate or within the one year period referred to in (ii) above or the three-month period referred to in (iv) below, the Option may be exercised by those entitled to do so under the Option Holder’s will or by the laws of descent and distribution within one year following the Option Holder’s death (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Shares that had become vested on or before the date of the Option Holder’s death.

(iv) Unless otherwise provided in an Award Agreement, if the Service of the Option Holder is terminated within the Option Period for any reason other than Cause, Disability, or death, the Option may be exercised by the Option Holder within three (3) months following the date of such termination (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Shares that had become vested on or before the date of termination of Service.

(f) No Service Right. Nothing in this paragraph shall limit or impair the right of the Company or any Affiliate to terminate the employment of any employee or to terminate the consulting or advisory services of any consultant or advisor.

(g) Exercise, Payments, Etc.

(i) Manner of Exercise. The method for exercising each Option granted hereunder shall be by delivery to the Company of written notice on any business day specifying the number of Shares with respect to which such Option is exercised. The Option shall be exercised when the Option Price for the number of Shares as to which the Option is exercised is paid to the Company in full. If the Shares are certificated, a properly executed certificate or certificates representing the Shares shall be delivered to or at the direction of the Option Holder upon payment therefor.

(ii) The exercise price shall be paid by any of the following methods or any combination of the following methods at the election of the Option Holder, or by any other method approved by the Committee:

(A) in cash;

(B) by certified check, cashier’s check or other check acceptable to the Company, payable to the order of the Company;

(C) if expressly permitted by a resolution of the Committee applicable to the Option at the time of exercise (whether such resolution is applicable solely to the Option being exercised or is generally applicable to some or all Options outstanding under the Plan), by delivery to the Company of certificates representing the number of Shares then owned by the Option Holder, the Fair Market Value of which equals the purchase price of the Shares purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that no Option may be exercised by delivery to the Company of certificates representing Shares, unless such Shares have been held by the Option Holder for more than six (6) months (or such other period of time as the Committee determines is necessary to avoid adverse financial accounting treatment); for purposes of this Plan, the Fair Market Value of any Shares delivered in payment of the purchase price upon exercise of the Option shall be the Fair Market Value as of the exercise date, and the exercise date shall be the day of delivery of the certificates for the Shares used as payment of the Option Price.

(D) if expressly permitted by a resolution of the Committee applicable to the Option at the time of exercise (whether such resolution is applicable solely to the Option or is generally applicable to some or all Options outstanding under the Plan), to the extent such Option Price is in excess of the par value of the Shares, by delivering a full-recourse promissory note bearing interest at a market rate and secured by the purchased Shares, and the payment schedule in effect for any such promissory note shall be established by the Committee in its sole discretion;

(E) if the Option is a Non-Qualified Stock Option, by delivery to the Company of irrevocable instructions directing the Company to withhold from the purchased Shares a number of Shares having a Fair Market Value as of the exercise date equal to the aggregate Option Price of the purchased Shares subject to the Option.

(F) should the Stock be registered under Section 12(g) of the Exchange Act at the time the Option is exercised, then the exercise price may also be paid to the extent the Option is exercised for vested Shares, through a special sale and remittance procedure pursuant to which Option Holder (or any other person or persons exercising the Option) shall concurrently provide irrevocable written instructions (a) to a Company-designated brokerage firm to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Company by reason of such exercise and (b) to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale.

(h) Date of Grant. An Option shall be considered as having been granted on the date specified in the grant resolution of the Committee.

(i) Withholding.

(i) Non-Qualified Stock Options. Upon vesting and exercise of an Option, the Option Holder shall make appropriate arrangements with the Company to provide for the amount of any additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws, including payment of such taxes through delivery of Shares or by withholding Shares to be issued under the Option, as provided in Article XIII.

(ii) Incentive Stock Options. If an Option Holder makes a disposition (as defined in Section 424(c) of the Code) of any Shares acquired pursuant to the exercise of an Incentive Stock Option prior to the expiration of two years from the date on which the Incentive Stock Option was granted or prior to the expiration of one year from the date on which the Option was exercised, the Option Holder shall send written notice to the Company at the Company’s principal place of business of the date of such disposition, the number of Shares disposed of, the amount of proceeds received from such disposition and any other information relating to such disposition as the Company may reasonably request. The Option Holder shall, in the event of such a disposition, make appropriate arrangements with the Company to provide for the amount of any additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws.

(j) Lock-Up Period. Unless otherwise provided in an Award Agreement, if requested by the Company or the representative of the underwriters of Stock (or other securities) of the Company, the Participant shall not, without the prior written consent of the underwriter(s) of Stock (or other securities of the Company) and the Company, sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Stock (or other securities) of the Company held by the Participant (other than those included in the registration) during (i) the 180-day period following the effective date of the first firm commitment underwritten public offering of the Stock registered under the Securities Act (or such longer period, not to exceed 18 days after the expiration of the 180-day period, as the underwriters or the Company or Affiliate shall request in order to facilitate compliance with FINRA Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation), and (ii) the 90-day period following the effective date of a registration statement of the Company filed under the Securities Act (or such longer period, not to exceed 18 days after the expiration of the 90-day period, as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation). The obligations described in this paragraph shall not apply to a registration

relating solely to employee benefit plans on SEC Form S-1 or Form S-8 or similar forms that may be promulgated in the future by the SEC, or a registration relating solely to a transaction on SEC Form S-4 or similar forms that may be promulgated in the future. If requested by the Company or the representative of the underwriters of Stock (or other securities) of the Company, the Participant will enter into an agreement regarding his, her or its compliance with this requirement that will survive the term of the Award Agreement.

7.3 Restrictions on Incentive Stock Options.

(a) $100,000 Per Year Limitation. The aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by an Option Holder in any calendar year, under the Plan or otherwise, shall not exceed $100,000 (or such higher amount as may at the time of grant be applicable under Section 422(d) (or any successor provision) of the Code). For this purpose, the Fair Market Value of the Shares shall be determined as of the date of grant of the Option and Incentive Stock Options shall be taken into account in the order granted. The portion of any Incentive Stock Option accelerated in connection with a Change in Control shall remain exercisable as an Incentive Stock Option only to the extent the above limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such Incentive Stock Option shall thereafter be exercisable as a Non-Qualified Stock Option.

(b) Ten Percent Stockholders. Incentive Stock Options granted to an Option Holder who is the holder of record of 10% or more of the outstanding stock of the Company shall have an Option Price equal to 110% of the Fair Market Value of the Shares on the date of grant of the Option and the Option Period for any such Option shall not exceed five years.

7.4 Transferability.

(a) General Rule: No Lifetime Transfers. An Option shall not be transferable by the Option Holder except (i) by will or pursuant to the laws of descent and distribution or (ii) or to the Option Holder’s former spouse, to the extent such assignment is of a Non-Qualified Stock Option and is pursuant to a Domestic Relations Order. Except as otherwise provided by the terms of a Domestic Relations Order, an Option shall be exercisable during the Option Holder’s lifetime only by him or her, or in the event of Disability or incapacity, by his or her guardian or legal representative. The Option Holder’s guardian or legal representative shall have all of the rights of the Option Holder under this Plan.

(b) No Assignment. No right or interest of any Option Holder in an Option granted pursuant to the Plan shall be assignable or transferable during the lifetime of the Option Holder, either voluntarily or involuntarily, or be subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy, except as set forth above. In the event the Option is assigned or transferred in any manner contrary to terms of this Plan, then all Options transferred or assigned shall immediately terminate.

7.5 Stockholder Privileges. No Option Holder shall have any rights as a stockholder with respect to any Shares covered by an Option until the Option Holder becomes the holder of record of such Shares, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date such Option Holder becomes the holder of record of such Shares, except as provided in Article IV.

7.6 Non-Exempt Employees. No Option granted to a Participant who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any Shares until at least six months following the date of grant of the Option. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, in the event of the Participant’s death or Disability, upon a Change in Control in which the vesting of such Options accelerates, or upon the Participant’s retirement (as such term may be defined in the Participant’s Stock Award Agreement or in another applicable agreement or in accordance with the Company’s then current employment policies and guidelines) any such vested Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.

ARTICLE VIII

RESTRICTED STOCK AWARDS

8.1 Grant of Restricted Stock Awards. Coincident with or following designation for participation in the Plan, the Committee may grant a Participant one or more Restricted Stock Awards consisting of Shares. The number of Shares granted as a Restricted Stock Award shall be determined by the Committee. Each Restricted Stock Award granted under the Plan shall be evidenced by a written restricted stock agreement (a “Restricted Stock Agreement”). The Restricted Stock Agreement shall incorporate and conform to the conditions set forth in this Article VIII as well as such other terms and conditions that are not inconsistent as the Committee may consider appropriate in each case.

8.2 Restrictions. A Participant’s right to retain a Restricted Stock Award granted to him or her under Section 8.1 shall be subject to such restrictions, including but not limited to his or her continuous Service for the Company or an Affiliate for a restriction period specified by the Committee or the attainment of specified performance goals and objectives, as may be established by the Committee with respect to such Award (such restrictions as established by the Committee shall be known as the “Forfeiture Restrictions”). The Committee may in its sole discretion provide for different Forfeiture Restrictions or no Forfeiture Restrictions with respect to different Participants, to different Restricted Stock Awards or to separate, designated portions of the Shares constituting a Restricted Stock Award. The Committee may in its sole discretion provide for the earlier lapse of any Forfeiture Restrictions in the event of a Change in Control in accordance with Article V of this Plan. Unless explicitly provided for otherwise in an Award Agreement, if a Participant’s Service terminates for any reason, any Shares as to which the Forfeiture Restrictions have not been satisfied (or waived or accelerated as provided herein) shall be forfeited, and all Shares related thereto shall be immediately returned to the Company.

8.3 Privileges of a Stockholder, Transferability. A Participant shall have all voting, dividend, liquidation and other rights with respect to Stock in accordance with its terms received by him or her as a Restricted Stock Award under this Article VIII upon his or her becoming the holder of record of such Stock; provided, however, that the Participant’s right to sell, encumber, or otherwise transfer such Stock shall be subject to the limitations of Sections 10.2 and Article XI and to the rights of first refusal of the Company and its assignees pursuant to the Bylaws.

8.4 Enforcement of Restrictions. The Committee shall cause a legend to be placed on the Stock certificates issued pursuant to each Restricted Stock Award referring to the restrictions provided by Sections 8.2 and 8.3 and, in addition, may in its sole discretion require one or more of the following methods of enforcing the restrictions referred to in Sections 8.2 and 8.3:

(a) Requiring the Participant to keep the Stock certificates, duly endorsed, in the custody of the Company while the restrictions remain in effect; or

(b) Requiring that the Stock certificates, duly endorsed, be held in the custody of a third party while the restrictions remain in effect.

ARTICLE IX

OTHER GRANTS

From time to time during the duration of this Plan, the Board may, in its sole discretion, adopt one or more incentive compensation arrangements for Participants pursuant to which the Participants may acquire Shares, whether by purchase, outright grant, or otherwise. Any arrangement may be made subject to the general provisions of this Plan and all Shares issued pursuant to such arrangements that may be made subject to this Plan shall be issued under this Plan.

ARTICLE X

RIGHTS OF PARTICIPANTS

10.1 Employment or Service. Nothing contained in the Plan or in any Option, or other Award granted under the Plan shall confer upon any Participant any right with respect to the continuation of employment by, or consulting relationship with, or Service with the Company or any Affiliate, or interfere in any way with the right of the Company or any Affiliate, subject to the terms of any separate employment agreement or other contract to the contrary, at any time to terminate such employment, consulting relationship or Service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Award. Whether an authorized leave of absence, or absence in military or government service, shall constitute a termination of Service shall be determined by the Committee at that time.

10.2 Nontransferability of Awards. Except as provided otherwise at the time of grant or thereafter, or except as otherwise provided in a Domestic Relations Order, no right or interest of any Participant in a Restricted Stock Award (prior to the completion of the restriction period applicable thereto), or other Award (excluding Options) granted pursuant to the Plan, shall be assignable or transferable during the lifetime of the Participant, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. In the event of a Participant’s death, a Participant’s rights and interests in Options, Restricted Stock Awards, and other Awards, shall, to the extent provided in Article VII, Article VIII, and Article IX be transferable by will or the laws of descent and distribution, and payment of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the Participant’s legal representatives, heirs or legatees. However, a Participant’s rights and interests in Restricted Stock Awards and other Awards shall be transferable to a former spouse pursuant to a Domestic Relations Order. If in the opinion of the Committee a person entitled to payments or to exercise rights with respect to the Plan is disabled from caring for his affairs because of mental condition, physical condition or age, payment due such person may be made to, and such rights shall be exercised by, such person’s guardian, conservator or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status.

10.3 No Plan Funding. Obligations to Participants under the Plan will not be funded, trusted, insured or secured in any manner. The Participants under the Plan shall have no security interest in any assets of the Company or any Affiliate, and shall be only general creditors of the Company.

ARTICLE XI

GENERAL RESTRICTIONS

11.1 Investment Representations. The Company may require any person to whom an Option, Restricted Stock Award, or other Award, is granted, as a condition of exercising such Option, receiving such Restricted Stock Award, or such other Award to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the Stock for

his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company or its counsel deems necessary or appropriate in order to comply with Federal and applicable state securities laws. Legends evidencing such restrictions may be placed on the Stock certificates.

11.2 Compliance with Securities Laws. Each Option, Restricted Stock Award, or other Award shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such Option, Restricted Stock Award, or other Award grant upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such Option, Restricted Stock Award or other Award may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification.

11.3 Changes in Accounting or Tax Rules. Except as provided otherwise at the time an Award is granted, notwithstanding any other provision of the Plan to the contrary, if, during the term of the Plan, any changes in the financial or tax accounting rules applicable to Options, Restricted Stock Awards, or other Awards shall occur which, in the sole judgment of the Committee, may have a material adverse effect on the reported earnings, assets or liabilities of the Company, the Committee shall have the right and power to modify as necessary, any then outstanding and unexercised Options, outstanding Restricted Stock Awards and other outstanding Awards as to which the applicable services or other restrictions have not been satisfied.

11.4 Stockholder Agreements. If the Company has one or more stockholder agreements in effect at the time of grant or exercise of an Award under the Plan, then the Committee shall, if the Company is contractually obligated to, and may, in its discretion, condition the grant or exercise (as applicable) of any such Award upon execution by the Participant of such stockholder agreement(s), such that the Participant shall become a party to such stockholder agreements(s) concurrently with such grant or exercise (as applicable) of any such Award. The Company may also require, as a condition to the grant, exercise or settlement of any Award, that the Participant appoint the Company’s Chief Executive Officer (or other member of the Board) as having the sole and exclusive power of attorney to vote all Shares subject to the Participant’s Award, which power shall be effective until the earlier of the consummation of a Change in Control or the Company’s initial public offering of its securities on a national stock exchange or national market such as Nasdaq or NYSE.

11.5 Change in Time Commitment. If a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, if the Participant has a change in status from a full-time employee to part-time employee, or if the Participant goes on a leave of absence other than ordinary course vacation and sick days) after the date of grant of any Award to the Participant, the Committee has the right in its sole discretion (and without the need to seek or obtain the consent of the affected Participant) to (i) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment and (ii) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right to any portion of the Award that is so reduced or extended.

11.6 Right of Repurchase. An Award may include a provision whereby the Company may elect to repurchase all or any part of the Shares acquired by the Participant. The terms of any repurchase option shall be specified in the Award Agreement. Unless otherwise determined by the Committee and subject to compliance with applicable laws, the repurchase price for vested Shares will be the Fair Market

Value of the Shares on the date of repurchase. The Company will not exercise its repurchase option until at least six months (or such longer or shorter period of time necessary to avoid classification of the Award as a liability for financial accounting purposes) have elapsed following delivery of the Shares subject to the Award, unless otherwise specifically provided by the Committee. The Committee reserves the right to assign the Company’s right of repurchase.

11.7 Right of First Refusal. An Award may also include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Participant of the intent to transfer all or any part of the Shares received under the Award. Except as expressly provided in this paragraph or in the Award Agreement, such right of first refusal shall otherwise comply with any applicable provisions of the bylaws of the Company. The Board reserves the right to assign the Company’s right of first refusal.

11.8 No Obligation to Notify. The Company shall have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award.

ARTICLE XII

AMENDMENT, MODIFICATION AND TERMINATION

The Board may at any time or from time to time, with or without prior notice, amend, modify, suspend or terminate the Plan, and the Board or the Committee may amend or modify an Award Agreement; provided, however, that no amendment or modification may become effective without approval of the amendment or modification by the stockholders if stockholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, or if the Company, on the advice of counsel, determines that stockholder approval is otherwise necessary or desirable. No amendment, modification or termination of the Plan or an Award Agreement shall in any manner adversely affect any Options, Restricted Stock Awards, or other Award theretofore granted under the Plan, without the consent of the Participant holding such Options, Restricted Stock Awards, or other Awards. Notwithstanding the foregoing or anything to the contrary in this Plan, the Board may amend or modify the terms of the Plan or an Award Agreement, retroactively or prospectively, as permitted under Section 11.3 (Changes in Accounting or Tax Rules) or Section 14.3 (Section 409A) hereof with or without the consent of the Participant.

ARTICLE XIII

WITHHOLDING

13.1 Withholding Requirement. The Company or any Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Participant, or to condition the Company’s obligations to deliver Shares upon the exercise of any Option, the vesting of any Restricted Stock Award or lapse of Forfeiture Restrictions or Repurchase Rights, or the grant of Stock upon the payment by the Participant of, any federal, state, local or foreign taxes of any kind required by law with respect to the grant or issuance of, or the vesting of or other lapse of restrictions applicable to, the applicable Award or the Shares subject to, or issuable upon exercise of, such Award. At the time of such grant, issuance, vesting or lapse, the Participant shall pay to the Company or Affiliate, as the case may be, any amount that the Company or Affiliate may reasonably determine to be necessary to satisfy such withholding obligation.

13.2 Withholding With Stock. At the time the Committee grants an Option, Restricted Stock Award, other Award, or Stock or at any time thereafter, it may, in its sole discretion, grant the Participant an election to pay all such amounts of tax withholding, or any part thereof, by electing (a) to have the Company withhold from shares otherwise issuable to the Participant, Shares having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant; provided however, that the amount of Stock so withheld shall not exceed the minimum amount required to be withheld under the method of withholding that results in the smallest amount of withholding, or (b) to transfer to the Company a number of Shares that were acquired by the Participant more than six months prior to the transfer to the Company and that have a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant. All elections shall be subject to the approval or disapproval of the Committee. The value of Shares to be withheld shall be based on the Fair Market Value of the Stock on the date that the amount of tax to be withheld is to be determined (the “Tax Date”). Any such elections by Participants to have Shares withheld for this purpose will be subject to the following restrictions:

(a) All elections must be made prior to the Tax Date.

(b) All elections shall be irrevocable.

(c) If the Participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act (“Section 16”), the Participant must satisfy the requirements of such Section 16 and any applicable Rules thereunder with respect to the use of Stock to satisfy such tax withholding obligation.

ARTICLE XIV

REQUIREMENTS OF LAW

14.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant to the Plan shall be subject to all applicable laws, rules and regulations.

14.2 Federal Securities Law Requirements. If a Participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act, Awards granted hereunder shall be subject to all conditions required under Rule 16b-3, or any successor rule promulgated under the Exchange Act, to qualify the Award for any exception from the provisions of Section 16(b) of the Exchange Act available under that Rule. Such conditions shall be set forth in the agreement with the Participant which describes the Award or other document evidencing or accompanying the Award.

14.3 Section 409A. Notwithstanding anything in this Plan to the contrary, the Plan and Awards made under the Plan will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards exempt from Section 409A of the Code, and to the extent not so exempt, in compliance with the requirements imposed by Section 409A of the Code. If any Plan provision or Award would result in the imposition of an additional tax under Section 409A of the Code, the Company and the Participant intend that the Plan provision or Award will be reformed to avoid imposition, to the extent possible, of the applicable tax and no action taken to comply with Section 409A of the Code shall be deemed to adversely affect the Participant’s rights to an Award. The Participant further agrees that the Committee, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify an Award in any manner and delay the payment of any amounts payable pursuant to an Award to the minimum extent necessary to meet the requirements of Section 409A of the Code as the Committee deems appropriate or desirable. The Company makes no representation that the Plan or any Award complies with Section 409A of the Code and shall have no liability to any Participant for any failure to comply with Section 409A of the Code.

14.4 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Delaware excluding its conflict of laws rules.

ARTICLE XV

DURATION OF THE PLAN

Unless sooner terminated by the Board, the Plan shall terminate at the close of business on the day immediately following the tenth anniversary of the Effective Date and no Option, Restricted Stock Award, other Award or Stock shall be granted, or offer to sell Stock made, under the Plan after such termination. Options, Restricted Stock Awards, and other Awards outstanding at the time of the Plan termination may continue to vest, be exercised, or otherwise become free of restrictions, or be paid, in accordance with their terms.

Exhibit 10.17

LIGHTNING SYSTEMS, INC.

2019 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

You are hereby provided this Notice of Stock Option Grant (this “Grant Notice”) for the following option grant (the “Option”) to purchase shares of the common stock (the “Shares”) of Lightning Systems, Inc., a Delaware corporation (the “Company”) under the Lightning Systems, Inc. 2019 Equity Incentive Plan (the “Plan”). All capitalized terms in this Grant Notice shall have the meaning assigned to them in this Grant Notice or the attached Stock Option Agreement, or if not defined herein or therein, in the Plan.


Optionholder:

Grant Date:

Vesting Commencement Date:

Option Price:		$ per Share

Number of Shares:		Shares

Expiration Date:		Ten Year Anniversary of the Grant Date



Type of Option^*:		Check the appropriate box below:



		☐ Incentive Stock Options

		☐ Non-Qualified Stock Options

Vesting Schedule: Optionholder shall acquire a vested interest in the Shares as follows:

[Vesting Schedule be inserted]

Optionholder understands and agrees that the Option is granted subject to and in accordance with, and Optionholder agrees to be bound by, the terms of the Plan and the Stock Option Agreement attached hereto. As of the Grant Date, this Grant Notice, the Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the Option, and supersede all prior oral and written agreements with respect to the Option. By accepting the Option, Optionholder consents to receive documents governing the Option by electronic delivery and to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company from time to time.


Lightning Systems, Inc.						Optionholder

By:						By:
Name:						Name:
Title:						Date:
Date:

Please note that for tax purposes, this is only a preliminary indication of the Company’s intent as to the type of option you are being granted. The determination of the type of option you hold is governed by statute and may change depending upon many statutorily required criteria, including but not limited to, how many options are vested in a calendar year.

EXHIBIT D

Stock Option Agreement

[See Attached]

LIGHTNING SYSTEMS, INC.

2019 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

This STOCK OPTION AGREEMENT (this “Agreement”) is made between Lightning Systems, Inc., a Delaware corporation (the “Company”), and the Optionholder indicated in the Grant Notice, under the Company’s 2019 Equity Incentive Plan (the “Plan”), as of the dates set forth in the Grant Notice. This Option Agreement will be deemed to be signed by the Participant on the signing by the Participant of the Grant Notice to which it is attached.

1. Definitions.

All capitalized terms in this Agreement and the Grant Notice shall have the meaning assigned to them in this Agreement, or if not defined herein, in the Plan. In the event of any conflict between the terms in this Agreement and the Plan, the terms of the Plan will control. The following definitions shall be in effect under this Agreement:

(a) “Exercise Agreement” means the Stock Option Exercise Agreement in the form provided by the Company.

(b) “Exercise Date” means the date on which the Option shall have been exercised in accordance with Section 7 of this Agreement.

(d) “Grant Date” means the date of grant of the Option as specified in the Grant Notice.

(e) “Grant Notice” means the Notice of Stock Option Grant accompanying this Agreement pursuant to which Optionholder has been informed of the basic terms of the Option evidenced by this Agreement.

(f) “Option” has the meaning given to that term in Section 2 of this Agreement.

(g) “Option Period” has the meaning given to that term in Section 3 of this Agreement.

(h) “Option Price” means the exercise price payable per Share as specified in the Grant Notice.

2. Grant of Option. The Company hereby grants to Optionholder, as of the Grant Date, an option (this “Option”) to purchase up to the number of Shares specified in the Grant Notice. The Shares shall be purchasable from time to time during the Option Period at the Option Price.

3. Option Period. Unless otherwise provided in the Grant Notice, the Option shall have a term (the “Option Period”) that expires on, and the Option shall cease to be outstanding as of, the earliest to occur of

(a) the Optionholder’s termination of Service for Cause;

(b) the date that is 3 months after the termination of the Optionholder’s termination of Service for any reason other than Cause, Disability or death;

(d) the 1st anniversary of the Optionholder’s death, if the Optionholder dies while in Service or during the 3- or 12-month periods described in sections (b) and (c) above; and

(e) the close of business on the Expiration Date as specified in the Grant Notice.

4. Dates of Exercise. The Option shall become exercisable for the Shares as they become vested pursuant to the vesting schedule specified in the Grant Notice. All vested installments shall accumulate, and the Option shall remain exercisable for the accumulated vested installments until the Option Period expires, as described in Section 3 above. Unless otherwise provided in the Grant Notice, any unvested installments shall be forfeited upon your termination of Service for any reason.

5. Change in Control. Upon a Change in Control, the Options shall be subject to the provisions of the Plan, and if applicable, the Grant Notice, regarding Change in Control.

6. Shareholder Privileges. The Optionholder shall not have any rights as a shareholder with respect to the Shares until the Optionholder becomes the holder of record of such Shares, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date such Optionholder becomes the holder of record of such Shares, except as provided pursuant to the Change in Control provisions referenced in Section 5.

7. Manner of Exercising Option. To exercise an Option, the Optionholder shall deliver written notice to the Company specifying the number of Shares for which the Option is exercised. In addition, the Optionholder (or any other person or persons exercising the Option) must:

(a) Execute and deliver to the Company the Exercise Agreement.

(b) Pay the aggregate Option Price for the purchased Shares in one or more of the methods provided for in the Plan.

(c) Furnish to the Company appropriate documentation that the person or persons exercising the Option (if other than Optionholder) have the right to exercise the Option.

(d) Execute and deliver to the Company such written representations as may be requested by the Company in order for it to comply with the applicable requirements of applicable securities laws.

(e) Make appropriate arrangements with the Company for the satisfaction of all applicable income and employment tax withholding requirements applicable to the Option exercise.

8. Transfer Restrictions and Repurchase Rights. Optionholder hereby acknowledges and agrees that (a) the Option is subject to certain limitations on transferability as set forth in the Plan, and (b) all Shares shall be subject to certain repurchase rights and rights of first refusal in favor of the Company and its assigns, as set forth in the Exercise Agreement, the Company’s Bylaws, or the Plan.

9. Compliance with Laws and Regulations. The exercise of the Option and the issuance of the Shares upon such exercise shall be subject to compliance by the Company and the Optionholder with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the NASDAQ Global Market, if applicable) on which the Stock may be listed for trading at the time of such exercise and issuance. The Option is subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, the Option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification.

10. Successors and Assigns. Except to the extent otherwise provided in this Agreement or the Plan, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionholder, Optionholder’s assigns and the legal representatives, heirs and legatees of Optionholder’s estate.

11. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionholder shall be in writing and addressed to Optionholder at the address in the Company’s records. All notices shall be deemed effective upon personal delivery or as of the second day after deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

12. Grant Subject to Plan; Exercise Agreement. This Agreement and the Option are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. Optionholder hereby acknowledges and agrees that (a) the Company has made available to Optionholder copies of the Plan and the form of Exercise Agreement and (b) Optionholder has had the opportunity to review such documents and this Notice and to consult with the Optionholder’s individual tax advisor and legal counsel with respect to the same. Optionholder further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in this Agreement. Optionholder understands that any Shares purchased under the Option will be subject to the terms set forth in the Exercise Agreement to be executed by Optionholder and the Company upon any exercise of the Option. In the event of any conflict between this Agreement and the Plan, the provisions of the Plan will control. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Option.

13. Construction; Severability. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

14. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to Delaware’s conflict-of-laws rules.

15. Shareholder Approval. If the Shares covered by this Agreement exceed, as of the Grant Date, the number of Shares which may be issued under the Plan as last approved by the Company’s shareholders, then the Option shall be void with respect to such excess Shares, unless shareholder approval of an amendment sufficiently increasing the number of Shares issuable under the Plan is obtained in accordance with the provisions of the Plan.

16. Amendment. No amendment or modification of this Option may in any manner adversely affect the Optionholder’s rights hereunder without the Optionholder’s written consent.

17. Waiver. Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Committee, but only to the extent permitted under the Plan.

18. At Will Service. Nothing in this Agreement, the Grant Notice or the Plan shall confer upon Optionholder any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Optionholder) or of Optionholder, which rights are hereby expressly reserved by each, to terminate Optionholder’s Service at any time for any reason, with or without cause. This Agreement is limited solely to governing the rights and obligations of the Optionholder with respect to the Shares and the Option.

19. Additional Terms Applicable to an Incentive Stock Option.

(a) In the event the Option is initially designated as an Incentive Stock Option in the Grant Notice, the Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) the Option is exercised for one or more Shares: (i) more than three (3) months after the date Optionholder ceases to be an Employee for any reason other than death or Disability or (ii) more than twelve (12) months after the date Optionholder ceases to be an Employee by reason of Disability. Nothing in this Section shall require that the Optionholder be allowed to exercise this Option, in whole or in part, after the expiration of the time periods specified in Section 3 hereof.

(b) If Optionholder makes a disposition (as defined in Section 424(c) of the Code) of any Shares acquired pursuant to the exercise of an Incentive Stock Option prior to the expiration of two years from the date on which the Incentive Stock Option was granted or prior to the expiration of one year from the date on which the Option was exercised, the Optionholder shall send written notice to the Company at the Company’s principal place of business of the date of such disposition, the number of Shares disposed of, the amount of proceeds received from such disposition and any other information relating to such disposition as the Company may reasonably request.

20. Withholding. The Company’s obligations to deliver Shares upon the exercise of the Option shall be subject to the Optionholder’s satisfaction of all applicable federal, state and local income and other tax withholding requirements. Upon exercise of the Option, the Optionholder shall make appropriate arrangements with the Company to provide for the amount of additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws. With respect to Non-Qualified Stock Options, if expressly permitted by a resolution of the Committee applicable to this Option at the time of exercise (whether such resolution is applicable solely to this Option or is generally applicable to some or all Options outstanding under the Plan) payment of such taxes may be made through delivery of Shares or by withholding Shares to be issued under the Option, as provided in Section 13.2 of the Plan.

21. No Obligation to Notify. The Company shall have no duty or obligation to Optionholder to advise as to the time or manner of exercising his or her Option. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise Optionholder of a pending termination or expiration of an Option or a possible period in which the Option may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Option to the Optionholder.

22. Golden Parachute Taxes. Optionholder agrees that if the benefits provided for in connection with this Award or otherwise payable to Optionholder by the Company or any successor thereto (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then Optionholder’s benefits will be either (1) delivered in full or (2) delivered to such lesser extent as would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by you on an after-tax basis, of the greatest amount of benefits, despite that all or some of such benefits may be taxable under Section 4999 of the Code. On the reasonable request of the Company, Optionholder agrees to execute a waiver of his or her right to receive that portion of any benefits provided hereunder or otherwise, in a manner that satisfies the stockholder approval requirements under Section 280G(b)(5)(B) of the Code, so that no payment or benefit provided hereunder or otherwise to Optionholder will be a “parachute payment” under Section 280G(b) of the Code.

23. Section 409A. The Option will be interpreted to the greatest extent possible in a manner that makes the Option exempt from Section 409A of the Code, and to the extent not so exempt, in compliance with the requirements imposed by Section 409A of the Code. If any provision in the Grant Notice or this Agreement would result in the imposition of an additional tax under Section 409A of the Code, the Company and the Optionholder intend that the Grant Notice or this Agreement will be reformed to avoid imposition, to the extent possible, of the applicable tax and no action taken to comply with Section 409A of the Code shall be deemed to adversely affect the Optionholder’s rights to the Option. The Optionholder further agrees that the Committee, in the exercise of its sole discretion and without the consent of the Optionholder, may amend or modify the Plan, the Grant Notice or this Agreement in any manner and delay the payment of any amounts payable pursuant to the Option to the minimum extent necessary to meet the requirements of Section 409A of the Code as the Committee deems appropriate or desirable. The Company makes no representation that the Plan or any Award complies with Section 409A of the Code and shall have no liability to any Optionholder for any failure to comply with Section 409A of the Code.

Exhibit 99.2

Lightning Systems, Inc.

Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	March 31,			December 31,
	2021			2020
Assets
Current assets
Cash and cash equivalents	$	1,774		$	460
Accounts receivable, net		4,537			4,122
Inventories		7,129			5,743
Prepaid expenses and other current assets		6,380			3,999

Total current assets		19,820			14,324

Property and equipment, net		3,058			2,615
Operating lease right-of-use asset		7,328			7,881
Other assets		145			45

Total assets	$	30,351		$	24,865

Liabilities, redeemable convertible preferred stock, and stockholders’ deficit
Current liabilities
Accounts payable	$	3,903		$	2,599
Accrued expenses and other current liabilities		4,160			2,762
Accrued expenses - related party		128			128
Warrant liabilities		36,384			21,155
Current portion of long-term debt		10,954			7,954
Current portion of long-term debt—related party		10,225			6,225
Current portion of operating lease obligation		1,982			1,769
Current portion of finance lease obligation		48			54

Total current liabilities		67,784			42,646

Long-term debt, net of current portion and debt discount—related party		2,634			1,649
Operating lease obligation, net of current portion		6,743			7,265

Total liabilities		77,161			51,560

Commitments and contingencies (Note 14)
Redeemable convertible preferred stock
Series A redeemable convertible preferred stock, par value $.00001,12,293,014 shares authorized, 12,293,014 shares issued and outstanding as of March 31, 2021 and December 31, 2020 (liquidation value of $22,966 as of March 31, 2021)		18,036			18,036
Series B redeemable convertible preferred stock, par value $.00001, 3,825,694 shares authorized, 3,825,694 shares issued and outstanding as of March 31, 2021 and December 31, 2020 (liquidation value of $6,299 as of March 31, 2021)		4,101			4,101
Series C redeemable convertible preferred stock, par value $.00001, 30,000,000 shares authorized March 31, 2021 and December 31, 2020; 14,904,963 and 14,001,349 shares issued and outstanding as of March 31, 2021 and December 31, 2020 (liquidation value of $33,368 as of March 31, 2021)		27,945			21,135

Total redeemable convertible preferred stock		50,082			43,272

Stockholders’ deficit
Common stock, $.00001 par value, 60,000,000 authorized as of March 31, 2021 and December 31, 2020; 5,058,949 and 4,910,555 shares issued and outstanding as of March 31, 2021 and December 31, 2020		—			—
Additional paid-in capital		11,339			10,828
Accumulated deficit		(108,231	)		(80,795	)

Total stockholders’ deficit		(96,892	)		(69,967	)

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit	$	30,351		$	24,865

See accompanying notes to unaudited financial statements

Lightning Systems, Inc.

Statement of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2021			2020
Revenues	$	4,591		$	695
Cost of revenues		5,318			852

Gross loss		(727	)		(157	)

Operating expenses
Research and development		648			243
Selling, general, and administrative		3,920			2,249

Total operating expenses		4,568			2,492
Loss from operations		(5,295	)		(2,649	)
Other expenses
Interest expense		1,611			334
Loss (gain) from change in fair value of warrant liabilities		20,539			(166	)
Other expense, net		(9	)		(1	)

Total other expenses		22,141			167

Net loss	$	(27,436	)	$	(2,816	)

Net loss attributable to common stockholders, basic and diluted
Net loss	$	(27,436	)	$	(2,816	)
Accretion of dividends on redeemable convertible preferred stock		(889	)		(763	)

Net loss attributable to common stockholders	$	(28,325	)	$	(3,579	)

Net loss per share	$	(5.64	)	$	(1.10	)

Weighted-average shares outstanding, basic and diluted		5,018,980			3,254,478

See accompanying notes to unaudited financial statements

Lightning Systems, Inc.

Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share data) (Unaudited)


	Redeemable								Additional		Stockholders’			Total
	Convertible Preferred								Paid-in		Accumulated			Stockholders’
	Stock				Common Stock				Capital		Deficit			Deficit
	Shares		Amount		Shares		Par Value
Balance — December 31, 2019		25,757,260	$	37,982		3,254,478	$	—	$	5,552	$	(43,164	)	$	(37,612	)
Adoption of ASC 842		—		—		—		—		—		22			22
Issuance of Series C redeemable convertible preferred stock		135,342		225		—		—		—		—			—
Issuance of convertible notes beneficial conversion feature		—		—		—		—		272		—			272
Stock— based compensation expense		—		—		—		—		3		—			3
Net loss		—		—		—		—		—		(2,816	)		(2,816	)

Balance — March 31, 2020		25,892,602	$	38,207		3,254,478	$	—	$	5,827	$	(45,958	)	$	(40,131	)


Balance — December 31, 2020		30,120,057	$	43,272		4,910,555	$	—	$	10,828	$	(80,795	)	$	(69,967	)
Issuance of Series C redeemable convertible preferred stock upon exercise of Series C warrants		903,614		6,810		—		—		—		—			—
Issuance of common stock warrants		—		—		—		—		433		—			433
Exercise of stock options		—		—		148,394		—		10		—			10
Stock— based compensation expense		—		—		—		—		68		—			68
Net loss		—		—		—		—		—		(27,436	)		(27,436	)

Balance — March 31, 2021		31,023,671	$	50,082		5,058,949	$	—	$	11,339	$	(108,231	)	$	(96,892	)

See accompanying notes to unaudited financial statements

Lightning Systems, Inc.

Statements of Cash Flows

(in thousands, except share data)

(Unaudited)


	Three Months Ended
	March 31,
	2021			2020
Cash flows from operating activities
Net loss	$	(27,436	)	$	(2,816	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		126			78
Provision for doubtful accounts		142			—
Gain on disposal of property, plant and equipment		(9	)		—
Change in fair value of warrant liabilities		20,539			(166	)
Stock-based compensation		68			3
Amortization of debt discount (beneficial conversion feature in connection with 2020 short term convertible debt)		985			113
Non-cash impact of operating lease right of use lease asset		553			271
Issuance of common stock warrants for services performed		433			—
Changes in operating assets and liabilities that (used) provided cash:
Accounts receivable		(557	)		(418	)
Inventories		(1,386	)		(856	)
Prepaid expenses and other current assets and other assets		(2,481	)		428
Accounts payable		1,304			(356	)
Accrued expenses and other current liabilities		1,398			516

Net cash used in operating activities		(6,321	)		(3,203	)
Cash flows from investing activities
Proceeds from disposal of property and equipment		9			—
Purchase of property and equipment		(569	)		(453	)

Net cash used in investing activities		(560	)		(453	)
Cash flows from financing activities
Proceeds from term loan and working capital facility		7,000			—
Proceeds from short-term convertible notes payable		—			3,000
Proceeds from exercise of Series C warrants		1,500			—
Proceeds from issuance of Series C convertible preferred stock		—			225
Payments on operating lease obligation		(309	)		—
Payments on finance lease obligations		(6	)		(10	)
Proceeds from exercise of stock options		10			—

Net cash provided by financing activities		8,195			3,215

Net increase (decrease) in cash		1,314			(441	)
Cash - Beginning of year		460			1,297

Cash - End of period	$	1,774		$	856

Supplemental cash flow information - Cash paid for interest	$	350		$	—
Significant noncash transactions
Reduction of warrant liability for conversion of warrants into Series C redeemable convertible preferred stock	$	5,310		$	—

See accompanying notes to unaudited financial statements

Lightning Systems, Inc.

Notes to Financial Statements

(in thousands, except share and per share data)

(Unaudited)

Note 1 – Description of Business and Basis of Presentation

Lightning Systems, Inc. (the “Company”, “Lightning Systems”, “we”, “us”, “our”) is an innovative automotive manufacturing and research company based in Loveland, Colorado. The Company operates in the zero-emission electric vehicle (“ZEV”) market and manufactures zero emission Class 3 to 7 Battery Electric Vehicles (“BEV”) and Fuel Cell Electric Vehicles (“FCEV”), and infrastructure solutions for commercial medium duty vans and motor coach fleets. The Company also sells charging systems as an ancillary supporting product. The Company operates predominately in the United States.

Basis of presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements have been included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results for the full year ending December 31, 2021.

These unaudited interim financial statements should be read in conjunction with the annual financial statements and the related notes for the fiscal year ended December 31, 2020 included in Amendment No. 3 to the Form S-4 Registration Statement filed with the SEC by GigCapital3 on March 22, 2021.

Liquidity

As of March 31, 2021, the Company had approximately $1.8 million in cash and cash equivalents. For the year three months ended March 31, 2021, the net loss of the Company was $27.4 million and cash flow used in operating activities was $6.3 million. The Company had negative working capital of $48.0 million as of March 31, 2021. The current and historical operating cash flows, current cash and working capital balances, and forecasted obligations of the Company were considered in connection with management’s evaluation of the Company’s ongoing liquidity.

As described below, on December 10, 2020, the Company entered into the Business Combination Agreement (“BCA”) with GigCapital3 and Project Power Merger Sub, Inc., (“Merger Sub”), which was consummated on May 6, 2021 and Merger Sub was merged with and into Lightning Systems. As a result of the transaction, the Company received net proceeds of $216.8 million in cash, after paying off the outstanding working capital facilities, secured promissory note, and unsecured facility agreements. The cash proceeds received from the transaction are expected to provide sufficient capital to fund planned operations for one year from the date of financial statement issuance.

COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new coronavirus, known as COVID-19, a pandemic. In response, most U.S. states have implemented measures to combat the outbreak that have impacted U.S. business operations. As of the date of issuance of the financial statements, the Company’s operations have not been significantly impacted, but the Company continues to monitor the situation. No impairments were recorded as of the balance sheet date, as no triggering events or changes in circumstances had occurred as of period-end; however, due to significant uncertainty surrounding the situation, management’s judgment regarding this could change in the future. In addition, while the Company’s results of operations, cash flows, and financial condition could be impacted, the extent of the impact cannot be reasonably estimated at this time.

•

The CDC guidelines offer three options for employers to follow when an employee tests positive for COVID-19: 1) a 14-day quarantine before returning to work; 2) a 10-day quarantine before returning to work if the employee is asymptomatic; and 3) a 7-day quarantine if the employee can provide a negative test result taken within 48 hours before returning to work. The Company is currently utilizing the 7-day quarantine. The Company has at times, had specific work groups (a group of employees within a department) absent for a week due to an employee testing positive, in addition to having had employees absent from work or working from home due to suspected COVID-19 infections.

•

Also, as a result of the COVID-19 pandemic, the Company has experienced significant delivery delays from suppliers since April 2020. Within our capital constraints, the Company has increased raw material inventories to attempt to manage and mitigate this risk. In addition, several key suppliers are also experiencing delivery delays ranging from four to sixteen weeks.

Business Combination Transaction

On December 10, 2020, the Company entered into the Business Combination Agreement (“BCA”) with GigCapital3 and Project Power Merger Sub, Inc., (“Merger Sub”), a newly formed subsidiary of GigCapital3. Pursuant to the BCA, on April 21, 2021 GigCapital3’s stockholders approved the business combination. On May 6, 2021, the business combination was consummated and Merger Sub was merged with and into Lightning Systems (the “Business Combination”). Refer to Note 16 – Subsequent Events.

Note 2 – Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company’s most significant estimates and judgments involve deferred income taxes, allowance for doubtful accounts, write downs and write offs of obsolete and damaged inventory, valuation of stock-based compensation, and the value of common and preferred stock warrants and warrant liabilities. 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, and such differences could be material to the Company’s financial statements.

Segment information

Accounting Standards Codification (“ASC 280”), Segment Reporting, defines operating segments as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company operates as a single operating segment. The Company’s CODM is the Chief Executive Officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The CODM uses Company forecasts, a financial and operations dashboard, and cash flows as the primary measures to manage the business and does not segment the business for internal reporting or decision making.

Concentrations of credit risk

As of March 31, 2021 and December 31, 2020, three and two customers, respectively, accounted for 83% and 37% of the Company’s total accounts receivable. For the three months ended March 31, 2021 and 2020 three customers accounted for 67% and 97%, respectively, of revenues.

Concentrations of supplier risk

As of March 31, 2021 and December 31, 2020 two and one suppliers, respectively, accounted for 40% and 12% of the Company’s accounts payable. For the three months ended March 31, 2021 and 2020 two suppliers accounted for 41% and 50% of purchases.

Cash and cash equivalents

Cash and cash equivalents include cash held in banks. The Company’s cash and cash equivalents are placed with high-credit-quality financial institutions and issuers, and at times exceed federally insured limits. To date, the Company has not experienced any credit loss relating to its cash and cash equivalents.

Accounts receivable

Accounts receivable are recorded at invoiced amounts, net of discounts, and allowances. The Company grants credit in the normal course of business to its customers. The Company periodically performs credit analyses and monitors the financial condition of its customers to reduce credit risk and, under certain circumstances, requires collateral to support accounts receivable. The Company reduces the carrying value for estimated uncollectible accounts based on a variety of factors including the length of time receivables are past due, economic trends and conditions affecting the Company’s customer base, and historical collection experience. Specific provisions are recorded for individual receivables when the Company becomes aware of a customer’s inability to meet its financial obligations. The Company writes off accounts receivable when they are deemed uncollectible or, in certain jurisdictions, when legally able to do so. The allowance for doubtful accounts balances at March 31, 2021 and December 31, 2020 was $142 and $0, respectively.

Inventories

Inventories consist of raw materials, work in progress, and finished goods and are stated at the lower of cost or net realizable value, with cost determined on the average cost method, which approximates the first-in, first-out (FIFO) method.

The Company records a provision to write-down obsolete inventories equal to the difference between the costs of inventories on hand and the net realizable value based upon assumptions about future sales trends, market and economic conditions, and customer demand. If the estimated inventory net realizable value is less than its carrying value, the carrying value is adjusted to net realizable value and the resulting charge is recorded in “cost of revenues.”

Prepaid SPAC transaction costs

As of March 31, 2021, the Company has capitalized $2,988 of transaction costs in “prepaid expenses and other current assets” that will be reclassified and offset against equity upon consummation of the Business Combination, in accordance with the accounting guidance related to an equity transaction.

Property and equipment

Property and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful asset lives. Leasehold improvements are stated at cost and amortized on the straight-line basis over their estimated economic useful lives or the lease term, whichever is shorter. Costs of enhancements or modifications that substantially extend the capacity or useful life of an asset are capitalized and depreciated accordingly. Ordinary repairs and maintenance are expensed as incurred. Depreciation is included in our statements of operations. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our balance sheets and the resulting gain or loss, if any, is reflected in “other income, net.”

Impairment of long-lived assets

Long-lived assets to be held and used in the Company’s operations are evaluated for impairment when events or circumstances indicate the carrying value of a long-lived asset or asset group is less than the undiscounted cash flows from its use and eventual disposition over its remaining economic life. The Company assesses recoverability by comparing the sum of projected undiscounted cash flows from the use and eventual disposition over the remaining economic life of a long-lived asset or asset group to its carrying value, and records a loss from impairment if the carrying value is more than its undiscounted cash flows. Assets or asset groups to be abandoned or from which no future benefit is expected are written down to zero in the period it is determined they will no longer be used and are removed entirely from service. There were no impairments of long-lived assets recognized during the three months ended March 31, 2021 and 2020.

Redeemable convertible preferred stock

Due to the contingently redeemable nature of the preferred stock, the Company classifies the preferred stock as temporary equity in the mezzanine section of the balance sheet. In addition, the Company does not currently believe that the related contingent events and the redemption of the preferred stock is probable to occur. Therefore, the Company is not currently accreting the preferred stock to redemption value and will only do so if the preferred stock becomes probable of redemption in the future.

Revenue recognition

The Company develops and produces Powertrain Kits for urban medium and heavy-duty vehicles, such as delivery trucks and buses. Powertrain Kits can either be sold direct to customers or installed and integrated by us into a vehicle. The Company transfers control and recognizes revenue for Powertrain Kits sold direct to customers when the product is shipped “FOB Shipping Point.” When we are responsible for Vehicle Conversions, revenue is recognized upon completion of the conversion and the vehicle is made available to the customer. For Vehicle Conversions, the components are highly interdependent and interrelated, and conversion requires both the components and their installation and integration, which collectively represent the combined output to the customer. The Company also provides chargers as an ancillary supporting product to customers. Revenue for chargers is recognized when the product is drop shipped directly to the customer from the manufacturer. The Company, who controls the customer relationship and product pricing for chargers, is the principal in such transactions and revenue is recognized on a gross basis. From time to time we also sell services associated with the Powertrain Kits, revenue from which is recognized as the service is transferred to the customer. Service revenue for the three months ended March 31, 2021 and 2020 represented less than 7.7% and 3.4% of total revenue, respectively.

The Company accounts for shipping and handling costs arranged on behalf of customers as fulfillment costs and records these costs within “cost of revenues” in the accompanying statements of operations. Shipping and handling billed to customers is included in revenues and is not significant.

The following economic factors affect the nature, amount, timing, and uncertainty of the Company’s revenue and cash flows as indicated:

Type of customer: The majority of Company sales are directly to fleet customers. The Company also sold to certified installers or dealers who install the powertrain components in the vehicles.

Type of contract: Sales contracts are for goods or services. The majority of contracts are short term (i.e., less than or equal to one year in duration).

Significant Payment Terms

None of the Company’s contracts have a significant financing component. Any cash that is received prior to revenue recognition is deferred as deferred revenue (a contract liability) until the good is delivered or service is rendered.

Returns and Refunds

Consideration paid for goods and/or services that customers purchase from the Company are nonrefundable. Therefore, at the time revenue is recognized, the Company does not estimate expected refunds for goods or services, nor does the Company exclude any such amounts from revenue.

Allocating the Transaction Price

The transaction price of a contract is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. Transaction prices do not include amounts collected on behalf of third parties (e.g., sales taxes). Sales taxes collected on sales are recorded as a sales tax liability and are included in “accrued expenses and other current liabilities.” To determine the transaction price of a contract, the Company considers its customary business practices and the terms of the contract. For the purpose of determining transaction prices, the Company assumes that the goods and/or services will be transferred to the customer as promised in accordance with existing contracts and that the contracts will not be canceled, renewed, or modified. The Company’s revenue terms do not include retrospective or prospective volume discounts, rights of return, rebates, performance bonuses or other forms of variable consideration.

The Company’s contracts with customers have fixed transaction prices that are denominated in U.S. dollars and payable in cash.

Costs to Obtain or Fulfill a Contract with a Customer

The Company has elected the practical expedient to expense contract acquisition costs, which consist of sales commissions, which are reported within “selling, general, and administrative” expenses.

Revenue Summary

The following table disaggregates revenue by major source


	Three months ended March 31,
	2021		2020
ZEV conversions
Vehicle conversions—direct to customer	$	4,146	$	132
Powertrain kits—direct to customer		88		—
Powertrain kits—certified installer or dealers		—		540
Charging systems		2		—
Other		355		23

	$	4,591	$	695

Warranties

In most cases, goods that customers purchase from the Company are covered by five-year and -thousand-mile limited product warranty. The Company does not sell warranties separately.

At the time revenue is recognized, the Company estimates the cost of expected future warranty claims and accrues estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty liability for actual historical experience. The warranty liability is included in “accrued and other current liabilities” and the cost of warranties is included in the “cost of revenues.”

Fair value, measurements, and financial instruments

U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can access at the measurement date.

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

We categorize fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC 820, Fair Value Measurement:

Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities

Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost)

Income approach: Techniques to convert future amounts to a single present value amount based upon market expectations (including present value techniques, option pricing and excess earnings models)

The Company believes its valuation methods are appropriate and consistent with other market participants, however, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, convertible notes payable, and warrant liabilities. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates fair value because of the short-term nature of those instruments. The Company estimates that the current value of the notes approximates fair value based on prevailing market rates.

The common and preferred stock warrants issued in connection with the issuance of debt, the conversion of debt to preferred stock, and the issuance of redeemable convertible preferred stock are measured and recorded at their fair market value as of the date of each transaction. These common and preferred stock warrants are classified as warrant liabilities and are measured and adjusted to their fair market value as of each reporting period.

During the current and prior years, the Company estimated the value of its common stock, Series C preferred stock, and Series C preferred warrants. These values were used in the determination of the value of warrants issued in connection with certain debt and preferred stock transactions and when measuring at the end of the reporting period. The Company considers the measurement of such liability-classified warrants in Level 3 due to significant unobservable inputs in this valuation.

The valuations are based on Lightning Systems being a private company and determined using a Probability Weighted Expected Return Method (“PWERM”) and a combination of several income and market approaches to determine the enterprise value of the Company. The enterprise value is adjusted for the probabilities of various scenarios/liquidity events occurring to create an overall weighted value of common stock as each valuation date. Each liquidity scenario has unique probabilities based on management’s opinion, which is based on various management discussions with potential investors, advisors, and market participants, and unique facts and circumstances as of the valuation dates. The scenarios included early liquidation, a private merger and acquisition (“M&A”) transaction, staying a privately held company, and a special purpose acquisition company (“SPAC”) transaction/merger.

Each scenario was based on a different valuation methodology based on the unique risks, opportunities and a likely investor’s or market participant’s perspective. These included (a) Early liquidation: based on an Asset Approach using the existing equity value as of the valuation date; (b) Private M&A: based on a guideline transaction (market) approach using an assembled group of comparable transactions and trailing revenue metric/multiples; (c) Stay private: based on a discounted cash flow (income) approach using the Company’s non-SPAC forecast and a market-based discount rate; and (d) SPAC transaction: based on a guideline public company (market) approach using an assembled peer group of comparable companies and forward revenue metrics/multiples. Value was allocated to all outstanding securities through the PWERM using capitalization tables unique to each liquidity scenario.

The preliminary valuation was then discounted by applying a DLOM based on a Finnerty put-option model to determine a non-marketable, minority value of one share of common stock and one Series C preferred share.

The Company’s non-financial assets, which primarily consist of property and equipment, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable, these along with other non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value.

Beneficial conversion features

The Company follows beneficial conversion feature guidance in ASC 470-20, Debt-Debt with Conversion and Other Options, which applies to redeemable convertible preferred stock and convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date.

The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence.

Stock-based compensation

In connection with the Company’s conversion from a partnership to a corporation on December 31, 2019, the Company adopted the 2019 Equity Incentive Plan and converted therein all participants from a previous Profit-Sharing Plan, under which the Company was authorized to issue profit units to officers and employees of the Company. All participants transferred with a strike price based on the fair value of the common stock on December 31, 2019 and the same number of shares, vesting periods, and term. The Company determined the difference between the fair value of profit units immediately before the conversion, and the fair value of the stock options was de minimis, therefore, the Company did not record any additional expense.

The Company’s 2019 Equity Incentive Plan provides for stock options and other equity compensation awards to be granted to plan participants, which includes certain officers and employees. The grant date fair value of awards granted under this plan is amortized over the requisite service period using the straight-line method. The grant date fair value of stock options is calculated using the Black Scholes option pricing model.

The assumptions used in the Black-Scholes model are management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if other assumptions had been used, the recorded stock-based compensation expense could have been materially different from that depicted in the financial statements.

Warrants and Warrant liabilities

The Company accounts for common and preferred warrants in accordance with the authoritative guidance which requires that free-standing financial instruments with certain cash settlement features and / or associated with redeemable convertible preferred stock, which is classified as temporary equity, to be recorded at their fair value. All outstanding common (with the exception of certain warrants issued to vendors discussed below) and all preferred warrants are recorded as “warrant liabilities” based on their fair value on the date of the transaction. See the “Fair value” significant accounting policy for a description of the determination of fair value. Any changes in the fair value of these instruments are reported as “loss (gain) from change in fair value of warrant liabilities.”

Warrants are separated from the host contract and reported at fair value when the warrant is a freestanding financial instrument that may ultimately require the issuer to settle the obligation by transferring assets. Under certain circumstances, most notably in the case of a deemed liquidation, the warrants issued in conjunction with the Company’s debt and preferred stock transactions may be ultimately required to settle by a transfer of assets, and as a result the warrants are reported as liabilities at fair value each reporting period.

Based on the terms of the common and preferred warrant agreements, the Company has determined that all warrants (with the exception of certain warrants issued to vendors) issued are liabilities, as such, are included in “warrant liabilities “ on the balance sheets and recorded at fair value each reporting period.

In February 2021 the Company granted common warrants to certain vendors for services provided prior to March 31, 2021. Refer to Note 10 – Warrants and Warrant Liabilities.

Research and development

Research and development costs are expensed when incurred and consists of engineering personnel and materials.

Advertising

Advertising costs are expensed when incurred and are included in “selling, general, and administrative” expenses and total $30 and $0 for the three months ended March 31, 2021 and 2020, respectively.

Income taxes

Effective December 31, 2019, the Company converted from a LLC to a C corporation. Prior to December 31, 2019, the Company was treated as a partnership for federal income tax purposes. Consequently, federal income taxes were not payable or provided for by the Company. Members were taxed individually on their pro rata ownership share of the Company’s earnings. The Company’s net loss was allocated among the members in accordance with the Company’s operating agreement.

Income taxes are accounted for using the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of other assets and liabilities. We provide for income taxes at the current and future enacted tax rates and laws applicable in each taxing jurisdiction. We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. We recognize interest and penalties related to income tax matters in income tax expense in the statements of operations.

Net loss per share

Basic and diluted earnings per common share (“EPS”) is presented using the two-class method. Participating securities are included in the computation of EPS on a pro-rata, if-converted basis. Diluted EPS reflects the potential dilution to common shareholders from securities that could share in the Company’s earnings. The dilutive effect of each participating security, if any, is calculated using the more dilutive of the two-class method described above. Anti-dilutive securities are excluded from diluted EPS.

Emerging growth company

Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth company. At times, the Company may elect to early adopt a new or revised standard.

Recent accounting pronouncements issued and adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases, which supersedes the current lease requirements in ASC 840. The ASU requires lessees to recognize a right-to-use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet.

The Company adopted ASC 842 on January 1, 2020 using the modified retrospective transition method. In connection with the adoption, the Company recognized right-of-use lease assets of $3,683, net of “other long-term liabilities” of $328, lease liabilities of $4,011, and a transition adjustment that increased the Company’s “accumulated deficit” by $22.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods therein, with early adoption permitted. The adoption method is dependent on the specific amendment included in this update as certain amendments require retrospective adoption, modified retrospective adoption, an option of retrospective or modified retrospective, and prospective adoption. The Company adopted this standard effective January 1, 2021, utilizing the prospective method which no material impact on its financial statements.

Recent accounting pronouncements issued not yet adopted

In June 2016, the FASB issued ASU 2016-13 related to the measurement of credit losses on financial instruments and has since modified the standard with several ASUs (collectively, the “credit loss standard”). The credit loss standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the

collectability of the reported amount. The credit loss standard will take effect for public entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As amended in ASU 2019-10, for companies that file under private company guidelines, the credit loss standard will take effect for fiscal years beginning after December 15, 2022, and for interim periods within those fiscal years. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018. The adoption of this ASU will require a cumulative-effect adjustment to Accumulated deficit as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company expects to adopt this standard on January 1, 2022 and is currently evaluating the impact this ASU will have on its financial statements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, the ASU requires entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Management expects to adopt this standard on January 1, 2022 and has not yet completed its assessment of the impact of the new standard on the Company’s financial statements.

Note 3 – Inventories

At March 31, 2021 and December 31, 2020, inventories consist of the following:


	March 31, 2021		December 31, 2020
Raw materials	$	4,032	$	4,456
Work in progress		2,540		1,143
Finished goods		557		144

Total inventories	$	7,129	$	5,743

Note 4 – Prepaid and Other Current Assets

At March 31, 2021 and December 31, 2020, prepaid and other assets consist of the following:


	March 31, 2021		December 31, 2020
Vendor deposits	$	2,747	$	1,794
Prepaid SPAC transaction costs		2,988		1,913
Prepaid insurance and other assets		645		292

Total prepaid expenses and other current assets	$	6,380	$	3,999

Note 5 - Property and Equipment

Cost, accumulated depreciation, and the related estimated useful lives of property and equipment as of March 31, 2021 and December 31, 2020 are as follows:


	March 31, 2021			December 31, 2020			Useful Lives
Machinery and equipment	$	1,275		$	939			7 years
Vehicles		1,116			825			5 years
Leasehold improvements		666			650			5 years
Computer equipment		162			167			3 years
Software		112			116			3 years
Furniture and fixtures		141			126			7 years
Capital projects in progress		891			1,081

Total cost		4,363			3,904
Accumulated depreciation and amortization		(1,305	)		(1,289	)

Total property and equipment	$	3,058		$	2,615

Depreciation and amortization expense for the three months ended March 31, 2021 and 2020 totaled $126 and $78, respectively, of which $39 and $23, respectively are included in “cost of revenues” and $87 and $55, respectively are included in “selling, general and administrative” expenses.

Note 6 - Accrued Expenses and Other Current Liabilities

At March 31, 2021 and December 31, 2020, accrued expenses and other current liabilities consist of the following:


	2021		2020
	March 31, 2021		December 31, 2020
Accrued SPAC transaction costs	$	2,096	$	1,521
Warranty liability		511		455
Customer deposits		308		267
Accrued interest		519		246
Accrued payroll and benefits		439		207
Accrued other		287		66

Total accrued expenses and other current liabilities	$	4,160	$	2,762

Note 7 – Notes Payable

Notes payable as of March 31, 2021 and December 31, 2020 consist of the following:


		March 31, 2021			December 31, 2020
Related party notes
Term note and revolving working capital facility	$	10,000		$	6,000
2020 short-term convertible notes payable		3,225			3,225
Third party notes
2020 short-term convertible notes payable		6,454			6,454
Unsecured facility agreement		1,500			1,500
Secured promissory note		3,000			—

Total notes payable		24,179			17,179
Unamortized debt discount		(366	)		(1,351	)

Total debt less unamortized debt discount		23,813			15,828
Less current portion—related party		10,225			6,225
Less current portion—third party		10,954			7,954

Long-term portion—related party	$	2,634		$	1,649

Related party term loan and working capital facility

In October 2019, the Company entered into a term note and working capital facility (the “Facility”), with a company represented on the board of directors. Under the Facility, the Company may borrow up to $24,000. Borrowings under the Facility, which were $10,000 as of March 31, 2021, are secured by substantially all the Company’s assets, are subject to borrowing base limitations, and require the Company to meet certain covenants. During the three months ended March 31, 2021, the Company has been in violation with certain financial and non-financial covenants, which have been waived by the lender. Interest is payable quarterly on borrowings at a fixed annual rate of 15%. The principal is due as follows: $3,000 in June 2021; $4,000 in January 2022; and $3,000 in October 2024.

In connection with entering into this Facility, the Company issued warrants in 2020 and 2019, exercisable into 60,241 and 301,205, respectively, shares of Series C preferred shares at the conversion price of $1.66 per share. The Company estimated the fair value of the warrants at issuance at $6 and $66, respectively, and has recorded a debt discount, which is being recognized over the life of the Facility borrowings, and a warrant liability, which is adjusted to fair value each reporting period, with the changes in fair value reported within “other expenses, net.”

Third-party promissory note

In February 2021 the Company borrowed $3,000 by entering into a promissory note with a third-party lender. The note is secured by substantially all the Company’s assets and bears an annual interest rate of 20%, of which 10% shall be paid in cash and 10% shall be paid-in-kind by adding such interest to the principal balance. Interest which shall be paid quarterly beginning on April 30, 2021 until the earliest of the following events occur: the maturity date of February 19, 2022; or 14 days after the closing of the Business Combination as described in Note 1, at which time all outstanding principal and interest shall be due.

Related party 2020 convertible notes payable

In February 2020, the Company borrowed $3,000 under two convertible note payable agreements from companies represented on the board. The convertible notes bore interest at 8% and were subject to certain covenants. In May 2020, the notes were subject to a mandatory redemption in connection with a qualified equity offering of $3,000, resulting in a conversion into 2,118,819 Series C preferred shares at a weighted average conversion price of $1.42 per share. The mandatory redemption was treated as a debt extinguishment for accounting purposes. To record the extinguishment, the fair value of consideration received and debt relieved was compared to the fair value of consideration paid and equity instruments issued. The fair value of consideration received was greater than the consideration paid. Subsequent to March 31, 2020, the excess fair value of $1,844 was recorded as a contribution to “additional paid in capital”.

In connection with the redemption, the Company issued short and long-term warrants, exercisable into 3,614,457 and 831,326, respectively, shares of Series C preferred shares at the conversion price of $1.66 per share. The Company estimated the fair value of the warrants at $336 which was recorded subsequent to March 31, 2021.

Related and third-party 2020 short-term convertible notes payable

In August and September 2020, the Company borrowed $9,679 under convertible note purchase agreements from third parties ($6,454) and related parties ($3,225). The related parties include officers, a director, and individuals whose companies are represented on the Board of Directors. The convertible notes bear interest at 8%. Interest is payable monthly, with principal and unpaid interest due June 30, 2021. The notes are convertible into 5,830,723 Series C preferred shares at the conversion price of $1.66 per share. These notes are subordinate to the related party term loan and working capital facility and third-party unsecured facility agreement.

The 2020 short-term notes are convertible into shares of Series C redeemable convertible stock upon the 1) a change in control (“CIC”) having a value in excess of $200,000; 2) a debt or equity financing with aggregated gross proceeds in excess of $10,000; or 3) at maturity. Should the notes be converted at maturity, the debt holders will receive a beneficial conversion feature allowing the conversion at 75% of the lowest issue price. The Company recorded the beneficial conversion feature at its intrinsic value of $3,071. This was recorded as a debt discount and an addition to “additional paid-in capital.” During the three months ended March 31, 2021, the Company amortized $981 of the discount, which is included in “interest expense.” The remainder of the debt discount, $315, will be amortized as “interest expense” during the three months ending June 30, 2021.

Third-party unsecured facility agreement

In March 2015, the Company borrowed $1,500 under an unsecured facility agreement. The note does not bear stated interest and was due in December 2020. Subsequent to March 31, 2021, the Company was in violation of a covenant which required repayment of the loan by April 30, 2021, which was subsequently waived by the lender who extended the maturity date of the loan to May 31, 2021, in anticipation of the closing of the Business Combination.

Debt maturities

The total balance of all debt matures as follows:


Period ending December 31,	Amount
2021 (remainder of the year)	$	11,179
2022		10,000
2023		—
2024		3,000
2025		—

	$ 24,179

Note 8 – Leases

Operating lease

The Company adopted authoritative guidance related to leases effective January 1, 2020 using the modified retrospective method. The comparative information presented in the financial statements was not restated and is reported under the accounting standards in effect for the three months presented.

The Company’s facility leases its warehouse, distribution center, and office space, under two noncancelable operating leases that expire in November 2024 and February 2027, respectively, and contain provisions for future rent increases. The leases require the Company to pay taxes, insurance, utilities, and maintenance costs. The leases, as of March 31, 2021, have a weighted average remaining lease term of 5.1 years and a weighted average discount rate of 12%.

Finance leases

The Company has leased vehicles under finance leases that expire at various dates, with the longest lease ending in 2021. None of the Company’s leases include a renewal option. The Company’s leases do not include variable payments and as a result the Company does not have variable lease payments.

For financial reporting purposes, minimum lease payments related to the assets have been recorded as inventory raw materials, principally electric battery systems, and have been expensed through “cost of revenues sold” and, as a result, has included the purchase option payments due at the end of the lease terms in the finance lease obligation.

The Company utilized a portfolio approach to discount its lease obligations. The Company assesses the expected lease term at lease inception and discounts the lease using a fully secured annual incremental borrowing rate of 12%, adjusted for time value corresponding with the expected lease term.

Leases with an original term of twelve months or less are not reported in the balance sheet with the expense for these short-term leases recognized on a straight-line basis over the lease term

Right-of-use assets and lease liabilities as of March 31, 2021 consist of the following:


	March 31, 2021
	Operating		Finance
Assets:
Right-of-use assets	$	7,328	$	—

Liabilities
Operating lease obligation—current portion	$	1,982	$	—
Operating lease obligation—long-term portion		6,743		—
Finance lease obligation—current portion		—		47

Total operating and finance lease obligations	$	8,725	$	47

Operating lease expense for the three months ended March 31, 2021 totaled $590, of which $133 is included in “cost of revenues;” $422 is included in “selling, general and administrative;” and $35 is included in “research and development.” Operating lease expense for the three months ended March 31, 2020 totaled $271, of which $44 is included in “cost of revenues;” $216 is included in “selling, general and administrative;” and $11 is included in “research and development.”

During the three months ended March 31, 2021, the cash paid for amounts included in the measurement of lease liabilities for operating cash flow from operating leases totaled $345 and for financing cash flow from finance leases totaled $7.

The maturities of the Company’s lease liabilities are as follows:


	March 31, 2021
	Operating			Finance
2021 (remainder of year)	$	1,685		$	48
2022		2,588			—
2023		2,803			—
2024		2,756			—
2025		1,398			—
2026 and thereafter		1,676			—

Total future minimum lease payments		12,906			48
Less: imputed interest		(4,181	)		(1	)

Total maturities	$	8,725		$	47

Note 9 – Redeemable Convertible Preferred Stock

The Company converted from a limited liability company to a C corporation on December 31, 2019. Voting rights, liquidation preferences, dividend or distribution preferences, and conversion rights did not change upon conversion to a corporation. Each of the then outstanding convertible preferred units converted on a one-to-one basis into the respective convertible preferred shares. Each preferred share is entitled to one vote for each share of preferred stock on an if-converted basis.

Series A, B and C preferred shares are eligible for a cumulative annual simple return of 8% (the “preferred return”) on amounts paid to purchase their preferred shares upon a liquidation, winding up or dissolution of the Company, or if declared by the Board of Directors. No preferred dividends have been declared. As of March 31, 2021 and December 31, 2020, the amount of cumulative undeclared dividends total $9,118 ($1.82 per share) and $8,229 ($2.24 per share), respectively.

The Company’s preferred shares are not redeemable at the option of the holders. However, the holders of preferred shares may request that the Company redeem all outstanding preferred shares in accordance with their liquidation preferences in the event of a deemed liquidation event in which the Company does not effect a dissolution of the Company under Delaware General Corporation Law within 90 days after such deemed liquidation event. Deemed liquidation events are defined to include (i) a merger or consolidation in which the Company is a constituent party, (ii) sale, lease, exclusive license or other disposition or the sale or disposition of substantially all of the Company’s assets, or (iii) a “change in control” transaction in which current stockholders’ control less than 50% of the voting power of the entity resulting from the transaction. Accordingly, these shares are considered contingently redeemable and are classified as temporary equity.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, any remaining assets of the Company are distributed as follows: (i) first, to holders of Series C preferred shares, an amount equivalent to 1.25 times the original purchase price per share plus the accrued but unpaid preferred return per share; (ii) second, to holders of Series B preferred shares, an amount equivalent to 1.25 times the original purchase price per share plus the preferred accrued but unpaid return per share; (iii) third, to holders of Series A preferred shares, an amount equivalent to 1.00 times the original purchase price per share plus the accrued but unpaid preferred return per share; and (iv) any remaining assets after satisfying the required distributions to preferred stockholders are distributed pro rata among preferred and common stockholders on an if-converted basis.

Series A, Series B and Series C preferred shares are convertible into common shares at any time at the option of the holder, and are automatically converted into common shares upon the affirmative election of more than 70% of the Series B and Series C preferred stockholders, or upon the closing of a sale of common shares in an initial public offering (“IPO”) with gross proceeds to the Company of $50 million or more accompanied by a listing of such common shares on the Nasdaq’s National Market, the New York Stock Exchange, or another exchange approved by the board of directors. At March 31, 2021, the conversion price per preferred share, which is subject to adjustment to provide anti-dilution protection to preferred stockholders, was $1.00, $1.20 and $1.66 for Series A, Series B and Series C, respectively.

See Note 7 – notes payable for description of the convertible debt conversion transactions and Note 10 – warrant liabilities regarding warrants issued in connection with the preferred share purchases.

In connection with the 2019 Series C preferred stock issued for cash, the Company issued warrants, exercisable into 702,811 shares of Series C preferred shares at the conversion price of $1.66 per share. The Company estimated the fair value of the warrants at $155 and recorded a warrant liability, which is reported at fair value at each reporting period, with the change in fair value reported as “loss (gain) from change in fair value of warrant liabilities.”

In May 2020 in connection with the 2020 Series C preferred stock issued in connection with the redemption of related party 2020 convertible notes payable of $3,000 and cash of $3,000 the Company issued warrants, exercisable into 4,445,783 shares of Series C preferred shares at the weighted average conversion price of $1.42 per share. The Company estimated the fair value of the warrants at $336 and subsequent to March 31, 2020, recorded a warrant liability, which is reported at fair value at each reporting period, with the change in fair value reported as “loss (gain) from change in fair value of warrant liabilities.”

In March 2021 one of the preferred warrant holders exercised their warrants to purchase 903,614 shares of Series C preferred stock at an exercise price of $1.66 for cash proceeds of $1,500.

Note 10 – Warrants and Warrant Liabilities

The Company has issued warrants that enable the holder to exercise in exchange for common shares or Series C preferred shares. See Note 7 - Notes payable and Note 9 – Redeemable convertible preferred stock for descriptions of the underlying transactions.

Series C warrants are exercisable by the holder at any time at the stated exercise price, which price is subject to adjustment to provide anti-dilution protection to the holder. Upon the closing of an Initial Public Offering (“IPO”), or a merger, sale or other transaction involving substantially all of the assets of the Company (a “Deemed Liquidation “) the holder may require the Company to purchase any unexercised warrants at net value equal to the difference between the exercise price of the warrant and the proceeds the holder would have otherwise received as a result of the Deemed Liquidation or IPO. The Company has no obligation to file for registration of the shares issuable upon exercise of the warrant under the Securities Act. No fractional shares will be issued upon exercise. If upon exercise, the holder would be entitled to a fractional share, the number of shares issued upon exercise will be rounded to the nearest whole share and the difference settled in cash.

As described above in Note 9, in March 2021 one of the preferred warrant holders exercised their warrants to purchase 903,614 shares of Series C preferred stock at an exercise price of $1.66 for cash proceeds of $1,500. At the time of the exercise, the fair value of the warrants was deemed to be $5.87-$5.90 per warrant. In connection with the exercise, the warrant liability was reduced by $5,310 with the offset recorded to series C redeemable convertible preferred stock in addition to the cash proceeds received.

The following table presents information for Common and Series C preferred warrants issued and outstanding and included in warrant liabilities for the three months ended March 31, 2021.


									Weighted
							Weighted		Average
	Number of			Warrant Fair			Average Exercise		Remaining
	Warrants			Value			Price		Life

Warrants to purchase common stock
Outstanding — December 31, 2020		648,743		$	2,270		$	0.25		3.6
Change in fair value		—			2,284		$	—		—

Outstanding - March 31, 2021		648,743		$	4,554		$	0.25		3.3

Warrants to purchase Series C preferred stock
Outstanding — December 31, 2020		6,313,252		$	18,885		$	1.66		2.6
Exercise of warrants to purchase redeemable convertible preferred stock		(903,614	)		(5,310	)	$	1.66		—
Change in fair value		—			18,255			—		—

Outstanding — March 31, 2021		5,409,638		$	31,830		$	1.66		2.7

Total warrant fair value - March 31, 2021				$	36,384

Warrants issued to vendors

In February 2021, the Board of Directors authorized the grant of 125,000 warrants to purchase common stock to three vendors of the Company who provided various sales and marketing related services prior to March 31, 2021. The warrants are immediately exercisable at an exercise price of $6.18 per share, and have a contractual life of five years but require conversion upon the completion of the Business Combination described in Note 1. The fair value of the warrants

were deemed to be $3.46 on the date of grant using the Black-Scholes option pricing model with the following inputs: value of common share $6.18; exercise price of $6.18 per share; 5 year term; risk-free interest rate of 0.62%; and volatility of 68%. As the warrants were issued for services already provided, the value of the warrants of $433 was expensed to “selling, general and administrative” expense, and offset to “Additional paid-in-capital” as the warrants were deemed to be equity instruments under ASC 480, Distinguishing Liabilities from Equity. At March 31, 2021 all 125,000 warrants remained outstanding.

Note 11 – Stock Options and Stock-Based Compensation

The 2019 Equity Incentive Plan (“EIP”) provides for the grant of incentive stock option, non-qualified stock options, and other awards. As of March 31, 2021, there were 6,500,000 reserved, 6,154,868 granted, and 345,132 available for grant under the EIP.

To date the Company has issued incentive stock options to the Company’s employees. Stock option awards are issued with an exercise price equal to the estimated fair market value per share at the date of grant with 4-year vesting schedule and a term of 10 years.

The Company recognizes stock-based compensation expense based on the fair value of the awards issued at the date of grant and amortized on a straight-line basis as the employee renders services over the requisite service period. Stock-based compensation expense for the three months ended March 31, 2021 and 2020 totaled $68 and $3, respectively, of which $5 and $0, respectively, are included in “cost of revenues”, $6 and $0, respectively in “research and development expense”, and $57 and $3, respectively is included in “selling, general and administrative” expenses.

During the three months ended March 31, 2021 and 2020 stock options of 148,394 and 0 shares, respectively, were exercised.

During the three months ended March 31, 2021, the Board of Directors granted 420,081 stock options to certain executives, one director and various employees. Options granted were valued using a Black-Scholes option pricing model using the following assumptions:


		Three months ended March 31, 2021
Expected volatility		68.0%
Dividend yield		0%
Risk-free interest rate		0.82%
Expected life (in years)		6 to 6.25

The weighted average expected term of stock options represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends. The weighted average expected volatility is based on the historical price volatility of the Company’s common stock. The weighted average risk-free interest rate represents the U.S. Treasury bill rate for the expected term of the related stock options. The dividend yield represents the Company’s anticipated cash dividend over the expected term of the stock options.

Note 12- Income Taxes

The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. There is no provision for income taxes because the Company has incurred operating losses since inception. The Company’s effective income tax rate was 0% for the three months ended March 31, 2021 and 2020 and the realization of any deferred tax assets is not more likely than not.

Note 13 – Net Loss per Share

The Company’s potential dilutive securities, which include convertible notes payable, redeemable convertible stock, stock options, and common and preferred Series C warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the following potential common shares from the computation of diluted net loss per share for the periods indicated below because including them would have had an anti-dilutive effect. The number of shares underlying outstanding convertible note payable, redeemable convertible preferred shares, stock options, and common and preferred warrants at March 31, 2021 and 2020 were as follows:


	Three months ended March 31,
	2021		2020
Convertible notes payable		5,830,723		2,271,945
Redeemable convertible preferred stock		36,094,151		31,274,874
Stock options		4,350,397		4,790,456
Common and preferred Series C warrants		6,183,381		3,118,621

Total potential anti-dilutive stock		52,458,652		41,455,896

Note 14 – Commitments and Contingencies

The Company’s financial commitments under leasing arrangements are described elsewhere with in the notes to the financial statements under the capital and operating lease footnotes.

From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of its business. The Company is not aware of any pending or threatened litigation against the Company that it believes could have a material adverse effect on its business, operating results, financial condition or cash flows.

Note 15 – Related Party Transactions

Prior to 2018, the Company purchased hybrid related inventories from a related party. The inventory is considered obsolete in conjunction with the Company’s transition from hybrid solutions to focusing fully on ZEVs and was previously written down to zero. As of March 31, 2021, and December 31, 2020, the amount due to related party is $128.

Note 16 - Subsequent Events

The Company evaluated the potential impact of subsequent events on the financial statements through May 17, 2021, the date the financial statements were available to be issued and determined there were no subsequent events to disclose other than those disclosed below.

Events occurring subsequent to March 31, 2021 include:

During April 2021 the following transactions occurred related to convertible instruments:

•

Certain warrant holders exercised their common warrants in exchange for 73,605 shares of common stock in exchange for approximately $158 in cash proceeds;

•

Certain warrant holders exercised their preferred warrants in exchange for 963,855 shares of Series C redeemable convertible preferred stock for approximately $1,600 in cash proceeds;

•

Certain option holders exercised options in exchange for 501,250 shares of common stock for approximately $26 in cash proceeds .

As noted in Note 1, on December 10, 2020, the Company entered into the BCA with GigCapital3 subject to stockholder approval. On April 21, 2021 GigCapital3’s stockholders voted to approve the business combination, which was consummated on May 6, 2021. Upon close of the transaction, Merger Sub, a newly formed subsidiary of GigCapital3, was merged with and into Lightning Systems and the separate corporate existence of Merger Sub ceased, with Lightning Systems continuing as the surviving corporation of the Merger. Lightning Systems was deemed the accounting predecessor and the combined entity will be the successor SEC registrant, Lightning eMotors, Inc.

In anticipation of and in connection with the close of the transaction, all debt and interest, except the related party term loan, were paid off and the short-term convertible notes were converted into shares of common stock of the combined entity (Merger Sub and the Company), which subsequently changed its name to Lightning eMotors, Inc., according to the terms of the BCA.

Exhibit 99.3

LOGO

FOR IMMEDIATE RELEASE

Lightning eMotors Reports $4.6 million of Revenue in First

Quarter of 2021 From Sales of 31 Commercial Electric Vehicles

and Provides 2021 Outlook

LOVELAND, Colo., May 17, 2021 – Lightning eMotors, Inc. (“Lightning eMotors” or the “Company”), a leading provider of commercial electric vehicles for fleets, today announced revenue and vehicle deliveries for the quarter ending March 31, 2021 for its wholly-owned subsidiary (“Lightning Systems”). The Company is pleased to report revenue of $4.6M and sales of 31 zero-emission commercial vehicles, across five specialty vehicle applications.

Subsequent to the end of the first quarter, Lightning Systems completed its business combination with GigCapital3, Inc., which resulted in $268 million of gross proceeds and $216.8 million of net proceeds to Lightning eMotors’ balance sheet, and GigCapital3, Inc. being renamed Lightning eMotors, Inc.

Q1 2021 Highlights:

•

Despite supply chain headwinds, Lightning Systems reported Q1 sales of 31 purpose-built, commercial zero emission vehicles.

•

First quarter 2021 revenue of $4.6 million, up from the first quarter 2020 revenue of $0.7 million. This is in line with the quarterly growth required to meet the 2021 revenue guidance below. The Company incurred a loss from operations of $5.3 million during the quarter.

•

Vehicle sales for the quarter included electric shuttles buses, delivery vehicles, refrigerated trucks, ambulances and RVs across Classes 3, 4 and 5, shipped to customers including DHL Express, Fluid Truck, ABC Companies, Meals on Wheels and others, all with 1 Hz telematics providing big-data information on commercial electric vehicles’ range, payload, efficiency and reliability.

•

Backlog at quarter end of $169 million and sales pipeline of $807 million, respectively.

Tim Reeser, chief executive officer of Lightning eMotors said, “We are delivering purpose-built commercial zero-emission vehicles today from a factory that is already in production, continuing to add to our two years of customer on-the-road experience, validation and data. Q1 2021 continued the fast sales and delivery growth that started in 2020. As our production capacity, supply chain diversification, automation implementation, and marketing efforts increased, so did our abilities to execute deliveries at a record pace. As a result, Lightning eMotors is well-positioned to achieve its 2021 forecast of over 500 purpose-built zero-emission commercial vehicles. Our results, and the head start that our data, production experience and customer validation provide us, demonstrates the value of real purchase orders and real deliveries.”

Reeser further noted, “We have spent the last 12 years developing our proprietary modular hardware and software platforms. We have partnered with fleets all over the U.S. to build best-in-class, purpose-built, zero-emission battery-electric and fuel-cell-electric commercial solutions to meet the high-level of customization required by fleets. In the past year, we have added nearly 100 employees with a large focus on our engineering and manufacturing teams, and in the short period since announcing our merger with GigCapital3, Lightning eMotors has bolstered our executive team with a distinguished chief financial officer, chief procurement officer, and chief revenue officer and announced several commercial partnerships and new large fleet customers. The capital raised in the merger transaction will enable Lightning eMotors to accelerate its growth plans and fulfill significant demand from our customers, including some of the most recognizable transportation, public safety and e-commerce companies in the U.S. We are excited to begin our next chapter as a public company.”

Lightning eMotors is the only electric commercial vehicle manufacturer to sell and deliver zero-emission vehicles (ZEV) in Class 3, 4, 5, 6 and 7, including passenger vans, ambulances, shuttle buses, last-mile delivery vans, box trucks, and motor coaches for customers in parcel and delivery, microtransit, airport parking operations and electric utilities. Based on reported numbers from other manufacturers, Lightning eMotors has more zero-emission medium-duty commercial vehicles on the road today than any other manufacturer in the Americas. The Company now has more than 140 zero-emission Class 3 through Class 7 vehicles in service with nearly 500,000 fleet miles, all with 1 Hz telematics providing big-data information on commercial electric vehicles’ range, payload, efficiency and reliability.

“Lightning eMotors’ broad portfolio of products allows us to deliver despite the current supply chain unpredictability, as we can move production to products for which we have chassis and components on-hand. Even with our battery supply, we have multiple pack suppliers supporting multiple platforms and applications, providing a safety net against any single supplier constraint. However, the current supply chain disruptions will have significant consequences on short term margin and operating profits,” Reeser concluded.

Backlog and Sales Pipeline

The Company’s backlog on March 31, 2021 was $169 million, an increase of +500% year-over-year. The increase in backlog orders reflects continued robust demand for the Company’s vehicles.

The Company’s sales pipeline remains strong at $807 million and is expected to grow further in 2021 due to favorable news at the local, state and federal level that suggests broad support for commercial fleet electrification, as well as an expanding sales force. Sales pipeline may not be indicative of future sales and can vary from significantly from period to period.

Full Year 2021 Revenue, Gross Margin, Operating Loss and Vehicle Sales Outlook

Based on current business conditions, business trends and other factors, for the full year 2021 ending Dec. 31, 2021, the Company expects:

•

Revenues to be in the range of $50 million to $60 million.

•

Vehicle and powertrain sales of 500 units.

•

Extreme supply chain shortages will have a significant impact on short-term margin and operating costs, resulting in a small, negative gross margin for the full year. However, margins are expected to progressively improve over the next three quarters from the-16% in Q1 as the Company ramps production and benefits from operating leverage. Operating losses will also be impacted and are expected to be higher each quarter than the first quarter loss of $5.3 million with public company costs as well as higher investments in research and development and sales, general and administrative costs to scale the business.

About Lightning eMotors

Lightning eMotors has been providing specialized and sustainable fleet solutions since 2009, deploying complete zero-emission-vehicle (ZEV) solutions for commercial fleets since 2018 – including Class 3 cargo and passenger vans, Class 4 and 5 cargo vans and shuttle buses, Class 6 work trucks, school buses, Class 7 city buses, and Class A motor coaches. The Lightning eMotors’ team designs, engineers, customizes, and manufactures zero-emission vehicles to support the wide array of fleet customer needs including school buses and ambulances, with a full suite of control software, telematics, analytics and charging solutions to simplify the buying and ownership experience and maximize uptime and energy efficiency. To learn more, visit https://lightningemotors.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding the financial statements of Lightning eMotors, its product and customer developments, its expectations, hopes, beliefs, intentions, plans, prospects or strategies regarding the future revenues and expenses and the business plans of Lightning eMotor’s management team. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this press release are based on certain assumptions and analyses made by the management of Lightning eMotors in light of their respective experience and perception of historical trends, current conditions and expected future developments and their potential effects on Lightning eMotors as well as other factors they believe are appropriate in the circumstances. There can be no assurance that future

developments affecting Lightning eMotors will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the parties) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including but not limited to: (i) the ability to maintain the listing of the Company’s securities on a national securities exchange, (ii) the price of the Company’s securities may be volatile due to a variety of factors, including changes in the competitive industries in which the Company operates, variations in operating performance across competitors, changes in laws and regulations affecting the Company’s business and changes in the combined capital structure, (iii) that Lightning eMotors will have sufficient capital to operate as anticipated, and (iv) the impact that the novel coronavirus and the illness, COVID-19, that it causes, as well as governmental responses to deal with the spread of this illness and the reopening of economies that have been closed as part of these responses, may have on Lightning eMotors’ operations, the demand for Lightning eMotors’ products, global supply chains and economic activity in general. Should one or more of these risks or uncertainties materialize or should any of the assumptions being made prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Lightning Systems, Inc.

Statement of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2021			2020
Revenues	$	4,591		$	695
Cost of revenues		5,318			852

Gross loss		(727	)		(157	)

Operating expenses
Research and development		648			243
Selling, general, and administrative		3,920			2,249

Total operating expenses		4,568			2,492
Loss from operations		(5,295	)		(2,649	)
Other expenses
Interest expense		1,611			334
Loss (gain) from change in fair value of warrant liabilities		20,539			(166	)
Other expense, net		(9	)		(1	)

Total other expenses		22,141			167

Net loss	$	(27,436	)	$	(2,816	)

Net loss attributable to common stockholders, basic and diluted
Net loss	$	(27,436	)	$	(2,816	)
Accretion of dividends on redeemable convertible preferred stock		(889	)		(763	)

Net loss attributable to common stockholders	$	(28,325	)	$	(3,579	)

Net loss per share	$	(5.64	)	$	(1.10	)

Weighted-average shares outstanding, basic and diluted		5,018,980			3,254,478

Lightning Systems, Inc.

Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	March 31, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	1,774		$	460
Accounts receivable, net		4,537			4,122
Inventories		7,129			5,743
Prepaid expenses and other current assets		6,380			3,999

Total current assets		19,820			14,324

Property and equipment, net		3,058			2,615
Operating lease right-of-use asset		7,328			7,881
Other assets		145			45

Total assets	$	30,351		$	24,865

Liabilities, redeemable convertible preferred stock, and stockholders’ deficit
Current liabilities
Accounts payable	$	3,903		$	2,599
Accrued expenses and other current liabilities		4,160			2,762
Accrued expenses—related party		128			128
Warrant liabilities		36,384			21,155
Current portion of long-term debt		10,954			7,954
Current portion of long-term debt—related party		10,225			6,225
Current portion of operating lease obligation		1,982			1,769
Current portion of finance lease obligation		48			54

Total current liabilities		67,784			42,646

Long-term debt, net of current portion and debt discount—related party		2,634			1,649
Operating lease obligation, net of current portion		6,743			7,265
Total liabilities		77,161			51,560

Commitments and contingencies (Note 14)
Redeemable convertible preferred stock
Total redeemable convertible preferred stock		50,082			43,272

Stockholders’ deficit
Additional paid-in capital		11,339			10,828
Accumulated deficit		(108,231	)		(80,795	)

Total stockholders’ deficit		(96,892	)		(69,967	)

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit	$	30,351		$	24,865

Investor Relations Contact:

1-800-223-0740

ir@lightningemotors.com

News Media Contact:

1-800-223-0740

pressrelations@lightningemotors.com