Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report on Form 10-K.
Overview
We are a technology innovator and integrator, working to develop innovative energy and transportation solutions. We are pioneering a business model that will enable corporate customers to integrate next-generation truck technology, hydrogen fueling infrastructure, and related maintenance. By creating this ecosystem, we and our strategic business partners and suppliers hope to build a long-term competitive advantage for clean technology vehicles and next generation fueling solutions.
Our expertise lies in design, innovation, and software and engineering. We assemble, integrate, and commission our vehicles in collaboration with our business partners and suppliers. Our approach has always been to leverage strategic partnerships to help lower cost, increase capital efficiency and increase speed to market.
We operate in two business units: Truck and Energy. The Truck business unit is developing and commercializing BEV and FCEV Class 8 trucks that provide environmentally friendly, cost effective solutions to the short, medium and long haul trucking sector. The Energy business unit is primarily developing and constructing a network of hydrogen fueling stations to meet hydrogen fuel demand for our FCEV customers.
In 2019, we partnered with Iveco, a subsidiary of CNHI, a leading European industrial vehicle manufacturing company. Together, we are jointly developing cab over BEV and FCEV trucks for sale in the European market which will be manufactured through a 50/50 owned joint venture in Europe. In April 2020, we entered into a series of agreements with Iveco which established the joint venture, Nikola Iveco Europe GmbH. Our joint venture with Iveco provides us with the manufacturing infrastructure to build BEV trucks for the North American market in addition to that of our greenfield manufacturing facility in Coolidge, Arizona. The operations of the joint venture commenced during the fourth quarter of 2020.
We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we:
•construct manufacturing facilities and purchase related equipment;
•commercialize our heavy-duty trucks and other products;
•develop hydrogen fueling stations;
•continue to invest in our technology;
•increase our investment in marketing and advertising, sales, and distribution infrastructure for our products and services;
•maintain and improve our operational, financial and management information systems;
•hire additional personnel;
•obtain, maintain, expand, and protects our intellectual property portfolio; and
•operate as a public company.
Comparability of Financial Information
Our results of operations and statements of assets and liabilities may not be comparable between periods as a result of the Business Combination.
Business Combination and Public Company Costs
On June 3, 2020, we consummated the merger contemplated by the Business Combination Agreement with VectoIQ, with Legacy Nikola surviving the merger as a wholly-owned subsidiary of VectoIQ. Immediately prior to the closing of the Business Combination, all shares of outstanding redeemable convertible preferred stock of Legacy Nikola were automatically converted into shares of VectoIQ's common stock. Upon the consummation of the Business Combination, each share of Legacy Nikola common stock issued and outstanding was canceled and converted into the right to receive the Per Share Merger Consideration.
Upon the closing of the Business Combination, VectoIQ's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 750,000,000 shares, of which 600,000,000 shares were designated common stock, $0.0001 par value per share, and of which 150,000,000 shares were designated preferred stock, $0.0001 par value per share.
In connection with the execution of the Business Combination Agreement, VectoIQ entered into separate subscription agreements with a number of investors, pursuant to which the Subscribers agreed to purchase, and VectoIQ agreed to sell to the Subscribers, an aggregate of 52,500,000 PIPE Shares, for a purchase price of $10.00 per share and an aggregate purchase price of $525.0 million, in the PIPE. The PIPE investment closed simultaneously with the consummation of the Business Combination.
Prior to the closing of the Business Combination, Legacy Nikola repurchased 2,850,930 shares of Legacy Nikola's Series B redeemable convertible preferred stock at the price of $8.77 per share for an aggregate purchase price of $25.0 million pursuant to the Nimbus Repurchase Agreement. The repurchase is retrospectively adjusted in the statement of stockholders' equity to reflect our equity structure for all periods presented.
Immediately following the Business Combination, pursuant to a redemption agreement, Nikola redeemed 7,000,000 shares of common stock from M&M Residual at a purchase price of $10.00 per share.
The Business Combination is accounted for as a reverse merger in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). While VectoIQ was the legal acquirer, because Legacy Nikola was deemed the accounting acquirer, the historical financial statements of Legacy Nikola became the historical financial statements of the combined company, upon the consummation of the Business Combination.
As a consequence of the Business Combination, we became a Nasdaq-listed company, which will require that we continue to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance, and legal fees.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those set forth in the section entitled "Risk Factors."
Commercial Launch of Nikola heavy duty trucks and other products
We expect to derive revenue from our BEV trucks in late 2021 and FCEV trucks in the second half 2023. Prior to commercialization, we must complete modification or construction of required manufacturing facilities, purchase and integrate related equipment and software, and achieve several research and development milestones. As a result, we will require substantial additional capital to develop our products and services and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales and hydrogen FCEV leases, we expect to finance our operations through a combination of existing cash on hand, public offerings, private placements, debt financings, collaborations, and licensing arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. Any delays in the successful completion of our manufacturing facility will impact our ability to generate revenue.
Customer Demand
While our products are not yet commercially available, we have received significant interest from potential customers. Going forward, we expect the size of our committed reservations to be an important indicator of our future performance.
Basis of Presentation
Currently, we conduct business through one reportable and one operating segment. See Note 2 in the accompanying audited consolidated financial statements for more information.
Components of Results of Operations
Revenues
To date, we have primarily generated revenue from services related to solar installation projects that are completed in one year or less. Solar installation projects are not a part of our primary operations and were concluded in 2020.
Following the anticipated introduction of our products to the market, we expect the significant majority of our revenue to be derived from direct sales of BEV trucks starting in 2021 and from the bundled leases of FCEV trucks beginning in 2023. Our bundled lease offering is inclusive of the cost of the truck, hydrogen fuel and regularly scheduled maintenance. We expect the bundled leases to qualify for the sales type lease accounting under GAAP, with the sale of the truck recognized upon the transfer of the title, and hydrogen fuel and maintenance revenues recognized over time as they are being provided to the customer.
Cost of Revenues
To date, our cost of revenues has included materials, labor, and other direct costs related to solar installation projects.
Once we have reached commercial production, cost of revenues will include direct parts, material and labor costs, manufacturing overhead, including amortized tooling costs and depreciation of our greenfield manufacturing facility, depreciation of our hydrogen fueling stations, cost of hydrogen production, shipping and logistics costs and reserves for estimated warranty expenses.
Research and Development Expense
Research and development expenses consist primarily of costs incurred for the discovery and development of our vehicles, which include:
•Fees paid to third parties such as consultants and contractors for outside development;
•Expenses related to materials, supplies and third-party services, including prototype tooling and non-recurring engineering.
•Personnel-related expenses, including salaries, benefits, and stock-based compensation expense, for personnel in our engineering and research functions;
•Depreciation for prototyping equipment and R&D facilities.
During the years ended December 31, 2020, 2019, and 2018 our research and development expenses were primarily incurred in the development of the BEV and FCEV trucks.
As a part of its in-kind investment, Iveco is providing us with $100.0 million in advisory services (based on pre-negotiated hourly rates), including project coordination, drawings, documentation support, engineering support, vehicle integration, and product validation support. During the years ended December 31, 2020 and 2019, we utilized $45.7 million and $8.0 million, respectively, of advisory services which were recorded as research and development expense. As of December 31, 2020, we have $46.3 million of prepaid in-kind advisory services remaining which is expected to be consumed in 2021 and will be recorded as research and development expense until we reach commercial production.
We expect our research and development costs to increase for the foreseeable future as we continue to invest to achieve our technology and product roadmap goals.
Selling, General, and Administrative Expense
Selling, general, and administrative expenses consist of personnel related expenses for our corporate, executive, finance, and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as
well as expenses for facilities, depreciation, amortization, travel, and marketing costs. Personnel related expenses consist of salaries, benefits, and stock-based compensation.
We expect our selling, general, and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the Securities Exchange Commission, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.
Impairment Expense
Impairment expense consists of charges related to our Powersports business unit that was discontinued in the fourth quarter of 2020, including intangible assets consisting of in-process R&D and trademarks, and long-lived assets.
Interest Income, net
Interest income, net consists primarily of interest received or earned on our cash and cash equivalents balances. Interest expense consists of interest paid on our term loan and finance lease liability.
Revaluation of Series A Redeemable Convertible Preferred Stock Warrant Liability
The revaluation of Series A redeemable convertible preferred stock warrant liability includes gains and losses from the remeasurement of our redeemable convertible preferred stock warrant liability. As of December 31, 2019, all of our outstanding redeemable convertible preferred stock warrants were exercised, therefore, subsequent to 2019, there is no impact from the remeasurement of redeemable convertible preferred stock warrants.
Loss on Forward Contract Liability
The loss on forward contract liability includes losses from the remeasurement of the Series D redeemable convertible preferred share forward contract liability. In April 2020, the forward contract liability was fulfilled and, therefore, subsequent to June 30, 2020, there is no impact from the remeasurement of the forward contract liability.
Other Income (Expense), net
Other income (expense), net consists primarily of other miscellaneous non-operating items, such as government grants, subsidies, merchandising, foreign currency gains and losses, and unrealized gains and losses on investments.
Income Tax Expense (Benefit)
Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against U.S. and state deferred tax assets. Cash paid for income taxes, net of refunds during the years ended December 31, 2020, 2019, and 2018 was not material.
Equity in Net Loss of Affiliate
Equity in net loss of affiliate consists of our portion of losses from our joint venture, Nikola Iveco Europe, Gmbh.
Results of Operations
Comparison of Year Ended December 31, 2020 to Year Ended December 31, 2019
The following table sets forth our historical operating results for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|
( in thousands, except share and per share data)
|
Solar revenues
|
$
|
95
|
|
|
$
|
482
|
|
|
$
|
(387)
|
|
|
NM
|
Cost of solar revenues
|
72
|
|
|
271
|
|
|
(199)
|
|
|
NM
|
Gross profit
|
23
|
|
|
211
|
|
|
(188)
|
|
|
NM
|
Operating expenses:
|
|
|
|
|
|
|
|
Research and development
|
185,619
|
|
|
67,514
|
|
|
118,105
|
|
|
175
|
%
|
Selling, general, and administrative
|
182,724
|
|
|
20,692
|
|
|
162,032
|
|
|
783
|
%
|
Impairment expense
|
14,415
|
|
|
—
|
|
|
14,415
|
|
|
NM
|
Total operating expenses
|
382,758
|
|
|
88,206
|
|
|
294,552
|
|
|
334
|
%
|
Loss from operations
|
(382,735)
|
|
|
(87,995)
|
|
|
(294,740)
|
|
|
335
|
%
|
Other income (expense):
|
|
|
|
|
|
|
|
Interest income, net
|
202
|
|
|
1,456
|
|
|
(1,254)
|
|
|
(86)
|
%
|
Revaluation of Series A redeemable convertible preferred stock warrant liability
|
—
|
|
|
(3,339)
|
|
|
3,339
|
|
|
NM
|
Loss on forward contract liability
|
(1,324)
|
|
|
—
|
|
|
(1,324)
|
|
|
NM
|
Other income (expense), net
|
(846)
|
|
|
1,373
|
|
|
(2,219)
|
|
|
(162)
|
%
|
Loss before income taxes and equity in net loss of affiliate
|
(384,703)
|
|
|
(88,505)
|
|
|
(296,198)
|
|
|
335
|
%
|
Income tax expense (benefit)
|
(1,026)
|
|
|
151
|
|
|
(1,177)
|
|
|
NM
|
Loss before equity in net loss of affiliate
|
(383,677)
|
|
|
(88,656)
|
|
|
(295,021)
|
|
|
333
|
%
|
Equity in net loss of affiliate
|
(637)
|
|
|
—
|
|
|
(637)
|
|
|
NM
|
Net loss
|
(384,314)
|
|
|
(88,656)
|
|
|
(295,658)
|
|
|
333
|
%
|
Premium paid on repurchase of redeemable convertible preferred stock
|
(13,407)
|
|
|
(16,816)
|
|
|
3,409
|
|
|
(20)
|
%
|
Net loss attributable to common stockholders, basic and diluted
|
$
|
(397,721)
|
|
|
$
|
(105,472)
|
|
|
$
|
(292,249)
|
|
|
277
|
%
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(1.19)
|
|
|
$
|
(0.40)
|
|
|
$
|
(0.79)
|
|
|
197
|
%
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
335,325,271
|
|
|
262,528,769
|
|
|
72,796,502
|
|
|
NM
|
Solar Revenues and Cost of Solar Revenues
Solar revenues and cost of solar revenues for the years ended December 31, 2020 and 2019 were related to solar installation service projects. Solar installation projects were not related to our primary operations and were concluded in 2020. Solar revenues and costs of solar revenues were immaterial for the years ended December 31, 2020 and 2019.
Research and Development
Research and development expenses increased by $118.1 million or 175% from $67.5 million during the year ended December 31, 2019 to $185.6 million during the year ended December 31, 2020. This increase was primarily due to $77.4 million in higher spend on purchased prototype components and outside engineering services as we focus primarily on the development, build, and testing of our BEV truck platform, as well as continuing the development of our FCEV truck platform. In addition, we incurred increased personnel costs of $21.4 million driven by growth in our in-house engineering headcount, and higher stock-based compensation expense of $15.2 million primarily in connection with the Business Combination, higher headcount, and RSU grants made to employees during 2020. We also incurred higher depreciation and occupancy costs associated with our headquarters in Phoenix, Arizona and related capital equipment and software.
Selling, General, and Administrative
Selling, general, and administrative expenses increased by $162.0 million or 783% from $20.7 million during the year ended December 31, 2019 to $182.7 million during the year ended December 31, 2020. The increase was primarily related to higher stock-based compensation expense of $117.9 million for RSU grants to executive officers in connection with the Business Combination and increased headcount. In addition, there was an increase in legal expenses of $27.5 million primarily related to regulatory and legal matters incurred in connection with the short-seller analyst report from September 2020. Further, there was an increase in personnel expenses of $7.3 million driven by growth in headcount and higher general corporate expenses, professional services, travel, and depreciation of our headquarters. This was partially offset by a decrease in marketing costs due to the Nikola World event held in 2019, which was not held in 2020.
Impairment Expense
Impairment expense of $14.4 million during the year ended December 31, 2020 resulted from the discontinuation of the Powersports business unit in the fourth quarter of 2020, which resulted in an impairment charge on in-process R&D, trademarks and certain long-lived assets.
Interest Income, net
Interest income, net decreased by $1.3 million or 86%, from $1.5 million of income during the year ended December 31, 2019 to $0.2 million of income during the year ended December 31, 2020. The decrease is primarily due to an increase in interest expense from our finance lease liability and a lower average interest rate earned on deposits. This was partially offset by a higher cash and cash equivalents balance in 2020.
Loss on Forward Contract Liability
Our loss on the forward contract liability represents recognized loss from a $1.3 million change in fair value as of the settlement date. The forward contract liability was settled in April 2020.
Other Income (Expense), net
Other income (expense), net decreased by $2.2 million, from $1.4 million of income during the year ended December 31, 2019 to $0.8 million of expense during the year ended December 31, 2020. The decrease was driven primarily by one-time grant income received during 2019, losses on foreign currency exchange and unrealized losses on investments during 2020.
Income Tax Expense (Benefit)
Income tax expense (benefit) for the year ended December 31, 2020 was a $1.0 million benefit, primarily related to changes in deferred tax liabilities related to our indefinite-lived intangible which was impaired in 2020. Income tax expense was immaterial for the year ended December 31, 2019. We have cumulative net operating losses at the federal and state level and maintain a full valuation allowance against our net deferred taxes.
Equity in Net Loss of Affiliate
Equity in net loss of affiliate for the year ended December 31, 2020 was $0.6 million as operations of our joint venture commenced in the fourth quarter of 2020.
Comparison of Year Ended December 31, 2019 to Year Ended December 31, 2018
The following table sets forth our historical operating results for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
2018
|
|
$ Change
|
|
% Change
|
|
( in thousands, except share and per share data)
|
Solar revenues
|
$
|
482
|
|
|
$
|
173
|
|
|
$
|
309
|
|
|
NM
|
Cost of solar revenues
|
271
|
|
|
50
|
|
|
221
|
|
|
NM
|
Gross profit
|
211
|
|
|
123
|
|
|
88
|
|
|
NM
|
Operating expenses:
|
|
|
|
|
|
|
|
Research and development
|
67,514
|
|
|
58,374
|
|
|
9,140
|
|
|
16
|
%
|
Selling, general, and administrative
|
20,692
|
|
|
12,238
|
|
|
8,454
|
|
|
69
|
%
|
|
|
|
|
|
|
|
|
Total operating expenses
|
88,206
|
|
|
70,612
|
|
|
17,594
|
|
|
25
|
%
|
Loss from operations
|
(87,995)
|
|
|
(70,489)
|
|
|
(17,506)
|
|
|
25
|
%
|
Other income (expense):
|
|
|
|
|
|
|
|
Interest income, net
|
1,456
|
|
|
686
|
|
|
770
|
|
|
112
|
%
|
Revaluation of Series A redeemable convertible preferred stock warrant liability
|
(3,339)
|
|
|
3,502
|
|
|
(6,841)
|
|
|
NM
|
|
|
|
|
|
|
|
|
Other income, net
|
1,373
|
|
|
6
|
|
|
1,367
|
|
|
NM
|
Loss before income taxes and equity in net loss of affiliate
|
(88,505)
|
|
|
(66,295)
|
|
|
(22,210)
|
|
|
34
|
%
|
Income tax expense (benefit)
|
151
|
|
|
(2,002)
|
|
|
2,153
|
|
|
NM
|
Loss before equity in net loss of affiliate
|
(88,656)
|
|
|
(64,293)
|
|
|
(24,363)
|
|
|
38
|
%
|
Equity in net loss of affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
NM
|
Net loss
|
(88,656)
|
|
|
(64,293)
|
|
|
(24,363)
|
|
|
38
|
%
|
Premium paid on repurchase of redeemable convertible preferred stock
|
(16,816)
|
|
|
(166)
|
|
|
(16,650)
|
|
|
NM
|
Net loss attributable to common stockholders, basic and diluted
|
$
|
(105,472)
|
|
|
$
|
(64,459)
|
|
|
$
|
(41,013)
|
|
|
64
|
%
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(0.40)
|
|
|
$
|
(0.28)
|
|
|
$
|
(0.12)
|
|
|
43
|
%
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
262,528,769
|
|
|
226,465,041
|
|
|
36,063,728
|
|
|
NM
|
Solar Revenues and Cost of Solar Revenues
Solar revenues and cost of solar revenues for the years ended December 31, 2019 and 2018 were related to solar installation service projects. Solar installation projects are related to legacy projects that were not related to our primary operations and were concluded in 2020. Solar revenues and costs of solar revenues were immaterial for the years ended December 31, 2019 and 2018.
Research and Development
Research and development expenses increased by $9.1 million or 16% from $58.4 million during the year ended December 31, 2018 to $67.5 million in the year ended December 31, 2019. The increase was primarily due to an increase of $13.3 million in personnel related expenses, offset by a $4.4 million decrease in outside development expenses.
The increase in personnel costs was primarily driven by our increased engineering headcount year over year as we continue to advance the development and design of our vehicles and invest in our in-house engineering capabilities.
Outside development and materials expenses were higher in the year ended December 31, 2018 to support the development and build of the FCEV trucks, along with other vehicles. Additionally, in the year ended December 31, 2019, we managed our outside research and development spend by building our internal engineering team and expect to continue to do so going forward.
Selling, General, and Administrative
Selling, general, and administrative expenses increased by $8.5 million or 69% from $12.2 million during the year ended December 31, 2018 to $20.7 million during the year ended December 31, 2019, primarily due to a one-time payment of $2.1 million related to consulting services on future manufacturing site selection, and higher marketing expenses of $2.7 million primarily related to the Nikola World event held in April 2019. The remaining $3.7 million increase is attributed to higher personnel expenses driven by growth in headcount and higher general corporate expenses, including depreciation of our headquarters in Phoenix, Arizona.
Interest Income, net
Interest income, net increased by $0.8 million or 112%, from $0.7 million during the year ended December 31, 2018 to $1.5 million during the year ended December 31, 2019. The increase was primarily due to the substantial portion of cash and cash equivalents on hand being moved to a higher interest-bearing investment account in the second quarter of 2019.
Revaluation of Series A Redeemable Convertible Preferred Stock Warrant Liability
The revaluation of Series A redeemable convertible preferred stock warrant liability decreased $6.8 million due to a $3.5 million gain recorded during the year ended December 31, 2018 on 3.0 million Series A redeemable convertible preferred warrants which expired in March 2018 as opposed to a $3.3 million loss recorded during the year ended December 31, 2019 on 720 thousand Series A warrants which were exercised in December 2019.
Other Income, net
Other income, net increased by $1.4 million, from $6 thousand during the year ended December 31, 2018 to $1.4 million during the year ended December 31, 2019. The increase was primarily related to grants received from the state of Arizona, as well as subcontracting work performed on government contracts.
During the year ended December 31, 2019, we entered into a $3.5 million grant agreement with Arizona Commerce Authority to relocate our headquarters to Arizona, build manufacturing and research and development operations, create jobs, and enter into capital investments within the state. We met the first milestone of the agreement in the fourth quarter of 2019 and received the initial payment of $1.0 million from the state. We will record future payments in other income as they are received.
Income Tax Expense (Benefit)
Income tax expense (benefit) increased by $2.2 million, from a benefit of $2.0 million during the year ended December 31, 2018 to an expense of $0.2 million during the year ended December 31, 2019. The increase in tax expense is primarily related to changes in deferred tax liabilities recorded for our intangible assets and goodwill.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating operational performance. We use the following non-GAAP financial information to evaluate ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing operating performance.
EBITDA and Adjusted EBITDA
“EBITDA” is defined as net loss before interest income or expense, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation and other items determined by management. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
The following table reconciles net loss to EBITDA and Adjusted EBITDA for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2018
|
|
(in thousands)
|
Net loss
|
$
|
(147,096)
|
|
|
$
|
(26,279)
|
|
|
$
|
(384,314)
|
|
|
$
|
(88,656)
|
|
|
$
|
(64,293)
|
|
Interest (income) expense, net
|
53
|
|
|
(374)
|
|
|
(202)
|
|
|
(1,456)
|
|
|
(686)
|
|
Income tax expense (benefit)
|
(1,030)
|
|
|
1
|
|
|
(1,026)
|
|
|
151
|
|
|
(2,002)
|
|
Depreciation and amortization
|
1,753
|
|
|
1,219
|
|
|
6,008
|
|
|
2,323
|
|
|
625
|
|
EBITDA
|
(146,320)
|
|
|
(25,433)
|
|
|
(379,534)
|
|
|
(87,638)
|
|
|
(66,356)
|
|
Stock-based compensation
|
46,255
|
|
|
1,086
|
|
|
137,991
|
|
|
4,858
|
|
|
3,843
|
|
Revaluation of Series A redeemable convertible preferred stock warrant liability
|
—
|
|
|
—
|
|
|
—
|
|
|
3,339
|
|
|
(3,502)
|
|
Loss on forward contract liability
|
—
|
|
|
—
|
|
|
1,324
|
|
|
—
|
|
|
—
|
|
Equity in net loss of affiliate
|
637
|
|
|
—
|
|
|
637
|
|
|
—
|
|
|
—
|
|
Regulatory and legal matters(1)
|
19,510
|
|
|
—
|
|
|
24,683
|
|
|
—
|
|
|
—
|
|
Impairment expense
|
14,415
|
|
|
—
|
|
|
14,415
|
|
|
—
|
|
|
—
|
|
Adjusted EBITDA
|
$
|
(65,503)
|
|
|
$
|
(24,347)
|
|
|
$
|
(200,484)
|
|
|
$
|
(79,441)
|
|
|
$
|
(66,015)
|
|
(1) Regulatory and legal matters include legal, advisory and other professional service fees incurred in connection with the short-seller analyst article from September 2020, and investigations and litigation related thereto.
Non-GAAP Net Loss and Non-GAAP Net Loss Per Share, Basic and Diluted
Non-GAAP net loss and non-GAAP net loss per share, basic and diluted are presented as supplemental measures of our performance. Non-GAAP net loss is defined as net loss attributable to common stockholders, basic and diluted adjusted for stock compensation expense and other items determined by management. Non-GAAP net loss per share, basic and diluted, is defined as non-GAAP net loss divided by weighted average shares outstanding, basic and diluted.
The following table reconciles net loss and net loss per share to non-GAAP net loss and non-GAAP net loss per share for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2018
|
|
(in thousands, except share and per share data)
|
Net loss attributable to common stockholders
|
$
|
(147,096)
|
|
|
$
|
(43,095)
|
|
|
$
|
(397,721)
|
|
|
$
|
(105,472)
|
|
|
$
|
(64,459)
|
|
Stock-based compensation
|
46,255
|
|
|
1,086
|
|
|
137,991
|
|
|
4,858
|
|
|
3,843
|
|
Premium paid on repurchase of redeemable convertible preferred stock
|
—
|
|
|
16,816
|
|
|
13,407
|
|
|
16,816
|
|
|
166
|
|
Regulatory and legal matters(1)
|
19,510
|
|
|
—
|
|
|
24,683
|
|
|
—
|
|
|
—
|
|
Impairment expense
|
14,415
|
|
|
—
|
|
|
14,415
|
|
|
—
|
|
|
—
|
|
Non-GAAP net loss
|
$
|
(66,916)
|
|
|
$
|
(25,193)
|
|
|
$
|
(207,225)
|
|
|
$
|
(83,798)
|
|
|
$
|
(60,450)
|
|
Non-GAAP net loss per share, basic and diluted
|
$
|
(0.17)
|
|
|
$
|
(0.09)
|
|
|
$
|
(0.62)
|
|
|
$
|
(0.32)
|
|
|
$
|
(0.27)
|
|
Weighted average shares outstanding, basic and diluted
|
385,983,645
|
|
|
268,698,455
|
|
|
335,325,271
|
|
|
262,528,769
|
|
|
226,465,041
|
|
(1) Regulatory and legal matters include legal, advisory and other professional service fees incurred in connection with the short-seller analyst article from September 2020, and investigations and litigation related thereto.
Liquidity and Capital Resources
Since inception, Legacy Nikola financed its operations primarily from the sales of redeemable convertible preferred stock and common stock and redemption of public warrants. As of December 31, 2020, our principal sources of liquidity were our cash and cash equivalents in the amount of $840.9 million, which are primarily invested in money market funds.
Short-Term Liquidity Requirements
As of the date of this Annual Report on Form 10-K, we have yet to generate revenue from our core business operations. As of December 31, 2020, our current assets were $896.9 million consisting primarily of cash and restricted cash of $845.3 million, and our current liabilities were $52.3 million primarily comprised of accounts payable, accrued expenses, and a $4.1 million term note.
We believe our cash and cash equivalents balance will be sufficient to continue to execute our business strategy over the next twelve month period by (i) completing the development and industrialization of the BEV truck, (ii) completing phase one construction of the greenfield manufacturing facility, (iii) completing the construction of a pilot commercial hydrogen station and (iv) hiring of personnel.
However, actual results could vary materially and negatively as a result of a number of factors, including:
•the costs of our greenfield manufacturing facility construction and equipment;
•the timing and the costs involved in bringing our vehicles to market, mainly the BEV truck;
•our ability to manage the costs of manufacturing the BEV trucks;
•the scope, progress, results, costs, timing and outcomes of our research and development for our FCEV trucks;
•the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities;
•revenue received from sales of our BEV trucks;
•the costs of additional general and administrative personnel, including accounting and finance, legal and human resources, as well as costs related to litigation, investigations, or settlements;
•our ability to collect future revenue; and
•other risks discussed in the section entitled "Risk Factors".
Long-Term Liquidity Requirements
Our current capital will not be sufficient to cover forecasted capital needs and operating expenditures starting in the second half of fiscal year 2022. Until we can generate sufficient revenue from BEV truck sales and FCEV leases to cover operating expenses, working capital and capital expenditures, we expect to fund cash needs through a combination of equity and debt financing, including lease securitization. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The credit market and financial services industry have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing.
While we will need to raise additional capital in the future, if adequate funds are not available, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations.
The following table provides a summary of cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
(in thousands)
|
Net cash used in operating activities
|
$
|
(150,533)
|
|
|
$
|
(80,627)
|
|
|
$
|
(54,019)
|
|
Net cash used in investing activities
|
(31,141)
|
|
|
(39,302)
|
|
|
(15,410)
|
|
Net cash provided by financing activities
|
941,120
|
|
|
35,805
|
|
|
211,732
|
|
Cash Flows from Operating Activities
Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development and selling, general, and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.
Net cash used in operating activities was $150.5 million for the year ended December 31, 2020. The most significant component of our cash used during this period was a net loss of $384.3 million, which included non-cash expenses of $138.0 million related to stock-based compensation, $45.7 million for in-kind services, $6.0 million related to depreciation and amortization, $14.4 million for impairment charges, and a loss of $1.3 million related to the change in fair value of our forward contract liability, and net cash inflows of $28.7 million from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and liabilities were the result of an increase in accounts payable and accrued expenses of $29.7 million, primarily related to accrued expenses related to regulatory and legal matters, and increased spend on the development of our BEV and FCEV trucks, partially offset by an increase in accounts receivable, net and prepaid expenses and other current assets.
Net cash used in operating activities was $80.6 million for the year ended December 31, 2019. The most significant component of our cash used during this period was a net loss of $88.7 million, which included non-cash expenses of $8.0 million for in-kind services, $4.9 million related to stock-based compensation, loss of $3.3 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability and $2.3 million related to depreciation and amortization, and net cash outflows of $10.6 million from changes in operating assets and liabilities. The net cash outflows from changes in operating assets and liabilities were primarily the result of a decrease in accounts payable and accrued expenses of $9.4 million, primarily related to the completion of certain outside development projects and settlement of related liabilities.
Net cash used in operating activities was $54.0 million for the year ended December 31, 2018. The largest component of our cash used during this period was a net loss of $64.3 million, which included non-cash charges of $3.8 million related to stock-based compensation, gain of $3.5 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability, a benefit of $2.0 million related to deferred income taxes, and $0.6 million related to depreciation and amortization expense, and net cash inflows of $11.6 million from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and liabilities were primarily the result of an increase in accounts payable and accrued expenses and other current liabilities of $15.1 million.
Cash Flows from Investing Activities
We continue to experience negative cash flows from investing activities as we expand our business and build our infrastructure. Cash flows from investing activities primarily relate to capital expenditures to support our growth. Net cash used in investing activities is expected to continue to increase substantially as we build out and tool our North American truck manufacturing facility in Coolidge, Arizona, finance initial operations of our joint venture in Ulm, Germany, and develop the network of hydrogen fueling stations.
Net cash used in investing activities was $31.1 million for the year ended December 31, 2020, which was primarily due to purchases and deposits for property and equipment, including costs of construction for our Coolidge manufacturing facility and purchases of capital equipment of $22.3 million and $8.8 million in cash paid for investment in the joint venture.
Net cash used in investing activities was $39.3 million for the year ended December 31, 2019, which was primarily due to purchases and deposits on capital equipment of $21.1 million and $18.2 million related to the construction of our headquarters.
Net cash used in investing activities was $15.4 million for the year ended December 31, 2018, which was primarily due to purchases and deposits on capital equipment of $9.2 million, $3.4 million related to the construction of our headquarters, and the issuance of a note receivable to a related party of $2.5 million.
Cash Flows from Financing Activities
Through December 31, 2020, we have financed our operations through proceeds from sales of redeemable convertible preferred stock, the Business Combination, the PIPE, and redemption of warrants.
Net cash provided by financing activities was $941.1 million for the year ended December 31, 2020, which was primarily due to net proceeds of $616.7 million from the Business Combination and the PIPE, the proceeds from the exercise of public and private warrants of $264.5 million, the proceeds from the issuance of Legacy Nikola's Series D redeemable convertible preferred stock, net of issuance costs, of $50.3 million, proceeds from the exercises of stock options of $9.7 million and proceeds from tenant allowances for the construction of our headquarters of $0.9 million, offset by payments on our finance lease liability of $1.0 million.
Net cash provided by financing activities was $35.8 million for the year ended December 31, 2019, which was primarily due to proceeds from the issuance of Series D redeemable convertible preferred stock of $65.0 million and proceeds from the exercise of the Series A redeemable convertible preferred stock warrants of $2.2 million, offset by the repurchase of Series B redeemable convertible preferred stock of $31.4 million.
Net cash provided by financing activities was $211.7 million for the year ended December 31, 2018, which was primarily due to net proceeds from the issuance of Series C redeemable convertible preferred stock of $209.0 million and proceeds from borrowings of $4.1 million related to the term note, offset by the retirement of Series B redeemable convertible preferred stock of $1.4 million.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and other commitments as of December 31, 2020, and the years in which these obligations are due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By period
|
|
Total
|
|
Less than
1 Year
|
|
1 - 3
Years
|
|
3 - 5
Years
|
|
More than
5 Years
|
|
(in thousands)
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
Finance lease liability
|
$
|
19,057
|
|
|
$
|
1,797
|
|
|
$
|
3,756
|
|
|
$
|
3,972
|
|
|
$
|
9,532
|
|
Purchase obligations
|
31,161
|
|
|
21,758
|
|
|
9,403
|
|
|
—
|
|
|
—
|
|
|
$
|
50,218
|
|
|
$
|
23,555
|
|
|
$
|
13,159
|
|
|
$
|
3,972
|
|
|
$
|
9,532
|
|
Purchase obligations include purchase orders and agreements with a total term exceeding one year, to purchase goods or services that are enforceable, legally binding, and where the significant terms and minimum purchase obligations are stipulated.
In addition, we enter into agreements in the normal course of business with vendors for research and development services and outsourced services, which are generally cancellable upon written notice. These payments are not included in this table of contractual obligations.
As part of our arrangement with Iveco, once we commence commercial production, we are obligated to pay Iveco a royalty of 1.0% on BEV truck revenues and 1.25% on FCEV truck revenues over a period of seven years. We have not included royalty payments with respect to the licensed Iveco technology in the table above as the timing and amount of such obligations are uncertain.
Off-Balance Sheet Arrangements
Since the date of incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments involve valuation of our stock-based compensation, including the fair value of
common stock and market-based restricted stock units, the valuation of warrant liabilities, the valuation of the redeemable convertible preferred stock tranche liability, estimates related to our lease assumptions, and contingent liabilities, including litigation reserves. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following accounting policies are most critical to understanding our financial condition and historical and future results of operations.
Stock-Based Compensation
We recognize the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. We recognize stock-based compensation costs and reverse previously recognized costs for unvested awards in the period forfeitures occur. We determine the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the following assumptions:
•Expected Term—We use the simplified method when calculating the expected term due to insufficient historical exercise data.
•Expected Volatility—As the Company's shares have limited history, the volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.
•Expected Dividend Yield—The dividend rate used is zero as we have never paid any cash dividends on common stock or Legacy Nikola common stock and do not anticipate doing so in the foreseeable future.
•Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.
Common Stock Valuations
The grant date fair value of Legacy Nikola common stock was determined by Legacy Nikola's board of directors with the assistance of management and an independent third-party valuation specialist. The grant date fair value of Legacy Nikola common stock was determined using valuation methodologies which utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability (Level 3 inputs). Based on our early stage of development and other relevant factors, we determined that an Option Pricing Model ("OPM") was the most appropriate method for allocating our enterprise value to determine the estimated fair value of Legacy Nikola common stock. Application of the OPM involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of future events. Specifically, we have historically used the OPM backsolve method to estimate the fair value of Legacy Nikola common stock, which derives the implied equity value for one type of equity security from a contemporaneous transaction involving another type of security, shares of our redeemable convertible preferred stock in this instance.
As of June 3, 2020, our stock is publicly traded and the fair value of our common stock is based on the closing price of our common stock on or around the date of grant.
Market-Based RSUs
The fair value of market based RSU awards is determined using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market condition stipulated in the award to calculate the fair value of the award. Significant judgment is required in determining the expected volatility of our common stock. Due to the limited history of trading of our common stock, we determined expected volatility based on a peer group of publicly traded companies.
Recent Accounting Pronouncements
Note 2 to our consolidated financial statements and notes thereto, contained elsewhere in this Annual Report on the Form 10-K, provides more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as well as risks to the availability of funding sources, hazard events, and specific asset risks.
Interest Rate Risk
The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, 2020, and 2019 we had cash and cash equivalents of $840.9 million and $85.7 million, respectively, consisting of interest-bearing money market accounts for which the fair market value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities and the low-risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents.
Foreign Currency Risk
For the year ended December 31, 2020, we recorded $0.8 million in foreign currency losses. There was no material foreign currency loss for the years ended December 31, 2019 or 2018.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Nikola Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Nikola Corporation (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with US generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
|
|
|
|
|
|
|
|
|
|
|
Valuation of Market Based Restricted Stock Units
|
|
|
|
Description of the matter
|
|
The grant date fair value of the Market Based Restricted Stock Units (“Market Based RSUs”) granted during the year ended December 31, 2020 totaled $485.1 million. As of December 31, 2020, the unrecognized compensation expense related to the Market Based RSUs totaled $283.0 million. The market condition underlying these Market Based RSUs is based upon achieving certain stock price thresholds over a period of time. As discussed in Notes 2 and 11 to the consolidated financial statements, the Market Based RSUs were valued using a Monte Carlo simulation model that utilized various assumptions, including volatility and risk free rate, to determine the probability of satisfying the market condition stipulated in the award to calculate the fair value of the award. The volatility assumption was the most critical assumption and had a significant effect on the grant date fair value of the Market Based RSUs and the correlated compensation expense. The volatility assumption was calculated using the historical volatilities of guideline public companies, which were selected based on the nature and similarity of their operations to that of the Company.
Auditing the Market Based RSUs was challenging due to the complexity of the Monte Carlo simulation model that considers thousands of simulation paths for stock price performance, as well as the highly judgmental nature of selecting the guideline public companies that determine the critical volatility assumption used in the calculation of the grant date fair value and the correlated recognition of compensation expense.
|
|
|
|
How we addressed the matter in our audit
|
|
To test the grant date fair value of the Market Based RSUs, our audit procedures included, among others, assessing the appropriateness of the use of the Monte Carlo simulation model and the underlying calculation, as well as testing the assumptions used to calculate the grant date fair value of the Market Based RSUs. We compared the risk free rate to readily available information as of the grant date. For the critical volatility assumption, we assessed the applicability of the guideline public companies used based on the nature of their business, compared the historical volatilities of the guideline public companies used in the estimate to actual historical results, and we developed an independent range of volatility. We involved our specialists to assist us with evaluating the Monte Carlo simulation model, as well as to perform comparative range calculations using the assumptions previously discussed.
|
/s/ Ernst & Young LLP
We have served the Company's auditor since 2018.
Phoenix, Arizona
February 25, 2021
NIKOLA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Assets
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
$
|
840,913
|
|
|
$
|
85,688
|
|
Restricted cash and cash equivalents
|
4,365
|
|
|
—
|
|
Accounts receivable, net
|
—
|
|
|
658
|
|
Prepaid in-kind services
|
46,271
|
|
|
—
|
|
Prepaid expenses and other current assets
|
5,368
|
|
|
4,535
|
|
Total current assets
|
896,917
|
|
|
90,881
|
|
Restricted cash and cash equivalents
|
4,000
|
|
|
4,144
|
|
Long-term deposits
|
17,687
|
|
|
13,276
|
|
Property and equipment, net
|
71,401
|
|
|
53,378
|
|
Intangible assets, net
|
50,050
|
|
|
62,513
|
|
Investment in affiliate
|
8,420
|
|
|
—
|
|
Goodwill
|
5,238
|
|
|
5,238
|
|
Total assets
|
$
|
1,053,713
|
|
|
$
|
229,430
|
|
Liabilities and stockholders' equity
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable
|
29,364
|
|
|
5,113
|
|
Accrued expenses and other current liabilities
|
18,809
|
|
|
11,425
|
|
Term note, current
|
4,100
|
|
|
—
|
|
Total current liabilities
|
52,273
|
|
|
16,538
|
|
Term note
|
—
|
|
|
4,100
|
|
Finance lease liabilities
|
13,956
|
|
|
—
|
|
Other long-term liabilities
|
—
|
|
|
12,212
|
|
Deferred tax liabilities, net
|
8
|
|
|
1,072
|
|
Total liabilities
|
66,237
|
|
|
33,922
|
|
Commitments and contingencies (Note 14)
|
|
|
|
Preferred stock, $0.0001 par value, 150,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020 and 2019
|
—
|
|
|
—
|
|
Stockholders' equity
|
|
|
|
Common stock, $0.0001 par value, 600,000,000 shares authorized, 391,041,347 and 270,826,092 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
39
|
|
|
27
|
|
Additional paid-in capital
|
1,560,820
|
|
|
383,961
|
|
Accumulated other comprehensive income
|
239
|
|
|
—
|
|
Accumulated deficit
|
(573,622)
|
|
|
(188,480)
|
|
Total stockholders' equity
|
987,476
|
|
|
195,508
|
|
Total liabilities and stockholders' equity
|
$
|
1,053,713
|
|
|
$
|
229,430
|
|
See accompanying notes to consolidated financial statements.
NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Solar revenues
|
$
|
95
|
|
|
$
|
482
|
|
|
$
|
173
|
|
Cost of solar revenues
|
72
|
|
|
271
|
|
|
50
|
|
Gross profit
|
23
|
|
|
211
|
|
|
123
|
|
Operating expenses:
|
|
|
|
|
|
Research and development
|
185,619
|
|
|
67,514
|
|
|
58,374
|
|
Selling, general, and administrative
|
182,724
|
|
|
20,692
|
|
|
12,238
|
|
Impairment expense
|
14,415
|
|
|
—
|
|
|
—
|
|
Total operating expenses
|
382,758
|
|
|
88,206
|
|
|
70,612
|
|
Loss from operations
|
(382,735)
|
|
|
(87,995)
|
|
|
(70,489)
|
|
Other income (expense):
|
|
|
|
|
|
Interest income, net
|
202
|
|
|
1,456
|
|
|
686
|
|
Revaluation of Series A redeemable convertible preferred stock warrant liability
|
—
|
|
|
(3,339)
|
|
|
3,502
|
|
Loss on forward contract liability
|
(1,324)
|
|
|
—
|
|
|
—
|
|
Other income (expense), net
|
(846)
|
|
|
1,373
|
|
|
6
|
|
Loss before income taxes and equity in net loss of affiliate
|
(384,703)
|
|
|
(88,505)
|
|
|
(66,295)
|
|
Income tax expense (benefit)
|
(1,026)
|
|
|
151
|
|
|
(2,002)
|
|
Loss before equity in net loss of affiliate
|
(383,677)
|
|
|
(88,656)
|
|
|
(64,293)
|
|
Equity in net loss of affiliate
|
(637)
|
|
|
—
|
|
|
—
|
|
Net loss
|
(384,314)
|
|
|
(88,656)
|
|
|
(64,293)
|
|
Premium paid on repurchase of redeemable convertible preferred stock
|
(13,407)
|
|
|
(16,816)
|
|
|
(166)
|
|
Net loss attributable to common stockholders, basic and diluted
|
$
|
(397,721)
|
|
|
$
|
(105,472)
|
|
|
$
|
(64,459)
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(1.19)
|
|
|
$
|
(0.40)
|
|
|
$
|
(0.28)
|
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
335,325,271
|
|
|
262,528,769
|
|
|
226,465,041
|
|
See accompanying notes to consolidated financial statements.
NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Net loss
|
(384,314)
|
|
|
(88,656)
|
|
|
(64,293)
|
|
Other comprehensive income:
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
239
|
|
|
—
|
|
|
—
|
|
Comprehensive loss
|
(384,075)
|
|
|
(88,656)
|
|
|
(64,293)
|
|
See accompanying notes to consolidated financial statements.
NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
Convertible
Preferred Stock
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated Other Comprehensive Income
|
|
Total
Stockholders' Equity
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance as of December 31, 2017
|
52,189,169
|
|
|
$
|
73,062
|
|
|
|
60,166,667
|
|
|
$
|
1
|
|
|
$
|
3,065
|
|
|
$
|
(34,272)
|
|
|
$
|
—
|
|
|
$
|
(31,206)
|
|
Retroactive application of recapitalization
|
(52,189,169)
|
|
|
(73,062)
|
|
|
|
153,421,743
|
|
|
20
|
|
|
73,042
|
|
|
—
|
|
|
—
|
|
|
73,062
|
|
Adjusted balance, beginning of period
|
—
|
|
|
—
|
|
|
|
213,588,410
|
|
|
21
|
|
|
76,107
|
|
|
(34,272)
|
|
|
—
|
|
|
41,856
|
|
Issuance of Series C redeemable convertible preferred stock, net of $7,000 issuance costs.(1)
|
—
|
|
|
—
|
|
|
|
47,801,632
|
|
|
5
|
|
|
208,995
|
|
|
—
|
|
|
—
|
|
|
209,000
|
|
Repurchase of Series B redeemable convertible preferred stock (1)
|
—
|
|
|
—
|
|
|
|
(983,699)
|
|
|
—
|
|
|
(4,166)
|
|
|
—
|
|
|
—
|
|
|
(4,166)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
3,843
|
|
|
—
|
|
|
—
|
|
|
3,843
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64,293)
|
|
|
—
|
|
|
(64,293)
|
|
Balance as of December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
|
260,406,343
|
|
|
$
|
26
|
|
|
$
|
284,779
|
|
|
$
|
(98,565)
|
|
|
$
|
—
|
|
|
$
|
186,240
|
|
Issuance of Series D redeemable convertible preferred stock, net of $4,700 issuance costs (1)
|
—
|
|
|
—
|
|
|
|
6,671,998
|
|
|
1
|
|
|
60,304
|
|
|
—
|
|
|
—
|
|
|
60,305
|
|
Issuance of Series D redeemable convertible preferred stock for in-kind contribution (1)
|
—
|
|
|
—
|
|
|
|
5,953,515
|
|
|
—
|
|
|
58,000
|
|
|
—
|
|
|
—
|
|
|
58,000
|
|
Exercise of Series A redeemable convertible preferred stock warrants (1)
|
—
|
|
|
—
|
|
|
|
1,368,720
|
|
|
—
|
|
|
6,116
|
|
|
—
|
|
|
—
|
|
|
6,116
|
|
Repurchase of Series B redeemable convertible preferred stock (1)
|
—
|
|
|
—
|
|
|
|
(3,575,750)
|
|
|
—
|
|
|
(30,259)
|
|
|
(1,097)
|
|
|
—
|
|
|
(31,356)
|
|
Exercise of stock options
|
—
|
|
|
—
|
|
|
|
1,266
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
4,858
|
|
|
—
|
|
|
—
|
|
|
4,858
|
|
Cumulative effect of ASU 2018-07 adoption
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
(162)
|
|
|
—
|
|
|
—
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88,656)
|
|
|
—
|
|
|
(88,656)
|
|
Balance as of December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
|
270,826,092
|
|
|
$
|
27
|
|
|
$
|
383,961
|
|
|
$
|
(188,480)
|
|
|
$
|
—
|
|
|
$
|
195,508
|
|
Issuance of Series D redeemable convertible preferred stock, net of $8,403 issuance costs (1)
|
—
|
|
|
—
|
|
|
|
6,581,340
|
|
1
|
|
56,249
|
|
|
—
|
|
|
—
|
|
|
56,250
|
Issuance of Series D redeemable convertible preferred stock for in kind contribution (1)
|
—
|
|
|
—
|
|
|
|
9,443,353
|
|
1
|
|
91,998
|
|
|
—
|
|
|
—
|
|
|
91,999
|
Business Combination and PIPE financing
|
—
|
|
|
—
|
|
|
|
72,272,942
|
|
7
|
|
616,213
|
|
|
—
|
|
|
—
|
|
|
616,220
|
Exercise of stock options
|
—
|
|
|
—
|
|
|
|
8,716,423
|
|
—
|
|
|
9,863
|
|
|
—
|
|
|
—
|
|
|
9,863
|
Issuance of shares for RSU awards
|
—
|
|
|
—
|
|
|
|
194,306
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
137,991
|
|
|
—
|
|
|
—
|
|
|
137,991
|
Common stock issued for warrants exercised
|
—
|
|
|
—
|
|
|
|
23,006,891
|
|
3
|
|
|
264,545
|
|
|
—
|
|
|
—
|
|
|
264,548
|
Cumulative effect of ASU 2016-02 adoption
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(828)
|
|
|
—
|
|
|
(828)
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(384,314)
|
|
|
—
|
|
|
(384,314)
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
239
|
|
|
239
|
|
Balance as of December 31, 2020
|
—
|
|
|
$
|
—
|
|
|
|
391,041,347
|
|
$
|
39
|
|
|
$
|
1,560,820
|
|
|
$
|
(573,622)
|
|
|
$
|
239
|
|
|
$
|
987,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Issuance of redeemable convertible preferred stock and convertible preferred stock warrants have been retroactively restated to give effect to the recapitalization transaction.
See accompanying notes to consolidated financial statements.
NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Cash flows from operating activities
|
|
|
|
|
|
Net loss
|
$
|
(384,314)
|
|
|
$
|
(88,656)
|
|
|
$
|
(64,293)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
6,008
|
|
|
2,323
|
|
|
625
|
|
Stock-based compensation
|
137,991
|
|
|
4,858
|
|
|
3,843
|
|
Non-cash interest income
|
—
|
|
|
—
|
|
|
(298)
|
|
Revaluation of Series A redeemable convertible preferred stock warrant liability
|
—
|
|
|
3,339
|
|
|
(3,502)
|
|
Deferred income taxes
|
(1,063)
|
|
|
151
|
|
|
(2,002)
|
|
Non-cash in-kind services
|
45,729
|
|
|
8,000
|
|
|
—
|
|
Loss on forward contract liability
|
1,324
|
|
|
—
|
|
|
—
|
|
Impairment expense
|
14,415
|
|
|
—
|
|
|
—
|
|
Equity in net loss of affiliate
|
637
|
|
|
—
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable, net
|
658
|
|
|
(763)
|
|
|
47
|
|
Prepaid expenses and other current assets
|
(1,586)
|
|
|
157
|
|
|
(2,588)
|
|
Accounts payable, accrued expenses and other current liabilities
|
29,668
|
|
|
(9,366)
|
|
|
15,121
|
|
Other long-term liabilities
|
—
|
|
|
(670)
|
|
|
(972)
|
|
Net cash used in operating activities
|
(150,533)
|
|
|
(80,627)
|
|
|
(54,019)
|
|
Cash flows from investing activities
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(350)
|
|
Issuance of related party note receivable
|
—
|
|
|
—
|
|
|
(2,500)
|
|
Purchases and deposits for property and equipment
|
(22,324)
|
|
|
(21,100)
|
|
|
(9,155)
|
|
Investments in affiliate
|
(8,817)
|
|
|
—
|
|
|
—
|
|
Cash paid towards build-to-suit lease
|
—
|
|
|
(18,202)
|
|
|
(3,405)
|
|
Net cash used in investing activities
|
(31,141)
|
|
|
(39,302)
|
|
|
(15,410)
|
|
Cash flows from financing activities
|
|
|
|
|
|
Proceeds from the exercise of Series A redeemable convertible preferred stock warrants
|
—
|
|
|
2,160
|
|
|
—
|
|
Repurchase of Series B redeemable convertible preferred stock from related parties, net of issuance costs paid
|
—
|
|
|
(31,356)
|
|
|
(1,368)
|
|
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs paid
|
—
|
|
|
—
|
|
|
209,000
|
|
Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs paid
|
50,349
|
|
|
65,000
|
|
|
—
|
|
Business Combination and PIPE financing, net of issuance costs paid
|
616,726
|
|
|
—
|
|
|
—
|
|
Proceeds from the exercise of stock options
|
9,650
|
|
|
1
|
|
|
—
|
|
Proceeds from the exercise of stock warrants, net of issuance costs paid
|
264,548
|
|
|
—
|
|
|
—
|
|
Proceeds from landlord on finance lease
|
889
|
|
|
—
|
|
|
—
|
|
Payments on finance lease liability
|
(1,042)
|
|
|
—
|
|
|
—
|
|
Proceeds from note payable
|
4,134
|
|
|
—
|
|
|
4,100
|
|
Payment of note payable
|
(4,134)
|
|
|
—
|
|
|
—
|
|
Net cash provided by financing activities
|
941,120
|
|
|
35,805
|
|
|
211,732
|
|
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents
|
759,446
|
|
|
(84,124)
|
|
|
142,303
|
|
Cash and cash equivalents, including restricted cash and cash equivalents, beginning of period
|
89,832
|
|
|
173,956
|
|
|
31,653
|
|
Cash and cash equivalents, including restricted cash and cash equivalents, end of period
|
$
|
849,278
|
|
|
$
|
89,832
|
|
|
$
|
173,956
|
|
Supplementary cash flow disclosures:
|
|
|
|
|
|
Cash paid for interest
|
$
|
884
|
|
|
$
|
96
|
|
|
$
|
96
|
|
Cash interest received
|
$
|
703
|
|
|
$
|
1,437
|
|
|
$
|
484
|
|
Cash paid for income taxes, net of refunds
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Supplementary disclosures for noncash investing and financing activities:
|
|
|
|
|
|
Non-cash interest received related to related party notes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
298
|
|
Non-cash settlement of related party note receivable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,500
|
|
Accrued purchases of property and equipment
|
$
|
6,751
|
|
|
$
|
1,094
|
|
|
$
|
1,781
|
|
Property acquired through build-to-suit lease
|
$
|
—
|
|
|
$
|
3,243
|
|
|
$
|
9,287
|
|
Non-cash acquisition of license
|
$
|
—
|
|
|
$
|
50,000
|
|
|
$
|
—
|
|
Non-cash Series C redeemable convertible preferred stock issuance costs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,001
|
|
Accrued Series D redeemable convertible preferred stock issuance costs
|
$
|
—
|
|
|
$
|
4,695
|
|
|
$
|
—
|
|
Non-cash prepaid in-kind services
|
$
|
46,271
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued Business Combination and PIPE transaction costs
|
$
|
285
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net liabilities assumed by VectoIQ
|
$
|
221
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Settlement of forward contract liability
|
$
|
1,324
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Stock option proceeds receivable
|
$
|
213
|
|
|
$
|
—
|
|
|
$
|
—
|
|
See accompanying notes to consolidated financial statements.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Nikola Corporation (‘‘Nikola’’ or the ‘‘Company’’) is a designer and manufacturer of battery electric and hydrogen-electric vehicles.
On June 3, 2020 (the "Closing Date"), VectoIQ Acquisition Corp. ("VectoIQ"), consummated the previously announced merger pursuant to the Business Combination Agreement, dated March 2, 2020 (the "Business Combination Agreement"), by and among VectoIQ, VCTIQ Merger Sub Corp., a wholly-owned subsidiary of VectoIQ incorporated in the State of Delaware ("Merger Sub"), and Nikola Corporation, a Delaware corporation ("Legacy Nikola"). Pursuant to the terms of the Business Combination Agreement, a business combination between the Company and Legacy Nikola was effected through the merger of Merger Sub with and into Legacy Nikola, with Legacy Nikola surviving as the surviving company and as a wholly-owned subsidiary of VectoIQ (the "Business Combination").
On the Closing Date, and in connection with the closing of the Business Combination, VectoIQ changed its name to Nikola Corporation (the "Company" or "Nikola"). Legacy Nikola was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification ("ASC") 805. This determination was primarily based on Legacy Nikola's stockholders prior to the Business Combination having a majority of the voting interests in the combined company, Legacy Nikola's operations comprising the ongoing operations of the combined company, Legacy Nikola's board of directors comprising a majority of the board of directors of the combined company, and Legacy Nikola's senior management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Nikola issuing stock for the net assets of VectoIQ, accompanied by a recapitalization. The net assets of VectoIQ are stated at historical cost, with no goodwill or other intangible assets recorded.
While VectoIQ was the legal acquirer in the Business Combination, because Legacy Nikola was deemed the accounting acquirer, the historical financial statements of Legacy Nikola became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Nikola prior to the Business Combination; (ii) the combined results of the Company and Legacy Nikola following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Nikola at their historical cost; and (iv) the Company’s equity structure for all periods presented.
In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company's common stock, $0.0001 par value per share issued to Legacy Nikola's stockholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Nikola redeemable convertible preferred stock and Legacy Nikola common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination Agreement. Activity within the statement of stockholders' equity for the issuances and repurchases of Legacy Nikola's redeemable convertible preferred stock, were also retroactively converted to Legacy Nikola common stock.
(a)Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and pursuant to the regulations of the U.S. Securities and Exchange Commission ("SEC").
Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes.
All dollar amounts are in thousands, unless otherwise noted. Share and per share amounts are presented on a post-conversion basis for all periods presented, unless otherwise noted.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
(b)Funding Risks and Going Concern
As an early stage growth company, Nikola's ability to access capital is critical. Management plans to raise additional capital through a combination of equity and debt financing, including lease securitization.
Additional stock financing may not be available on favorable terms and could be dilutive to current stockholders. Debt financing, if available, may involve restrictive covenants and dilutive financing instruments.
The Company's ability to access capital when needed is not assured and, if capital is not available to the Company when, and in the amounts needed, the Company could be required to delay, scale back, or abandon some or all of its development programs and other operations, which could materially harm the Company's business, financial condition and results of operations.
These financial statements have been prepared by management in accordance with GAAP and this basis assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. These financial statements do not include any adjustments that may result from the outcome of this uncertainty.
As of the date of this report, the Company's existing cash resources and existing borrowing availability are sufficient to support planned operations for the next 12 months. As a result, management believes that the Company's existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated.
(b)Comprehensive Loss
Comprehensive loss includes all changes in equity during a period from non-owner sources. Other comprehensive income is comprised of currency translation adjustments relating to the Company's equity method investment whose functional currency is not the U.S. dollar.
(c)Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. The Company's most significant estimates and judgments involve valuation of the Company's stock-based compensation, including the fair value of common stock and market-based restricted stock units, the valuation of warrant liabilities, the valuation of the redeemable convertible preferred stock tranche liability, estimates related to the Company's lease assumptions, and contingent liabilities, including litigation reserves. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
(d)Segment Information
Under ASC 280, Segment Reporting, operating segments are defined 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 has two components, the Truck business unit and Energy business unit. The Truck business unit is developing and commercializing hydrogen-electric and battery-electric semi-trucks that provide environmentally friendly, cost effective solutions to the trucking sector. The Energy business unit is developing and constructing a network of hydrogen fueling stations to meet hydrogen fuel demand for its customers. To date, the Company has not entered into production for the above-mentioned business units. Therefore, the Company's chief executive officer, who
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
is also the CODM, makes decisions and manages the Company's operations as a single operating and reportable segment for purposes of allocating resources and evaluating financial performance.
(e)Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, and restricted cash and cash equivalents. The Company's cash is placed with high-credit-quality financial institutions and issuers, and at times exceeds federally insured limits. The Company limits its concentration of risk in cash equivalents by diversifying its investments among a variety of industries and issuers. The Company has not experienced any credit loss relating to its cash equivalents.
(f)Concentration of Supplier Risk
The Company is not currently in the production stage and generally utilizes suppliers for outside development and engineering support. The Company does not believe that there is any significant supplier concentration risk during the years ended December 31, 2020, 2019, or 2018.
(g)JOBS Act Accounting Election
Prior to December 31, 2020, the Company was an emerging growth company under the JOBS Act, and as a result was eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. However, as the Company satisfies the definition of a “large accelerated filer” under the definition of the Securities Exchange Act of 1934, as amended, it no longer qualifies as an emerging growth company as of December 31, 2020. Therefore the Company is no longer able to take advantage of the extended transition period for adopting new or revised accounting standards.
(h)Cash, Cash Equivalents and Restricted Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Additionally, the Company considers investments in money market funds with a floating net asset value to be cash equivalents. As of December 31, 2020 and 2019 the Company had $840.9 million and $85.7 million of cash and cash equivalents, which included cash equivalents of $827.1 million and $73.0 million highly liquid investments at December 31, 2020 and 2019, respectively.
As of December 31, 2020 and 2019, the Company had $4.1 million in an escrow account related to the securitization of the term loan with JP Morgan Chase included in restricted cash and cash equivalents. Additionally, as of December 31, 2020 and 2019, the Company had $4.0 million and zero, respectively, included in non-current restricted cash and cash equivalents for the required deposit to Pinal Land Holdings, LLC ("PLH") during construction of the manufacturing facility in Coolidge, Arizona. Further, as of December 31, 2020 and 2019, the Company had $0.3 million and zero, respectively, in refundable customer deposits included in current restricted cash and cash equivalents.
The reconciliation of cash and cash equivalents and restricted cash and cash equivalents to amounts presented in the consolidated statements of cash flows are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Cash and cash equivalents
|
$
|
840,913
|
|
|
$
|
85,688
|
|
Restricted cash—current
|
4,365
|
|
|
—
|
|
Restricted cash and cash equivalents—non-current
|
4,000
|
|
|
4,144
|
|
Cash, cash equivalents and restricted cash and cash equivalents
|
$
|
849,278
|
|
|
$
|
89,832
|
|
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i)Fair Value of Financial Instruments
The carrying value of the Company's current assets and current liabilities approximate their fair value based on the short-term nature of those instruments. The following table summarizes the Company's financial instruments, measured on a recurring basis, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents—money market
|
$
|
827,118
|
|
|
—
|
|
|
—
|
|
|
$
|
827,118
|
|
Restricted cash equivalents—money market
|
4,100
|
|
|
—
|
|
|
—
|
|
|
4,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents—money market
|
$
|
73,005
|
|
|
—
|
|
|
—
|
|
|
$
|
73,005
|
|
Restricted cash equivalents—money market
|
4,144
|
|
|
—
|
|
|
—
|
|
|
4,144
|
|
During 2020, 2019 and 2018, the Company recognized zero, a $3.3 million loss, and a $3.5 million gain, respectively, as a component of other income (expense) on the consolidated statements of operations for the remeasurement of the Series A redeemable convertible preferred stock warrant liability. As of December 31, 2019, all Series A redeemable convertible preferred stock warrants were exercised, upon which time the Company reclassified the warrant liability to additional paid-in capital on the consolidated balance sheet.
The following table provides a reconciliation of the ending balances for the Series A redeemable convertible preferred stock warrant liability measured at fair value:
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock Warrant Liability
|
Estimated fair value at December 31, 2018
|
$
|
617
|
|
Change in estimated fair value
|
3,339
|
|
Exercise of Series A redeemable convertible preferred stock warrants
|
(3,956)
|
|
Estimated fair value at December 31, 2019
|
$
|
—
|
|
The following table represents the significant unobservable inputs used in determining the fair value of the redeemable convertible preferred stock warrant liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Risk-free interest rate
|
N/A
|
|
1.48% - 2.41%
|
|
2.63%
|
Expected term (in years)
|
N/A
|
|
0 - 0.75
|
|
1
|
Expected dividend yield
|
N/A
|
|
—
|
|
—
|
Expected volatility
|
N/A
|
|
70%
|
|
70%
|
In September 2019, Legacy Nikola entered into an agreement that required Legacy Nikola to issue, and the investor to purchase, Series D redeemable convertible preferred stock at a fixed price in April 2020 (the “Forward Contract Liability”), which was accounted for as a liability. The liability was remeasured to its fair value each reporting period and at settlement, which occurred in April 2020 with the issuance of Series D redeemable convertible preferred stock. The change in fair value
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
was recognized in other income (expense) on the consolidated statements of operations. The change in fair value of the Forward Contract Liability was as follows:
|
|
|
|
|
|
|
Forward Contract Liability
|
Estimated fair value at December 31, 2019
|
$
|
—
|
|
Change in estimated fair value
|
1,324
|
|
Settlement of forward contract liability
|
(1,324)
|
|
Estimated fair value at December 31, 2020
|
$
|
—
|
|
In determining the fair value of the Forward Contract Liability, estimates and assumptions impacting fair value included the estimated future value of the Company's Series D redeemable convertible preferred stock, discount rates and estimated time to liquidity. The following reflects the significant quantitative inputs used:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
April 10, 2020
|
|
December 31, 2019
|
Estimated future value of Series D redeemable convertible preferred stock
|
$
|
10.00
|
|
|
$
|
9.74
|
|
Discount rate
|
—
|
%
|
|
1.56
|
%
|
Time to liquidity (years)
|
0
|
|
0.3
|
(j)Investments
Variable Interest Entities
The Company may enter into investments in entities that are considered variable interest entities ("VIE") under ASC 810. A VIE is an entity that has either insufficient equity to permit the entity to finance its activities without additional subordinated financial support or equity investors who lack the characteristics of a controlling financial interest. If the Company is a primary beneficiary of a VIE, it is required to consolidate the entity. To determine if the Company is the primary beneficiary of a VIE, the Company evaluates whether it has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the Company. If the Company is not the primary beneficiary and an ownership interest is held in the entity, the interest is accounted for under the equity method of accounting. The Company continuously assesses whether it is the primary beneficiary of a VIE as changes to existing relationships or future transactions may result in changing conclusions.
Equity Method
Investments in which the Company can exercise significant influence, but do not control, are accounted for using the equity method and are presented on the consolidated balance sheets. The Company’s share of the net earnings or losses of the investee is presented within the consolidated statements of operations. The Company evaluates its equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. Distributions received from equity method investees are presented in the consolidated statements of cash flows based on the cumulative earnings approach, whereby distributions received from equity method investments are classified as cash flows
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
from operations to the extent of equity earnings and then as cash flows from investing activities thereafter. Refer to Note 7, Investments, for further discussion.
(k)Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Repair and maintenance costs are expensed as incurred. Depreciation is recorded on a straight-line basis over each asset's estimated useful life.
|
|
|
|
|
|
Property and Equipment
|
Useful life
|
Machinery and equipment
|
5 - 20 years
|
Furniture and fixtures
|
7 years
|
Leasehold improvements
|
Shorter of useful life or lease term
|
Software
|
3 years
|
Building
|
12 years
|
(l)Leases
The Company determines if an arrangement is or contains a lease at inception. This determination depends on whether the arrangement conveys the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the right to direct the use of and obtains substantially all of the economic benefits from using the underlying asset. The Company classifies leases with contractual terms greater than 12 months as either operating or finance.
Lease liabilities are recognized based on the present value of lease payments, reduced by lease incentives, at the lease commencement date. The Company uses an incremental borrowing rate to determine the present value of lease payments as the rate implicit in the lease is generally not readily determinable. The Company's incremental borrowing rate is the rate of interest that it would have to pay to borrow an amount equal to the lease payments, on a collateralized basis and in a similar economic environment over a similar term.
Lease assets are recognized based on the related lease liabilities, plus any prepaid lease payments and initial direct costs from executing the leasing arrangement. The lease term includes the base, non-cancelable lease term, and any options to extend or terminate the lease when it is reasonably certain, at commencement, that the Company will exercise such options.
Finance lease assets are amortized on a straight-line basis over the shorter of the estimated useful life of the assets or the lease term. The interest component of a finance lease is included in “Interest income, net” and recognized using the effective interest method over the lease term. Leases with terms of less than 12 months at commencement are expensed on a straight-line basis over the lease term in accordance with the short-term lease practical expedient under ASC 842. The Company has also elected the practical expedient under ASC 842 to not separate lease and non-lease components within a leasing arrangement. Non-lease components primarily include payments for maintenance and utilities. The Company has elected to apply both of these practical expedients to its current classes of underlying lease assets.
Variable payments related to a lease are expensed as incurred. These costs often relate to payments for real estate taxes, insurance, common area maintenance, and other operating costs in addition to base rent.
As of December 31, 2020, the Company's only leasing arrangement with a term greater than 12 months was for the Company's headquarters in Phoenix, Arizona. This leasing arrangement was previously classified as a built-to-suit arrangement, for which construction had been completed prior to the adoption of ASC 842, effective January 1, 2020. For purposes of applying ASC 842’s transition provisions, the Company elected to first assess lease classification for the arrangement at lease inception under previous lease accounting guidance (ASC 840), and then apply ASC 842’s transition provisions based on those assessments. The Company derecognized the assets and liabilities associated with the built-to-suit arrangement for transitional purposes and recognized a finance lease asset and finance lease liability pursuant to the classification designation determined in the ASC 840 reassessment. The finance lease asset is included in "Property and equipment, net" and the short and long-term
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
portions of finance lease liabilities are included in "Accrued expenses and other current liabilities" and "Finance lease liabilities", respectively, in the consolidated balance sheets. See Note 5, Leases, for additional discussion.
(m)Goodwill
The Company records goodwill when consideration paid in a purchase acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. The Company has determined that there is a single reporting unit for the purpose of the goodwill impairment test, which is performed annually. For purposes of assessing the impairment of goodwill, the Company performs a qualitative analysis on December 31, each year to determine if events or changes in circumstances indicate the fair value of the reporting unit is less than its carrying value.
Factors considered which could trigger a further impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets, the Company's overall business strategy, and significant industry or macroeconomic trends. If the qualitative analysis indicates that the carrying value of the asset may not be recoverable based on the existence of one or more of the above indicators, recoverability is determined by comparing the carrying amount of the asset to net future undiscounted cash flows that the asset is expected to generate. An impairment charge would then be recognized equal to the amount by which the carrying amount exceeds the fair-market value of the asset.
There was no impairment of goodwill for the years ended December 31, 2020, 2019 and 2018.
(n)Intangible Assets with Indefinite Useful Lives
The Company's prior acquisitions have resulted in value assigned to in-process R&D related to the Company's Powersports business unit. In-process R&D has an indefinite useful life until completion or abandonment of the associated R&D efforts. If abandoned, the assets would be impaired. If the activities are completed, a determination is made regarding the useful lives of the assets and the methods of amortization.
The Company is required to test its in-process R&D assets for impairment annually using the guidance for indefinite-lived intangible assets. The Company's impairment evaluation consists of first assessing qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the in-process R&D asset is impaired. Factors considered which could trigger a further impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets, the Company's overall business strategy, and significant industry or macroeconomic trends. If it is more likely than not that the asset is impaired, the Company determines the fair value of the in-process R&D asset and records an impairment charge if the carrying amount exceeds the fair value.
During the fourth quarter of 2020, the Company ceased operations related to the Powersports business unit in order to focus on the Company's primary mission of commercial production of semi-trucks and construction of hydrogen fueling stations. All employees in the Powersports business unit were transferred to the Truck and Energy business units within the Company. As a result, the Company recorded impairment expense related to its in-process R&D during 2020. There was no impairment of indefinite-lived intangible assets for the years ended December 31, 2019 and 2018. See Note 6, Intangible Assets, Net, for further discussion.
For intangible assets acquired in a non-monetary exchange, the estimated fair value of the shares transferred are used to establish their recorded values.
External costs incurred to renew or extend the term of the identifiable intangible assets are capitalized and amortized over the estimated useful life.
(o)Long-Lived Assets and Finite Lived Intangibles
The Company has finite lived intangible assets consisting of licenses and tradenames. These assets are amortized on a straight-line basis over their estimated remaining economic lives. Trademarks are amortized over twelve years and included in research and development expense, or selling, general, and administrative expense within the consolidated statements of
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
operations. Licenses are amortized over five to seven years and included in selling, general, and administrative expense within the consolidated statements of operations.
The Company reviews its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The events and circumstances the Company monitors and considers include significant decreases in the market price of similar assets, significant adverse changes to the extent and manner in which the asset is used, an adverse change in legal factors or business climate, an accumulation of costs that exceed the estimated cost to acquire or develop a similar asset, and continuing losses that exceed forecasted costs. The Company assesses the recoverability of these assets by comparing the carrying amount of such assets or asset group to the future undiscounted cash flow it expects the assets or asset group to generate. The Company recognizes an impairment loss if the sum of the expected long-term undiscounted cash flows that the long-lived asset is expected to generate is less than the carrying amount of the long-lived asset being evaluated. An impairment charge would then be recognized equal to the amount by which the carrying amount exceeds the fair value of the asset.
During the fourth quarter of 2020, the Company ceased use of its Powersports business unit and recorded an impairment charge for certain of its long-lived assets and finite lived intangibles related to the Powersports business unit for the year ended December 31, 2020. There was no impairment of long-lived assets for the years ended December 31, 2019 and 2018. See Note 4, Balance Sheet Components, and Note 6, Intangible Assets, Net, for further discussion.
(p)Income Taxes
The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company's lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance as of December 31, 2020 and 2019. Uncertain tax positions taken or expected to be taken in a tax return are accounted for using the more likely than not threshold for financial statement recognition and measurement.
(q)Stock-based Compensation
The Company recognizes the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. The Company recognizes stock-based compensation cost and reverses previously recognized costs for unvested awards in the period forfeitures occur. The Company determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the fair value of common stock, expected price volatility of common stock, expected term, risk-free interest rates, and expected dividend yield. The fair value of restricted stock unit ("RSU") awards is determined using the closing price of the Company's common stock on the grant date. The fair value of market based RSU awards ("Market Based RSUs") is determined using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market condition stipulated in the award to calculate the fair value of the award.
(r)Redeemable Convertible Preferred Stock Warrant Liability
The Company has issued freestanding warrants to purchase shares of its Series A redeemable convertible preferred stock that are classified outside of permanent equity. As such these warrants were recorded at fair value, and subject to remeasurement at each balance sheet date until the earlier of the exercise of the warrants or the completion of a liquidation event, including the completion of an initial public offering. Upon exercise, the redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital.
(s)Revenue Recognition
To date, the Company's revenues are derived from solar installation services, which are generally completed in less than one year. Solar installation projects are not part of the Company's primary operations and were concluded in 2020.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company's customer contracts contain a single performance obligation, which is the solar installation service. The transaction price in the Company's customer contracts is fixed. Revenue for solar installation contracts is generally recognized over time as the services are rendered to the customer based on the extent of progress towards completion of the performance obligation. Under this method, progress of contracts is measured by actual costs incurred in relation to the Company's best estimate of total estimated costs, which are reviewed and updated routinely for contracts in progress. The cumulative effect of any change in estimate is recorded in the period when the change in estimate is determined.
(t)Cost of Solar Revenues
Cost of solar revenues includes materials, labor, and other direct costs related to solar installation projects. The Company recognizes cost of solar revenues in the period that revenues are recognized. Solar installation projects are not part of the Company's primary operations and were concluded in 2020.
(u)Research and Development Expense
Research and development expense consist of outsourced engineering services, allocated facilities costs, depreciation, internal engineering and development expenses, materials, labor and stock-based compensation related to development of the Company's products and services. Research and development costs are expensed as incurred.
(v)Selling, General, and Administrative Expense
Selling, general, and administrative expense consist of personnel costs, allocated facilities expenses, depreciation and amortization, travel, and advertising costs.
Advertising expense is expensed as incurred and was $0.7 million, $2.5 million and $0.2 million for the years ended December 31, 2020, 2019, and 2018, respectively.
(w)Other Income (Expense)
Other income (expense) consist of grant income received from the government, foreign currency gains and losses, and unrealized gains and losses on investments. Grant income is recognized as income over the periods necessary to match the income on a systematic basis to the costs that it is intended to compensate. For the year ended December 31, 2020, the Company recognized $0.8 million of foreign currency losses. For the years ended December 31, 2019 and 2018, foreign currency gains and losses were immaterial.
(x)Net Loss Per Share
Basic net loss per share of common stock attributable to common shareholders is calculated by dividing net loss attributable to common shareholders by the weighted-average shares of common stock outstanding for the period.
As the Company has reported losses for all periods presented, all potentially dilutive securities including stock options, restricted stock units and warrants, are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.
(y)Recent Accounting Pronouncements
In December 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the effects of this pronouncement on the Company's consolidated financial statements and does not expect it to have a material impact on the consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments – Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. ASU 2020-01 is effective for fiscal years
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently in the process of evaluating the effects of this pronouncement on the Company’s consolidated financial statements and does not expect it to have a material impact on the consolidated financial statements.
(z)Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In July 2018, ASU 2018-10, Codification Improvements to Topic 842, Leases, was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.
Until December 31, 2020, the Company was an emerging growth company as defined by the JOBS Act and previously disclosed that these amendments would become effective for interim and annual periods beginning January 1, 2021. However, this ASU instead became effective for the Company in this Annual Report on Form 10-K for the fiscal year ended December 31, 2020, with an effective date of January 1, 2020, as it no longer qualifies as an emerging growth company as of December 31, 2020. The adoption of this standard resulted in the recognition of a finance lease asset and finance lease liability of $34.8 million and $16.0 million, respectively. In addition, the Company recognized a $0.8 million cumulative effect adjustment to accumulated deficit driven by derecognition of net assets and lease obligations of $32.4 million and $12.8 million, respectively, related to the Company's lease that was previously classified as build-to-suit. The adoption of this standard did not have a material impact on the consolidated statements of operations nor the consolidated statements of cash flows. See Note 5, Leases, for further discussion of the adoption of ASC 842 and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which, together with subsequent amendments, amends the requirement on the measurement and recognition of expected credit losses for financial assets held. The Company adopted the ASU in the current period and the ASU did not have a material impact on the consolidated financial statements.
3. BUSINESS COMBINATIONS
On June 3, 2020, the Company and VectoIQ consummated the merger contemplated by the Business Combination Agreement, with Legacy Nikola surviving the merger as a wholly-owned subsidiary of VectoIQ. Immediately prior to the closing of the Business Combination, all shares of outstanding redeemable convertible preferred stock of Legacy Nikola were automatically converted into shares of the Company's common stock. Upon the consummation of the Business Combination, each share of Legacy Nikola common stock issued and outstanding was canceled and converted into the right to receive 1.901 shares (the "Exchange Ratio") of the Company's common stock (the "Per Share Merger Consideration").
Upon the closing of the Business Combination, VectoIQ's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 750,000,000 shares, of which 600,000,000 shares were designated common stock, $0.0001 par value per share, and of which 150,000,000 shares were designated preferred stock, $0.0001 par value per share.
In connection with the execution of the Business Combination Agreement, VectoIQ entered into separate subscription agreements (each, a "Subscription Agreement") with a number of investors (each a "Subscriber"), pursuant to which the Subscribers agreed to purchase, and VectoIQ agreed to sell to the Subscribers, an aggregate of 52,500,000 shares of the Company's common stock (the "PIPE Shares"), for a purchase price of $10.00 per share and an aggregate purchase price of $525.0 million, in a private placement pursuant to the subscription agreements (the "PIPE"). The PIPE investment closed simultaneously with the consummation of the Business Combination.
Prior to the closing of the Business Combination, Legacy Nikola repurchased 2,850,930 shares of Legacy Nikola's Series B redeemable convertible preferred stock at the price of $8.77 per share for an aggregate purchase price of $25.0 million pursuant to a Series B preferred stock repurchase agreement (the "Repurchase Agreement") with Nimbus Holdings LLC ("Nimbus").
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
3. BUSINESS COMBINATIONS (Continued)
The repurchase is retrospectively adjusted in the consolidated statements of stockholders' equity to reflect the Company’s equity structure for all periods presented.
Immediately following the Business Combination, pursuant to a redemption agreement, Nikola redeemed 7,000,000 shares of common stock from M&M Residual, LLC at a purchase price of $10.00 per share. See Note 8, Related Party Transactions, for further details on the transaction.
The Business Combination is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, VectoIQ was treated as the "acquired" company for financial reporting purposes. See Note 1, Description of Business and Basis of Presentation, for further details. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Nikola issuing stock for the net assets of VectoIQ, accompanied by a recapitalization. The net assets of VectoIQ are stated at historical cost, with no goodwill or other intangible assets recorded.
Prior to the Business Combination, Legacy Nikola and VectoIQ filed separate standalone federal, state and local income tax returns. As a result of the Business Combination, structured as a reverse acquisition for tax purposes, Legacy Nikola, which was renamed Nikola Subsidiary Corporation in connection with the Business Combination (f/k/a Nikola Corporation), became the parent of the consolidated filing group, with Nikola Corporation (f/k/a VectoIQ Acquisition Corp.) as a subsidiary.
The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of changes in equity for the period ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization
|
Cash - VectoIQ's trust and cash (net of redemptions)
|
|
|
$
|
238,358
|
|
Cash - PIPE
|
|
|
525,000
|
|
Less: transaction costs and advisory fees paid
|
|
|
(51,210)
|
|
Less: VectoIQ loan payoff in conjunction with close
|
|
|
(422)
|
|
Less: M&M Residual redemption
|
|
|
(70,000)
|
|
Less: Nimbus repurchase
|
|
|
(25,000)
|
|
Net Business Combination and PIPE financing
|
|
|
616,726
|
|
Less: non-cash net liabilities assumed from VectoIQ
|
|
|
(221)
|
|
Less: accrued transaction costs and advisory fees
|
|
|
(285)
|
|
Net contributions from Business Combination and PIPE financing
|
|
|
$
|
616,220
|
|
The number of shares of common stock issued immediately following the consummation of the Business Combination:
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
3. BUSINESS COMBINATIONS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
Common stock, outstanding prior to Business Combination
|
|
22,986,574
|
|
Less: redemption of VectoIQ shares
|
|
(2,702)
|
|
Common stock of VectoIQ
|
|
22,983,872
|
|
VectoIQ Founder Shares
|
|
6,640,000
|
|
Shares issued in PIPE
|
|
52,500,000
|
|
Less: M&M Residual redemption
|
|
(7,000,000)
|
|
Less: Nimbus repurchase
|
|
(2,850,930)
|
|
Business Combination and PIPE financing shares
|
|
72,272,942
|
|
Legacy Nikola shares (1)
|
|
288,631,536
|
|
Total shares of common stock immediately after Business Combination
|
|
360,904,478
|
|
|
|
|
(1) The number of Legacy Nikola shares was determined from the 151,831,441 shares of Legacy Nikola common stock outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio of 1.901. All fractional shares were rounded down.
4. BALANCE SHEET COMPONENTS
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at December 31, 2020 and 2019, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Materials and supplies
|
$
|
—
|
|
|
$
|
1,872
|
|
Prepaid expenses and other current assets
|
5,368
|
|
|
2,663
|
|
Total prepaid expenses and other current assets
|
$
|
5,368
|
|
|
$
|
4,535
|
|
For the years ended December 31, 2020 and 2019, the Company expensed $1.9 million and zero, respectively, of materials and supplies previously reflected in other current assets to research and development.
As of December 31, 2020 and 2019, prepaid expenses and other current assets included $0.5 million and zero, respectively, of capitalized cloud computing implementation costs related to the Company's enterprise resource planning software.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
4. BALANCE SHEET COMPONENTS (Continued)
Property and Equipment
Property and equipment consist of the following at December 31, 2020 and 2019, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Machinery and equipment
|
$
|
14,820
|
|
|
$
|
13,483
|
|
Furniture and fixtures
|
1,480
|
|
|
1,228
|
|
Leasehold improvements
|
1,488
|
|
|
1,437
|
|
Software
|
4,285
|
|
|
1,909
|
|
Building
|
—
|
|
|
33,248
|
|
Finance lease asset
|
34,775
|
|
|
—
|
|
Construction-in-progress
|
21,218
|
|
|
4,264
|
|
Other
|
1,750
|
|
|
1,309
|
|
Property and equipment, gross
|
79,816
|
|
|
56,878
|
|
Less: accumulated depreciation and amortization
|
(8,415)
|
|
|
(3,500)
|
|
Total property and equipment, net
|
$
|
71,401
|
|
|
$
|
53,378
|
|
Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $6.0 million, $2.3 million and $0.6 million, respectively.
For the year ended December 31, 2020, the Company expensed $2.0 million of construction-in-progress and machinery and equipment, net of accumulated depreciation, to impairment expense on the consolidated statements of operations. These assets were related to the Powersports business unit whose operations ceased in the fourth quarter of 2020. The Company had no impairment expense for the years ended December 31, 2019 and 2018.
Deposits on equipment are classified from long-term deposits to property and equipment upon receipt or transfer of title of the related equipment.
During the year ended December 31, 2019, the Company was conveyed 430 acres of land in the City of Coolidge, Arizona at no cost. See Note 14, Commitments and Contingencies, for additional information regarding the land conveyance.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at December 31, 2020 and 2019, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Accrued payroll and payroll related expenses
|
$
|
1,105
|
|
|
$
|
1,385
|
|
Accrued stock issuance costs
|
285
|
|
|
4,695
|
|
Accrued outsourced engineering services
|
2,514
|
|
|
3,205
|
|
Accrued purchases of property and equipment
|
2,533
|
|
|
433
|
|
Accrued legal expenses
|
8,845
|
|
|
243
|
|
Other accrued expenses
|
2,457
|
|
|
804
|
|
Current portion of finance lease liability
|
1,070
|
|
|
—
|
|
Current portion of BTS lease financing liability
|
—
|
|
|
660
|
|
Total accrued expenses and other current liabilities
|
$
|
18,809
|
|
|
$
|
11,425
|
|
5. LEASES
ASC 842 Disclosures
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
5. LEASES (Continued)
In February 2018, the Company entered into a non-cancellable lease agreement and purchase option for a headquarters and R&D facility in Phoenix, Arizona. The lease commenced in September 2018, and continues for 11.75 years with the option to extend the lease for two additional five-year periods. During the first 36 months of the lease, the Company has the option to purchase the building for a price of between $23.7 million and $25.1 million depending on the time of the purchase from the lease commencement. The Company's lease does not contain significant restrictive provisions nor residual value guarantees.
The following table summarizes the effects of finance lease costs in the Company's consolidated statements of operations for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations Caption
|
|
Year Ended
|
|
December 31, 2020
|
Selling, general and administrative
|
|
1,937
|
|
Research and development
|
|
1,375
|
|
Interest expense
|
|
782
|
|
Total finance lease cost
|
|
4,094
|
|
Variable lease costs were not included in the measurement of the finance lease liability and primarily include property taxes, property insurance and common area maintenance expenses. The following table summarizes variable lease costs in the Company's consolidated statements of operations for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations Caption
|
|
Year Ended
|
|
December 31, 2020
|
Selling, general and administrative
|
|
435
|
|
Research and development
|
|
309
|
|
Total variable lease costs
|
|
744
|
|
Supplemental balance sheet information related to the lease was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
As of
|
|
|
|
December 31, 2020
|
Assets
|
|
|
|
|
Finance lease asset
|
|
Property and equipment, net
|
|
31,463
|
|
Total lease assets
|
|
|
|
31,463
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
|
|
Accrued expenses and other current liabilities
|
|
1,070
|
|
Non-current
|
|
Finance lease liabilities
|
|
13,956
|
|
Total lease liabilities
|
|
|
|
15,026
|
|
As of December 31, 2020, the remaining lease term of the Company's finance lease was 9.5 years and the discount rate was 5.0%.
For the year ended December 31, 2020, operating cash flows included $0.8 million in cash paid for amounts included in the measurement of lease liabilities.
Maturities of the Company's finance lease liability was as follows:
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
5. LEASES (Continued)
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Lease Payments
|
2021
|
|
$
|
1,797
|
|
2022
|
|
1,851
|
|
2023
|
|
1,905
|
|
2024
|
|
1,959
|
|
2025
|
|
2,013
|
|
Thereafter
|
|
9,532
|
|
Total lease payments
|
|
$
|
19,057
|
|
Less: imputed interest
|
|
4,031
|
|
Total lease liabilities
|
|
$
|
15,026
|
|
Less: current portion
|
|
1,070
|
|
Long-term lease liabilities
|
|
$
|
13,956
|
|
The Company has elected to exclude leases with terms less than 12 months in the measurement of the lease liability on the consolidated balance sheets under the short-term lease exclusion. For the year ended December 31, 2020, the Company expensed an immaterial amount to research and development on the consolidated statements of operations for leases with terms less than 12 months.
Disclosures related to periods prior to adoption of ASC 842:
The future minimum lease payments over the term of the Company's lease as of December 31, 2019 was as follows:
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Lease Payments
|
2020
|
|
$
|
1,739
|
|
2021
|
|
1,792
|
|
2022
|
|
1,846
|
|
2023
|
|
1,900
|
|
2024
|
|
1,954
|
|
Thereafter
|
|
11,712
|
|
Total
|
|
$
|
20,943
|
|
In June 2018, the Company began construction on several significant building expansion and improvement projects in-order to meet the Company's requirements. Construction on the Company's headquarters was substantially completed in the third quarter of 2019 and the related asset was placed in service in September 2019.
Because the Company was involved in certain aspects of the construction per the terms of the lease, the Company was deemed the owner of the building for accounting purposes during the construction period. Accordingly, as of December 31, 2019 the Company recorded a build-to-suit lease asset of $33.2 million in property and equipment, net, which included building costs paid by the Company of $20.8 million, with a $11.7 million financing liability recorded in other non-current liabilities and $0.7 million liability recorded in accrued expenses and other current liabilities on the consolidated balance sheets.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
6. INTANGIBLE ASSETS, NET
The gross carrying amount and accumulated amortization of separately identifiable intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
Licenses
|
$
|
50,150
|
|
|
$
|
(100)
|
|
|
$
|
50,050
|
|
Total intangible assets
|
$
|
50,150
|
|
|
$
|
(100)
|
|
|
$
|
50,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
In-process R&D
|
$
|
12,110
|
|
|
$
|
—
|
|
|
$
|
12,110
|
|
Trademarks
|
394
|
|
|
(71)
|
|
|
323
|
|
Licenses
|
50,150
|
|
|
(70)
|
|
|
50,080
|
|
Total intangible assets
|
$
|
62,654
|
|
|
$
|
(141)
|
|
|
$
|
62,513
|
|
Amortization expense for the years ended December 31, 2020, 2019, and 2018 was immaterial.
For the year ended December 31, 2020, the Company expensed $12.1 million of in-process R&D and $0.3 million of trademarks, net of accumulated amortization, previously included in intangible assets to impairment expense on the consolidated statements of operations. These assets were related to the Powersports business unit whose operations ceased in the fourth quarter of 2020. The Company had no impairment expense for the years ended December 31, 2019 and 2018.
As part of the Series D financing, the Company was granted a non-exclusive and non-transferable license to intellectual property used in the Iveco S-WAY Platform and Product, which is the cab over engine truck manufactured by Iveco S.p.A ("Iveco"), a wholly-owned subsidiary of CNH Industrial N.V. ("CNHI"). The material rights under the license agreement include the non-exclusive use of the S-WAY key technology to manufacture, distribute and service BEV and FCEV trucks and related components in the United States, and the ability to grant the use of the key technology to the Company's North American sub-suppliers. The Company intends to utilize the license solely in North America for the development of BEV and FCEV trucks. The fair value of the license was determined to be $50.0 million. In exchange for the license, the Company issued 5,132,291 shares of Series D redeemable convertible preferred stock to CNHI and its affiliates. The Company will amortize the license using a straight-line method over a 7-year useful life, beginning at the start of commercial production, as it reflects the period over which the sales of BEV and FCEV trucks utilizing Iveco S-WAY platform are expected to contribute to the Company's cash flows. As of December 31, 2020, the Company has not started amortizing the license.
Estimated amortization expense for all intangible assets subject to amortization in future years is expected to be:
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Amortization
|
2021
|
|
$
|
1,816
|
|
2022
|
|
7,163
|
|
2023
|
|
7,143
|
|
2024
|
|
7,143
|
|
2025
|
|
7,143
|
|
Thereafter
|
|
19,642
|
|
Total
|
|
$
|
50,050
|
|
7. INVESTMENTS
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
Unconsolidated VIE
In April 2020, the Company and Iveco entered into a series of agreements which established a joint venture in Europe, Nikola Iveco Europe B.V. All assets and liabilities of Nikola Iveco Europe B.V. were transferred to Nikola Iveco Europe GmbH during the third quarter of 2020. The operations of the joint venture are located in Ulm, Germany, and consist of manufacturing the BEV and FCEV Class 8 trucks for the European market, as well as for the North American market while the Company's greenfield manufacturing facility in Coolidge, Arizona, is being completed.
The agreements provide for a 50/50 ownership of the joint venture and a 50/50 allocation of the joint venture's production volumes and profits between Nikola and Iveco. Both parties are entitled to appoint an equal number of members to the shareholders' committee of the joint venture. Pursuant to the terms of the agreements, the Company and Iveco each contributed intellectual property licenses to their respective technology. During 2020, the Company contributed $8.8 million for a 50% interest in the joint venture, in accordance with the amended contribution agreement. The intellectual property licenses contributed to the joint venture by Nikola are related to intellectual property related to Nikola-developed BEV and FCEV technology for the use in the European market. Iveco contributed to the joint venture a license for the S-WAY technology for use in the European market.
Nikola Iveco Europe GmbH is considered a VIE due to insufficient equity to finance its activities without additional subordinated financial support. The Company is not considered the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE is accounted for under the equity method.
As of December 31, 2020, the carrying amount of the Company's equity interest was $8.4 million and is included in investments in affiliate on the consolidated balance sheets. For the year ended December 31, 2020, the Company recognized $0.6 million loss from the joint venture and is included in equity in net loss of affiliate on the consolidated statements of operations. The Company does not guarantee debt for, or have other financial support obligations to the entity and its maximum exposure to loss in connection with its continuing involvement with the entity is limited to the carrying value of the investment.
8. RELATED PARTY TRANSACTIONS
Related Party Aircraft Charter Agreement
In 2019, the Company entered into an aircraft charter arrangement with the Company’s former Executive Chairman of the board of directors of the Company and Legacy Nikola's former Chief Executive Officer to reimburse him for the flight hours incurred for Company use on his personal aircraft. These flight hours were related to business travel by the former Executive Chairman and other members of the executive team to business meetings and trade conferences, as well as the former Executive Chairman's commute between the Company’s headquarters in Phoenix, Arizona, and his residence in Utah. The Company recognized expenses of $1.6 million, $0.2 million and zero for the years ended December 31, 2020, 2019 and 2018, respectively, for the business use of the aircraft. As of December 31, 2020 and 2019 the Company had zero and $0.03 million, respectively, outstanding in accounts payable and accrued expenses to the former Executive Chairman for the business use of the aircraft. The aircraft charter arrangement was terminated effective October 2020.
Related Party Income and Accounts Receivable
During 2020, 2019 and 2018 the Company recorded immaterial amounts for the provision of solar installation services to the former Executive Chairman, which are billed on time and materials basis. As of December 31, 2020 and 2019, the Company had zero and $0.05 million, respectively, outstanding in accounts receivable related to solar installation services to the former Executive Chairman. Solar installation services were terminated effective October 2020.
Related Party Stock Options
In December 2018, the former Executive Chairman issued 6,005,139 performance-based stock options to recognize the performance and contribution of specific employees, including certain executive officers, pursuant to Legacy Nikola's Founder Stock Option Plan (the "Founder Stock Option Plan"). The underlying common stock of these option awards are owned by M&M Residual, a Nevada limited liability company that is wholly-owned by the former Executive Chairman and are
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
8. RELATED PARTY TRANSACTIONS (Continued)
considered to be issued by the Company for accounting purposes. These performance-based stock options vest based on the Company's achievement of a liquidation event, such as a private sale or an initial public offering on a U.S. stock exchange. An additional award of 180,153 shares was made under the plan in May 2020, to replace a forfeited grant. The performance conditions were met upon the closing of the Business Combination and the Company recognized stock-based compensation expense related to these option awards for $7.2 million in June 2020. As of December 31, 2020 the weighted average exercise price per share is $1.39, the weighted-average grant date fair value is $1.20 per share, and the weighted-average remaining contractual term is 6.42 years for these performance-based stock options.
Related Party Stock Repurchase and Redemption of Common Stock
In November 2018, the Company repurchased 983,699 shares of Series B redeemable convertible preferred stock from the former Executive Chairman at $4.23 per share for a total purchase price of $4.2 million. The repurchased redeemable convertible preferred stock was retired immediately thereafter. The payment of $4.2 million was net against the former Executive Chairman's $2.5 million promissory note with the Company. The former Executive Chairman also paid $0.3 million interest on the promissory note, therefore, the net payment to the former Executive Chairman was $1.4 million.
Immediately following the Business Combination, pursuant to a redemption agreement, the Company redeemed 7,000,000 shares of common stock from M&M Residual at a purchase price of $10.00 per share, payable in immediately available funds. The number of shares to be redeemed and the redemption price were determined and agreed upon during negotiations between the various parties to the Business Combination, including the former Executive Chairman and representatives of VectoIQ, Legacy Nikola and the Subscribers.
Former Related Party License and Service Agreements
In September 2019, the Company entered into a Master Industrial Agreement (“CNHI Services Agreement”) and S-WAY Platform and Product Sharing Agreement (“CNHI License Agreement”) with CNH Industrial N.V. ("CNHI") and Iveco S.p.A ("Iveco"), a former related party, in conjunction with the Company’s Series D redeemable convertible preferred stock offering. Under these agreements, CNHI and Iveco were issued 25,661,448 shares of Legacy Nikola Series D redeemable convertible preferred stock in exchange for an intellectual property license valued at $50.0 million, $100.0 million in-kind services and $100.0 million in cash.
During 2019, the Company issued 5,953,515 shares of Series D redeemable convertible preferred stock to Iveco in exchange for the licensed Iveco technology and $8.0 million of prepaid in-kind services. Additionally, the Company issued 5,132,291 Series D preferred redeemable convertible preferred shares in exchange for $50.0 million in cash.
During 2020, the Company issued 9,443,353 shares of Series D redeemable convertible preferred stock, to Iveco, in exchange for $92.0 million of prepaid in-kind services. Additionally, the Company issued 5,132,289 shares of Series D redeemable convertible preferred stock to Iveco in exchange for $50.0 million in cash.
During 2020 and 2019, the Company recognized $45.7 million and $8.0 million of in-kind services in research and development on the consolidated statements of operations, respectively. As of December 31, 2020 and 2019, $46.3 million and zero prepaid in-kind services were reflected on the consolidated balance sheets, respectively.
As of June 3, 2020, Iveco was no longer considered a related party under ASC 850.
Former Related Party Research and Development and Accounts Payable
During 2020, 2019, and 2018 the Company recorded research and development expenses of $15.1 million, $14.1 million and zero, respectively, from a former related party. As of December 31, 2020, the Company had $2.8 million of accounts payable due to the former related party and $0.8 million in accrued expenses due to the former related party. As of December 31, 2019, the Company had $0.6 million of accounts payable due to the former related party and $0.5 million of accrued expenses due to the former related party.
As of June 3, 2020, the entity is no longer considered a related party.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
8. RELATED PARTY TRANSACTIONS (Continued)
Former Related Party Stock Repurchase
In August 2018, concurrently with the Series C preferred stock financing, the Company entered into the Nimbus Redemption Letter Agreement with Nimbus, a former related party. Pursuant to the terms of the Nimbus Redemption Letter Agreement, Nimbus received the right but not the obligation to sell back to the Company its shares of Series B preferred stock and Series C preferred stock, with any such repurchases applying first to Series B preferred stock, in an amount equal to the value of up to five percent (5%) of the aggregate size of each of Nikola's subsequent equity financing rounds. The shares elected to be repurchased by Nimbus were to be purchased by the Company at a share price equal to 90% of the share price in the applicable subsequent financing round.
In September 2019, in contemplation of the Company's proposed Series D preferred stock financing, the Company entered into an amendment of the letter agreement by and between the Company and Nimbus, dated August 3, 2018 (the “Nimbus Redemption Letter Agreement” and as amended, the “Nimbus Amendment”). Pursuant to the terms of the Amendment and the Nimbus Repurchase Agreement, the Company agreed to repurchase 3,575,750 shares of Series B redeemable convertible preferred stock held by Nimbus, a former related party, at the share price of $8.77 which is equal to 90% of the share price in the Series D redeemable convertible preferred stock financing of $9.74 per share. The number of shares to be repurchased exceeded five percent (5%) of the contemplated Series D round of financing. This was negotiated by the Company in order to reduce the total number of shares of Series B redeemable convertible preferred stock held by Nimbus, to such an extent that Nimbus would no longer be entitled to elect a member to the Company's board of directors as a result of Nimbus' Series B preferred stock holdings. The repurchase was completed in October 2019, for an aggregate repurchase amount of $31.4 million. The Amendment also provided Nimbus with additional redemption rights based on various capital raise thresholds, none of which were met as of December 31, 2019.
In March 2020, the Company entered into an additional letter agreement with Nimbus in which Nimbus agreed to terminate the Nimbus Redemption Letter Agreement. Concurrently, the Company entered into an agreement with Nimbus, whereby the Company agreed to repurchase an additional 2,850,930 shares of Series B preferred stock from Nimbus at a share price of $8.77 for an aggregate repurchase price of $25.0 million. The parties agreed that the repurchase price constituted the price that Nimbus would otherwise be entitled to under the Nimbus Redemption Letter Agreement. The number of shares to be repurchased was negotiated by the Company and Nimbus as a mechanism to compensate Nimbus for agreeing to relinquish its previous redemption rights granted in the Nimbus Redemption Letter Agreement.
The repurchase was contingent on completion of the Business Combination which occurred during the quarter ending June 30, 2020, and the Company repurchased the shares in conjunction with the closing of the Business Combination. The Company recorded a reduction to additional paid in capital for the repurchase price in excess of the carrying value of the redeemable convertible preferred stock of $13.4 million. The carrying value of the shares repurchased were recorded as a reduction to redeemable convertible preferred stock, which has been retrospectively adjusted in the consolidated statements of stockholders' equity to reflect the Company’s equity structure for all periods presented. For the computation of net loss per share for the year ended December 31, 2020, the repurchase price in excess of the carrying value of the redeemable convertible preferred stock of $13.4 million is reflected as a decrease to net loss attributable to common stockholders (see Note 15, Net Loss per Share).
As of June 3, 2020, Nimbus is no longer considered a related party.
9. DEBT
Debt consisted of the following as of December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31,
|
|
2020
|
|
2019
|
Term note - current
|
$
|
4,100
|
|
|
$
|
—
|
|
Term note - non-current
|
—
|
|
|
4,100
|
|
Total debt
|
$
|
4,100
|
|
|
$
|
4,100
|
|
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
9. DEBT (Continued)
Term Note
In January 2018, the Company entered into a term note with JP Morgan Chase, pursuant to which, the Company borrowed $4.1 million to fund equipment purchases. The term note accrued interest at 2.43% per annum and was payable on or before January 31, 2019. The term note is secured by restricted cash.
In February 2019, the Company amended the term note to extend its term by one year and increased the interest rate to 3.00% per annum. In February 2020, the Company amended the term note to extend its term for one year, to January 31, 2021. The term note accrued interest at a rate equal to the LIBOR rate for the applicable interest period multiplied by the statutory reserve rate as determined by the Federal Reserve Board. The term loan has a financial covenant that requires the Company to maintain a minimum amount of liquidity with the bank. As of December 31, 2020, the Company was in compliance with the financial covenant.
Payroll Protection Program Note
In April 2020, the Company entered into a Note with JP Morgan Chase under the Small Business Administration Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (CARES) Act, pursuant to which the Company borrowed $4.1 million (the "Note"). The Note accrues interest at rate of 0.98% per annum and matures in 24 months. On April 30, 2020, the Company returned the $4.1 million in proceeds from the Note to JP Morgan Chase.
10. CAPITAL STRUCTURE
Shares Authorized
As of December 31, 2020, the Company had authorized a total of 750,000,000 shares for issuance with 600,000,000 shares designated as common stock and 150,000,000 shares designated as preferred stock.
Warrants
As of December 31, 2020, the Company had 760,915 private warrants outstanding. Each private warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment, at any time commencing 30 days after the completion of the Business Combination. There were 129,085 private warrants exercised in the fourth quarter of 2020, for total proceeds of $1.5 million.
The exercise price and number of common shares issuable upon exercise of the private warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, the private warrants will not be adjusted for issuance of common stock at a price below its exercise price.
On July 22, 2020, the Company issued a notice of redemption of all of its outstanding public warrants on a cash basis which was completed in September 2020. The Company issued 22,877,806 shares of common stock pursuant to the exercise of public warrants and received approximately $263.1 million of proceeds from such exercises. The 122,194 public warrants not exercised by the end of the redemption period were redeemed for a price of $0.01 per public warrant, and subsequently cancelled by the Company. The private warrants held by the initial holders thereof or permitted transferees of the initial holders were not subject to this redemption.
11. STOCK-BASED COMPENSATION EXPENSE
2017 and 2020 Stock Plans
Legacy Nikola's 2017 Stock Option Plan (the “2017 Plan”) provides for the grant of incentive and nonqualified options to purchase Legacy Nikola common stock to officers, employees, directors, and consultants of Legacy Nikola. Options are granted at a price not less than the fair market value on the date of grant and generally become exercisable between one and four years after the date of grant. Options generally expire ten years from the date of grant. Outstanding awards under the 2017 Plan continue to be subject to the terms and conditions of the 2017 Plan.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
11. STOCK-BASED COMPENSATION EXPENSE (Continued)
Each Legacy Nikola option from the 2017 Plan that was outstanding immediately prior to the Business Combination, whether vested or unvested, was converted into an option to purchase a number of shares of common stock (each such option, an "Exchanged Option") equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Legacy Nikola common stock subject to such Legacy Nikola option immediately prior to the Business Combination and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Legacy Nikola option immediately prior to the consummation of the Business Combination, divided by (B) the Exchange Ratio. Except as specifically provided in the Business Combination Agreement, following the Business Combination, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy Nikola option immediately prior to the consummation of the Business Combination. All stock option activity was retroactively restated to reflect the Exchanged Options.
At the Company's special meeting of stockholders held on June 2, 2020, the stockholders approved the Nikola Corporation 2020 Stock Incentive Plan (the "2020 Plan") and the Nikola Corporation 2020 Employee Stock Purchase Plan (the "2020 ESPP"). The 2020 Plan and the 2020 ESPP were previously approved, subject to stockholder approval, by the Company's board of directors on May 6, 2020. The aggregate number of shares authorized for issuance under the 2020 Plan will not exceed 42,802,865, plus the number of shares subject to outstanding awards as of the closing of the Business Combination under the 2017 Plan that are subsequently forfeited or terminated. In addition, the shares authorized for the 2020 Plan may be increased on an annual basis for a period of up to ten years, beginning with the fiscal year that begins January 1, 2021, in an amount equal up to 2.5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year. The aggregate number of shares available for issuance under the 2020 ESPP is 4,000,000, which may be increased on an annual basis of up to 1.0% of the outstanding shares of common stock as of the first day of each such fiscal year.
The 2020 Plan provides for the grant of incentive and nonqualified stock option, restricted stock units ("RSUs"), restricted share awards, stock appreciation awards, and cash-based awards to employees, outside directors, and consultants of the Company. The 2020 Plan and the 2020 ESPP became effective immediately upon the closing of the Business Combination. No offerings have been authorized to date by the Company's board of directors under the ESPP.
Common Stock Valuation
Prior to the completion of the Business Combination the fair value of Legacy Nikola common stock that underlies the stock options was determined by Legacy Nikola's board of directors based upon information available at the time of grant. Because such grants occurred prior to the exchange of Legacy Nikola common stock into the Company's common stock, Legacy Nikola's board of directors determined the fair value of Legacy Nikola common stock with assistance of periodic valuation studies from an independent third-party valuation firm. The valuations were consistent with the guidance and methods outlined in the AICPA Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or AICPA Practice Aid.
Stock Option Valuation
The Company utilizes the Black-Scholes option pricing model for estimating the fair value of options granted, which requires the input of highly subjective assumptions.
The Company calculates the fair value of each option grant on the grant date using the following assumptions:
Expected Term—The Company uses the simplified method when calculating expected term due to insufficient historical exercise data.
Expected Volatility—As the Company's shares have limited history, the volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.
Expected Dividend Yield—The dividend rate used is zero as the Company does not have a history of paying dividends on its common stock and does not anticipate doing so in the foreseeable future.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
11. STOCK-BASED COMPENSATION EXPENSE (Continued)
Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Exercise price
|
$1.05 - $9.66
|
|
$1.05 - $3.58
|
|
$1.05
|
Risk-free interest rate
|
0.1% - 1.7%
|
|
1.4% - 2.7%
|
|
2.3% - 3.0%
|
Expected term (in years)
|
0.2 - 6.3
|
|
5.0 - 6.3
|
|
4.6 - 6.2
|
Expected dividend yield
|
—
|
|
—
|
|
—
|
Expected volatility
|
70.0% - 85.8%
|
|
70.0% - 85.1%
|
|
70%
|
Performance Based Stock Options
As of December 31, 2020, 2019, and 2018, the outstanding performance-based options ("PSUs") issued by the Company were 5,090,182, 5,153,485 and 5,628,735, respectively. No PSUs were granted in fiscal year 2020. As of December 31, 2018, the performance-based provision was achieved for all of the outstanding performance-based award and the Company began recognizing expense related to these PSUs in 2018. The weighted-average grant date fair value of these stock options was $0.63 in the years ended December 31, 2020, 2019, and 2018.
The 5,090,182, 5,153,485, and 5,628,735 PSUs outstanding as of December 31, 2020, 2019 and 2018, does not include PSUs issued by a related party. See Note 8, Related Party Transactions, for additional information regarding the related party PSUs.
Stock Option Activity
Changes in stock options are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted
Average
Exercise Price
Per share
|
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
|
Aggregate
Intrinsic
Value
|
Outstanding at December 31, 2017
|
18,260,484
|
|
|
$
|
1.58
|
|
|
9.35
|
|
$
|
—
|
|
Granted
|
25,791,263
|
|
|
1.05
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
Cancelled
|
18,260,484
|
|
|
1.58
|
|
|
|
|
|
Outstanding at December 31, 2018
|
25,791,263
|
|
|
$
|
1.05
|
|
|
9.54
|
|
$
|
24,720
|
|
Granted
|
14,553,811
|
|
|
1.14
|
|
|
|
|
|
Exercised
|
1,266
|
|
|
1.05
|
|
|
|
|
|
Cancelled
|
330,983
|
|
|
1.06
|
|
|
|
|
|
Outstanding at December 31, 2019
|
40,012,825
|
|
|
$
|
1.08
|
|
|
8.78
|
|
$
|
99,999
|
|
Granted
|
1,582,496
|
|
|
5.31
|
|
|
|
|
|
Exercised
|
8,716,423
|
|
|
1.13
|
|
|
|
|
|
Cancelled
|
349,674
|
|
|
1.31
|
|
|
|
|
|
Outstanding at December 31, 2020
|
32,529,224
|
|
|
$
|
1.28
|
|
|
7.82
|
|
$
|
454,668
|
|
Vested and exercisable as of December 31, 2020
|
30,868,124
|
|
|
$
|
1.23
|
|
|
7.79
|
|
$
|
433,198
|
|
The option activity above does not include the PSUs issued by the related party. The weighted-average grant date fair value of stock options issued for the years ended December 31, 2020, 2019 and 2018 were $6.92, $0.75 and $0.39, respectively.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
11. STOCK-BASED COMPENSATION EXPENSE (Continued)
There were 8,716,423 and 1,266 stock options exercised during the years ended December 31, 2020 and 2019, respectively, and the total intrinsic value of stock options exercised was $132.7 million during 2020. The total intrinsic value of stock options exercised in 2019 was immaterial. There were no stock options exercised during 2018. The fair value of stock options vested for the years ended December 31, 2020, 2019, and 2018 was $27.0 million, $4.3 million, and $4.0 million, respectively.
As a result of the Business Combination, vesting of certain stock options and performance-based options accelerated in accordance with terms of the related award agreements, resulting in additional stock-based compensation expense of $8.1 million in the second quarter of 2020.
Restricted Stock Units
In June 2020, in connection with the closing of the Business Combination, the Company granted time-based RSUs to several executive officers and directors of the Company. The RSUs have a vesting cliff of one year for directors and three years for executive officers after the grant date. Additionally, during 2020, the Company granted time-based RSUs to various employees that vest semi-annually over a three year period or cliff vest over a three or six month period. In addition, for certain technical engineering employees the awards cliff vest after a three year period or vest on the achievement of certain operational milestones. The following table summarizes 2020 RSU activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs
|
|
Weighted-Average Grant Date Fair Value
|
Balance at December 31, 2019
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
5,287,795
|
|
|
31.5
|
|
Released
|
|
194,306
|
|
|
43.3
|
|
Cancelled
|
|
66,958
|
|
|
24.9
|
|
Balance at December 31, 2020
|
|
5,026,531
|
|
|
$
|
31.2
|
|
During the third quarter of 2020, the Company entered into a separation agreement with its former Executive Chairman which resulted in a modification of his time-based RSUs. Prior to the modification, the RSUs were not likely to vest and as a result $0.5 million of previously recorded stock-based compensation expense was reversed during 2020. Subsequent to modification, the RSUs were considered fully vested and the Company recorded stock-based compensation of $16.5 million during the third quarter of 2020.
The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date.
Market Based RSUs
During 2020, in connection with the closing of the Business Combination, the Company granted market based restricted stock unit awards ("Market Based RSUs") to several executive officers of the Company. The Market Based RSUs contain a stock price index as a benchmark for vesting. These awards have three milestones that each vest depending upon a consecutive 20-trading day stock price target of the Company’s common stock. The shares vested are transferred to the award holders upon the completion of the requisite service period of three years, and upon achievement certification by the Company's board of directors. If the target price for the tranche is not achieved by the end of third anniversary of the grant date, the Market Based RSUs are forfeited.
The grant date fair value of the Market Based RSUs was determined using a Monte Carlo simulation model that utilizes significant assumptions, including volatility, that determine the probability of satisfying the market condition stipulated in the award to calculate the fair value of the award. The following assumptions were used to determine the grant date fair value for these Market Based RSUs:
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
11. STOCK-BASED COMPENSATION EXPENSE (Continued)
|
|
|
|
|
|
|
Year Ended
December 31, 2020
|
Risk-free interest rate
|
0.2% - 0.3%
|
Expected volatility
|
70.0% - 85.0%
|
The total grant date fair value of the Market Based RSUs was determined to be $485.1 million and is recognized over the requisite service period.
During 2020, 4,859,000 Market Based RSUs originally issued to the Company's former Executive Chairman were cancelled as a part of the former Executive Chairman's separation agreement and $3.5 million of previously recorded stock-based compensation was reversed. The following table summarizes 2020 market-based RSU activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Market Based RSUs
|
|
Weighted-Average Grant Date Fair Value
|
Balance at December 31, 2019
|
|
—
|
|
|
—
|
|
Granted
|
|
18,176,712
|
|
|
26.7
|
|
Released
|
|
—
|
|
|
—
|
|
Cancelled
|
|
4,859,000
|
|
|
28.5
|
|
Balance at December 31, 2020
|
|
13,317,712
|
|
|
26.0
|
|
Stock-Based Compensation Expense
The following table presents the impact of stock-based compensation expense on the consolidated statements of operations for the years ending December 31, 2020, 2019 and 2018, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Research and development
|
$
|
15,862
|
|
|
$
|
653
|
|
|
$
|
513
|
|
Selling, general, and administrative
|
122,129
|
|
|
4,205
|
|
|
3,330
|
|
Total stock-based compensation expense
|
$
|
137,991
|
|
|
$
|
4,858
|
|
|
$
|
3,843
|
|
As of December 31, 2020, total unrecognized compensation expense and remaining weighted-average recognition period related to outstanding share-based awards were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized compensation expense
|
|
Remaining weighted-average recognition period (years)
|
Options
|
$
|
2,297
|
|
|
1.8
|
Market Based RSUs
|
283,035
|
|
|
2.5
|
RSUs
|
111,952
|
|
|
2.6
|
Total unrecognized compensation expense at December 31, 2020
|
$
|
397,284
|
|
|
|
12. RETIREMENT SAVINGS PLAN
The Company sponsored a savings plan available to all eligible employees, which qualifies under Section 401(k) of the Internal Revenue Code. Employees may contribute to the plan amounts of their pre-tax salary subject to statutory limitations. The Company did not offer and has not provided a company match for the years ended December 31, 2020, 2019 and 2018.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
12. RETIREMENT SAVINGS PLAN (Continued)
Beginning in 2021, the Company will provide an employer matching contribution for the amount a participant contributes as salary deferrals up to 100% of the amount contributed for the first 1% of the participant’s plan compensation plus 50% for each additional 1% of compensation contributed between 1% and 6% of the participant’s plan compensation.
13. INCOME TAXES
A provision (benefit) for income taxes of $(1.0) million, $0.2 million and ($2.0) million has been recognized for the years ended December 31, 2020, 2019 and 2018, respectively, related primarily to changes in indefinite-lived intangible and goodwill deferred tax liabilities.
The components of the provision for income taxes for the years ended December 31, 2020, 2019 and 2018 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Current tax provision
|
|
|
|
|
|
Federal
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
1
|
|
|
1
|
|
|
1
|
|
Total current tax provision
|
37
|
|
|
1
|
|
|
1
|
|
Deferred tax provision
|
|
|
|
|
|
Federal
|
(492)
|
|
|
43
|
|
|
(1,963)
|
|
State
|
(571)
|
|
|
107
|
|
|
(40)
|
|
Total deferred tax provision
|
(1,063)
|
|
|
150
|
|
|
(2,003)
|
|
Total income tax provision (benefit)
|
$
|
(1,026)
|
|
|
$
|
151
|
|
|
$
|
(2,002)
|
|
The reconciliation of taxes at the federal statutory rate to our provision for income taxes for the years ended December 31, 2020, 2019 and 2018 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Tax at statutory federal rate
|
$
|
(80,922)
|
|
|
$
|
(18,586)
|
|
|
$
|
(13,922)
|
|
State tax, net of federal benefit
|
(14,052)
|
|
|
(4,649)
|
|
|
(2,419)
|
|
Stock-based compensation
|
(7,652)
|
|
|
556
|
|
|
161
|
|
Section 162(m) limitation
|
1,834
|
|
|
—
|
|
|
—
|
|
Research and development credits, net of uncertain tax position
|
(14,945)
|
|
|
(5,915)
|
|
|
—
|
|
Other
|
408
|
|
|
915
|
|
|
1
|
|
Change in valuation allowance
|
114,303
|
|
|
27,830
|
|
|
14,177
|
|
Total income tax provision (benefit)
|
$
|
(1,026)
|
|
|
$
|
151
|
|
|
$
|
(2,002)
|
|
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
13. INCOME TAXES (Continued)
Deferred tax assets and liabilities as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
Federal and state income tax credits
|
$
|
21,279
|
|
|
$
|
6,334
|
|
Net operating loss carryforward
|
132,471
|
|
|
41,444
|
|
Start-up costs capitalized
|
1,490
|
|
|
1,157
|
|
Stock-based compensation
|
8,260
|
|
|
1,816
|
|
Tenant allowance
|
—
|
|
|
3,075
|
|
Finance lease liability
|
3,718
|
|
|
—
|
|
Property and equipment, net
|
4,069
|
|
|
—
|
|
Accrued expenses and other
|
—
|
|
|
104
|
|
Total deferred tax assets
|
171,287
|
|
|
53,930
|
|
Valuation allowance
|
(162,496)
|
|
|
(47,672)
|
|
Deferred tax assets, net of valuation allowance
|
8,791
|
|
|
6,258
|
|
Deferred tax liabilities:
|
|
|
|
Intangible assets
|
(1,020)
|
|
|
(3,277)
|
|
Finance lease asset
|
(7,786)
|
|
|
—
|
|
Property and equipment
|
—
|
|
|
(4,053)
|
|
Other
|
7
|
|
|
—
|
|
Total deferred tax liabilities
|
(8,799)
|
|
|
(7,330)
|
|
Deferred tax liabilities, net
|
$
|
(8)
|
|
|
$
|
(1,072)
|
|
|
|
|
|
In accordance with ASC 740-10, the deferred tax assets are reduced by a valuation allowance if it is not more likely than not that some portion or all the deferred tax assets will be realized. The realization of deferred tax assets can be affected by, among other things, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, the Company's experience with utilizing operating losses and tax credit carryforwards by jurisdiction, and tax planning alternatives that may be available.
The Company performed an analysis of the reversal of the deferred tax liabilities, and then considered the overall business environment, and the outlook for future years. The Company determined that it is not more likely than not that the benefit from deferred tax assets net of the reversal of certain deferred tax liabilities will be realized. Accordingly, the Company recorded valuation allowances of $162.5 million, $47.7 million and $19.8 million at December 31, 2020, 2019 and 2018, respectively. The increase in the valuation allowance for the years ended December 31, 2020 and 2019 was primarily due to increase in net operating loss carryforwards and R&D credits.
At December 31, 2020, the Company had federal net operating loss carryforwards of $11.0 million that begin to expire in 2037 and $518.0 million that have an indefinite carryforward period. The Company has combined state net operating loss carryforwards of $546.8 million at December 31, 2020, that begin to expire in 2037. The Company conducted a change in ownership study as of December 31, 2020, and determined that net operating losses and credits will not expire due to ownership change rules under the Internal Revenue Code Sections 382 and 383. The Company had federal and state tax credits of
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
13. INCOME TAXES (Continued)
$19.1 million and $11.4 million, respectively, at December 31, 2020, which if unused will begin to expire in 2037 for federal and 2031 for state tax purposes.
The following table reflect changes in the unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Gross amount of unrecognized tax benefits as of the beginning of the year
|
$
|
432
|
|
|
$
|
140
|
|
|
$
|
140
|
|
Additions based on tax positions related to the current year
|
5,622
|
|
|
292
|
|
|
—
|
|
Additions based on tax position from prior years
|
1,338
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Gross amount of unrecognized tax benefits as of the end of the year
|
$
|
7,392
|
|
|
$
|
432
|
|
|
$
|
140
|
|
ASC Topic 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained in a court of last resort, based on the technical merits. If more-likely-than-not, the amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination, including compromise settlements. For tax positions not meeting the more-likely-than-not threshold, no tax benefit is recorded.
As of December 31, 2020, 2019, and 2018, the Company had $7.4 million, $0.4 million, and $0.1 million, respectively, of gross unrecognized tax benefits, related to research and experimental tax credits. The Company does not expect a significant change to the amount of unrecognized tax benefits to occur within the next 12 months.
The Company's policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at December 31, 2020 or 2019, and has not recognized interest or penalties during the years ended December 31, 2020, 2019, and 2018, since there was no reduction in income taxes paid due to uncertain tax positions.
The Company files income tax returns in the United States, Arizona, California, Michigan, Tennessee and Utah. As of December 31, 2020, the earliest year subject to examination is 2017 for federal and state tax purposes. In addition, due to the Company's tax attribute carryforwards, tax authorities will continue to have the ability to adjust loss and tax credit carryforwards even after the statute expires on the year in which the attributes were originally claimed.
14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is subject to legal and regulatory actions that arise from time to time. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable, often involves significant judgment about future events, and the outcome of litigation is inherently uncertain. Other than as described below, there is no material pending or threatened litigation against the Company that remains outstanding as of December 31, 2020.
Regulatory and Governmental Investigations and Related Internal Review
On September 10, 2020, Hindenburg Research LLC reported on certain aspects of the Company’s business and operations. The Company and its board of directors retained Kirkland & Ellis LLP to conduct an internal review in connection with the Hindenburg article (the “Internal Review”), and Kirkland & Ellis promptly contacted the Division of Enforcement of the U.S. Securities and Exchange Commission to make it aware of the commencement of the Internal Review. The Company subsequently learned that the staff of the Division of Enforcement had previously opened an investigation. On September 14, 2020, the Company and five of its officers and employees, including Mark Russell, our Chief Executive Officer, received subpoenas from the Staff of the Division of Enforcement as a part of a fact-finding inquiry related to aspects of the Company’s business as well as certain matters described in the Hindenburg article. The Staff of the Division of Enforcement issued additional subpoenas to another three of the Company’s officers and employees, including Kim Brady, the Company's Chief Financial Officer, on September 21, 2020 and to the Company’s current and former directors on September 30, 2020.
The Company and Mr. Milton also received grand jury subpoenas from the U.S. Attorney’s Office for the Southern District of New York (the “SDNY”) on September 19, 2020. On September 20, 2020, Mr. Milton offered to voluntarily step down from
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
his position as Executive Chairman, as a member of the Company’s board of directors, including all committees thereof, and from all positions as an employee and officer of the Company. The board accepted his resignation and appointed Stephen Girsky as Chairman of the board of directors. The Company subsequently has appointed three new board members, Steve Shindler, Bruce Smith and Mary Petrovich.
The Company also received a grand jury subpoena from the N.Y. County District Attorney’s Office on September 21, 2020. On October 16, 2020, the N.Y. County District Attorney’s Office agreed to defer its investigation; it has not withdrawn its subpoena issued to the Company, but has informed the Company that no further productions to it are necessary at this time.
On October 28, 2020, the Company received an information request from The Nasdaq Stock Market LLC, seeking an update on the status of the Staff of the Division of Enforcement and SDNY inquiries, which the Company provided.
The Company is committed to cooperating fully with the Staff of the Division of Enforcement and the SDNY investigations, which are ongoing. As such, the Company's counsel frequently engages with the Staff of the Division of Enforcement and the SDNY. Further, the Company has made voluminous productions of information and made witnesses available for interviews. The Company will continue to comply with the requests of the Staff of the Division of Enforcement and the SDNY and expect to make additional productions in the future. The documents and information requested in the subpoenas include materials concerning Mr. Milton’s and the Company’s statements regarding the Company’s business operations and the future of the Company.
As part of the Internal Review, which has been substantially completed, Kirkland & Ellis had full access to Company data, emails and documents for collection and review. No request by Kirkland & Ellis for information from the Company was denied. Kirkland & Ellis was also given access to data contained on personal devices for over three dozen of our employees. Kirkland & Ellis, including with the assistance of contract attorneys, reviewed relevant documents in the legal, investor relations, finance, and human resources areas as well as Company emails from January 1, 2016 through December 31, 2020, employee text messages, documents found in our data room and other corporate documents. The Internal Review also included targeted interviews of over thirty (30) Company personnel. Additionally, as part of the Internal Review, Kirkland & Ellis retained automotive experts ("Automotive Experts") at a well-known consulting firm to conduct an independent assessment of the current state of our technology development.
The Hindenburg article alleged that Mr. Milton or the Company made a number of statements, which it asserted were inaccurate, including but not limited to the following:
1.in July 2016, the Company stated that it owned rights to natural gas wells, and in August 2016 that the wells were used as a backup to solar hydrogen production;
2.in August 2016, Milton and the Company stated that the Company had engineered a zero emissions truck;
3.in December 2016, Milton stated that the Nikola One was a fully functioning vehicle;
4.that an October 2017 video released by the Company gave the impression the Nikola One was driven;
5.in April 2019, Milton stated that solar panels on the roof of the Company’s headquarters produce approximately 18 megawatts of energy per day;
6.in December 2019 and July 2020, Milton stated that the Company “can produce” over 1,000 kg of hydrogen at the Company’s demo stations and that the Company was “down below” $3/kg at that time;
7.in July 2020, Milton stated that “all major components are done in house”; he made similar statements in June 2020;
8.in July 2020, Milton stated that the inverter software was the most advanced in the world and that other OEMs had asked to use it; and
9.in July 2020, Milton stated that five trucks were “coming off the assembly line” in Ulm, Germany.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
The statements listed above were inaccurate in whole or in part, when made. In other respects, the Hindenburg article's statements about the Company were inaccurate. For example, the Automotive Experts determined that: (1) the Company's workforce is led by technical and engineering leads that have deep industry experience and expertise; (2) the Company's technological contributions and development are consistent with other OEMs at similar stages of development; and (3) the Company's maturity level is consistent with that of an emerging OEM. These findings are inconsistent with the main conclusion of the Hindenburg article that the Company was an "intricate" or "massive fraud".
In connection with its Internal Review, Kirkland & Ellis has not issued any conclusions, as of the date of this report, as to whether any statements that may have been inaccurate when made violated any statute. Analysis is ongoing to assess, among other matters, whether any such statements were intentional, material, not corrected by other public statements, or harmful to the Company's stockholders, either before or after our business combination and subsequent public listing in June 2020. Kirkland & Ellis further continues to assess the accuracy of other statements made by the Company, including in its current SEC filings.
The legal and other professional costs the Company incurred during fiscal year 2020 in connection with the Internal Review and disclosed elsewhere in this Report include approximately $8.1 million advanced for Mr. Milton’s attorneys’ fees under his indemnification agreement with the Company, of which $1.5 million was paid during the fiscal year 2020. The Company expects to incur additional costs associated with the Staff of the Division of Enforcement and the SDNY investigations and the Internal Review in fiscal year 2021, which will be expensed as incurred and which could be significant in the periods in which they are recorded.
The Company cannot predict the ultimate outcome of the Staff of the Division of Enforcement and the SDNY investigations, nor can it predict whether any other governmental authorities will initiate separate investigations. The outcome of the Staff of the Division of Enforcement and the SDNY investigations and any related legal and administrative proceedings could include a wide variety of outcomes, including the institution of administrative, civil injunctive or criminal proceedings involving the Company and/or current or former employees, officers and/or directors, the imposition of fines and other penalties, remedies and/or sanctions, modifications to business practices and compliance programs and/or referral to other governmental agencies for other appropriate actions. It is not possible to accurately predict at this time when matters relating to the Staff of the Division of Enforcement and the SDNY investigations will be completed, the final outcome of the Staff of the Division of Enforcement and the SDNY investigations, what if any actions may be taken by the Staff of the Division of Enforcement, the SDNY or by other governmental agencies, or the effect that such actions may have on our business, prospects, operating results and financial condition, which could be material.
The Staff of the Division of Enforcement and the SDNY investigations, including any matters identified in the Internal Review, could also result in (1) third-party claims against the Company, which may include the assertion of claims for monetary damages, including but not limited to interest, fees, and expenses, (2) damage to the Company's business or reputation, (3) loss of, or adverse effect on, cash flow, assets, goodwill, results of operations, business, prospects, profits or business value, including the possibility of certain of the Company's existing contracts being cancelled, (4) adverse consequences on the Company's ability to obtain or continue financing for current or future projects and/or (5) claims by directors, officers, employees, affiliates, advisors, attorneys, agents, debt holders or other interest holders or constituents of the Company or its subsidiaries, any of which could have a material adverse effect on the Company's business, prospects, operating results and financial condition.
Further, to the extent that these investigations and any resulting third-party claims yield adverse results over time, such results could jeopardize the Company's operations and exhaust its cash reserves, and could cause stockholders to lose their entire investment.
Shareholder Securities Litigation
Beginning on September 15, 2020, six putative class action lawsuits were filed against the Company and certain of its current and former officers and directors, asserting violations of federal securities laws under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, in one case, violations of the Unfair Competition Law under California law (the “Shareholder Securities Litigation”). The complaints generally allege that the Company and certain of its officers and directors made false and/or misleading statements in press releases and public filings regarding the Company's business plan and prospects. The actions are: Borteanu v. Nikola Corporation, et al. (Case No. 2:20-cv-01797-JZB), filed by Daniel Borteanu in the United States District Court of the District of Arizona on September 15, 2020; Salem v. Nikola
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
Corporation, et al. (Case No. 1:20-cv-04354), filed by Arab Salem in the United States District Court for the Eastern District of New York on September 16, 2020; Wojichowski v. Nikola Corporation, et al. (Case No. 2:20-cv-01819-DLR), filed by John Wojichowski in the United States District Court for the District of Arizona on September 17, 2020; Malo v. Nikola Corporation, et al. (Case No. 5:20-cv-02168), filed by Douglas Malo in the United States District Court for the Central District of California on October 16, 2020; and Holzmacher, et al. v. Nikola Corporation, et al. (Case No. 2:20-cv-2123-JJT), filed by Albert Holzmacher, Michael Wood and Tate Wood in the United States District Court for the District of Arizona on November 3, 2020, and Eves v. Nikola Corporation, et al. (Case No. 2:20-cv-02168-DLR), filed by William Eves in the United States District Court for the District of Arizona on November 10, 2020. In October 2020, stipulations by and among the parties to extend the time for the defendants to respond to the complaints until a lead plaintiff, lead counsel, and an operative complaint are identified were entered as orders in certain of the filed actions. On November 16, 2020 and December 8, 2020 respectively, orders in the Malo and Salem actions were entered to transfer the actions to the United States District Court for the District of Arizona.
On November 16, 2020, ten motions both to consolidate the pending securities actions and to be appointed as lead plaintiff were filed by putative class members. On December 15, 2020, the United States District Court for the District of Arizona consolidated the actions under lead case Borteanu v. Nikola Corporation, et al., No. CV-20-01797-PXL-SPL, and appointed Angelo Baio as the “Lead Plaintiff”. On December 23, 2020, a motion for reconsideration of the Court’s order appointing the Lead Plaintiff was filed. On December 30, 2020, a petition for writ of mandamus seeking to vacate the District Court’s Lead Plaintiff order and directing the court to appoint another Lead Plaintiff was filed before the United States Court of Appeals for the Ninth Circuit, Case No. 20-73819. Both the motion for reconsideration and mandamus petition remain pending.
On January 28, 2021, the district court entered a scheduling order in the consolidated lawsuit. The Lead Plaintiff’s Amended Consolidated Complaint is due March 15, 2021, the Company’s responsive pleading is due April 29, 2021, the Lead Plaintiff’s opposition to a motion to dismiss, should one be filed by the defendants, is due June 1, 2021, and the defendants’ reply is due July 1, 2021.
Plaintiffs seek an unspecified amount in damages, attorneys’ fees, and other relief. The Company intends to vigorously defend itself. The Company is unable to estimate the potential loss or range of loss, if any, associated with these lawsuits, which could be material.
Derivative Litigation
Beginning on September 23, 2020, two purported shareholder derivative actions were filed in the United States District Court for the District of Delaware (Byun v. Milton, et al., Case No. 1:20-cv-01277-UNA; Salguocar v. Girsky et. al., Case No. 1:20-cv-01404-UNA), purportedly on behalf of the Company, against certain of the Company's current and former directors alleging breaches of fiduciary duties, violations of Section 14(a) of the Exchange Act, and gross mismanagement. The Byun action also brings claims for unjust enrichment and abuse of control, while the Salguocar action brings a claim for waste of corporate assets. On October 19, 2020, the Byun action was stayed until 30 days after the earlier of (a) the Shareholder Securities Litigation being dismissed in their entirety with prejudice; (b) defendants filing an answer to any complaint in the Shareholder Securities Litigation; or (c) a joint request by plaintiff and defendants to lift the stay. On November 17, 2020, the Byun and Salguocar actions were consolidated as In re Nikola Corporation Derivative Litigation, Lead Case No. 20-cv-01277-CFC. The consolidated action remains stayed.
On December 18, 2020, a purported shareholder derivative action was filed in the United States District Court for the District of Arizona, Huhn v. Milton et al., Case No. 2:20-cv-02437-DWL, purportedly on behalf of the Company, against certain of the Company’s current and former directors alleging breaches of fiduciary duties, violations of Section 14(a) of the Exchange Act, unjust enrichment, and against defendant Jeff Ubben, a member of the Company’s board of directors, insider selling and misappropriation of information. On January 26, 2021, the Huhn action was stayed until 30 days after the earlier of (a) the Shareholder Securities Litigation being dismissed in its entirety with prejudice; (b) defendants filing an answer to any complaint in the Shareholder Securities Litigation; or (c) a joint request by plaintiff and defendants to lift the stay.
The complaints seek unspecified monetary damages, costs and fees associated with bringing the actions, and reform of the Company's corporate governance, risk management and operating practices. The Company intends to vigorously defend against the foregoing complaints. The Company is unable to estimate the potential loss or range of loss, if any, associated with these lawsuits, which could be material.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
Books and Record Demands Pursuant to Delaware General Corporation Law Section 220
The Company has received a number of demand letters pursuant to Section 220 of the Delaware General Corporation Law (“DGCL”), seeking disclosure of certain of the Company’s records. The Company has responded to those demands, stating its belief that the demand letters fail to fully comply with the requirements of Section 220 of the DGCL. However, in the interest of resolution and while preserving all rights of the defendants, the Company has engaged in negotiations with the shareholders, and intends to provide certain information that the Company had reasonably available to it.
On January 15, 2021, Plaintiff Frances Gatto filed a complaint in Delaware Chancery Court seeking to compel inspection of books and records pursuant to Section 220 of the DGCL. On January 26, 2021, Plaintiff’s counsel and the Company filed a joint letter, notifying the Court that the parties are engaged in dialogue regarding Plaintiff’s demand, and the Company need not answer or otherwise respond to the complaint at this time. The parties have agreed to update the Court within 60 days, or if the parties cannot reach a consensual resolution.
Purchase Commitments
The Company enters into commitments under non-cancellable or partially cancellable purchase orders or vendor agreements in the normal course of business. The following table presents the Company's commitments and contractual obligations as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period as of December 31, 2020
|
|
Total
|
|
Less than 1 Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
More than 5 Years
|
Purchase Obligations
|
$
|
31,161
|
|
|
$
|
21,758
|
|
|
$
|
9,403
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,161
|
|
|
$
|
21,758
|
|
|
$
|
9,403
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commitments and Contingencies on Land Conveyance
In February 2019, the Company was conveyed 430 acres of land in Coolidge, Arizona, by PLH. The purpose of the land conveyance was to incentivize the Company to locate its manufacturing facility in Coolidge, Arizona, and provide additional jobs to the region. The Company is required to commence construction, as defined within the agreement, of the manufacturing facility within two years of February 2019 (the “Manufacturing Facility Commencement Deadline”), and is required to complete construction of the manufacturing facility within five years of February 2019 (the “Manufacturing Facility Deadline”).
Upon the earlier of the Manufacturing Facility Commencement Deadline or the commencement of construction the Company will deposit $4.0 million in escrow to PLH. The amount in escrow will be returned to the Company upon completion of construction. The Company broke ground on the manufacturing facility during the third quarter of 2020 and met the definition of commencement of construction as of September 30, 2020. The required deposit is included within non-current restricted cash and cash equivalents on the consolidated balance sheets.
If the Company fails to meet the Manufacturing Facility Deadline, the Company may extend the completion deadline by paying PLH $0.2 million per month, until construction is completed (the "Monthly Payment Option"). The extension of the Manufacturing Facility Deadline beyond two years will require express written consent of PLH. If the Company does not exercise the Monthly Payment Option, fails to make timely payments on the Monthly Payment Option, or fails to complete construction by the extended Manufacturing Facility Deadline, PLH is entitled to either the $4.0 million security deposit or may reacquire the land and property at the appraised value to be determined by independent appraisers selected by the Company and PLH.
Contingent Fee for Advisory Services
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
In January 2020, the Company entered into an agreement to obtain advisory services for the potential Business Combination. The fee for the services was contingent upon completion of the Business Combination, which occurred on June 3, 2020. The contingent fee of $3.0 million was paid during the second quarter of 2020.
15. NET LOSS PER SHARE
The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2020, 2019, and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
Net loss
|
$
|
(384,314)
|
|
|
$
|
(88,656)
|
|
|
$
|
(64,293)
|
|
Less: Premium on repurchase of redeemable convertible preferred stock
|
(13,407)
|
|
|
(16,816)
|
|
|
(166)
|
|
Net loss attributable to common stockholder, basic and diluted
|
$
|
(397,721)
|
|
|
$
|
(105,472)
|
|
|
$
|
(64,459)
|
|
Denominator:
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
335,325,271
|
|
|
262,528,769
|
|
|
226,465,041
|
|
Net loss per share to common stockholder, basic and diluted
|
$
|
(1.19)
|
|
|
$
|
(0.40)
|
|
|
$
|
(0.28)
|
|
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common stock outstanding would have been anti-dilutive.
The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Stock options, including performance stock options
|
32,529,224
|
|
|
40,012,825
|
|
|
25,791,263
|
|
Warrants
|
760,915
|
|
|
—
|
|
|
—
|
|
Restricted stock units, including Market Based RSUs
|
18,344,243
|
|
|
—
|
|
|
—
|
|
|
51,634,382
|
|
|
40,012,825
|
|
|
25,791,263
|
|
16. SUBSEQUENT EVENTS
During the first quarter of 2021, the Company repaid its term note with JP Morgan Chase for $4.1 million.
NIKOLA CORPORATION
Notes to Consolidated Financial Statements (Continued)
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables sets forth the unaudited consolidated statements of operations for each of the fiscal quarters in 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
December 31, 2020
|
|
September 30, 2020
|
|
June 30, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
September 30, 2019
|
|
June 30, 2019
|
|
March 31, 2019
|
Solar revenues
|
—
|
|
|
—
|
|
|
36
|
|
|
58
|
|
|
49
|
|
|
296
|
|
|
13
|
|
|
124
|
|
Cost of solar revenues
|
—
|
|
|
—
|
|
|
30
|
|
|
43
|
|
|
44
|
|
|
141
|
|
|
24
|
|
|
62
|
|
Gross profit
|
—
|
|
|
—
|
|
|
6
|
|
|
15
|
|
|
5
|
|
|
155
|
|
|
(11)
|
|
|
62
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
67,521
|
|
|
51,496
|
|
|
42,525
|
|
|
24,077
|
|
|
22,781
|
|
|
9,482
|
|
|
11,854
|
|
|
23,397
|
|
Selling, general and administrative
|
64,903
|
|
|
65,782
|
|
|
44,104
|
|
|
7,935
|
|
|
5,154
|
|
|
3,693
|
|
|
5,344
|
|
|
6,501
|
|
Impairment expense
|
14,415
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total operating expenses
|
146,839
|
|
|
117,278
|
|
|
86,629
|
|
|
32,012
|
|
|
27,935
|
|
|
13,175
|
|
|
17,198
|
|
|
29,898
|
|
Loss from operations
|
(146,839)
|
|
|
(117,278)
|
|
|
(86,623)
|
|
|
(31,997)
|
|
|
(27,930)
|
|
|
(13,020)
|
|
|
(17,209)
|
|
|
(29,836)
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
(53)
|
|
|
171
|
|
|
22
|
|
|
62
|
|
|
374
|
|
|
411
|
|
|
338
|
|
|
333
|
|
Revaluation of Series A redeemable convertible preferred stock warrant liability
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,844)
|
|
|
98
|
|
|
(593)
|
|
Loss forward contract liability
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,324)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income (expense), net
|
(597)
|
|
|
(340)
|
|
|
(23)
|
|
|
114
|
|
|
1,278
|
|
|
85
|
|
|
9
|
|
|
1
|
|
Loss before income taxes and equity in net loss of affiliate
|
(147,489)
|
|
|
(117,447)
|
|
|
(86,624)
|
|
|
(33,145)
|
|
|
(26,278)
|
|
|
(15,368)
|
|
|
(16,764)
|
|
|
(30,095)
|
|
Income tax expense (benefit)
|
(1,030)
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
146
|
|
|
2
|
|
|
2
|
|
Loss before equity in net loss of affiliate
|
(146,459)
|
|
|
(117,449)
|
|
|
(86,625)
|
|
|
(33,146)
|
|
|
(26,279)
|
|
|
(15,514)
|
|
|
(16,766)
|
|
|
(30,097)
|
|
Equity in net loss of affiliate
|
(637)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net loss
|
(147,096)
|
|
|
(117,449)
|
|
|
(86,625)
|
|
|
(33,146)
|
|
|
(26,279)
|
|
|
(15,514)
|
|
|
(16,766)
|
|
|
(30,097)
|
|
Premium paid on repurchase of redeemable convertible preferred stock
|
—
|
|
|
—
|
|
|
(13,407)
|
|
|
—
|
|
|
(16,816)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net loss attributable to common stockholders, basic and diluted
|
(147,096)
|
|
|
(117,449)
|
|
|
(100,032)
|
|
|
(33,146)
|
|
|
(43,095)
|
|
|
(15,514)
|
|
|
(16,766)
|
|
|
(30,097)
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(0.38)
|
|
|
$
|
(0.31)
|
|
|
$
|
(0.33)
|
|
|
$
|
(0.12)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.06)
|
|
|
$
|
(0.06)
|
|
|
$
|
(0.12)
|
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
385,983,645
|
|
|
377,660,477
|
|
|
303,785,616
|
|
|
271,896,258
|
|
|
268,698,455
|
|
|
260,534,724
|
|
|
260,406,343
|
|
|
260,406,343
|
|
Figures may not total due to rounding of quarterly periods
As an emerging growth company, the Company elected to take advantage of the extended transition provisions for adoption of ASC 842. As a result, quarterly financial results previously reported by the Company in its unaudited consolidated statement of operations for each of the first three quarterly periods of 2020, were not required to reflect the adoption of ASC 842. These periods were therefore presented using a different basis of accounting than the basis used to prepare the consolidated financial statements for the fiscal year 2020 annual and unaudited quarterly reporting periods presented in this Form 10-K, which reflect the impact of ASC 842, adopted as of January 1, 2020.