Filed pursuant to Rule 424(b)(3)
Registration No. 333-239940
PROSPECTUS SUPPLEMENT NO. 96
(to Prospectus dated July 27, 2020)
Nikola Corporation
Up to 249,843,711 Shares of Common Stock
This prospectus supplement supplements the prospectus dated July 27, 2020 (the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-239940). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on October 31, 2024 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.
The Prospectus and this prospectus supplement relate to the offer and sale from time to time by the selling securityholders named in the Prospectus or their donees, pledgees, transferees or other successors in interest (the “Selling Securityholders”) of up to 249,843,711 shares of our common stock, $0.0001 par value per share (“Common Stock”), which includes (i) up to 6,640,000 shares held by certain persons and entities (the “Original Holders”) holding shares of Common Stock initially purchased by VectoIQ Holdings, LLC (the “Sponsor”) and Cowen Investments II, LLC (“Cowen Investments” and, together with the Sponsor, the “Founders”) in a private placement in connection with the initial public offering of VectoIQ Acquisition Corp. and (ii) 243,203,711 shares held by certain affiliates of the Company. We are registering the shares for resale pursuant to such stockholders’ registration rights under a Registration Rights and Lock-Up Agreement between us and such stockholders, which in addition to such registration rights, also provides for certain transfer and lock-up restrictions on such shares.
Our Common Stock is listed on the Nasdaq Global Select Market under the symbol “NKLA”. On October 30, 2024, the closing price of our Common Stock was $4.23.
This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.
See the section entitled “Risk Factors” beginning on page 7 of the Prospectus to read about factors you should consider before buying our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is October 31, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2024
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-38495
Nikola Corporation
(Exact Name of Registrant as Specified in Its Charter)
| | | | | | | | | | | | | | |
| Delaware | | 82-4151153 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| | | | |
| 4141 E Broadway Road | | | |
| Phoenix, AZ | | 85040 | |
| (Address of principal executive offices) | | (Zip Code) | |
| | | | |
| (480) 581-8888 | |
| (Registrant’s telephone number, including area code) | |
| | | | |
| N/A | |
| (Former name, former address and former fiscal year, if changed since last report) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, $0.0001 par value per share | | NKLA | | The Nasdaq Stock Market LLC |
| | | | |
| | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 28, 2024, there were 60,867,055 shares of the registrant’s common stock outstanding.
NIKOLA CORPORATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
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| | Page |
Summary Risk Factors | |
PART I - FINANCIAL INFORMATION |
Item 1. | Condensed Consolidated Financial Statements | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
PART II - OTHER INFORMATION |
Item 1. | | |
Item 1A. | | |
Item 6. | | |
| |
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company.
•We have a history of losses, expect to incur significant expenses and continuing losses for the foreseeable future, and there is substantial doubt about our ability to continue as a going concern.
•We need to raise additional capital to continue as a going concern, which capital may not be available to us when we need it. If we cannot raise additional capital when needed, our operations and prospects will be negatively affected.
•We may be unable to adequately control the costs associated with our operations.
•Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
•Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
•Our success is dependent upon the trucking market's willingness to adopt hydrogen-electric ("FCEV") trucks and battery-electric ("BEV") trucks.
•Material impairment of indefinite or long-lived assets may adversely impact our results of operations.
•The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.
•If we fail to manage our future growth effectively, we may not be able to market and sell our vehicles successfully.
•We may face legal challenges in one or more states attempting to sell directly to fleets or end users, which could materially and adversely affect our costs.
•We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.
•Product recalls have and may in the future materially and adversely affect our business, prospects, operating results and financial condition.
•Our success will depend on our ability to economically manufacture our trucks at scale and establish a hydrogen fueling ecosystem to meet our customers’ business needs, and our ability to develop and manufacture trucks of sufficient quality and appeal to end user fleets on schedule and at scale.
•We may experience significant delays in the design, validation, and manufacture of our trucks, which could harm our business and prospects.
•Increases in costs, disruption of supply or shortage of components and raw materials could harm our business.
•We may not be able to source the hydrogen needed to establish our planned hydrogen fueling solutions in sufficient volumes or at favorable prices, or at all, or sell hydrogen to customers at prices at or above our cost.
•We may face challenges related to perceptions of safety for commercial electric vehicles, especially if adverse events or accidents occur that are linked to the quality or safety of commercial electric vehicles.
•We may not have sufficient cash flow from our business to pay our substantial debt, and we may not be able to refinance or restructure our debt.
•We identified a material weakness in our internal control over financial reporting, and have identified other material weaknesses in the past. If we are unable to remediate these material weaknesses, or if we experience additional material weaknesses or other deficiencies in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial results.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NIKOLA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| | | | | | | | | | | |
| September 30, | | December 31, |
| 2024 | | 2023 |
| (Unaudited) | | |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 198,301 | | | $ | 464,715 | |
Restricted cash and cash equivalents | 3,374 | | | 1,224 | |
Accounts receivable, net | 51,773 | | | 17,974 | |
Inventory | 76,076 | | | 62,588 | |
| | | |
Prepaid expenses and other current assets | 61,996 | | | 25,911 | |
Total current assets | 391,520 | | | 572,412 | |
Restricted cash and cash equivalents | 16,086 | | | 28,026 | |
Long-term deposits | 17,256 | | | 14,954 | |
| | | |
Property, plant and equipment, net | 490,244 | | | 503,416 | |
Intangible assets, net | 52,130 | | | 85,860 | |
Investment in affiliate | 56,197 | | | 57,062 | |
Goodwill | — | | | 5,238 | |
| | | |
Other assets | 12,610 | | | 7,889 | |
Total assets | $ | 1,036,043 | | | $ | 1,274,857 | |
Liabilities and stockholders' equity | | | |
Current liabilities | | | |
Accounts payable | $ | 57,161 | | | $ | 44,133 | |
Accrued expenses and other current liabilities | 205,508 | | | 207,022 | |
Debt and finance lease liabilities, current (including $63.2 million and $0 measured at fair value, respectively) | 73,111 | | | 8,950 | |
Total current liabilities | 335,780 | | | 260,105 | |
Long-term debt and finance lease liabilities, net of current portion | 270,018 | | | 269,279 | |
Operating lease liabilities | 6,806 | | | 4,765 | |
| | | |
| | | |
Other long-term liabilities | 44,193 | | | 21,534 | |
| | | |
Total liabilities | 656,797 | | | 555,683 | |
Commitments and contingencies (Note 11) | | | |
Stockholders' equity | | | |
Preferred stock, $0.0001 par value, 150,000,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023 | — | | | — | |
Common stock, $0.0001 par value, 1,000,000,000 and 1,600,000,000 shares authorized as of September 30, 2024 and December 31, 2023, respectively, 55,283,396 and 44,336,100 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively(1) | 6 | | | 4 | |
Additional paid-in capital | 3,931,702 | | | 3,790,401 | |
Accumulated deficit | (3,552,246) | | | (3,071,069) | |
Accumulated other comprehensive loss | (216) | | | (162) | |
Total stockholders' equity | 379,246 | | | 719,174 | |
Total liabilities and stockholders' equity | $ | 1,036,043 | | | $ | 1,274,857 | |
(1) Shares issued and outstanding have been adjusted to reflect the one-for-thirty (1-for-30) reverse stock split that became effective on June 24, 2024. See Note 1, Basis of Presentation.
See accompanying notes to the condensed consolidated financial statements.
4
NIKOLA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenues: | | | | | | | |
Truck sales | $ | 24,847 | | | $ | (2,368) | | | $ | 61,008 | | | $ | 19,693 | |
Service and other | 334 | | | 636 | | | 2,989 | | | 4,614 | |
Total revenues | 25,181 | | | (1,732) | | | 63,997 | | | 24,307 | |
Cost of revenues: | | | | | | | |
Truck sales | 82,205 | | | 122,679 | | | 222,946 | | | 195,902 | |
Service and other | 4,919 | | | 1,092 | | | 15,295 | | | 4,236 | |
Total cost of revenues | 87,124 | | | 123,771 | | | 238,241 | | | 200,138 | |
Gross loss | (61,943) | | | (125,503) | | | (174,244) | | | (175,831) | |
Operating expenses: | | | | | | | |
Research and development | 41,800 | | | 41,966 | | | 121,458 | | | 168,286 | |
Selling, general, and administrative | 41,629 | | | 57,982 | | | 126,157 | | | 159,443 | |
Impairment expense | 33,419 | | | — | | | 33,419 | | | — | |
Loss on supplier deposits | — | | | 716 | | | — | | | 18,433 | |
Total operating expenses | 116,848 | | | 100,664 | | | 281,034 | | | 346,162 | |
Loss from operations | (178,791) | | | (226,167) | | | (455,278) | | | (521,993) | |
Other income (expense): | | | | | | | |
Interest expense, net | (10,875) | | | (52,680) | | | (17,094) | | | (71,262) | |
| | | | | | | |
| | | | | | | |
Gain on divestiture of affiliate | — | | | — | | | — | | | 70,849 | |
Loss on debt extinguishment | (871) | | | — | | | (3,184) | | | (20,362) | |
Other expense, net | (9,417) | | | (146,654) | | | (4,664) | | | (151,969) | |
Loss before income taxes and equity in net profit (loss) of affiliates | (199,954) | | | (425,501) | | | (480,220) | | | (694,737) | |
Income tax expense | — | | | 1 | | | 92 | | | 1 | |
Loss before equity in net profit (loss) of affiliates | (199,954) | | | (425,502) | | | (480,312) | | | (694,738) | |
Equity in net profit (loss) of affiliates | 173 | | | (262) | | | (865) | | | (16,287) | |
Net loss from continuing operations | (199,781) | | | (425,764) | | | (481,177) | | | (711,025) | |
Discontinued operations: | | | | | | | |
Loss from discontinued operations | — | | | — | | | — | | | (76,726) | |
Loss from deconsolidation of discontinued operations | — | | | — | | | — | | | (24,935) | |
Net loss from discontinued operations | — | | | — | | | — | | | (101,661) | |
Net loss | $ | (199,781) | | | $ | (425,764) | | | $ | (481,177) | | | $ | (812,686) | |
| | | | | | | |
Basic and diluted net loss per share (1): | | | | | | | |
Net loss from continuing operations | $ | (3.89) | | | $ | (14.90) | | | $ | (10.12) | | | $ | (30.20) | |
Net loss from discontinued operations | $ | — | | | $ | — | | | $ | — | | | $ | (4.32) | |
Net loss | $ | (3.89) | | | $ | (14.90) | | | $ | (10.12) | | | $ | (34.52) | |
| | | | | | | |
Weighted-average shares outstanding, basic and diluted(1) | 51,388,962 | | | 28,573,800 | | | 47,553,460 | | | 23,544,174 | |
(1) Amounts have been adjusted to reflect the one-for-thirty (1-for-30) reverse stock split that became effective on June 24, 2024. See Note 1, Basis of Presentation.
See accompanying notes to the condensed consolidated financial statements.
5
NIKOLA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net loss | $ | (199,781) | | | $ | (425,764) | | | $ | (481,177) | | | $ | (812,686) | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment, net of tax | (195) | | | 145 | | | (54) | | | 1,629 | |
Comprehensive loss | $ | (199,976) | | | $ | (425,619) | | | $ | (481,231) | | | $ | (811,057) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See accompanying notes to the condensed consolidated financial statements.
6
NIKOLA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2024 |
| Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of June 30, 2024 | 48,473,984 | | | $ | 5 | | | $ | 3,876,034 | | | $ | (3,352,465) | | | $ | (21) | | | $ | 523,553 | |
Issuance of shares for RSU awards | 94,722 | | | — | | | — | | | — | | | — | | | — | |
Common stock issued for conversions of 8.25% Convertible Notes | 9,257 | | | — | | | 75 | | | — | | | — | | | 75 | |
Common stock issued for conversions of Senior Convertible Notes | 4,600,695 | | | 1 | | | 26,185 | | | — | | | — | | | 26,186 | |
Common stock issued under Equity Distribution Agreement, net | 2,104,738 | | | — | | | 20,807 | | | — | | | — | | | 20,807 | |
Stock-based compensation | — | | | — | | | 8,601 | | | — | | | — | | | 8,601 | |
Net loss | — | | | — | | | — | | | (199,781) | | | — | | | (199,781) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (195) | | | (195) | |
Balance as of September 30, 2024 | 55,283,396 | | | $ | 6 | | | $ | 3,931,702 | | | $ | (3,552,246) | | | $ | (216) | | | $ | 379,246 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2024 |
| Common Stock(1) | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of December 31, 2023 | 44,336,100 | | | $ | 4 | | | $ | 3,790,401 | | | $ | (3,071,069) | | | $ | (162) | | | $ | 719,174 | |
Issuance of shares for RSU awards | 354,408 | | | — | | | — | | | — | | | — | | | — | |
Common stock issued for conversions of 8.25% Convertible Notes | 733,331 | | | — | | | 18,112 | | | — | | | — | | | 18,112 | |
Common stock issued for conversions of Senior Convertible Notes | 4,600,695 | | | 1 | | | 26,185 | | | — | | | — | | | 26,186 | |
Common stock issued under Equity Distribution Agreement, net | 5,258,862 | | | 1 | | | 71,667 | | | — | | | — | | | 71,668 | |
Stock-based compensation | — | | | — | | | 25,337 | | | — | | | — | | | 25,337 | |
Net loss | — | | | — | | | — | | | (481,177) | | | — | | | (481,177) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (54) | | | (54) | |
Balance as of September 30, 2024 | 55,283,396 | | | $ | 6 | | | $ | 3,931,702 | | | $ | (3,552,246) | | | $ | (216) | | | $ | 379,246 | |
(1) Amounts have been adjusted to reflect the one-for-thirty (1-for-30) reverse stock split that became effective on June 24, 2024. See Note 1, Basis of Presentation.
See accompanying notes to the condensed consolidated financial statements.
7
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 |
| Common Stock(1) | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of June 30, 2023 | 25,643,344 | | | $ | 3 | | | $ | 2,944,578 | | | $ | (2,421,772) | | | $ | (93) | | | $ | 522,716 | |
Exercise of stock options | 198,909 | | | — | | | 6,353 | | | — | | | — | | | 6,353 | |
Issuance of shares for RSU awards | 104,770 | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | |
Common stock issued under Equity Distribution Agreement, net | 922,096 | | | — | | | 53,139 | | | — | | | — | | | 53,139 | |
Issuance of common stock upon conversion of Senior Convertible Notes | 4,470,054 | | | — | | | 139,250 | | | — | | | — | | | 139,250 | |
Common stock issued for conversion of April 2023 Toggle Convertible Notes | 2,415,293 | | | — | | | 115,152 | | | — | | | — | | | 115,152 | |
Common stock received for contingent stock consideration | (686,667) | | | — | | | (2) | | | (69,937) | | | — | | | (69,939) | |
Reclassification of conversion features embedded in Toggle Convertible Notes to equity | — | | | — | | | 241,851 | | | — | | | — | | | 241,851 | |
Reclassification of share-based payment awards from liability to equity | — | | | — | | | 20,992 | | | — | | | — | | | 20,992 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Reclassification of share-based payment awards from equity to liability | — | | | — | | | (8,395) | | | — | | | — | | | (8,395) | |
Stock-based compensation | — | | | — | | | 8,068 | | | — | | | — | | | 8,068 | |
Net loss | — | | | — | | | — | | | (425,764) | | | — | | | (425,764) | |
Other comprehensive income | — | | | — | | | — | | | — | | | 145 | | | 145 | |
Balance as of September 30, 2023 | 33,067,799 | | | $ | 3 | | | $ | 3,520,986 | | | $ | (2,917,473) | | | $ | 52 | | | $ | 603,568 | |
(1) Amounts have been adjusted to reflect the one-for-thirty (1-for-30) reverse stock split that became effective on June 24, 2024. See Note 1, Basis of Presentation.
See accompanying notes to the condensed consolidated financial statements.
8
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2023 |
| Common Stock(1) | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Total Stockholders' Equity |
| Shares | | Amount | | | | |
Balance as of December 31, 2022 | 17,097,850 | | | $ | 2 | | | $ | 2,562,904 | | | $ | (2,034,850) | | | $ | (1,577) | | | $ | 526,479 | |
Exercise of stock options | 224,121 | | | — | | | 7,155 | | | — | | | — | | | 7,155 | |
Issuance of shares for RSU awards | 363,858 | | | — | | | — | | | — | | | — | | | — | |
Common stock issued under Tumim Purchase Agreements | 1,073,726 | | | — | | | 67,587 | | | — | | | — | | | 67,587 | |
Common stock issued under Equity Distribution Agreement, net | 2,223,015 | | | — | | | 115,593 | | | — | | | — | | | 115,593 | |
Issuance of common stock upon conversion of Senior Convertible Notes | 7,380,412 | | | — | | | 246,431 | | | — | | | — | | | 246,431 | |
Common stock issued in public offering | 997,024 | | | — | | | 32,244 | | | — | | | — | | | 32,244 | |
Common stock issued in registered direct offering | 1,979,167 | | | 1 | | | 63,155 | | | — | | | — | | | 63,156 | |
Common stock issued for conversion of April 2023 Toggle Convertible Notes | 2,415,293 | | | | | 115,152 | | | — | | | — | | | 115,152 | |
Common stock received for contingent stock consideration | (686,667) | | | — | | | (2) | | | (69,937) | | | — | | | (69,939) | |
Reclassification of conversion features embedded in Toggle Convertible Notes to equity | — | | | — | | | 241,851 | | | — | | | — | | | 241,851 | |
Reclassification of share-based payment awards from liability to equity | — | | | — | | | 20,992 | | | — | | | — | | | 20,992 | |
Reclassification of share-based payment awards from equity to liability | — | | | — | | | (10,401) | | | — | | | — | | | (10,401) | |
Stock-based compensation | — | | | — | | | 58,325 | | | — | | | — | | | 58,325 | |
Net loss | — | | | — | | | — | | | (812,686) | | | — | | | (812,686) | |
Other comprehensive income | — | | | — | | | — | | | — | | | 1,629 | | | 1,629 | |
Balance as of September 30, 2023 | 33,067,799 | | | $ | 3 | | | $ | 3,520,986 | | | $ | (2,917,473) | | | $ | 52 | | | $ | 603,568 | |
(1) Amounts have been adjusted to reflect the one-for-thirty (1-for-30) reverse stock split that became effective on June 24, 2024. See Note 1, Basis of Presentation.
See accompanying notes to the condensed consolidated financial statements.
9
NIKOLA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
Cash flows from operating activities | | | |
Net loss | $ | (481,177) | | | $ | (812,686) | |
Less: Loss from discontinued operations | — | | | (101,661) | |
Loss from continuing operations | (481,177) | | | (711,025) | |
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | | | |
Depreciation and amortization | 33,408 | | | 28,758 | |
Stock-based compensation | 25,337 | | | 68,916 | |
Equity in net loss of affiliates | 865 | | | 16,287 | |
Revaluation of financial instruments | 6,284 | | | 195,132 | |
Revaluation of contingent stock consideration | — | | | (43,981) | |
Inventory write-downs | 56,587 | | | 64,500 | |
Non-cash interest expense | 11,906 | | | 72,846 | |
Loss on supplier deposits | — | | | 18,433 | |
Gain on divestiture of affiliate | — | | | (70,849) | |
Loss on debt extinguishment | 3,184 | | | 20,362 | |
Loss on disposal of assets | 2,921 | | | — | |
Impairment expense | 33,419 | | | — | |
Other non-cash activity | 5,674 | | | 3,888 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable, net | (33,799) | | | 20,932 | |
Inventory | (71,085) | | | (9,983) | |
Prepaid expenses and other current assets | (14,017) | | | (48,332) | |
Other assets | (1,595) | | | (2,384) | |
Accounts payable, accrued expenses and other current liabilities | (3,478) | | | (1,672) | |
Long-term deposits | (262) | | | (1,377) | |
Operating lease liabilities | (2,769) | | | (1,191) | |
Other long-term liabilities | 29,064 | | | 2,316 | |
Net cash used in operating activities | (399,533) | | | (378,424) | |
Cash flows from investing activities | | | |
Purchases and deposits of property, plant and equipment | (43,740) | | | (108,409) | |
Proceeds from the sale of assets | 21,398 | | | 20,742 | |
Divestiture of affiliate | — | | | 35,000 | |
Payments to Assignee | — | | | (2,725) | |
Investments in affiliate | — | | | (250) | |
Net cash used in investing activities | (22,342) | | | (55,642) | |
See accompanying notes to the condensed consolidated financial statements.
10
| | | | | | | | | | | |
Cash flows from financing activities | | | |
Proceeds from the exercise of stock options | — | | | 7,393 | |
Proceeds from issuance of shares under the Tumim Purchase Agreements | — | | | 67,587 | |
Proceeds from registered direct offering, net of underwriter's discount | — | | | 63,456 | |
Proceeds from public offering, net of underwriter's discount | — | | | 32,244 | |
Proceeds from issuance of common stock under Equity Distribution Agreement, net of commissions and other fees paid | 73,464 | | | 115,027 | |
Proceeds from issuance of convertible notes | 80,000 | | | 217,075 | |
| | | |
Proceeds from issuance of financing obligation, net of issuance costs | — | | | 53,548 | |
Proceeds from insurance premium financing | 4,598 | | | 5,223 | |
Repayment of debt and promissory notes | (522) | | | (45,287) | |
Payment for Coupon Make-Whole Premium | (4,579) | | | — | |
Payments on insurance premium financing | (3,661) | | | (3,550) | |
Payments on finance lease liabilities and financing obligations | (3,549) | | | (459) | |
Payments for issuance costs | (80) | | | — | |
Net cash provided by financing activities | 145,671 | | | 512,257 | |
Net increase (decrease) in cash and cash equivalents, including restricted cash and cash equivalents | (276,204) | | | 78,191 | |
Cash and cash equivalents, including restricted cash and cash equivalents, beginning of period | 493,965 | | | 313,909 | |
Cash and cash equivalents, including restricted cash and cash equivalents, end of period | $ | 217,761 | | | $ | 392,100 | |
| | | |
Cash flows from discontinued operations: | | | |
Operating activities | $ | — | | | $ | (4,964) | |
Investing activities | — | | | (1,804) | |
Financing activities | — | | | (572) | |
Net cash used in discontinued operations | $ | — | | | $ | (7,340) | |
| | | |
Supplementary cash flow disclosures: | | | |
Cash paid for interest | $ | 13,859 | | | $ | 5,561 | |
Cash interest received | $ | 12,141 | | | $ | 7,153 | |
Supplementary disclosures for noncash investing and financing activities: | | | |
Conversion of Senior Convertible Notes into common stock | $ | 26,186 | | | $ | 246,431 | |
Conversion of 8.25% Convertible Notes | $ | 18,112 | | | $ | — | |
Purchases of property, plant and equipment included in liabilities | $ | 12,311 | | | $ | 13,551 | |
PIK interest | $ | 11,135 | | | $ | 16,263 | |
Leased assets obtained in exchange for new finance lease liabilities | $ | 4,407 | | | $ | 10,982 | |
Accrued commissions under Equity Distribution Agreement | $ | 1,844 | | | $ | 1,114 | |
Reclassification of conversion features embedded in Toggle Convertible Notes to equity | $ | — | | | $ | 241,851 | |
Conversion of April 2023 Toggle Convertible Notes | $ | — | | | $ | 115,152 | |
Accrued issuance costs | $ | — | | | $ | 300 | |
Contingent stock consideration for divestiture of affiliate | $ | — | | | $ | 25,956 | |
Embedded derivative liability bifurcated from April 2023 Toggle Convertible Notes | $ | — | | | $ | 21,180 | |
Reclassification from liability to equity for certain share-based awards | $ | — | | | $ | 20,992 | |
| | | |
| | | |
| | | |
Reclassification from equity to liability for certain share-based awards | $ | — | | | $ | 10,401 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
See accompanying notes to the condensed consolidated financial statements.
11
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.BASIS OF PRESENTATION
(a)Overview
Nikola Corporation (‘‘Nikola’’ or the ‘‘Company’’) is a designer and manufacturer of heavy-duty commercial hydrogen-electric ("FCEV") and battery-electric ("BEV") trucks and energy infrastructure solutions.
(b)Unaudited Condensed Consolidated Financial Statements
The accompanying unaudited condensed 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”). The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as amended.
Certain prior period balances have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and the accompanying notes. All dollar amounts are in thousands, unless otherwise noted.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Pre-production activities for Tre FCEV trucks, including manufacturing readiness, process validation, prototype builds, freight, and inventory write-downs were recorded as research and development activities on the Company's condensed consolidated statements of operations. Commensurate with the start of production, manufacturing costs, including labor and overhead, facility costs, and inventory-related expenses related to the Tre FCEV trucks, are recorded in cost of revenues beginning in the fourth quarter of 2023.
On June 30, 2023, pursuant to a general assignment (the “Assignment”), the Company transferred ownership of its subsidiary, Romeo Power, Inc.'s ("Romeo") right, title and interest in and to all of its tangible and intangible assets, subject to certain agreed upon exclusions (collectively, the “Assets”) to SG Service Co., LLC, in its sole and limited capacity as Assignee for the Benefit of Creditors of Romeo (“Assignee”), and also designated Assignee to act as the assignee for the benefit of creditors of Romeo, such that, as of June 30, 2023, Assignee succeeded to all of Romeo’s right, title and interest in and to the Assets. The results of operations of Romeo are reported as discontinued operations for the three and nine months ended September 30, 2023. See Note 9, Deconsolidation of Subsidiary, for additional information. All references made to financial data in this Quarterly Report on Form 10-Q are to the Company's continuing operations, unless otherwise specifically noted.
On June 24, 2024, the Company effected a one-for-thirty (1-for-30) reverse stock split of its common stock (the “Reverse Stock Split”). The Reverse Stock Split was approved by stockholders at the Company's annual meeting of stockholders on June 5, 2024, and on June 13, 2024, the Company's board of directors approved the Reverse Stock Split. Contemporaneously with the Reverse Stock Split, the number of authorized shares of common stock was reduced from 1,600,000,000 to 1,000,000,000. All references to common stock, warrants to purchase common stock, options to purchase common stock, restricted stock units, share data, per share data, conversion rates and prices with respect to convertible notes and related information contained in the unaudited condensed consolidated financial statements have been retroactively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.
(c)Funding Risks and Going Concern
In accordance with Accounting Standards Codification ("ASC") 205-40, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASC 205-40") the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As an early-stage growth company, the Company's ability to access capital is critical. Until the Company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the Company will need to raise additional capital. Additional stock financing may not be available on favorable terms, or at all, and would be dilutive to current stockholders. Debt financing, if available, may involve restrictive covenants and dilutive financing instruments.
The Company intends to employ various strategies to obtain the required funding for future operations such as continuing to access capital through the amended and restated equity distribution agreement with Citigroup Global Markets Inc. ("Citi"), as sales agent. See Note 7, Capital Structure. However, the ability to access the amended and restated equity distribution agreement is dependent on the market price of the Company's common stock and trading volumes, which cannot be assured, and as a result cannot be included as a source of liquidity for the Company’s ASC 205-40 analysis.
If capital is not available to the Company when, and in the amounts needed, the Company would be required to delay, scale back, or abandon some or all of its development programs and operations, which could materially harm the Company’s business, financial condition and results of operations. The result of the Company’s ASC 205-40 analysis, due to uncertainties discussed above, is that there is substantial doubt about the Company’s ability to continue as a going concern through the next twelve months from the date of issuance of these condensed consolidated financial statements. In addition, the amount of capital available under the equity distribution agreement is not sufficient to meet the Company's capital requirements.
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.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)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, including money market funds, to be cash equivalents. As of September 30, 2024 and December 31, 2023, the Company had $198.3 million and $464.7 million of cash and cash equivalents, respectively. Cash equivalents and restricted cash equivalents included $27.8 million and $29.8 million of highly liquid investments as of September 30, 2024 and December 31, 2023, respectively.
As of September 30, 2024 and December 31, 2023, the Company had $19.5 million and $29.3 million, respectively, in current and non-current restricted cash. Restricted cash represents cash that is restricted as to withdrawal or usage and consists of securitization of the Company's letters of credit. See Note 6, Debt and Finance Lease Liabilities, for additional details.
The reconciliation of cash and cash equivalents and restricted cash and cash equivalents to amounts presented in the condensed consolidated statements of cash flows are as follows:
| | | | | | | | | | | | | | | | | |
| As of |
| September 30, 2024 | | December 31, 2023 | | September 30, 2023 |
Cash and cash equivalents | $ | 198,301 | | | $ | 464,715 | | | $ | 362,850 | |
Restricted cash and cash equivalents – current | 3,374 | | | 1,224 | | | 1,224 | |
Restricted cash and cash equivalents – non-current | 16,086 | | | 28,026 | | | 28,026 | |
Cash, cash equivalents and restricted cash and cash equivalents | $ | 217,761 | | | $ | 493,965 | | | $ | 392,100 | |
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(b)Fair Value of Financial Instruments
The carrying value and fair value of the Company’s financial instruments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | |
Cash equivalents – money market | $ | 27,825 | | | $ | — | | | $ | — | | | $ | 27,825 | |
| | | | | | | |
| | | | | | | |
Liabilities | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Senior Convertible Notes | — | | | — | | | 63,158 | | | 63,158 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | |
Cash equivalents – money market | $ | 29,839 | | | $ | — | | | $ | — | | | $ | 29,839 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liabilities | | | | | | | |
Derivative liability | $ | — | | | $ | — | | | $ | 8,871 | | | $ | 8,871 | |
| | | | | | | |
Embedded conversion features derivative liabilities
In June 2022, the Company completed a private placement of $200.0 million aggregate principal amount of unsecured 8.00% / 11.00% convertible senior paid in kind ("PIK") toggle notes (the “June 2022 Toggle Convertible Notes”). On April 11, 2023, the Company completed an exchange (the "Exchange") of $100.0 million aggregate principal amount of the Company's existing June 2022 Toggle Convertible Notes for the issuance of $100.0 million aggregate principal amount of 8.00% / 11.00% Series B convertible senior PIK toggle notes (the "April 2023 Toggle Convertible Notes"). The April 2023 Toggle Convertible Notes were issued pursuant to an indenture dated as of April 11, 2023 (the "April 2023 Toggle Convertible Notes Indenture").
Additionally, in June 2023, the Company completed a private placement of $11.0 million aggregate principal amount of unsecured 8.00% / 8.00% Series C convertible senior PIK toggle notes (the "June 2023 Toggle Convertible Notes"). The June 2023 Toggle Convertible Notes were issued pursuant to an indenture dated as of June 23, 2023 (the "June 2023 Toggle Convertible Notes Indenture").
The April 2023 Toggle Convertible Notes Indenture and June 2023 Toggle Convertible Notes Indenture, among other things, limited conversion of the notes in certain instances until the earlier to occur of (x) an increase in the number of authorized shares in an amount sufficient to, among other things, allow for the issuance of common stock underlying the notes and (y) October 11, 2023, and provided that the Company would elect to settle conversions of the notes in cash until such increase in the number of authorized shares occurred, and the Company obtained the stockholder approval contemplated by Rule 5635 of the Nasdaq listing rules ("Nasdaq Rule 5635").
The conversion features embedded to the April 2023 Toggle Convertible Notes and June 2023 Toggle Convertible Notes were bifurcated and recognized separately at fair value due to the temporary requirement to settle conversions in cash, in certain instances, until stockholder approval as contemplated by Nasdaq Rule 5635 was obtained to increase the number of authorized shares. Upon the Exchange, the Company recognized $21.2 million for the embedded conversion features as a derivative liability within accrued expenses and other current liabilities on the condensed consolidated balance sheets.
During the third quarter of 2023, and commensurate with stockholder approval to increase the number of authorized shares on August 3, 2023, the Company reassessed the conversion features bifurcated from the April 2023 Toggle Convertible Notes and June 2023 Toggle Convertible Notes. As of August 3, 2023, the conversion features met all equity classification criteria, and as a result, the derivative liabilities were remeasured as of August 3, 2023, and reclassified from accrued expenses and other current liabilities to additional paid-in capital on the condensed consolidated balance sheets. Changes in the fair value
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
of the derivative liabilities are recorded within other expense, net on the condensed consolidated statements of operations. During the three and nine months ended September 30, 2023, the change in fair value of the derivative liability was as follows:
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2023 | | September 30, 2023 |
Estimated fair value - beginning of period | $ | 29,340 | | | $ | — | |
Recognition of derivative liability | — | | | 21,180 | |
Change in estimated fair value | 212,511 | | | 220,671 | |
Reclassification to equity | (241,851) | | | (241,851) | |
Estimated fair value - end of period | $ | — | | | $ | — | |
The fair value of the conversion features was estimated by applying a with-and-without approach to a binomial lattice model. The following reflects the inputs and assumptions used:
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 |
| | |
Stock price | | $102.00 | | $32.70 - $102.00 |
Conversion price | | $43.68 - $44.48 | | $43.68 - $44.48 |
Risk free rate | | 4.58% | | 3.76% - 4.58% |
Equity volatility | | 47.5% | | 47.5% - 60% |
Expected dividend yield | | —% | | —% |
Credit spread | | 14.9% | | 14.9% - 20.1% |
Additionally, on December 12, 2023, the Company consummated an underwritten public offering of $175.0 million aggregate principal amount of the Company’s 8.25% Green Convertible Senior Notes due 2026 (the “8.25% Convertible Notes”). The 8.25% Convertible Notes were issued pursuant to, and are governed by, an indenture, dated as of December 12, 2023, between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), as supplemented by a first supplemental indenture, dated as of December 12, 2023, between the Company and the Trustee.
The conversion features embedded in the 8.25% Convertible Notes met the criteria to be separated from the host contract and recognized separately at fair value. The derivative is measured both initially and in subsequent periods at fair value, with changes in fair value recognized in other expense, net on the condensed consolidated statements of operations. As of the issuance of the 8.25% Convertible Notes, the Company recognized $47.3 million for the embedded conversion features as a derivative liability within accrued expenses and other current liabilities on the condensed consolidated balance sheets. The change in fair value of the derivative liability for the nine months ended September 30, 2024 was as follows:
| | | | | | | | | | |
| | | | Nine Months Ended |
| | | | September 30, 2024 |
Estimated fair value - beginning of period | | | | $ | 8,871 | |
| | | | |
Change in estimated fair value | | | | (2,184) | |
Settlement of derivative liability for conversions | | | | (6,687) | |
Estimated fair value - end of period | | | | $ | — | |
The fair value of the derivative liability was immaterial during the three months ended September 30, 2024.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The fair value of the conversion features was estimated by applying a with-and-without approach. The following reflects the ranges of inputs and assumptions used:
| | | | | | | | | | |
| | | | Nine Months Ended |
| | | | September 30, 2024 |
Stock price | | | | $7.40 - $31.20 |
Conversion price | | | | $27.00 |
Risk free rate | | | | 4.10% - 5.47% |
Credit spread | | | | 14.08% - 15.18% |
Liability Classified Awards
During the second and third quarters of 2023, the Company reclassified certain share-based payment awards from equity to liabilities that would require cash settlement upon distribution or exercise. The fair value of these awards was determined based on the closing price of the Company's stock or a Black-Scholes model as of the measurement date and as of the end of each reporting period. Changes in the fair value of the liabilities were recognized as compensation cost over the requisite service period.
As of August 3, 2023, the share-based payment awards classified as liabilities no longer required cash settlement upon distribution or exercise. The Company reclassified the share-based payment awards into additional paid in capital on the Company's condensed consolidated balance sheets at their fair value. Changes in the fair value of liability classified awards during the three and nine months ended September 30, 2023, were as follows:
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2023 | | September 30, 2023 |
Liability classified awards - beginning of the period | $ | 2,006 | | | $ | — | |
Reclassification of share-based payment awards to liability | 8,395 | | | 10,401 | |
Change in fair value | 10,591 | | | 10,591 | |
Reclassification of share-based payment awards to equity | (20,992) | | | (20,992) | |
Liability classified awards - end of the period | $ | — | | | $ | — | |
(c)Revenue Recognition
Truck sales
Truck sales consist of revenue recognized on the sales of the Company's trucks. The sale of a truck is generally recognized as a single performance obligation at the point in time when control is transferred to the customer, which has historically been only the Company's dealers. Control is generally deemed transferred when the product is picked up by the carrier and the dealer can direct the product's use and obtain substantially all of the remaining benefits from the product. The Company may offer certain after-market upgrades at the request of dealers. If a contract contains more than one distinct performance obligation, the transaction price is allocated to each performance obligation based on the standalone selling price of each performance obligation. In accordance with state law and the Company's dealer agreements, the Company may be required to repurchase dealer inventory in the event a dealer agreement is terminated, and accounts for these as sales with right of return.
The Company estimates a reserve for returns based on average historical returns, including in the event of dealer agreement terminations. Management believes that the estimate is an accurate reflection of expected returns, but actual return activity may vary from estimates. Accrued returns were approximately $4.4 million and $0.7 million as of September 30, 2024 and December 31, 2023, respectively, and are generally reflected in accrued expenses and other current liabilities on the condensed consolidated balance sheets. If the reserve applies to trucks that have an outstanding accounts receivable balance, the reserve is reflected as a reduction of accounts receivable, net.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue is recognized based on the transaction price, which is measured as the amount of consideration that the Company expects to receive in exchange for transferring the product pursuant to the terms of the contract with its dealer. The transaction price may be adjusted, if applicable, for variable consideration, such as rebates and financing costs on floor plan arrangements, which requires the Company to make estimates for the portion of these allowances that have yet to be credited to dealers.
Payments for trucks sold are made in accordance with the Company's customary payment terms. The Company has elected an accounting policy whereby the Company does not adjust the promised amount of consideration for the effects of a significant financing component because, at contract inception, the Company expects the period between the time when the Company transfers a promised good or service to the dealer and the time when the dealer pays for that good or service will be one year or less. Sales tax collected from dealers is not considered revenue and is accrued until remitted to the taxing authorities. Shipping and handling activities occur after the dealer has obtained control of the product, thus the Company has elected to account for those expenses as fulfillment costs in cost of revenues, rather than an additional promised service.
Service and other
Service and other revenues primarily consist of sales of charging products, regulatory credits, service parts, after-market parts, service and labor, and hydrogen. Sales are generally recognized as a single performance obligation at the point in time when control is transferred to the customer. Control is generally deemed transferred when the product is delivered to the customer and the customer can direct the product's use and obtain substantially all of the remaining benefits from the asset. Payment for products sold are made in accordance with the Company's customary payment terms and the Company's contracts do not have significant financing components. Sales tax collected is not considered revenue and is accrued until remitted to the taxing authorities.
(d)Product Warranties and Recall Campaigns
Product warranty costs are recognized upon transfer of control of trucks to dealers and are estimated based on factors including the length of the warranty (generally 2 to 5 years), product costs, and product failure rates. Warranty reserves are reviewed and adjusted quarterly to ensure that accruals are adequate to meet expected future warranty obligations. Estimating future warranty costs is highly subjective and requires significant management judgment. Management believes that the accruals are adequate. However, based on the limited historical information available, it is possible that substantial additional charges may be required in future periods based on new information or changes in facts and circumstances. The Company's accrual includes estimates of the replacement costs for covered parts which is based on historical experience. This estimate could be impacted by contractual changes with third-party suppliers or the need to identify new suppliers and the engineering and design costs that would accompany such a change.
Recall campaign costs are recognized when a product recall liability is probable and related amounts are reasonably estimable. Costs are estimated based on the number of trucks to be repaired and the required repairs including engineering and development, product costs, labor rates, and shipping. Estimating the cost to repair the trucks is highly subjective and requires significant management judgment. Based on information that is currently available, management believes that the accruals are adequate. It is possible that substantial additional charges may be required in future periods based on new information, changes in facts and circumstances, availability of materials from key suppliers, and actions the Company may commit to or be required to undertake.
During the third quarter of 2023, the Company filed a voluntary recall with the National Highway Traffic Safety Administration for the Company's BEV trucks, related to issues with the existing battery pack. The Company accrued recall campaign costs of $56.7 million, of which $34.9 million has been incurred through September 30, 2024. The Company placed a temporary hold on new BEV truck shipments until its BEV truck inventory has been retrofit with alternative battery packs. See Note 11, Commitments and Contingencies, for additional information.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The change in warranty liability for the three and nine months ended September 30, 2024 and 2023 is summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Accrued warranty - beginning of period | | $ | 77,266 | | | $ | 11,057 | | | $ | 78,946 | | | $ | 7,788 | |
Warranties issued in period - product warranty | | 19,274 | | | 172 | | | 44,353 | | | 4,245 | |
Warranties issued in period - recall campaign | | — | | | 61,848 | | | — | | | 61,848 | |
Net changes in liability for pre-existing warranties | | (4,936) | | | (1,084) | | | (10,658) | | | (1,304) | |
Warranty costs incurred | | (14,472) | | | (1,665) | | | (35,509) | | | (2,249) | |
Accrued warranty - end of period | | $ | 77,132 | | | $ | 70,328 | | | $ | 77,132 | | | $ | 70,328 | |
As of September 30, 2024, warranty accrual of $34.1 million was recorded in accrued expenses and other current liabilities and $43.0 million in other long-term liabilities on the condensed consolidated balance sheets. As of December 31, 2023, warranty accrual of $65.7 million was recorded in accrued expenses and other current liabilities and $13.2 million in other long-term liabilities on the condensed consolidated balance sheets.
(e)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 manufacturing and selling FCEV and BEV trucks that provide, or are expected to 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 the Company's customers. The Company's chief executive officer, who is also the CODM, makes decisions and manages the Company's operations as a single reporting unit, and single operating and reportable segment for purposes of allocating resources and evaluating financial performance.
(f)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 on December 31. During the three months ended September 30, 2024, the Company experienced a sustained decline in stock price and in the Company's market capitalization which represents a qualitative factor indicating the carrying value of reporting unit may not be recoverable, and thus required further impairment review pursuant to ASC 350, Goodwill and Other.
The Company performed an interim impairment review as of September 30, 2024, which indicated that the carrying value of the Company's single reporting unit was in excess of the fair value of the reporting unit. Accordingly, the Company recognized goodwill impairment of $5.2 million during the three and nine months ended September 30, 2024 within impairment expense on the condensed consolidated statement of operations, representing the difference between the carrying value and the fair value of the reporting unit, limited by the carrying amount of goodwill on the Company's condensed consolidated balance sheets. See Note 4, Goodwill and Intangible Assets, Net.
(g)Intangible Assets with Indefinite Useful Lives
The Company is required to test its intangible assets with indefinite lives for impairment annually using the guidance for indefinite-lived intangible assets in ASC 350. The Company's evaluation consists of first assessing qualitative factors to
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
determine if impairment of the asset is more likely than not. If it is more likely than not that the asset is impaired, the Company determines the fair value of the asset and records an impairment charge if the carrying amount exceeds the fair value.
During the third quarter of 2024, the sustained decline in the Company's stock price and market capitalization indicated that the carrying value of the Company's indefinite lived intangible asset was more likely than not impaired. With the assistance of a third party valuation firm, the Company determined a fair value for the indefinite lived intangible asset as of September 30, 2024, by assessing if the terms of the applicable license agreement are at market. A relief from royalty valuation approach was utilized in assessing if the implied royalty rate was deemed to be at market. The relief from royalty approach is based on the assumption that, in lieu of ownership, an entity would be willing to pay a royalty in order to benefit from the use of the asset. The relief from royalty approach involves two steps: (1) estimation of a reasonable royalty rate for the asset and (2) the application of the royalty rate to a forecasted net revenue stream and discounting the resulting cash flows to determine a present value. The Company multiplied the selected royalty rate by the forecasted net revenue to calculate the cost savings (relief from royalty payment) associated with the asset.
During the three and nine months ended September 30, 2024 the Company recognized an impairment loss within impairment expense on the condensed consolidated statement of operations for $28.2 million representing the difference between the carrying value and the fair value of the Company's indefinite lived intangible asset. See Note 4, Goodwill and Intangible Assets, Net.
(h)Long-Lived Assets and Finite Lived Intangibles
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 third quarter of 2024, the sustained decline in the Company's stock price and market capitalization indicated that the Company's long-lived assets and finite lived intangibles may be more likely than not impaired, thus requiring a recoverability assessment under ASC 360-10, Impairment of long-lived assets to be held and used. As of September 30, 2024, the Company performed the recoverability test as described above and concluded that all asset groups were deemed recoverable and thus no impairment was recognized during the three and nine months ended September 30, 2024.
(i)Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet adopted
In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023-06 to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC's regulations. The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated statements.
In December 2023, FASB issued ASU No. 2023-09 ("ASU 2023-09"), Income Taxes, to enhance income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s worldwide operation. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and early adoption is permitted. The Company plans to adopt ASU 2023-09 for the year ended December 31, 2025, and is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.BALANCE SHEET COMPONENTS
Inventory
Inventory consisted of the following at September 30, 2024 and December 31, 2023, respectively:
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2024 | | December 31, 2023 |
Raw materials | | $ | 35,112 | | | $ | 32,889 | |
Work in process | | 28,078 | | | 15,486 | |
| | | | |
Finished goods | | 4,695 | | | 8,206 | |
Service parts | | 8,191 | | | 6,007 | |
Total inventory | | $ | 76,076 | | | $ | 62,588 | |
Inventory cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Inventories are stated at the lower of cost or net realizable value. Inventories are written down for any excess or obsolescence and when net realizable value, which is based upon estimated selling prices, is in excess of carrying value. Once inventory is written down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration of or increase in that newly established cost basis.
During the third quarter of 2023, the Company wrote down $45.7 million of BEV inventory related to the existing battery packs, cells and other BEV components which were deemed excess or obsolete due to the Company's voluntary recall.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at September 30, 2024 and December 31, 2023, respectively:
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2024 | | December 31, 2023 |
Insurance receivables | | $ | 17,500 | | | $ | — | |
| | | | |
Inventory deposits | | 16,939 | | | 4,843 | |
Non-trade receivables | | 8,039 | | | 4,895 | |
Prepaid expenses | | 5,715 | | | 7,573 | |
Holdback receivable | | 4,869 | | | 3,655 | |
Prepaid insurance premiums | | 3,890 | | | 2,148 | |
| | | | |
Other current assets | | 2,893 | | | 1,154 | |
| | | | |
Other deposits | | 2,151 | | | 1,643 | |
Total prepaid expenses and other current assets | | $ | 61,996 | | | $ | 25,911 | |
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following at September 30, 2024 and December 31, 2023:
| | | | | | | | | | | |
| As of |
| September 30, 2024 | | December 31, 2023 |
Buildings | $ | 240,861 | | | $ | 239,918 | |
Construction-in-progress | 105,718 | | | 135,994 | |
Equipment | 83,482 | | | 67,657 | |
Tooling | 62,114 | | | 39,389 | |
Finance lease assets | 41,072 | | | 37,504 | |
Software | 8,689 | | | 8,649 | |
Land | 7,957 | | | 7,957 | |
| | | |
| | | |
Other | 6,871 | | | 6,409 | |
Leasehold improvements | 3,115 | | | 3,100 | |
Demo vehicles | 1,798 | | | 788 | |
| | | |
| | | |
Property, plant and equipment, gross | 561,677 | | | 547,365 | |
Less: accumulated depreciation and amortization | (71,433) | | | (43,949) | |
Total property, plant and equipment, net | $ | 490,244 | | | $ | 503,416 | |
Construction-in-progress on the Company's condensed consolidated balance sheets as of September 30, 2024 relates primarily to the development of hydrogen infrastructure.
During the first quarter of 2024, the Company changed its accounting estimate for the expected useful life of tooling. The Company determined that straight-line depreciation with an estimated useful life of 5 years was more representative of the estimated economic lives of those assets than the consumption method. This change in estimate was applied prospectively effective for the first quarter of 2024 and resulted in an increase in depreciation expense of $2.9 million and $8.5 million for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2024, the change in estimate resulted in an increase in net loss per share of $0.06 and $0.18, respectively.
Depreciation expense for the three months ended September 30, 2024 and 2023 was $9.9 million and $15.1 million, respectively. Depreciation expense for the nine months ended September 30, 2024 and 2023 was $27.8 million and $23.9 million, respectively.
In July 2023, the Company executed a membership interest and asset purchase agreement (the "FFI Purchase Agreement") with FFI Phoenix Hub Holdings, LLC, a wholly-owned subsidiary of Fortescue Future Industries ("FFI"). Pursuant to the terms of the FFI Purchase Agreement, FFI Phoenix Hub Holdings, LLC, acquired 100% of the interests in Phoenix Hydrogen Hub, LLC, the Company's wholly owned subsidiary holding the assets related to the Phoenix hydrogen hub project, including land and construction-in-progress. The Company sold $24.4 million of assets during the third quarter of 2023 pursuant to the first closing. The Company's proceeds are net of a $3.7 million holdback. During the first quarter of 2024, the Company completed the second closing under the terms of the FFI Purchase Agreement. The Company sold $25.1 million of assets during the first quarter of 2024 pursuant to the second closing. The Company's proceeds are net of a $3.7 million holdback. As of September 30, 2024, the Company recognized $4.9 million in prepaid and other current assets on the condensed consolidated balance sheets for the remaining holdback receivable on the first and second closings. As of December 31, 2023, the Company recognized $3.7 million in prepaid and other current assets on the consolidated balance sheets for the holdback receivable on the first closing.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at September 30, 2024 and December 31, 2023:
| | | | | | | | | | | |
| As of |
| September 30, 2024 | | December 31, 2023 |
Settlement liabilities | $ | 103,446 | | | $ | 91,330 | |
| | | |
Warranty liability, current | 34,112 | | | 65,703 | |
Inventory received not yet invoiced | 23,408 | | | 8,642 | |
Other accrued expenses | 14,435 | | | 6,894 | |
Accrued payroll and payroll related expenses | 8,242 | | | 3,254 | |
Accrued purchases of property, plant and equipment | 7,913 | | | 2,458 | |
Accrued purchase of intangible asset | 5,624 | | | 13,796 | |
Accrued outsourced engineering services | 5,441 | | | 4,207 | |
| | | |
Operating lease liabilities, current | 2,887 | | | 1,867 | |
Derivative liability | — | | | 8,871 | |
Total accrued expenses and other current liabilities | $ | 205,508 | | | $ | 207,022 | |
4.GOODWILL AND INTANGIBLE ASSETS, NET
The gross carrying amount and accumulated amortization of separately identifiable intangible assets and goodwill are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 |
| Gross Carrying Amount | | Accumulated Amortization | | Impairment | | Net Carrying Amount |
Licenses: | | | | | | | |
S-WAY Product and Platform license | $ | 50,000 | | | $ | (17,857) | | | $ | — | | | $ | 32,143 | |
FCPM license | 47,181 | | | — | | | (28,181) | | | 19,000 | |
Other intangibles | 1,650 | | | (663) | | | — | | | 987 | |
Total intangible assets, net | $ | 98,831 | | | $ | (18,520) | | | $ | (28,181) | | | $ | 52,130 | |
| | | | | | | |
Goodwill | $ | 5,238 | | | $ | — | | | $ | (5,238) | | | $ | — | |
| | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Licenses: | | | | | |
S-WAY Product and Platform license | $ | 50,000 | | | $ | (12,500) | | | $ | 37,500 | |
FCPM license | 47,181 | | | — | | | 47,181 | |
Other intangibles | 1,650 | | | (471) | | | 1,179 | |
Total intangible assets, net | $ | 98,831 | | | $ | (12,971) | | | $ | 85,860 | |
| | | | | |
Goodwill | $ | 5,238 | | | $ | — | | | $ | 5,238 | |
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amortization expense related to intangible assets for the three months ended September 30, 2024 and 2023 was $1.9 million. Amortization expense related to intangible assets for the nine months ended September 30, 2024 and 2023 was $5.5 million and $5.6 million, respectively.
In 2021, the Company acquired a license for fuel cell power modules ("FCPMs") for use in the production of FCEVs. The Company expects to amortize the license beginning at the start of in-house FCPM production. As of September 30, 2024, the Company has not started amortizing the license.
Due to the sustained decline in the Company's stock price and market capitalization during the three months ended September 30, 2024, the Company determined it appropriate to evaluate its definite and indefinite long-lived assets for impairment. For the three and nine months ended September 30, 2024, the Company recognized impairment charges of $33.4 million for the FCPM license and goodwill. See Note 2, Summary of Significant Accounting Policies, for additional information.
5.INVESTMENTS IN AFFILIATE
The investment in an unconsolidated affiliate accounted for under the equity method consisted of the following:
| | | | | | | | | | | | | | | | | | | | |
| | | | As of |
| | Ownership as of September 30, 2024 | | September 30, 2024 | | December 31, 2023 |
| | | | | | |
Wabash Valley Resources LLC | | 20 | % | | $ | 56,197 | | | $ | 57,062 | |
| | | | | | |
| | | | | | |
| | | | $ | 56,197 | | | $ | 57,062 | |
Equity in net profit (loss) of affiliates on the condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Equity in net profit (loss) of affiliates: | | | | | | | | |
Nikola Iveco Europe GmbH | | $ | — | | | $ | — | | | $ | — | | | $ | (15,556) | |
Wabash Valley Resources LLC | | 173 | | | (262) | | | (865) | | | (731) | |
Total equity in net profit (loss) of affiliates | | $ | 173 | | | $ | (262) | | | $ | (865) | | | $ | (16,287) | |
Nikola Iveco Europe GmbH
In April 2020, the Company and Iveco S.P.A. ("Iveco") became parties to a series of agreements which established a joint venture in Europe, Nikola Iveco Europe GmbH. The operations of the joint venture were located in Ulm, Germany, and consisted of manufacturing the FCEV and BEV Class 8 trucks for the European market.
Nikola Iveco Europe GmbH was considered a variable interest entity ("VIE") due to insufficient equity to finance its activities without additional subordinated financial support. The Company was not considered the primary beneficiary as it did 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 was accounted for under the equity method.
On June 29, 2023, the Company and Iveco executed the European Joint Venture Transaction Agreement (the "Transaction Agreement") whereby the Company sold its 50% equity interest in Nikola Iveco Europe GmbH to Iveco for $35.0 million. In conjunction with the Transaction Agreement, the Company entered into an intellectual property license agreement (the “License Agreement”), which grants Iveco and Nikola Iveco Europe GmbH a non-exclusive, perpetual, irrevocable, fully sublicensable, transferable, and fully assignable license ("Licensed Software") to software and controls technology related to the BEV and FCEV. According to the terms of the Transaction Agreement, the Company was also eligible to receive 0.7 million shares of its own common stock from Iveco, contingent on successful due diligence ("Software Due Diligence") performed by Iveco and its consultants on the Licensed Software delivered to Iveco on the divestiture closing pursuant to the License Agreement. The Software Due Diligence was evaluated based on mutually agreed criteria between Iveco and the Company.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On the divestiture closing, the Company recognized a gain equal to the difference between the consideration received and its basis in the Nikola Iveco Europe GmbH investment, consisting of a liability balance of $11.4 million for investment in affiliate, and cumulative currency translation losses of $1.5 million. The delivery of the Licensed Software on the closing of the divestiture was determined to represent a right to use the Licensed Software and the performance obligation was satisfied upon the delivery of the Licensed Software on the divestiture closing. The Company recognized gains related to the derecognition of its basis in Nikola Iveco Europe GmbH and delivery of the Licensed Software in gain on divestiture of affiliate on the condensed consolidated statements of operations. During the nine months ended September 30, 2023, the Company recognized a gain of $70.8 million in gain on divestiture of affiliates consisting of the following:
| | | | | | | | |
| | Nine Months Ended |
| | September 30, 2023 |
Cash consideration received | | $ | 35,000 | |
Contingent stock consideration receivable | | 25,956 | |
Derecognition of investment in affiliate | | 11,428 | |
Derecognition of cumulative currency translation losses | | (1,535) | |
Gain on divestiture of affiliate | | $ | 70,849 | |
Contingent stock consideration receivable
The contingent stock consideration was accounted for as variable consideration and included in total consideration as of the divestiture closing, as it was not probable that a significant reversal of such consideration would occur upon resolution of the contingency. On August 3, 2023, the Software Due Diligence was deemed successful and Iveco transferred to the Company 0.7 million shares of Nikola common stock, which were immediately retired. The Company recognized the fair value of the common stock upon receipt in accumulated deficit on the condensed consolidated balance sheets. The fair value of the contingent stock consideration was measured based on the closing price of the Company's common stock, with changes in fair value recognized in other expense, net on the condensed consolidated statements of operations.
During the three and nine months ended September 30, 2023, the change in fair value of the contingent stock consideration was as follows:
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2023 | | September 30, 2023 |
Fair value - beginning of the period | $ | 28,428 | | | $ | — | |
Contingent stock consideration recognized on Divestiture Closing | — | | | 25,956 | |
Change in fair value | 41,509 | | | 43,981 | |
Delivery of shares for stock consideration | (69,937) | | | (69,937) | |
Fair value - end of the period | $ | — | | | $ | — | |
Wabash Valley Resources LLC
On June 22, 2021, the Company entered into a Membership Interest Purchase Agreement (the "MIPA") with Wabash Valley Resources LLC ("WVR") and the Sellers, pursuant to which, the Company purchased a 20% equity interest in WVR in exchange for $25.0 million in cash and 56,079 shares of the Company’s common stock. The common stock consideration was calculated based on the Company's 30-day average closing stock price, or $445.80 per share, and the Company issued 56,079 shares of its common stock.
The Company's interest in WVR is accounted for under the equity method and is included in investment in affiliate on the Company's condensed consolidated balance sheets. Included in the initial carrying value was a basis difference of $55.5 million due to the difference between the cost of the investment and the Company's proportionate share of WVR's net assets. The basis difference is primarily comprised of property, plant and equipment and intangible assets.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of September 30, 2024, the Company's maximum exposure to loss was $56.7 million, which represents the book value of the Company's equity interest and loans to WVR for $0.5 million.
6.DEBT AND FINANCE LEASE LIABILITIES
A summary of debt and finance lease liabilities as of September 30, 2024 and December 31, 2023, were as follows:
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2024 | | December 31, 2023 |
Current: | | | | |
Senior Convertible Notes | | $ | 63,158 | | | $ | — | |
Finance lease liabilities | | 6,187 | | | 6,312 | |
Insurance premium financing | | 2,791 | | | 1,852 | |
Promissory notes | | 827 | | | 699 | |
Financing obligations | | 148 | | | 87 | |
Debt and finance lease liabilities, current | | $ | 73,111 | | | $ | 8,950 | |
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2024 | | December 31, 2023 |
Non-current: | | | | |
Toggle Convertible Notes | | $ | 138,483 | | | $ | 124,061 | |
Financing obligations | | 102,169 | | | 101,470 | |
Finance lease liabilities | | 26,353 | | | 26,395 | |
8.25% Convertible Notes | | 1,226 | | | 15,047 | |
Promissory notes | | 1,787 | | | 2,306 | |
Long-term debt and finance lease liabilities, net of current portion | | $ | 270,018 | | | $ | 269,279 | |
The fair values of the following debt obligations are estimated using level 2 fair value inputs, including stock price and risk-free rates. The following table presents the carrying value and estimated fair values:
| | | | | | | | | | | | | | |
| | As of September 30, 2024 |
| | Carrying Value | | Fair Value |
June 2022 Toggle Convertible Notes | | $ | 128,159 | | | $ | 125,669 | |
June 2023 Toggle Convertible Notes | | 10,324 | | | 11,136 | |
| | | | |
Promissory notes | | 2,614 | | | 2,593 | |
Insurance Premium financing | | 2,791 | | | 2,773 | |
8.25% Convertible Notes | | 1,226 | | | 644 | |
Toggle Convertible Notes
In June 2022, the Company completed a private placement of $200.0 million aggregate principal amount of the Company's June 2022 Toggle Convertible Notes, which will mature on May 31, 2026. The June 2022 Toggle Convertible Notes were issued pursuant to an indenture, dated as of June 1, 2022 (the "June 2022 Toggle Convertible Notes Indenture").
In conjunction with the issuance of the April 2023 Toggle Convertible Notes, the Company executed the first supplemental indenture to the June 2022 Toggle Convertible Notes Indenture dated as of April 3, 2023 (the "First Supplemental Indenture to June 2022 Toggle Convertible Notes Indenture"), and the second supplemental indenture to the June 2022 Toggle Convertible Notes Indenture dated as of April 10, 2023 (the "Second Supplemental Indenture to June 2022 Toggle Convertible Notes Indenture"), which First Supplemental Indenture to June 2022 Toggle Convertible Notes Indenture, among other things, amended the conversion provisions of the June 2022 Toggle Convertible Notes Indenture to limit conversions of the June 2022
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Toggle Convertible Notes in certain instances until the earlier to occur of (x) an increase in the number of authorized shares in an amount sufficient to, among other things, allow for the issuance of common stock underlying the June 2022 Toggle Convertible Notes and (y) October 11, 2023, and provide that the Company shall elect to settle conversions of the June 2022 Toggle Convertible Notes in cash prior to such increase in the number of authorized shares.
In June 2023, the Company completed the private placement of $11.0 million aggregate principal amount of the Company's June 2023 Toggle Convertible Notes (together with the June 2022 Toggle Convertible Notes and the April 2023 Toggle Convertible Notes, the "Toggle Convertible Notes"), which will mature on May 31, 2026. The June 2023 Toggle Convertible Notes were issued pursuant to the June 2023 Toggle Convertible Notes Indenture (together with the June 2022 Toggle Convertible Notes Indenture and the April 2023 Toggle Convertible Notes Indenture, the "Toggle Convertible Notes Indentures"). The June 2023 Toggle Convertible Notes were issued in consideration as a consent fee to the holders for execution of the third supplemental indenture to the June 2022 Toggle Convertible Notes Indenture dated as of June 23, 2023 (the "Third Supplemental Indenture to June 2022 Notes"), and the first supplemental indenture to the April 2023 Toggle Convertible Notes Indenture dated as of June 23, 2023 (the "First Supplemental Indenture to April 2023 Notes"), which, among other things, released Romeo as a guarantor of the June 2022 Toggle Convertible Notes and the April 2023 Toggle Convertible Notes, respectively. The April 2023 Toggle Convertible Notes were fully converted in the third quarter of 2023. As of September 30, 2024 and December 31, 2023, the June 2022 Toggle Convertible Notes and June 2023 Toggle Convertible Notes were outstanding.
Below is a summary of certain terms of the outstanding Toggle Convertible Notes:
Interest Payments
The Company can elect to make any interest payment on the Toggle Convertible Notes in cash ("Cash Interest"), through the issuance of additional Toggle Convertible Notes in the form of the Toggle Convertible Notes with respect to which such interest is due ("PIK Interest"), or any combination thereof. Interest on the Toggle Convertible Notes is payable semi-annually in arrears. The interest rates and payment dates for each of the Toggle Convertible Notes is summarized below:
| | | | | | | | | | | |
| June 2022 Toggle Convertible Notes | | June 2023 Toggle Convertible Notes |
PIK interest rate (per annum) | 11.00% | | 8.00% |
Cash interest rate (per annum) | 8.00% | | 8.00% |
Semi-annual interest payable dates | May 31 and November 30 of each year | | June 30 and December 31 of each year |
First interest payment date | November 30, 2022 | | December 31, 2023 |
Interest on the June 2023 Toggle Convertible Note that accrued from June 23, 2023 was paid as PIK Interest on December 31, 2023.
Conversions
Based on the applicable conversion rate, the Toggle Convertible Notes plus any accrued and unpaid interest are convertible into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election.
With respect to the June 2022 Toggle Convertible Notes, the conversion rate was adjusted on June 24, 2024, to be 3.8120 shares per $1,000 principal amount, subject to customary anti-dilution adjustments in certain circumstances, which represents an adjusted conversion price of approximately $262.33 per share.
With respect to the June 2023 Toggle Convertible Notes, the conversion rate was adjusted on June 24, 2024, to be an amount equal to (a) 22.4809 divided by (b) a quotient, (i) the numerator of which is the sum of (x) the initial principal amount of the June 2023 Toggle Convertible Notes outstanding immediately prior to such conversion and (y) the aggregate amount capitalized related to PIK Interest issuances in respect of interest that came due on the June 2023 Toggle Convertible Notes and (ii) the denominator of which is the initial principal amount of the June 2023 Toggle Convertible Notes.
The Toggle Convertible Notes Indentures provide that prior to February 28, 2026, the Toggle Convertible Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods, and will be
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
convertible on or after February 28, 2026, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Toggle Convertible Notes.
Holders of the Toggle Convertible Notes will have the right to convert all or a portion of their Toggle Convertible Notes prior to the close of business on the business day immediately preceding February 28, 2026 only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2022 for the June 2022 Toggle Convertible Notes, and during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2023 for the June 2023 Toggle Convertible Notes (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Toggle Convertible Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the Toggle Convertible Notes for each trading day of that ten consecutive trading day period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate of the Toggle Convertible Notes on each such trading day; (iii) if the Company calls such Toggle Convertible Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events.
Redemption
The Company may not redeem the Toggle Convertible Notes prior to June 1, 2025. The Company may redeem the Toggle Convertible Notes in whole or in part, at its option, on or after such date and prior to the 26th scheduled trading day immediately preceding the maturity date, for a cash purchase price equal to the aggregate principal amount of any Toggle Convertible Notes to be redeemed plus accrued and unpaid interest.
In addition, following certain corporate events that occur prior to the maturity date or following issuance by the Company of a notice of redemption, in certain circumstances, the Company will increase the conversion rate for a holder who elects to convert its Toggle Convertible Notes (other than the June 2023 Toggle Convertible Notes) in connection with such a corporate event or who elects to convert any such Toggle Convertible Notes called for redemption during the related redemption period. Additionally, in the event of a fundamental change or a change in control transaction, holders of the Toggle Convertible Notes will have the right to require the Company to repurchase all or a portion of their Toggle Convertible Notes at a price equal to 100% of the capitalized principal amount of such Toggle Convertible Notes, in the case of a fundamental change, or 130% of the capitalized principal amount of such Toggle Convertible Notes, in the case of change in control transactions, in each case plus any accrued and unpaid interest to, but excluding, the repurchase date.
The Toggle Convertible Notes Indentures include restrictive covenants that, subject to specified exceptions, limit the ability of the Company and its subsidiaries to incur secured debt in excess of $500.0 million, incur other subsidiary guarantees, and sell equity interests of any subsidiary that guarantees the Toggle Convertible Notes. In addition, the Toggle Convertible Notes Indentures include customary terms and covenants, including certain events of default after which the holders may accelerate the maturity of the Toggle Convertible Notes issued thereunder and cause them to become due and payable immediately upon such acceleration.
During the second quarter of 2023, the exchange of $100.0 million of June 2022 Toggle Convertible Notes for the issuance of $100.0 million of April 2023 Toggle Convertible Notes was determined to represent a substantial change in terms and extinguishment accounting was applied. The Company recognized a loss on debt extinguishment of $20.4 million for the nine months ended September 30, 2023. As part of the assessment of the exchange, the Company bifurcated the conversion features on the April 2023 Toggle Convertible Notes and recognized a derivative liability of $21.2 million as of the exchange date, resulting in an adjustment to the debt discount.
Additionally, during the second quarter of 2023, the execution of the Third Supplemental Indenture to June 2022 Toggle Convertible Notes Indenture and First Supplemental Indenture to April 2023 Toggle Convertible Notes Indenture were deemed modifications to the notes outstanding under the June 2022 Toggle Convertible Notes Indenture and April 2023 Toggle Convertible Notes Indenture, respectively, as the amended terms did not substantially change the terms of the respective notes. The consideration paid to the holders in the form of the issuance of the June 2023 Toggle Convertible Notes was recognized as an issuance cost upon modification and is amortized as an adjustment of interest expense over the remaining terms of the June 2022 Toggle Convertible Notes and April 2023 Toggle Convertible Notes.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On August 4, 2023, the holders of the April 2023 Toggle Convertible Notes exercised their conversion right for all the outstanding principal amount. The Company elected to settle the conversion with the issuance of 2,415,293 shares of common stock. The remaining unamortized discount was recognized in interest expense, net on the condensed consolidated statements of operations due to the reclassification of the conversion feature to equity.
The net carrying amounts of the debt component of the Toggle Convertible Notes as of September 30, 2024 and December 31, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 2022 Toggle Convertible Notes | | June 2023 Toggle Convertible Notes |
| | As of September 30, 2024 | | As of December 31, 2023 | | As of September 30, 2024 | | As of December 31, 2023 |
Principal amount | | $ | 130,269 | | | $ | 123,478 | | | $ | 11,918 | | | $ | 11,460 | |
Accrued PIK interest | | 4,816 | | | 1,170 | | | 238 | | | — | |
Unamortized discount | | (1,672) | | | (2,306) | | | (1,832) | | | (2,496) | |
Unamortized issuance costs | | (5,254) | | | (7,245) | | | — | | | — | |
Net carrying amount | | $ | 128,159 | | | $ | 115,097 | | | $ | 10,324 | | | $ | 8,964 | |
As of September 30, 2024, the effective interest rates on the June 2022 Toggle Convertible Notes and June 2023 Toggle Convertible Notes were 13.90% and 17.24%, respectively. Amortization of the debt discount and issuance costs is reported as a component of interest expense and is computed using the straight-line method over the term of the applicable Toggle Convertible Notes, which approximates the effective interest method.
The following table presents the Company's interest expense related to the June 2022 Toggle Convertible Notes:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Contractual interest expense | | $ | 3,582 | | | $ | 3,219 | | | $ | 10,438 | | | $ | 12,464 | |
Amortization of debt discount and issuance costs | | 906 | | | 785 | | | 2,625 | | | 2,520 | |
Total interest expense | | $ | 4,488 | | | $ | 4,004 | | | $ | 13,063 | | | $ | 14,984 | |
The following table presents the Company's interest expense related to the April 2023 Toggle Convertible Notes:
| | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 |
| | |
Contractual interest expense | | $ | 1,096 | | | $ | 3,562 | |
Amortization of debt discount and issuance costs | | 41,530 | | | 42,242 | |
Total interest expense | | $ | 42,626 | | | $ | 45,804 | |
The following table presents the Company's interest expense related to the June 2023 Toggle Convertible Notes:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Contractual interest expense | | $ | 238 | | | $ | 220 | | | $ | 697 | | | $ | 240 | |
Amortization of debt discount and issuance costs | | 231 | | | 253 | | | 663 | | | 253 | |
Total interest expense | | $ | 469 | | | $ | 473 | | | $ | 1,360 | | | $ | 493 | |
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Senior Convertible Notes
First Purchase Agreement Notes
On December 30, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with the investors named therein for the sale of up to $125.0 million in initial principal amount of senior convertible notes (the “Purchase Agreement Notes”), in a registered direct offering. The Purchase Agreement Notes are convertible into shares of the Company’s common stock, subject to certain conditions and limitations. The Company consummated an initial closing for the sale of $50.0 million in aggregate principal amount of Purchase Agreement Notes on December 30, 2022 (the "Series A Notes").
Subsequent to the initial closing, the Company entered into amended securities purchase agreements (the "Amended Purchase Agreements") pursuant to which the Company consummated additional closings on March 17, 2023 for the sale of $25.0 million in aggregate principal amount of Purchase Agreement Notes (the "Series B-1 Notes"), on May 10, 2023 for the sale of $15.0 million in aggregate principal amount of Purchase Agreement Notes (the "Series B-2 Notes"), and on May 25, 2023 for the sale of $12.1 million in aggregate principal amount of Purchase Agreement Notes (the "Series B-3 Notes").
The purchase price for the Purchase Agreement Notes is $1,000 per $1,000 principal amount.
Each Purchase Agreement Note accrued interest at a rate of 5% per annum, payable in arrears on the first calendar day of each calendar quarter, beginning April 1, 2023 for the Series A Notes, June 1, 2023 for the Series B-1 Notes, and July 1, 2023 for the Series B-2 and Series B-3 Notes. Interest was payable in cash or shares of the Company's common stock or in a combination of cash and shares of common stock, at the Company’s option. Each Purchase Agreement Note issued pursuant to the Purchase Agreement and Amended Purchase Agreements had a maturity date of one year from issuance. Upon any conversion, redemption or other repayment of a Purchase Agreement Note, a “make-whole” amount equal to the amount of additional interest that would accrue under such Purchase Agreement Note at the interest rate then in effect assuming that the outstanding principal of such Purchase Agreement Notes remained outstanding through and including the maturity date of such Purchase Agreement Note.
At any time on or after January 9, 2023, all or any portion of the principal amount of each Purchase Agreement Note, plus accrued and unpaid interest, any make-whole amount and any late charges thereon (the “Conversion Amount”), is convertible at any time, in whole or in part, at the noteholder’s option, into shares of the Company's common stock at a conversion price per share (the “Conversion Price”) equal to the lower of (i) the applicable “reference price”, subject to certain adjustments (the “Reference Price”), (ii) the greater of (x) the applicable “floor price” (the “Floor Price”) and (y) the volume weighted average price (“VWAP”) of the common stock as of the conversion date, and (iii) the greater of (x) the Floor Price, and as elected by the converting noteholder, (y) either (X) depending on the delivery time of the applicable conversion notice, (1) the VWAP as of the applicable conversion date or (2) the VWAP immediately prior to the applicable conversion date and (Y) 95% of the average VWAP for the three trading days commencing on, and including, the applicable conversion date, subject to adjustment in accordance with the terms of the Purchase Agreement Notes. The Reference Price and Floor Price applicable to each issuance of Purchase Agreement Notes is summarized below:
| | | | | | | | | | | |
| Reference Price | | Floor Price |
Series A Notes | $ | 179.250 | | | $ | 14.340 | |
Series B-1 Notes | $ | 121.500 | | | $ | 14.340 | |
Series B-2 Notes | $ | 64.200 | | | $ | 14.340 | |
Series B-3 Notes | $ | 58.545 | | | $ | 14.340 | |
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes conversions of the Purchase Agreement Notes during the nine months ended September 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Series A Notes | | Series B-1 Notes | | Series B-2 Notes | | Series B-3 Notes |
Shares of common stock issued for conversions | 726,187 | | | 704,256 | | | 725,276 | | | 754,639 | |
Principal balance converted | $ | 50,000 | | | $ | 25,000 | | | $ | 15,000 | | | $ | 12,076 | |
Make-whole interest converted | $ | 2,500 | | | $ | 1,250 | | | $ | 750 | | | $ | 604 | |
Average conversion price | $ | 72.30 | | | $ | 37.27 | | | $ | 21.72 | | | $ | 16.80 | |
The Company elected to account for the Purchase Agreement Notes pursuant to the fair value option under ASC 825. ASC 825-10-15-4 provides for the “fair value option” election, to the extent not otherwise prohibited by ASC 825-10-15-5, to be afforded to financial instruments, wherein the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The Company believes that the fair value option better reflects the underlying economics of the Purchase Agreement Notes. The Purchase Agreement Notes were fully converted in the second quarter of 2023, and the Purchase Agreement was terminated in the third quarter of 2023.
Second Purchase Agreement Notes
On August 21, 2023, the Company entered into a securities purchase agreement (the "Second Purchase Agreement") with the investors named therein for the sale of up to $325.0 million in initial principal amount of senior convertible notes (the “Second Purchase Agreement Notes”), in a registered direct offering. The Second Purchase Agreement Notes (together with the First Purchase Agreement Notes, the "Senior Convertible Notes") are convertible into shares of the Company’s common stock, subject to certain conditions and limitations. The Company consummated an initial closing for the sale of $125.0 million in aggregate principal amount of Second Purchase Agreement Notes on August 21, 2023 (the "Series A-1 Notes").
Subsequent to the initial closing, the Company entered into a supplemental indenture pursuant to which the Company consummated an additional closing on September 22, 2023 for the sale of $40.0 million in aggregate principal amount of Second Purchase Agreement Notes (the "Series A-2 Notes").
The purchase price for the Second Purchase Agreement Notes is $1,000 per $1,000 principal amount.
Each Second Purchase Agreement Note accrued interest at a rate of 5% per annum, payable in arrears on the first calendar day of each calendar quarter, beginning January 1, 2024 for the Series A-1 Notes and for the Series A-2 Notes. Each Second Purchase Agreement Note issued pursuant to the Second Purchase Agreement had a maturity date of one year from issuance, which may be extended at the option of the noteholders in certain instances. Upon any conversion, redemption or other repayment of a Second Purchase Agreement Note, a “make-whole” amount equal to the amount of additional interest that would accrue under such Second Purchase Agreement Note at the interest rate then in effect assuming that the outstanding principal of such Second Purchase Agreement Notes remained outstanding through and including the maturity date of such Second Purchase Agreement Note.
At any time on or after August 21, 2023, the Conversion Amount is convertible at any time, at the Conversion Price. The Reference Price and Floor Price applicable to each issuance of Second Purchase Agreement Notes is summarized below:
| | | | | | | | | | | |
| Reference Price | | Floor Price |
Series A-1 Notes | $ | 88.200 | | | $ | 11.400 | |
Series A-2 Notes | $ | 88.200 | | | $ | 11.400 | |
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes conversions of the Second Purchase Agreement Notes during the three and nine months ended September 30, 2023:
| | | | | | | | | | | |
| Series A-1 Notes | | Series A-2 Notes |
Shares of common stock issued for conversions | 4,279,353 | | | 190,701 | |
Principal balance converted | $ | 125,000 | | | $ | 7,619 | |
Make-whole interest converted | $ | 6,250 | | | $ | 381 | |
Average conversion price | $ | 30.67 | | | $ | 41.95 | |
The Company elected to account for the Second Purchase Agreement Notes pursuant to the fair value option under ASC 825. The Second Purchase Agreement Notes were fully converted in the third quarter of 2023, and the Second Purchase Agreement was terminated in the third quarter of 2024.
Third Purchase Agreement Notes
On August 19, 2024, the Company entered into a securities purchase agreement (the "Third Purchase Agreement") with the investors named therein for the sale of up to $160.0 million in initial principal amount of senior convertible notes (the “Third Purchase Agreement Notes”), in a registered direct offering. The Third Purchase Agreement Notes (together with the First Purchase Agreement Notes and the Second Purchase Agreement, the "Senior Convertible Notes") are convertible into shares of the Company’s common stock, subject to certain conditions and limitations. The Company consummated an initial closing for the sale of $80.0 million in aggregate principal amount of Third Purchase Agreement Notes on August 19, 2024 (the "Series B-1 Notes").
The purchase price for the Third Purchase Agreement Notes is $1,000 per $1,000 principal amount. Subject to certain conditions being met or waived, at the option of the Company and with the investors’ consent, one or more additional closings for up to the remaining principal amount of Third Purchase Agreement Notes may occur.
Each Third Purchase Agreement Note will accrue interest at a rate of 5% per annum, payable in arrears on the first calendar day of each calendar quarter, beginning October 1, 2024 for the Series B-1 Notes. Interest will not be paid in cash but will be capitalized on each interest payment date by adding the accrued interest to the then outstanding principal of the Notes. Each Third Purchase Agreement Note issued pursuant to the Third Purchase Agreement will have a maturity date of one year from issuance, which may be extended at the option of the noteholders in certain instances. Upon any conversion, redemption or other repayment of a Third Purchase Agreement Note, a “make-whole” amount equal to the amount of additional interest that would accrue under such Third Purchase Agreement Note at the interest rate then in effect assuming that the outstanding principal of such Third Purchase Agreement Notes remained outstanding through and including the maturity date of such Third Purchase Agreement Note.
Pursuant to Nasdaq Rule 5635, the Company is limited to the issuance of an aggregate of 10,114,374 shares under the terms of the Third Purchase Agreement. The Company will not issue any shares of common stock upon conversion of any Third Purchase Agreement Notes if the issuance of such common stock, together with all other common stock issued in connection with the Third Purchase Agreement Notes, would exceed the aggregate number of shares issuable pursuant to Nasdaq Rule 5635 (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the Nasdaq Stock Market. At any time the Company is prohibited from issuing shares of common stock due to the Exchange Cap, the Company will pay cash in accordance with the terms of the Third Purchase Agreement Notes. There are no limitations to the timing or amount that may be converted by the holder when the Company is prohibited from issuing shares of common stock due to the Exchange Cap. Upon a conversion that occurs when the Company is prohibited from issuing shares due to the Exchange Cap, a cash payment is required upon the conversion date and upon final pricing of the conversion which occurs two trading days after the conversion date. Note that the Exchange Cap limitation was reached subsequent to September 30, 2024, see Note 13, Subsequent Events. As the Exchange Cap limitation was reached, there is no additional capacity to issue shares remaining under the Third Purchase Agreement without stockholder approval.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
At any time on or after August 19, 2024, the Conversion Amount is convertible at any time, at the Conversion Price. The Reference Price and Floor Price applicable to each issuance of Third Purchase Agreement Notes is summarized below:
| | | | | | | | | | | |
| Reference Price | | Floor Price |
Series B-1 Notes | $ | 12.200 | | | $ | 1.620 | |
The Company elected to account for the Third Purchase Agreement Notes pursuant to the fair value option under ASC 825. Using an as-converted fair value methodology, the Company determined the fair value of the Series B-1 Notes upon issuance were $88.4 million. The Company recognized an immediate fair value adjustment of $8.4 million in other expense, net on the condensed consolidated statement of operations for the three and nine months ended September 30, 2024. Additionally, the Company recognized $4.9 million in interest expense, net on the condensed consolidated statement of operations for the three and nine months ended September 30, 2024 for placement agent fees and other issuance costs. As of September 30, 2024, the Company recognized $63.2 million on the condensed consolidated balance sheets for the fair value of Third Purchase Agreement Notes outstanding.
The following table summarizes conversions of the Third Purchase Agreement Notes during the three and nine months ended September 30, 2024:
| | | | | | | | |
| | Series B-1 Notes |
Shares of common stock issued for conversions | | 4,600,695 | |
Principal balance converted | | $ | 22,857 | |
Make-whole interest converted | | $ | 1,143 | |
Average conversion price | | $ | 5.69 | |
Carrying value of notes converted | | $ | 25,263 | |
Loss on debt extinguishment | | $ | 923 | |
8.25% Convertible Notes
On December 12, 2023, the Company consummated the sale and issuance of $175.0 million aggregate principal amount of the 8.25% Convertible Notes. The 8.25% Convertible Notes are senior, unsecured obligations of the Company.
The 8.25% Convertible Notes accrue interest at a rate of 8.25% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2024. The 8.25% Convertible Notes will mature on December 15, 2026, unless earlier repurchased, redeemed or converted. At any time before the close of business on the second scheduled trading day immediately before the maturity date, noteholders may convert their 8.25% Convertible Notes at their option. The Company will settle conversions by delivering (i) shares of the Company’s common stock (together, if applicable, with cash in lieu of any fractional share), at the then-applicable conversion rate; and (ii) a cash amount representing the present value of remaining scheduled coupon payments on the converted notes discounted at United States treasuries plus 50 basis points (the “Coupon Make-Whole Premium”). The conversion rate was adjusted on June 24, 2024, to be 37.0370 shares of common stock per $1,000 principal amount of 8.25% Convertible Notes, which represents an adjusted conversion price of approximately $27.00 per share of common stock. The conversion rate and conversion price are subject to further customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a make-whole fundamental change occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.
The 8.25% Convertible Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after December 15, 2025 and before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 175% of the conversion price on each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. However, the Company may not redeem less than all of the outstanding 8.25% Convertible Notes unless at least $100.0 million aggregate principal amount of 8.25% Convertible Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. The redemption price will be a cash amount equal to the principal amount of the 8.25% Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
If certain corporate events that constitute a fundamental change occur prior to the maturity date, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their 8.25% Convertible Notes at a cash repurchase price equal to the principal amount of the 8.25% Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of fundamental change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
The 8.25% Convertible Notes have customary provisions relating to the occurrence of events of default, which include the following: (i) certain payment defaults on the 8.25% Convertible Notes (which, in the case of a default in the payment of interest on the 8.25% Convertible Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture with respect to the 8.25% Convertible Notes within specified periods of time; (iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (iv) a default by the Company in its other obligations or agreements under the Indenture or the 8.25% Convertible Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (v) certain payment defaults or other defaults that result in the acceleration prior to stated maturity of indebtedness for borrowed money of the Company or any of its significant subsidiaries of at least $30,000,000 are not cured, waived, rescinded or discharged, as applicable, within 30 days after notice is given in accordance with the Indenture; (vi) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $30,000,000 (excluding any amounts covered by insurance), where such judgments are not discharged or stayed within 60 days after date on which the right to appeal has expired or on which all rights to appeal have been extinguished; and (vii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries.
If an event of default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest and Coupon Make-Whole Premium, if any, on, all of the 8.25% Convertible Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other event of default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of 8.25% Convertible Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest and Coupon Make-Whole Premium, if any, on, all of the 8.25% Convertible Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive during the continuance of such event of default special interest on the 8.25% Convertible Notes for up to 180 days at a specified rate per annum of 0.25% for the first 90 days and 0.50% from the 91st day until the 180th day, in each case, on the principal amount of the 8.25% Convertible Notes.
The conversion features embedded to the 8.25% Convertible Notes met the criteria to be separated from the host contract and recognized separately at fair value. See Note 2, Summary of Significant Accounting Policies. The total proceeds received were first allocated to the fair value of the bifurcated derivative liability, and the remaining proceeds allocated to the host resulting in an adjustment to the initial purchasers' debt discount.
The Company recognized $122.1 million upon issuance of the 8.25% Convertible Notes, net of initial purchasers' discounts of $47.3 million and debt issuance costs of $5.6 million. Unamortized debt discount and issuance costs were reported as a direct deduction from the face amount of the 8.25% Convertible Notes. During 2023, noteholders of the 8.25% Convertible Notes converted aggregate principal amount of $153.4 million for issuance of 5,683,038 shares of the Company's common stock.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes conversions of the 8.25% Convertible Notes during the three and nine months ended September 30, 2024:
| | | | | | | | | | | |
| Three Months Ended September 30, 2024 | | Nine Months Ended September 30, 2024 |
Shares of common stock issued for conversions | 9,257 | | | 733,331 | |
Principal balance converted | $ | 250 | | | $ | 19,800 | |
Make-whole premium | $ | 48 | | | $ | 4,579 | |
Net carrying amount converted | $ | 174 | | | $ | 13,741 | |
Gain (loss) on debt extinguishment | $ | 51 | | | $ | (2,262) | |
The net carrying amount of the debt component of the 8.25% Convertible Notes as of September 30, 2024 and December 31, 2023 was as follows:
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2024 | | December 31, 2023 |
Principal amount | | $ | 1,758 | | | $ | 21,558 | |
Unamortized discount | | (475) | | | (5,821) | |
Unamortized issuance costs | | (57) | | | (690) | |
Net carrying amount | | $ | 1,226 | | | $ | 15,047 | |
Interest expense on the 8.25% Convertible Notes for the three and nine months ended September 30, 2024 was immaterial.
Financing Obligations
On May 10, 2022 (the "Sale Date"), the Company entered into a sale agreement (the "Sale Agreement"), pursuant to which the Company sold the land and property related to the Company's headquarters in Phoenix, Arizona for a purchase price of $52.5 million. As of the Sale Date, $13.1 million was withheld from the proceeds received related to portions of the headquarters undergoing construction. The Company received the remaining proceeds throughout the completion of construction pursuant to the terms of the Sale Agreement. Concurrent with the sale, the Company entered into a lease agreement (the "Lease Agreement"), whereby the Company leased back the land and property related to the headquarters for an initial term of 20 years with four extension options for 7 years each. As of the Sale Date, the Company considered one extension option reasonably certain of being exercised.
The buyer is not considered to have obtained control of the headquarters because the lease is classified as a finance lease. Accordingly, the sale of the headquarters is not recognized and the property and land continue to be recognized on the Company's condensed consolidated balance sheets. As of the Sale Date, the Company recorded $38.3 million as a financing obligation on the Company's condensed consolidated balance sheets representing proceeds received net of debt issuance costs of $1.1 million. Rent payments under the terms of the Lease Agreement are allocated between interest expense and principal repayments using the effective interest method. Additionally, debt issuance costs are amortized to interest expense over the lease term.
After the Sale Date and through September 30, 2024, the Company recognized an additional $13.1 million for financing obligations on the Company's condensed consolidated balance sheets related to the completion of construction. For the three months ended September 30, 2024 and 2023, the Company recognized $0.9 million of interest expense related to interest on the financing obligation and amortization of debt issuance costs. For the nine months ended September 30, 2024 and 2023, the Company recognized $2.7 million of interest expense related to interest on the financing obligation and amortization of debt issuance costs.
On June 29, 2023 (the "Land Sale Date"), the Company entered into a sale agreement (the "Land Sale Agreement"), pursuant to which the Company sold the land in Coolidge, Arizona on which the Company's manufacturing facility is located for a purchase price of $50.4 million. Concurrent with the sale, the Company entered into a lease agreement (the "Land Lease
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Agreement"), whereby the Company leased back the land for an initial term of 99 years. The Land Lease Agreement grants the Company an option to repurchase the land upon the fiftieth (50th) anniversary of the Land Sale Date for a price equal to the greater of the fair market value, or 300% of the purchase price. As of the Land Sale Date, the Company considered the purchase option reasonably certain of being exercised.
The buyer is not considered to have obtained control of the land because the lease is classified as a finance lease. Accordingly, the sale of the land in Coolidge, Arizona is not recognized and the land continues to be recognized on the Company's condensed consolidated balance sheets. As of the Land Sale Date, the Company recorded $49.4 million as a financing obligation on the Company's condensed consolidated balance sheets representing proceeds received net of debt issuance costs of $1.0 million. Rent payments under the terms of the Land Lease Agreement are allocated between interest expense and principal repayments using the effective interest method. Additionally, debt issuance costs are amortized to interest expense over the lease term.
For the three and nine months ended September 30, 2024, the Company recognized $1.3 million and $3.9 million, respectively, of interest expense related to interest on the financing obligation and amortization of debt issuance costs. For the three and nine months ended September 30, 2023, the Company recognized $1.3 million of interest expense related to interest on the financing obligation and amortization of debt issuance costs.
Collateralized Promissory Notes
On June 7, 2022, the Company executed a promissory note and a master security agreement (the "Master Security Agreement") for $50.0 million at a stated interest rate of 4.26% (the "Collateralized Note"). The Collateralized Note was fully collateralized by certain personal property assets as fully described in the Master Security Agreement. The Collateralized Note carried a 60 month term and was payable in 60 equal consecutive monthly installments due in arrears.
For the three and nine months ended September 30, 2023, the Company recognized $0.2 million and $1.1 million of interest expense, respectively, on the Collateralized Note. The Company repaid the promissory note during the third quarter of 2023. The Company repaid $39.3 million during the third quarter of 2023, representing the outstanding principal balance of the Collateralized Note.
On August 4, 2022, the Company executed a promissory note and a security agreement for $4.0 million at an implied interest rate of 7.00% (the "Second Collateralized Note"). The Second Collateralized Note is fully collateralized by certain personal property assets as fully described in the security agreement. The Second Collateralized Note carries a 60 month term and is payable in 60 equal monthly installments due in arrears.
For the three and nine months ended September 30, 2024 and 2023, interest expense related to the Second Collateralized Note was immaterial.
Insurance Premium Financings
The Company executed an insurance premium financing agreement pursuant to which the Company financed certain annual insurance premiums for $6.6 million, primarily consisting of premiums for directors' and officers' insurance. The insurance premium payable incurred interest at 2.95%, and matured on March 27, 2023.
During the second and third quarters of 2023, the Company executed additional insurance premium financing agreements pursuant to which the Company financed certain annual insurance premiums for $3.9 million and $1.2 million, respectively, primarily consisting of premiums for directors' and officers' insurance. The insurance premium payables each incurred interest at 6.64%, and matured on March 27, 2024.
During the second quarter of 2024, the Company executed an additional insurance premium financing agreement pursuant to which the Company financed certain annual insurance premiums for $4.6 million, primarily consisting of premiums for directors' and officers' insurance. The insurance premium payable incurs interest at 6.99%, and is due in monthly installments maturing on March 27, 2025.
For the three and nine months ended September 30, 2024 and 2023, the Company recognized an immaterial amount of interest expense on the insurance premium financing agreements.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Letters of Credit
During the first quarter of 2024, the Company executed a $3.0 million letter of credit in connection with the FFI Purchase Agreement through January 30, 2025. As of September 30, 2024, no amounts have been drawn on the letter of credit.
During the third quarter of 2023, the Company executed a $1.2 million letter of credit to secure a customs bond through September 14, 2024. The letter of credit was subsequently extended through September 14, 2025. As of September 30, 2024, no amounts have been drawn on the letter of credit.
During the second quarter of 2022, and in conjunction with the execution of the Lease Agreement, the Company executed an irrevocable standby letter of credit for $12.5 million to collateralize the Company's lease obligation. The Lease Agreement was subsequently amended, increasing the amount of the letter of credit to $13.1 million. The letter of credit is subject to annual increases commensurate with base rent increases pursuant to the Lease Agreement. The letter of credit will expire upon the expiration of the Lease Agreement, but may be subject to reduction or early termination upon the satisfaction of certain conditions as described in the Lease Agreement.
During the fourth quarter of 2021, the Company executed an irrevocable standby letter of credit for $25.0 million through December 31, 2024 in connection with the execution of a product supply agreement with a vendor. Pursuant to subsequent amendments, the amount of the letter of credit was reduced to $2.2 million. As of September 30, 2024, no amounts have been drawn on the letters of credit.
7.CAPITAL STRUCTURE
Shares Authorized
As of September 30, 2024, the Company had authorized 1,150,000,000 shares consisting of 1,000,000,000 shares designated as common stock and 150,000,000 shares designated as preferred stock.
Warrants
As of September 30, 2024 and December 31, 2023, the Company had 28,038 private warrants outstanding. The Company assumed the private warrants previously issued by VectoIQ Acquisition Corp. ("VectoIQ") and Romeo, respectively, and each private warrant entitles the registered holder to purchase one share of common stock at a price of $345.00 or $2,908.94 per share, respectively, subject to adjustment. The outstanding private warrants are immaterial.
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 stock dividend, or recapitalization, reorganization, merger or consolidation. However, the private warrants will not be adjusted for the issuance of common stock at a price below their exercise price.
Stock Purchase Agreements
First Purchase Agreement with Tumim
On June 11, 2021, the Company entered into a common stock purchase agreement (the "First Tumim Purchase Agreement") and a registration rights agreement (the "Registration Rights Agreement") with Tumim Stone Capital LLC ("Tumim"), pursuant to which Tumim committed to purchase up to $300.0 million in shares of the Company's common stock, subject to certain limitations and conditions set forth in the First Tumim Purchase Agreement.
Under the terms of the First Tumim Purchase Agreement, the Company had the right, but not the obligation, to sell to Tumim, shares of common stock over the period commencing on the date of the First Tumim Purchase Agreement (the “Tumim Closing Date”) and ending on the first day of the month following the 36-month anniversary of the Tumim Closing Date. The purchase price was calculated as 97% of the volume weighted average prices of the Company's common stock during normal trading hours for three consecutive trading days commencing on the purchase notice date.
During the nine months ended September 30, 2023, the Company sold 114,033 shares of common stock, for proceeds of $8.4 million, and terminated the First Tumim Purchase Agreement during the first quarter of 2023.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Second Purchase Agreement with Tumim
On September 24, 2021, the Company entered into a second common stock purchase agreement (the "Second Tumim Purchase Agreement") and a registration rights agreement with Tumim, pursuant to which Tumim committed to purchase up to $300.0 million in shares of the Company's common stock, subject to certain limitations and conditions set forth in the Second Tumim Purchase Agreement.
Under the terms of the Second Tumim Purchase Agreement, the Company had the right, but not the obligation, to sell to Tumim, shares of common stock over the period commencing on the date of the Second Tumim Purchase Agreement (the “Second Tumim Closing Date”) and ending on the first day of the month following the 36-month anniversary of the Second Tumim Closing Date, provided that certain conditions have been met. The purchase price was calculated as 97% of the volume weighted average prices of the Company's common stock during normal trading hours for three consecutive trading days commencing on the purchase notice date.
During the nine months ended September 30, 2023, the Company sold 959,693 shares of common stock, for proceeds of $59.2 million to Tumim under the terms of the Second Tumim Purchase Agreement, and terminated the Second Tumim Purchase Agreement during the third quarter of 2023.
Equity Distribution Agreement
In August 2022, the Company entered into an equity distribution agreement with Citi as sales agent, pursuant to which the Company can issue and sell shares of its common stock with an aggregate maximum offering price of $400.0 million. In August 2023, the Company amended and restated the equity distribution agreement (as amended and restated through May 2024, the "Equity Distribution Agreement") with Citi as a sales agent, pursuant to which the Company increased the aggregate maximum offering price by $200.0 million, resulting in an aggregate offering price of up to $600.0 million.
The Company pays Citi a fixed commission rate of 2.5% of gross offering proceeds of shares sold under the Equity Distribution Agreement. During the three and nine months ended September 30, 2024, the Company sold 2,104,738 and 5,258,862 shares of common stock under the Equity Distribution Agreement at an average price per share of $10.19 and $14.02, for gross proceeds of $21.5 million and $73.8 million, and net proceeds of approximately $20.8 million and $71.7 million, after $0.7 million and $2.1 million, respectively. in commissions to the sales agent and other issuance costs. During the three and nine months ended September 30, 2023, the Company sold 922,096 and 2,223,015 shares of common stock under the Equity Distribution Agreement at an average price per share of $59.11 and $53.33, respectively, for gross proceeds of $54.5 million and $118.6 million and net proceeds of approximately $53.1 million and $115.6 million, after $1.4 million and $3.0 million, respectively, in commissions to the sales agent. Commissions incurred in connection with the Equity Distribution Agreement are reflected as a reduction of additional paid-in capital on the Company's condensed consolidated balance sheets. Commissions recognized in accrued expenses and other current liabilities on the Company's condensed consolidated balance sheets were $1.8 million as of September 30, 2024 and immaterial as of December 31, 2023.
Public Offering
The Company sold 997,024 shares of common stock in an underwritten public offering (the "Public Offering") at an offering price of $33.60 per share. The Public Offering closed on April 4, 2023, and the Company received net proceeds of $32.2 million after underwriters discounts and offering costs.
Direct Offering
The Company entered into a stock purchase agreement with an investor (the "Investor") pursuant to which the investor agreed to purchase up to $100.0 million of shares of the Company's common stock in a registered direct offering (the "Direct Offering"), with the actual amount of shares of common stock purchased in the Direct Offering reduced to the extent of the total number of shares issued pursuant to the Public Offering. The Direct Offering closed on April 11, 2023, and the Company sold 1,979,167 shares of common stock at the Public Offering price of $33.60 per share to the Investor for net proceeds of $63.2 million, after deducting placement agent fees and offering expenses.
NIKOLA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.STOCK BASED COMPENSATION EXPENSE
2017 and 2020 Stock Plans
The 2017 Stock Option Plan (the “2017 Plan”) provides for the grant of incentive and nonqualified options to purchase common stock to officers, employees, directors, and consultants. Options were granted at a price not less than the fair market value on the date of grant and generally became 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.
The Nikola Corporation 2020 Stock Incentive Plan ("2020 Plan") provides for the grant of incentive and nonqualified stock options, 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 Nikola Corporation 2020 Employee Stock Purchase Plan ("2020 ESPP") became effective immediately upon the closing of the business combination with VectoIQ. No offerings have been authorized to date by the Company's board of directors under the ESPP.
Stock Options
A summary of changes in stock options are as follows:
| | | | | | | | | | | | | | | | | |
| Options | | Weighted Average Exercise Price Per share | | Weighted Average Remaining Contractual Term (Years) |
Outstanding at December 31, 2023 | 501,362 | | | $ | 40.74 | | | 3.64 |
Granted | — | | | — | | | |
Exercised | — | | | — | | | |
Cancelled | (3,838) | | | 44.39 | | | |
Outstanding at September 30, 2024 | 497,524 | | | | | 2.87 |
Vested and exercisable as of September 30, 2024 | 497,524 | | |