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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-249981

PROSPECTUS

 

LOGO

Fisker Inc.

Up to 133,785,596 Shares of Class A Common Stock

Up to 27,760,000 Shares of Class A Common Stock Issuable Upon Exercise of Warrants

Up to 9,360,000 Warrants

 

 

This prospectus relates to the issuance by us of up to an aggregate of up to 27,760,000 shares of our Class A Common Stock, $0.00001 par value per share (“Class A Common Stock”), which consists of (i) up to 9,360,000 shares of Class A Common Stock that are issuable upon the exercise of 9,360,000 warrants (the “Private Warrants”) originally issued in a private placement in connection with the IPO (as defined below) of Spartan Energy Acquisition Corp. (“Spartan”), at an exercise price of $11.50 per share of Class A Common Stock and (ii) up to 18,400,000 shares of Class A Common Stock that are issuable upon the exercise of 18,400,000 warrants (the “Public Warrants” and, together with the Private Warrants, the “Warrants”) originally issued in the IPO of Spartan, at an exercise price of $11.50 per share of Class A Common Stock.

This prospectus also relates to the resale from time to time by the Selling Securityholders named in this prospectus (the “Selling Securityholders”) of up to 133,785,596 shares of Class A Common Stock, including (i) 28,356,906 shares of Class A Common Stock issued pursuant to the Business Combination Agreement (as defined below) as Merger Consideration (as defined below), (ii) 13,358,824 Conversion Shares (as defined below), (iii) 9,360,000 shares of Class A Common Stock that may be issued upon exercise of the Private Warrants, (iv) 13,235,412 Executive Shares (as defined below), (v) up to 19,474,454 shares of Class A Common Stock that may be issued upon exercise of 19,474,454 warrants originally issued in a private placement to Magna International Inc. in connection with entering into a cooperation agreement, at an exercise price of $0.01 per share of Class A Common Stock (the “Magna Warrants”), and (vi) 50,000,000 PIPE Shares (as defined below).

This prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus.

We will not receive any proceeds from the sale of shares of Class A Common Stock or Private Warrants by the Selling Securityholders or of shares of Class A Common Stock by us pursuant to this prospectus, except with respect to amounts received by us upon exercise of the Warrants and the Magna Warrants. However, we will pay the expenses, other than any underwriting discounts and commissions, associated with the sale of securities pursuant to this prospectus.

We are registering the securities for resale pursuant to the Selling Securityholders’ registration rights under certain agreements between us and the Selling Securityholders. Our registration of the securities covered by this prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of the securities. The Selling Securityholders may offer and sell the securities covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares or Warrants in the section entitled “Plan of Distribution.”

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

Our Class A Common Stock and Public Warrants are listed on the NYSE under the symbols “FSR” and “FSR WS,” respectively. On December 8, 2020, the closing price of our Class A Common Stock was $17.21 and the closing price for our Public Warrants was $5.27.

 

 

See the section entitled “Risk Factors” beginning on page 8 of this 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 is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is December 9, 2020.


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Index to Financial Statements

TABLE OF CONTENTS

 

About This Prospectus

   ii

Frequently Used Terms

   iii

Forward-Looking Statements

   v

Summary

   1

Risk Factors

   8

Use of Proceeds

   34

Determination of Offering Price

   34

Market Information for Class A Common Stock and Dividend Policy

   34

Selected Historical Consolidated Financial And Operating Data Of Fisker

   36

Selected Historical Financial Information of Spartan

   37

Unaudited Pro Forma Condensed Combined Financial Information

   38

Comparative Share Information

   48

Capitalization

   49

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

   50

Business

   63

Management

   87

Executive Compensation

   95

Certain Relationships And Related Transactions

   110

Beneficial Ownership of Securities

   114

Selling Securityholders

   116

Plan of Distribution

   130

Certain United States Federal Income Tax Considerations

   133

Description of Capital Stock

   138

Securities Act Restrictions on Resale of Securities

   145

Legal Matters

   147

Experts

   147

Change In Auditor

   147

Where You Can Find More Information

   147

Index To Unaudited Condensed Consolidated Financial Statements

   F-1

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Class A Common Stock issuable upon the exercise of any Warrants. We will receive proceeds from any exercise of the Warrants or the Magna Warrants for cash.

Neither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”

On October 29, 2020 (the “Closing Date”), Spartan, our predecessor company, consummated the previously announced merger pursuant to that certain Business Combination Agreement, dated July 10, 2020 (the “Business Combination Agreement”), by and among Spartan, Spartan Merger Sub Inc., a wholly-owned subsidiary of Spartan incorporated in the State of Delaware (“Merger Sub”), and Fisker Group Inc. (f/k/a Fisker Inc.), a Delaware corporation (“Legacy Fisker”). Pursuant to the terms of the Business Combination Agreement, a Business Combination between the Company and Legacy Fisker was effected through the merger of Merger Sub with and into Legacy Fisker, with Legacy Fisker surviving as the surviving company and as a wholly-owned subsidiary of Spartan (the “Merger” and, collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”). On the Closing Date, and in connection with the closing of the Business Combination (the “Closing”), Spartan Energy Acquisition Corp. changed its name to Fisker Inc.

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

 

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FREQUENTLY USED TERMS

Unless the context indicates otherwise, the following terms have the following meanings when used in this prospectus:

A&R Registration Rights Agreement” means that certain Amended and Restated Registration Rights, dated as of October 29, 2020, among the Company, the Former Sponsor (as defined below), Magna (as defined below), Henrik Fisker, Dr. Geeta Gupta and certain former stockholders of Legacy Fisker.

Board” or “Board of Directors” means our board of directors.

Business Combination” means the transactions contemplated by the Merger Agreement, pursuant to which Merger Sub was merged with and into Legacy Fisker (the “Merger”), with Legacy Fisker surviving the Merger as the Company’s wholly owned subsidiary, which transactions were consummated on October 29, 2020.

Business Combination Agreement” means that certain Agreement and Plan of Merger, dated as of July 10, 2020, by and among the Company, Merger Sub and Legacy Fisker.

Class A Common Stock” means the shares of our Class A common stock, par value $0.00001 per share.

Class B Common Stock” means the shares of our Class B common stock, par value $0.00001 per share.

Closing” means the closing of the Business Combination on October 29, 2020.

Common Stock” means the Class A Common Stock and the Class B Common Stock.

Conversion Shares” means the 13,358,824 shares of Class A Common Stock issued upon conversion of Founder Shares at the closing of the Business Combination, which include 12,946,324 shares that are held by the Former Sponsor, 150,000 shares that are held by Robert C. Reeves, 150,000 shares that are held by John M. Stice, 75,000 shares that are held by John J. MacWilliams, and 37,500 shares that are held by Jan C. Wilson.

DGCL” means the General Corporation Law of the State of Delaware.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Executive Shares” means 13,235,412 shares of Class A Common Stock underlying 13,235,412 shares of Class B Common Stock held in the aggregate by Henrik Fisker (6,617,706 shares individually) and Dr. Geeta Gupta (6,617,706 shares individually).

Former Sponsor” means Spartan Energy Acquisition Sponsor LLC, a Delaware limited liability company.

Founder Shares” means the 13,800,000 shares of Class B Common Stock purchased by the Former Sponsor in connection with the Company’s IPO, of which 441,176 were forfeited and cancelled in connection with consummation of the Business Combination.

Initial Stockholders” means the Former Sponsor and Robert C. Reeves, John M. Stice, John J. MacWilliams and Jan C. Wilson, the Company’s independent directors prior to the Business Combination.

IPO” means the Company’s initial public offering, consummated on August 14, 2018, through the sale of 55,200,000 public units (including 7,200,000 units sold pursuant to the underwriters’ full exercise of their over-allotment option) at $10.00 per unit.

Merger Consideration” means the 28,356,906 shares of Class A Common Stock issued to the former securityholders of Legacy Fisker pursuant to the transactions contemplated by the Merger Agreement.

 

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PIPE Financing” means the private placement of 50,000,000 shares of Class A Common Stock with a limited number of “qualified institutional buyers” (as defined in Rule 144A of the Securities Act) and “accredited investors” (as defined by Rule 501 of Regulation D) pursuant to Section 4(a)(2) of the Securities Act, for gross proceeds to the Company in an aggregate amount of approximately $500,000,000.

PIPE Investors” means certain “qualified institutional buyers” (as defined in Rule 144A of the Securities Act) and “accredited investors” (as defined by Rule 501 of Regulation D).

PIPE Shares” means the 50,000,0000 shares of Class A Common Stock purchased by the PIPE Investors pursuant to the Subscription Agreements.

Private Warrants” means the warrants that were issued to the Company’s Former Sponsor on the IPO closing date, each of which is exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share, in accordance with its terms.

public shares” means shares of Class A Common Stock included in the units issued in the IPO.

public stockholders” means holders of public shares, including the Initial Stockholders to the extent the Initial Stockholders hold public shares, provided, that the Initial Stockholders will be considered a “public stockholder” only with respect to any public shares held by them.

public units” or “units” means one share of Class A Common Stock and one-third of one Public Warrant of the Company sold in the IPO.

Public Warrants” means the warrants included in the public units issued in the IPO, each of which is exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share, in accordance with its terms.

Securities Act” means the Securities Act of 1933, as amended.

Selling Securityholders” means the persons listed in the table in the “Selling Securityholders” section of this prospectus, and the pledgees, donees, transferees, assignees, successors and others who later come to hold any of the Selling Securityholders’ interest in Class A Common Stock or Private Warrants in accordance with the terms of the A&R Registration Rights Agreement or the Subscription Agreements, as applicable, and in each case other than through a public sale.

Subscription Agreements” means, collectively, those certain subscription agreements entered into on July 10, 2020, as amended or modified, between the Company and certain investors, including certain employees and affiliates of the Former Sponsor, pursuant to which such investors agreed to purchase an aggregate of 50,000,000 shares of Class A Common Stock in the PIPE Shares.

 

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FORWARD-LOOKING STATEMENTS

This prospectus and any accompanying prospectus supplement, or some of the information incorporated herein by reference, contains statements that are forward-looking and as such are not historical facts. These forward-looking statements include, without limitation, statements regarding future financial performance, business strategies, expansion plans, future results of operations, estimated revenues, losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on our management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this prospectus and any accompanying prospectus supplement, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “project” or the negative of such terms or other similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus and any accompanying prospectus supplement and in any document incorporated by reference in this prospectus may include, for example, statements about:

 

   

our ability to maintain the listing of our Class A Common Stock on the NYSE following the Business Combination;

 

   

our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and our to grow and manage growth profitably following the Business Combination;

 

   

our ability to enter into binding contracts with OEMs or tier-one suppliers in order to execute on our business plan;

 

   

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

 

   

that we have identified a material weakness in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements;

 

   

our expansion plans and opportunities;

 

   

our expectations regarding future expenditures;

 

   

our ability to raise capital in the future;

 

   

our ability to attract and retain qualified employees and key personnel;

 

   

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

 

   

changes in applicable laws or regulations;

 

   

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

 

   

the possibility that COVID-19 may adversely affect the results of our operations, financial position and cash flows; and

 

   

other factors detailed under the section entitled “Risk Factors.”

The forward-looking statements contained in this prospectus and in any document incorporated by reference are based on current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties, some of which are beyond our control, or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors” and in our periodic filings with the SEC. Our SEC filings are available publicly on the SEC website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Accordingly, forward-looking statements in this prospectus and in any document incorporated herein by reference should not be relied upon as representing our views as of any subsequent date, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

 

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SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that may be important to you. To understand this offering fully, you should read this entire prospectus carefully, including the information set forth under the heading “Risk Factors” and our financial statements.

The Company

We are building a technology-enabled, asset-light automotive business model that we believe will be among the first of its kind and aligned with the future state of the automotive industry. This involves a focus on vehicle development, customer experience, sales and service to change the personal mobility experience through technological innovation, ease of use and flexibility. We combine the legendary design and engineering expertise of Henrik Fisker – the visionary behind the iconic BMW Z8 sports car and the famed Aston Martin DB9 and V8 Vantage, and – to develop high quality electric vehicles with strong emotional appeal by engaging the consumer’s senses through the overall experience of Fisker vehicles. Central to our business model is the Fisker Flexible Platform Agnostic Design (“FF-PAD”), a proprietary process that allows the development and design of a vehicle to be adapted to any given electric vehicle (“EV”) platform in the specific segment size. The process focuses on selecting industry leading vehicle specifications and adapting the design to crucial hard points on a third-party supplied EV platform and outsourced manufacturing to reduce development cost and time to market. We believe we are well-positioned through our global premium EV brand, our renowned design capabilities and sustainability focus.

Background

Spartan was originally known as Spartan Energy Acquisition Corp. On October 29, 2020, we consummated the Business Combination with Legacy Fisker pursuant to the Business Combination Agreement dated as of July 10, 2020 among us, Legacy Fisker and Merger Sub. In connection with the Closing of the Business Combination, we changed our name to Fisker Inc. Legacy Fisker was deemed to be the accounting acquirer in the Merger based on an analysis of the criteria outlined in Accounting Standards Codification 805. While we were the legal acquirer in the Merger, because Legacy Fisker was deemed the accounting acquirer, the historical financial statements of Legacy Fisker became the historical financial statements of the combined company, upon the consummation of the Merger.

Immediately prior to the effective time of the Merger (the “Effective Time”), each share of Legacy Fisker preferred stock (“Legacy Fisker Preferred Stock”) that was issued and outstanding was automatically converted into a share of Legacy Fisker Common Stock, par value $0.00001 per share (“Legacy Fisker Common Stock”), such that each converted share of Legacy Fisker Preferred Stock was no longer outstanding and ceased to exist, and each holder of Legacy Fisker Preferred Stock thereafter ceased to have any rights with respect to such securities.

Also immediately prior to the Effective Time, the outstanding principal and unpaid accrued interest due on Legacy Fisker’s outstanding convertible notes (“Legacy Fisker Convertible Notes”) immediately prior to the Effective Time were automatically converted into shares of Legacy Fisker Common Stock in accordance with the terms of such Legacy Fisker Convertible Notes, and such converted Legacy Fisker Convertible Notes were no longer outstanding and ceased to exist, and any liens securing obligations under the Legacy Fisker Convertible Notes were released.

At the Effective Time, (i) each share of Legacy Fisker Common Stock was converted into and exchanged for 2.7162 shares (the “Exchange Ratio”) of our Class A Common Stock and (ii) each share of Legacy Fisker Founders Stock was converted into and exchanged for 2.7162 shares of our Class B Common Stock.

At the Effective Time, all shares of Legacy Fisker Common Stock and Legacy Fisker Preferred Stock held in the treasury of Legacy Fisker were canceled without any conversion thereof and no payment or distribution was made with respect thereto.



 

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At the Effective Time, each share of common stock, par value $0.00001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time was converted into and exchanged for one validly issued, fully paid and nonassessable share of Legacy Fisker Common Stock.

Each Legacy Fisker option that was outstanding immediately prior to the Effective Time, whether vested or unvested, was converted into an option to purchase a number of shares of Common Stock (such option, an “Exchanged Option”) equal to the product (rounded up or down to the nearest whole number, with a fraction of 0.5 rounded up) of (i) the number of shares of Legacy Fisker Common Stock subject to such Legacy Fisker option immediately prior to the Effective Time and (ii) the Exchange Ratio, at an exercise price per share (rounded up or down to the nearest whole cent, with a fraction of $0.005 rounded up) equal to (A) the exercise price per share of such Legacy Fisker option immediately prior to the Effective Time, divided by (B) the Exchange Ratio. Except as specifically provided in the Business Combination Agreement, following the Effective Time, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy Fisker option immediately prior to the Effective Time.

No certificates or scrip or shares representing fractional shares of Common Stock were issued upon the exchange of Legacy Fisker Common Stock. Any fractional shares were rounded up or down to the nearest whole share of Common Stock, with a fraction of 0.5 rounded up. No cash settlements were made with respect to fractional shares eliminated by such rounding.

Pursuant to our prior amended and restated certificate of incorporation, each share of Spartan’s Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock”), converted into one share of Spartan’s Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”), at the Closing. After the Closing and following the effectiveness of our second amended and restated certificate of incorporation (“Certificate of Incorporation”), (i) each share of Class A Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable share of newly authorized Class A Common Stock, without any further action by us or any stockholder and (ii) each share of Class B Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable share of newly authorized Class B Common Stock, without any further action by us or any stockholder.

On October 29, 2020, a number of purchasers (each, a “Subscriber”) purchased from the Company an aggregate of 50,000,000 shares of Class A Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $500 million, pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of July 10, 2020. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of PIPE Shares was consummated concurrently with the Closing.

On October 14, 2020, Fisker and Spartan entered into a Cooperation Agreement with Magna International Inc. (“Magna”) setting forth certain terms for the development of a full electric vehicle (the “Cooperation Agreement”). Pursuant to the terms of the Cooperation Agreement, we issued the Magna Warrants to Magna on October 29, 2020.

Our Class A Common Stock and Public Warrants are currently listed on the NYSE under the symbols “FSR” and “FSR WS,” respectively.

The rights of holders of our Class A Common Stock, Class B Common Stock and Warrants are governed by our second amended and restated certificate of incorporation (the “Certificate of Incorporation”), our amended and restated bylaws (the “Bylaws”) and the Delaware General Corporation Law (the “DGCL”), and, in the case of the Warrants, the Warrant Agreement, dated May 15, 2018, between Spartan and the Continental Stock Transfer & Trust Company (the “Warrant Agreement”). See the sections entitled “Description of Capital Stock” and “Selling Securityholders.”



 

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Corporate Information

We were originally incorporated in the State of Delaware in October 13, 2017 as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar Business Combination with one or more businesses. Spartan completed its IPO in August 2018. In October 2020, our wholly-owned subsidiary merged with and into Legacy Fisker, with Legacy Fisker surviving the merger as a wholly-owned subsidiary of Spartan. In connection with the Merger, we changed our name to Fisker Inc. Our principal executive offices are located at 1888 Rosecrans Avenue, Manhattan Beach, CA 90266. Our telephone number is (833) 434-7537. Our website address is www.fiskerinc.com. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.



 

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The Offering

 

Issuer        Fisker Inc. (f/k/a Spartan Energy Acquisition Corp.)
Issuance of Class A Common Stock   
Shares of Class A Common Stock Offered by us    27,760,000 shares of Class A Common Stock issuable upon exercise of the Warrants, consisting of (i) 9,360,000 shares of Class A Common Stock that are issuable upon the exercise of 9,360,000 Private Warrants and (ii) 18,400,000 shares of Class A Common Stock that are issuable upon the exercise of 18,400,000 Public Warrants
Shares of Common Stock Outstanding Prior to Exercise of All Warrants (including the Magna Warrants)    277,258,103 shares (as of November 30, 2020)
Shares of Common Stock Outstanding Assuming Exercise of All Warrants (including the Magna Warrants)    324,492,557 shares (based on the total shares outstanding as of November 30, 2020)
Exercise Price of the Warrants    $11.50 per share, subject to adjustments as described herein
Use of proceeds    We will receive up to an aggregate of approximately $261.3 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes. See “Use of Proceeds.”
Resale of Class A Common Stock and Warrants   
Shares of Class A Common Stock Offered by the Selling Securityholders    133,785,596 shares of Class A Common Stock (including up to 9,360,000 shares of Class A Common Stock that may be issued upon exercise of the Private Warrants and 19,474,454 shares of Class A Common Stock that may be issued upon exercise of 19,474,454 Magna Warrants)
Warrants Offered by the Selling Securityholders    9,360,000 Private Warrants
Redemption    The Warrants are redeemable in certain circumstances. See “Description of Capital Stock—Warrants” for further discussion


 

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Use of Proceeds    We will not receive any proceeds from the sale of shares of Class A Common Stock or Private Warrants (assuming the cashless exercise provision is used) by the Selling Securityholders
Lock-Up Restrictions    Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See “Plan of Distribution – Lock-up Agreements” for further discussion
Market for Class A Common Stock and Warrants    Our Class A Common Stock and Warrants are currently traded on the NYSE under the symbols, “FSR” and “FSR WS,” respectively
Risk Factors    See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing our securities


 

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Summary Risk Factors

An investment in shares of our common stock involves a high degree of risk. If any of the factors enumerated below or in the section entitled “Risk Factors” occurs, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected.

 

   

Our ability to develop, manufacture and obtain required regulatory approvals for a car of sufficient quality and appeal to customers on schedule and on a large scale is unproven.

 

   

We are substantially reliant on our relationships with OEMs, suppliers and service providers for the parts and components in our vehicles, as well as for the manufacture of our initial vehicles. If any of these OEMs, suppliers or service partners choose to not do business with us, then we would have significant difficulty in procuring and producing our vehicles and our business prospects would be significantly harmed.

 

   

Our relationship with one or more OEMs and automotive suppliers is integral to our platform procurement and manufacturing plan, but we do not have any binding commitments from an OEM or automotive supplier to participate in a platform sharing arrangement or manufacturing activities and we may not be able to obtain such commitments. We therefore are seeking alternative arrangements with a number of OEMs, component suppliers, and manufacturers, which we may not be successful in obtaining.

 

   

If we are unable to contract with OEMs or suppliers on platform sharing and manufacturing of our vehicles, we would need to develop our own platform and manufacturing facilities, which may not be feasible and, if feasible at all, would significantly increase our capital expenditure and would significantly delay production of our vehicles.

 

   

Manufacturing in collaboration with partners is subject to risks.

 

   

There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for our electric vehicles, and there can be no assurance such systems will be successfully developed.

 

   

We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.

 

   

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

 

   

If any of our suppliers become economically distressed or go bankrupt, we may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase our costs, affect our liquidity or cause production disruptions.

 

   

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

 

   

We have a limited operating history and face significant challenges as a new entrant into the automotive industry. Fisker vehicles are in development and we do not expect our first vehicle to be produced until the fourth quarter of 2022, at the earliest, if at all.

 

   

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

 

   

Our EMaaS 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 operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

 

   

We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.

 

   

We could experience cost increases or disruptions in supply of raw materials or other components used in our vehicles. If we are unable to establish an arrangement for the sustainable supply of batteries for our vehicles, our business would be materially and adversely harmed.

 

   

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



 

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Our services may not be generally accepted by our users. If we are unable to provide quality customer service, our business and reputation may be materially and adversely affected.

 

   

The automotive market is highly competitive, and we may not be successful in competing in this industry.

 

   

The automotive industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies, including but not limited to hydrogen, may adversely affect the demand for our electric vehicles.

 

   

Reservations for our vehicles are cancellable.

 

   

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

 

   

We have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences.

 

   

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

 

   

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

 

   

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

 

   

Our distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating our business, operating results and future prospects difficult.

 

   

We may face regulatory limitations on our ability to sell vehicles directly which could materially and adversely affect our ability to sell our electric vehicles.

 

   

We will initially depend on revenue generated from a single model and in the foreseeable future will be significantly dependent on a limited number of models.

 

   

We are highly dependent on the services of Henrik Fisker, our Chief Executive Officer.

 

   

Our business plans require a significant amount of capital. In addition, our future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.

 

   

Failure of information security and privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.

 

   

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

 

   

We face risks related to natural disasters, health epidemics, including the recent COVID 19 pandemic, and other outbreaks, which could significantly disrupt our operations.

 

   

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

 

   

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

 

   

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.

 

   

Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a material adverse effect on our business and operating results.

 

   

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

 

   

The dual class structure of our Common Stock has the effect of concentrating voting control with Henrik Fisker and Dr. Geeta Gupta, our co-founders, members of our Board of Directors and Chief Executive Officer and Chief Financial Officer, respectively. This will limit or preclude your ability to influence corporate matters, including the outcome of important transactions, including a change in control.

 

   

Henrik Fisker and Dr. Geeta Gupta are married to each other. The separation or divorce of the couple in the future could adversely affect our business.



 

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RISK FACTORS

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

Our ability to develop, manufacture and obtain required regulatory approvals for a car of sufficient quality and appeal to customers on schedule and on a large scale is unproven.

Our business depends in large part on our ability to develop, manufacture, market and sell or lease our electric vehicles. Initially, we plan to manufacture vehicles in collaboration with one or more automotive component and engineering services suppliers, including large original equipment manufacturers (“OEMs”) or tier-one automotive suppliers. We recently entered into a Cooperation Agreement with Magna, an industry-leading OEM, but we have not yet executed definitive supply or manufacturing agreements with any OEM or tier-one automotive supplier for the supply of parts for production of the Fisker Ocean, or any of our other future vehicle offerings. If we are unable to negotiate and finalize such supply and manufacturing agreements with an OEM or a tier-one automotive supplier, we will not be able to produce any vehicles and will not be able to generate any revenue, or the vehicles may become more expensive to deliver with a higher bill of materials, which would have a material adverse effect on our business, prospects, operating results and financial condition.

The continued development and the ability to start manufacturing our vehicles, including the Fisker Ocean, are and will be subject to risks, including with respect to:

 

   

our ability to secure necessary funding;

 

   

our ability to negotiate and execute definitive agreements with our various suppliers for hardware, software, or services necessary to engineer or manufacture our vehicles;

 

   

our ability to accurately manufacture vehicles within specified design tolerances;

 

   

obtaining required regulatory approvals and certifications;

 

   

compliance with environmental, safety, and similar regulations;

 

   

securing necessary components, services, or licenses on acceptable terms and in a timely manner;

 

   

delays by us in delivering final component designs to our suppliers;

 

   

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

 

   

quality controls that prove to be ineffective or inefficient;

 

   

delays or disruptions in our supply chain including raw material supplies;

 

   

our ability to maintain arrangements on reasonable terms with its manufacturing partners and suppliers, engineering service providers, delivery partners, and after sales service providers; and

 

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other delays, backlog in manufacturing and research and development of new models, and cost overruns.

Our ability to develop, manufacture and obtain required regulatory approvals for a vehicle of sufficient quality and appeal to customers on schedule and on a large scale is unproven, and the business plan is still evolving. We may be required to introduce new vehicle models and enhanced versions of existing models. To date, we have limited experience, as a company, designing, testing, manufacturing, marketing and selling or leasing our electric vehicles and therefore cannot assure you that we will be able to meet customer expectations. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines would have a material adverse effect on our business, prospects, operating results and financial condition.

We are substantially reliant on our relationships with OEMs, suppliers and service providers for the parts and components in our vehicles, as well as for the manufacture of our initial vehicles. If any of these OEMs, suppliers or service partners choose to not do business with us, then we would have significant difficulty in procuring and producing our vehicles and our business prospects would be significantly harmed.

We have entered into a number of non-binding agreements with third parties in order to implement our asset-light business model and will need to enter into definitive agreements with one or more OEMs and suppliers in order to produce the Fisker Ocean and other vehicles in a manner contemplated by our business plan. Furthermore, we have explored and intend to secure alternative suppliers and providers for many of the most material aspects of our business model.

Collaboration with third parties for the manufacturing of vehicles is subject to risks with respect to operations that are outside our control. We could experience delays to the extent our current or future partners do not continue doing business with us, meet agreed upon timelines, experience capacity constraints or otherwise are unable to deliver components or manufacture vehicles as expected. There is risk of potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is related to their collaboration with us. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our partners’ vehicles or other vehicles manufactured by the same partner. In addition, although we intend to be involved in material decisions in the supply chain and manufacturing process, given that we also rely on our partners to meet our quality standards, there can be no assurance that we will be able to maintain high quality standards.

We may in the future enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party, and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business.

To sell or lease Fisker vehicles as currently contemplated, we will need to enter into certain additional agreements and arrangements that are not currently in place. These include entering into definitive agreements with third party service partners for fleet management, vehicle storage, dockside collection, mobile fleet servicing, financing and end of lease collections. If we are unable to enter into such definitive agreements, or if we are only able to do so on terms that are unfavorable to us, we may have a material adverse effect on our business, prospects, operating results and financial condition.

Our relationship with one or more OEMs and automotive suppliers is integral to our platform procurement and manufacturing plan, but we do not have any binding commitments from an OEM or automotive supplier to participate in a platform sharing arrangement or manufacturing activities and we may not be able to obtain such commitments. We therefore are seeking alternative arrangements with a number of OEMs, component suppliers, and manufacturers, which we may not be successful in obtaining.

To manufacture our vehicles as currently contemplated, we will need to enter into definitive agreements and arrangements that are not currently in place. Although we (i) have recently entered into a Collaborative Agreement with Magna setting forth certain terms for the development of a full electric vehicle and (ii) have a

 

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historic working relationship with Volkswagen Aktiengesellschaft ("VW") to source the Modularer E-Antriebs-Baukasten (“MEB”) platform, including the Fisker Ocean prototype built on the MEB platform by Italdesign Giugiaro S.p.A. ("IDG"), we do not have a definitive agreement with Magna, VW or any other OEM to use a platform and commercially manufacture our vehicles, and as a result, we may not be able to implement our business strategy in the timeframe anticipated, or at all. If we are unable to enter into definitive agreements or are only able to do so on terms that are unfavorable to us, we may not be able to timely identify adequate strategic relationship opportunities, or form strategic relationships, and consequently, we may not be able to fully carry out our business plans. Accordingly, investors should not place undue reliance on our statements about our production plans or their feasibility in the timeframe anticipated, or at all.

If we are unable to contract with OEMs or suppliers on platform sharing and manufacturing of our vehicles, we would need to develop our own platform and manufacturing facilities, which may not be feasible and, if feasible at all, would significantly increase our capital expenditure and would significantly delay production of our vehicles.

We may be unable to enter into definitive agreements with OEMs and suppliers for platform sharing and manufacturing on terms and conditions acceptable to us and therefore we may need to contract with other third parties or establish our own production capacity. There can be no assurance that in such event that we would be able to partner with other third parties or establish our own production capacity to meet our needs on acceptable terms, or at all. The expense and time required to complete any transition and to assure that vehicles manufactured at facilities of new third-party partners comply with our quality standards and regulatory requirements would likely be greater than currently anticipated. If we need to develop our own manufacturing and production capabilities, which may not be feasible, it would significantly increase our capital expenditures and would significantly delay production of our vehicles. This may require that we attempt to raise or borrow money, which may not be successful. Also, it may require that we change the anticipated pricing of our vehicles, which would adversely affect our margins and cash flows. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.

Manufacturing in collaboration with partners is subject to risks.

Our business model relies on outsourced manufacturing of our vehicles. The cost of tooling a manufacturing facility with a collaboration partner is high, but such cost will not be known until we enter into a vehicle manufacturing agreement. Collaboration with third parties to manufacture vehicles is subject to risks that are outside of our control. We could experience delays if our partners do not meet agreed upon timelines or experience capacity constraints. There is risk of potential disputes with partners, which could stop or slow vehicle production, and we could be affected by adverse publicity related to our partners, whether or not such publicity is related to such third parties’ collaboration with us. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our partners’ products. In addition, we cannot guarantee that our suppliers will not deviate from agreed-upon quality standards.

We may be unable to enter into agreements with manufacturers on terms and conditions acceptable to us and therefore we may need to contract with other third parties or significantly add to our own production capacity. We may not be able to engage other third parties or establish or expand our own production capacity to meet our needs on acceptable terms, or at all. The expense and time required to adequately complete any transition may be greater than anticipated. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.

There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for our electric vehicles, and there can be no assurance such systems will be successfully developed.

Fisker vehicles will use a substantial amount of third-party and in-house software codes and complex hardware to operate. The development of such advanced technologies are inherently complex, and we will need to coordinate with our vendors and suppliers in order to reach production for our electric vehicles. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. Thus, our potential inability to develop the necessary software and technology systems may harm our competitive position.

 

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We are relying on third-party suppliers to develop a number of emerging technologies for use in our products, including lithium ion battery technology. These technologies are not today, and may not ever be, commercially viable. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics we anticipate in our business plan. As a result, our business plan could be significantly impacted and we may incur significant liabilities under warranty claims which could adversely affect our business, prospects, and results of operations.

We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.

Any delay in the financing, design, manufacture, regulatory approval or launch of our vehicles, including entering into agreements for platform sharing, supply of component parts, and manufacturing, could materially damage our brand, business, prospects, financial condition and operating results and could cause liquidity constraints. Vehicle manufacturers often experience delays in the design, manufacture and commercial release of new products. To the extent we delay the launch of our vehicles, our growth prospects could be adversely affected as we may fail to establish or grow our market share. We rely on third-party suppliers for the provision and development of the key components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing necessary components, we could experience delays in delivering on our timelines.

Prior to mass production of the Fisker Ocean, we will need the vehicle to be fully designed and engineered and be approved for sale according to differing requirements, including but not limited to regulatory requirements, in the different geographies we intend to launch our vehicles. If we encounter delays in any of these matters, we may consequently delay our deliveries of the Fisker Ocean.

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

While we plan to obtain components from multiple sources whenever possible, many of the components used in our vehicles will be purchased by us from a single source. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are acceptable to us. In addition, we could experience delays if our suppliers do not meet agreed upon timelines or experience capacity constraints.

Any disruption in the supply of components, whether or not from a single source supplier, could temporarily disrupt production of our vehicles until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Any of the foregoing could materially and adversely affect our results of operations, financial condition and prospects.

If any of our suppliers become economically distressed or go bankrupt, we may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase our costs, affect our liquidity or cause production disruptions.

We expect to purchase various types of equipment, raw materials and manufactured component parts from our suppliers. If these suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, we may be required to provide substantial financial support to ensure supply continuity or would have to take other measures to ensure components and materials remain available. Any disruption could affect our ability to deliver vehicles and could increase our costs and negatively affect our liquidity and financial performance.

 

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

The battery packs within our vehicles will make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, once our vehicles are commercially available, a field or testing failure of battery packs in our vehicles could occur, which could result in bodily injury or death and could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive and could harm our brand image. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications, the social and environmental impacts of cobalt mining, or any future incident involving lithium-ion cells, such as a vehicle or other fire, could seriously harm our business and reputation.

We have a limited operating history and face significant challenges as a new entrant into the automotive industry. Fisker vehicles are in development and we do not expect our first vehicle to be produced until the fourth quarter of 2022, at the earliest, if at all.

Fisker was incorporated in September 2016 and we have a short operating history in the automobile industry, which is continuously evolving. We have no experience as an organization in high volume manufacturing of the planned electric vehicles. We cannot assure you that we or our partners will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market the Fisker Ocean and future vehicles. You should consider our business and prospects in light of the risks and significant challenges we face as a new entrant into our industry, including, among other things, with respect to our ability to:

 

   

design and produce safe, reliable and quality vehicles on an ongoing basis;

 

   

obtain the necessary regulatory approvals in a timely manner;

 

   

build a well-recognized and respected brand;

 

   

establish and expand our customer base;

 

   

successfully market not just our vehicles but also our other services, including our Flexee lease and other services we intend to provide;

 

   

properly price our services, including our charging solutions, financing and lease options, and successfully anticipate the take-rate and usage of such services by users;

 

   

successfully service our vehicles after sales and maintain a good flow of spare parts and customer goodwill;

 

   

improve and maintain our operational efficiency;

 

   

maintain a reliable, secure, high-performance and scalable technology infrastructure;

 

   

predict our future revenues and appropriately budget for our expenses;

 

   

attract, retain and motivate talented employees;

 

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anticipate trends that may emerge and affect our business;

 

   

anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and

 

   

navigate an evolving and complex regulatory environment.

If we fail to adequately address any or all of these risks and challenges, our business may be materially and adversely affected.

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

We have incurred a net loss since our inception. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of our vehicles. Even if we are able to successfully develop and sell or lease our vehicles, there can be no assurance that we will be commercially successful.

We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things, design, develop and manufacture our vehicles; build up inventories of parts and components for our vehicles; increase our sales and marketing activities, including opening new Fisker Experience Centers; develop our distribution infrastructure; and increases our general and administrative functions to support our growing operations. We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.

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

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

 

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Our operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

The projected financial and operating information appearing elsewhere in this registration statement reflect current estimates of future performance. Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecast depends on a number of factors, many of which are outside our control, including, but not limited to:

 

   

whether we can obtain sufficient capital to sustain and grow our business;

 

   

our ability to manage its growth;

 

   

whether we can manage relationships with key suppliers;

 

   

the ability to obtain necessary regulatory approvals;

 

   

demand for our products and services;

 

   

the timing and costs of new and existing marketing and promotional efforts;

 

   

competition, including from established and future competitors;

 

   

our ability to retain existing key management, to integrate recent hires and to attract, retain and motivate qualified personnel;

 

   

the overall strength and stability of domestic and international economies;

 

   

regulatory, legislative and political changes; and

 

   

consumer spending habits.

Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our business, results of operations and financial results.

We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.

It is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. We will be required to provide forecasts of our demand to our suppliers several months prior to the scheduled delivery of products to our prospective customers. Currently, there is no historical basis for making judgments on the demand for our vehicles or our ability to develop, manufacture, and deliver vehicles, or our profitability in the future. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to our customers could be delayed, which would harm our business, financial condition and operating results.

We could experience cost increases or disruptions in supply of raw materials or other components used in our vehicles. If we are unable to establish an arrangement for the sustainable supply of batteries for our vehicles, our business would be materially and adversely harmed.

We may be unable to adequately control the costs associated with our operations. We expect to incur significant costs related to procuring raw materials required to manufacture and assemble our vehicles. We expect to use various raw materials in our vehicles including, steel, recycled rubber, recycled polyester, carpeting from fishing nets and bottles recycled from ocean waste. The prices for these raw materials fluctuate depending on factors beyond our control. Our business also depends on the continued supply of battery cells for our vehicles. We are exposed to multiple risks relating to availability and pricing of quality lithium-ion battery cells.

 

 

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Furthermore, currency fluctuations, tariffs or shortages in petroleum and other economic or political conditions may result in significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components would increase our operating costs, and could reduce our margins. In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result in shortages, which would result in increased costs in raw materials to us or impact of prospects.

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

You must consider the risks and difficulties we face as an early stage company with a limited operating history. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed. We have a very limited operating history on which investors can base an evaluation of our business, operating results and prospects. It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected. The projected financial information appearing elsewhere in this registration statement was prepared by management and reflects current estimates of future performance.

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

Once production commences, our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair, recalls, and design changes. Our vehicles will use a substantial amount of software code to operate and software products are inherently complex and often contain defects and errors when first introduced. We have a limited frame of reference by which to evaluate the long-term performance of our systems and vehicles. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. If any of our vehicles fail to perform as expected, we may need to delay deliveries or initiate product recalls, which could adversely affect our brand in our target markets and could adversely affect our business, prospects, and results of operations.

Our services may not be generally accepted by our users. If we are unable to provide quality customer service, our business and reputation may be materially and adversely affected.

Our servicing may primarily be carried out through third parties certified by us. Although such servicing partners may have experience in servicing other vehicles, they will initially have limited experience in servicing Fisker vehicles. There can be no assurance that our service arrangements will adequately address the service requirements of our customers to their satisfaction, or that we and our partners will have sufficient resources to meet these service requirements in a timely manner as the volume of vehicles Fisker delivers increases.

In addition, if we are unable to roll out and establish a widespread service network that complies with applicable laws, user satisfaction could be adversely affected, which in turn could materially and adversely affect our reputation and thus our sales, results of operations, and prospects.

The automotive market is highly competitive, and we may not be successful in competing in this industry.

Both the automobile industry generally, and the electric vehicle segment in particular, are highly competitive, and we will be competing for sales with both ICE vehicles and other EVs. Many of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution,

 

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promotion, sale and support of our products, including our electric vehicles. We expect competition for electric vehicles to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results, and prospects.

The automotive industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies, including but not limited to hydrogen, may adversely affect the demand for our electric vehicles.

We may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a fuel source and, as a result, our competitiveness may suffer. Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the ICE, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Any failure by us to successfully react to changes in existing technologies could materially harm our competitive position and growth prospects.

Reservations for our vehicles are cancellable.

Deposits paid to reserve the Fisker Ocean SUVs are cancellable by the customer until the customer enters into a lease or purchase agreement. Because all of our reservations are cancellable, it is possible that a significant number of customers who submitted reservations for the Fisker Ocean may not purchase vehicles.

The potentially long wait from the time a reservation is made until the time the vehicle is delivered, and any delays beyond expected wait times, could also impact user decisions on whether to ultimately make a purchase. Any cancellations could harm our financial condition, business, prospects, and operating results.

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

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

We have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other adverse consequences.

We have identified material weaknesses in internal control over financial reporting, which relate to: (a) our risk assessment process, including as it relates to fraud risks; (b) general segregation of duties, including the review and approval of journal entries; and (c) precision level to ensure accruals were recorded in the correct period.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to our consolidated financial statements that could not be prevented or detected on a timely basis.

 

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Our management has concluded that these material weaknesses in our internal control over financial reporting are due to the fact that, prior to the completion of the Business Combination, we were a private company with limited resources and did not have the necessary business processes and related internal control formally designed and implemented coupled with the appropriate resources with the appropriate level of experience and technical expertise to oversee our business processes and controls surrounding risk assessment, segregation of duties and accuracy of accruals.

Our management is in the process of developing a remediation plan. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. Our management will monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses could result in further material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If we are unable to assert that its internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A Common Stock could be adversely affected and we could become subject to litigation or investigations by the NYSE, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.

Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt electric vehicles, and even if electric vehicles become more mainstream, consumers choosing us over other EV manufacturers. Demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect our business, prospects, financial condition, and operating results.

In addition, the demand for our vehicles and services will highly depend upon the adoption by consumers of new energy vehicles in general and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards, and changing consumer demands and behaviors.

Other factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:

 

   

perceptions about electric vehicle quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles, whether or not such vehicles are produced by us or other manufacturers;

 

   

range anxiety;

 

   

the availability of new energy vehicles, including plug-in hybrid electric vehicles;

 

   

the availability of service and charging stations for electric vehicles;

 

   

the environmental consciousness of consumers, and their adoption of EVs;

 

   

perceptions about and the actual cost of alternative fuel; and

 

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macroeconomic factors.

Any of the factors described above may cause current or potential customers not to purchase electric vehicles in general, and Fisker electric vehicles in particular. If the market for electric vehicles does not develop as we expect or develop more slowly than we expect, our business, prospects, financial condition and operating results will be affected.

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.

Any reduction, elimination, or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results.

While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, our financial position could be harmed.

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

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

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

We intend to expand our operations significantly, which will require hiring, retaining and training new personnel, controlling expenses, establishing facilities and experience centers, and implementing administrative infrastructure, systems and processes. In addition, because our electric vehicles are based on a different technology platform than traditional ICE vehicles, individuals with sufficient training in electric vehicles may not be available to be hired, and we will need to expend significant time and expense training employees it hires. We also require sufficient talent in additional areas such as software development. Furthermore, as we are a relatively young company, our ability to train and integrate new employees into its operations may not meet the growing demands of our business which may affect our ability to grow. Any failure to effectively manage our growth could materially and adversely affect our business, prospects, operating results and financial condition.

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

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

 

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We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of its vehicles and components and its business, revenues and prospects.

Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Fisker brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Our ability to develop, maintain and strengthen the Fisker brand will depend heavily on the success of our marketing efforts. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of our current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan, the European Union and China, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.

Our distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating our business, operating results and future prospects difficult.

Our distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating our business, operating results and future prospects difficult. Our distribution model is not common in the automotive industry today. Our plans to conduct vehicle sales directly to users rather than through dealerships, primarily through our Flexee App and Fisker Experience Centers. This model of vehicle distribution is relatively new and, with limited exceptions, unproven, and subjects us to substantial risk. For example, we will not be able to utilize long established sales channels developed through a franchise system to increase sales volume. Moreover, we will be competing with companies with well established distribution channels. Our success will depend in large part on our ability to effectively develop our own sales channels and marketing strategies. If we are unable to achieve this, we could have a material adverse effect on our business, prospects, financial results and results of operations. There are substantial automotive franchise laws in place in many geographies in the world and we might be exposed to significant franchise dealer litigation risks.

We may face regulatory limitations on our ability to sell vehicles directly which could materially and adversely affect our ability to sell our electric vehicles.

Some states have laws that may be interpreted to impose limitations on this direct-to-consumer sales model. The application of these state laws to our operations may be difficult to predict. Laws in some states may limit our ‘ability to obtain dealer licenses from state motor vehicle regulators.

In addition, decisions by regulators permitting us to sell vehicles may be challenged by dealer associations and others as to whether such decisions comply with applicable state motor vehicle industry laws. In some states, there have also been regulatory and legislative efforts by dealer associations to propose laws that, if enacted, would prevent us from obtaining dealer licenses in their states given our anticipated sales model. A few states have passed legislation that clarifies our ability to operate, but at the same time limits the number of dealer licenses we can obtain or dealerships that we can operate.

Internationally, there may be laws in jurisdictions that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell vehicles directly to consumers could have a negative and material impact on our business, prospects, financial condition and results of operations.

We will initially depend on revenue generated from a single model and in the foreseeable future will be significantly dependent on a limited number of models.

 

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We will initially depend on revenue generated from a single vehicle model and in the foreseeable future will be significantly dependent on a limited number of models. Historically, automobile customers have come to expect a variety of vehicle models offered in a manufacturer’s fleet and new and improved vehicle models to be introduced frequently. Given that for the foreseeable future our business will depend on a single or limited number of models, to the extent a particular model is not well-received by the market, our sales volume, business, prospects, financial condition, and operating results could be materially and adversely affected.

Doing business internationally creates operational and financial risks for our business.

Our business plan includes operations in international markets, including initial manufacturing and supply activities in Europe, initial sales in North America and Europe, and eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If we fail to coordinate and manage these activities effectively, our business, financial condition or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which we sell our products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.

We are highly dependent on the services of Henrik Fisker, our Chief Executive Officer.

We are highly dependent on the services of Henrik Fisker, our co-founder and Chief Executive Officer, and, together with his wife, our Chief Financial Officer, our largest stockholder. Mr. Fisker is the source of many, if not most, of the ideas and execution driving Fisker. If Mr. Fisker were to discontinue his service to Fisker due to death, disability or any other reason, we would be significantly disadvantaged.

Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our operations may be severely disrupted if we lost their services.

Our success depends substantially on the continued efforts of our executive officers, key employees and qualified personnel, and our operations may be severely disrupted if we lost their services. As we build our brand and becomes more well known, the risk that competitors or other companies may poach our talent increases. The failure to attract, integrate, train, motivate and retain these personnel could seriously harm our business and prospects.

Our business may be adversely affected by labor and union activities.

Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We may also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results.

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

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

 

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The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. For example, employees at our headquarters located in Manhattan Beach, California, are currently subject to a stay-at-home order from the state government. These measures may adversely impact our employees and operations and the operations of its customers, suppliers, vendors and business partners, and may negatively impact our sales and marketing activities. In addition, various aspects of our business cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect our manufacturing plans, sales and marketing activities, business and results of operations.

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

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to its business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment, or a decline in consumer confidence as a result of the COVID-19 pandemic could have a material adverse effect on the demand for our vehicles. Under difficult economic conditions, potential customers may seek to reduce spending by forgoing our vehicles for other traditional options or may choose to keep their existing vehicles, and cancel reservations.

There are no comparable recent events that may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain.

Our business plans require a significant amount of capital. In addition, our future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.

We expect our capital expenditures to continue to be significant in the foreseeable future as we expands our business, and that our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a limited operating history means we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those it currently anticipates. We may need to seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely manner or on terms that are acceptable, or at all.

Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our EMaaS business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to

 

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raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.

In addition, our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could dilute our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our stockholders.

If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected.

Failure of information security and privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.

We expect to face significant challenges with respect to information security and privacy, including the storage, transmission and sharing of confidential information. We will transmit and store confidential and private information of our customers, such as personal information, including names, accounts, user IDs and passwords, and payment or transaction related information.

We have adopted strict information security policies and deployed advanced measures to implement the policies, including, among others, advanced encryption technologies, and plans to continue to deploy additional measurers as we grow. However, advances in technology, an increased level of sophistication and diversity of our products and services, an increased level of expertise of hackers, new discoveries in the field of cryptography or others can still result in a compromise or breach of the measures that it uses. If we are unable to protect our systems, and hence the information stored in our systems, from unauthorized access, use, disclosure, disruption, modification or destruction, such problems or security breaches could cause a loss, give rise to our liabilities to the owners of confidential information or even subject it to fines and penalties. In addition, complying with various laws and regulations could cause us to incur substantial costs or require it to change our business practices, including our data practices, in a manner adverse to our business.

In addition, we will need to comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the United States, Europe and elsewhere. For example, the European Union adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018 and the State of California adopted the California Consumer Privacy Act of 2018 (“CCPA”). Both the GDPR and the CCPA impose additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and recently enacted laws (including implementation of the privacy and process enhancements called for under the GDPR) and regulations can be costly; any failure to comply with these regulatory standards could subject us to legal and reputational risks.

Compliance with any additional laws and regulations could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with our customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, and damage to our reputation and credibility, and could have a negative impact on revenues and profits.

Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable

 

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information or other customer data, could cause our customers to lose trust in us and could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online retail and other online services generally, which may reduce the number of orders we receive.

We retain certain information about our users and may be subject to various privacy and consumer protection laws.

We intend to use our vehicles’ electronic systems to log information about each vehicle’s use, such as charge time, battery usage, mileage and driving behavior, in order to aid us in vehicle diagnostics, repair and maintenance, as well as to help us customize and optimize the driving and riding experience. Our users may object to the use of this data, which may harm our business. Possession and use of our users’ driving behavior and data in conducting our business may subject us to legislative and regulatory burdens in the United States and other jurisdictions that could require notification of any data breach, restrict our use of such information, and hinder our ability to acquire new customers or market to existing customers. If users allege that we have improperly released or disclosed their personal information, we could face legal claims and reputational damage. We may incur significant expenses to comply with privacy, consumer protection and security standards and protocols imposed by laws, regulations, industry standards or contractual obligations. If third parties improperly obtain and use the personal information of our users, we may be required to expend significant resources to resolve these problems.

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

Our vehicles will contain complex information technology systems. For example, our vehicles will be outfitted with built-in data connectivity to accept and install periodic remote updates from us to improve or update the functionality of our vehicles. We have designed, implemented and tested security measures intended to prevent cybersecurity breaches or unauthorized access to our information technology networks, our vehicles and their systems, and intends to implement additional security measures as necessary. However, hackers may attempt in the future, to gain unauthorized access to modify, alter and use such networks, vehicles and systems to gain control of, or to change, our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle. Vulnerabilities could be identified in the future and our remediation efforts may not be successful. Any unauthorized access to or control of our vehicles or their systems or any loss of data could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our vehicles, their systems or data, as well as other factors that may result in the perception that our vehicles, their systems or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects, financial condition and operating results.

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

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

We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.

 

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Our facilities or operations could be adversely affected by events outside of our control, such as natural disasters, wars, health epidemics (as more fully described in the risk factor “We face risks related to health epidemics, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations” located elsewhere in these Risk Factors), and other calamities. Although we have servers that are hosted in an offsite location, our backup system does not capture data on a real-time basis and we may be unable to recover certain data in the event of a server failure. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services.

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

Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell, leasing or market our vehicles or components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. Our applications and uses of trademarks relating to our design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

 

   

cease selling or leasing, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;

 

   

pay substantial damages;

 

   

seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, or at all;

 

   

redesign our vehicles or other goods or services; or

 

   

establish and maintain alternative branding for our products and services.

In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses, and other contractual rights to establish and protect our rights in its technology. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take will prevent misappropriation. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

 

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Patent, trademark, and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue which, would adversely affect our business, prospects, financial condition and operating results.

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

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

As our patents may expire and may not be extended, our patent applications may not be granted and our patent rights may be contested, circumvented, invalidated or limited in scope, our patent rights may not protect it effectively. In particular, we may not be able to prevent others from developing or exploiting competing technologies, which could have a material and adverse effect on our business operations, financial condition and results of operations.

We cannot assure you that we will be granted patents pursuant to our pending applications. Even if our patent applications succeed and we are issued patents in accordance with them, we are still uncertain whether these patents will be contested, circumvented or invalidated in the future. In addition, the rights granted under any issued patents may not provide us with meaningful protection or competitive advantages. The claims under any patents that issue from our patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar us from licensing and exploiting any patents that issue from our pending applications. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and are developing our technology. These patents and patent applications might have priority over our patent applications and could subject our patent applications to invalidation. Finally, in addition to those who may claim priority, any of our existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.

Many of our employees were previously employed by other automotive companies or by suppliers to automotive companies. We may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or our work product could hamper or prevent our ability to commercialize our products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a material adverse effect on our business and operating results.

All vehicles sold must comply with international, federal, and state motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by us to have the Fisker Ocean or any future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on our business and operating results.

 

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

Our electric vehicles, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving and we face risks associated with changes to these regulations.

To the extent the laws change, our vehicles may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.

Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell or lease vehicles directly to consumers could have a negative and material impact on our business, prospects, financial condition and results of operations.

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

We will face risks associated with any potential international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm our business. We anticipate having international operations and subsidiaries that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. We have no experience to date selling or leasing and servicing our vehicles internationally and such expansion would require us to make significant expenditures, including the hiring of local employees and establishing facilities, in advance of generating any revenue. We will be subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell or lease our EVs and require significant management attention. These risks include:

 

   

conforming our vehicles to various international regulatory requirements where our vehicles are sold which requirements may change over time;

 

   

difficulty in staffing and managing foreign operations;

 

   

difficulties attracting customers in new jurisdictions;

 

   

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

 

   

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

 

   

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

 

   

foreign labor laws, regulations and restrictions;

 

   

changes in diplomatic and trade relationships;

 

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

 

   

the strength of international economies.

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

Our business could be adversely affected by trade tariffs or other trade barriers.

In recent years, both China and the United States have each imposed tariffs indicating the potential for further trade barriers. These tariffs may escalate a nascent trade war between China and the United States. Tariffs could potentially impact our raw material prices and impact any plans to sell vehicles in China. In addition, these developments could have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

We may become subject to product liability claims, even those without merit, which could harm our business, prospects, operating results, and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given it has limited field experience of our vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of other future vehicle candidates, which would have material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we face liability for our products and are forced to make a claim under our policy.

We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, and other anti-corruption laws and regulations. The FCPA and the U.K. Bribery Act 2010 prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K. Bribery Act also prohibits non-governmental “commercial” bribery and soliciting or accepting bribes. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation. Our policies and procedures designed to ensure compliance with these regulations may not be sufficient and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.

 

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Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in its shares.

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

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

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

We will need to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so will adversely affect our billing and reporting.

To manage the expected growth of our operations and increasing complexity, we will need to improve our operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.

Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.

As a public company, we will operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the regulations of the NYSE, the rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. We have never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

We anticipate that the process of building our accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. We expect that we will need to implement a new internal system to combine and streamline the management of our financial, accounting, human

 

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resources and other functions. However, such a system would likely require us to complete many processes and procedures for the effective use of the system or to run our business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect our controls and harm our business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. In addition, we may discover additional weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities.

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

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

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

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

Charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our Certificate of Incorporation and Bylaws contain provisions that could delay or prevent a change in control of Fisker. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

 

   

authorizing our Board of Directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control;

 

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Mr. Fisker and Dr. Gupta hold sufficient voting power to control voting for election of directors and amend our Certificate of Incorporation;

 

   

prohibiting cumulative voting in the election of directors;

 

   

providing that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum;

 

   

prohibiting the adoption, amendment or repeal of our Bylaws or the repeal of the provisions of our Certificate of Incorporation regarding the election and removal of directors without the required approval of at least two-thirds of the shares entitled to vote at an election of directors;

 

   

prohibiting stockholder action by written consent;

 

   

limiting the persons who may call special meetings of stockholders; and

 

   

requiring advance notification of stockholder nominations and proposals.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, the provisions of Section 203 of the “DGCL” govern Fisker. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with Fisker for a certain period of time without the consent of its Board of Directors.

These and other provisions in our Certificate of Incorporation and Bylaws and under Delaware law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of Class A Common Stock and result in the market price of Class A Common Stock being lower than it would be without these provisions. For more information, see the section of this registration statement captioned “Description of Capital Stock— Delaware Anti-Takeover Law and Certificate of Incorporation and Bylaw Provisions.”

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our Certificate of Incorporation and Bylaws provides that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the DGCL, our Bylaws and our indemnification agreements that we entered into with our directors and officers provide that:

 

   

We will indemnify our directors and officers for serving Fisker in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

 

   

We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

 

   

We will be required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;

 

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We will not be obligated pursuant to our Bylaws to indemnify a person with respect to proceedings initiated by that person against Fisker or our other indemnitees, except with respect to proceedings authorized by our Board of Directors or brought to enforce a right to indemnification;

 

   

the rights conferred in our Bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and

 

   

We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

Our management has limited experience in operating a public company.

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

The dual class structure of our Common Stock has the effect of concentrating voting control with Henrik Fisker and Dr. Geeta Gupta, our co-founders, members of our Board of Directors and Chief Executive Officer and Chief Financial Officer, respectively. This will limit or preclude your ability to influence corporate matters, including the outcome of important transactions, including a change in control.

Shares of our Class B Common Stock have 10 votes per share, while shares of our Class A Common Stock have one vote per share. Henrik Fisker and Dr. Geeta Gupta, Fisker’s co-founders, members of our Board of Directors and Chief Executive Officer and Chief Financial Officer, respectively, hold all of the issued and outstanding shares of our Class B Common Stock. Accordingly, Mr. Fisker and Dr. Gupta will hold approximately 90.8% of the voting power of Fisker’s capital stock on an outstanding basis and will be able to control matters submitted to its stockholders for approval, including the election of directors, amendments of its organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. Mr. Fisker and Dr. Gupta may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of Fisker, could deprive its stockholders of an opportunity to receive a premium for their capital stock as part of a sale of Fisker, and might ultimately affect the market price of shares of our Class A Common Stock. For information about our dual class structure, see the section entitled “Description of Capital Stock.”

Our dual class structure may depress the trading price of our Class A Common Stock.

We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, pursuant to which companies with multiple classes of shares of common stock are excluded. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our Common Stock

 

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may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause Fisker to change our capital structure. Any such exclusion from indices or any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could adversely affect the value and trading market of our Class A Common Stock.

We are a controlled company within the meaning of the NYSE rules, and, as a result, qualify for exemptions from certain corporate governance requirements that provide protection to stockholders of other companies. To the extent we utilize any of these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to such requirements. We do not currently intend to rely on the exemptions afforded to controlled companies at this time.

So long as more than 50% of the voting power for the election of directors of Fisker is held by an individual, a group or another company, we will qualify as a “controlled company” under NYSE rules. Effective as of the completion of the Business Combination, Henrik Fisker and Dr. Geeta Gupta control a majority of the voting power of Fisker’s outstanding capital stock. As a result, we are a “controlled company” under NYSE rules. As a controlled company, we are be exempt from certain NYSE corporate governance requirements, including those that would otherwise require our Board of Directors to have a majority of independent directors and require that we either establish compensation and nominating and corporate governance committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of our executive officers and nominees for directors are determined or recommended to the Board of Directors by the independent members of the Board of Directors. While we do not currently intend to rely on any of these exemptions, we will be entitled to do so for as long as we are considered a “controlled company,” and to the extent we rely on one or more of these exemptions, holders of our capital stock will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

Henrik Fisker and Dr. Geeta Gupta are married to each other. The separation or divorce of the couple in the future could adversely affect our business.

Henrik Fisker and Dr. Geeta Gupta, Fisker’s co-founders, members of the Board of Directors and Chief Executive Officer and Chief Financial Officer, respectively, are married to each other. They are two of our executive officers and are a vital part of our operations. If they were to become separated or divorced or could otherwise not amicably work with each other, one or both of them may decide to cease his or her employment with Fisker or it could negatively impact our working environment. Alternatively, their work performance may not be satisfactory if they become preoccupied with issues relating to their personal situation. In these cases, our business could be materially harmed.

Our ability to utilize our net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If we have experienced an ownership change at any time since our incorporation, we may already be subject to limitations on our ability to utilize our existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, the Business Combination and future changes in our stock ownership, which may be outside of our control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, even if we earn net taxable income in the future, our ability to use our pre-change NOL carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to us.

 

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Changes to applicable U.S. tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.

New laws and policy relating to taxes may have an adverse effect on our business, financial condition and results of operations. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the U.S. government enacted the Tax Cuts and Jobs Act, or the Tax Act, and certain provisions of the Tax Act may adversely affect us. Changes under the Tax Act include, but are not limited to, a federal corporate income tax rate decrease to 21% for tax years beginning after December 31, 2017, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017 and the elimination of carrybacks of net operating losses. Under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which modified the Tax Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. The Tax Act is unclear in many respects and could be subject to potential amendments and technical corrections, and is subject to interpretations and implementing regulations by the Treasury and IRS, any of which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation. Generally, future changes in applicable U.S. tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial condition and results of operations.

Our failure to meet the continued listing requirements of the NYSE could result in a delisting of our Class A Common Stock.

If, after listing, we fail to satisfy the continued listing requirements of the NYSE such as the corporate governance requirements or the minimum closing bid price requirement, the NYSE may take steps to delist our Class A Common Stock. Such a delisting would likely have a negative effect on the price of our Class A Common Stock and would impair your ability to sell or purchase our Class A Common Stock when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by it to restore compliance with listing requirements would allow our Class A Common Stock to become listed again, stabilize the market price or improve the liquidity of our Class A Common Stock, prevent our Class A Common Stock from dropping below the NYSE minimum bid price requirement or prevent future non-compliance with NYSE’s listing requirements.

If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our share price and trading volume could decline.

The trading market for our Class A Common Stock will depend on the research and reports that securities or industry analysts publish about us or our business. Currently, we do not have any analyst coverage and may not obtain analyst coverage in the future. In the event we obtain analyst coverage, we will not have any control over such analysts. If one or more of the analysts who cover Fisker downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of Fisker company or fail to regularly publish reports on Fisker, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

 

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USE OF PROCEEDS

All of the Class A Common Stock and Warrants offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.

We will receive up to an aggregate of approximately $261.3 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash (and an additional $0.2 million from the exercise of the Magna Warrants, assuming the exercise in full of the Magna Warrants for cash). We expect to use the net proceeds from the exercise of the Warrants and the Magna Warrants for general corporate purposes. We will have broad discretion over the use of proceeds from the exercise of the Warrants and the Magna Warrants. There is no assurance that the holders of the Warrants and the Magna Warrants will elect to exercise any or all of such Warrants and the Magna Warrants. To the extent that the Warrants and the Magna Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the Warrants and the Magna Warrants will decrease.

DETERMINATION OF OFFERING PRICE

The offering price of the shares of Class A Common Stock underlying the Private Warrants offered hereby is determined by reference to the exercise price of the Warrants of $11.50 per share. The Public Warrants are listed on the NYSE under the symbol “FSR WS.” The exercise price of the Magna Warrants is $0.01 per share and the shares underlying the Magna Warrants are only being registered for resale by the holder thereof and are not being registered for primary offering. The Magna Warrants may not be transferred other than in accordance with the provisions set forth therein.

We cannot currently determine the price or prices at which shares of our Class A Common Stock or Warrants may be sold by the Selling Securityholders under this prospectus.

MARKET INFORMATION FOR CLASS A COMMON STOCK AND DIVIDEND POLICY

Market Information

Our Class A Common Stock and Public Warrants are currently listed on the NYSE under the symbols “FSR” and “FSR WS,” respectively. Prior to the consummation of the Business Combination, our Class A Common Stock and our Public Warrants were listed on the NYSE under the symbols “SPAQ” and “SPAQ WS,” respectively. As of November 30, 2020 following the completion of the Business Combination, there were 161 holders of record of our Class A Common Stock, two holders of record of our Warrants and one holder of record of our Magna Warrants. We currently do not intend to list the Private Warrants offered hereby on any stock exchange or stock market. Our Class B Common Stock is not registered and we do not currently intend to list the Class B Common Stock on any exchange or stock market.

Dividend Policy

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

Securities Authorized for Issuance under Equity Compensation Plans

As of September 30, 2020, we did not have any securities authorized for issuance under equity compensation plans. In connection with the Business Combination, our stockholders approved the Fisker Inc. 2020 Equity Incentive Plan (the “2020 Plan”) and the Fisker Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”).

We intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of Class A Common Stock issued or issuable under the 2020 Plan, the 2020 ESPP and the assumed options to purchase outstanding shares of Legacy Fisker Class A common stock, whether or not exercisable and whether or not

 

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vested, immediately prior to the consummation of the Business Combination under the Legacy Fisker 2016 Stock Plan (the “Legacy Fisker Options”). Any such Form S-8 registration statement will become effective automatically upon filing. We expect that the initial registration statement on Form S-8 will cover shares of Class A Common Stock underlying the 2020 Plan, the 2020 ESPP and the assumed Legacy Fisker Options. Once these shares are registered, they can be sold in the public market upon issuance, subject to applicable restrictions.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF FISKER

The selected historical condensed consolidated statements of operations data of Legacy Fisker for the nine months ended September 30, 2020 and 2019 and the condensed consolidated balance sheet data as of September 30, 2020 are derived from Legacy Fisker’s unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated statements of operations data of Legacy Fisker for the years ended December 31, 2019 and 2018 and the historical consolidated balance sheet data as of December 31, 2019 and 2018 are derived from Legacy Fisker’s audited consolidated financial statements included elsewhere in this prospectus. In Legacy Fisker management’s opinion, the unaudited interim condensed consolidated financial statements include all adjustments necessary to state fairly Legacy Fisker’s financial position as of September 30, 2020 and the results of operations for the nine months ended September 30, 2020 and 2019. Legacy Fisker’s historical results are not necessarily indicative of the results that may be expected in the future and Legacy Fisker’s results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020 or any other period. You should read the following selected historical consolidated financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Legacy Fisker” and Legacy Fisker’s consolidated financial statements and related notes included elsewhere in this prospectus.

The financial information contained in this section relates to Legacy Fisker, prior to and without giving pro forma effect to the impact of the Business Combination and, as a result, the results reflected in this section may not be indicative of our results going forward. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” included elsewhere in this prospectus.

 

Statement of Operations Data    For The Nine
months Ended
September 30,
2020
    For The Nine
months Ended
September 30,
2019
    For The Year
Ended December 31,
2019
    For The Year
Ended December 31,
2018
 
     (in actual dollars and shares)  

Revenue

   $ —       $ —       $ —       $ —    

General and administrative

     8,055,515       2,882,451       3,625,833       1,475,613  

Research and development

     3,962,711       4,942,532       6,961,981       1,938,871  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (12,018,226     (7,824,983     (10,587,814     (3,414,484

Other income (expense):

        

Other income (expense)

     15,000       —         575       (21,000

Interest income

     13,460       7,088       8,503       7,427  

Interest expense

     (1,326,370     (19,728     (177,997     (1,590

Change in fair value of embedded derivative

     (405,567     (8,904     (79,751     —    

Change in fair value of convertible equity security

     (29,003,494     —         —         —    

Foreign currency gain (loss)

     121,695       (15,340     (42,266     (1,298
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss

   $ (42,603,502   $ (7,861,867   $ (10,878,750   $ (3,430,945
  

 

 

   

 

 

   

 

 

   

 

 

 

Deemed dividend attributable to preferred stock

     —         —         —         (1,222,368
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common shareholders

   $ (42,603,502   $ (7,861,867   $ (10,878,750   $ (4,653,313
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of Class A common stock

     94,754       51,837       57,139       20,040  

Weighted average shares outstanding of Class B common stock

     38,727,340       38,727,340       38,727,340       38,727,340  

Net loss per share attributable to Class A and Class B Common shareholders- Basic and Diluted

   $ (1.10   $ (0.20   $ (0.28   $ (0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Balance Sheet Data    September 30, 2020     December 31, 2019     December 31, 2018  

Total assets

   $ 47,948,757     $ 2,076,427     $ 5,651,302  

Total liabilities

     96,257,899       8,198,823       987,749  

Total temporary equity

     11,020,683       11,020,683       11,020,683  

Total stockholders’ deficit

     (59,329,825     (17,143,079     (6,357,130

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF SPARTAN

The selected historical condensed statements of operations data of Spartan for the nine months ended September 30, 2020 and 2019 and the condensed balance sheet data as of September 30, 2020 are derived from Spartan’s unaudited interim condensed financial statements included elsewhere in this prospectus. The selected historical statements of operations data of Spartan for the years ended December 31, 2019 and 2018 and the historical balance sheet data as of December 31, 2019 and 2018 are derived from Spartan’s audited financial statements included elsewhere in this prospectus. In Spartan management’s opinion, the unaudited interim condensed financial statements include all adjustments necessary to state fairly Spartan’s financial position as of September 30, 2020 and the results of operations for the nine months ended September 30, 2020 and 2019.

Spartan’s historical results are not necessarily indicative of the results that may be expected in the future and Spartan’s results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020 or any other period. The information below is only a summary and should be read in conjunction with the financial statements and the notes and schedules related thereto, which are included elsewhere in this prospectus. In connection with the Business Combination, Legacy Fisker was determined to be the accounting acquirer.

 

Statement of Operations Data    For the Nine
months Ended
September 30,
2020
    For the Nine
months Ended
September 30,
2019
    For the
Year ended
December 31,
2019
    For the
Year ended
December 31,
2018
 
     (in actual dollars and shares)  

Revenue

   $ —       $ —       $ —       $ —    

Expenses

      

Administrative fee—related party

     90,000       90,000       120,000       40,000  

General and administrative expenses

     4,248,250       1,021,755       1,132,661       811,091  

Other Income

      

Investment income from Trust Account

     4,554,058       9,927,002       12,654,638       4,375,763  

Interest income

     2,387       19,400       22,557       6,947  

Income tax provision

     (924,823     (2,053,257     (2,615,474     (878,369
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (706,628   $ 6,781,390     $ 8,809,060     $ 2,653,250  

Weighted average shares outstanding of Class A common stock

     55,198,449       55,200,000       55,200,000       55,200,000  

Basic and diluted net income per share, Class A

   $ 0.06     $ 0.14     $ 0.18     $ 0.06  

Weighted average shares outstanding of Class B common stock

     13,800,000       13,800,000       13,800,000       13,800,000  

Basic and diluted net loss per share, Class B

   $ (0.31   $ (0.07   $ (0.07   $ (0.05

 

Balance Sheet Data    September 30, 2020      December 31, 2019      December 31, 2018  

Total assets

   $ 569,245,438      $ 565,975,181      $ 557,475,687  

Total liabilities

     23,689,808        19,636,001        19,945,567  

Value of Class A Common Stock that may be redeemed in connection with an initial business combination

     540,555,620        541,339,170        532,530,110  

Total stockholders’ equity

     5,000,010        5,000,010        5,000,010  

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below have the same meaning as terms defined and included elsewhere in this prospectus. Unless the context otherwise requires, the “Company” refers to Fisker Inc. and its subsidiaries after the Closing, and Spartan Energy Acquisition Corp. prior to the Closing.

Introduction

The Company is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of Legacy Fisker becoming a wholly-owned subsidiary of Spartan Energy Acquisition Corp. (“Spartan”) as a result of Spartan’s wholly-owned subsidiary, Merger Sub, merging with and into Legacy Fisker, and Legacy Fisker surviving the merger (the “Merger Transaction”). Subsequent to the transaction, Spartan was renamed Fisker Inc. (the “Business Combination”). The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of September 30, 2020 combines the historical balance sheet of Spartan and the historical balance sheet of Legacy Fisker on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on September 30, 2020. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2019 and the nine months ended September 30, 2020 combine the historical statements of operations of Spartan and Legacy Fisker for such periods on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2019, the beginning of the earliest period presented:

 

   

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

 

   

the net proceeds of $482.5 million ($500.0 million gross proceeds less $17.5 million in fees) from the issuance and sale of 50,000,000 shares of Class A Common Stock at $10.00 per share in the PIPE Financing;

 

   

the issuance and conversion of all of Legacy Fisker convertible equity securities (the “Legacy Fisker Convertible Equity Securities”) and Legacy Fisker convertible notes into Class A Common Stock; and

 

   

the conversion of all outstanding Legacy Fisker shares and Legacy Fisker stock options into Class A Common Stock totaling 179.2 million shares.

The pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of the post-combination company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The historical financial information of Spartan was derived from the unaudited and audited financial statements of Spartan as of and for the nine months ended September 30, 2020, and for the year ended December 31, 2019, which are included elsewhere in this prospectus. The historical financial information of Fisker was derived from the unaudited and audited consolidated financial statements of Fisker as of and for the nine months ended September 30, 2020, which are included in this prospectus and for the year ended December 31, 2019, which are included elsewhere in this prospectus. This information should be read together with Spartan’s and Fisker’s unaudited and audited financial statements and related notes, and the section set forth in this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fisker” and other financial information which is included in this prospectus for the nine months ended September 30, 2020 and incorporated by reference for the year ended December 31, 2019 .

The Business Combination was accounted for as a reverse recapitalization, in accordance with GAAP. Under this method of accounting, Spartan was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of Legacy Fisker issuing stock for the net assets of Spartan, accompanied by a recapitalization, whereby no goodwill or other intangible assets was recorded. Operations prior to the Business Combination are those of Legacy Fisker.

 

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Legacy Fisker was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

Fisker stockholders have the largest voting interest in the post-combination company;

 

   

The Class B Common Stock issued to two Fisker stockholders allows for incremental voting rights;

 

   

The Board of Directors of the post-combination company has seven members, and Legacy Fisker has the ability to nominate the majority of the members of the Board of Directors;

 

   

Fisker management holds executive management roles for the post-combination company and is responsible for the day-to-day operations;

 

   

The post-combination company assumed the Fisker name; and

 

   

The intended strategy of the post-combination entity will continue Fisker’s current strategy of being a leader in the electric vehicle industry.

Description of the Business Combination

The aggregate consideration for the Business Combination was $1.8 billion, paid in the form of shares of Common Stock.

The following summarizes the consideration:

 

(in thousands, except for share and per share amounts)       

Shares transferred at Closing

     179,192,713  

Value per share(1)

     10.00  
  

 

 

 

Total Share Consideration

   $ 1,791,927  
  

 

 

 

 

(1)

Share Consideration is calculated using a $10.00 reference price. The closing share price on the date of the consummation of the Merger Transaction was $8.96. As the Merger Transaction was accounted for as a reverse recapitalization, the value per share is disclosed for informational purposes only in order to indicate the fair value of shares transferred.

Holders of Legacy Fisker Class A Common Stock and Legacy Fisker Class B Common Stock received shares of Class A Common Stock and Class B Common Stock, respectively, in an amount determined by application of the Exchange Ratio except for the purchaser of the Legacy Fisker Convertible Equity Security. The purchaser of the Legacy Fisker Convertible Equity Security received a number of shares as defined in the Convertible Equity Security Purchase Agreement, dated July 7, 2020. The following summarizes the pro forma Common Stock shares at Closing:

 

     New Fisker Shares      %  

Fisker Stockholders—Class A Common Stock

     39,594,965        12.6
  

 

 

    

 

 

 

Convertible Equity Security shares

     5,882,352        1.9

Convertible Note shares

     1,361,268        0.4
  

 

 

    

 

 

 

Fisker total—Class A

     46,838,585        14.9
  

 

 

    

 

 

 

Fisker Stockholders—Class B Common Stock

     132,354,128        42.0
  

 

 

    

 

 

 

Total Fisker Merger Shares

     179,192,713        56.9

Magna Warrant Shares (1)

     19,474,454        6.1

Spartan public shares

     53,188,245        16.9

Founder Shares

     13,358,824        4.2

PIPE Financing

     50,000,000        15.9
  

 

 

    

Pro Forma Common Stock at Closing

     315,214,236        100.0
  

 

 

    

 

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(1)

The shares underlying the Magna Warrants do not represent legally issued and outstanding shares of the Class A Common Stock and are not exercisable immediately upon the Closing (and were issued following the Closing). The Magna Warrants vest upon achievement of certain production milestones as specified in the Cooperation Agreement entered into by Legacy Fisker and Magna, the holder of the Magna Warrants, dated October 15, 2020, and thus are not directly attributable to the Business Combination. As such, the shares underlying these warrants are excluded in the calculation of pro forma basic loss per share.

The following unaudited pro forma condensed combined balance sheet as of September 30, 2020 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 are based on the historical financial statements of Spartan and Legacy Fisker. The unaudited pro forma adjustments are based on information currently available, and assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2020

(in thousands)

 

     As of September 30, 2020                         As of September 30, 2020  
     Fisker
(Historical)
    Spartan
(Historical)
     Reclassification
Adjustments
(Note 2)
    Pro Forma
Adjustments
           Pro Forma
Combined
 

ASSETS

              

Current assets:

              

Cash and cash equivalents

     $ 44,976       $ 165        $ —         $ 569,041       A        $1,018,649  
            500,000       B     
            (19,320)       C     
            (55,499)       D     
            (50)       E     
            (20,664)       M     

Prepaid expenses

     —         39        (39)       —            —    

Prepaid expenses and other current assets

     2,676       —          39       (1,913)       D        802  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

Total current assets

     47,652       204        —         971,595          1,019,451  

Non-current assets:

              

Cash and investments held in Trust Account

     —         569,041        —         (569,041)       A        —    

Property and equipment, net

     263       —          —         —            263  

Right-of-use asset, net

     34       —          —         —            34  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

Total non-current assets

     297       569,041        —         (569,041)          297  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

TOTAL ASSETS

     47,949       569,245        —         402,554          1,019,748  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)

              

Accounts payable

     676       —          2,722       (2,672)       D        676  
            (50)       E     

Accrued expenses

     2,678       —          262       (1,242)       D        1,422  
            (276)       F     

Accounts payable and accrued expenses

     —         2,722        (2,722)       —            —    

Accrued income and franchise taxes

     —         262        (262)       —            —    

Advances from related parties

     —         1,385          (1,385)       D        —    

Convertible Security

     79,003       —          —         (79,003)       L        —    

Bridge notes payable

     10,927       —          —         (10,927)       F        —    

Lease liabilities

     36       —          —         —            36  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

Total current liabilities

     93,320       4,369        —         (95,555)          2,134  

Non-current liabilities:

              

Customer deposits

     2,940       —          —         —            2,940  

Deferred underwriting commissions

     —         19,320        —         (19,320)       C        —    
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

Total non-current liabilities

     2,940       19,320        —         (19,320)          2,940  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

Total liabilities

     96,260       23,689        —         (114,875)          5,074  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

COMMITMENTS AND CONTINGENCIES

              

Temporary equity:

              

Series A Convertible Preferred stock

     4,634       —          —         (4,634)       H        —    

Series B Convertible Preferred stock

     6,386       —          —         (6,386)       H        —    

Common stock subject to possible redemption

     —         540,556        —         (540,556)       G        —    

Stockholders’ equity (deficit):

              

Founders Convertible Preferred stock

     —         —          —         —            —    

Class A Common stock

     —         —          —         5       B        16  
            —         F     
            5       G     
            4       H     
            1       I     
            1       L     
            —         M     

Class B Common stock

     —         1        —         (1)       I        13  
            13       J     

Additional paid-in capital

     1,173       4,146        —         499,995       B        1,107,849  
            (19,413     D     
            11,203       F     
            540,551       G     
            11,016       H     
            (13     J     
            853       K     
            79,002       L     
            (20,664     M     

Retained earnings

     —         853        (853     —            —    

Accumulated deficit

     (60,504     —          853       (32,700     D        (93,204
            (853     K     
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

Total stockholders’ equity (deficit)

     (59,331     5,000        —         1,069,005          1,014,674  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT

     47,949       569,245        —         402,554          1,019,748  
  

 

 

   

 

 

    

 

 

   

 

 

      

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

(in thousands, except share and per share data)

 

     For the Nine Months Ended September 30, 2020                  For the Nine Months Ended
September 30, 2020
 
     Fisker
(Historical)
    Spartan
(Historical)
    Pro Forma
Adjustments
           Pro Forma
Combined
 

Revenue:

           

Revenue

   $ —       $ —       $ —          $ —    

Operating costs and expenses:

           

Administrative fee - related party

     —         90       —            90  

General and administrative

     8,056       4,248       (4,067     AA        8,237  

Research and development

     3,963       —         —            3,963  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating costs and expenses

     12,019       4,338       (4,067        12,290  
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (12,019     (4,338     4,067          (12,290

Other income (expense):

           

Other income (expense)

     15         —            15  

Interest income

     13       2       —            15  

Interest expense

     (1,326     —         1,326       BB        —    

Change in fair value of embedded derivative

     (406     —         406       CC        —    

Change in fair value of Convertible Security

     (29,003     —         29,003       DD        —    

Foreign currency gain

     122       —         —            122  

Other income - Interest income on Trust Account

     —         4,554       (4,554     EE        —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Total other income (expense)

     (30,585     4,556       26,181          152  
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) before income tax provision

     (42,604     218       30,248          (12,138

Income tax provision

     —         925       (925     FF        —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss)

     (42,604     (707     31,173          (12,138
  

 

 

   

 

 

   

 

 

      

 

 

 

Weighted average Common shares outstanding - Class A

     94,754       55,198,449            163,385,654  

Basic and diluted net income (loss) per share - Class A

   $ (1.10   $ 0.06          $ (0.04

Weighted average Common shares outstanding - Class B

     38,727,340       13,800,000            132,354,128  

Basic and diluted net income (loss) per share - Class B

   $ (1.10   $ (0.31        $ (0.04

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR YEAR ENDED DECEMBER 31, 2019

(in thousands, except share and per share data)

 

     For the Year ended
December 31, 2019
                 For the Year ended
December 31, 2019
 
     Fisker
(Historical)
    Spartan
(Historical)
    Pro Forma
Adjustments
           Pro Forma
Combined
 

Revenue:

           

Revenue

   $ —       $ —       $ —          $ —    

Operating costs and expenses:

           

Administrative fee - related party

     —         120       —            120  

General and administrative

     3,626       1,133       —            4,759  

Research and development

     6,962       —         —            6,962  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating costs and expenses

     10,588       1,253       —            11,841  
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (10,588     (1,253     —            (11,841

Other income (expense):

           

Other income (expense)

     1       —         —            1  

Interest income

     9       23       —            32  

Interest expense

     (178     —         178       BB        —    

Change in fair value of embedded derivative

     (80     —         80       CC        —    

Foreign currency gain (loss)

     (42     —         —            (42

Other income - Interest income on Trust Account

     —         12,655       (12,655     EE        —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Total other income (expense)

     (290     12,678       (12,397        (9
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss) before income tax provision

     (10,878     11,425       (12,397        (11,850

Income tax provision

     —         2,615       (2,615     FF        —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss)

     (10,878     8,810       (9,782        (11,850
  

 

 

   

 

 

   

 

 

      

 

 

 

Weighted average Common shares outstanding - Class A

     57,139       55,200,000            163,385,654  

Basic and diluted net income (loss) per share - Class A

   $ (0.28   $ 0.18          $ (0.04

Weighted average Common shares outstanding - Class B

     38,727,340       13,800,000            132,354,128  

Basic and diluted net income (loss) per share - Class B

   $ (0.28   $ (0.07        $ (0.04

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Basis of Presentation

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Spartan was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of Legacy Fisker issuing stock for the net assets of Spartan, accompanied by a recapitalization, whereby no goodwill or other intangible assets was recorded. Operations prior to the Business Combination are those of Legacy Fisker.

The unaudited pro forma condensed combined balance sheet as of September 30, 2020 assumes that the Business Combination occurred on September 30, 2020. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 present pro forma effect to the Business Combination as if it had been completed on January 1, 2019.

The unaudited pro forma condensed combined balance sheet as of September 30, 2020 has been prepared using, and should be read in conjunction with, the following:

 

   

Spartan’s unaudited condensed balance sheet as of September 30, 2020 and the related notes for the period ended September 30, 2020, incorporated by reference; and

 

   

Legacy Fisker’s unaudited condensed consolidated balance sheet as of September 30, 2020 and the related notes for the period ended September 30, 2020, contained elsewhere herein.

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 has been prepared using, and should be read in conjunction with, the following:

 

   

Spartan’s unaudited condensed statement of operations for the nine months ended September 30, 2020 and the related notes, incorporated by reference; and

 

   

Legacy Fisker’s unaudited condensed consolidated statement of operations for the Nine months ended September 30, 2020 and the related notes, contained elsewhere herein.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 has been prepared using, and should be read in conjunction with, the following:

 

   

Spartan’s audited statement of operations for the year ended December 31, 2019 and the related notes, incorporated by reference; and

 

   

Fisker’s audited consolidated statement of operations for the year ended December 31, 2019 and the related notes, incorporated by reference.

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination.

The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated.

Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

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The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Spartan and Legacy Fisker.

2. Accounting Policies

Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the post-combination company. Based on its initial analysis, management had identified differences that would have an impact on the unaudited pro forma condensed combined financial information and recorded the necessary adjustments.

3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only.

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are (1) directly attributable to the Business Combination, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the results of the post-combination company. Legacy Fisker and Spartan have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of the post-combination company’s shares outstanding, assuming the Business Combination occurred on January 1, 2019.

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2020 are as follows:

 

  (A)

Reflects the reclassification of $569.0 million of cash and cash equivalents held in the Trust Account at the balance sheet date that becomes available to fund expenses in connection with the Business Combination or future cash needs of the Company.

 

  (B)

Represents the gross proceeds from the private placement of 50,000,000 shares of Class A Common Stock at $10.00 per share pursuant to the PIPE Financing.

 

  (C)

Reflects the payment of $19.3 million of deferred underwriters’ fees. The fees were paid at the Closing out of the trust account.

 

  (D)

Represents transaction costs totaling $56.2 million, consisting of approximately $19.4 million of equity issuance costs. Classification of transaction costs is as follows:

 

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(in thousands)    Amount  

Costs related to issuance of equity

  

Amounts previously capitalized and paid

     671  

Amounts previously capitalized and not paid

     1,242  

Amounts incurred as part of the Business Combination (1)

     17,500  
  

 

 

 

Subtotal

     19,413  

Transaction expenses

  

Amounts previously incurred and paid

     10  

Amounts previously incurred but not paid

     4,057  

Amounts incurred as part of the Business Combination

     32,700  
  

 

 

 

Subtotal

     36,767  
  

 

 

 

Grand Total

     56,180  
  

 

 

 

 

(1)

Includes estimated fees of $17.5 million related to the issuance of the PIPE payable by the Company.

 

  (E)

Reflects the settlement of Spartan’s historical liabilities that were settled prior to the consummation of the Business Combination and thus will not be part of the Company after the Closing.

 

  (F)

Represents the conversion of the Fisker Convertible Notes upon a business combination, causing a conversion of the outstanding principal amount and any unpaid accrued interest into equity securities (Legacy Fisker did not utilize the election to convert directly into proceeds paid to the holders of Legacy Fisker’s Class A Common Stock in connection with the Business Combination). The Fisker Convertible Notes were issued from July 2019 to July 2020 and converted at the Closing.

 

  (G)

Reflects the reclassification of approximately $540.6 million of Class A Common Stock subject to possible redemption to permanent equity.

 

  (H)

Represents recapitalization of Legacy Fisker equity and issuance of 39.9 million of the post-combination company’s Class A Common Stock to Fisker equity holders as consideration for the reverse recapitalization.

 

  (I)

Reflects the conversion of Spartan’s Class B Common Stock held by the initial stockholders to Class A Common Stock. Pursuant to the terms of the Company’s seconded amended and restated certificate of incorporation, all shares of Class B Common Stock outstanding prior to the Effective Time were converted into shares of Class A Common Stock at the Closing. All of the shares of Class B Common Stock converted into shares of Class A Common Stock are no longer outstanding and have ceased to exist, and each holder of such Class B Common Stock has ceased to have any rights with respect to such securities.

 

  (J)

Reflects the issuance of 132.0 million shares of Class B Common Stock to Henrik Fisker and Dr. Geeta Gupta in exchange for their shares of Fisker Class B Common Stock.

 

  (K)

Reflects the reclassification of Spartan’s historical retained earnings.

 

  (L)

Reflects the conversion of the Fisker Convertible Security upon the Closing. Upon the Closing, the mandatory conversion feature upon a business combination was triggered, causing a conversion of the outstanding principal amount of the Fisker Convertible Security into equity securities at a specified price. The Fisker Convertible Security was outstanding from July 2020 through the Closing.

 

  (M)

Reflects actual redemptions of 2,004,297 public shares at the Closing for aggregate redemption payments of approximately $20.6 million allocated to Class A Common Stock and additional paid-in capital using par value $0.0001 per share and at a redemption price of $10.31 per share.

 

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Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the Nine months ended September 30, 2020 and year ended December 31, 2019 are as follows:

 

  (AA)

Elimination of non-recurring transaction expenses incurred in connect with the Business Combination.

 

  (BB)

Elimination of interest expense from the Fisker Convertible Notes that converted upon the Closing.

 

  (CC)

Elimination of the change in fair value of the embedded derivative liability in the Fisker Convertible Notes that converted upon the Closing.

 

  (DD)

Elimination of the change in fair value of the Fisker Convertible Security that converted upon the Closing.

 

  (EE)

Elimination of investment income on the Trust Account.

 

  (FF)

Reflects elimination of income tax expense as a result of elimination of the trust account income (noted in footnote EE).

4. Loss per Share

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2019. As the Business Combination and related equity transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net income (loss) per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented. Holders of Fisker Class A Common Stock and Fisker Class B Common Stock received shares of Class A Common Stock and Class B Common Stock, respectively, in an amount determined by application of the Exchange Ratio except for the purchaser of the Legacy Fisker Convertible Equity Security. The purchaser of the Legacy Fisker Convertible Equity Security received a number of shares as defined in the Convertible Equity Security Purchase Agreement, dated July 7, 2020.

The unaudited pro forma condensed combined financial information has been prepared for the nine months ended September 30, 2020 and for the year ended December 31, 2019:

 

     For the Nine Months
Ended September 30, 2020
     For the Year ended
December 31, 2019
 

Pro forma net loss

     (12,138      (11,850

Weighted average shares outstanding of Class A Common Stock(1)

     163,385,654        163,385,654  

Net loss per share (Basic and Diluted) attributable to Class A Common
Stockholders (1)(2)

   $ (0.04    $ (0.04

Weighted average shares outstanding of Class B Common Stock

     132,354,128        132,354,128  

Net loss per share (Basic and Diluted)

attributable to Class B Common Stockholders (2)

   $ (0.04    $ (0.04

 

(1)

Excludes approximately 19,474,454 shares of Class A Common Stock underlying the Magna Warrants issued on October 29, 2020 that are included as part of the capitalization table. The shares underlying the Magna Warrants will not represent legally issued and outstanding shares of Class A Common Stock and are not exercisable upon the Closing (and were issued following the Closing). The Magna Warrants vest upon achievement of certain production milestones as specified in the Cooperation Agreement entered into by Legacy Fisker and Magna, the holder of the Magna Warrants, dated October 15, 2020, and thus are not directly attributable to the Business Combination. As such, the shares underlying these warrants will be excluded in the calculation of pro forma basic loss per share.

(2)

For the purposes of calculating diluted earnings per share, it was assumed that all outstanding warrants sold in the IPO and the private placement are exchanged to Class A common stock. However, since this results in anti-dilution, the effect of such exchange was not included in calculation of diluted loss per share.

 

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COMPARATIVE SHARE INFORMATION

The following table sets forth summary historical comparative share information for Spartan and Legacy Fisker and unaudited pro forma condensed combined per share information after giving effect to the Business Combination.

The pro forma book value information reflects the business combination as if it had occurred on September 30, 2020. The weighted average shares outstanding and net earnings per share information reflect the business combination as if it had occurred on January 1, 2019.

This information is only a summary and should be read in conjunction with the historical financial statements of Spartan and Legacy Fisker and related notes included elsewhere herein. The unaudited pro forma combined per share information of Spartan and Legacy Fisker is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere herein.

The unaudited pro forma combined earnings (loss) per share information below does not purport to represent the earnings (loss) per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Spartan and Legacy Fisker would have been had the companies been combined during the periods presented.

 

     Fisker
(Historical)
     Spartan
(Historical)
     Combined
Pro Forma
 

As of and for the Nine Months ended September 30, 2020

        

Book Value per share (1)

   $ (1.53    $ 0.07      $ 3.43  

Weighted average shares outstanding of Class A common stock—basic and diluted

     94,754        55,198,449        163,385,654  

Weighted average shares outstanding of Class B common stock—basic and diluted

     38,727,340        13,800,000        132,354,128  

Net income (loss) per share of Class A common stock—basic and diluted

   $ (1.10    $ 0.06      $ (0.04

Net loss per share of Class B common stock—basic and diluted

   $ (1.10    $ (0.31    $ (0.04

As of and for the Year ended December 31, 2019

        

Weighted average shares outstanding of Class A common stock—basic and diluted

     57,139        55,200,000        163,385,654  

Weighted average shares outstanding of Class B common stock—basic and diluted

     38,727,340        13,800,000        132,354,128  

Net income (loss) per share of Class A common stock—basic and diluted

   $ (0.28    $ 0.18      $ (0.04

Net loss per share of Class B common stock—basic and diluted

   $ (0.28    $ (0.07    $ (0.04

 

(1)

Book value per share = (Total equity excluding preferred shares)/shares outstanding. The components of book value per share calculation are as follow (in thousands except per share data):

 

     Fisker
(Historical)
     Spartan
(Historical)
     Pro Forma
Combined
 

Total Equity (excluding preferred shares)

     (59,331      5,000        1,014,674  

Total Shares Outstanding —Class A and B

     38,822,094        68,998,449        295,739,782  

 

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CAPITALIZATION

The following table sets forth the cash and capitalization of Spartan and Legacy Fisker on an unaudited, historical basis as of September 30, 2020.

Please refer to the historical financial statements of Spartan and Fisker and the related notes included elsewhere in this prospectus, as well as the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

 

     September 30, 2020  
     Historical      Pro Forma
Combined
 

(in thousands)

   Spartan      Fisker  

Cash and cash equivalents

   $ 165      $ 44,976      $ 1,018,649  
  

 

 

    

 

 

    

 

 

 

Investment held in Trust Account

   $ 569,041      $ —        $ —    
  

 

 

    

 

 

    

 

 

 

Debt

        

Total Debt

   $ —        $ 10,927      $ —    

Commitments:

        

Common Stock subject to possible redemption

     540,556        —          —    

Redeemable convertible preferred stock

     —          11,020        —    

Convertible equity security

     —          79,003        —    

Equity:

        

Preferred Stock

     —          —          —    

Class A Common Stock

     —          —          16  

Class B Common Stock

     1        —          13  

Additional paid-in capital

     4,146        1,173        1,107,849  

Retained earnings (accumulated deficit)

     853        (60,504      (93,204
  

 

 

    

 

 

    

 

 

 

Total stockholders’ equity (deficit)

     5,000        (59,331      1,014,674  
  

 

 

    

 

 

    

 

 

 

Total capitalization

   $ 545,556      $ 41,619      $ 1,014,674  
  

 

 

    

 

 

    

 

 

 

 

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

The following discussion and analysis provides information that Fisker’s management believes is relevant to an assessment and understanding of Fisker’s consolidated results of operations and financial condition. The discussion should be read together with “Selected Historical Consolidated Financial and Operating Data of Fisker” and the historical audited annual consolidated financial statements as of and for the years ended December 31, 2019 and 2018 and unaudited interim condensed consolidated financial statements as of September 30, 2020 and the nine-month periods ended September 30, 2020 and 2019, and the related respective notes thereto, included elsewhere in this prospectus. The discussion and analysis should also be read together with Fisker’s unaudited pro forma financial information for the year ended December 31, 2019 and the nine months ended September 30, 2020. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Fisker’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” elsewhere in this prospectus. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fisker” to “Fisker” and “the Company” refer to the business and operations of Legacy Fisker and its consolidated subsidiaries prior to the Business Combination and to Fisker and its consolidated subsidiaries, following the consummation of the Business Combination.

Overview

Fisker is building a technology-enabled, asset-light automotive business model that it believes will be among the first of its kind and aligned with the future state of the automotive industry. This involves a focus on vehicle development, customer experience, sales and service to change the personal mobility experience through technological innovation, ease of use and flexibility. The Company combines the legendary design and engineering expertise of Henrik Fisker — the visionary behind the iconic BMW Z8 sports car and the famed Aston Martin DB9 and V8 Vantage — to develop high quality electric vehicles with strong emotional appeal by engaging the consumer’s senses through the overall experience of Fisker vehicles. Central to Fisker’s business model is the Fisker Flexible Platform Agnostic Design (“FF-PAD”), a proprietary process that allows the development and design of a vehicle to be adapted to any given electric vehicle (“EV”) platform in the specific segment size. The process focuses on selecting industry leading vehicle specifications and adapting the design to crucial hard points on a third-party supplied EV platform and outsourced manufacturing to reduce development cost and time to market. Fisker believes it is well-positioned through its global premium EV brand, its renowned design capabilities and sustainability focus.

The Fisker Ocean is targeting a large and rapidly expanding “premium with volume” segment (meaning a premium automaker producing more than 100,000 units of a single model such as the BMW 3 Series or Tesla Model 3) of the electric SUV market. Fisker expects to begin production of the Ocean as early as the fourth quarter of 2022 and, through November 1, 2020, the Company has received over 9,100 paid reservations for the Ocean, including a fleet order of 300 cars placed by Viggo HQ ApS, a Danish ride-hailing company that provides 100% of their services via zero-emission vehicles (“Viggo”). The Fisker Ocean, a five-passenger vehicle with potentially a 250- to over 300-mile range and state-of-the-art autonomous driving capabilities, will be differentiated in the marketplace by its innovative and timeless design and a re-imagined customer experience delivered through an advanced software-based user interface. The Fisker Ocean is designed for a high degree of sustainability, using recycled rubber, eco-suede interior trim made from recycled polyester, and carpeting from fishing nets and plastic bottles recycled from ocean waste, among many other sustainable features. The optional features for the Ocean, including California Mode (patent pending), a solar photovoltaic roof and augmented reality “Head-up” display, resulted in the Fisker Ocean prototype being the most awarded new automobile at CES 2020 by Time, Newsweek, Business Insider, CNET and others.

 

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Fisker believes its innovative business model, including “E-Mobility-as-a-Service” (“EMaaS”), will revolutionize how consumers view personal transportation and car ownership. Over time, Fisker plans to combine a customer-focused experience with flexible leasing options, affordable monthly payments and no fixed lease terms. Through an innovative platform sharing partnership strategy, Fisker believes that it will be able to significantly reduce the capital intensity typically associated with developing and manufacturing vehicles, while maintaining flexibility and optionality in component sourcing and manufacturing due to Fisker’s FF-PAD proprietary process. Through Fisker’s FF-PAD proprietary process, Fisker will partner with one or more industry-leading original equipment manufacturers (“OEMs”) and/or tier-one automotive suppliers for platform sharing and access to procurement networks, while focusing on key differentiators in innovative design, software and user interface. Fisker envisions a go-to-market strategy with both web- and app-based digital sales, loan financing approvals, leasing, and service management, with limited reliance on traditional brick-and-mortar “sales-and-service” dealer networks. Fisker believes that this customer-focused approach will drive revenue, user satisfaction and higher margins than competitors.

The Business Combination

Fisker entered into a business combination agreement and plan of reorganization (the “Business Combination Agreement”) with Spartan Energy Acquisition Corp. (“Spartan”) on July 10, 2020. Pursuant to the Business Combination Agreement, and assuming a favorable vote of Spartan’s stockholders, Spartan Merger Sub Inc. (“Merger Sub”), a newly formed subsidiary of Spartan, will be merged with and into Fisker (the “Business Combination”). Upon consummation of the Business Combination, the separate corporate existence of Merger Sub shall cease, Fisker will survive and become a wholly-owned subsidiary of Spartan (“Fisker”).

The Business Combination is anticipated to be accounted for as a reverse recapitalization. Fisker will be deemed the accounting predecessor and the combined entity will be the successor SEC registrant, meaning that Fisker’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. Under this method of accounting, Spartan will be treated as the acquired company for financial statement reporting purposes. The most significant change in the successor’s future reported financial position and results are expected to be an estimated net increase in cash (as compared to Fisker’s consolidated balance sheet at September 30, 2020) of $974 million, after stockholder redemptions, and including $500 million in gross proceeds from the private investment in public equity (“PIPE”) by Spartan. Total transaction costs are estimated at approximately $79 million. See “Unaudited Pro Forma Condensed Combined Financial Information.” In addition, immediately prior to the effective time of the Business Combination, Fisker caused the outstanding principal and accrued but unpaid interest due on its outstanding convertible notes, which amounted to approximately $10.9 million, and convertible equity security totaling $79 million, adjusted for changes in fair value, as of September 30, 2020, to be automatically converted into a number of shares of Fisker’s Class A Common Stock, and such converted convertible notes are no longer outstanding and ceased to exist at the effective time of the Business Combination. See “Managements Discussion and Analysis of Financial Condition and Results of Operations of Fisker—Liquidity and Capital Resources—Debt.”

As a result of the Business Combination, Fisker is the successor to an SEC-registered and New York Stock Exchange-listed company, which requires Fisker to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Fisker expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, internal audit function, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees. While we expect to incur significant general and administrative expenses, Fisker will closely monitor its expenditures and take actions designed to improve our processes and manage our cash effectively to facilitate scalability for the design and manufacturing teams.

 

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Key Trends, Opportunities and Uncertainties

Fisker is a pre-revenue company and believes that its future performance and success depends to a substantial extent on the ability to capitalize on the following opportunities, which in turn is subject to significant risks and challenges, including those discussed below and in the section of the prospectus titled “Risk Factors,” which is incorporated herein by reference.

Partnering with Industry-Leading OEMs and/or Tier-One Automotive Suppliers

On October 14, 2020, Fisker and Spartan entered into a Cooperation Agreement with Magna International Inc. (“Magna”) setting forth certain terms for the development of a full electric vehicle (the “Cooperation Agreement”). The Cooperation Agreement sets out the main terms and conditions of the upcoming operational phase agreements (the “Operational Phase Agreements”) that will extend from the Cooperation Agreement and other agreements with Magna (or its affiliates) that are expected to be entered into by and between Fisker and Magna (or its affiliates). The upcoming Operational Phase Agreements referenced in the Cooperation Agreement relate to various platform and manufacturing agreements.

Fisker is currently in negotiations with Magna and several other industry-leading OEMs and tier-one automotive suppliers for platform sharing, component sourcing and manufacturing. This allows Fisker to focus on vehicle design, strong brand affiliation and a differentiated customer experience. Fisker intends to leverage one or more EV platforms to accelerate its time to market, reduce vehicle development costs and gain access to an established global supply chain of batteries and other components.

Fisker believes that its business model will reduce the considerable execution risk typically associated with new car companies. Through such platform sharing, component sourcing and manufacturing partnerships, Fisker believes it will be able to accelerate its time to market and reduce vehicle development costs. Fisker intends to meet timing, cost and quality expectations while optimally matching its cost structure with its projected production ramp by leveraging such partnerships and trained workforces. Remaining hardware agnostic allows for selection of partners, components, and manufacturing decisions to be based on both timeline and cost advantages and enables Fisker to focus on delivering truly innovative design features, a superior customer experience, and a leading user interface that leverages sophisticated software and other technology advancements.

Fisker continues to negotiate a potential relationship with several other industry-leading OEMs and tier-one automotive suppliers. Fisker intends to enter into agreements covering supply, engineering services (including tooling), and vehicle assembly, among other matters. Further, while Fisker has entered into the Collaboration Agreement with Magna, Fisker is strongly incentivized to promptly conclude negotiations with Magna and other OEM’s and tier-one automotive suppliers to meet its commercialization timeline. If Fisker is unable to enter into definitive operational agreements with Magna or other OEM’s agreements or if Fisker is only able to do so on terms that are unfavorable to it, there is no assurance that commercialization will occur within the anticipated timeframe or at costs consistent with production plans. Extended negotiation of the specific project-related agreements, the sourcing of components or labor at higher than anticipated cost, or any delays in sourcing suppliers of sustainable parts may delay Fisker’s commercialization plans or require it to change the anticipated pricing of its vehicles. Such delays could be caused by a variety of factors, some of which may be out of Fisker’s control. For example, the outbreak of the COVID-19 pandemic has severely restricted international travel, which may make it more difficult for Fisker to conclude agreements with partners outside the United States. See the section entitled “Risk Factors—We face risks related to health epidemics, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations,” for more information. Unanticipated events, delays in negotiations by third parties and any required changes in Fisker’s current business plans could materially and adversely affect its business, margins and cash flows.

Market Trends and Competition

Fisker anticipates robust demand for the Fisker Ocean, based on its award-winning design, its unique sustainability features, the management team’s experience and know-how and, in particular, the growing acceptance of and demand for EVs as a substitute for gasoline-fueled vehicles. According to Bloomberg’s Electric Vehicle Outlook 2020, the global EV fleet is expected to increase at an estimated cumulative annual growth rate of approximately 26%, from

 

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less than 20 million vehicles in 2020 to more than 120 million by 2030, driven by worldwide governmental and private initiatives for growth. The EV market is highly competitive and Fisker believes the market will be broken down into three primary consumer segments: the white space segment, the value segment, and the conservative premium segment. See the section entitled “Business—Sales – Go to Market Strategy” for more information. Fisker expects to sell approximately 50% of its vehicles within the white space segment, appealing to customers who want to be part of the new EV movement and value sustainability and environmental, social, and governance (“ESG”) initiatives. Fisker believes that it will be well positioned to be the primary alternative to Tesla in this segment with the Ocean priced around the base price of the Model 3 and Model Y. While Fisker will compete with other EV startups, many of them are moving into the higher luxury priced segments due to the lack of volume pricing of components that Fisker expects to obtain through platform sharing partnerships with industry-leading OEMs and/or tier-one automotive suppliers. To expand market share and attract customers from competitors, Fisker must continue to innovate and convert successful research and development efforts into differentiated products, including new EV models.

Fisker is also working to quantify the sustainability advancements and claims that the Fisker brand would produce the most sustainable vehicles in the world, which it believes will be an increasingly important differentiator among a growing subset of consumers. In Fisker’s pursuit of these objectives, it will be in competition with substantially larger and better capitalized vehicle manufacturers. While Fisker believes that the low-capital-intensity platform sharing partnership strategy, together with direct-to-customer commercialization, provides the Company with an advantage relative to traditional and other established auto manufacturers, Fisker’s better capitalized competitors may seek to undercut the pricing or compete directly with Fisker’s designs by replicating their features. In addition, while Fisker believes that its strong management team forms the necessary backbone to execute on its strategy, the Company expects to compete for talent, as Fisker’s future growth will depend on hiring qualified and experienced personnel to operate all aspects of the business as it prepares to launch commercial operations.

Commercialization

Fisker currently anticipates commencing production of the Fisker Ocean in the fourth quarter of 2022, with initial customer deliveries in late 2022 at the earliest. Production commencement is dependent upon Fisker entering into definitive platform sharing agreements with one or more industry-leading OEMs and/or tier-one automotive suppliers. Failure to enter into these agreements timely could result in being unable to begin production in the timeframe anticipated. Through November 1, 2020, Fisker has received over 9,100 paid reservations, including a fleet order of 300 cars placed by Viggo, and over 40,000 indications of interest through the Flexee app (meaning the Flexee App has been downloaded and the potential purchaser has provided a contact phone number), reflecting the significant public interest in the Fisker Ocean.

Fisker plans to initially market its vehicles through its direct-to-consumer sales model, leveraging its proprietary Flexee app, which will serve as a one-stop-shop for all components of its EMaaS business model. Over time, Fisker plans to develop Fisker Experience Centers in select cities in North America and Europe, which will enable prospective customers to experience Fisker vehicles through test drives and virtual and augmented reality. Fisker also intends to enter, in each launch market, into third-party service partnerships with credible vehicle service organizations with established service facilities, operations and technicians. These companies’ services will be integrated into and booked via the Flexee app in order to create a hassle-free, app-based service experience for Fisker’s customers delivered at home, at work, or with a pick-up and delivery service booked online. For North America, as an example, Fisker has entered into a non-exclusive Memorandum of Understanding with Manheim related to fleet management services. Fisker will continue to seek opportunities to build the service partnership model.

Over time, Fisker aims to transform the EV sales model through the flexible lease model, under which customers will be able to utilize a vehicle on a month-to-month basis at an anticipated cost of $379 per month for the base model, with the ability to terminate the lease or upgrade their vehicle at any time. Development of a fleet of high value, sustainable EVs will allow Fisker to offer these flexible lease options to capture more customers. Fisker intends to require a non-refundable up-front payment of $3,000 under the flexible lease model, which the Company believes will reduce its cash flow risk and incentivize customers to keep their vehicles for a period of time. Assuming an eight-year expected vehicle life, Fisker anticipates that, over time, it will acquire a substantial fleet of used EVs available for sale or further flexible lease by Fisker, which it believes will enhance its ability to maintain its premium brand and pricing.

 

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Fisker believes its digital, direct-to-consumer sales model reflects today’s changing consumer preferences and is less capital intensive and expensive than the traditional automotive sales models. Fisker’s commercialization strategy is, however, relatively novel for the car industry, which has historically relied on extensive advertising and marketing, as well as relationships with physical car dealership networks. Should Fisker’s assumptions about the commercialization of its vehicles prove overly optimistic or if the Company is unable to develop, obtain or maintain the direct-to-consumer marketing or service technology upon which its prospective customer base would rely, Fisker may incur delays to its ability to commercialize the Fisker Ocean. This may also lead Fisker to make changes in its commercialization plans, which could result in unanticipated marketing delays or cost overruns, which could in turn adversely impact margins and cash flows or require Fisker to change its pricing. Further, to the extent that Fisker doesn’t generate the margins it expects upon commercialization of the Fisker Ocean, Fisker may be required to raise additional debt or equity capital, which may not be available or may only be available on terms that are onerous to Fisker and its stockholders.

Regulatory Landscape

Fisker operates in an industry that is subject to and benefits from environmental regulations, which have generally become more stringent over time, particularly across developed markets. Regulations in Fisker’s target markets include economic incentives to purchasers of EVs, tax credits for EV manufacturers, and economic penalties that may apply to a car manufacturer based on its fleet-wide emissions ratings. See the section entitled “Business—Government Regulation and Credits” for more information. For example, a federal tax credit of $7,500 may be available to U.S. purchasers of Fisker vehicles, which would bring the effective estimated purchase price of the base Fisker Ocean model to approximately $30,000. Further, the registration and sale of Zero Emission Vehicles (“ZEVs”) in California will earn Fisker ZEV credits, which it may be able to sell to other OEMs or tier-one automotive suppliers seeking to access the state’s market. Several other U.S. states have adopted similar standards. In the European Union, where European car manufacturers are penalized for excessive fleet-wide emissions on the one hand and incentivized to produce low emission vehicles on the other, Fisker believes it will have the opportunity to monetize the ZEV technology through fleet emissions pooling arrangements with car manufacturers that may not otherwise meet their CO2 emissions targets. While Fisker expects environmental regulations to provide a tailwind to its growth, it is possible for certain regulations to result in margin pressures. For example, regulations that effectively impose EV production quotas on auto manufacturers may lead to an oversupply of EVs, which in turn could promote price decreases. As a pure play EV company, Fisker’s margins could be particularly and adversely impacted by such regulatory developments. Trade restrictions and tariffs, while historically minimal between the European Union and the United States where most of Fisker’s production and sales are expected, are subject to unknown and unpredictable change that could impact Fisker’s ability to meet projected sales or margins.

Basis of Presentation

Fisker currently conducts its business through one operating segment. As a pre-revenue company with no commercial operations, Fisker’s activities to date have been limited and were conducted primarily in the United States and its historical results are reported under U.S. GAAP and in U.S. dollars. Upon commencement of commercial operations, Fisker expects to expand its global operations substantially, including in the USA and the European Union, and as a result Fisker expects its future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its historical financial statements. As a result, Fisker expects that the financial results it reports for periods after it begins commercial operations will not be comparable to the financial results included in this prospectus.

Components of Results of Operations

Fisker is an early stage company and its historical results may not be indicative of its future results for reasons that may be difficult to anticipate. Accordingly, the drivers of Fisker’s future financial results, as well as the components of such results, may not be comparable to Fisker’s historical or projected results of operations.

 

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Revenues

Fisker has not begun commercial operations and currently does not generate any revenue. Once Fisker commences production and commercialization of its vehicles, it expects that the significant majority of its revenue will be initially derived from direct sales of Fisker Ocean SUVs and, subsequently, from flexible leases of its vehicles.

Cost of Goods Sold

To date, Fisker has not recorded cost of goods sold, as it has not recorded commercial revenue. Once Fisker commences the commercial production and sale of its vehicles, it expects cost of goods sold to include mainly vehicle components and parts, including batteries, direct labor costs, amortized tooling costs, and reserves for estimated warranty expenses.

General and Administrative Expense

General and administrative expenses consist mainly of personnel-related expenses for Fisker’s executive and other administrative functions and expenses for outside professional services, including legal, accounting and other advisory services.

Fisker is rapidly expanding its personnel headcount, in anticipation of ramping up for commercial operations and becoming a public company upon the consummation of the Business Combination. Accordingly, in addition to the non-recurring transaction costs discussed above, Fisker expects its general and administrative expenses to increase significantly in the near term and for the foreseeable future. Upon commencement of commercial operations, Fisker also expects general and administrative expenses to include facilities, marketing and advertising costs.

Research and Development Expense

To date, Fisker’s research and development expenses have consisted primarily of external engineering services in connection with the design of the Fisker Ocean model and development of the first prototype. As Fisker ramps up for commercial operations, it anticipates that research and development expenses will increase for the foreseeable future as the Company expands its hiring of engineers and designers and continues to invest in new vehicle model design and development of technology.

Income Tax Expense / Benefit

Fisker’s income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Fisker maintains a valuation allowance against the recognized amount of its U.S. and state net deferred tax assets because Fisker believes the recoverability of the tax assets is not more likely than not.

Results of Operations

Comparison of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

The following table sets forth Fisker’s historical operating results for the periods indicated:

 

     Nine Months Ended September 30,                
     2020      2019      $ Change      % Change  
     (dollar amounts in thousands)  

Operating costs and expenses:

           

General and administrative

   $ 8,056      $ 2,882      $ 5,174        179.5

Research and development

     3,963        4,943        (980      (19.8 )% 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating costs and expenses

     12,019        7,825        4,194        53.6
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss from operations

     (12,019      (7,825      (4,194      53.6

 

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     Nine Months Ended September 30,                
     2020      2019      $ Change      % Change  
     (dollar amounts in thousands)  

Other income (expense):

           

Other income

     15        —          15        n.m.  

Interest income

     13        7        6        n.m.  

Interest expense

     (1,326      (20      (1,306      n.m.  

Change in fair value of embedded derivatives

     (406      (9      (397      n.m.  

Change in fair value of convertible equity security

     (29,003      —          (29,003      n.m.  

Foreign currency gain (loss)

     122        (15      137        n.m.  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other income (expense)

     (30,585      (37      (30,548      n.m.  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

   $ (42,604    $ (7,862    $ (34,742      441.9
  

 

 

    

 

 

    

 

 

    

 

 

 

 

n.m. = not meaningful.

General and Administrative

General and administrative expenses increased by $5.2 million or 179.5% from $2.9 million in the first nine months of 2019 to $8.1 million in the first nine months of 2020, primarily due a $4.2 million increase in professional fees, mainly success fees related to the issuance of our convertible equity security in July 2020.

Research and Development

Research and development expenses decreased by $0.9 million or 19.8% from $4.9 million through the first nine months of 2019 to $4.0 million through the first nine months of 2020. The decrease primarily reflected lower outside engineering costs due to IDG’s development of the demonstrator vehicle, which reduced expense by $1.8 million through the first nine months of 2020. Fisker’s arrangement with IDG terminated in September 2020 and, as a result, Fisker does not anticipate future reductions in research and development expenses.

Other Income

Other income increased by a nominal amount in the first nine months of 2020 from nil in the first nine months of 2019.

Interest Income

Interest income increased a nominal amount from the first nine months of 2019 to the first nine months of 2020.

Interest Expense

Interest expense was $1.3 million through the first nine months of 2020 and nominal in the first nine months of 2019, reflecting the issuance of convertible bridge notes, starting in the second half of 2019 through the first nine months of 2020.

Change in Fair Value of Embedded Derivatives

The change in fair value of embedded derivatives amounted to $0.4 million in the first nine months of 2020 compared to a nominal amount in the same nine-month period of 2019, reflecting the change in value of the embedded derivative relating to Fisker’s convertible bridge notes.

Change in Fair Value of Convertible Equity Security

The change in fair value of the convertible equity security, which was issued in July 2020, amounted to $29.0 million in the first nine months of 2020, reflecting the change in value of Class A Common Stock to be issued to the holder of the convertible equity security in the event of the consummation of the Business Combination.

 

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Foreign Currency Gain (Loss)

Fisker recorded a foreign currency gain of $0.1 million in the first nine months of 2020 as compared to a nominal loss in the first nine months of 2019.

Net Loss

Net loss was $42.6 million in the first nine months of 2020, an increase of $34.7 million or 441.9% from $7.9 million in the first nine months of 2019, for the reasons discussed above.

Comparison of the Fiscal Year Ended December 31, 2019 to the Fiscal Year Ended December 31, 2018

The following table sets forth Fisker’s historical operating results for the periods indicated:

 

     Years Ended December 31,                
     2019      2018      $ Change      % Change  
     (dollar amounts in thousands)  

Operating costs and expenses:

           

General and administrative

   $ 3,626      $ 1,476      $ 2,150        145.7

Research and development

     6,962        1,939        5,023        259.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating costs and expenses

     10,588        3,415        7,173        210.0
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss from operations

     (10,588      (3,415      (7,173      210.0

Other income (expense):

           

Other income (expense)

     1        (21      22        n.m.  

Interest income

     9        7        2        28.6

Interest expense

     (178      (2      (176      n.m.  

Change in fair value of embedded derivatives

     (80      —          (80      n.m.  

Foreign currency loss

     (42      (1      (41      n.m.  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other expense

     (290      (17      (273      n.m.  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

     (10,878      (3,432      (7,446      217.0
  

 

 

    

 

 

    

 

 

    

 

 

 

Deemed dividend attributable to preferred stock

     —          (1,222      1,222        100.0
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to common stockholders

   $ (10,878    $ (4,654    $ (6,224      133.7
  

 

 

    

 

 

    

 

 

    

 

 

 

 

n.m. = not meaningful.

General and Administrative

General and administrative expenses increased by $2.1 million or 145.7% from $1.5 million in 2018 to $3.6 million in the 2019, reflecting an increase in legal expenses of approximately $1.7 million due to general professional legal services and litigation expense and a one-time charge of $0.8 million for the settlement of a legal matter in the 2019 period.

Research and Development

Research and development expenses increased by approximately $5.0 million or 259.1% from $1.9 million in 2018 to $7.0 million in 2019, reflecting mainly a ramp-up in external engineering consulting in connection with the Fisker Ocean prototype design of approximately $4.4 million and an increase of internal research and development personal costs of approximately $0.6 million.

Other Income (Expense)

Other income (expense) increased from a nominal expense position in 2018 to a nominal income position in 2019.

 

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Interest Income

Interest income increased a nominal amount from fiscal year 2018 to fiscal year 2019.

Interest Expense

Interest expense increased from nearly nil in 2018 to $0.2 million in 2019, reflecting the issuance of convertible bridge notes, as discussed above.

Change in Fair Value of Embedded Derivatives

The change in fair value of embedded derivatives was $0.1 million in 2019 (compared to nil in 2018), reflecting the change in value of the embedded derivative relating to Fisker’s convertible bridge notes.

Foreign Currency Loss

Foreign currency loss increased a nominal amount from fiscal year 2018 to fiscal year 2019.

Net Loss

Net loss was $10.9 million in 2019, an increase of $7.5 million from $3.4 million in 2018, for the reasons discussed above.

In 2018, Fisker also recorded a deemed dividend attributable to preferred stock in the amount of $1.2 million, resulting in net loss attributable to common stockholders of $4.7 million in that year. Fisker did not have a comparable impact in 2019.

Liquidity and Capital Resources

As of the date of this prospectus, Fisker has yet to generate any revenue from its business operations. To date, Fisker has funded its capital expenditure and working capital requirements through equity and debt capital, as further discussed below. Fisker’s ability to successfully commence commercial operations and expand its business will depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.

As of September 30, 2020, Fisker’s cash and cash equivalents amounted to $45.0 million and its long-term debt amounted to $10.9 million. On a pro forma basis, upon stockholder approval and consummation of the Business Combination, Fisker’s cash and cash equivalents amount to approximately $1,018 million at September 30, 2020, after redemptions by Spartan stockholders.

Fisker expects its capital expenditures and working capital requirements to increase substantially in the near future, as it seeks to produce the Fisker Ocean EV model, develop its customer support and marketing infrastructure and expand its research and development efforts. Fisker believes that its cash on hand following the consummation of the Business Combination, including the net proceeds from Spartan’s cash in trust, and the PIPE will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this prospectus and sufficient to fund its operations until it commences production of the Fisker Ocean, assuming Fisker is able to do so as currently contemplated. Fisker may, however, need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, disruptions due to COVID-19, competitive pressures, and regulatory developments, among other developments. To the extent that Fisker’s current resources are insufficient to satisfy its cash requirements, Fisker may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than Fisker expects, Fisker may be forced to decrease its level of investment in product development or scale back its operations, which could have an adverse impact on its business and financial prospects. See Note 1 to the audited consolidated financial statements included elsewhere in this prospectus.

 

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Going Concern

As of September 30, 2020, the Company evaluated whether there were any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern over the next twelve months. Since inception, the Company has incurred significant losses of approximately $60.5 million. The Company expects to continue to incur significant operating losses for the foreseeable future. As of September 30, 2020, the Company had approximately $45.0 million in cash and cash equivalents. The Company has historically funded its operations primarily through the sale of convertible debt and equity securities. However, given the anticipated cash received from the Business Combination and timing of expenditure assumptions, the Company currently expects that its cash will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months.

Debt

Fisker had $10.0 million of principal in convertible bridge notes outstanding on September 30, 2020. The convertible bridge notes are due July 29, 2021, with simple interest rate of 5% per annum. In June 2020, Fisker amended the terms of its convertible bridge notes to provide that a transaction with a Special Purpose Acquisition Corporation (“SPAC”), which includes the Business Combination, prior to repayment or conversion in full of the notes, would result, immediately prior to such SPAC transaction, in the automatic conversion of the outstanding principal and any accrued but unpaid interest under the convertible bridge notes into shares of Legacy Fisker’s Class A Common Stock (or, at the election of the Company, directly into proceeds paid to the holders of Legacy Fisker’s Class A Common Stock in connection with such SPAC transaction) at a price per share that is 75% of the price per share of Legacy Fisker’s Class A Common Stock paid in such SPAC transaction. Immediately prior to the Close, the outstanding principal and any accrued but unpaid interest under the convertible bridge notes were converted into 1,361,268 shares of Class A Common Stock.

Cash Flows

The following table provides a summary of Fisker’s cash flow data for the periods indicated:

 

     Nine Months Ended September 30,      Years Ended December 31,  
     2020      2019      2019      2018  
     (dollar amounts in thousands)  

Net cash used in operating activities

   $ (7,941    $ (4,911    $ (7,260    $ (3,417

Net cash used in investing activities

     (224      (14      (14      (48

Net cash provided by financing activities

     51,283        1,089        3,586        7,614  

Cash Flows used in Operating Activities

Fisker’s cash flows used in operating activities to date have been primarily comprised of costs related to research and development, payroll and other general and administrative activities. As Fisker continues to ramp up hiring ahead of starting commercial operations, Fisker expects its cash used in operating activities to increase significantly before it starts to generate any material cash flows from its business.

Net cash used in operating activities was $7.9 million in the nine months ended September 30, 2020, an increase from $4.9 million net cash used in the nine months ended September 30, 2019.

Net cash used in operating activities was $7.3 million in 2019, up from $3.4 million in 2018.

Cash Flows used in Investing Activities

Fisker’s cash flows from investing activities, to date, have been comprised mainly of purchases of property and equipment and have not been material. Fisker expects these costs to increase substantially in the near future as it ramps up activity ahead of commencing commercial operations.

Fisker had $0.2 million of investing cash flow activity in the nine months ended September 30, 2020 compared to a nominal amount of cash used in the nine months ended September 30, 2019. Net cash used in investing activities were also nominal for the years ended 2019 and 2018.

 

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Cash Flows from Financing Activities

Through September 30, 2020, Fisker has financed its operations primarily through the sale of equity securities, and, to a lesser extent, convertible notes.

Net cash from financing activities was $51.3 million in the first nine months of 2020, reflecting mainly the issuance of $46.5 million in convertible equity securities, net of payments of $3.5 million to advisors, and $1.1 million in the comparative period of 2019. Net cash from financing activities was $3.6 million in 2019, reflecting mainly proceeds from the issuance of convertible notes. Net cash from financing activities was $7.6 million in 2018, mainly reflecting net proceeds from the issuance of equity securities.

Contractual Obligations and Commitments

The following table summarizes Fisker’s contractual obligations and other commitments for cash expenditures as of September 30, 2020, and the years in which these obligations are due:

 

     Payments Due by Period  
     Total      Less than
1 Year
     1-3 Years      3-5 Years      More than
5 years
 
     (Dollar amounts in thousands)  

Contractual Obligations:

              

Convertible bridge notes(1)

   $ 10,015      $ 10,015    $ —        $ —      $ —  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,015      $ 10,015    $ —        $ —      $ —  

 

(1)

Amounts do not include interest, which accrues at a simple interest rate of 5% per annum, payable upon demand following maturity or at the time of conversion, whichever is earlier.

As of September 30, 2020, Fisker leased its headquarters space in the Los Angeles area under a single lease classified as an operating lease expiring on December 31, 2020. Subsequent to September 30, 2020, the Company executed two new leases for office space in the cities of Manhattan Beach and San Francisco, California over initial lease terms ranging from 42 months to 66 months.

Off-Balance Sheet Arrangements

Fisker is not a party to any off-balance sheet arrangements, as defined under SEC rules.

Critical Accounting Policies and Estimates

Fisker’s financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In the preparation of these financial statements, Fisker is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Fisker considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements.

Fisker’s significant accounting policies are described in Note 2 to its audited consolidated financial statements included elsewhere in this prospectus. Because Fisker is a pre-revenue company without commercial operations, management believes it does not currently have any critical accounting policies or estimates. Management believes that the accounting policies most likely to become critical in the near future are those described below.

 

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Stock-Based Compensation and Common Stock Valuation

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

 

   

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

 

   

Expected Volatility—As Fisker’s shares are not actively traded, the volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.

 

   

Expected Dividend Yield—The dividend rate used is zero as Fisker has never paid any cash dividends on common stock and does not anticipate doing so in the foreseeable future.

 

   

Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Common Stock Valuations

Prior to the Business Combination, the grant date fair value of Fisker common stock was determined by the Board of Directors with the assistance of management and a third-party valuation specialist. Given its pre-revenue stage of development, management utilized that an Option Pricing Model (“OPM”) as the most appropriate method for allocating enterprise value to determine the estimated fair value of the Common Stock. Application of the OPM involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding Fisker’s expected future revenue, expenses, and cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of future events. Now that Fisker’s stock is publicly traded, the Board of Directors intends to determine the fair value of Fisker common stock based on the closing market price on or around the date of grant.

Valuation of the Convertible Equity Security

Fisker measures convertible equity security at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the convertible equity security uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The fair value of the convertible equity security represents the fair value of the potential common stock to be issued to the holder of the convertible equity security in the event of the Business Combination. The significant unobservable input used in the fair value measurement of the Company’s convertible equity security is the probability of the Company’s closing of the Business Combination, which would trigger conversion of the convertible equity security. The Company assessed the probability of completing the Business Combination at 85% and the probability of not completing the Business Combination at 15%. Based on that assessment, the Company calculated the weighted fair value of the shares at approximately $79.0 million at September 30, 2020.

Emerging Growth Company Status

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

Spartan is an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Following the consummation of the Business Combination, Fisker expects to remain an emerging growth company at least through the end of the 2020 fiscal year and Fisker expects to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting

 

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standards to the extent permitted by such standards. This may make it difficult or impossible to compare Fisker’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

Recent Accounting Pronouncements

See Note 2 to the audited consolidated financial statements included elsewhere in this prospectus incorporated herein by reference for more information about recent accounting pronouncements, the timing of their adoption, and Fisker’s assessment, to the extent it has made one, of their potential impact on Fisker’s financial condition and its results of operations and cash flows.

Quantitative and Qualitative Disclosures About Market Risk

Fisker has not, to date, been exposed to material market risks given its early stage of operations. Upon commencing commercial operations, Fisker expects to be exposed to foreign currency translation and transaction risks and potentially other market risks, including those related to interest rates or valuation of financial instruments, among others.

Foreign Currency Risk

Fisker’s functional currency is the U.S. dollar, while certain of Fisker’s current and future subsidiaries are expected to have functional currencies in Euro and British pound sterling, reflecting their principal operating markets. Once Fisker commences commercial operations, it expects to be exposed to both currency transaction and translation risk. For example, Fisker expects its contracts with OEMs and/or tier-one automotive suppliers to be transacted in Euro or other foreign currencies. In addition, Fisker expects that certain of its subsidiaries will have functional currencies other than the U.S. dollar, meaning that such subsidiaries’ results of operations will be periodically translated into U.S. dollars in Fisker’s consolidated financial statements, which may result in revenue and earnings volatility from period to period in response to exchange rates fluctuations. To date, Fisker has not had material exposure to foreign currency fluctuations and has not hedged such exposure, although it may do so in the future.

 

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BUSINESS

Fisker Vision

A clean future for all.

Fisker Mission

Create the world’s most emotional and sustainable vehicles.

Overview

Fisker is building a technology-enabled, asset-light automotive business model that it believes will be among the first of its kind and aligned with the future state of the automotive industry. This involves a focus on vehicle development, customer experience, sales and service to change the personal mobility experience through technological innovation, ease of use and flexibility. Fisker combines the legendary design and engineering expertise of Henrik Fisker – the visionary behind the iconic BMW Z8 sports car and the famed Aston Martin DB9 and V8 Vantage, and – to develop high quality electric vehicles with strong emotional appeal by engaging the consumer’s senses through the overall experience of Fisker vehicles. Central to Fisker’s business model is the Fisker Flexible Platform Agnostic Design (“FF-PAD”), a proprietary process that allows the development and design of a vehicle to be adapted to any given EV platform in the specific segment size. The process focuses on selecting industry leading vehicle specifications and adapting the design to crucial hard points on a third-party supplied EV platform and outsourced manufacturing to reduce development cost and time to market.

Fisker believes it is well positioned through its global premium EV brand, its renowned design capabilities and sustainability focus. Fisker’s first EV, the Fisker Ocean, is an award-winning, affordable, all-electric SUV with premium styling and features that Fisker expects to begin producing in the fourth quarter of 2022. Through November 1, 2020, Fisker has received over 9,100 paid reservations, including a fleet order of 300 cars placed by Viggo.

Fisker believes over the next 10 years the automotive industry will experience a substantial evolution. In addition to continued electrification and support for environmental, social and governance (“ESG”) initiatives, Fisker believes there will be an acceleration of platform and supply chain sharing. This, Fisker believes, will considerably reduce direct investment costs in automobile hardware, such as steel-stamped platforms, crash structures, and other components that are not readily visible to customers, but that are essential to create an automobile. Fisker expects that software and visual exterior/interior design and user interface (“UI”) graphics will be the primary differentiators of EVs for customers. Finally, Fisker anticipates that customers will demand less restrictive leases and easier ways of accessing mobility, and Fisker’s offering of new mobility choices, along with great design and a hassle-free experience, will enable Fisker to gain a leading-market position.

The Fisker Ocean is targeting a large and rapidly expanding “premium with volume” segment (meaning a premium automaker producing more than 100,000 units of a single model such as the BMW 3 Series or Tesla Model 3) of the electric SUV market. The Fisker Ocean, a five-passenger vehicle with potentially a 250-to over 300-mile range and state-of-the-art autonomous driving capabilities, will stand out due to Fisker’s innovative and timeless design and a re-imagined customer experience delivered through an advanced software-based UI. Fisker has designed the Ocean for a high degree of sustainability, using recycled rubber, eco-suede interior trim made from recycled polyester, and carpeting from fishing nets and bottles recycled from ocean waste, among many other sustainable features. The Fisker Ocean was recognized among the best new automobiles at CES 2020 by Time, Newsweek, Business Insider, CNET and others. Fisker expects to price the Fisker Ocean starting at $37,499 for customers who want to purchase the vehicle, or a flexible lease model (instead of a traditional fixed-term lease) starting at $379 per month, which Fisker believes will position the Fisker Ocean as a highly competitive and affordable all-electric SUV, with premium styling and features.

 

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Fisker’s goal is to revolutionize how customers view personal transportation and car ownership. Fisker plans to employ an innovative “E-Mobility-as-a-Service” (“EMaaS”) business model that combines a customer-focused experience with flexible leasing options with affordable monthly payments and no fixed term. Fisker envisions a go-to-market strategy with both web-and app-based digital sales, loan financing approvals, leasing, and service management tools with limited reliance on traditional brick-and-mortar “sales-and-service” dealer networks. Prospective customers would be able to “touch and feel” the vehicles at immersive Fisker Experience Centers, which Fisker anticipates will initially be located in key strategic locations across the United States and Europe. These centers will utilize dynamic augmented and virtual reality for customers to experience the vehicles, their technology, and sustainability features. Virtual factory tours, group test drives and in-store vehicle visualization, will be offered to prospective customers at Fisker Experience Centers, along with specification and offering for customers choosing not to use the web- or app-based sales. Fisker believes that this customer-focused approach will drive user engagement in Fisker’s products, brand and technology, and result in positive customer experiences. Such customer satisfaction, Fisker believes, should result in brand loyalty with potentially sustainable revenues.

Through Fisker’s FF-PAD proprietary process, Fisker intends to significantly reduce the capital intensity and investments typically associated with a new car manufacturing business and accelerate its path to production in several ways, including:

 

   

Launching with a highly respected brand name in the automotive and EV categories. The Fisker name is a recognized part of automotive industry history and has established premium EV brand value in the global EV marketplace. Henrik Fisker, Fisker’s co-founder, Chairman, President and Chief Executive Officer, is a pioneer in the EV industry, having launched the world’s first luxury plug-in hybrid EV, and has a track record of successful designs as the former Chief Executive Officer and President of BMW Designworks USA and the former Design Director for Aston Martin. Fisker enters the market with an established brand name that is associated with automotive innovation and superior design.

 

   

Using an existing EV Platform. Fisker has entered into a cooperation agreement with Magna International Inc. (“Magna”), an industry-leading OEM and manufacturer of luxury cars such as the Mercedes Benz G-Class SUV and electric cars such as the Jaguar I-PACE. The cooperation agreement sets out the main terms and conditions for certain operational agreements related to platform sharing, component sourcing and manufacturing for the Fisker Ocean. Fisker intends to leverage Magna’s platform to accelerate its time to market, reduce vehicle development costs, and gain access to an established global supply chain that includes a multi-source battery supply consortium. Fisker’s proprietary FF-PAD process is hardware agnostic which will enable it to collaborate with several OEMs for the production of its future vehicles.

 

   

Using an existing manufacturing facility. With an estimated 20% automotive manufacturing overcapacity in the world, Fisker intends to leverage Magna’s existing modern manufacturing facilities and trained workforce, which positions Fisker well to meet timing, cost, and quality expectations while optimally matching Fisker’s cost structure with its projected production ramp. Partnering with Magna on manufacturing is intended to position Fisker to meet its projected production and delivery targets and will enable Fisker to focus on what it believes will be the key differentiators for a new car company: delivering truly innovative design features, a superior customer experience, and a leading user interface that leverages sophisticated software and other technology advancements.

 

   

Developing a digitally-driven, hassle-free sales and service experience. Fisker believes that Fisker’s digital, direct-to-customer sales model reflects today’s changing customer preferences and is superior to “traditional” capital intensive and expensive automotive sales models. Fisker’s proprietary Flexee App will enable vehicle configuration, seamless digital sales and vehicle delivery. Fisker also intends to enter into a service partnership with third parties such as Pivet and Manheim, which are affiliates of Cox Automotive, to create a hassle-free, app-based service experience for its customers.

 

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Market Opportunity

Sustainable vehicles are the future of transportation

In the last few years, Fisker has observed a significant transformation in the motor vehicle landscape. Electric cars, which were once only a fringe element in a market dominated by major global automakers, are quickly becoming mainstream. Along with Tesla, which has been public since 2010, the major automakers are all transitioning towards electric models. Joining them, Fisker and several other start-ups are developing EV offerings.

In Fisker’s view, this trend is driven by several factors. A rising environmental consciousness is encouraging customers to weigh their emission footprint. As a zero-emission alternative to traditional internal combustion engine (“ICE”) options, an EV that can match or exceed an ICE in performance is a natural choice. Assisting with that choice, local and national governments are offering various forms of rebates and credits for the purchase of an EV and have otherwise begun to support the rise of e-mobility by accelerating the push for zero emission vehicles due to increased awareness of the impacts of global warming. As EV sales grow, parts volume grows in tandem, allowing automakers to purchase parts at a lower cost and further accelerating the switch to electric. Lastly, the continuing improvement in battery technology, continuing build-out of electric charging infrastructure, and the growing comfort with EV range capabilities are easing “range anxiety” and facilitating adoption.

 

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Source: Derived from data in Bloomberg Electric Vehicle Outlook 2020

But there is more to sustainability than just electrification. The Fisker Ocean will be built primarily from sustainable materials. By seeking to use excess existing manufacturing capacity, Fisker will not be contributing to the development of any additional industrial manufacturing construction. Fisker is committed to sustainability on all fronts, and it believes that commitment is in line with today’s market.

Sustainability is not the only major trend from which Fisker is intending to benefit. Fisker believes a more subtle transition is underway. For 100 years, the automobile industry has been hardware-based. Customers were fixated on the physical attributes and performance specifications of vehicles. Today, that is changing. While EV technology is such that the raw performance capabilities are largely on par with or better than ICE counterparts, customers are increasingly focused on software. The software interface and user experience are critical. That understanding inspired us to set out to be the first “digital” car company, leading the way to a more software-based future.

 

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Few automotive manufacturers have established brand names in the EV space in order to fully benefit from the resulting changes to the automotive industry. The Fisker name is well recognized in the automotive world – the design credentials of our brand are undisputed, and the focus on building the most sustainable, fully electric vehicles aligns Fisker with changing consumer behavior and expectations for increased environmental consciousness.

The rise of the SUV

When designing its first offering, the Fisker team elected to develop an SUV. Fisker chose an SUV because it recognized another major trend in auto sales – the rise of the SUV.

For various reasons, today’s customers increasingly prefer SUVs to traditional sedans or crossovers. According to JATO, 2018 SUV sales globally, in the United States and European Union were 29.8 million, 7.8 million and 5.4 million vehicles, respectively, meaning that Fisker would require less than 1% market share in each market to achieve its near-term plan. With the Tesla Model Y, the Audi E-Tron, the Mercedes EQC and the XC40 Recharge on the market or expected in 2020, the EV SUV market continues to accelerate. According to Research Nester, the global SUV market is forecasted to be 53.2 million SUVs in 2027.

 

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Source: Derived from data in DOC, OICA and GoodCarBadCar

Fisker Flexible Platform Adaptive Design (FF-PAD)

Fisker has entered into a cooperation agreement with Magna which sets forth the main terms and conditions of a platform sharing partnership. Fisker intends that the final platform to be developed with Magna will form the basis of the Fisker Ocean and potentially additional Fisker models. Engaging in collaboration and partnership arrangements is intended to enable Fisker to share investments made by industry-leading OEMs and tier-one automotive suppliers, allowing Fisker to focus on creating value beyond basic engineering and customer expectations. Fisker believes this platform-sharing arrangement will reduce delivery risk by eliminating factors such as development of new and untested manufacturing processes and creation of new supply chains.

The critical elements of the platform (also referred to as a “skateboard”) Fisker plans to adopt would include, for example, the sheet metal structure for the floor plan of the vehicle, the electrical powertrain, the suspension, steering and braking systems, airbags, seatbelts, and other architectural elements such as seat frames and HVAC. The implicit functionality provided by the platform/skateboard reduces the task of satisfying all of the requirements associated with high-and low-speed crashworthiness, side impacts and roof crush, occupant injury, and pedestrian safety, among others, to one of system tuning. Similarly, durability, noise, vibration, and harshness performance become optimizing exercises where Fisker takes an already highly developed product and improves in those areas that are important to its customers.

Fundamentally, the platforming sharing approach is intended to allow Fisker to mitigate risk in the research and development and delivery phases of the program so that Fisker can focus on creating additional value for its customers without distracting its resources on reinventing proven engineering.

 

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By managing the degree of change in each functional and business area, Fisker intends to manage the overall program total risk, which greatly reduces cost and time to market while simultaneously ensuring high product quality. These advantages are intended to manifest themselves (i) to Fisker’s customers as reduced cost of ownership and high levels of ownership satisfaction, and (ii) to Fisker’s investors as reduced cost and time to market.

Alongside the FF-PAD, Fisker will focus its design and engineering process to improve the flow of information from customer demands, to design and engineering:

 

   

Sales and marketing: identify target customer and the customer’s demands for vehicles

 

   

Vehicle engineering: translate customer demand into a full technical specification of the vehicle, describing every attribute in quantifiable terms (SI units or Vehicle Evaluation Rating)

 

   

Design: deliver the visual aesthetic with a unique emotional attraction

 

   

Engineering: translate the technical and aesthetic specifications into engineered components and subsystems to deliver a fully optimized, compatible final product

The fulcrum of this process is the Vehicle Architecture (“VA”) team. The VA team is placed at the center of the flow of information from these branches of the business and is tasked with balancing the conflicting requirements and arbitrating between business groups to achieve consensus.

Using the VA team in this way is intended to result in a highly efficient design and engineering process and reduce cost and time to market. One key aspect of this approach is to eliminate several over-lapping teams found in traditional automobile manufacturers and most new startups, including studio engineering, vehicle packaging and decision-making unit, and siloed computer-aided design authoring groups. By eliminating these separate teams and amalgamating them into one pivotal group, Fisker intends to reduce lines of communication and the potential for undiscovered errors.

Another key advantage of the VA approach is that it facilitates partnerships beyond that of simple platform sharing. By creating a group whose key role is to coordinate and organize, it then becomes a simple task to extend that role to include multiple, task oriented external partners in an effectively seamless fashion. By utilizing the VA role, Fisker is able to more seamlessly distribute other key elements of the business, as set forth in the graphic below which illustrates the total task to bring a vehicle to market.

This approach is intended to allow Fisker to efficiently leverage many of the industry leaders in service provision for the engineering, validation, supply chain and manufacturing tasks.

Fisker’s Manufacturing Approach

The existing automotive production industry has an estimated 20% overcapacity. Specifically, Fisker estimates that the industry has the capacity to produce approximately 100 million vehicles annually versus current production of around 80 million annually. Fisker decided to seek out a partnership with an existing manufacturer rather than constructing new production capacity and recently entered into a cooperation agreement with Magna which outlines the main terms of manufacturing agreements that are under negotiation between Fisker and Magna. This approach is intended to lower Fisker’s upfront costs, while also supporting Fisker’s ESG mission by reducing the carbon footprint of its operations. It has also commenced discussions with several other industry-leading OEMs and tier-one automotive suppliers for additional component sourcing and manufacturing for potential future vehicles or additional capacity needs. Fisker currently intends to manufacture its vehicles using Magna’s existing manufacturing facilities in Europe utilizing Magna’s existing labor force, with potential expansion to the United States in the near future.

Recruiting and training a new vehicle manufacturing workforce can be an expensive and time consuming task. By leveraging existing manufacturing capacity, Fisker intends to bypass this startup cost and eliminate the need to recruit and train labor, with all the associated risk of poor initial build quality which can easily damage reputation. This approach is also intended to enable more efficient knowledge transfer—as we work alongside our partners,

 

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Fisker personnel will absorb and learn vital skills which can then be deployed if and when Fisker chooses to create dedicated Fisker manufacturing facilities. Fisker also intends to reduce ramp up time through such partnerships, which would in turn allow Fisker to achieve production on a rapid timescale, while limiting risk to product quality.

An additional and significant advantage of working with established manufacturing partners is that such enterprises are already connected to the existing automotive supply chain. The maturity of supply chain relationships is critical, and is reflected in the connectivity of business systems and IT infrastructure. A typical vehicle consists of over 5,000 individual parts and assemblies, each of which is sourced from an extended supply chain consisting of thousands of suppliers. Compounding this further is the fact that there is complexity in the vehicle build specifications to suit customer choice. These parts must be delivered to the final point of assembly at a rate and in a sequence that matches planned vehicle production. Considering that a typical automotive facility will assemble these more than 5,000 parts into a complete vehicle at a rate of one vehicle every 120 seconds, the smooth running of that logistics effort becomes critical to the running of the operation. Such organizational efficiency is the result of decades of experience and cannot be easily replicated. These critical relationships extend beyond the simple supply of parts and into areas such as local government, where support and cooperation is vital to ensure that local infrastructure updates are considered at a strategic local government level. Such partnerships are also decades in the making, and are critical to the ongoing success of the enterprise.

Competitive Strengths

Fisker’s competitive strengths include the following:

 

   

Legendary automotive Fisker brand. Henrik Fisker, Fisker’s co-founder, Chairman, President and Chief Executive Officer, is a pioneer in the EV industry and has built a global reputation for superior quality and distinctive automotive design over the last three decades. He is the former Chief Executive Officer and President of BMW Designworks USA and the former Member of the Board and Design Director for Aston Martin. He has spent his career designing luxury vehicles, including several award-winning cars and automobile industry icons such as the BMW Z8, Aston Martin’s most successful model (the last generation Vantage), and the Fisker Karma (the first luxury EV with a range extender). Unlike new entrants that launch with no brand identity or reputation for quality or execution, Fisker is entering the market with an established brand name in automotive innovation and superior design.

 

   

Award-winning all-electric SUV. Fisker’s first model, the Fisker Ocean, was the most awarded new automobile at CES 2020, receiving accolades for its modern SUV design, luxury interior space, premium performance, and optional state-of-the-art equipment and software. The Fisker Ocean is a five-passenger, premium-yet-affordable, all-electric SUV that features a range of approximately 250 to over 300 miles (with 80% of its capacity re-charged in just 30 minutes), optional advanced autonomous driving capabilities, and optional photovoltaic solar roof. Fisker designed the Fisker Ocean to be the world’s most sustainable vehicle, eco-suede interior trim made from recycled polyester, and carpeting from fishing nets and bottles recycled from ocean waste. At a starting price below $40,000, Fisker believes the Fisker Ocean will be highly competitive in the large and rapidly growing premium with volume segment of the electric SUV market.

 

   

Digitally-driven, customer-first focus. Fisker believes that the competitive strengths in the new EV industry will significantly change over time. While in the combustion engine world, engine know-how, drivetrain technology, brand, design, and manufacturing capability were core competitive strengths, Fisker believes that, in the EV industry, key competitive differentiators will be brand, design, customer experience, charging network access, connectivity and software. Fisker’s strength in these areas range from an established premium EV brand, to a completely new customer experience, access to the largest charging network, and software and connectivity skills. Additionally, Fisker has been set up by Henrik Fisker since inception to be environmentally responsible, without the legacy issues of the established car companies. Fisker intends to revolutionize how customers view personal transportation and car ownership. Fisker plans to implement the first EMaaS business model in the car industry, combining a novel customer-focused experience with flexible leasing options, low monthly payments and no fixed

 

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term. Fisker is also designing an app-based, direct-to-customer strategy for vehicle configuration, sales and financing, leasing, and service management to replace the traditional brick-and-mortar “sales-and-service” dealer network. Fisker plans to drive marketing through immersive Fisker Experience Centers in key strategic locations in the United States and Europe that will use dynamic augmented reality and virtual reality to convey the new-and-improved technology and sustainability features of its vehicles and its customer-centric business model. Family-friendly Fisker Experience Centers will offer prospective customers virtual factory tours, group test drives and the opportunity for in-store vehicle visualization, specification, and ordering. Fisker also intends to enter into a service partnership with third parties such as Pivet and Manheim to create a hassle-free service experience for Fisker’s customers. Service requests will be easily scheduled through Fisker’s Flexee App, with vehicle pick-up and delivery by Fisker-branded personnel, through Manheim or other third-parties. Fisker believes that its customer-first approach will drive revenue and user satisfaction, while lowering upfront capital investment and enabling greater margins for Fisker over time.

 

   

Substantially “de-risked” path to commercialization. Fisker has developed a detailed plan that is intended to reduce the considerable execution risk typically associated with new car companies. For example, Fisker has entered into a cooperation agreement with Magna that forms the basis of a platform sharing partnership. In addition, Fisker intends to establish additional relationships with one or more industry-leading OEMs and tier-one automotive suppliers that will give Fisker access to additional platform sharing, component sourcing, and manufacturing. Fisker intends to leverage such arrangements to accelerate its time to market and reduce vehicle development costs. By utilizing these types of arrangements, Fisker will seek to benefit from previously established high-volume vehicle engineering, manufacturing, and safety experience and know-how. Fisker also intends to gain access to an established supply chain that includes one or more established suppliers and a low cost, multi-source battery supply consortium. Fisker also intends to leverage one or more third-party manufacturing facilities and trained workforce, which positions Fisker well to meet timing, cost and quality expectations while optimally matching Fisker’s cost structure with its projected production ramp. Partnering on a platform, supply chain and manufacturing is intended to position Fisker to meet its projected production and delivery targets and enable Fisker to focus on what it believes will be the key differentiators for a new car company: delivering truly innovative design features, a superior customer experience, and a leading UI that leverages sophisticated software and other technology advancements.

 

   

Focus on the “critical few” for controlled operating expenses. Fisker intends to deploy a team that is optimized to concentrate on the “critical few” tasks that are core to Fisker’s business. In order to stay efficiently lean, Fisker plans to build out the team to create a core skillset that gives Fisker control of product definition and project governance in the delivery phase. Following introduction of its products, Fisker intends to build on these foundations, expanding the team to enhance its capabilities to innovate in those areas of product performance that embody the Fisker mission. Those tasks beyond the “critical few” will be delivered through a series of selected partnerships. Alongside the Fisker engineering team, Fisker will partner with one or more engineering services providers to provide the majority of mundane task execution. Fisker has expertise in this arena with several key members of the team having worked in this space prior to joining Fisker.

Growth Strategy

Fisker intends to leverage its competitive strengths and the following growth strategies to drive stakeholder value.

 

   

Continue to develop the Fisker Ocean. Fisker intends to continue to invest in research and development and work on establishing partnerships that would enable Fisker to commence customer deliveries of the Fisker Ocean as early as the fourth quarter 2022. Fisker believes that it can achieve this goal by using Magna’s established platform, parts sourcing and the manufacturing advantages resulting from its collaboration with Magna, as well as the deep automobile design and execution experience of

 

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Fisker’s management team. As part of this plan, Fisker expects to begin building prototype, pre-production Fisker Oceans in 2021 through Magna’s manufacturing facilities. Additionally, Fisker and Magna have agreed to certain prototyping and engineering services relating to the Fisker Ocean.

 

   

Re-imagine the customer experience for personal transportation and car ownership. Fisker believes immense opportunities exist to re-imagine the customer experience for personal transportation and car ownership. Fisker will continue to design EVs that will be differentiated in the marketplace by proprietary design innovation and a customer experience delivered through a state-of-the-art, software-based UI. Fisker will also continue to develop its proprietary Flexee App to improve the customer experience throughout the entire personal transportation lifecycle. In addition, Fisker is designing its EVs to be compatible with existing charging infrastructures, including ChargePoint and EVgo, as well as Electrify America, with whom Fisker has executed a network program charging agreement.

 

   

Develop additional high value, sustainable EV models. Fisker believes the combination of its superior design expertise, along with the power and versatility of a platform provided by an industry-leading OEM or tier-one automotive supplier, will enable Fisker to efficiently achieve its goal of providing the world with a fleet of high value, sustainable EVs. Fisker intends to utilize one or more platforms over time to develop a lifestyle pickup truck and a sport crossover to complement the Fisker Ocean. In addition, in the future, Fisker will also explore additional EV platform opportunities that will facilitate its mission to revolutionize the personal transportation industry.

Fisker’s Vehicles

 

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Fisker’s first vehicle will be the Fisker Ocean, an all-electric premium SUV that is expected to have a highly competitive starting price of $37,499 in the U.S. market before federal and state incentives are applied (Fisker will initiate sales with all of its currently allocated EV credits – $7,500 on the first 200,000 delivered vehicles). It will have at least three option packages, with prices anticipated to range from a base price of $37,499 to approximately $69,900 for several premium features. This allows customers with different preferences and means to find a vehicle and price that fits their needs. Fisker expects most of its sales initially to be vehicles with higher priced option packages, which is typical for a new, exciting vehicle entering the market.

Fisker is planning to develop several unique option packages to broaden the market appeal of the Fisker Ocean, including an anticipated extreme off-road package, which Fisker refers to as Force E. Fisker plans to announce several option packages, each with their own characteristics by the end of 2020.

Fisker believes the electric range of the Fisker Ocean will be potentially 250 to over 300 miles, depending on driving conditions and testing procedures (e.g., EPA cycle vs. WLTP cycle). Fisker believes its software engineers have the ability to optimize its proprietary battery management system and other technical aspects of the battery system to potentially offer potentially longer-range versions.

The Fisker Ocean has many selling points that will set Fisker apart from any of its competitors, including:

 

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California Mode. California Mode (patent-pending) delivers an open-air experience with the push of one button. California Mode enables all of the vehicle’s windows – side windows, sunroof and the rear hatch window – to open simultaneously. This feature allows for long items (like a surfboard) to be transported by placing them through the rear window without having to drive with an open hatch. This feature will not work as well on an ICE vehicle as exhaust fumes could enter the cabin.

 

   

Extra wide track. For the size of the vehicle and category, Fisker believes the Ocean’s extra wide track will, among other technical features, give the Ocean best-in-class ride and handling while maintaining the same tire aspect ratios. The wide track on sports cars contribute to a visual powerful “stance,” and Fisker believes this will further distinguish the Ocean’s design. It has also allowed for a more dramatically sculptured body side design and, combined with the dynamic silhouette, Fisker believes it has achieved a class-leading aesthetically arresting and emotional design.

 

   

Fixed hood. Major electronic components have been moved under the hood to increase the interior space. The Ocean therefore does not need a traditional opening hood, where extra cost is spent on hinges and seals. This means the Ocean has fewer cut lines in the front end of the car, simplifying the design.

 

   

User Interface. The Ocean features a large curved center screen with integrated haptic buttons. Fisker has done extensive design development on the highest quality UI to enhance the driving experience. Fisker believes combining a large touch screen with several haptic buttons provides drivers a user-friendly interface that allows drivers to access the most-often-used functions while maintaining their eyes on the road.

 

   

Autonomy. Fisker believes autonomous driving technology will ultimately be regulated, produced in high volume by a few large automotive companies, and be available to everyone. Fisker believes it will be able to offer state-of-the-art autonomous driving features through a partnership with industry-leading OEMs and tier-one automotive suppliers.

 

   

Solar roof. The Fisker brand is a pioneer in full length curved solar roof design and integration into a passenger vehicle. Fisker believes that it can continue this leadership and will be providing an optional solar roof with state-of-the-art PV solar cells. The solar roof makes a strong personal statement for those customers that want to fully optimize for zero emissions and sustainability.

 

   

Vegan interior. Fisker is planning to offer a full vegan interior on the Fisker Ocean.

 

   

Recycled materials in the interior. Fisker plans to introduce carpets made from recycled plastic bottles and fishing nets from the world’s oceans. Fisker is also looking at introducing several other recycled materials throughout the Fisker Ocean.

 

   

Sustainability. Fisker aims to make the Fisker Ocean the world’s most sustainable vehicle, measured by how many components use recycled materials, the fact that Fisker offers a full-length solar roof option, and the fact that Fisker plans on using existing manufacturing capacity rather than building new plants. In addition, Fisker will work with all of its suppliers to try to make them use the most sustainable manufacturing methods possible.

Fisker is planning to introduce three more vehicles by 2025 using an established-platform-sharing arrangement with one or more industry-leading OEMs. In addition to the Ocean, the four-vehicle lineup will include a super-sports sedan based on Fisker’s Emotion concept, a sport crossover, and a lifestyle pickup truck. Each of those vehicles have already been defined and the initial design concept has already been created. These vehicles are designed to stand out and provide a unique offering in each of their segments, attributes that Fisker believes will assist Fisker in achieving future growth.

 

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New electronics architecture

The Fisker Ocean electronics architecture is based around a small number of key domain controllers, for advanced driver assistance functions, drivetrain and battery management, and infotainment. A traditional vehicle electronics architecture typically contains a high number of independent and self-contained modules, each a black box to the rest of the car. This new architecture, based on a few high-performance computers, opens new avenues for integration, sensor fusion, and an adaptive and evolving user experience. A connectivity module enables full communication with the Fisker cloud and the possibility for edge computing, while over-the-air (“OTA”) software updates ensure the in-car experience can stay ahead of market expectations.

Future generations of Fisker architecture will integrate automotive requirements into customized electronics chips and boards, with hardware accelerators for AI, machine-learning, and computer-vision. This further reduction in electronics component counts will lead to lower power consumption, increased computational power, and even greater scope for feature integration and optimization.

Digital car of the future: delivered over the air

The new electric, digital car is more technologically sophisticated than its predecessors. Many immediate benefits to the customer of this always-online car will be evident in the infotainment system. Entertainment and productivity apps, mobility services, and navigation aids can keep pace with the latest regional trends. The integrated and fully connected nature of the digital car opens new opportunities for innovation, and enables functions previously impossible, such as predictive maintenance and remote fault diagnosis.

 

LOGO

Through edge computing and ultra-low latency 5G connectivity, it also becomes possible for virtually infinite cloud computing resources to be used as a seamless extension of the computing power in the car. Continuous software updates, both for embedded systems in the car and functions hosted in the cloud, let the digital car grow and become smarter over its lifetime.

E-powertrain

In future generations of Fisker cars, Fisker intends to utilize software to improve the powertrain performance, making the cars more efficient, allowing more instantaneous power output, or improving the charging experience. For example, powertrain parameters will be tailored to each driver in real time, based on driving habits, traffic density, road geometry, and environmental conditions. The optimal characteristics of the motors can be constantly measured and altered, and the level of the recuperation system can be adjusted in real time. On-board diagnostics, combined with predictive models and anomaly detection can guide the customer to schedule a service appointment before they can even perceive any symptoms, possibly averting a costly repair.

 

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UX/UI

Fisker EVs will always be “connected.” Fisker’s next-generation connectivity platform will enable the seamless integration of online services and functions, whether unique Fisker services or from third parties. Features that are visualized on the large center touchscreen or digital instrument cluster will meet strict driver-distraction guidelines and will be rendered in high resolution through Fisker’s custom UI framework. The leading-edge head-up display will project useful information onto the windshield so the driver’s eyes never need to leave the road. The Flexee App seamlessly connects to the car, ensuring the customer’s digital life and driving experience meet in the car.

With data analysis, cloud computing, and OTA updates, the in-car experience can adapt over time to the driver, not the other way around as has traditionally been the case.

Sales—Go To Market Strategy

Fisker believes over the next seven years, the U.S. and E.U. EV market will be broken down into three fundamental segments: the white space segment, the value segment and the conservative premium segment. All three segments will attract customers from traditional ICE vehicles, but the largest growth, by volume, will be the white space segment and the value segment.

 

EV Segment

  

Attributes of Segment

  

Fisker Plan within Segment

White space segment    Currently occupied by Tesla globally and by a few Chinese EV independent start-ups operating in China only.    Fisker believes it will be the primary alternative to Tesla in this segment with the Fisker Ocean priced around the base price of the Tesla Model 3 and Model Y.
   Appeals to customers who want to be part of the new EV movement, who value sustainability and ESG.    Fisker believes other EV startups will move into the higher luxury priced segments due to the lack of volume pricing of components.
   Can only be occupied by pure EV brands that only produce EVs with a clear commitment towards zero emission vehicles.   

Fisker expects to sell approximately 50% of its vehicles into this segment.

Value segment    Focus on price and value proposition—customers will buy vehicles in this segment when the purchase price and cost of maintaining/running fits the budget and is better than an ICE vehicle.    Fisker believes it will penetrate the upper end of this segment by offering a compelling and differentiated price/ performance vehicle, compared to other traditional car makers struggling to compete due to lack of volume pricing.
  

Yet to be dominated by any auto maker.

   Fisker expects to sell approximately 10% of its vehicles into this segment.

 

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EV Segment

  

Attributes of Segment

  

Fisker Plan within Segment

Conservative premium segment    Emerging segment currently occupied by several traditional auto makers that are trying to keep their own customers from deflecting to new start up EV makers like Tesla.    Fisker believes its vehicles will be very attractive to customers sitting “on the fence” in this segment, ready to leave their ICE brand, but needing assurance of quality and reliability. This is a segment where Fisker believes it can attract new customers that will come from traditional ICE brands.
   Vehicles in this segment, produced by the traditional premium automakers, are struggling with a clear EV identity as they try to bridge the traditional ICE attributes with new EV attributes.    Fisker believes it will sell approximately 40% of its vehicles into this segment, but it will grow rapidly, as Fisker will be able to offer a more emotional design, an exclusive EV brand, a larger battery and better equipment for the price due to Fisker’s volume pricing versus the lower volume traditional brands

Marketing, Brand Awareness, Order Growth, and Sales/Lease

Fisker has developed a proprietary direct-to-customer mobile application. After showing the Fisker Ocean at CES 2020, Fisker received over 40,000 indications of interest (meaning the Flexee App has been downloaded and the potential purchaser has provided a contact phone number), as of November 1, 2020. As of November 1, 2020, Fisker has received over 9,100 paid reservations, including a fleet order of 300 cars placed by Viggo, all without any paid marketing.

Fisker plans to grow paid reservations substantially by the end of 2020 by raising the brand profile and brand awareness. Fisker plans to hire several online market agencies to increase its marketing efforts. Fisker believes that a large and growing portion of the world’s population believe in the importance of sustainability, and as a company built with an ESG-first mindset, it has the ability to attract and build brand loyalty from this critical market segment. Fisker also plans to open Fisker Experience Centers across the U.S. and E.U. that will have a completely new brand experience focused on the environment and enjoyment of life. Fisker also plans to attend events and trade shows and to increase its social media presence. Additionally, Fisker plans to enter a new electric SUV sustainable racing series called Extreme E which will be televised globally.

 

   

Data and marketing studies show that a large number of consumers have a clear preference for pure EV brands, but currently only have the choice of Tesla.

 

   

According to AUTOCAR, customers prefer no hassle, easy digital buying – three-quarters of Teslas are sold online and, in the Netherlands and Germany, more than 50% of vehicle purchases are made without a test drive.

Finally, Fisker believes many customers from any of the three above segments will welcome a new choice of an independent EV OEM. Fisker believes its collaborative use of Magna’s EV platform will be an advantage to Fisker over any independent competitor as it will give customers assurance of:

 

   

Quality: Built by Magna in its European plant

 

   

Reliability: Engineered by Magna, a leading automotive manufacturer

 

   

Service and Maintenance: Confidence in product with standardized service and maintenance plans provided by credible third-party partners

 

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Fisker is confident that its competitive strengths, including its development strategy and the selling points of its vehicles, will enable Fisker to compete effectively in its target markets and achieve its vision and mission.

Service, Marketing and Insurance

Fisker’s co-founder Henrik Fisker’s reputation, Fisker’s collaboration with Magna and Fisker’s roll-out of the Fisker Ocean has generated significant media coverage of the company and its vehicles, and Fisker believes this brand awareness will expand dramatically upon the achievement of major company milestones. As such, Fisker believes media coverage and word-of-mouth will be the primary drivers of Fisker’s sales leads and have already helped Fisker achieve a high volume of reservations without traditional marketing efforts and with a relatively low marketing budget. Fisker plans to continue to expand its social media presence as a key part of its marketing effort. Additionally, Mr. Fisker intends to increase his personal engagement on social media in order to make potential customers feel they hear directly from the Fisker founder’s “voice.” In addition, Fisker plans to attend global events and open Fisker Experience Centers to give the opportunity for more potential buyers to experience its vehicles. Fisker is also planning a distinctive new customer rewards program and a unique customer retention engagement program.

Fisker intends to use a combination of third-party insurance and self-insurance mechanisms, potentially including (if financially feasible and in compliance with regulatory requirements) a wholly-owned captive insurance subsidiary to provide for the insurance against certain risks, including auto liability and physical damage, general liability and products liability.

Direct Sales and Service

Fisker markets and will sell its vehicles directly to customers using Fisker’s proprietary digital platforms, including the Flexee App and website. This digital approach allows Fisker to collect customer data and improve the overall customer experience. Fisker’s digital customer interactive platforms are cost effective and increase the value proposition and competitiveness of Fisker’s vehicles.

Fisker believes it will be able to quickly build its company brand on a global scale and retain its customers through the direct interaction with its customers. In addition, Fisker plans to launch a unique “miles”-style retention program, which will include awards where Fisker’s reservation holders and future customers can generate points that can be converted into money or put towards the purchase or lease of a vehicle. This program is a unique rewards program that resembles successful programs used in other non-automotive industries.

Fisker is also planning to offer both financing and insurance of its vehicles directly through its digital platforms. Fisker believes it can reduce the total cost of ownership (“TCO”) for its customers and potentially generate additional sources of revenue by providing both financing and insurance for its vehicles.

Fisker plans to keep introducing new direct-to-customer programs and services to further define the Fisker customer experience. As described elsewhere, Fisker also plans to keep Fisker’s lean sales, lease, and service model in order to be able to continue to offer great value to its customers regardless of the segment Fisker enters.

Fisker intends that its digital platform will eventually allow potential customers to view a selection of used Fisker vehicles for both purchase and Flexee lease. Fisker also anticipates that non-Fisker vehicle trade-ins will be done digitally and handled in collaboration with Fisker’s service providers.

 

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Vehicle Maintenance

An important aspect to consumers is the maintenance of vehicles. Fisker believes customers ultimately do not enjoy taking their vehicle to service, waiting in line, filling out forms, waiting for a loaner vehicle, etc., only to be called back to pick up their vehicle and go through the same process. Fisker will offer a new approach to service that will result in less required infrastructure, higher efficiency, and significantly higher customer satisfaction. Through consumer requests on the Flexee App or information gathered through on-board diagnostics and connectivity, vehicle maintenance needs will be identified proactively. The vehicle will be picked up at a customer-specified location and brought to a nearby centralized service facility. This process will avoid the unpleasant experience that service stops at dealerships represent to consumers today.

Fisker will have no “first mandatory service” as its vehicles will not need such a service. If a customer vehicle needs service, Fisker believes it will be for mainly two reasons: (1) a fault shows up in the on-board diagnostics/request to go to service or (2) the customer notices something needs to be “fixed” and service is needed. In those cases, either the vehicle’s on-board diagnostics will alert Fisker, or the customer will alert Fisker through its digital platforms. Fisker will then pick up the customer vehicle at an agreed time and place, service the vehicle and bring it back at an agreed time and place. Fisker believes it will eventually be able to conduct pick-up and delivery without the customer being physically present, using a digital key and a location map.

Fisker believes a majority of service can be done in one day and will not need an exchange of a loaner vehicle, as Fisker anticipates most people will be at work during the service period. Should a loaner vehicle be needed, Fisker’s service representative will bring it and take it back when delivering the service vehicle back to the customer. This efficient service model will be performed in conjunction with select service partners, such as Pivet and Manheim, which are Fisker’s partners in the North American market. Fisker believes this service model delivers a better, faster, and more convenient customer experience. Fisker also believes this model drastically reduces cost, as Fisker does not need to construct and operate dealerships at which to perform service. Manheim has already streamlined its service model and because no customers will be required to visit the service centers, the service centers can be located in lower cost areas and be focused only on vehicle service and not customer reception.

Fisker plans to have several company-owned service centers for more technically challenging cases, which will be strategically placed across geographies.

Fisker believes its service model will take the customer experience and satisfaction to a new level and that Fisker’s service cost during the warranty period will be reduced. Fisker also believes this service will reduce cost for customers maintaining used Fisker vehicles.

Vehicle Financing

The most common method of buying a car is borrowing the money and then paying it off in installments. Over 85% of new car purchases and half of used car purchases are financed as opposed to being paid for in a lump sum with cash. Approximately 30% of new vehicles are leased.

Fisker intends to launch a non-fixed term financing contract for Fisker’s customers, which Fisker will call the “Flexee lease.” The Flexee lease is inclusive of car use and maintenance. Fisker is working on options to add insurance as well. Fisker believes it will be able to offer a comparatively low lease payment due to lower capitalized costs, lower depreciation, and very low maintenance and replacement parts cost compared to traditional automobile brands.

The capitalized cost reduction occurs through elimination of the dealer margin usually financed in a lease, a customer down payment, and by including government EV incentives where and when available.

The lower and more even depreciation of the vehicle cost over its usable life results from the anticipated eight-year useful life of the vehicle and the relatively high expected residual value of the vehicle due to the expected high battery resale values. Additionally, carefully managed residual risk through reuse and refurbishment of the vehicles will minimize wear and tear and extend the vehicle life and value.

 

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There are two methods of financing a car: direct and indirect. A direct loan is one that the borrower arranges with a lender directly. Indirect financing is arranged by the car dealership where the car is purchased. Fisker intends to offer branded financing directly to consumers. Fisker anticipates that the loan process and funding will be arranged through financial services partners in different countries. Because of the high profitability of direct financing, Fisker will evaluate whether to establish its own captive finance company in the future.

Total Cost of Ownership

In general, EVs have significantly lower TCO than internal combustion engines vehicles. Fisker also believes that its EVs will have lower TCO than those of its EV competitors.

The TCO advantage over ICE vehicles resides in the fact that electricity is cheaper than gasoline or diesel, an EV has less components that can break as compared to an ICE vehicle, brake pads are less utilized in EV due to motor regenerative breaking, and an EV has fewer fluids and components exposed to friction, among other factors. Therefore, the Fisker Ocean is anticipated to have 30% to 50% lower TCO than a comparable vehicle with an internal combustion engine. The Fisker Ocean uses regenerative braking systems that use motor resistance through the electric motor, so brake pad utilization and cost is very minimal. EV powertrains are much simpler than their ICE vehicle counterparts. EVs don’t rely on a complicated multi-speed transmission. Instead, most use a fixed-ratio, direct-drive setup. EVs have significantly fewer parts. There is also no exhaust system, muffler, catalytic converter, fuel injector or fuel pump in an EV. Electric motors are not only reliable, long-lasting, and easy to maintain, but they also provide instant power on acceleration, they are quiet, highly efficient and, of course, they do not produce tailpipe emissions or odor.

There are a number of federal and state incentives available for EVs that further lower TCO. The TCO advantage of the Fisker Ocean versus comparable EVs is expected to result primarily from the parts pricing and vehicle servicing approach of Fisker. Through Fisker’s direct sales and Flexee lease models, Fisker de-emphasizes service part markups, resulting in lower maintenance and repair costs. Additionally, Fisker’s vehicle bodies will be made of steel, which is less costly to repair, and repair centers for this type of body work are more widely available.

Additionally, given the lower repair costs for Fisker vehicles, Fisker’s aim is to reduce insurance premiums for its customers. A key element that makes up customer TCO is cost of repair in the event of physical damage to the vehicle as a result of an impact. In order to deliver lowest possible TCO, Fisker has developed a repair strategy, which is aligned with independent insurance providers. This is developed as an intrinsic part of the engineering of the vehicle. To ensure Fisker has the lowest TCO in the industry, Fisker has studied in detail the highest quality material and joining technologies for all parts of the vehicle that could be damaged in a collision, from a low speed bump in a parking lot, to a major, high-speed impact. By analyzing in detail how the Fisker Ocean absorbs impact energy, Fisker is able to precisely place the right material in the right place on the vehicle. Consequently, the Fisker Ocean body structure will be made of several grades of steel—from basic, highly formable mild steel for the skin, to ultra-high strength, hot stamped Boron steel for high load bearing areas. These materials are compatible with ‘low tech’ repair methods, meaning that there are a huge number of fully qualified repair facilities already in operation throughout all of Fisker’s main intended markets. This ensures that the cost of every type of “standard” in-service repair will be known in advance and insurance premiums can be optimized as a result.

Further, Fisker’s predictive maintenance through the telematics connection of the vehicle to Fisker’s cloud ensures maintenance is completed long before a part can break, saving significant costs for parts replacement and inferred damages.

Fisker Added Value

Because Fisker’s vehicles will adopt much of the base engineering from a platform provided by an established OEM, Fisker intends to focus its design and engineering efforts exclusively on what differentiates a Fisker product from the competition, leaving the “reinvention of the wheel” to competitors with the time, the money, and the inclination to do so.

 

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Key among the attributes defining Fisker-brand design and engineering is exterior and interior design language. The Fisker Ocean will establish the look and feel of Fisker products going forward—an evolution of the design language Henrik Fisker developed over his career and with which he has become synonymous. A key element of this design language is the broad shouldered, “muscular” stance of the vehicle. In creating an exterior design with these proportions, the Fisker team has taken some key decisions intended to move typical autobody engineering solutions to a position more relevant to EVs. For instance, customers are less interested in the hardware “under the hood” of EVs as compared to vehicles with internal combustion engines. Given that fact, Fisker will adopt a fixed hood and, in doing so, create a new design language for the front end of its vehicles. Not only will this give Fisker vehicles a distinctive, unique look, it also simplifies an otherwise complex manufacturing build tolerance issue. This approach provides greater control of the front-end package and removes certain hardware, ultimately facilitating Fisker’s desire to design a vehicle with class-leading frontal high-speed impact and pedestrian impact safety.

The Fisker Ocean will also introduce Fisker’s proprietary California Mode feature. This feature allows for all door windows, the sixth light in the rear quarter, the glazed roof, and the tailgate glass to be fully opened with a single press of one control. Not only does this provide the ideal combination of convertible “openness” with fixed roof safety and security, but it also adds utility to the vehicle, allowing long cargo to be carried through the open tailgate glass.

Fisker-brand design and engineering also encompasses Fisker’s goal to build the world’s most sustainable vehicles. On the exterior of the vehicle Fisker plans to install one of the largest automotive solar roof installations currently available. This feature will be designed to have the capability to deliver annually the equivalent of up to 1000km of completely carbon free miles. The technology behind this system is state of the art photovoltaic (“PV”) cells. Fisker is working with two suppliers who are leaders in their respective fields. The first supplier owns the PV technology that will deliver the panels generating the energy. These panels can be manufactured in complex shapes allowing them to be incorporated directly into the glass panels of the sunroof. Fisker’s second supplier, who specializes in the manufacture of opening glass roof panels, will incorporate the PV panels into a uniquely designed opening roof delivering a system that Fisker believes will be a world first in terms of a vehicle mounted, opening solar roof.

The sustainability features extend to the interior of the vehicle, where Fisker will utilize several materials that are at the cutting edge of recycling and reuse. For example, through the reuse of tire manufacturing byproducts, Fisker will significantly reduce the amount of process waste that would otherwise go to landfill. Fisker is also working with suppliers who recover and repurpose ocean waste. These suppliers recover plastic materials that have accumulated in oceans, such as bottles and fishing nets, and reprocess them into automotive grade feedstock which can then be used to manufacture new interior trim fabrics and moldings. In doing so Fisker reduces its requirement to source ‘new’ hydrocarbon-based feedstock, while simultaneously providing an outlet for, and thus supporting, those suppliers who are investing in ocean clean up as an alternate source of raw material.

Fisker design language extends further into the interior of the vehicle with the deployment of Fisker’s unique UI. In addition to seamless integration of user devices, such as mobile phones and tablets, Fisker has developed a curved central screen display that is the largest in its class. This screen is the centerpiece of the Fisker UI and will integrate all main vehicle electrical functions and settings into a single, simple interface. The ergonomics of the central screen are further enhanced by combining user programmable “soft keys” on the touch screen surface, with five fixed switches that control the five most frequently used functions. In this way Fisker will deliver a futuristic EV “glass cockpit” without the annoyance of searching through several menus to find that critical function, which has been a criticism of similar systems. The combination of this unique central screen and the digital driver’s display will ensure a class-leading user experience.

Customers and Backlog

Fisker’s inaugural EV, the Fisker Ocean, is an award-winning, premium-yet-affordable, all-electric SUV that Fisker expects to begin producing in late 2022. Fisker has received over 40,000 indications of interest as of November 1, 2020 through its Flexee App. Also, as of November 1, 2020, Fisker has received over 9,100 paid reservations, including a fleet order of 300 cars placed by Viggo.

 

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In October 2020, Viggo HQ and Fisker announced the signing of a vehicle fleet order whereby Fisker will deliver 300 Fisker Ocean vehicles in the fourth quarter of 2022 to Viggo as part of Viggo’s expansion into Scandinavia.

Research and Development

Fisker’s research and development activities primarily take place at Fisker’s headquarters in Manhattan Beach, California, and at Fisker’s partners’ facilities.

The majority of Fisker’s current activities are primarily focused on the research and development of Fisker’s EVs and software technology platforms. Fisker undertakes significant testing and validation of its products in order to ensure that Fisker will meet the demands of its customers. Fisker is working with its strategic partners to bring Fisker Ocean and other future EV models to commercialization.

Sustainability Actions

As demonstrated in Fisker’s vision and mission, Fisker is committed to sustainability, which includes Fisker’s dedication not only to the environment, but also Fisker’s communities and other stakeholders. Fisker intends to engage with its community through direct actions such as beach clean-ups, and is currently evaluating incentive and other programs to support sustainability throughout its corporate activities.

Fisker’s Commitment to Building a Leading ESG, Digital Car Company

Fisker believes that its commitment to building a world class digital automotive company upon a broad foundation of environmental, sustainability and ethical governance policies will benefit all of its consumers and help drive better, more efficient and more profitable results.

Fisker commits to establishing ESG goals and initiatives that are consistent with its mission, and to monitor and report on progress against these ESG initiatives. As part of such process, Fisker has identified specific areas that will benefit its employees, customers and stockholders and other stakeholders. And Fisker’s diverse Board of Directors is a testament to this commitment.

Intellectual Property

Fisker’s success depends in part upon Fisker’s ability to protect its core technology and intellectual property. Fisker attempts to protect its intellectual property rights, both in the United States and abroad, through a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure and invention assignment agreements with Fisker’s consultants and employees, and Fisker seeks to control access to and distribution of its proprietary information through non-disclosure agreements with Fisker’s vendors and business partners. Unpatented research, development and engineering skills make an important contribution to Fisker’s business, but Fisker pursues patent protection when Fisker believes it is possible and consistent with Fisker’s overall strategy for safeguarding intellectual property.

As of October 30, 2020, Fisker owned 12 issued U.S. patents and has 10 pending or allowed U.S. patent applications and 17 foreign patent applications. In addition, Fisker has 20 registered U.S. trademark applications, 156 registered foreign trademark applications and eight pending trademark applications. Fisker’s patents and patent applications are directed to, among other things, vehicle design, engineering and battery technology.

Government Regulation and Credits

Fisker operates in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which Fisker is subject govern, among others, water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the protection of the environment, natural resources and endangered species; and the remediation of environmental contamination. Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of Fisker’s ability to continue its operations.

 

 

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

Emissions

In the U.S., Europe and China, there are vehicle emissions performance standards that will provide an opportunity for Fisker to sell emissions credits.

United States

California has greenhouse gas emissions standards that closely follow the standards of the U.S. Environmental Protection Agency. The registration and sale of Zero Emission Vehicles (“ZEVs”) in California will earn Fisker ZEV credits that Fisker can sell to other OEMs. Other U.S. states have adopted similar standards including Colorado, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont. Fisker intends to take advantage of these regimes by registering and selling ZEVs in these other U.S. states.

ZEV credits in California are calculated under the ZEV Regulation and are paid in relation to ZEVs sold and registered in California including Battery Electric Vehicles (“BEVs”) and Fuel Cell Electric Vehicles (“FCEVs”).

The ZEV program assigns ZEV credits to each vehicle manufacturer. Vehicle manufacturers are required to maintain ZEV credits equal to a set percentage of non-electric vehicles sold and registered in California.

Each vehicle sold and registered in California earns a number of credits based on the drivetrain type and the all-electric range (“AER”) of the vehicle under the Urban Dynamometer Driving Schedule Test Cycle. Plug-in hybrid vehicles (“PHEVs”) receive between 0.4 and 1.3 credits per vehicle sold and registered in California. Battery electric and fuel cell vehicles receive between 1 and 4 credits per vehicle sold in California, based on range.

The credit requirement was 7% in 2019 which required about 3% of sales to be ZEVs. The credit requirement will rise to 22 percent in 2025, which will require about 8 percent of sales to be ZEVs.

If a vehicle manufacturer does not produce enough EVs to meet its quota, it can choose to buy credits from other manufacturers who do or pay a $5,000 fine for each credit it is short. This should provide an opportunity for Fisker.

European Union

Regulation (EU) No. 443/2009 setting emissions performance standards for new passenger cars in the EU (as amended) provides that if the average CO2 emissions of a manufacturer’s fleet exceed its limit value in any Calendar Year from Calendar Year 2019 onwards, the manufacturer will have to pay to the European Commission an excess emissions premium of €95 for each subsequent CO2 g/km of exceedance per vehicle registered in the EU.

In the EU, manufacturers of passenger cars may act jointly through a pooling arrangement to collectively meet their CO2 emissions targets.

 

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The indicative average EU fleet-wide emissions target for new passenger cars for the calendar year 2019 was 130 CO2 g/km. From 1 January 2020 this target has been reduced to 95 CO2 g/km. From 1 January 2020 until 31 December 2024 this target will be complemented by additional measures corresponding to a reduction of 10 CO2 g/km. Between 2025 and 2029 the target will be 15% stricter compared to 2021. From 1 January 2030, the target will be equal to a 37.5% reduction of the target in 2021.

The European Commission adjusts the Specific Emissions Target each year for each manufacturer on the basis of the average mass of the relevant passenger cars using a limit value curve. This is laid down in Implementing Decisions.

Manufacturers of passenger cars are given additional incentives to put on the European market zero and low-emission passenger cars emitting less than 50 CO2 g/km through a “super-credits” system. These are taken into account for the calculation of a manufacturer’s specific average emissions. Such passenger cars are to be counted as 2 vehicles in 2020, 1.67 vehicles in 2021, 1.33 vehicles in 2022, and 1 vehicle from 2023 onwards (subject to a cap of 7.5 CO2 g /km over the 2020-2022 period for each manufacturer).

Given that the specific average emissions of CO2 of Fisker’s electric passenger cars will be 0.000 CO2 g/km per vehicle registered in the EU, this will provide an opportunity for other manufacturers, which may not otherwise meet their specific CO2 emissions targets, to pay Fisker to consolidate their fleets with those of Fisker via a pooling arrangement for CO2 emissions compliance purposes.

China

The Chinese New Energy Vehicle (“NEV”) legislation is a modified version of the Californian ZEV Regulation. The NEV program assigns NEV credits to each passenger vehicle manufacturer. Passenger vehicle manufacturers are required to maintain NEV credits equal to a set percentage of non-electric vehicles sold registered in China.

Each NEV sold and registered in China earns a number of credits taking into account factors such as energy efficiency and driving range. Higher performance vehicles receive more credits, capped at six credits per vehicle.

The NEV credit target is 12% in 2020. The NEV credit target is set to increase to 14% in 2021, 16% in 2022 and 18% in 2023.

The system also allows passenger vehicle manufacturers to use surplus NEV credits to offset corporate average fuel consumption (“CAFC”) credit deficits.

The policy creates a market for credits that will benefit manufacturers of electric passenger vehicles such as Fisker. Surplus NEV credits can be sold to other companies, and surplus CAFC credits can be banked and carried forward to help with CAFC compliance in future years or transferred to affiliated companies to help offset a CAFC credit deficit.

If a passenger vehicle manufacturer fails to meet CAFC or NEV credit targets after adopting all possible compliance pathways, China’s Ministry of Industry and Information Technology may deny type approval for new models that cannot meet their specific fuel consumption standards until those deficits are fully offset.

EPA Emissions and Certificate of Conformity

The U.S. Clean Air Act requires that Fisker obtain a Certificate of Conformity issued by the EPA and a California Executive Order issued by the California Air Resources Board (“CARB”), concerning emissions for its vehicles. A Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act’s standards and an Executive Order is required for vehicles sold in states that have sought and received a waiver from the EPA to utilize California standards. CARB sets the California standards for emissions control for certain regulated pollutants for new vehicles and engines sold in California. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of vehicles. There are currently four states which have adopted the California standard for heavy-duty vehicles.

 

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The Greenhouse Gas Rule was incorporated into the Clean Air Act on August 9, 2011. Since Fisker’s vehicles have zero-emissions, Fisker is required to seek an EPA Certificate of Conformity for the Greenhouse Gas Rule, and a CARB Executive Order for the CARB Greenhouse Gas Rule.

Vehicle Safety and Testing

Fisker’s vehicles will be subject to, and will be required to comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”), including applicable U.S. federal motor vehicle safety standards (“FMVSS”). Fisker intends that the Fisker Ocean will fully comply with all applicable FMVSSs without the need for any exemptions, and expects future Fisker vehicles to either fully comply or comply with limited exemptions related to new technologies. Additionally, there are regulatory changes being considered for several FMVSSs, and while Fisker anticipates compliance, there is no assurance until final regulation changes are enacted.

As a manufacturer, Fisker must self-certify that its vehicles meet all applicable FMVSSs, as well as the NHTSA bumper standard, or otherwise are exempt, before the vehicles can be imported or sold in the U.S. Numerous FMVSSs will apply to Fisker’s vehicles, such as crash-worthiness requirements, crash avoidance requirements and EV requirements. Fisker will also be required to comply with other federal laws administered by NHTSA, including the CAFE standards, Theft Prevention Act requirements, consumer information labeling requirements, Early Warning Reporting requirements regarding warranty claims, field reports, death and injury reports and foreign recalls and owner’s manual requirements.

The Automobile Information and Disclosure Act requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing. In addition, this law allows inclusion of city and highway fuel economy ratings, as determined by EPA, as well as crash test ratings as determined by NHTSA if such tests are conducted.

Fisker’s vehicles that may be sold outside of the U.S. are subject to similar foreign safety, environmental and other regulations. Many of those regulations are different from those applicable in the U.S. and may require redesign and/or retesting. The European Union has established new rules regarding additional compliance oversight that are scheduled to commence in 2020, and there is also regulatory uncertainty related to the United Kingdom’s withdrawal from the European Union. These changes could impact the rollout of new vehicle features in Europe.

In addition to the various territorial legal requirements Fisker is obligated to meet, the Fisker Ocean is engineered to deliver 5-star performance in the two main voluntary vehicle safety performance assessment programs, U.S. New Car Assessment Program (“NCAP”) and Euro NCAP. Five-star is the maximum attainable score. These independent organizations have introduced a number of additional safety related tests aimed at improving the safety of passenger vehicles, both for occupants and pedestrians involved in collisions with vehicles. Some of these tests are derived from the legal tests, such as side impact, but have higher performance requirements. Others are unique to the program. Areas covered by these tests in 2020 include:

 

   

Mobile Progressive Deformable Barrier

 

   

Full Width Rigid Barrier

 

   

Mobile Side Impact Barrier

 

   

Side Pole

 

   

Far Side Impact

 

   

Whiplash

 

   

Vulnerable Road Users (Pedestrians and Cyclists)

 

   

Safety Assist

 

   

Rescue and Extrication

 

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The Fisker Ocean will also be equipped with certain advanced driving assistance features which may allow Fisker to garner further Euro NCAP awards for features which are not yet a formal part of the 5 Star rating. This will help promote the advanced societal benefits of the Fisker Ocean.

Strategic Collaborations

Magna

On October 14, 2020, Fisker and Spartan entered into a cooperation agreement with Magna setting forth certain terms for the development of a full electric vehicle (the “Cooperation Agreement”). The Cooperation Agreement sets out the main terms and conditions of the upcoming operational phase agreements (the “Operational Phase Agreements”) that will extend from the Cooperation Agreement and other agreements with Magna that are expected to be entered into by and between Fisker and Magna (or its affiliates). The upcoming Operational Phase Agreements referenced in the Cooperation Agreement relate to various platform and manufacturing agreements. The Cooperation Agreement provides that the Company would issue to Magna warrants to purchase Class A Common Stock in an amount equal to six percent (6%) of the capital stock of the Company on a fully diluted basis (which means for these purposes, after giving effect to the deemed conversion or exercise of all options, warrants and other convertible securities of the Company outstanding on the issuance date; provided, however, that the “public warrants” sold as part of the units issued by Spartan in its IPO which closed on August 14, 2018 shall not be deemed to be exercised for these purposes) after giving effect to the Merger and issuance of the warrants to purchase such shares to Magna, with an exercise price of $0.01 per share of (the “Magna Warrants”). On October 29, 2020, the Company issued to Magna 19,474,454 Magna Warrants. The Magna Warrants are subject to vesting as follows:

 

Milestones

   Percentage of
Warrants
that Vest
Upon
Achievement
 

(i) Achievement of the “preliminary production specification” gateway as set forth in the Development Agreement; (ii) entering into the Platform Agreement; and (iii) entering into the Initial Manufacturing Agreement

     33.3

(i) Achievement of the “target agreement” gateway as set forth in the Development Agreement and (ii) entering into the Detailed Manufacturing Agreement, which will contain terms and conditions agreed to in the Initial Manufacturing

     33.3

Start of pre-serial production

     33.4

Additionally, the shares of Class A Common Stock underlying the Magna Warrants are entitled to registration rights under the A&R Registration Rights Agreement and Magna entered into a Lock-Up Agreement on the same terms as the other investors in Fisker.

The Cooperation Agreement, and all rights and obligations of the parties thereunder, shall terminate upon any termination of the Business Combination Agreement. Fisker and Magna have not entered into a binding definitive agreement for manufacturing of Fisker’s vehicles and there is no guarantee that such a binding definitive agreement will be reached.

Employees

Fisker prides itself on the quality of its diverse team by seeking to hire only employees dedicated and aligned with Fisker’s strategic mission. Fisker works to leverage partnerships and modulate hiring based on Fisker’s product roadmap. As of October 30, 2020, Fisker employed 82 full-time employees and approximately 24 consultants based primarily in Fisker’s headquarters in Manhattan Beach, California. A majority of Fisker’s employees are engaged in research and development and related functions. To date, Fisker has not experienced any work stoppages and considers Fisker’s relationship with its employees to be in good standing. None of Fisker’s employees are either represented by a labor union or subject to a collective bargaining agreement.

 

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Properties

In November 2020, Fisker moved its corporate headquarters from Torrance, California to Manhattan Beach, California, where Fisker occupies 72,649 square feet of space which it uses for an automobile design studio and general office purposes for its management, technology, product design, sales and marketing, finance, legal, human resources, general administrative and information technology teams. The lease term commenced on November 1, 2020 and will terminate on May 1, 2026. The Company has an option to extend the lease for an additional five years. The Company may be obligated to pay amounts in addition to the base rent in the form of an operating expense adjustment, contingent upon the Company’s operations reaching certain operating expenses thresholds.

The Company entered into a sublease agreement for 5,533 square feet of office and research and development space in San Francisco, California. The term of the sublease commenced on October 2, 2020 and will expire on March 31, 2024. The sublease does not expressly allow for renewal of the lease term.

The Company believes its existing facilities are adequate for its current requirements. The Company also believes it will be able to obtain additional or alternative space at other locations at commercially reasonable terms to support its continuing expansion.

Legal Proceedings

From time to time, Fisker may become involved in additional legal proceedings arising in the ordinary course of its business. Fisker is not currently a party to any legal proceedings the outcome of which, if determined adversely to Fisker, would individually or in the aggregate have a material adverse effect on its business, financial condition, and results of operations.

 

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MANAGEMENT

Executive Officers and Directors

Our directors and executive officers and their ages as of October 30, 2020 are as follows:

Executive Officers

 

Henrik Fisker   57    Chairman of the Board, President and Chief Executive Officer
Dr. Geeta Gupta   46    Chief Financial Officer and Director
Dr. Burkhard J. Huhnke   53    Chief Technology Officer

Non-Employee Directors

 

Wendy J. Greuel(1)   59    Director
Mark E. Hickson(1)(3)   53    Director
William R. McDermott(1)   59    Director
Roderick K. Randall(2)   61    Director
Nadine I. Watt(2)   52    Director

 

(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Executive Officers

Henrik Fisker. Our co-founder, Mr. Fisker, has served as Chairman of the Board and as our Chief Executive Officer since October 2020 and prior to this, served as Chief Executive Officer of Legacy Fisker since September 2016 and as President since October 2020, and he is married to Dr. Geeta Gupta, his co-founder and our Chief Financial Officer and a member of our Board. Although Mr. Fisker spends significant time with Fisker and is highly active in our management, he does not devote his full time and attention to Fisker. Since 2013, Mr. Fisker has served as Managing Member of HF Design LLC (“HF Design”). Mr. Fisker served as a Senior Advisor at McKinsey & Company where he worked from 2013 to 2016. In addition, from 2015 to 2017, he served as the Chief of Product and Design of VLF Automotive, LLC, which he co-founded. From 2007 to 2011, Mr. Fisker served as Chief Executive Officer and Chief Design Officer of Fisker Automotive, Inc., which he co-founded, and he served as Executive Chairman from 2012 to 2013. In 2013, Fisker Automotive, Inc. voluntarily filed for Chapter 11 bankruptcy with the United States Bankruptcy Court for the District of Delaware after Mr. Fisker had stepped down as its Executive Chairman. Prior to that, from 2000 to 2005, Mr. Fisker served as Creative Director at Ford Motor Company and Design Director at Aston Martin Lagonda Ltd, which was a subsidiary of Ford Motor Company at the time. He was also the Designer at Bayerische Flugzeugwerke AG (“BMW”) from 1999 to 2000. Mr. Fisker holds a Bachelor of Science in Automotive Design from the ArtCentre College of Design, California.

We believe that Mr. Fisker is qualified to serve as a director because of his operational and historical expertise gained from serving as our Chief Executive Officer, and his extensive professional and educational experience in the automotive industry.

Dr. Geeta Gupta. Dr. Gupta has served as our Chief Financial Officer and as a member of the Board since October 2020 and prior to this, served as Chief Financial Officer of Legacy Fisker since September 2016, and she is married to Henrik Fisker, her co-founder and our Chief Executive Officer and Chairman of the Board. Prior to founding Fisker, Dr. Gupta served as an Entrepreneur and Investment Manager for the Fisker family from 2014 to 2020. Previously, Dr. Gupta served as an Investment Advisor at the Alfred Mann Foundation from 2013 to 2014. Dr. Gupta holds a Bachelor’s Degree in Zoology/Animal Biology from Maitrey College, New Delhi, India, a Master’s Degree in Biotechnology from the University of Kent, United Kingdom, a Doctor of Philosophy, Ph.D., in Biotechnology/Organic Chemistry from the University of Cambridge, United Kingdom, where she was an EPSRC Postdoctoral Research Newton Fellow.

 

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We believe that Dr. Gupta is qualified to serve as a director because of her historical expertise gained from serving as our Chief Financial Officer, and her financial and investing experience.

Dr. Burkhard J. Huhnke. Dr. Huhnke has served as our Chief Technical Officer since October 2020 and prior to this, served as Chief Technology Officer of Legacy Fisker since July 2020. Previously, Dr. Huhnke served as the Vice President Automotive at Synopsys Inc., from 2018 to July 2020. Prior to this, from 2016 to 2018, Dr. Huhnke served as the Senior Vice President of e-mobility at Volkswagen of America, Inc. From 2011 to 2014, Dr. Huhnke served as the Senior General Manager of Electronics Development at Volkswagen AG. Dr. Huhnke holds an electrical engineering diploma and a doctorate in engineering from the Technical University of Braunschweig, Germany.

Key Employee

Martin T. Welch. Mr. Welch has served as our Senior Vice President of Engineering since October 2020 and prior to this, served as Senior Vice President of Engineering of Legacy Fisker since April 2018. Previously, Mr. Welch served as Global Director of Vehicle Integration at Tata Technologies Limited from 2011 to 2018. Mr. Welch holds a Mechanical Engineering degree from Northumbira University, Newcastle upon Tyne, England.

Non-Employee Directors

Wendy J. Greuel. Ms. Greuel has served on our Board of Directors since October 2020 and prior to this, served as a director of Legacy Fisker since June 2020. Since 2013, Ms. Greuel has served as a consultant to the Discovery Cube Science Center. In addition, Ms. Greuel has served as Executive in Residence and Strategic Advisor at the David Nazarian College of Business and Economics (DNCBE), California State University Northridge (CSUN), since 2016. Previously, Ms. Greuel served as the Controller for the City of Los Angeles from 2009 to 2013. Ms. Greuel holds a Bachelor of Arts in Political Science from the University of California, Los Angeles.

We believe that Ms. Greuel’s extensive executive and professional experience as a business consultant qualify her to serve as a director.

Mark E. Hickson. Mr. Hickson has served on our Board of Directors since October 2020 and prior to this, served as a director of Legacy Fisker since July 2020. Since 2012, Mr. Hickson has served as the Executive Vice President of Corporate Development, Strategy, Quality & Integration at NextEra Energy, Inc., a public company. Mr. Hickson also serves as the Executive Vice President of Corporate Development, Strategy, Quality & Integration at NextEra Energy Partners, LP, an affiliate of NextEra Energy, Inc., and Mr. Hickson serves on its board of directors. Previously, Mr. Hickson served as a Managing Director of Global M&A in the Global Energy & Power Group at Merrill Lynch & Co. Mr. Hickson holds a Bachelor of Science in Aerospace Engineering from Texas A&M University, and a Master of Business Administration, Finance from Columbia University, New York.

We believe that Mr. Hickson’s extensive executive and professional experience in the energy industry qualify him to serve as a director.

William R. McDermott. Mr. McDermott has served as a member of the Board since October 2020 and prior to this, served as a director of Legacy Fisker since October 2020. Previously, Mr. McDermott has served as the Chief Executive Officer of ServiceNow, Inc., a public digital workflow company, since November 2019. From 2010 through 2014, Mr. McDermott served as Co-Chief Executive Officer, and from 2014 until October 2019, as sole Chief Executive Officer, of SAP SE (“SAP”), a multinational software company providing enterprise software. Mr. McDermott joined SAP in 2002 as Chief Executive Officer of SAP America, Inc., and served on the SAP Executive Board from 2008 until October 2019. Prior to joining SAP, Mr. McDermott served as Executive Vice President of Worldwide Sales and Operations at Siebel CRM Systems, Inc. from 2001 to 2002 and served as President of Gartner, Inc. from 2000 to 2001. Mr. McDermott also serves as a member of the board of directors of ServiceNow, Inc. Mr. McDermott holds a Bachelor’s Degree from Dowling College, New York, a Master of Business Administration from Northwestern University’s Kellogg School of Management and participated in the Executive Development Program of the Wharton School, University of Pennsylvania.

 

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We believe Mr. McDermott is qualified to serve as a director because of his extensive executive experience in the technology industry, including his leadership experience with a leading global business, as Chief Executive Officer, and his service on a number of public company boards which provides an important perspective on operations, finance and corporate governance.

Roderick K. Randall. Mr. Randall has served on our Board of Directors since October 2020 and prior to this, served as a director of Legacy Fisker since March 2018. Mr. Randall is currently an Executive Partner at Siris Capital Group, LLC, a private equity firm focused on technology startups, where he has worked since 2010. Mr. Randall currently serves on the boards of the following private companies: MagLev Aero, Inc., Mavenir Systems, Inc., and Stratus Technologies, Inc. He is also a member of the board of Trustees at Vaughn College of Aeronautics and Technology, a private college in East Elmhurst, New York, specializing in aviation and engineering education. Mr. Randall holds a Bachelor of Electrical Engineering with Highest Honor from The Georgia Institute of Technology, and a Master of Sciences in Electrical Engineering and Computer Science from the University of California, Berkeley.

We believe that Mr. Randall is qualified to serve as a director because of his extensive experience in the technology industry, his experience as a venture capitalist and his service on multiple boards of various technology companies.

Nadine I. Watt. Ms. Watt has served on our Board of Directors since October 2020 and prior to this, served as a director of Legacy Fisker since June 2020. Ms. Watt has served as the Chief Executive Officer of Watt Companies, Inc. since December 2019. She previously served as President from 2011 to 2019. She joined Watt Companies, Inc. in 2000 as an asset and project manager and she has served in various positions of increasing responsibility culminating in her current role as Chief Executive Officer. In addition, Ms. Watt has served as the Chair of the Los Angeles Business Council since 2015. She previously served on the board of two publicly traded companies: 1st Century Bancshares, Inc., from May 2008 until 2017 and The New Home Company Inc., from 2009 to 2018. Ms. Watt received her Bachelor of Science in Foreign Service from the Georgetown University School of Foreign Service, Washington D.C. and her Master of Arts from the School of Cinematic Arts at the University of Southern California.

We believe that Ms. Watt is qualified to serve as a director because of her extensive experience in management and her prior service on a number of public company boards, which provides an important perspective on operations and corporate governance matters.

Board Composition

Our business and affairs are organized under the direction of the Board. The Board consists of seven members. Henrik Fisker serves as Chairman of the Board. The primary responsibilities of the Board are to provide oversight, strategic guidance, counseling and direction to our management. The Board will meet on a regular basis and additionally as required.

In accordance with the terms of the Bylaws, the Board is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. The Board is divided into the following classes:

 

   

Class I, which consists of Wendy J. Greuel and Roderick K. Randall, whose terms will expire at our first annual meeting of stockholders to be held after consummation of the Business Combination;

 

   

Class II, which consists of Dr. Geeta Gupta, Nadine I. Watt and William R. McDermott, whose terms will expire at our second annual meeting of stockholders to be held after consummation of the Business Combination; and

 

   

Class III, which consists of Henrik Fisker and Mark E. Hickson, whose terms will expire at our third annual meeting of stockholders to be held after consummation of the Business Combination.

 

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At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election and until their successors are duly elected and qualified. This classification of the Board may have the effect of delaying or preventing changes in our control or management. Our directors may be removed for cause by the affirmative vote of the holders of at least two-thirds (2/3) of our voting stock.

Director Independence; Controlled Company Exemption

The Board determined that each of the directors on the Board other than Henrik Fisker and Dr. Geeta Gupta, qualify as independent directors, as defined under the listing rules of the NYSE, and the Board consists of a majority of “independent directors,” as defined under the rules of the SEC and NYSE listing rules relating to director independence requirements. In addition, we are subject to the rules of the SEC and the NYSE relating to the membership, qualifications, and operations of the audit committee, as discussed below.

Henrik Fisker and Dr. Geeta Gupta control a majority of the voting power of our outstanding capital stock. As a result, we are a “controlled company” under NYSE rules. As a controlled company, we are exempt from certain NYSE corporate governance requirements, including those that would otherwise require our Board of Directors to have a majority of independent directors and require that we either establish compensation and nominating and corporate governance committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of our executive officers and nominees for directors are determined or recommended to the Board of Directors by the independent members of the Board of Directors. While we do not currently intend to rely on any of these exemptions, we will be entitled to do so for as long as we are considered a “controlled company,” and to the extent we relies on one or more of these exemptions, holders of our capital stock will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

Board Leadership Structure

The Board believes that it should maintain the flexibility to select the Chairman of the Board and adjust its board leadership structure from time to time. Mr. Fisker is currently serving as both Fisker’s Chief Executive Officer and the Chairman of the Board. The Board determined that having its Chief Executive Officer also serve as the Chairman of the Board provides Fisker with optimally effective leadership and is in its best interests and those of its stockholders. Mr. Fisker founded and has led Fisker since its inception. The Board believes that Mr. Fisker’s strategic vision for the business, his in-depth knowledge of our operations, the EV industry, and his experience serving as the Chairman of the Board and Chief Executive Officer since Legacy Fisker’s inception make him well qualified to serve as both Chairman of the Board and Chief Executive Officer.

Role of the Board in Risk Oversight

One of the key functions of the Board is informed oversight of our risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Our compensation committee also assesses and monitors whether our compensation plans, policies and programs comply with applicable legal and regulatory requirements. Our nominating and corporate governance committee monitors the effectiveness of our governance guidelines.

 

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Board Committees

In connection with the consummation of the Business Combination, the Board established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which have the composition and responsibilities described below. Members will serve on these committees until their resignation or until otherwise determined by the Board. Each committee operates under a charter previously approved by the Board. Copies of each charter are posted on the Corporate Governance section of our website at www.fiskerinc.com. Our website and the information contained on, or that can be accessed through, our website is not deemed to be incorporated by reference in, and is not considered part of, this prospectus.

Audit Committee

Our audit committee consists of Wendy J. Greuel, Mark E. Hickson and William R. McDermott, with Wendy J. Greuel serving as audit committee chairperson. The Board has determined that Wendy J. Greuel, Mark E. Hickson and William R. McDermott each meet the requirements for independence and financial literacy under the current NYSE listing standards and SEC rules and regulations, including Rule 10A-3. In addition, the Board has determined that Ms. Greuel, Mr. Hickson and Mr. McDermott each qualifies as an “audit committee financial expert” within the meaning of Item 407(d) of Regulation S-K promulgated under the Securities Act. This designation does not impose any duties, obligations, or liabilities that are greater than are generally imposed on members of the audit committee and the Board. The audit committee is responsible for, among other things:

 

   

selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

 

   

helping to ensure the independence and overseeing the performance of the independent registered public accounting firm;

 

   

reviewing and discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and that firm, our interim and year-end operating results;

 

   

reviewing our financial statements and critical accounting policies and estimates;

 

   

reviewing the adequacy and effectiveness of our internal controls;

 

   

developing procedures for employees to submit concerns anonymously about questionable accounting, internal accounting controls, or audit matters;

 

   

overseeing our policies on risk assessment and risk management;

 

   

overseeing compliance with our code of business conduct and ethics;

 

   

reviewing related party transactions; and

 

   

approving or, as permitted, pre-approving all audit and all permissible non-audit services (other than de minimis non-audit services) to be performed by the independent registered public accounting firm.

The audit committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of NYSE, and which is available on our website. All audit services to be provided to us and all permissible non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm will be approved in advance by the audit committee.

Compensation Committee

Our compensation committee consists of Nadine I. Watt and Roderick K. Randall. Ms. Watt is the chairperson of the compensation committee. The Board has determined that the composition of the compensation committee will meet the requirements for independence under the current NYSE listing standards and SEC rules and regulations. Each member of the committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. The compensation committee is responsible for, among other things:

 

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reviewing, approving and determining, or making recommendations to the Board regarding, the compensation of our executive officers, including the Chief Executive Officer;

 

   

making recommendations regarding non-employee director compensation to our full Board of Directors;

 

   

administering our equity compensation plans and agreements with our executive officers;

 

   

reviewing, approving and administering incentive compensation and equity compensation plans; and

 

   

reviewing and approving our overall compensation philosophy.

The compensation committee operates under a written charter, which satisfies the applicable rules of the SEC and the listing standards of NYSE, and which is available on our website.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Mark E. Hickson. Mr. Hickson is the chairperson of the nominating and corporate governance committee. The Board has determined that the composition of the nominating and corporate governance committee will meet the requirements for independence under the current NYSE listing standards and SEC rules and regulations. The nominating and corporate governance committee is responsible for, among other things:

 

   

identifying, evaluating and selecting, or making recommendations to the Board regarding nominees for election to the Board of Directors and its committees;

 

   

considering and making recommendations to the Board regarding the composition of the Board of Directors and its committees;

 

   

developing and making recommendations to the Board regarding corporate governance guidelines and matters;

 

   

overseeing our corporate governance practices;

 

   

overseeing the evaluation and the performance of the Board and individual directors; and

 

   

contributing to succession planning.

The nominating and corporate governance committee operates under a written charter, which satisfies the applicable rules of the SEC and the NYSE listing standards and is available on our website.

Compensation Committee Interlocks and Insider Participation

None of the members of the compensation committee is or has been at any time one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Board or compensation committee (or other Board of Directors committee performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of any entity that has one or more executive officers serving as a member of the Board or compensation committee.

 

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Code of Ethics

The Board has adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics is available on the Corporate Governance section of our website. In addition, we have posted on the Corporate Governance section of our website all disclosures that are required by law or the listing standards of the NYSE concerning any amendments to, or waivers from, any provision of the Code of Business Conduct and Ethics. The reference to our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

Limitation on Liability and Indemnification of Directors and Officers

The Certificate of Incorporation limits our directors’ liability to the fullest extent permitted under the “DGCL”. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability:

 

   

for any transaction from which the director derives an improper personal benefit;

 

   

for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

   

for any unlawful payment of dividends or redemption of shares; or

 

   

for any breach of a director’s duty of loyalty to the corporation or its stockholders.

If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

Delaware law and the Bylaws provide that we will, in certain situations, indemnify our directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to advancement, direct payment, or reimbursement of reasonable expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding.

In addition, we entered into separate indemnification agreements with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers or any other company or enterprise to which the person provides services at our request.

We maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe these provisions in the Certificate of Incorporation, Bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Non-Employee Director Compensation

Historically, we have neither had a formal compensation policy for our non-employee directors, nor have we had a formal policy of reimbursing expenses incurred by our non-employee directors in connection with their board service. However, we have reimbursed our non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending Board of Director and committee meetings and occasionally granted stock options to our non-employee directors. Directors who are also employees do not receive any compensation for their services as directors.

 

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Index to Financial Statements

The table below summarizes the compensation of each person serving as a non-employee director in 2019. Neither Henrik Fisker, our Chief Executive Officer, nor Dr. Geeta Gupta, our Chief Financial Officer, received any additional compensation for service as directors in 2019. See the section titled “Executive Compensation” for a summary of the compensation provided to our named executive officers Mr. Fisker and Dr. Gupta.

 

     All Other Option Awards
Compensation
    

 

 

Name

   $(1)      $(2)      Total ($)  

Roderick Randall

     —          —          —    

Morana Jovan(3)

     —          28,961        28,961  

 

(1)

Mr. Randall held outstanding stock options covering 58,829 Legacy Fisker shares (pre-combination shares) as of December 31, 2019. No other non-employee director held, directly or indirectly, as of December 31, 2019 outstanding stock options.

(2)

With respect to Ms. Jovan, the amount in this column represents the value of a stock option provided in consideration of services Globeways Holdings Limited performed as a consultant to Legacy Fisker. Ms. Jovan is the sole owner of Globeways Holdings Limited. The services Globeways Holdings Limited performed as a consultant to Legacy Fisker were distinct from Ms. Jovan’s services as a director of Legacy Fisker. The dollar amounts reported in this column represent the aggregate grant date fair value for financial statement reporting purposes of stock options granted in 2019 under the Legacy Fisker 2016 Stock Plan as calculated in accordance with FASB ASC Topic 718. This amount reflects our accounting expense for this stock option and does not represent the actual economic value that may be realized by the optionee. There can be no assurance that this amount will ever be realized. The valuation assumptions used in calculating the fair value of this stock option is set forth in Note 13 to the financial statements. As required by SEC rules, the amounts shown excludes the impact of estimated forfeitures related to service-based vesting conditions.

(3)

Ms. Jovan resigned from the Legacy Fisker board of directors effective March 21, 2019.

The Board adopted an Outside Director Compensation Policy (the “Policy”), which was effective as of the consummation of the Business Combination, which Policy sets forth the terms upon which non-employee directors are compensated for their service on the Board. Under the terms of the Policy, each non-employee director will receive an annual cash retainer of $50,000 and the lead independent director (if applicable) will receive an additional annual cash retainer of $25,000. The chairpersons of the audit committee, compensation committee and nominating and corporate governance committee will receive additional annual cash retainers of $25,000, $18,000 and $10,000, respectively. Other members of the audit committee, compensation committee and nominating and corporate governance committee will receive additional annual cash retainers of $10,000, $7,500 and $5,000, respectively.

Under the terms of the Policy, (a) on the date of each annual meeting of the Company, each continuing non-employee director will also receive a grant of restricted stock units having a value of $200,000, vesting in equal quarterly installments over the 12-month period following the grant date, and (b) on the date any non-employee director is newly elected or appointed, such person will receive a grant of restricted stock units having a value of $200,000, pro-rated based on the number full months that are expected to lapse between such appointment date and the next annual meeting of the Company and vesting in equal installments on each full quarterly anniversary from the Company’s last annual meeting that are expected to lapse between the director’s election or appointment and the next annual meeting, subject in each case to such director’s continued service as a member of the Board through each applicable vesting date. Restricted stock units granted under the Policy will automatically vest on a change in control of the Company during the director’s service period. Under the terms of the Policy, non-employee directors may elect to convert all or a portion of their annual cash retainer for Board service (not including any annual retainer that a director may receive for serving as lead independent director (if applicable) and not including any annual retainers for committee service) into restricted stock units or to convert all or a portion of their restricted stock units into cash, as more fully set forth in the terms of the Policy.

 

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EXECUTIVE COMPENSATION

Our compensation committee has designed, and intends to modify as necessary, our compensation and benefits program to attract, retain, incentivize and reward deeply talented and qualified executives who share our philosophy and desire to work towards achieving these goals.

We believe our compensation program should promote the success of the company and align executive incentives with the long-term interests of our stockholders. Our current compensation programs reflect its startup origins in that they consist primarily of salary and stock option awards. As our needs evolve, we intend to continue to evaluate our philosophy and compensation programs as circumstances require.

This section provides an overview of our executive compensation programs, including a narrative description of the material factors necessary to understand the information disclosed in the summary compensation table below.

We have opted to comply with the executive compensation disclosure rules applicable to “emerging growth companies,” within the meaning of the Jumpstart Our Business Startups Act of 2012. These rules require reduced compensation disclosure for our principal executive officer and our two most highly compensated executive officers other than our principal executive officer (the named executive officers).

Prior to the formation of our compensation committee, our Board of Directors, with input from our Chief Executive Officer, has historically determined the compensation for our named executive officers. For the year ended December 31, 2019, our named executive officers were:

 

   

Henrik Fisker, President and Chief Executive Officer; and

 

   

Dr. Geeta Gupta, Chief Financial Officer.

Summary Compensation Table

The following table presents information regarding the total compensation awarded to, earned by, and paid to our named executive officers for services rendered to us in all capacities for 2019.

 

Name and Principal Position

   Year      Salary ($)      All Other
Compensation($)(1)
     Total ($)  

Henrik Fisker

     2019        42,197        8,985        51,182  

President, Chief Executive Officer and Chairman of the Board

           

Dr. Geeta Gupta

     2019        45,673        6,500        52,173  

Chief Financial Officer and Former President(2)

           

 

(1)

Reflects policy premiums for term life insurance covering Mr. Fisker in the amount of $2,485, which we pay. We also provided the following auto allowances to certain of our named executive officers: Mr. Fisker ($6,500) and Dr. Gupta ($6,500).

(2)

Effective October 2, 2020, Mr. Fisker assumed the role of President.

Narrative Disclosure to Summary Compensation Table

For 2019, the compensation program for our named executive officers consisted of base salary and certain perquisites.

 

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Base Salary

We have historically paid each of Mr. Fisker and Dr. Gupta an annual base salary equal to the minimum base salary required to be paid under applicable law. Effective August 1, 2020, Dr. Gupta’s annual base salary was increased to $325,000.

Cash Bonus

We have not had any formal arrangements with our named executive officers providing for annual cash bonus awards.

The Executive Incentive Bonus Plan, or Bonus Plan, was adopted on October 4, 2020, effective as of the consummation of the Business Combination. The purpose of the Bonus Plan is to motivate and reward eligible officers and employees for their contributions toward the achievement of certain performance goals.

Administration. The Bonus Plan is administered by our compensation committee, which has the discretionary authority to interpret the provisions of the Bonus Plan, including all decisions on eligibility to participate, the establishment of performance goals, the number of awards payable under the plan, and the payment of awards. The compensation committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers under the Bonus Plan to one or more of our directors and/or officers.

Performance criteria. The compensation committee may establish cash bonus targets and corporate performance metrics for a specific performance period or fiscal year pursuant to the Bonus Plan. Corporate performance goals may be based on one or more of the following criteria, as determined by the compensation committee and any adjustments thereto established by the compensation committee: (i) sales or non-sales revenue; (ii) return on revenues; (iii) operating income; (iv) income or earnings including operating income; (v) income or earnings before or after taxes, interest, depreciation, and/or amortization; (vi) income or earnings from continuing operations; (vii) net income; (viii) pre-tax income or after-tax income; (ix) net income excluding amortization of intangible assets, depreciation, and impairment of goodwill and intangible assets and/or excluding charges attributable to the adoption of new accounting pronouncements; (x) raising of financing or fundraising; (xi) project financing; (xii) revenue backlog; (xiii) gross margin; (xiv) operating margin or profit margin; (xv) capital expenditures, cost targets, reductions, and savings and expense management; (xvi) return on assets (gross or net), return on investment, return on capital, or return on stockholder equity; (xvii) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xviii) performance warranty and/or guarantee claims; (xix) stock price or total stockholder return; (xx) earnings or book value per share (basic or diluted); (xxi) economic value created; (xxii) pre-tax profit or after-tax profit; (xxiii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or market share, completion of strategic agreements such as licenses, funded collaborations, joint ventures acquisitions, and the like, geographic business expansion, objective customer satisfaction or information technology goals, or intellectual property asset metrics; (xxiv) objective goals relating to divestitures, joint ventures, mergers, acquisitions, and similar transactions; (xxv) objective goals relating to staff management, results from staff attitude and/or opinion surveys, staff satisfaction scores, staff safety, staff accident and/or injury rates, compliance, headcount, performance management, or completion of critical staff training initiatives; (xxvi) objective goals relating to projects, including project completion, timing and/or achievement of milestones, project budget, or technical progress against work plans; (xxvii) key regulatory objectives or milestones; and (xxviii) enterprise resource planning.

However, awards issued to participants may take into account other factors (including subjective factors). Performance goals may differ from participant to participant, performance period to performance period, and from award to award. Any criteria used may be measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but not limited to, any increase (or decrease) over the passage of time and/or any measurement against other companies or financial or business or stock index metrics particular to us), (iii) on a per share and/or share per capita basis, (iv) against our performance as a whole or against any of our affiliate(s), or a particular segment(s), our business unit(s) or a product(s) or individual project company, (v) on a pre-tax or after-tax basis, and/or (vi) using an actual foreign exchange rate or on a foreign exchange neutral basis.

 

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Service requirement. Unless otherwise determined by the compensation committee, a participant must be actively employed and in good standing with us on the date the award is paid. The compensation committee may make exceptions to this requirement in the case of retirement, death or disability, an unqualified leave of absence or under other circumstances, as determined by the compensation committee in its sole discretion.

Amendment or Termination. The compensation committee may terminate the Bonus Plan at any time, provided such termination shall not affect the payment of any awards accrued under the Bonus Plan prior to the date of the termination. The compensation committee may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Bonus Plan in whole or in part.

Benefits and Perquisites

We provide benefits to our named executive officers on the same basis as provided to all of our employees, including health, dental and vision insurance; life insurance; accidental death and dismemberment insurance; and short-and long-term disability insurance; and a tax-qualified Section 401(k) plan for which we do not provide a match. In addition, Mr. Fisker and Dr. Gupta are each entitled to term life insurance with a face amount of $5,000,000 and a $1,000 per month car allowance (and, when available, the use of a Fisker automobile). We do not maintain any executive-specific benefit or perquisite programs.

Severance Agreements

In September 2020, the compensation committee approved severance benefits for Mr. Fisker and Dr. Gupta after reviewing certain market data provided by the independent consulting firm, Compensia, and taking into account the historically low cash compensation paid to Mr. Fisker and Dr. Gupta. We entered into severance agreements with Mr. Fisker and Dr. Gupta setting forth these severance benefits.

Henrik Fisker

Pursuant to the severance agreement to be entered into with Mr. Fisker, if we terminate Mr. Fisker’s employment without cause or Mr. Fisker resigns for good reason, Mr. Fisker will be entitled to receive a cash payment equal to $9,682,000, plus the amount equal to 24 months of COBRA premium payments, in each case, less applicable withholding taxes and subject to, among other things, executing a general release of claims in favor of the company and complying with the terms of his confidentiality agreement.

Dr. Geeta Gupta

Pursuant to the severance agreement to be entered into with Dr. Gupta, if we terminate Dr. Gupta’s employment without cause or Dr. Gupta resigns for good reason, Dr. Gupta will be entitled to receive a cash payment equal to $4,597,500, plus the amount equal to 24 months of COBRA premium payments, in each case, less applicable withholding taxes and subject to, among other things, executing a general release of claims in favor of the company and complying with the terms of her confidentiality agreement.

Outstanding Equity Awards as of December 31, 2019

The following table sets forth information regarding unexercised stock options (pre-combination) held by each of our named executive officers as of December 31, 2019.

 

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Name

   Grant Date      Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(1)
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
     Option
Exercise
Price ($)(2)
     Option
Expiration
Date
 

Henrik Fisker

     12/19/2016        2,647,060 (3)      —          0.15        12/19/2016  

President, Chief Executive Officer and Chairman of the Board

     04/26/2017        294,120 (3)      —          0.15        04/26/2017  

Dr. Geeta Gupta

     04/26/2017        2,941,180 (3)      —          0.15        04/26/2017