Filed pursuant to Rule 424(b)(3)
Registration No. 333-264346

PROSPECTUS SUPPLEMENT NO. 4
(to Prospectus dated April 26, 2022)
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Proterra Inc
125,389,111 Shares of Common Stock
26,317,092 Shares of Common Stock Underlying Warrants and Convertible Notes
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This prospectus supplement supplements the prospectus dated April 26, 2022, as supplemented by Prospectus Supplement No. 1, dated May 6, 2022, Prospectus Supplement No. 2, dated June 2, 2022 and Prospectus Supplement No. 3, dated June 15, 2022 (the “Prospectus”), which forms a part of our registration statement on Form S-1 (File No. 333-264346). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our quarterly report on Form 10-Q for the period ended June 30, 2022, filed with the Securities and Exchange Commission on August 3, 2022 (the “Q2 2022 Quarterly Report”). Accordingly, we have attached the Q2 2022 Quarterly Report to this prospectus supplement.
The Prospectus and this prospectus supplement relate to the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”) of up to 125,389,111 shares of common stock, par value $0.0001 per share (“common stock”), consisting of (i) up to 16,334,868 shares of common stock issued in a private placement of 41,500,000 shares of common stock pursuant to subscription agreements entered into on January 11, 2021; (ii) up to 1,904,692 shares of common stock held by ArcLight CTC Holdings, L.P.; and (iii) up to 107,149,551 shares of common stock issued or issuable to certain former stockholders and other security holders of Legacy Proterra (the “Legacy Proterra Holders”) in connection with or as a result of the consummation of the Business Combination, consisting of (a) up to 56,766,043 shares of common stock; (b) up to 26,316,200 shares of common stock (the “Note Shares”) issuable upon the conversion of outstanding convertible promissory notes (the “Convertible Notes”); (c) up to 892 shares of common stock issuable upon the exercise of certain warrants (the “Legacy Proterra warrants”); (d) 11,171,287 shares of common stock issued or issuable upon the exercise of certain equity awards; and (e) up to 12,895,129 shares of common stock (“Earnout Shares”), comprising both Earnout Shares that were issued to certain Legacy Proterra Holders in July 2021 and Earnout Shares that certain Legacy Proterra Holders have the contingent right to receive upon the achievement of certain stock price-based vesting conditions.
In addition, the Prospectus and this prospectus supplement relate to the offer and sale of (i) up to 892 shares of common stock issuable by us upon exercise of the Legacy Proterra warrants that were previously registered, and (ii) up to 26,316,200 Note Shares issuable by us upon conversion of the Convertible Notes, certain of which were previously registered. The number of shares issuable upon conversion of Convertible Notes is calculated assuming that the Convertible Notes convert pursuant to their mandatory conversion terms on December 31, 2022. The actual number of shares issued upon conversion will depend on the actual date of conversion.



Our common stock is listed on the Nasdaq Global Select Market under the symbol “PTRA.” On August 2, 2022, the last reported sale price of our common stock was $5.58 per share.
This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.
Investing in our common stock involves risks. See the section entitled “Risk Factors” beginning on page 7 of the Prospectus to read about factors you should consider before buying our common stock.
The registration statement to which the Prospectus and this prospectus supplement relates registers the resale of a substantial number of shares of our common stock by the Selling Securityholders. Sales in the public market of a large number of shares, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is August 3, 2022




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  _________ to _________

Commission file number 001-39546

Proterra Inc
(Exact name of registrant as specified in its charter)

Delaware
98-1551379
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1815 Rollins Road
Burlingame, California
94010
(Address of Principal Executive Offices)
(Zip Code)
(864) 438-0000
Registrant's telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.0001 par value per share PTRA The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x  No  o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer
o
Non-accelerated filer  
o
Smaller reporting company
o
Emerging growth company
o
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   o     No  x


The registrant had outstanding 225.1 million shares of common stock as of July 29, 2022.





TABLE OF CONTENTS
4


Explanatory Note – Certain Defined Terms
Unless otherwise stated in this Quarterly Report on Form 10-Q (the “Quarterly Report”) or the context otherwise requires, references to:
“ArcLight” means ArcLight Clean Transition Corp., a Cayman Islands exempted company, prior to the consummation of the Domestication;
“Business Combination” means the Domestication, the Merger and the other transactions contemplated by the Merger Agreement, collectively, including the PIPE Financing;
“Class A ordinary shares” means the Class A ordinary shares, par value $0.0001 per share, of ArcLight, prior to the Domestication, which automatically converted, on a one-for-one basis, into shares of common stock in connection with the Domestication;
“Class B ordinary shares” means the Class B ordinary shares, par value $0.0001 per share, of ArcLight that were initially issued to the Sponsor (a portion of which were subsequently transferred to the other initial shareholders) in a private placement prior to ArcLight’s initial public offering, and, in connection with the Domestication, which automatically converted, on a one-for-one basis, into shares of common stock;
“Closing” means the closing of the Business Combination;
“Closing Date” means June 14, 2021;
“common stock” means the common stock, par value $0.0001 per share, of Proterra;
“Domestication” means the transfer by way of continuation and deregistration of ArcLight from the Cayman Islands and the continuation and domestication of ArcLight as a corporation incorporated in the State of Delaware;
“initial public offering” means ArcLight’s initial public offering that was consummated on September 25, 2020;
“Legacy Proterra” means Proterra Inc, a Delaware corporation, prior to the consummation of the Business Combination;
“Merger” means the merger of Phoenix Merger Sub with and into Legacy Proterra pursuant to the Merger Agreement, with Legacy Proterra as the surviving company in the Merger and, after giving effect to such Merger, Legacy Proterra becoming a wholly-owned subsidiary of Proterra;
“Merger Agreement” means that certain Merger Agreement, dated as of January 11, 2021 (as may be amended, supplemented or otherwise modified from time to time), by and among ArcLight, Phoenix Merger Sub and Legacy Proterra;
“Phoenix Merger Sub” refers to Phoenix Merger Sub, Inc., a Delaware corporation and a wholly-owned direct subsidiary of ArcLight;
“PIPE Financing” means the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors collectively subscribed for 41,500,000 shares of common stock for an aggregate purchase price of $415,000,000 in connection with the Closing;
“PIPE Investors” means the investors who participated in the PIPE Financing and entered into the Subscription Agreements;
“private placement warrants” means the 7,550,000 private placement warrants outstanding as of September 30, 2021 that were issued to the Sponsor as part of ArcLight’s initial public offering, which were substantially identical to the public warrants, subject to certain limited exceptions; the Sponsor
5


exercised the private placement warrants on a “cashless” basis in connection with our redemption of our remaining outstanding public warrants on October 26, 2021;
“Proterra” means ArcLight upon and after Closing;
“public warrants” means the 13,874,994 redeemable warrants to purchase common stock outstanding as of September 30, 2021 that were issued by ArcLight in its initial public offering; on October 29 2021, we redeemed the remaining outstanding public warrants that had not previously been exercised at a redemption price of $0.10 per public warrant;
“Sponsor” means ArcLight CTC Holdings, L.P., a Delaware limited partnership; and
“Subscription Agreements” means the subscription agreements, entered into by ArcLight and each of the PIPE Investors in connection with the PIPE Financing.
In addition, unless otherwise indicated or the context otherwise requires, references in this Quarterly Report to the “Company,” “we,” “us,” “our” and other similar terms refer to Legacy Proterra prior to the Business Combination and to Proterra and its consolidated subsidiaries after giving effect to the Business Combination.
6


Forward-Looking Statements
This Quarterly Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This Quarterly Report contains forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. These statements are based on the beliefs and assumptions of our management. We also may provide forward-looking statements in oral statements or other written materials released to the public. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes”, “estimates”, “expects”, “projects”, “forecasts”, “may”, “will”, “should”, “seeks”, “plans”, “scheduled”, “anticipates” or “intends” or similar expressions. Forward-looking statements contained in this Quarterly Report may include, for example, statements about:
our financial and business performance, including business metrics;
the ability to maintain the listing of our common stock on the Nasdaq Global Select Market (“Nasdaq”), and the potential liquidity and trading of our common stock;
changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
substantial regulations, which are evolving, and unfavorable changes or failure by us to comply with these regulations;
expectations regarding corporate, state, federal and international mandates/commitments;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors, and our ability to attract and retain key personnel;
the anticipated success of our most recent business expansion with Proterra Powered and Proterra Energy, and our ability to attract the customers and business partners we expect;
forecasts regarding long-term end-customer adoption rates and demand for our products in markets that are new and rapidly evolving and our ability to meet demand for our products;
our ability to compete successfully against current and future competitors in light of intense and increasing competition in the transit bus and commercial vehicle electrification market;
the availability of government economic incentives and government funding for public transit upon which our transit business is significantly dependent;
willingness of corporate and other public transportation providers to adopt and fund the purchase of electric vehicles for mass transit;
availability of a limited number of suppliers for our products and services;
material losses and costs from product warranty claims, recalls, or remediation of electric transit buses for real or perceived deficiencies or from customer satisfaction campaigns;
increases in costs, disruption of supply, or shortage of materials, particularly lithium-ion cells;
our dependence on a small number of customers that fluctuate from year to year, and failure to add new customers or expand sales to our existing customers;
7


our dependence on our business suppliers, particularly as we build out new facilities;
rapid evolution of our industry and technology, and related unforeseen changes, including developments in alternative technologies and powertrains or improvements in the internal combustion engine that could adversely affect the demand for our electric transit buses;
development, maintenance and growth of strategic relationships in the Proterra Powered or Proterra Energy business, identification of new strategic relationship opportunities, or formation strategic relationships;
competition for the business of both small and large transit agencies, which place different demands on our business, including the need to build an organization that can serve both types of transit customers;
accident or safety incidents involving our buses, battery systems, electric drivetrains, high-voltage systems or charging solutions;
product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims;
changes to U.S. trade policies, including new tariffs or the renegotiation or termination of existing trade agreements or treaties;
various environmental and safety laws and regulations that could impose substantial costs upon us and negatively impact our ability to operate our manufacturing facilities; outages and disruptions of our services if we fail to maintain adequate security and supporting infrastructure as we scale our information technology systems;
availability of additional capital to support business growth;
failure to protect our intellectual property;
intellectual property rights claims by third parties, which could be costly to defend, related significant damages and resulting limits on our ability to use certain technologies;
developments and projections relating to our competitors and industry;
our anticipated growth rates and market opportunities;
the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements;
the potential for our business development efforts to maximize the potential value of our portfolio;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
the inability to develop and maintain effective internal controls;
the diversion of management’s attention and consumption of resources as a result of potential acquisitions of other companies;
failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows;
cyber-attacks and security vulnerabilities; and
8


the effect of the COVID-19 pandemic, macroeconomic conditions, such as rising inflation rates, uncertain credit and global financial markets and supply chain disruptions, and geopolitical events, such as the conflict between Russia and Ukraine and related sanctions, on the foregoing.
These forward-looking statements are based on information available as of the date of this Quarterly Report, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements such as those contained in documents we have filed with the Securities and Exchange Commission (the “SEC”). Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or similar transactions.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. For a discussion of the risks involved in our business and investing in our common stock, see Part II, Item 1A. titled “Risk Factors.”
Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.
9


Summary of Risk Factors
The below summary of risk factors provides an overview of many of the risks we are exposed to in the normal course of our business activities. As a result, the following summary of risks does not contain all of the information that may be important to you, and you should read the summary of risks together with the more detailed discussion of risks set forth in Part II, Item 1A under the heading “Risk Factors,” and elsewhere in this Quarterly Report. Additional risks, beyond those summarized below or discussed elsewhere in this Quarterly Report, may apply to our activities or operations as currently conducted or as we may conduct them in the future or in the markets in which we operate or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including risks associated with the following:
Our limited history of selling battery systems, electrification and charging solutions, fleet and energy management systems, electric transit buses, and related technologies makes it difficult to evaluate our business and prospects and may increase the risks associated with your investment.
Our most recent business expansion with Proterra Powered and Proterra Energy may not be as successful as anticipated, may not attract the customers and business partners we expect, and the assumptions underlying the growth prospects of these businesses may not prove to be accurate.
Because many of the markets in which we compete are new and rapidly evolving, including possible consolidation of industry players, it is difficult to forecast long-term end-customer adoption rates and demand for our products, and our ability to meet demand for our products.
We face intense and increasing competition in the transit bus market and may not be able to compete successfully against current and future competitors, which could adversely affect our business, revenue growth, and market share.
We have been and may continue to be impacted by macroeconomic conditions resulting from the global COVID-19 pandemic including supply chain disruptions.
Our transit business is significantly dependent on government funding for public transit, and the unavailability, reduction, or elimination of government economic incentives would have an adverse effect on our business, prospects, financial condition, and operating results.
The growth of our transit business is dependent upon the willingness of corporate and other public transportation providers to adopt and fund the purchase of electric vehicles for mass transit.
Our dependence on a limited number of suppliers introduces significant risk that could have adverse effects on our financial condition and operating results.
We have a long sales, production, and technology development cycle for new public transit customers, which may create fluctuations in whether and when revenue is recognized and may have an adverse effect on our business.
We have a history of net losses, have experienced rapid growth and anticipate increasing our operating expenses in the future, and may not achieve or sustain positive gross margin or profitability in the future.
We could incur material losses and costs from product warranty claims, recalls, or remediation of electric transit buses for real or perceived deficiencies or from customer satisfaction campaigns.
Increases in costs, disruption of supply, or shortage of materials, particularly lithium-ion cells, could harm our business.
Our annual revenue has in the past depended, and will likely continue to depend, on a small number of customers that fluctuate from year to year, and failure to add new customers or expand sales to our existing customers could have an adverse effect on our operating results for a particular period.
10


Our industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies and powertrains or improvements in the internal combustion engine may adversely affect the demand for our electric transit buses and our electric battery solutions for commercial vehicles.
We may not be able to develop, maintain and grow strategic relationships in the Proterra Powered or Proterra Energy business, identify new strategic relationship opportunities, or form strategic relationships, in the future.
We are competing for the business of both small and large transit agencies, which place different demands on our business, and if we do not build an organization that can serve both types of transit customers by scaling our internal resources to meet varying customer needs, our business, prospects, financial condition and operating results may be harmed.
Our business is subject to substantial regulations and compliance programs, which are evolving, and unfavorable changes or failure by us to comply with these regulations and compliance programs could have an adverse effect on our business.
The use of lithium-ion cells may become disfavored as a result of the availability, or perceived superiority of, other types of batteries or yet undeveloped or unknown technologies.
Our business could be adversely affected from an accident or safety incident involving our battery systems, electrification and charging solutions, fleet and energy management systems, electric transit buses or defaults in the materials or workmanship of our composite bus bodies or other components.
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.
Changes to U.S. trade policies, including new tariffs or the renegotiation or termination of existing trade agreements or treaties, may adversely affect our financial performance.
We are subject to various environmental and safety laws and regulations that could impose substantial costs upon us and negatively impact our ability to operate our manufacturing facilities if we fail in our efforts to abide by these laws and regulations.
We may experience outages and disruptions of our services if we fail to maintain adequate security and supporting infrastructure as we scale our information technology systems.
We may require additional capital to support business growth, and such capital might not be available on terms acceptable to us, if at all.
Failure to protect our intellectual property could adversely affect our business.
We may be subject to intellectual property rights claims by third parties, which could be costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.
Our loan and security agreements contain covenants that may restrict our business and financing activities.
If we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable law and regulations could be impaired.
Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.
Our management team has limited experience managing a public company.
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Part I. Financial Information
Item 1. Financial Statements
PROTERRA INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30, 2022 December 31, 2021
(Unaudited) (Note 1)
Assets:
Cash and cash equivalents $ 52,722  $ 170,039 
Accounts receivable, net 82,682  81,644 
Short-term investments 470,490  490,967 
Inventory 149,050  114,556 
Prepaid expenses and other current assets 17,015  15,300 
Deferred cost of goods sold 3,956  1,816 
Restricted cash, current 12,105  12,105 
Total current assets 788,020  886,427 
Property, plant, and equipment, net 82,204  62,246 
Operating lease right-of-use assets
25,745  24,282 
Restricted cash, non-current 460  460 
Long-term inventory prepayment 10,000  — 
Other assets 10,261  8,472 
Total assets $ 916,690  $ 981,887 
Liabilities and Stockholders’ Equity:
Accounts payable $ 55,816  $ 53,404 
Accrued liabilities 20,286  20,634 
Deferred revenue, current 13,536  13,821 
Operating lease liabilities, current 6,618  4,084 
Total current liabilities 96,256  91,943 
Debt, non-current 111,457  110,999 
Deferred revenue, non-current 26,836  22,585 
Operating lease liabilities, non-current 20,264  20,963 
Other long-term liabilities 15,427  15,245 
Total liabilities 270,240  261,735 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.0001 par value; 500,000 shares authorized and 224,979 shares issued and outstanding as of June 30, 2022 (unaudited); 500,000 shares authorized and 221,960 shares issued and outstanding as of December 31, 2021
22  22 
Preferred stock, $0.0001 par value; 10,000 shares authorized and zero shares issued and outstanding as of June 30, 2022 (unaudited); 10,000 shares authorized, zero shares issued and outstanding as of December 31, 2021
—  — 
Additional paid-in capital
1,599,246  1,578,943 
Accumulated deficit
(950,124) (858,225)
Accumulated other comprehensive loss (2,694) (588)
Total stockholders’ equity
646,450  720,152 
Total liabilities and stockholders’ equity
$ 916,690  $ 981,887 
See accompanying notes to unaudited condensed consolidated financial statements.
12


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Product revenue $ 70,256  $ 56,072  $ 124,427  $ 107,494 
Parts and other service revenue 4,308  2,430  8,718  5,014 
Total revenue 74,564  58,502  133,145  112,508 
Product cost of goods sold 69,109  54,948  126,335  105,479 
Parts and other service cost of goods sold 4,900  2,241  9,258  4,845 
Total cost of goods sold 74,009  57,189  135,593  110,324 
Gross profit (loss) 555  1,313  (2,448) 2,184 
Research and development 14,904  10,315  26,706  20,015 
Selling, general and administrative 31,705  20,744  60,092  39,204 
Total operating expenses 46,609  31,059  86,798  59,219 
Loss from operations (46,054) (29,746) (89,246) (57,035)
Interest expense, net 6,951  29,129  13,830  37,926 
Gain on debt extinguishment (10,201) —  (10,201) — 
Loss on valuation of derivative and warrant liabilities —  129,789  —  146,110 
Other expense (income), net (983) 363  (976) 118 
Loss before income taxes (41,821) (189,027) (91,899) (241,189)
Provision for income taxes —  —  —  — 
Net loss $ (41,821) $ (189,027) $ (91,899) $ (241,189)
Net income (loss) per share of common stock:
Basic $ (0.19) $ (4.24) $ (0.41) $ (9.49)
Diluted $ (0.38) $ (4.24) $ (0.56) $ (9.49)
Weighted average shares used in per share computation:
Basic 223,745  44,571  223,015  25,403 
Diluted 248,876  44,571  247,870  25,403 
See accompanying notes to unaudited condensed consolidated financial statements.

13


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net loss $ (41,821) $ (189,027) $ (91,899) $ (241,189)
Other comprehensive loss, net of taxes:
Available-for-sales securities:
Unrealized losses on available-for-sale securities (465) —  (2,106) — 
Other comprehensive loss, net of taxes (465) —  (2,106) — 
Total comprehensive loss, net of taxes $ (42,286) $ (189,027) $ (94,005) $ (241,189)
See accompanying notes to unaudited condensed consolidated financial statements.
14


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total
Three Months Ended June 30, 2022 Shares Amount Shares Amount
Balance, March 31, 2022 —  $ —  222,703  $ 22  $ 1,585,418  $ (908,303) $ (2,229) $ 674,908 
Stock issuance for exercise of stock options, net of costs —  —  1,951  —  6,011  —  —  6,011 
Stock issuance for employee stock purchase plan —  —  325  —  1,502  —  —  1,502 
Stock-based compensation —  —  —  —  6,315  —  —  6,315 
Net loss —  —  —  —  —  (41,821) —  (41,821)
Other comprehensive loss, net of taxes —  —  —  —  —  —  (465) (465)
Balance, June 30, 2022
—  $ —  224,979  $ 22  $ 1,599,246  $ (950,124) $ (2,694) $ 646,450 
Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total
Three Months Ended June 30, 2021 Shares Amount Shares Amount
Balance, March 31, 2021 115,136  $ 13  6,244  $ $ 687,692  $ (660,381) $ —  $ 27,325 
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization (115,136) (13) 115,576  11  —  —  — 
Conversion of Convertible Notes into common stock —  —  7,424  48,780  —  —  48,781 
Issuance of common stock upon the reverse recapitalization, net of issuance costs —  —  76,172  502,419  —  —  502,427 
Issuance of stock upon exercise of options and warrants, net of costs —  —  2,205  —  1,778  —  —  1,778 
Reclassification of derivative liability upon the reverse recapitalization —  —  —  —  182,554  —  —  182,554 
Reclassification of Legacy Proterra warrant liability upon the reverse recapitalization —  —  —  —  87,016  —  —  87,016 
Stock-based compensation —  —  —  —  5,090  —  —  5,090 
Net loss —  —  —  —  —  (189,027) —  (189,027)
Balance, June 30, 2021
—  $ —  207,621  $ 21  $ 1,515,331  $ (849,408) $ —  $ 665,944 
Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total
Six Months Ended June 30, 2022 Shares Amount Shares Amount
Balance, December 31, 2021 (Note 1)
—  $ —  221,960  $ 22  $ 1,578,943  $ (858,225) $ (588) $ 720,152 
Stock issuance for exercise of stock options, net of costs —  —  2,694  —  7,844  —  —  7,844 
Stock issuance for employee stock purchase plan —  —  325  —  1,502  —  —  1,502 
Stock-based compensation —  —  —  —  10,957  —  —  10,957 
Net loss —  —  —  —  —  (91,899) —  (91,899)
Other comprehensive loss, net of taxes —  —  —  —  —  —  (2,106) (2,106)
Balance, June 30, 2022
—  $ —  224,979  $ 22  $ 1,599,246  $ (950,124) $ (2,694) $ 646,450 
Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total
Six Months Ended June 30, 2021 Shares Amount Shares Amount
Balance, December 31, 2020 (Note 1) 115,136  $ 13  5,678  $ $ 682,671  $ (608,219) $ —  $ 74,466 
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization (115,136) (13) 115,576  11  —  —  — 
Conversion of Convertible Notes into common stock —  —  7,424  48,780  —  —  48,781 
Issuance of common stock upon the reverse recapitalization, net of issuance costs —  —  76,172  502,419  —  —  502,427 
Issuance of stock upon exercise of options and warrants, net of costs —  —  2,771  —  3,802  —  —  3,802 
Reclassification of derivative liability upon the reverse recapitalization —  —  —  —  182,554  —  —  182,554 
Reclassification of Legacy Proterra warrant liability upon the reverse recapitalization —  —  —  —  87,016  —  —  87,016 
Stock-based compensation —  —  —  —  8,087  —  —  8,087 
Net loss —  —  —  —  —  (241,189) —  (241,189)
Balance, June 30, 2021
—  $ —  207,621  $ 21  $ 1,515,331  $ (849,408) $ —  $ 665,944 
See accompanying notes to unaudited condensed consolidated financial statements.
15


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net loss $ (91,899) $ (241,189)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 6,672  7,737 
Stock-based compensation 10,957  8,087 
Amortization of debt discount and issuance costs 6,833  28,346 
Accretion of debt end of term charge and PIK interest 3,665  4,564 
Gain on debt extinguishment (10,007) — 
Loss on valuation of derivative and warrant liabilities —  146,110 
Others 53  521 
Changes in operating assets and liabilities:
Accounts receivable (1,026) (13,325)
Inventory (33,979) (2,582)
Prepaid expenses and other current assets (1,792) (1,500)
Deferred cost of goods sold (2,139) 878 
Operating lease right-of-use assets and liabilities 372  (55)
Other assets (11,830) (984)
Accounts payable and accrued liabilities 3,259  11,397 
Deferred revenue, current and non-current 3,966  4,161 
Other non-current liabilities 197  949 
Net cash used in operating activities (116,698) (46,885)
Cash flows from investing activities:
Purchase of investments (297,672) (137,087)
Proceeds from maturities of investments 316,000  79,000 
Purchase of property and equipment (27,577) (5,321)
Net cash used in investing activities (9,249) (63,408)
Cash flows from financing activities:
Proceeds from reverse recapitalization, net of transaction costs —  646,441 
Repayment of debt and prepayment penalty
—  (17,083)
Repayment of finance obligation (16) (242)
Proceeds from (repayment of) government grants (700) 1,079 
Proceeds from exercise of stock options 7,844  3,802 
Proceeds from employee stock purchase plan 1,502  — 
Net cash provided by financing activities 8,630  633,997 
Net increase (decrease) in cash and cash equivalents, and restricted cash (117,317) 523,704 
Cash and cash equivalents, and restricted cash at the beginning of period 182,604  123,697 
Cash and cash equivalents, and restricted cash at the end of period $ 65,287  $ 647,401 
Supplemental disclosures of cash flow information:
Cash paid for interest $ 4,155  $ 4,853 
Cash paid for income taxes —  — 
Non-cash investing and financing activity:
Assets acquired through accounts payable and accrued liabilities $ 4,545  $ 947 
Non-cash transfer of assets to inventory 515  465 
Reclassification of Convertible Notes warrants liability upon exercise —  17,696 
Conversion of Convertible Notes into common stock —  48,607 
Reclassification of remaining Convertible Notes warrants liability upon the reverse recapitalization —  69,320 
Reclassification of derivative liability upon the reverse recapitalization —  182,554 
Conversion of convertible preferred stock into common stock —  627,315 
See accompanying notes to unaudited condensed consolidated financial statements.
16

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.    Summary of Significant Accounting Policies
Organization and Description of Business
Proterra Inc (“Proterra”), formerly known as ArcLight Clean Transition Corp. (“ArcLight”), is a leading developer and producer of electric vehicle technology for commercial applications. Proterra designs, develops, manufactures, and sells electric transit buses as an original equipment manufacturer for North American public transit agencies, airports, universities, and other commercial transit fleets. It also designs, develops, manufactures, sells, and integrates proprietary battery systems and electrification solutions for global commercial vehicle manufacturers. Additionally, Proterra provides fleet-scale, high-power charging solutions for its customers.
Legacy Proterra (as defined below) was originally formed in June 2004 as a Colorado limited liability company and converted to a Delaware corporation in February 2010. Proterra operates from its headquarters and battery production facility in Burlingame, California. Proterra also has manufacturing and product development facilities in Greenville and Greer, South Carolina and City of Industry, California.
On June 11, 2021, ArcLight filed a notice of deregistration with the Cayman Islands Registrar of Companies, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which ArcLight was domesticated and continued as a Delaware corporation. On June 14, 2021 (the “Closing Date”), ArcLight consummated a merger with Phoenix Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of ArcLight (“Phoenix Merger Sub”), and Proterra Inc, a Delaware corporation (“Legacy Proterra”), with Legacy Proterra surviving as the surviving company and as a wholly-owned subsidiary of ArcLight (the “Merger” and, collectively with the other transactions described in the Agreement and Plan of Merger (the “Merger Agreement”), the “Business Combination”). In connection with the Business Combination, Legacy Proterra changed its name to “Proterra Operating Company, Inc.” and ArcLight changed its name to “Proterra Inc”.
The Merger was accounted for as a reverse merger and a recapitalization with Legacy Proterra being the accounting acquirer. Accordingly, all historical financial information presented in the unaudited condensed consolidated financial statements of Proterra represents the accounts of Legacy Proterra and its wholly owned subsidiaries as if Legacy Proterra is the predecessor to Proterra. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (0.8925 shares of Legacy Proterra common stock for 1 share of Proterra common stock) (the “Exchange Ratio”). Unless otherwise specified or unless the context otherwise requires, references in these notes to the “Company,” “we,” “us,” or “our” refer to Legacy Proterra prior to the Business Combination and to Proterra following the Business Combination.
Prior to the closing of the Business Combination (the “Closing”), ArcLight’s Class A ordinary shares and public warrants were listed on the Nasdaq Capital Market under the symbols “ACTC” and “ACTCW,” respectively. Proterra’s common stock is currently listed on the Nasdaq Global Select Market under the symbol “PTRA”. See Note 3 “Reverse Recapitalization” for further details of the Merger. The Company’s public warrants were previously listed on the Nasdaq Global Select Market under the symbol “PTRAW.” On October 29, 2021, the Company redeemed its remaining outstanding public warrants at a redemption price of $0.10 per public warrant.
The Company has incurred net losses and negative cash flows from operations since inception. As of June 30, 2022, the Company has an accumulated deficit of $950.1 million. The Company has $523.2 million of cash and cash equivalents and short-term investments as of June 30, 2022. The Company has funded operations primarily through a combination of equity and debt financing. Management believes that the Company’s currently available resources will be sufficient to fund its cash requirements for at least the next twelve months. However, there can be no assurance that future financings will be successfully completed or completed on terms acceptable to the Company. These financial statements do not include any adjustments that may result from the outcome of this uncertainty.
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 and the related notes incorporated by referenced in the Company’s Annual Report (the “Annual Report”) on Form 10-K, filed with SEC on March 14, 2022, which provides a more complete discussion of the Company’s accounting policies and certain other information. The information as of December 31, 2021 and 2020 was derived from the Company’s audited financial statements. The condensed consolidated financial statements were prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2022 and the results of operations and cash flows for the three and six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Use of Estimates
In preparing the condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC, the Company must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ materially from these estimates.
Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies described in the Annual Report.
The Company has not experienced any significant impact to estimates or assumptions as a result of the COVID-19 pandemic. However, the Company’s financial results have been impacted by ongoing constraints and inefficiencies in production largely driven by shortages of component parts and shipment delays, and workforce absences due to illness or quarantines during the pandemic experienced by the Company or its suppliers. The Company will continue to monitor impacts of the COVID-19 pandemic on an ongoing basis. While the COVID-19 pandemic has not had a material adverse impact on the Company’s financial condition and results of operations to date, the gravity of the impact of the COVID-19 pandemic and related macroeconomic and geopolitical conditions on the Company’s future operational and financial performance will depend on certain developments, including the duration of the pandemic and spread of COVID-19 (including the variant strains of the virus), the impact on the Company’s customers and the effect on the Company’s suppliers, all of which are uncertain and cannot be predicted.
18

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Segments
The Company operates in the United States and has sales to the European Union, Canada, United Kingdom, Australia, Japan and Turkey. Revenue disaggregated by geography, based on the addresses of the Company’s customers, consists of the following (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
United States $ 61,673  $ 51,921  $ 113,640  $ 104,490 
Rest of World 12,891  6,581  19,505  8,018 
74,564  58,502  $ 133,145  $ 112,508 
The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented at the entity level. Accordingly, the Company has determined that it has a single reportable segment.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for credit losses based on historical write-off experience, an analysis of the aging of outstanding receivables, customer payment patterns and expectations of changes in macroeconomic conditions that may affect the collectability of outstanding receivables. The allowance for credit losses was not material as of June 30, 2022 and December 31, 2021.
Credit Risk and Concentration
The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments, and accounts receivable. Cash and cash equivalents and short-term investments are maintained primarily at one financial institution as of June 30, 2022, and deposits exceed federally insured limits. Risks associated with cash and cash equivalents, and short-term investments are mitigated by banking with creditworthy financial institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents or its short-term investments.
Cash equivalents and short-term investments consist of short-term money market funds, corporate debt securities, and debt securities issued by the U.S. Treasury, which are deposited with reputable financial institutions. The Company’s cash management and investment policy limits investment instruments to securities with short-term credit ratings at the timing of purchase of P-2 and A-2 or better from Moody’s Investors Service and Standard & Poor’s Financial Services, LLC, respectively, with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations.
Accounts receivable are typically unsecured and are generally derived from revenue earned from transit agencies, universities and airports in North America and global commercial vehicle manufacturers in North America, the European Union, the United Kingdom, Australia, Japan and Turkey. The Company periodically evaluates the collectability of its accounts receivable and provides an allowance for potential credit losses as necessary. 
19

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Given the large order value for customers and the relatively low number of customers, revenue and accounts receivable have typically been concentrated with a limited number of customers.
Revenue Accounts Receivable
Three Months Ended June 30, Six Months Ended June 30, June 30, December 31,
2022 2021 2022 2021 2022 2021
Number of customers accounted for 10% or more* 2 1 2 2 2 1
__________________
*No individual customer accounted for more than 20% of the Company’s revenue for the three and six months ended June 30, 2022 and 2021, or accounts receivable as of June 30, 2022 and December 31, 2021.
Single source suppliers provide the Company with a number of components that are required for manufacturing of its current products. In other instances, although there may be multiple suppliers available, many of the components are purchased from a single source. If these single source suppliers fail to meet the Company’s requirements on a timely basis at competitive prices, the Company could suffer manufacturing delays, a possible loss of revenue, or incur higher cost of sales, any of which could adversely impact the Company’s operating results.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of property, plant, and equipment and right-of-use assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.
In addition to the recoverability assessment, the Company periodically reviews the remaining estimated useful lives of property, plant, and equipment. If the estimated useful life assumption for any asset is reduced, the remaining net book value is depreciated over the revised estimated useful life.
The Company reviews long-lived assets for impairment at the lowest level for which separate cash flows can be identified. No impairment charge was recognized in the three and six months ended June 30, 2022 and 2021.
Deferred Revenue
Deferred revenue consists of billings or payments received in advance of revenue recognition that are recognized as revenue once the revenue recognition criteria are met. In some instances, progress billings are issued upon meeting certain milestones stated in the contracts. Accordingly, the deferred revenue balance does not represent the total contract value of non-cancelable arrangements. Invoices are typically due within 30 to 40 days.
The changes in deferred revenue consisted of the following (in thousands):
Deferred revenue as of December 31, 2021
$ 36,406 
Revenue recognized from beginning balance during the six months ended June 30, 2022
(8,624)
Deferred revenue added during the six months ended June 30, 2022
12,590 
Deferred revenue as of June 30, 2022
$ 40,372 
The current portion of deferred revenue represents the amount that is expected to be recognized as revenue within one year from the balance sheet date.
Revenue Recognition
The Company derives revenue primarily from the sale of vehicles and charging systems, the installation of charging systems, the sale of battery systems and powertrain components to other vehicle manufacturers, as well
20

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as the sale of spare parts and other services provided to customers. Product revenue consists of revenue earned from vehicles and charging systems, battery systems and powertrain components, installation of charging systems, and revenue from leased vehicles, charging systems, and batteries under operating leases. Leasing revenue recognized over time was approximately $0.3 million and $0.5 million in the three months ended June 30, 2022 and 2021, respectively, and $0.6 million and $1.1 million in the six months ended June 30, 2022 and 2021, respectively. Parts and other service revenue includes revenue earned from spare parts, the design and development of battery systems and powertrain systems for other vehicle manufacturers, and extended warranties.
The Company recognizes revenue when or as it satisfies a performance obligation by transferring control of a product or service to a customer. Revenue from product sales is recognized when control of the underlying performance obligations is transferred to the customer. Revenue from sales of vehicles is typically recognized upon delivery when the Company can objectively demonstrate that the criteria specified in the contractual acceptance provisions are achieved prior to delivery. In cases, where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue is recognized upon acceptance by the customer. Revenue from sales of charging systems is recognized at a point in time, generally upon acceptance by the customer or commissioning. Under certain contract arrangements, the control of the performance obligations related to the charging systems is transferred over time, and the associated revenue is recognized over the installation period using an input measure based on costs incurred to date relative to total estimated costs to completion. Spare parts revenue is recognized upon shipment. Extended warranty revenue is recognized over the life of the extended warranty using the time elapsed method. Development service contracts typically include the delivery of prototype products to customers. The performance obligation associated with the development of prototype products as well as battery systems and powertrain components to other vehicle manufacturers, is satisfied at a point in time, typically upon shipping.
Revenue derived from performance obligations satisfied over time from charging systems and installation was zero and $1.3 million for the three months ended June 30, 2022 and 2021, respectively, and $2.1 million and $5.1 million for the six months ended June 30, 2022 and 2021, respectively. Extended warranty revenue was $0.7 million and $0.3 million for the three months ended June 30, 2022 and 2021, respectively, and $1.1 million and $0.6 million for the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022 and December 31, 2021, the contract assets balance was $2.8 million and $1.3 million, respectively. The contract assets are expected to be billed within the next twelve months and are recorded in prepaid expenses and other current assets on the Company’s balance sheets.
As of June 30, 2022, the amount of remaining performance obligations that have not been recognized as revenue was $408.6 million, of which 80% were expected to be recognized as revenue over the next 12 months and the remainder thereafter. This amount excludes the value of remaining performance obligations for contracts with an original expected length of one year or less.
Our business is organized into two business units with three business lines, each of which addresses a critical component of the commercial vehicle electrification value proposition in a complementary and self-reinforcing manner:
Proterra Transit designs, develops, manufactures, and sells electric transit buses as an original equipment manufacturer (“OEM”) for North American public transit agencies, airports, universities, and other commercial transit fleets.
Proterra Powered & Energy includes Proterra Powered, which designs, develops, manufactures, sells, and integrates proprietary battery systems and electrification solutions into vehicles for global commercial vehicle OEMs, and Proterra Energy, which provides turnkey fleet-scale, high-power charging solutions and software services, ranging from fleet and energy management software-as-a-service, to fleet planning, hardware, infrastructure, installation, utility engagement, and charging optimization.
21

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The revenue of business units are as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Proterra Transit $ 50,819  $ 47,808  $ 86,200  $ 90,012 
Proterra Powered & Energy 23,745  10,694  46,945  22,496 
Total $ 74,564  $ 58,502  $ 133,145  $ 112,508 
Product Warranties
Warranty expense is recorded as a component of cost of goods sold. Accrued warranty activity consisted of the following (in thousands):
Six Months Ended June 30, 2022
Warranty reserve - beginning of period $ 23,274 
Warranty costs incurred (4,445)
Net changes in liability for pre-existing warranties, including expirations (2,499)
Provision for warranty 7,039 
Warranty reserve - end of period $ 23,369 
2.    Adoption of New Accounting Standards
ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt—Debt with Conversion and Other Options. This standard updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, this standard made amendments to the EPS guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted earnings per share calculation, and no longer allowing the net share settlement method. This standard also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. The Company adopted this standard on January 1, 2022, and it had no material impact on the condensed consolidated financial statements.
3.    Reverse Recapitalization
On June 14, 2021, Phoenix Merger Sub merged with Legacy Proterra, with Legacy Proterra surviving as a wholly-owned subsidiary of ArcLight. In connection with the Business Combination, Legacy Proterra changed its name to “Proterra Operating Company, Inc.” and ArcLight changed its name to “Proterra Inc”.
The following transactions occurred upon the Closing:
each share of outstanding Legacy Proterra convertible preferred stock was converted into shares of Proterra common stock in accordance with the applicable conversion ratio immediately prior to the effective time, and each share of Legacy Proterra common stock (including shares issued upon conversion of Legacy Proterra convertible preferred stock and warrants net exercised upon Closing) was converted into shares of common stock after giving effect to the Exchange Ratio of 0.8925 and resulting in the issuance of 123,752,882 shares of common stock;
certain holders of Convertible Notes (as defined in Note 6 “Debt”) with an original aggregate principal amounts of $46.5 million elected to convert their outstanding Convertible Notes balances including
22

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
accrued PIK interest and cash interest at the Closing resulting in the issuance of 7.4 million shares of common stock;
each outstanding Legacy Proterra option was converted into an option to purchase shares of Proterra common stock by multiplying the number of underlying shares by the Exchange Ratio, rounded down to the nearest whole share, resulting in such options being exercisable to purchase for an aggregate of 22,532,619 shares of Proterra common stock; the exercise price of each converted option was determined by dividing the per share exercise price of the respective Legacy Proterra options by the Exchange Ratio of 0.8925, rounded up to the nearest whole cent;
each outstanding Legacy Proterra warrant to purchase Legacy Proterra common stock and convertible preferred stock was converted into a warrant to purchase shares of Proterra common stock by multiplying the number of underlying shares by the Exchange Ratio, rounded down to the nearest whole share, resulting in such warrants being exercisable to purchase an aggregate of 3,504,523 shares of Proterra common stock; the exercise price of each converted warrant will be determined by dividing the per share exercise price of the respective Legacy Proterra warrant by the Exchange Ratio of 0.8925, rounded up to the nearest whole cent;
each outstanding Convertible Note that was not optionally converted in connection with the Closing remained outstanding and became convertible into shares of Proterra common stock in accordance with the terms of such Convertible Notes;
15,172 public shares were redeemed by ArcLight shareholders, and an aggregate of $0.2 million was paid from the trust account to these redeeming holders; and each ArcLight Class A and Class B ordinary share was converted into the right to receive one share of Proterra’s common stock resulting in the issuance of 34,671,900 shares of common stock;
pursuant to the subscription agreements between ArcLight and certain investors (the “PIPE Investors”), the PIPE Investors purchased 41.5 million shares of Proterra common stock at a purchase price of $10.00 per share for aggregate gross proceeds of $415.0 million (the “PIPE Financing”);
each ArcLight warrant outstanding immediately prior to the consummation was converted into a warrant exercisable into an equivalent number of shares of Proterra common stock, resulting in such warrants being exercisable for an aggregate of 21,424,994 shares of Proterra common stock; and
the 669,375 shares of Proterra common stock underlying certain Milestone Options (as defined below) fully vested upon the Closing.
Upon the occurrence of any of the following events during the first five years following the Closing (“earnout period”), up to an additional 22,809,500 shares of Proterra common stock (the “Earnout Stock”) may be issued to former holders of Legacy Proterra convertible preferred stock, common stock, warrants, vested options and Convertible Notes as of immediately prior to the Closing, as follows:
a.21.0526% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the volume-weighted average price (“VWAP”) of the Proterra common stock is greater than or equal to $15.00 per share or there occurs any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $15.00 per share (the “First Earnout Shares”);
b.an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the VWAP of the Proterra common stock is greater than or equal to $20.00 per share or there occurs any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $20.00 per share;
c.an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the VWAP of the Proterra common stock is greater than or equal to $25.00 per share or there occurs any
23

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $25.00 per share; and
d.an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the VWAP of the Proterra common stock is greater than or equal to $30.00 per share or there occurs any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $30.00 per share.
Pursuant to a letter agreement with ArcLight CTC Holdings, L.P. (the “Sponsor”), 10% of the Proterra common stock received by the Sponsor upon consummation of the Merger in exchange for its outstanding ArcLight Class B ordinary shares, excluding 140,000 shares owned by the ArcLight board of directors (the “ArcLight Board”), was subject to vesting and forfeiture (the “Sponsor Earnout Stock”). Such shares of Sponsor Earnout Stock would vest if over any 20 trading days within any 30 trading day period during the five-year earnout period, the VWAP of the Proterra common stock was greater than or equal to $15.00 per share or there occurred any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $15.00 per share.
In July 2021, the conditions for the issuance of the First Earnout Shares and the vesting of the Sponsor Earnout Stock were satisfied, resulting in an aggregate of 4,800,563 shares of common stock being issued and the 679,750 shares of Sponsor Earnout Stock fully vesting.
The Earnout Stock and Sponsor Earnout Stock met indexation and other criteria under Topic 815, Derivatives and Hedging, and are considered as equity-classified instruments.
The number of shares of Proterra common stock issued immediately following the consummation of the Merger was (in thousands):
Shares
ArcLight Class A ordinary shares, outstanding prior to Merger 27,750 
Less redemption of ArcLight shares (15)
Sponsor 6,257 
Sponsor Earnout Stock 680
Common stock of ArcLight 34,672
PIPE Investors 41,500
Legacy Proterra shares 131,176
Total shares of common stock immediately after Merger 207,348
Immediately after the Merger, Proterra is authorized to issue 510.0 million shares, with a par value of $0.0001 per share. As of the Closing, the authorized shares consisted of 500.0 million shares of common stock and 10.0 million shares of preferred stock, and there were 207.3 million shares of common stock issued and outstanding, and no shares of preferred stock issued and outstanding. In addition, as of the Closing, there were 24.9 million warrants issued and outstanding, including 13.9 million public warrants, 7.6 million private placement warrants, and 3.5 million Legacy Proterra warrants.
As of the Closing, a total of 82.3 million shares were reserved for future issuance upon the exercise of stock options, warrants and the issuance of Earnout Stock, of which 10.4 million shares were reserved for issuance under Proterra’s 2021 Equity Incentive Plan, 22.5 million shares were reserved under Legacy Proterra’s 2010 Equity Incentive Plan and 1.6 million shares reserved under Proterra’s 2021 Employee Stock Purchase Plan.
The Merger has been accounted for as a reverse merger and a recapitalization under U.S. GAAP with Legacy Proterra being the accounting acquirer, based on evaluation of the following facts and circumstances:
Legacy Proterra’s stockholders have a majority of the voting power of Proterra following the Merger;
24

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Legacy Proterra initially designated a majority of the board of directors of Proterra (the “Board”);
Legacy Proterra’s management comprised the management of Proterra;
Legacy Proterra comprised the ongoing operations of Proterra;
Legacy Proterra was the larger entity based on historical revenues and business operations; and
Proterra assumed Legacy Proterra’s name.
Under this method of accounting, ArcLight is treated as the “acquired” company for accounting and financial reporting purposes. Accordingly, for accounting purposes, this merger transaction is treated as the equivalent of Legacy Proterra issuing equity for the net assets of ArcLight, accompanied by a recapitalization. The net assets of ArcLight have been stated at historical cost, with no goodwill or other intangible assets recorded.
The Company received aggregate cash proceeds of $649.3 million at the Closing, net of $13.8 million of PIPE Financing fees, $18.5 million of other transaction costs paid at Closing, $9.7 million of ArcLight IPO deferred underwriting fees payable, $1.3 million of other ArcLight’s accrued expenses, and $0.1 million of ArcLight’s related party payable. The unbilled ArcLight expenses incurred prior to the Closing were paid from the cash proceeds received by the Company. The transaction costs including advisory, legal and other professional services directly related to the Merger were recorded in the additional paid-in capital in the balance sheet to offset against proceeds. The deferred transaction costs of approximately $2.9 million paid by the Company prior to the Closing were recorded to the additional paid-in capital and classified as financing activities in the consolidated statement of cash flow for the six months ended June 30, 2021.
4.    Fair Value of Financial Instruments
The Company measures certain financial assets and liabilities at fair value. Fair value is determined based on the exit price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy:
Level 1 – Quoted prices in active markets for identical assets or liabilities; 
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and 
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. 
Financial assets measured at fair value on a recurring basis using the above input categories were as follows (in thousands):
Pricing Category Fair Value at
June 30, 2022 December 31, 2021
Assets:
Cash equivalents and marketable securities:
Money market funds Level 1 $ 47,250  $ 102,978 
U.S. Treasury securities Level 1 —  49,996 
Short-term investments:
U.S. Treasury securities Level 1 470,490  330,053 
Corporate debt securities Level 2 —  160,914 
Total $ 517,740  $ 643,941 
25

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s short-term investments were primarily comprised of U.S. Treasury and corporate debt securities, and classified as available-for-sale at the time of purchase because it is intended that these investments are available for current operations. Investments are reported at fair value and are subject to periodic impairment review. Unrealized gains and losses related to changes in the fair value of these securities are recognized in accumulated other comprehensive loss. The ultimate value realized on these securities is subject to market price volatility until they are sold. Realized gains or losses from short-term investments are recorded in other expense (income), net.
The following is a summary of cash equivalents and marketable securities as of June 30, 2022 (in thousands):
Amortized Cost Unrealized Losses Estimated Fair Value
Cash equivalents:
Money market funds $ 47,250  $ —  $ 47,250 
Short-term investments:
U.S. Treasury securities 473,184  (2,694) 470,490 
Total $ 520,434  $ (2,694) $ 517,740 
As of June 30, 2022, the contractual maturities of the short-term investments were less than one year.
The following is a summary of cash equivalents and marketable securities as of December 31, 2021 (in thousands):
Amortized Cost Unrealized Losses Estimated Fair Value
Cash equivalents:
Money market funds $ 102,978  $ —  $ 102,978 
U.S. Treasury securities 49,996  —  49,996 
Short-term investments:
U.S. Treasury securities 330,618  (565) 330,053 
Corporate debt securities 160,937  (23) 160,914 
Total $ 644,529  $ (588) $ 643,941 
The unrealized losses as of June 30, 2022 and December 31, 2021 were primarily related to U.S. Treasury securities with original maturities longer than one year due to recent changes in interest rates and are considered temporary in nature.
The fair value of the Convertible Notes was $215.3 million as of June 30, 2022. The carrying value of the Convertible Notes of $111.5 million, net of $55.5 million unamortized debt discount and issuance costs, as of June 30, 2022, was recorded in Debt, non-current on the balance sheets.

5.    Balance Sheet Components
Cash and cash equivalents consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Cash
$ 5,472  $ 17,065 
Cash equivalents
47,250  152,974 
Total cash and cash equivalents
$ 52,722  $ 170,039 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets to the total of such amounts shown on the statements of cash flows. The restricted cash is
26

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
primarily collateral for performance bonds issued to certain customers. The collateral is provided in the form of a cash deposit to either support the bond directly or to collateralize a letter of credit that supports the performance bonds.
June 30, 2022 December 31, 2021
Cash and cash equivalents
$ 52,722  $ 170,039 
Restricted cash, current portion
12,105  12,105 
Restricted cash, net of current portion
460  460 
Total restricted cash
12,565  12,565 
Total cash and cash equivalents, and restricted cash
$ 65,287  $ 182,604 
Inventories consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Raw materials
$ 85,507  $ 65,225 
Work in progress
31,284  25,062 
Finished goods
25,248  18,269 
Service parts
7,011  6,000 
Total inventories
$ 149,050  $ 114,556 
The write-down of excess or obsolete inventories to cost of goods sold was immaterial for the three and six months ended June 30, 2022, and $0.2 million and $0.7 million for the three and six months ended June 30, 2021, respectively.
Property, plant, and equipment, net, consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Computer hardware
$ 5,273  $ 5,195 
Computer software
9,688  9,561 
Internally used vehicles and charging systems
13,920  16,459 
Leased vehicles and batteries
5,142  6,863 
Leasehold improvements
10,656  10,516 
Machinery and equipment
28,522  28,302 
Office furniture and equipment
1,906  1,861 
Tooling
22,194  21,726 
Finance lease right-of-use assets
179  179 
Construction in progress
45,771  20,243 
143,251  120,905 
Less: Accumulated depreciation and amortization
(61,047) (58,659)
Total
$ 82,204  $ 62,246 
Construction in progress was comprised of various assets that are not available for their intended use as of the balance sheet date, and mainly related to the equipment and facility build out at Greer, South Carolina.
For the three and six months ended June 30, 2022, depreciation and amortization expense were $3.3 million and $6.7 million, respectively. For the three and six months ended June 30, 2021, depreciation and amortization expense were $4.0 million and $7.7 million, respectively.
27

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accrued liabilities consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Accrued payroll and related expenses
$ 8,342  $ 8,069 
Accrued sales and use tax
1,396  885 
Warranty reserve
8,014  8,116 
Accrued audit and accounting related expenses
824  783 
Accrued charger installation costs
376  579 
Other accrued expenses
1,334  2,202 
Total
$ 20,286  $ 20,634 
Other long-term liabilities consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Warranty reserve $ 15,355  $ 15,158 
Finance lease liabilities, non-current 72  87 
Total $ 15,427  $ 15,245 

6.    Debt
Debt, net of debt discount and issuance costs, consisted of the following (in thousands):
June 30, 2022 December 31, 2021
PPP loan
$ —  $ 10,000 
Convertible Notes
111,457  100,999 
Total debt    
111,457  110,999 
Less debt, current    
—  — 
Debt, non-current
$ 111,457  $ 110,999 
Senior Credit Facility
In May 2019, the Company entered into a Loan, Guaranty and Security Agreement for a senior secured asset-based lending facility (the “Senior Credit Facility”) with borrowing capacity up to $75.0 million. The commitment under the Senior Credit Facility is available to the Company on a revolving basis through the earlier of May 2024 or 91 days prior to the stated maturity of any subordinated debt in aggregate amount of $7.5 million or more. The maximum availability under the Senior Credit Facility is based on eligible accounts receivable and inventory, subject to certain reserves, to be determined in accordance with the Senior Credit Facility. The commitment under the Senior Credit Facility includes a $20.0 million letter of credit sub-line as of June 30, 2022. Subject to certain conditions, the commitment may be increased by $50.0 million upon approval by the lender, and at the Company’s option, the commitment can be reduced to $25.0 million or terminated upon at least 15 days’ written notice.
The Senior Credit Facility is secured by a security interest in substantially all of the Company’s assets except for intellectual property and other restricted property.
Borrowings under the Senior Credit Facility bear interest at per annum rates equal to, at the Company’s option, either (i) the base rate plus an applicable margin for base rate loan, or (ii) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin for LIBOR loan. The base rate is calculated as the greater of (a) the Lender prime rate, (b) the federal funds rate plus 0.5%, and (c) one-month LIBOR plus 1.0%. The applicable margin is calculated based on a pricing grid linked to quarterly average excess availability (as a percentage of borrowing capacity). For base rate loans, the applicable margin ranges from 0.0% to 1.5%, and for LIBOR loans, it ranges from 1.5% to 3.0%. The Senior Credit Facility contains certain customary non-financial covenants. In
28

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
addition, the Senior Credit Facility requires the Company to maintain a fixed charge coverage ratio of at least 1.00:1.00 during such times as a covenant trigger event shall exist. 
There was no outstanding balance for borrowings under this Senior Credit Facility as of June 30, 2022 and December 31, 2021. There was an aggregate of $15.2 million in letters of credit outstanding as of June 30, 2022.
Small Business Administration Loan
In May 2020, the Company received Small Business Administration (the “SBA”) loan proceeds of $10.0 million from Town Center Bank pursuant to the Paycheck Protection Program (“the PPP loan”) under the “Coronavirus Aid, Relief and Economic Security (CARES) Act”. The PPP loan was in the form of a note with an original maturity in May 2022, and was extended to May 2025 based on the SBA’s interim final rule. The interest rate was 1.0% per annum.
In May 2022, the SBA approved the Company’s PPP loan forgiveness application, and the PPP loan of $10.0 million was forgiven in full and the previously paid interest of approximately $0.2 million was refunded. A total of $10.2 million was recorded as gain on debt extinguishment in the Company’s consolidated statements of operations.
Convertible Notes
In August 2020, the Company entered into a Note Purchase Agreement for Secured Convertible Promissory Notes (the “Convertible Notes”). The Convertible Notes had an aggregate principal amount of $200.0 million, with cash interest of 5.0% per annum payable at each quarter end and a paid-in-kind interest of 4.5% per annum payable by increasing the principal balance at each quarter end. The Convertible Notes will mature in August 2025, and the Company may not make prepayment unless approved by the required holders of the Convertible Notes.
Each of the Convertible Notes shall rank equally without preference or priority of any kind over one another, but senior in all rights, privileges and preferences to all other shares of the Company’s capital stock and all other securities of the Company that are convertible into or exercisable for the Company’s capital stock directly or indirectly.
Prior to the maturity date or prior to the payment or conversion of the entire balance of the Convertible Notes, in the event of a liquidation or sale of the Company, the Company shall pay to the holders of Convertible Notes the greater of (i) 150% of the principal balance of the Convertible Notes or (ii) the consideration that the holders would have received had the holders elected to convert the Convertible Notes into common stock immediately prior to such liquidation event.
The Convertible Notes do not entitle the holders to any voting rights or other rights as a stockholder of the Company, unless and until the Convertible Notes are actually converted into shares of the Company’s capital stock in accordance with their terms.
The Note Purchase Agreement contains certain customary non-financial covenants. In addition, the Note Purchase Agreement requires the Company to maintain liquidity at quarter end of not less than the greater of (i) $75.0 million and (ii) four times of cash burn for the three-month period then ended.
The Convertible Notes will mature in August 2025 or will be settled by issuing common stock, and accordingly are classified as a non-current liability on the Company’s balance sheets.
In connection with the issuance of the Convertible Notes, the Company issued warrants to the holders of Convertible Notes to purchase 4.6 million shares of Company stock at an exercise price of $0.02 per share. The warrants are freestanding financial instruments and, prior to the Closing, were classified as a liability due to the possibility that they could become exercisable into Legacy Proterra convertible preferred stock. Upon the consummation of the Merger, the stock issuable upon exercise of the warrants is Proterra common stock, with no possibility to convert to Legacy Proterra convertible preferred stock. As a result, the carrying amount of the warrant liability was reclassified to stockholders’ equity. The warrant liability of $29.0 million was initially measured
29

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
at fair value on its issuance date and recorded as a debt discount and amortized during the term of the Convertible Notes to interest expense using the effective-interest method. The warrant liability was remeasured on a recurring basis at each reporting period date, with the change in fair value reported in the statement of operations. Upon any exercise of the warrants to common stock, the carrying amount of the warrant liability is reclassified to stockholders’ equity.
Prior to the Closing, the embedded features of the Convertible Notes were composed of conversion options that had the economic characteristics of a contingent early redemption feature settled in a variable number of shares of Company stock. These conversion options were bifurcated and accounted for separately from the host debt instrument. The derivative liability of $68.5 million was initially measured at fair value on the issuance date of the Convertible Notes and recorded as a debt discount and was amortized during the term of the Convertible Notes to interest expense using the effective-interest method. The derivative liability was remeasured on a recurring basis at each reporting period date, with the change in fair value reported in the statement of operations. Upon the consummation of the Merger, the embedded conversion features associated with the Convertible Notes no longer qualify for derivative accounting since the conversion price became fixed. The carrying amount of the embedded derivative, the fair value as of the Closing Date, was reclassified to stockholders’ equity in accordance with Topic 815, Derivatives and Hedging.
Issuance costs of $5.1 million were also recorded as debt discount and are amortized during the term of the Convertible Notes to interest expense using the effective interest method.
On June 14, 2021, certain Convertible Note holders with an original aggregate principal amount of $46.5 million elected to convert their Convertible Notes at the Closing. An aggregate of $48.8 million principal and interest was reclassified to additional paid-in capital, and $21.0 million of remaining related debt issuance costs were expensed to interest expense.
The outstanding Convertible Notes including accrued interest will be automatically converted to common stock at $6.5712 per share pursuant to the mandatory conversion provisions, if and when the VWAP exceeds $9.86 over 20 consecutive days subsequent to January 13, 2022.
The amortization expense of debt discount and issuance costs were $3.5 million and $6.8 million for the three and six months ended June 30, 2022, respectively. The amortization expense of debt discount and issuance costs were $24.6 million and $28.3 million for the three and six months ended June 30, 2021, respectively.
The Convertible Notes, net of debt discount and issuance costs, consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Principal
$ 153,500  $ 153,500 
PIK interest
13,491  9,826 
Total principal
166,991  163,326 
Less debt discount and issuance costs
(55,534) (62,327)
Total Convertible Notes
$ 111,457  $ 100,999 
As of June 30, 2022, the contractual future principal repayments of the total debt were as follows (in thousands):
2022
$ — 
2025 (1)
166,991 
Total debt
$ 166,991 
__________________
(1)Including PIK interest added to principal balance through June 30, 2022.

30

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7.    Leases
As a Lessor
The net investment in leases were as follows (in thousands):
June 30, 2022 December 31, 2021
Net investment in leases, current $ 411  $ 411 
Net investment in leases, non-current 7,323  5,179 
Total net investment in leases $ 7,734  $ 5,590 
Interest income from accretion of net investment in lease was not material in the three and six months ended June 30, 2022 or 2021.
Future minimum payments receivable from operating and sales-type leases as of June 30, 2022 for each of the next five years were as follows:
Operating leases Sales-type leases
Remainder of 2022 $ 384  $ 198 
2023 384  469 
2024 —  730 
2025 —  1,248 
2026 —  1,248 
Thereafter
—  4,623 
Total minimum lease payments
$ 768  $ 8,516 
As a Lessee
The Company leases its office and manufacturing facilities in Burlingame, California, Greenville and Greer, South Carolina, City of Industry, California, and Rochester Hills, Michigan under operating lease agreements with various expiration dates from 2023 through 2033.
The Company had no material capital leases as of June 30, 2022.
Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):
Remainder of 2022 $ 3,971 
2023 6,893 
2024 4,224 
2025 3,487 
2026 2,615 
Thereafter
12,096 
Total undiscounted lease payment 33,286 
Less: imputed interest (6,404)
Total operating lease liabilities $ 26,882 
Operating lease expense was $1.9 million and $3.5 million for the three and six months ended June 30, 2022, respectively. Operating lease expense was $1.0 million and $2.0 million for the three and six months ended June 30, 2021, respectively.
Short-term and variable lease expenses for the six months ended June 30, 2022 and 2021 were not material.
31

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Supplemental cash flow information related to leases were as follows (in thousands):
Six Months Ended June 30,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$ (2,916) $ (2,020)
Operating lease right-of-use assets and liabilities consisted of the following (in thousands):
June 30, 2022 December 31, 2021
Operating leases
Operating lease right-of-use assets
$ 25,745  $ 24,282 
Operating lease liabilities, current
6,618  4,084 
Operating lease liabilities, non-current
20,264  20,963 
Total operating lease liabilities
$ 26,882  $ 25,047 
The weighted average remaining lease term and discount rate of operating leases were 6.6 years and 5.7%, respectively, as of June 30, 2022. The weighted average remaining lease term and discount rate of operating leases were 7.6 years and 5.8%, respectively, as of December 31, 2021.
As of June 30, 2022, the Company had no significant additional operating leases and finance leases that have not yet commenced.
8.    Commitments and Contingencies
Purchase Commitments
As of June 30, 2022, the Company had outstanding inventory and other purchase commitments of $2.3 billion. Most of the commitments relate to the expected purchase of cylindrical cells manufactured at a yet to be built LG Energy Solution battery cell plant in the United States, pursuant to a long-term supply agreement through 2028. The terms of the agreement require the Company to make certain prepayments that vary in size and are made as milestones are met on the construction of the US facility. As of June 30, 2022, the Company has made a $10.0 million prepayment, which was recorded as the long-term inventory prepayment on the consolidated balance sheets. We expect our next prepayment to be made within the next six to twelve months. The prepayments will be recouped by the Company by offsetting a predetermined amount per unit on cells purchased from LG Energy Solution.
Letters of Credit
As of June 30, 2022, the Company had letters of credit outstanding totaling $15.3 million.
Legal Proceedings
The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. From time to time in the normal course of business, various claims and litigation have been asserted or commenced. Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject the Company to significant liability or damages. Any claims or litigation could have an adverse effect on the Company’s business, financial position, operating results, or cash flows in or following the period that claims or litigation are resolved.
As of June 30, 2022 and December 31, 2021, the Company was not a party to any legal proceedings that would have a material adverse effect on its business.
32

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.    Stockholders’ Equity
On June 14, 2021, the Merger was consummated and, following the Closing, the Company is authorized to issue 510,000,000 shares of capital stock, with a par value of $0.0001 per share. The authorized shares consist of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of June 30, 2022, 224,979,308 shares of common stock were issued and outstanding, and no shares of preferred stock were issued and outstanding. The holders of each share of common stock are entitled to one vote per share.
The Company has retroactively adjusted the shares of Legacy Proterra stock issued and outstanding prior to June 14, 2021 to give effect to the Exchange Ratio of 0.8925 established in the Merger Agreement to determine the number of shares of Proterra common stock into which they were converted. Immediately prior to the Merger, Legacy Proterra was authorized to issue 271,920,636 shares of stock, with a par value of $0.0001 per share, with 156,276,750 shares designated as common stock and 115,643,886 shares of convertible preferred stock. All of the outstanding Legacy Proterra convertible preferred stock was converted to Legacy Proterra common stock immediately prior to the Merger. See Note 3, Reverse Recapitalization.
As of June 30, 2022, the Company had reserved shares of common stock for issuance as follows (in thousands):
2010 Equity Incentive Plan
17,610 
2021 Equity Incentive Plan
20,471 
2021 Employee Stock Purchase Plan
3,524 
Warrants
Earnout Stock
18,009 
Convertible notes 26,316 
Total
85,931 
10.    Equity Plans and Stock-based Compensation
2010 Equity Incentive Plan
In 2010, Legacy Proterra adopted the 2010 Equity Incentive Plan (the “2010 Plan”), which provided for the grant of stock options, stock appreciation rights, restricted stock, and restricted stock units. Upon Closing, the then outstanding options under the 2010 Plan were converted into options exercisable to purchase an aggregate of 22,532,619 shares of common stock. Following the Closing, such options continue to be subject to the terms of the 2010 Plan and applicable award agreements; however, no further awards can be granted under the 2010 Plan. As of June 30, 2022, options to purchase 17,609,618 shares of common stock remained outstanding under the 2010 Plan.
2021 Equity Incentive Plan
The 2021 Plan was adopted by the ArcLight Board prior to the Closing, approved by ArcLight’s shareholders on June 11, 2021, and became effective upon the Closing Date. The Equity Incentive Plan allows the Company to grant awards of stock options, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), performance awards, and stock bonus awards to officers, employees, directors and consultants.
The Company initially reserved 10,000,000 shares of common stock, plus 387,531 reserved shares not issued under the 2010 Plan on the effective date of the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan increases automatically on January 1 of each of 2022 through 2031 by the number of shares equal to the lesser of 4% of the total number of outstanding shares of all classes of common stock as of the immediately preceding December 31, or a number as may be determined by the Board. In the first quarter of 2022, the shares reserved for issuance were increased by 8,878,388 additional shares.
Stock option and RSU awards generally vest annually over a four-year period.
33

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2021 Employee Stock Purchase Plan
Proterra’s 2021 Employee Stock Purchase Plan (the “ESPP”), including the authorization of the initial share reserve thereunder, was adopted by the ArcLight Board prior to the Closing, approved by ArcLight’s shareholders on June 11, 2021, and became effective upon the Closing Date.
An aggregate of 1,630,000 shares of common stock were reserved and available for sale under the ESPP. The aggregate number of shares reserved for sale under the ESPP increases automatically on January 1 of each of 2022 through 2031 by a number of shares equal to the lesser of 1% of the total number of outstanding shares of common stock as of the immediately preceding December 31 or a number of shares as may be determined by the Board or the compensation committee. The aggregate number of shares issued over the term of the ESPP, subject to certain adjustments, may not exceed 16,300,000 shares. In the first quarter of 2022, the shares reserved for issuance were increased by 2,219,597 additional shares.
The ESPP allows eligible employees to purchase shares of common stock at a discount through payroll deductions of up to 15% of their eligible compensation, at not less than 85% of the fair market value, as defined in the ESPP, subject to any plan limitations. A participant may purchase a maximum of 2,500 shares during each 6-month offering period and $25,000 in any one calendar year. The offering periods generally start on the first trading day on or after November 15th and May 15th of each year.
The first offering period started in the fourth quarter of 2021. The Company calculated the fair value of the employees’ purchase rights relating to the ESPP using the Black-Scholes model and recorded approximately $0.6 million of stock-based compensation expense for the six months ended June 30, 2022. In the three months ended June 30, 2022, the Company issued 325,106 shares of common stock under the ESPP with a purchase price of $4.62 per share.
A summary of the Company’s stock option activity and related information was as follows:
Options Outstanding
Number of Stock Options Outstanding Weighted- Average Exercise Price Weighted-Average Remaining Contractual Life
(Years)
Aggregate Intrinsic Value
(in thousands)
Balance as of December 31, 2021 (1)
18,101,584  4.08  5.5 $ 87,425 
Granted
758,528  7.70 
Exercised
(2,522,753) 3.08 
Cancelled/forfeited/expired
(1,038,896) 6.04 
Balance as of June 30, 2022 (1)
15,298,463  4.29  5.9 $ 15,298 
Exercisable as of June 30, 2022 (2)
11,626,130  3.66  5.1 $ 15,286 
__________________
(1)Excluding Equity Awards of 2,677,500 shares and Milestone Options of 669,375 shares. See below for further details.
(2)Excluding 1,506,096 shares exercisable under the Equity Awards with weighted average exercise price of $19.61 per share as of June 30, 2022.
In March 2020, in conjunction with Mr. Allen’s appointment as the then President and Chief Executive Officer, the board of directors of Legacy Proterra approved a grant to Mr. Allen of stock option awards with respect to 4,685,624 shares, comprised of (1) 1,338,749 shares of a time-based award with an exercise price of $5.33 per share vesting quarterly over four years, (2) 2,677,500 shares of a time-based award consisting of four tranches with an exercise price of $11.21, $16.81, $22.41 and $28.02 per share, respectively, and vesting quarterly over four years (“Equity Awards”), and (3) 669,375 shares of milestone-based award with an exercise price of $5.33 per share vesting entirely and becoming exercisable on the first trading day following the expiration of the lockup period of the Company’s initial public offering or the consummation of a change in control of the Company or upon the consummation of a merger involving a special purpose acquisition company (“Milestone Options”).
The stock-based compensation expense for Milestone Options was recognized at the time the performance milestone became probable of achievement, which was at the time of Closing. Upon Closing, the 669,375 shares
34

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
underlying the Milestone Options fully vested, and $2.1 million stock-based compensation expense was recognized in June 2021.
Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money stock options. The total intrinsic value of stock options exercised was $8.8 million for the six months ended June 30, 2022. The total estimated grant date fair value of stock options vested was $4.9 million for the six months ended June 30, 2022. As of June 30, 2022, the total unrecognized stock-based compensation expense related to outstanding stock options was $18.3 million, which is expected to be recognized over a weighted-average period of 2.2 years.
The fair value of stock options granted is estimated on the date of grant using the following assumptions:
Six Months Ended June 30,
2022 2021
Expected term (in years)
6.3 6.1
Risk-free interest rate
2.0  % 1.1  %
Expected volatility
55.1  % 55.6  %
Expected dividend rate
Restricted Stock Units
A summary of the Company's RSU activity and related information is as follows:
Number of RSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value
(in thousands)
Balance as of December 31, 2021
1,324,960  $ 10.67  $ 11,699 
Granted 3,903,044  7.18 
Released (171,738) 10.57 
Forfeited (250,736) 9.59 
Balance as of June 30, 2022
4,805,530  $ 7.90  $ 22,298 
The Company started granting RSUs to employees in the third quarter of 2021. As of June 30, 2022, the total unrecognized stock-based compensation expense related to outstanding RSUs was $34.2 million, which is expected to be recognized over a weighted-average period of 3.4 years.
Stock-based Compensation Expense
Stock-based compensation expense included in operating results was as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Cost of goods sold
$ 378  $ 270  $ 894  $ 546 
Research and development
1,288  545  2,281  1,058 
Selling, general and administrative
4,649  4,275  7,782  6,483 
Total stock-based compensation expense
$ 6,315  $ 5,090  $ 10,957  $ 8,087 
11.    Net Income (Loss) Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less the weighted-average unvested common stock subject to repurchase or forfeiture as they are not deemed to be issued for accounting purposes. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, RSUs and warrants, to the extent they are dilutive.
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The computation of basic and diluted net income (loss) per share of common stock attributable to common stockholders was as follows (in thousands, except for per share data):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator:
Net loss
$ (41,821) $ (189,027) $ (91,899) $ (241,189)
Effect of dilutive securities:
Interest expense to be recognized upon conversion of Convertible Notes (1)
(51,623) —  (47,797) — 
Numerator for diluted EPS - Net loss after the effect of dilutive securities $ (93,444) $ (189,027) $ (139,696) $ (241,189)
Denominator:
Weighted-average shares used in computing net loss per share of common stock, basic
223,745  44,571  223,015  25,403 
Convertible Notes (1)
25,131  —  24,855  — 
Diluted weighted average shares 248,876  44,571  247,870  25,403 
Net loss per share of common stock:
Basic
$ (0.19) $ (4.24) $ (0.41) $ (9.49)
Diluted $ (0.38) $ (4.24) $ (0.56) $ (9.49)
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(1)Adjustment is under the “if-converted” method. Adjustment for the three months ended June 30, 2022 includes write-off of $59.0 million unamortized debt discount of the Convertible Notes as of March 31, 2022, offset by the $7.4 million interest expense recorded in net loss of three months ended June 30, 2022. Adjustment for the six months ended June 30, 2022 includes write-off of $62.3 million unamortized debt discount of the Convertible Notes as of December 31, 2021, offset by the $14.5 million interest expense recorded in net loss of six months ended June 30, 2022.

As a result of the Merger, the Company has retroactively adjusted the weighted-average number of shares of common stock outstanding prior to the Closing Date by multiplying them by the Exchange Ratio of 0.8925 used to determine the number of shares of common stock into which they converted.
Prior to the Closing Date, the Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as the convertible preferred stock were participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. However, the two-class method did not impact the net loss per share of common stock as the Company was in a loss position and holders of convertible preferred stock did not participate in losses. Following the Closing Date, the Company applies the treasury stock method when calculating the diluted net income (loss) per share of common stock and “if-converted” method for Convertible Notes when applicable.
The outstanding Convertible Notes including accrued interest will be automatically converted to common stock at $6.5712 per share pursuant to the mandatory conversion provisions, if and when the VWAP exceeds $9.86 over 20 consecutive days subsequent to January 13, 2022.
Since the Company was in a loss position after the effect of dilutive securities, no adjustment is required to the weighted-average shares used in computing the diluted net loss per share as the inclusion of the remaining potential common stock shares outstanding would have been anti-dilutive. The potentially dilutive securities were as follows (in thousands):
June 30, 2022
Stock options and RSUs to purchase common stock 23,451 
Warrants to purchase common stock
23,452 
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12.    401(k) Plan
The Company sponsors a 401(k) defined contribution plan covering all eligible employees and provides a matching contribution for the first 4% of their salaries. The matching contribution costs incurred were $0.8 million and $1.5 million in the three and six months ended June 30, 2022, respectively. The matching contribution costs incurred were $0.6 million and $1.1 million in the three and six months ended June 30, 2021, respectively.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and our audited financial statements for the year ended December 31, 2021 and the related notes incorporated by referenced in our Annual Report (the “Annual Report”) on Form 10-K, filed with SEC on March 14, 2022. This discussion contains forward-looking statements and involves numerous risks and uncertainties. As a result of many factors, including those factors set forth in Part II, Item 1A titled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read Part II, Item 1A titled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are a leading developer and producer of commercial electric vehicle technology with an integrated business model focused on providing end-to-end solutions that enable commercial vehicle electrification.
Driven by factors including emissions targets and regulations, and lower operating costs, commercial and industrial fleets are expected to adopt electric vehicles at increasingly higher rates over the next two decades. More than 200,000 new electric buses, medium-duty trucks, and heavy-duty trucks are expected to be sold by 2030 and approximately 650,000 by 2040. Assuming average battery capacity per vehicle of 225 kWh for medium-duty trucks, 300 kWh for buses and 750 kWh for heavy-duty trucks, we estimate this could translate into demand for heavy-duty commercial and industrial-scale batteries of approximately 90 GWh in 2030 and approximately 300 GWh in 2040. Our business strategy is to capitalize on this opportunity.
Our business is organized into two business units comprised of three business lines, with each business line addressing a critical component of the commercial vehicle electrification.
Proterra Powered & Energy is our business unit that provides our technology solutions to commercial vehicle manufacturers and owners of commercial fleets, and is comprised of two business lines.
Proterra Powered designs, develops, manufactures, sells, and integrates proprietary battery systems and electrification solutions into vehicles for global commercial vehicle original equipment manufacturer (“OEM”) customers serving the Class 3 to Class 8 vehicle segments, including delivery trucks, school buses, and coach buses, as well as construction and mining equipment, and other applications.
Proterra Energy provides turnkey fleet-scale, high-power charging solutions and software services, ranging from fleet and energy management software-as-a-service, to fleet planning, hardware, infrastructure, installation, utility engagement, and charging optimization. These solutions are designed to optimize energy use and costs, and to provide vehicle-to-grid functionality.
Proterra Transit is our business unit that designs, develops, manufactures, and sells electric transit buses as an OEM for North American public transit agencies, airports, universities, and other commercial transit fleets. Proterra Transit vehicles showcase and validate our electric vehicle technology platform through rigorous daily use by a large group of sophisticated customers focused on meeting the wide-ranging needs of the communities they serve.
The first application of Proterra Powered commercial vehicle electrification technology was through Proterra Transit’s heavy-duty electric transit bus, which we designed from the ground up for the North American market. Our industry experience, the performance of our transit buses, and compelling total cost of ownership has helped make us a leader in the U.S. electric transit bus market. With over 900 electric transit buses on the road, our electric transit buses have delivered more than 30 million cumulative service miles spanning a wide spectrum of climates, conditions, altitudes and terrains. From this experience, we have been able to continue to iterate and improve our technology.
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Our decade of experience supplying battery electric heavy duty transit buses provided us the opportunity to validate our products’ performance, fuel efficiency and maintenance costs with a demanding customer base and helped broaden our appeal as a supplier to OEMs in other commercial vehicle segments and geographies. Proterra Powered has partnered with more than a dozen OEMs spanning from Class 3 to Class 8 trucks, several types of buses, and multiple off-highway categories. Through June 30, 2022, Proterra Powered has delivered battery systems and electrification solutions for more than 1,000 vehicles to our OEM partner customers.
In addition, Proterra Energy has established us as a leading commercial vehicle charging solution provider by helping fleet operators fulfill the high-power charging needs of commercial electric vehicles and optimize their energy usage, while meeting our customers’ space constraints and continuous service requirements. As of June 30, 2022, we had delivered more than 65 MW of charging infrastructure across North America.
Through June 30, 2022, we have generated the majority of our revenue from Proterra Transit’s sales of electric transit buses, complemented by additional revenue from Proterra Powered’s sales of battery systems and Proterra Energy’s sales and installation of charging systems, as well as from the sale of spare parts and other services provided to customers. As fleet electrification continues to expand beyond buses to trucks and other commercial vehicles, we expect Proterra Powered & Energy to grow into a significantly larger portion of our overall business and generate a greater portion of revenue. Through June 30, 2022, our chief operating decision maker, the Chief Executive Officer, reviewed financial information presented at the entity level for ongoing operations and for internal planning and forecasting purposes, and we had a single reportable segment.
Proterra Powered’s strategy is to leverage Proterra Transit’s success in the electric transit bus market to showcase the performance of our technology and demonstrate a strong track record of range and reliability in order to provide our battery systems and electrification solutions to other commercial vehicle segments. We believe our success in the transit bus market using our battery systems and electrification solutions to power heavy-duty vehicles with faster acceleration than a diesel-powered bus up steep hills, all while maintaining a rigorous regular schedule of operation with little tolerance for error, helps demonstrate the broad applicability of our technology to other commercial vehicle segments with similar requirements. We sell our electric powertrains using a business development team as well as a channel sales team for certain end markets. These teams work closely with our engineering team to develop optimal electrification solutions for our customers, depending on their vehicle requirements.
Enhanced by Proterra Powered’s high performance battery systems and electrification solutions and our purpose-built transit bus vehicle designed to optimize power, weight, and efficiency, Proterra Transit has been a leader in the North American electric transit market since 2012. Our sales efforts are focused on the 400 largest public transit agencies, which range in size from approximately 50 buses to thousands of buses in their fleets. These agencies operate more than 85% of the more than 70,000 transit buses on the road in North America, according to the FTA’s National Transit Database. We also focus our sales efforts on airports, universities, and corporate shuttle operators. As of June 30, 2022, there are, in aggregate, more than 25,000 buses in operation at fleets that are mandated to convert to 100% zero-emission by 2040 in North America, including fleets in the state of California and the cities of New York City, Chicago, and Seattle, among others. The fleet size of our primary public transit agency customer targets ranges between approximately 100 to more than 4,000 buses, and their electrification plans typically involve a phased approach. Our strategy is to maintain our leadership in market share of the North American electric transit bus market as electric penetration continues to rise by both acquiring new customers and expanding our share of existing customers as transit agencies’ average order rates increase to meet their zero emission targets. We believe we have a competitive advantage in winning new bus sales due to our extensive track record, with more than 900 vehicles on the road which have accumulated more than 30 million real-world service miles spanning a wide spectrum of climates, conditions, altitudes and terrains. We believe that repeat orders of increasing scale represent a considerable growth opportunity for our electric transit buses. After initial purchase, our customers often expand their electric vehicle programs and place additional orders for electric buses and charging systems. Repeat orders lower our customer acquisition costs and increase visibility into our sales pipeline. Many of our existing customers have announced long-term goals to transition to fleets completely comprised of electric vehicles.
We have a long sales and production cycle given our customers’ structured procurement processes and vehicle customization requirements, and believe that our proven ability to deliver commercial-quality battery systems, electrification and charging solutions, and electric transit buses gives us a distinct first mover advantage
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in end markets that are electrifying rapidly. For Proterra Powered, new vehicle development programs for commercial vehicle OEMs typically last between one and three years. As a result, volume production and revenue generation tend to trail initial contract signatures by a few years. For Proterra Transit, public transit agencies typically conduct a request for proposal process before awards are made and purchase orders are issued. Proposals are evaluated on various criteria, including but not limited to technical requirements, reliability, reputation of the manufacturer, and price. This initial sales process from first engagement to award typically ranges from 6 to 18 months. Once a proposal has been awarded, a pre-production process is completed where customer specific options are mutually agreed upon. A final purchase order follows the pre-production process. Procurement of parts and production typically follow the purchase order. Once a bus is fully manufactured, the customer performs a final inspection before accepting delivery, allowing us to recognize revenue. The length of time between a customer award and vehicle acceptance typically varies between 12 and 24 months, depending on product availability and production capacity.
We have significant manufacturing capacity already in place and at scale with approximately 360,000 square feet of manufacturing space across three facilities in two states. In City of Industry, California, we operate a battery production facility as well as a bus manufacturing facility. We also operate a battery production facility in Burlingame, California. Our largest bus manufacturing facility is located in Greenville, South Carolina. Battery manufacturing capacity at our City of Industry facility, if fully staffed on a three shift structure, is 675 MWh, sufficient to supply batteries for both our total bus manufacturing capacity of 680 transit buses across our two bus assembly facilities in Greenville, South Carolina and City of Industry, California, as well as more than 350 MWh of Proterra Powered batteries for third-party customers, equivalent to 1,500 school buses and/or delivery vehicles per year. In November 2021, we entered into a lease arrangement for a new plant with approximately 327,000 square feet at Greer, South Carolina to expand our battery system manufacturing capacity to multiple gigawatt-hours per year. We have specifically developed our battery modules using a design for manufacturability (DFM) approach that enables high-volume automated production of the module using a modular manufacturing line that can be rapidly built with low capital expenditures. Enabled by the simplicity of design and integrated architecture of our battery modules, we manufacture our battery packs in two widths and heights, various lengths ranging from 3-feet to 9-feet, and four different voltages. In the six months ended June 30, 2021 our battery production was 83 MWh and in the six months ended June 30, 2022 our battery production was 161 MWh, a 94% increase year over year. As we increase our production volumes, we believe that we will be able to leverage our historical investments in capacity to reduce our labor and overhead costs as a percentage of total revenue. With the addition of our new battery facility in Greer, South Carolina, we believe we will have sufficient capacity to fulfill our current backlog and anticipated near-term growth.
For the six months ended June 30, 2022 and 2021, our total revenue was $133.1 million and $112.5 million, respectively. We generated a gross loss of $(2.4) million and gross profit of $2.2 million for the six months ended June 30, 2022 and 2021, representing a gross margin of (2)% and 2%, respectively. We have also invested significant resources in research and development, operations, and sales and marketing to grow our business and, as a result, generated losses from operations of $89.2 million and $57.0 million for the six months ended June 30, 2022 and 2021, respectively.
We intend to continue to make investments in developing new products and enhancing existing products, increasing and optimizing production capacity, and also expect to make investments in our sales and marketing organizations as well as those expenses associated with operating as a public company. As a result, we expect that the cost of goods sold and operating expenses will increase with total revenue in absolute dollars in future periods but decline as a percentage of total revenue over time.
Key metrics and select financial data
Deliveries
We delivered 97 (92 new and 5 pre-owned) and 102 vehicles in the six months ended June 30, 2022 and 2021, respectively. We delivered battery systems for 635 and 56 vehicles in the six months ended June 30, 2022 and 2021, respectively.
Deliveries is an indicator of our ability to convert awarded orders into revenue and demonstrates the scaling of our operations. We expect volume of deliveries to vary every quarter and not be linear as product
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configurations vary in complexity and timing for completion is not standard. Vehicles delivered represents the number of buses that have met revenue recognition criteria during a period. Battery systems delivered represents the battery systems sold to OEMs that have met revenue recognition criteria during a period and is measured based on the number of underlying vehicles in which they are to be used. In addition to batteries, battery systems could include drivetrains and high voltage systems and controls, depending upon the customer contract.
Growth rates between deliveries and total revenue are not perfectly correlated because our total revenue is affected by other variables, such as the mix of products sold during the period or other services provided in addition to the hardware delivered.
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-GAAP financial measure of operating performance we use to evaluate our ongoing operations. Adjusted EBITDA is not defined under GAAP and may not be comparable to similarly titled measures used by other companies and should not be considered a substitute for other results reported in accordance with GAAP. We define Adjusted EBITDA as net income (loss), adjusted for the effects of financing, non-recurring items, depreciation on capital expenditures, and other non-cash items such as stock-based compensation, (gain) loss on valuation of derivative and warrant liabilities, gain on debt extinguishment, and other items like start-up costs for new facilities. We believe this measure is a useful financial metric for business planning purposes and to assess the operating performance from period to period by excluding certain items we believe are not representative of our core business. A reconciliation of net loss to adjusted EBITDA is provided below.
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Adjusted EBITDA Reconciliation:
Net loss
$ (41,821) $ (189,027) $ (91,899) $ (241,189)
Add (deduct):
Interest expense, net
6,951  29,129  13,830  37,926 
Provision for income taxes
—  —  —  — 
Depreciation and amortization expense
3,291  3,978  6,672  7,737 
Stock-based compensation expense
6,315  5,090  10,957  8,087 
Loss on valuation of derivative and warrant liabilities
—  129,789  —  146,110 
Gain on debt extinguishment
(10,007) —  (10,007) — 
Other items (1)
1,876  —  2,831  — 
Adjusted EBITDA
$ (33,395) $ (21,041) $ (67,616) $ (41,329)
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(1)Represents the start up costs for the new manufacturing facility at Greer, South Carolina, which is still under construction.
Business Combination
On June 14, 2021, we consummated the transactions contemplated by the Merger Agreement, by and among ArcLight, Phoenix Merger Sub, and Legacy Proterra. As contemplated by the Merger Agreement, on June 11, 2021, ArcLight consummated the Domestication. Further, on June 14, 2021, as contemplated by the Merger Agreement, we consummated the Merger.
In addition, pursuant to the Subscription Agreements, the PIPE Investors purchased an aggregate of 41,500,000 shares of Proterra common stock concurrently with the Closing for an aggregate purchase price of $415,000,000.
We received $649.3 million in net cash proceeds upon Closing to fund our growth initiatives, including research and development and our next-generation battery program.
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In October 2021, the majority of the public warrants and all of the private placement warrants were exercised, and we redeemed the remaining outstanding public warrants at a redemption price of $0.10 per public warrant.
Key factors affecting our performance
COVID-19 Pandemic and Global Economic Impacts
The outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S. and global economies and created uncertainty regarding potential impacts to our supply chain, operations, and customer demand. We have made adjustments to our business operations and have continued to operate with limited interruptions since March 2020 with no material adverse impact to our operations, financial position, or liquidity through June 30, 2022. Our vehicle and charging system deliveries were impacted, especially during the three months ended March 31, 2022, by ongoing constraints and inefficiencies in production driven by shortages in component parts, particularly resin for connectors, resulting from global supply chain disruptions stemming from the pandemic. Although we achieved revenue growth during the six months ended June 30, 2022 compared to the six months ended June 30, 2021, these disruptions decreased our revenue and increased our overhead, led to increased costs to secure components critical to our production needs and negatively impacted our margins. Our results for the remaining quarters of 2022 may continue to be impacted by supply chain issues. More generally, the COVID-19 pandemic, raw material and component price inflation, and increased freight and logistics costs are currently expected to continue to have an impact on our results of operations, financial position, and liquidity. If the COVID-19 pandemic, and related shutdowns, shipment delays, part shortages, production inefficiencies or extended customer order and acceptance processes, are prolonged or worsen, including as a result of variant strains of the virus, it could lead to more significant delays in production, the signing of new customer contracts and customer acceptances of near-term deliveries.
Ability to sell additional powertrains, vehicles, chargers and other products to new and existing customers
Our results will be impacted by our ability to sell our battery systems, electrification solutions including charging and energy management software, and electric transit buses, to new and existing customers. We have had initial success with Proterra Powered establishing strategic partnerships and with Proterra Transit selling electric transit buses and chargers to more than 130 customers. Our growth opportunity is dependent on commercial vehicle manufacturers electrifying their product offerings and increasing production as well as transit agencies electrifying more of their fleets (both of which we believe will increase with continued improvement in battery performance and costs over time), as well as our ability to increase manufacturing capacity and secure supply of key components, including battery cells, to meet expected demand. Our ability to sell additional products to existing customers is a key part of our success, as follow-on purchases indicate customer satisfaction and decrease the likelihood of competitive substitution. In order to sell additional products to new and existing customers, we will need to continue to invest significant resources in our products and services, and our manufacturing capacity and supply chain. If we fail to make the right investment decisions in our technology and electrification solutions, including our battery systems and electrification and charging solutions, and our manufacturing facilities and supply chain initiatives, if customers do not adopt our technology or our products and services, or if our competitors are able to develop technology or products and services that are superior to ours, our business, prospects, financial condition, and operating results could be adversely affected.
Ability to improve profit margins and scale our business
We intend to continue investing in initiatives to improve our operating leverage and significantly ramp production. We believe continued reduction in costs and an increase in production volumes will enable commercial vehicle manufacturers to electrify faster. Purchased materials represent the largest component of cost of goods sold in all products and we continue to explore ways to reduce these costs through improved design for cost, strategic sourcing, long-term contracts, and in some cases vertical integration. We launched two new manufacturing facilities in 2017 and a new battery manufacturing facility in 2020. We are currently under construction of our third battery manufacturing facility. We believe that an increase in volume and additional experience will allow us to leverage those investments and reduce our labor and overhead costs, as well as our freight costs, as a percentage of total revenue. We expect our product cost of goods sold to increase in absolute dollars in future periods as the volume of products we sell increases. As we grow into our current capacity,
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execute on cost-reduction initiatives, and improve production efficiency, we expect our product cost of goods sold as a percentage of revenue to decrease in the longer term. We anticipate that by increasing facility utilization rates and improving overall economies of scale, we can positively impact gross margins of our products, bring value to our customers and help accelerate commercial electric vehicle adoption. Our ability to achieve cost-saving and production-efficiency objectives can be negatively impacted by a variety of factors including, among other things, labor cost inflation, lower-than-expected facility utilization rates, manufacturing and production cost overruns, increased purchased material costs, and unexpected supply-chain quality issues or interruptions, and delays in our ability to hire, train, and retain employees needed to scale production to meet demand.
Continued emissions regulation and environmental stewardship
Our business benefits from international, federal, state, and local government interest in regulating air pollution and greenhouse gas emissions that contribute to global climate change. In July 2020, 15 states, including California and New York, pledged to work jointly towards a unified goal of zero emissions for 100% of new sales of medium- and heavy-duty commercial vehicles by 2050. In August 2019, the European Union passed Regulation 2019/1242, mandating a reduction in emissions from new trucks by 2025 and 2030. In addition, a growing number of cities and transit agencies have pledged to convert their entire transit bus fleets to zero-emission vehicles by a specific target date, and many have already begun to purchase electric vehicles in order to meet this goal. For example, on December 14, 2018, the California Air Resources Board adopted a state-wide mandate, the Innovative Clean Transit Rule, mandating transit agencies to commit to purchasing zero-emission buses starting in 2029. The move away from diesel- and natural gas-powered commercial vehicles is a significant step forward to accelerate the use of advanced technologies in medium- and heavy-duty vehicles to meet air quality and public health goals, thereby boosting near-term deployment of battery-electric commercial vehicles. As legacy internal combustion engine technology becomes more heavily regulated and costly across the globe, commercial vehicle manufacturers are investing in electrification. While this investment may increase competition, we believe that it will also increase customer demand, and help build the necessary supply chain and adjacent industry investments to support powertrain electrification. However, the uncertainty related to the passage of new legislation, appropriation of government funding, and implementation of regulations could impact the timing and number of vehicle orders, and any reduction in governmental interest in emissions regulation could negatively impact our business prospects or operating results.
Government programs accelerating adoption of zero-emission vehicles
Federal and state funding has accelerated the adoption of electric vehicles in our target markets. For instance, our U.S. transit customers have partially funded electric bus purchases through competitive grant programs, including the Low or No Emission Vehicle Program authorized by the federal Fixing America’s Surface Transportation Act in 2015, and other state-specific funding. The Infrastructure Investment and Jobs Act enacted on November 15, 2021 authorizes additional funding for electric vehicles and electric vehicle charging infrastructure through the creation of new programs and grants and the expansion of existing programs, including over $4.0 billion to replace existing buses with zero emission buses and at least $2.5 billion to replace existing school buses with zero emission school buses. In the United States, states are also allocating portions of settlement funds from the approximately $15 billion Volkswagen Emissions Settlement Program to investments in zero-emission transit buses and school buses. We expect that the continued availability of government funding for our customers to help fund purchases of our electric transit buses and battery systems will remain an important factor in our company’s growth prospects.
Components of results of operations
Revenue
We derive revenue primarily from the sale of vehicles, the sale of battery and powertrain systems, the sale and installation of charging systems, as well as the sale of spare parts and other services provided to customers.
Product revenue.    Product revenue consists of revenue earned from the sale of vehicles, sale of battery and powertrain systems as well as sales and installation of charging systems. A vehicle is considered delivered once met revenue recognition criteria. Revenue from sales of vehicles is typically recognized upon delivery when the Company can objectively demonstrate that the criteria specified in the contractual acceptance provisions are
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achieved prior to delivery. In cases, where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue is recognized upon acceptance by the customer. Revenue from sales of charging systems is recognized at a point in time, generally upon acceptance by the customer or commissioning. Under certain contract arrangements, revenue related to the charging systems is recognized over the installation period using an input measure based on costs incurred to date relative to total estimated costs to completion. Revenue from the sale of battery and powertrain systems is typically recognized upon shipping. Product revenue also includes revenue from leasing vehicles and charging systems under operating leases. Revenue from operating lease arrangements is recognized ratably over the lease term. The amount of product revenue we recognize in a given period depends on the number of vehicles delivered and the type of financing used by the customer.
Parts and other service revenue.    Parts and other service revenue includes sales of spare parts, revenue earned from the development of electric vehicle powertrain components, the design and development of battery and drive systems for other vehicle manufacturers, and sales of extended warranties. The amount of parts and service revenue tends to grow with the number of vehicles delivered. However, variability can exist as customers have different methodologies for sourcing spare parts for their fleets. Revenue related to the design, development and integration of battery and drive systems is typically recognized upon shipping or delivery of services and prototypes, depending on the terms in customer contracts.
Cost of goods sold
Product cost of goods sold.    Product cost of goods sold consists primarily of direct material and labor costs, manufacturing overhead, other personnel-related expenses, which include salaries, bonuses, benefits, and stock-based compensation expense, reserves for estimated warranty costs, freight expense, and depreciation expense. Product cost of goods sold also includes charges to write-down the carrying value of inventory when it exceeds its estimated net realizable value, including on-hand inventory that is either obsolete or in excess of forecasted demand. We expect our product cost of goods sold to increase in absolute dollars in future periods as the volume of products we sell increases. As we grow into our current capacity, execute on cost-reduction initiatives, and improve production efficiency, we expect our product cost of goods sold as a percentage of revenue to decrease in the longer term.
Parts and other service cost of goods sold.    Parts and other service cost of goods sold consists primarily of material costs and the cost of services provided, including field service costs and costs related to our development team. We record costs of development services incurred in periods prior to the finalization of an agreement as research and development expense. Once a development agreement is finalized, we record these costs in parts and other service cost of goods sold. We expect our parts and other service cost of goods sold to increase in absolute dollars in future periods as more customers put additional vehicles into service and sign new development agreements.
Gross profit (loss) and margin
Gross profit (loss) is total revenue less total cost of goods sold. Gross margin is gross profit (loss) expressed as a percentage of total revenue. Our gross profit (loss) and margin has and may in the future fluctuate from period-to-period. Such fluctuations have been and will continue to be affected by a variety of factors, including the timing of vehicle delivery, mix of products sold, manufacturing costs, financing options, and warranty costs. We expect our gross margin to improve over time as we continue to scale our operations and execute on cost reduction initiatives in the longer term.
Operating expenses
Research and development.    Research and development expense consists primarily of personnel-related expenses, consulting and contractor expenses, validation and testing expense, prototype parts and materials, depreciation expense, and allocated overhead costs. Through June 30, 2022, we have expensed certain software development costs related to our fleet and energy management platform as incurred because technological feasibility has not been fully achieved. We intend to continue to make significant investments in developing new products and enhancing existing products. Research and development expense will be variable relative to the
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number of products that are in development, validation or testing. However, we expect it to decline as a percentage of total revenue over time.
Selling, general and administrative.    Selling, general and administrative expenses consist primarily of personnel-related expenses for our sales, marketing, supply chain, finance, legal, human resources, and administrative personnel, as well as the costs of customer service, information technology, professional services, insurance, travel, allocated overhead, and other marketing, communications and administrative expenses. We will continue to actively promote our products. We also expect to invest in our corporate organization and incur additional expenses associated with operating as a public company, including increased legal and accounting costs, investor relations costs, higher insurance premiums, and compliance costs. As a result, we expect that selling, general and administrative expenses will increase in absolute dollars in future periods but decline as a percentage of total revenue over time.
Interest expense, net
Interest expense, net consists primarily of interest expense associated with our debt facilities and amortization of debt discount and issuance costs. Interest income consists primarily of interest income earned on our cash and cash equivalents and short-term investments balances.
Gain on debt extinguishment
Gain on debt extinguishment relates to the forgiveness of the PPP loan.
(Gain) loss on valuation of derivative and warrant liabilities
(Gain) loss on valuation of derivative and warrant liabilities relates to the changes in the fair value of derivative and warrant liabilities, which were subject to remeasurement at each balance sheet date.
Other expense (income), net
Other expense (income), net primarily relates to sublease income and currency fluctuations that generate foreign exchange gains or losses on invoices denominated in currencies other than the U.S. dollar, sublease income, amortization of short-term investment premium/discount and other non-operational financial gains or losses.
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Results of operations
The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. Percentages presented in the following tables may not sum due to rounding.
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Product revenue
$ 70,256  $ 56,072  $ 124,427  $ 107,494 
Parts and other service revenue
4,308  2,430  8,718  5,014 
Total revenue
74,564  58,502  133,145  112,508 
Product cost of goods sold
69,109  54,948  126,335  105,479 
Parts and other service cost of goods sold
4,900  2,241  9,258  4,845 
Total cost of goods sold (1)
74,009  57,189  135,593  110,324 
Gross profit (loss)
555  1,313  (2,448) 2,184 
Research and development (1)
14,904  10,315  26,706  20,015 
Selling, general and administrative (1)
31,705  20,744  60,092  39,204 
Total operating expenses
46,609  31,059  86,798  59,219 
Loss from operations
(46,054) (29,746) (89,246) (57,035)
Interest expense, net
6,951  29,129  13,830  37,926 
Gain on debt extinguishment (10,201) —  (10,201) — 
Loss on valuation of derivative and warrant liabilities
—  129,789  —  146,110 
Other expense (income), net
(983) 363  (976) 118 
Loss before income taxes
(41,821) (189,027) (91,899) (241,189)
Provision for income taxes
—  —  —  — 
Net loss
$ (41,821) $ (189,027) $ (91,899) $ (241,189)
__________________
(1)Includes stock-based compensation as follows:
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Cost of goods sold
$ 378  $ 270  $ 894  $ 546 
Research and development
1,288  545  2,281  1,058 
Selling, general and administrative
4,649  4,275  7,782  6,483 
Total stock-based compensation expense
$ 6,315  $ 5,090  $ 10,957  $ 8,087 
46


Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Product revenue
94  % 96  % 93  % 96  %
Parts and other service revenue
Total revenue
100  100  100  100 
Product cost of goods sold
93  94  95  94 
Parts and other service cost of goods sold
Total cost of goods sold (1)
99  98  102  98 
Gross profit (loss)
(2)
Research and development (1)
20  18  20  18 
Selling, general and administrative (1)
43  35  45  35 
Total operating expenses
63  53  65  53 
Loss from operations
(62) (51) (67) (51)
Interest expense, net
50  10  34 
Gain on debt extinguishment (14) —  (8) — 
Loss on valuation of derivative and warrant liabilities
—  222  —  130 
Other expense (income), net
(1) (1) — 
Loss before income taxes
(56) (324) (68) (215)
Provision for income taxes
—  —  —  — 
Net loss
(56) % (324) % (68) % (215) %
__________________
(1)Includes stock-based compensation expense as follows:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Cost of goods sold
% —  % % —  %
Research and development
Selling, general and administrative
Total stock-based compensation expense
% % % %
Comparison of the Three and Six Months Ended June 30, 2022 and 2021
Revenue
Three Months Ended June 30, $ % Six Months Ended June 30, $ %
(dollars in thousands) 2022 2021 Change Change 2022 2021 Change Change
Product revenue
$ 70,256  $ 56,072  $ 14,184  25  % $ 124,427  $ 107,494  $ 16,933  16  %
Parts and other service revenue
4,308  2,430  1,878