|
Item 2.01
|
Completion of Acquisition or Disposition of Assets.
|
The disclosure set
forth in the “Introductory Note” above is incorporated by reference into this Item 2.01.
At
a special meeting of stockholders held on June 2, 2020 in lieu of the 2020 annual meeting of stockholders of the Company (the “Special
Meeting”), the Company’s stockholders approved the Business Combination. The Business Combination was completed
on June 3, 2020.
In
connection with the Closing, (a) 1,499,700 shares of Legacy Nikola Series B preferred stock held by Nimbus Holdings LLC were
repurchased by Legacy Nikola at a purchase price of $16.67 per share, immediately prior to the Effective Time and (b) the
M&M Redemption occurred, immediately following the Effective Time.
As of the Closing Date
and following the completion of the Business Combination, including the M&M Redemption, the Company had the following outstanding
securities:
|
·
|
approximately 360,904,478 shares of Common Stock; and
|
|
·
|
approximately 23,890,000 warrants, each exercisable for one share of Common Stock at a price
of $11.50 per share (the “Warrants”).
|
FORM 10 INFORMATION
Prior to the Closing,
the Company was a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) with no operations, formed as a vehicle to effect a business combination with one or more operating businesses.
After the Closing, the Company became a holding company whose only assets consist of equity interests in Legacy Nikola.
Cautionary Note Regarding Forward-Looking
Statements
The
Company makes forward-looking statements in this Current Report on Form 8-K and in documents incorporated herein by reference.
All statements, other than statements of present or historical fact included in or incorporated by reference in this Current Report
on Form 8-K, regarding the Company’s future financial performance, as well as the Company’s strategy, future operations,
financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management are forward-looking
statements. When used in this Current Report on Form 8-K, the words “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intends,”
“may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “will,” “would” the negative of such terms and other
similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such
identifying words. These forward-looking statements are based on management’s current expectations,
assumptions, hopes, beliefs, intentions and strategies regarding future events and are based on currently available information
as to the outcome and timing of future events. The Company cautions you that these forward-looking statements are subject to all
of the risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company,
incident to its business.
These
forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations,
forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements in this Current
Report on Form 8-K and in any document incorporated herein by reference should not be relied upon as representing the Company’s
views as of any subsequent date, and the Company does 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.
As a result of a number
of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from
those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
|
·
|
the Company’s ability to recognize the anticipated benefits of the Business Combination,
which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitably following
the Closing;
|
|
·
|
costs related to the Business Combination;
|
|
·
|
changes in applicable laws or regulations;
|
|
·
|
the outcome of any legal proceedings against the Company ;
|
|
·
|
the effect of the COVID-19 pandemic on the Company’s business;
|
|
·
|
the ability of the Company to execute its business model, including market acceptance of its planned
products and services;
|
|
·
|
the Company’s ability to raise capital;
|
|
·
|
the possibility that the Company may be adversely affected by other economic, business, and/or
competitive factors; and
|
|
·
|
other risks and uncertainties set forth in the Proxy Statement in the section entitled “Risk
Factors” beginning on page 32 of the Proxy Statement, which is incorporated herein by reference.
|
Business and Properties
The
business and properties of VectoIQ and Legacy Nikola prior to the Business Combination are described in the Proxy Statement
in the sections entitled “Information
About VectoIQ” beginning on page 198 and “Information
About Nikola” beginning on page 141 of the Proxy Statement, which are incorporated herein by reference.
Legacy Nikola previously
partnered with Ryder for truck distribution and maintenance. On May 29, 2020, Legacy Nikola and Ryder announced that they had mutually
agreed to terminate their exclusive partnership with respect to the Company’s hydrogen electric semi-trucks.
Risk Factors
The
risks associated with the Company’s business are described in the Proxy Statement in the section entitled “Risk
Factors” beginning on page 32 of the Proxy Statement, which is incorporated herein by reference.
Selected Historical Financial Information
The selected
historical consolidated financial information and other data for the years ended December 31, 2017, 2018 and 2019, and
the selected consolidated balance sheet and other data as of December 31, 2018 and 2019 for Legacy Nikola are
included in the Proxy Statement in the section entitled “Selected
Historical Consolidated Financial Information of Nikola” beginning on page 25 of the Proxy Statement, which is
incorporated herein by reference.
Unaudited Consolidated Financial Statements
The unaudited consolidated
financial statements as of and for the three months ended March 31, 2020 of Legacy Nikola set forth in Exhibit 99.1 hereto have
been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the regulations of the SEC. The
unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments,
considered necessary for a fair statement of Legacy Nikola’s financial position, results of operations and cash flows for
the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may
be expected for the full year.
These
unaudited consolidated financial statements should be read in conjunction with the historical
audited consolidated financial statements of Legacy Nikola as of and for the year ended December 31, 2019 and the related
notes included in the Proxy Statement, the section entitled “Nikola’s
Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 173 of
the Proxy Statement and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” included herein.
Unaudited Pro Forma Condensed Consolidated
Combined Financial Information
The
unaudited pro forma condensed combined financial information of the Company as of and for the year ended December 31, 2019
is included in the Proxy Statement in the section entitled “Unaudited
Pro Forma Condensed Combined Financial Information” beginning on page 64 of the Proxy Statement, which is incorporated
herein by reference.
The unaudited pro forma
condensed combined financial information of the Company as of and for the three months ended March 31, 2020 is set forth in Exhibit
99.2 hereto and is incorporated herein by reference.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Management’s
discussion and analysis of the financial condition and results of operation of Legacy Nikola prior to the Business Combination
is included in the Proxy Statement in the section entitled “Nikola’s
Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 173 of
the Proxy Statement, which is incorporated herein by reference.
Management’s
discussion and analysis of the financial condition and results of operation of the Company as of and for the three months ended
March 31, 2020 is set forth below.
The
following discussion and analysis provides information which the Company’s management believes is relevant to an assessment
and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read
together with the consolidated financial statements and related notes and unaudited pro forma condensed financial information that
are included elsewhere or incorporated by reference in this Current Report on Form 8-K. The discussion and analysis should also
be read together with the Company’s audited consolidated financial statements and notes thereto included in the Company’s
2019 annual financial statements included in the Proxy Statement. This discussion may contain forward-looking statements based
upon current expectations that involve risks and uncertainties. The Company’s actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth in the Proxy Statement
in the section entitled “Risk
Factors” beginning on page 32 of the Proxy Statement, or in other parts of this Current Report on Form 8-K. Unless the
context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” to “the Company” is intended to mean the business and operations of the Company and its consolidated
subsidiaries.
Overview
The
Company is a vertically integrated zero emissions transportation systems provider that designs and manufactures state of the art
battery electric and hydrogen electric vehicles, electric vehicle drivetrains, energy storage systems, and hydrogen fueling stations.
To date, the Company has been primarily focused on delivering zero emission class 8 semi-trucks to the commercial transportation
sector in the U.S. and in Europe. The Company’s core product offering includes battery electric and hydrogen fuel cell electric
trucks and hydrogen fuel.
The
Company operates in three business units: Truck, Energy and Powersports. The Truck business unit is developing and commercializing
battery-electric vehicle (“BEV”) and hydrogen fuel cell electric vehicle
(“FCEV”) class 8 trucks that provide environmentally friendly, cost-effective solutions to the short
haul and long-haul trucking sector. The Energy business unit is developing and constructing a network of hydrogen fueling stations
to meet hydrogen fuel demand for FCEV customers. The Powersports business unit is developing electric vehicle solutions for military
and outdoor recreational applications.
In 2019, Legacy Nikola
partnered with Iveco S.p.A (“Iveco”), a subsidiary of CNH
Industrial N.V. (“CNHI”), a leading European industrial vehicle manufacturing company. Together,
the Company and Iveco are jointly developing cab over BEV
and FCEV trucks for sale in the European market, which will be manufactured through a 50/50 owned joint venture in Europe.
In April 2020, Legacy Nikola and Iveco entered into a series of agreements which established the joint venture, Nikola Iveco Europe
B.V. The joint venture with Iveco provides the Company with the manufacturing infrastructure to build BEV trucks for the North
American market prior to the completion of the Company’s planned greenfield manufacturing facility in Coolidge, Arizona.
The operations of the joint venture are expected to commence in the third quarter of fiscal 2020.
The Company plans to
begin construction on its greenfield manufacturing facility in late 2020, and Iveco will contribute technical engineering and production
support. Phase 1 of the greenfield manufacturing facility will be completed by the end of 2021, and the Company expects to start
BEV production at the facility in 2022 and FCEV production in 2023.
To
date, Legacy Nikola has financed its operations primarily through private placements of redeemable convertible preferred stock.
From the date of its incorporation through March 31, 2020, Legacy Nikola has raised aggregate gross proceeds of approximately $435.1
million from the issuance of redeemable convertible preferred stock, both for cash and in-kind contributions of services and intellectual
property. Legacy Nikola incurred a net loss of $33.2 million and used $22.0 million in cash to fund its operations during the three
months ended March 31, 2020.
The
Company expects both its capital and operating expenditures will increase significantly in connection with its ongoing activities,
as the Company:
|
·
|
constructs manufacturing facilities and purchases related equipment;
|
|
·
|
commercializes its heavy-duty trucks and other products;
|
|
·
|
develops hydrogen fueling stations;
|
|
·
|
continues to invest in its technology;
|
|
·
|
increases its investment in marketing and advertising, sales, and distribution infrastructure for
the Company’s products and services;
|
|
·
|
maintains and improves its operational, financial and management information systems;
|
|
·
|
hires additional personnel;
|
|
·
|
obtains, maintains, expands, and protects its intellectual property portfolio; and
|
|
·
|
operates as a public company.
|
Comparability
of Financial Information
The
Company’s results of operations and statements of assets and liabilities may not be comparable between periods as a result
of the Business Combination.
Business
Combination and Public Company Costs
The
disclosure set forth in the “Introductory Note” above with respect to the completion of the Business Combination is
incorporated by reference into this Item 2.01.
Following
the Closing, Legacy Nikola will be deemed the accounting predecessor of the Merger and the Company will be the successor registrant
for SEC purposes, meaning that Legacy Nikola’s financial statements for previous periods will be disclosed in the Company’s
future periodic reports filed with the SEC.
The
Merger is accounted for as a reverse recapitalization. Under this method of accounting, VectoIQ will be treated as the acquired
company for financial statement reporting purposes. The most significant change in the successor’s future reported financial
position and results are an increase in cash and cash equivalents (as compared to Legacy Nikola’s consolidated balance sheet
at March 31, 2020) of approximately $628 million through the date of this filing as a result of the Merger and net proceeds from Series D convertible preferred
stock, offset by payments for operations. Total non-recurring transaction costs are approximately
$52.3 million, of which Legacy Nikola incurred approximately $6.6 million. In addition, stock options issued by Legacy Nikola’s
Chief Executive Officer to certain employees were accelerated upon the Closing, which is a non-recurring expense of approximately
$3.8 million for the three months ended June 30, 2020. The underlying Legacy Nikola Common Stock of these stock options are owned
by Legacy Nikola’s Chief Executive Officer and are considered to be issued by the Company for accounting purposes. In addition,
certain stock options vesting periods were accelerated due to the Merger and Legacy Nikola recorded an additional $8.1 million
of expense during the three months ended June 30, 2020. The unaudited pro forma condensed combined financial information
of the Company as of and for the three months ended March 31, 2020 is set forth in Exhibit 99.2 hereto.
As
a consequence of the Merger, Legacy Nikola is the successor to the Company, an SEC registered and Nasdaq listed company, which
will require Legacy Nikola to hire additional personnel and implement procedures and processes to address public company regulatory
requirements and customary practices. Legacy Nikola expects to incur additional annual expenses as a public company for, among
other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting
and legal and administrative resources, including increased audit and legal fees.
Key
Factors Affecting Operating Results
The
Company believes that its performance and future success depend on several factors that present significant opportunities for the
Company but also pose risks and challenges, including those set forth in the Proxy Statement in the section entitled “Risk
Factors” beginning on page 32 of the Proxy Statement.
Commercial
Launch of Nikola heavy duty trucks and other products
The
Company expects to derive revenue from its BEV trucks in 2021 and FCEV trucks in 2023. Prior to commercialization, the Company
must complete modification or construction of required manufacturing facilities, purchase and integrate related equipment and software,
and achieve several research and development milestones. As a result, the Company will require substantial additional capital to
develop its products and services and fund operations for the foreseeable future. Until the Company can generate sufficient revenue
from product sales and hydrogen FCEV leases, it expects to finance its operations through a combination of existing cash on hand
as a result of the Business Combination and PIPE, secondary public offerings, debt financings, collaborations, and licensing arrangements.
The amount and timing of the Company’s future funding requirements will depend on many factors, including the pace and results
of the Company’s development efforts. Any delays in the successful completion of the Company’s manufacturing facility
will impact the Company’s ability to generate revenue.
Customer
Demand
While
not yet commercially available, the Company has received significant interest from potential customers. Going forward, the Company
expects the size of its committed backlog to be an important indicator of its future performance.
Basis
of Presentation
Currently,
the Company conducts business through one operating segment. All long-lived assets are maintained in, and all losses are attributable
to, the United States of America. A description of the Company’s operating segment is included in the Proxy Statement
in the section entitled “Nikola
Management’s Discussion and Analysis of Financial Condition and Results of Operations— Basis of Presentation”
on page 175 of the Proxy Statement.
Components
of Results of Operations
Revenues
To
date, Legacy Nikola has primarily generated revenues from services related to solar installation projects that are completed in
one year or less. Solar installation projects are expected to be discontinued.
Following
the anticipated introduction of the Company’s products to the market, the Company expects the significant majority of its
revenue to be derived from direct sales of BEV trucks starting in 2021 and from the bundled leases of FCEV trucks beginning in
2023. The Company’s bundled lease offering is inclusive of the cost of the truck, hydrogen fuel and regularly scheduled maintenance.
The Company expects the bundled leases to qualify for the “sales type lease” accounting under GAAP, with the sale of
the truck recognized upon the transfer of the title, and hydrogen fuel and maintenance revenues recognized over time as they are
being provided to the customer.
Cost
of Revenues
To
date, Legacy Nikola’s cost of revenues has included materials, labor, and other direct costs related to solar installation
projects.
Once
the Company has reached commercial production, cost of revenues will include direct parts, material and labor costs, manufacturing
overhead, including amortized tooling costs and depreciation of the Company’s greenfield manufacturing facility, depreciation
of the Company’s hydrogen fueling stations, cost of hydrogen production, shipping and logistics costs and reserves for estimated
warranty expenses.
Research
and Development Expense
Research
and development expenses consist primarily of costs incurred for the discovery and development of the Company’s vehicles,
which include:
|
·
|
Fees paid to third parties such as consultants and contractors for outside development;
|
|
·
|
Expenses related to materials, supplies and third-party services;
|
|
·
|
Personnel related expenses, including salaries, benefits, and stock-based compensation expense,
for personnel in the Company’s engineering and research functions;
|
|
·
|
Depreciation for prototyping equipment and research and development facilities.
|
During
the three months ended March 31, 2020, Legacy Nikola’s research and development expenses were primarily incurred in the development
of the BEV and FCEV trucks.
As
a part of its in-kind investment into the Company, Iveco is providing the Company with $100.0 million in advisory services (based
on pre negotiated hourly rates), including project coordination, drawings, documentation support, engineering support, vehicle
integration, and product validation support. Those services are expected to be consumed primarily in 2020 and 2021 and will be
recorded as research and development expense until the Company reaches commercial production.
The
Company expects its research and development costs to increase for the foreseeable future as it continues to invest in research
and develop activities to achieve its technology and product roadmap goals.
Selling,
General, and Administrative Expense
Selling,
general, and administrative expenses consist of personnel related expenses for the Company’s corporate, executive, finance,
and other administrative functions, expenses for outside professional services, including legal, audit and accounting services,
as well as expenses for facilities, depreciation, amortization, travel, and marketing costs. Personnel related expenses consist
of salaries, benefits, and stock-based compensation.
The
Company expects its selling, general, and administrative expenses to increase for the foreseeable future as the Company scales
headcount with the growth of its business, and as a result of operating as a public company, including compliance with the rules
and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative
and professional services.
Interest
Income (Expense), net
Interest
income (expense) consists primarily of interest received or earned on the Company’s cash and cash equivalents balances. Interest
expense consists of interest paid on the Company’s equipment term loan and financing lease.
Loss
on Forward Contract Liability
The
loss on forward contract liability includes losses from the remeasurement of Legacy Nikola’s Series D redeemable convertible
preferred share forward contract liability. In April 2020, Legacy Nikola fulfilled the forward contract liability and, therefore,
subsequent to June 30, 2020, there will not be any impact from the remeasurement of the forward contract liability.
Other
Income, net
Other
income consists primarily of other miscellaneous non-operating items, such as government grants, subsidies, and merchandising.
Income
Tax Expense
The
Company’s income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as
adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes
in the tax law. Due to cumulative losses, the Company maintains a valuation allowance against its U.S. and state deferred tax assets.
Cash paid for income taxes, net of refunds during the three months ended March 31, 2020 and 2019 was not material.
Results
of Operations
Comparison
of Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019
The
following table sets forth Legacy Nikola’s historical operating results for the periods indicated:
|
|
Three Months Ended March 31,
|
|
|
$
|
|
|
%
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
Change
|
|
|
|
(dollar amounts in thousands)
|
|
Revenues
|
|
$
|
58
|
|
|
$
|
124
|
|
|
$
|
(66
|
)
|
|
|
(53.2
|
)%
|
Cost of revenues
|
|
|
43
|
|
|
|
62
|
|
|
|
(19
|
)
|
|
|
(30.6
|
)
|
Gross profit
|
|
|
15
|
|
|
|
62
|
|
|
|
(47
|
)
|
|
|
(75.8
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
24,053
|
|
|
|
23,397
|
|
|
|
656
|
|
|
|
2.8
|
|
Selling, general, and administrative
|
|
|
7,978
|
|
|
|
6,501
|
|
|
|
1,477
|
|
|
|
22.7
|
|
Total operating expenses
|
|
|
32,031
|
|
|
|
29,898
|
|
|
|
2,133
|
|
|
|
7.1
|
|
Loss from operations
|
|
|
(32,016
|
)
|
|
|
(29,836
|
)
|
|
|
(2,180
|
)
|
|
|
(7.3
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
64
|
|
|
|
333
|
|
|
|
(269
|
)
|
|
|
(80.8
|
)
|
Loss on Series A redeemable convertible preferred stock warrant liability
|
|
|
—
|
|
|
|
(593
|
)
|
|
|
593
|
|
|
|
NM
|
|
Loss on forward contract liability
|
|
|
(1,324
|
)
|
|
|
—
|
|
|
|
(1,324
|
)
|
|
|
NM
|
|
Other income, net
|
|
|
114
|
|
|
|
1
|
|
|
|
113
|
|
|
|
NM
|
|
Loss before income taxes
|
|
|
(33,162
|
)
|
|
|
(30,095
|
)
|
|
|
(3,067
|
)
|
|
|
(10.2
|
)
|
Income tax expense
|
|
|
1
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
NM
|
|
Net loss
|
|
|
(33,163
|
)
|
|
|
(30,097
|
)
|
|
|
(3,066
|
)
|
|
|
(10.2
|
)
|
Net loss per share to common stockholders, basic and diluted
|
|
$
|
(0.55
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.05
|
)
|
|
|
NM
|
|
Weighted-average shares used to compute net loss per share to common stockholders, basic and diluted
|
|
|
60,167,749
|
|
|
|
60,166,667
|
|
|
|
1,082
|
|
|
|
NM
|
|
Revenues
Legacy
Nikola’s total revenue decreased by $66 thousand or 53.2% from $124 thousand during the three months ended March 31, 2019
to $58 thousand during the three months ended March 31, 2020. The decrease in revenue was related to a decrease in solar installation
services.
Cost
of Revenues
Legacy
Nikola’s cost of revenues decreased by $19 thousand or 30.6% from $62 thousand during the three months ended March 31, 2019
to $43 thousand during the three months ended March 31, 2020, due to a decrease in related revenues.
Research
and Development
Legacy
Nikola’s research and development expenses increased by $0.7 million or 2.8% from $23.4 million during the three months ended
March 31, 2019 to $24.1 million during the three months ended March 31, 2020. This increase was primarily from higher personnel
costs driven by increased engineering headcount, and depreciation costs primarily driven by the depreciation of the new HQ facility.
This was primarily offset from lower spend on purchased components due to preparation for Nikola World in 2019.
Selling,
General, and Administrative
Legacy
Nikola’s selling, general, and administrative expenses increased by $1.5 million or 22.7% from $6.5 million during the three
months ended March 31, 2019 to $8.0 million during the three months ended March 31, 2020. The increase was primarily related to
higher personnel expenses driven by growth in headcount and higher general corporate expenses, including depreciation of the Company’s
new headquarters in Phoenix, Arizona. This was partially offset by a decrease in marketing costs from Nikola World in 2019.
Interest
Income, net
Legacy
Nikola’s interest income, net decreased by $0.2 million or 80.5%, from $0.3 million during the three months ended March 31,
2019 to $0.1 million during the three months ended March 31, 2020. The decrease is primarily due to increased interest expense
from Legacy Nikola’s financing lease and a decrease in average cash and cash equivalents balance, offset by a higher interest
rate earned on deposits.
Loss
on Forward Contract Liability
Legacy
Nikola’s loss on Series D redeemable convertible preferred stock forward contract liability represents the recognized loss
from a $1.3 million change in fair value as of March 31, 2020.
Other
Income, net
Legacy
Nikola’s other income, net increased by $0.1 million, from $1 thousand during the three months ended March 31, 2019 to $0.1
million during the three months ended March 31, 2020. The increase was primarily related to subcontracting work performed on government
contracts.
Income
Tax Expense
Legacy
Nikola’s income tax expense was immaterial for the three months Ended March 31, 2020 and 2019. Legacy Nikola has accumulated
net operating losses at the federal and state level and maintain a full valuation allowance against Legacy Nikola’s net deferred
taxes.
Non-GAAP
Financial Measures
In
addition to Legacy Nikola’s results determined in accordance with GAAP, the Company believes the following non-GAAP measure
is useful in evaluating its operational performance. The Company uses the following non-GAAP financial information to evaluate
its ongoing operations and for internal planning and forecasting purposes. The Company believes that non-GAAP financial information,
when taken collectively, may be helpful to investors in assessing its operating performance.
EBITDA
and Adjusted EBITDA
“EBITDA”
is defined as net loss before other non-operating expense or income, income tax expense or benefit, and depreciation and amortization.
“Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation and other special items determined by
management. Adjusted EBITDA is intended as a supplemental measure of its performance that is neither required by, nor presented
in accordance with, GAAP. The Company believes that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors
to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with those of
comparable companies, which may present similar non GAAP financial measures to investors. However, you should be aware that when
evaluating EBITDA and Adjusted EBITDA the Company may incur future expenses similar to those excluded when calculating these measures.
In addition, the Company’s presentation of these measures should not be construed as an inference that the Company’s
future results will be unaffected by unusual or non-recurring items. The Company’s computation of Adjusted EBITDA may not
be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted
EBITDA in the same fashion.
Because
of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures
calculated in accordance with GAAP. The Company compensates for these limitations by relying primarily on the Company’s GAAP
results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA
and Adjusted EBITDA below and not rely on any single financial measure to evaluate the Company’s business.
The
following table reconciles net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2020 and 2019:
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Net loss
|
|
$
|
(33,163
|
)
|
|
$
|
(30,097
|
)
|
Interest income, net
|
|
|
(64
|
)
|
|
|
(333
|
)
|
Income tax expense
|
|
|
1
|
|
|
|
2
|
|
Depreciation and amortization
|
|
|
1,351
|
|
|
|
196
|
|
EBITDA
|
|
|
(31,875
|
)
|
|
|
(30,232
|
)
|
Stock-based compensation
|
|
|
1,313
|
|
|
|
1,153
|
|
Loss on Series A redeemable convertible preferred stock warrant liability
|
|
|
—
|
|
|
|
593
|
|
Loss on forward contract liability
|
|
|
1,324
|
|
|
|
—
|
|
Adjusted EBITDA
|
|
$
|
(29,238
|
)
|
|
$
|
(28,486
|
)
|
Liquidity
and Capital Resources
Since
inception, Legacy Nikola has financed its operations primarily from the sales of redeemable convertible preferred stock. As of
March 31, 2020, Legacy Nikola’s principal sources of liquidity were Legacy Nikola’s cash and cash equivalents in the
amount of $75.5 million, which are primarily invested in money market funds.
Short-Term
Liquidity Requirements
As
of the date of this Current Report on From 8-K, Legacy Nikola has yet to generate any material revenues from its business operations.
As of March 31, 2020, Legacy Nikola’s current assets were $101.2 million consisting primarily of cash and restricted cash
of $79.6 million, and Legacy Nikola’s current liabilities were $30.5 million primarily comprised of accrued expenses, accounts
payables and a $4.1 million equipment term note.
In connection with
the June 3, 2020 Business Combination and PIPE transactions The Company raised gross proceeds of $763.2 million, incurring $52.3
million in transaction fees, for net proceeds of $710.9 million. Net proceeds excludes payments for redemptions of M&M Residual for $70.0 million and repurchase of Nimbus Series B convertible
redeemable preferred shares for $25.0 million.
As a result of these
transactions, as of June 3, 2020 the Company had a cash and cash equivalents balance of approximately $729.4 million. The Company
believes this will be sufficient to continue to execute its business strategy over the next twelve to eighteen month period by
(i) completing the development and industrialization of the Nikola Tre BEV truck, (ii) completing phase one construction of the
greenfield manufacturing facility, (iii) completing the construction of a pilot commercial hydrogen station and (iv) hiring of
personnel.
However,
actual results could vary materially and negatively as a result of a number of factors, including:
|
·
|
the costs of building Phase 1 of the Company’s greenfield manufacturing facility and equipment;
|
|
·
|
the timing and the costs involved in bringing the Company’s vehicles to market, mainly the
Nikola Tre BEV truck;
|
|
·
|
the Company’s ability to manage the costs of manufacturing the Nikola Tre BEV trucks;
|
|
·
|
the scope, progress, results, costs, timing and outcomes of the Company’s research and development
for its fuel cell trucks;
|
|
·
|
the costs of maintaining, expanding and protecting the Company’s intellectual property portfolio,
including potential litigation costs and liabilities;
|
|
·
|
revenues received from sales of the Nikola Tre BEV trucks in 2021;
|
|
·
|
the costs of additional general and administrative personnel, including accounting and finance,
legal and human resources, as a result of becoming a public company;
|
|
·
|
the Company’s ability to collect revenues; and
|
|
·
|
other risks discussed in the Proxy Statement in the section entitled “Risk
Factors” beginning on page 32 of the Proxy Statement.
|
Long-Term
Liquidity Requirements
The
capital raised in the Business Combination will not be sufficient to cover forecasted capital needs and operating expenditures
in fiscal year 2022 through fiscal year 2024. Until the Company can generate sufficient revenue from BEV truck sales and FCEV leases
to cover operating expenses, working capital and capital expenditures, the Company expect to fund cash needs through a combination
of equity and debt financing, including lease securitizations. If the Company raises funds by issuing equity securities,
dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences or privileges senior
to those of holders of Common Stock. If the Company raises funds by issuing debt securities, these debt securities would have rights,
preferences and privileges senior to those of holders Common Stock. The terms of debt securities or borrowings could impose significant
restrictions on the Company’s operations. The credit market and financial services industry have in the past, and may in
the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing.
If
adequate funds are not available, The Company will need to curb its expansion plans or limit the Company’s research and development
activities, which would have a material adverse impact on the Company’s business prospects and results of operations.
The
following table provides a summary of cash flow data (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Net cash used in operating activities
|
|
$
|
(22,047
|
)
|
|
$
|
(32,162
|
)
|
Net cash used in investing activities
|
|
|
(1,439
|
)
|
|
|
(9,863
|
)
|
Net cash provided by financing activities
|
|
|
13,301
|
|
|
|
—
|
|
Cash
Flows from Operating Activities
Legacy
Nikola’s cash flows from operating activities are significantly affected by the growth of Legacy Nikola’s business
primarily related to research and development and selling, general, and administrative activities. Legacy Nikola’s operating
cash flows are also affected by Legacy Nikola’s working capital needs to support growth in personnel related expenditures
and fluctuations in accounts payable and other current assets and liabilities.
Legacy
Nikola’s net cash used in operating activities was $22.0 million for the three months ended March 31, 2020. The most significant
component of Legacy Nikola’s cash used during this period was a net loss of $33.2 million, which included non-cash expenses
of $6.7 million for in-kind services, $1.4 million related to depreciation and amortization, $1.3 million related to stock based
compensation, and a loss of $1.3 million related to the change in fair value of Legacy Nikola’s Series D redeemable convertible
preferred stock forward contract liability, and net cash inflows of $0.4 million from changes in operating assets and liabilities.
Legacy
Nikola’s cash used in operating activities was $32.2 million for the three months ended March 31, 2019. The largest component
of Legacy Nikola’s cash used during this period was a net loss of $30.1 million, which included non-cash charges of $1.2
million related to stock based compensation, loss of $0.6 million related to the change in fair value of Legacy Nikola’s
Series A redeemable convertible preferred stock warrant liability, and $0.2 million related to depreciation and amortization expense,
and net cash outflows of $4.0 million from changes in operating assets and liabilities primarily driven by a decrease in accounts
payable
Cash
Flows from Investing Activities
Legacy
Nikola continues to experience negative cash flows from investing activities as it expands Legacy Nikola’s business and builds
its infrastructure. Cash flows from investing activities primarily relate to capital expenditures to support the Company’s
growth. Legacy Nikola net cash used in investing activities is expected to continue to increase substantially as the Company builds
out and tools the North American truck manufacturing facility in Coolidge, Arizona and develop the network of hydrogen fueling
stations.
Legacy
Nikola net cash used in investing activities was $1.4 million for the three months ended March 31, 2020, which was due to purchases
and deposits on capital equipment for research and development testing equipment and software purchases.
Legacy
Nikola net cash used in investing activities was $9.9 million for the three months ended March 31, 2019, which was primarily due
to purchases and deposits on capital equipment of $5.8 million and $4.0 million related to the construction of the Company’s
headquarters.
Cash
Flows from Financing Activities
Through
March 31, 2020, Legacy Nikola raised aggregate gross proceeds of approximately $435.1 million, of which $355.1 million was in the
form of cash, from sales of redeemable convertible preferred stock. Additionally, in April 2020, Legacy Nikola received cash of
$50.0 million in connection with the issuance of its Series D redeemable convertible preferred stock.
Legacy
Nikola’s net cash provided by financing activities was $13.3 million for the three months ended March 31, 2020, which was
primarily due to proceeds from the issuance of Series D redeemable convertible preferred stock of $13.0 million and proceeds from
tenant allowances for the construction of the Company’s headquarters of $0.9 million, offset by payments made for future
stock issuance costs of $0.4 million and Legacy Nikola’s financing lease of $0.2 million.
Legacy
Nikola has no cash financing activities for the three months ended March 31, 2019.
Contractual
Obligations and Commitments
For
the three months ended March 31, 2020, there have been no material changes to Legacy Nikola’s significant contractual obligations
as previously disclosed in the Proxy Statement.
Waitlist
and Reservations
Potential
FCEV customers may reserve slots in the Company’s future production schedule by submitting a reservation request on Company’s
website. No deposit is required to be paid by the customer. The Company stopped soliciting FCEV reservations in fiscal 2019 in
order to focus on large corporate dedicated customers. The Company considers the reservation list as an indication of potential
demand rather than a product backlog for pending vehicle sales, as customers have not made firm commitments to order and take deliveries
of vehicles and may cancel such reservations at any time. As the Company nears commercial production in 2023, the Company expects
to convert existing FCEV reservations into binding orders.
As
of March 31, 2020, Legacy Nikola had approximately 14,000 reservations for its FCEV trucks.
The
Company only accepts binding orders on its BEV trucks, which are negotiated on a case by case basis.
Off
Balance Sheet Arrangements
Since
the date of Legacy Nikola’s incorporation, Legacy Nikola has not engaged in any off balance sheet arrangements, as defined
in the rules and regulations of the SEC.
Critical
Accounting Policies and Estimates
The
Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s
financial statements, which have been prepared in accordance with GAAP. These principles require the Company to make certain estimates
and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period.
The Company’s most significant estimates and judgments involve valuation of the Company’s stock-based compensation,
including the fair value of common stock, the valuation of warrant liabilities, the valuation of the redeemable convertible preferred
stock tranche liability and estimates related to the Company’s build-to-suit lease. Management bases its estimates on historical
experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results could differ from those estimates.
There
have been no substantial changes to these estimates, or the policies related to them during the three months ended March 30, 2020.
A full discussion of these estimates and policies is included in the Proxy Statement in the section entitled “Nikola’s
Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 173 of
the Proxy Statement, which is incorporated herein by reference.
Emerging
Growth Company Status
The
Company is an emerging growth company (“EGC”), as defined in the JOBS Act. The JOBS Act permits companies with
EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the
adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended
transition period to enable it to comply with new or revised accounting standards that have different effective dates for public
and private companies until the earlier of the date it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably
opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s financial statements may
not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In
addition, the Company intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject
to certain conditions set forth in the JOBS Act, if, as an EGC, the Company intends to rely on such exemptions, the Company is
not required to, among other things: (i) provide an auditor’s attestation report on its system of internal controls over
financial reporting pursuant to Section 404(b) of the Sarbanes Oxley Act; (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd Frank Wall Street Reform and Consumer Protection Act; (iii)
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements
(auditor discussion and analysis); and (iv) disclose certain executive compensation related items such as the correlation between
executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
The
Company will remain an EGC under the JOBS Act until the earliest of (i) the last day of the Company’s first fiscal year following
the fifth anniversary of the first sale
of VectoIQ’s common stock in its initial public offering, (ii) the last date of the Company’s fiscal year in
which it has total annual gross revenue of at least $1.07 billion, (iii) the date on which the Company is deemed to be a “large
accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates,
or (iv) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the previous
three years. The Company expects this to occur during fiscal 2020.
Recent
Accounting Pronouncements
Note
2 to the Company’s unaudited consolidated financial statements and notes thereto, set forth in Exhibit 99.1 hereto,
provides more information about recent accounting pronouncements, the timing of their adoption, and the Company’s assessment,
to the extent the Company has made one, of their potential impact on the Company’s financial condition and its results of
operations and is incorporated herein by reference.
Directors and Executive Officers
Information
with respect to the Company’s directors and executive officers after the Closing is set forth in the Proxy Statement
in the sections entitled “Management
After the Business Combination” beginning on page 222 and “Nikola’s
Executive Compensation” beginning on page 169 of the Proxy Statement, which are incorporated herein by reference.
Directors
Effective
as of the Effective Time, in connection with the Business Combination, the size of the board of directors of the Company (the “Board”)
was increased from five members to nine members. Effective as of the Effective Time,
Sooyean Jin (a.k.a. Sophia Jin), Michael L. Mansuetti, Gerrit A. Marx, Trevor R. Milton, Mark A. Russell, Lonnie R. Stalsberg,
DeWitt C. Thompson, V and Jeffrey W. Ubben were appointed to serve as directors of the Company. Each of Robert
Gendelman, Richard Lynch, Victoria McInnis and Sarah Hallac resigned as directors of the Company effective as of the Effective
Time. Stephen J. Girsky continues to serve as a director of the Company. Messrs.
Girsky, Mansuetti and Thompson were appointed to serve as Class I directors, with terms expiring at the Company’s
2021 annual meeting of stockholders; Ms. Jin and Messrs. Stalsberg and Ubben were
appointed to serve as Class II directors, with terms expiring at the Company’s 2022 annual meeting of stockholders;
and Messrs. Marx, Milton and Russell were appointed to serve as Class III directors,
with terms expiring at the Company’s 2023 annual meeting of stockholders. Biographical information for these individuals
is set forth in the Proxy Statement in the section entitled “Management
After the Business Combination” beginning on page 222 of the Proxy Statement, which is incorporated herein by
reference.
Independence of Directors
The Board has determined
that each the directors of the Company other than Messrs. Milton and Russell qualify as independent directors, as defined under
the listing rules of The Nasdaq Stock Market LLC (the “Nasdaq listing rules”), and that the Board consists of
a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq listing rules relating to director
independence requirements.
Committees of the Board of Directors
Effective as of as
of the Effective Time, the standing committees of the Board consist of an audit committee (the “Audit Committee”),
a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee
(the “Nominating Committee”). Each of the committees reports to the Board.
Effective
as of the Effective Time, the Board appointed Mr. Girsky, Ms. Jin and Mr. Mansuetti
to serve on the Audit Committee, with Mr. Girsky as chair of the Audit Committee.
The Board appointed Messrs. Marx, Thompson and Stalsberg to serve on the Compensation
Committee, with Mr. Marx as chair of the Compensation Committee. The Board appointed
Messrs. Ubben, Girsky and Marx to serve on the Nominating Committee, with Mr. Ubben
as chair of the Nominating Committee.
Executive Officers
Effective
as of the Effective Time, in connection with the Business Combination, the Board appointed Trevor R. Milton to serve as Executive
Chairman, Mark A. Russell to serve as President and Chief Executive Officer, Kim J. Brady to serve as Chief Financial Officer,
Joseph R. Pike to serve as Chief Human Resources Officer, and Britton M. Worthen to serve as Chief Legal Officer and Secretary
of the Company. Each of Stephen J. Girsky, Steve Shindler and Mary Chan resigned as the President and Chief Executive Officer,
Chief Financial Officer and Chief Operating Officer, respectively, effective as of the Effective Time. Biographical information
for the new executive officers are set forth in the Proxy Statement in the section entitled “Management
After the Business Combination” beginning on page 222 of the Proxy Statement, which is incorporated herein by reference.
Director Compensation
The Board designed
the Company’s non-employee director compensation program to reward directors for their contributions to the Company’s
success, align the director compensation program with stockholder interests and the Company’s executive compensation program,
and provide competitive compensation necessary to attract and retain high quality non-employee directors. The Board expects to
review director compensation periodically to ensure that director compensation remains competitive such that the Company is able
to recruit and retain qualified directors.
Under
the non-employee director compensation program, the Company will reward directors entirely in the form of stock-based compensation,
consisting of (i) for each non-employee director, an annual grant of a restricted stock unit award (“RSUs”)
under the Nikola Corporation 2020 Stock Incentive Plan (the “2020 Plan”) for shares of Common Stock having
a grant date fair market value of $200,000, to vest in full on the first anniversary of such grant date, subject to continued service
through such vesting date and (ii) for the chair of each of the committees, an annual grant of RSUs with a value of $10,000, to
vest in full on the first anniversary of such grant date, subject to continued service through such vesting date.
The
initial grant of such RSUs will be subject to approval by the Board as soon as practicable following the effective registration
of the securities under the 2020 Plan on a Registration Statement on Form S-8. The calculation of the number of shares subject
to the initial RSUs will be based upon an assumed value on the date of grant of $10.00 per share, and the RSUs will vest in full
on the first anniversary of the Closing Date, subject to continued service through such vesting date.
Subject
to Board approval as soon as practicable following the effective registration of the securities under the 2020 Plan on a Registration
Statement on Form S-8, subsequent grants of RSUs under the non-employee director compensation program will be automatically
granted, on the next business day following the annual meeting of stockholders of the Company, commencing with the annual meeting
of stockholders of the Company to be held in 2021. The calculation of the number of shares subject to such annual RSU grant will
be based upon the average closing stock price of Common Stock over the 21-trading days prior to the grant date.
Compensation
under the director compensation program will be subject to the annual limits on non-employee director compensation set forth in
the 2020 Plan. In addition, each equity award granted to the eligible directors under the director compensation program will vest
in full immediately prior to the occurrence of a change in control (as defined in the 2020 Plan) to the extent outstanding
at such time, subject to continued service through the closing of such change in control.
The Company’s
policy is to reimburse directors for reasonable and necessary out-of-pocket expenses incurred in attending board and committee
meetings or performing other services in their capacities as directors. The Company does not provide tax gross-up payments to members
of the Board.
Executive Compensation
On
the Closing Date, the Company entered into individual amended and restated employment agreements with its executive officers, Trevor
R. Milton, Mark A. Russell, Kim J. Brady, Joseph R. Pike and Britton M. Worthen, which superseded their existing employment agreements.
Details of the employment agreements are outlined below.
Agreement
with Trevor R. Milton
On
June 3, 2020, Trevor R. Milton entered into an amended and restated employment agreement with the Company to serve as Executive
Chairman of the Board. Mr. Milton’s employment will continue until terminated in accordance with the terms of the employment
agreement. Pursuant to the employment agreement, Mr. Milton’s annual base salary is $1. Mr. Milton’s employment
agreement provides that he is eligible to participate in the Company’s health and welfare benefit plans maintained for the
benefit of Company employees. Mr. Milton has declined to participate in any annual cash bonus program provided by the Company,
without regard to his eligibility for any such program. Subject to Board approval, Mr. Milton is eligible to receive an annual
time-vested stock award consisting of RSUs for shares of Common Stock having a value on the date of grant of not less than $6,000,000
(based on an assumed stock value of $10.00 per share for the initial grant), subject to continued employment during a three-year
cliff vesting schedule, and a performance-based stock award consisting of 4,859,000 RSUs which can be earned upon the achievement
of pre-established share price milestones, subject to continued employment during a performance period that ends on the third anniversary
of the Closing Date. Mr. Milton’s employment agreement contains customary confidentiality, non-solicitation and intellectual
property assignment provisions.
Pursuant to the employment
agreement, in the event of an Involuntary Termination (as defined in the agreement)
of Mr. Milton’s employment, the Company will engage Mr. Milton as a non-employee consultant for the period commencing
on the termination date and ending on the second anniversary of the termination date. As consideration for his consulting services,
the Company will pay Mr. Milton $10.0 million on each of the first and second anniversaries of the termination date. In the event
of such Involuntary Termination and subject to Mr. Milton’s delivery of an effective release of claims and ongoing compliance
with certain post-termination restrictive covenants, including a two-year non-compete and non-solicit covenants and a mutual non-disparagement
covenant, all of Mr. Milton’s unvested equity awards, including his performance-based
stock award, will accelerate in full (and the post-termination exercise period for unexercised stock options will be extended until
the earlier of (i) three years following his termination date or (ii) the remaining term of each such stock option), and Mr. Milton
will be entitled to a lump sum cash payment equal to 18 months of COBRA benefits coverage, less applicable withholding taxes.
Agreement
with Mark A. Russell
On
June 3, 2020, Mark A. Russell entered into an amended and restated employment agreement with the Company to serve as President
and Chief Executive Officer. Mr. Russell’s employment will continue until terminated in accordance with the terms
of the employment agreement. Pursuant to the employment agreement, Mr. Russell’s annual base salary is $1. Mr. Russell’s
employment agreement provides that he is eligible to participate in the Company’s health and welfare benefit plans maintained
for the benefit of Company employees. Mr. Russell has declined to participate in any annual cash bonus program provided by
the Company, without regard to his eligibility for any such program. Subject to Board approval, Mr. Russell is eligible to receive
an annual time-vested stock award consisting of RSUs for shares of Common Stock having a value on the date of grant of not less
than $6,000,000 (based on an assumed stock value of $10.00 per share for the initial grant), subject to continued employment during
a three-year cliff vesting schedule, and a performance-based stock award consisting of 4,859,000 RSUs which can be earned upon
the achievement of pre-established share price milestones, subject to continued employment during a performance period that ends
on the third anniversary of the Closing Date. As of the Effective Time, all unvested stock options then held by Mr. Russell vested
in full. Mr. Russell’s employment agreement contains customary confidentiality, non-solicitation and intellectual property
assignment provisions.
Pursuant
to the employment agreement, in the event of an Involuntary Termination (as defined in the
agreement) of Mr. Russell’s employment and subject to Mr. Russell’s delivery
of an effective release of claims and ongoing compliance with certain post-termination restrictive covenants, including a two-year
non-compete and non-solicit covenants and a non-disparagement covenant, Mr. Russell
will be entitled to receive: (1) a lump sum cash payment in an amount equal to $2,600,000,
less applicable withholding taxes; (2) a lump sum cash payment equal to 18 months of COBRA benefits coverage, less applicable withholding
taxes; (3) the acceleration in full of all unvested equity and equity-based awards, other
than Mr. Russell’s performance-based award (and the post-termination exercise period for unexercised stock options will be
extended to three years following his termination date); and (4) following certification by the Board, Mr. Russell’s
performance-based stock award will vest in an amount based upon the achievement of the share price milestones prior to his termination
date, pro-rated for the length of his employment during the performance period.
Agreement
with Kim J. Brady
On
June 3, 2020, Kim J. Brady entered into an amended and restated employment agreement with the Company to serve as Chief
Financial Officer. Mr. Brady’s employment will continue until terminated in accordance with the terms of the employment
agreement. Pursuant to the employment agreement, Mr. Brady’s annual base salary is $1. Mr. Brady’s employment
agreement provides that he is eligible to participate in the Company’s health and welfare benefit plans maintained for the
benefit of Company employees. Mr. Brady has declined to participate in any annual cash bonus program provided by the Company,
without regard to his eligibility for any such program. Subject to Board approval, Mr. Brady is eligible to receive an annual time-vested
stock award consisting of RSUs for shares of Common Stock having a value on the date of grant of not less than $3,200,000 (based
on an assumed stock value of $10.00 per share for the initial grant), subject to continued employment during a three-year cliff
vesting schedule, and a performance-based stock award consisting of 2,591,000 RSUs which can be earned upon the achievement of
pre-established share price milestones, subject to continued employment during a performance period that ends on the third anniversary
of the Closing Date. As of the Effective Time, all unvested stock options then held by Mr. Brady vested in full. Mr. Brady’s
employment agreement contains customary confidentiality, non-solicitation and intellectual property assignment provisions.
Pursuant
to the employment agreement, in the event of an Involuntary Termination (as defined
in the agreement) of Mr. Brady’s employment and subject to Mr. Brady’s
delivery of an effective release of claims and ongoing compliance with certain post-termination restrictive covenants, including
a two-year non-compete and non-solicit covenants and a non-disparagement covenant, Mr.
Brady will be entitled to receive: (1) a lump sum cash payment in an amount equal
to $1,050,000, less applicable withholding taxes; (2) a lump sum cash payment equal to 18 months of COBRA benefits coverage, less
applicable withholding taxes; (3) the acceleration in full of all unvested equity and equity-based
awards, other than Mr. Brady’s performance-based award (and the post-termination exercise period for unexercised stock options
will be extended to three years following his termination date); and (4) following certification by the Board, Mr. Brady’s
performance-based stock award will vest in an amount based upon the achievement of the share price milestones prior to his termination
date, pro-rated for the length of his employment during the performance period.
Agreement
with Joseph R. Pike
On
June 3, 2020, Joseph R. Pike entered into an amended and restated employment agreement with the Company to serve as Chief
Human Resources Officer. Mr. Pike’s employment will continue until terminated in accordance with the terms of the employment
agreement. Pursuant to the employment agreement, Mr. Pike’s annual base salary is $1. Mr. Pike’s employment
agreement provides that he is eligible to participate in the Company’s health and welfare benefit plans maintained for the
benefit of Company employees. Mr. Pike has declined to participate in any annual cash bonus program provided by the Company,
without regard to his eligibility for any such program. Subject to Board approval, Mr. Pike is eligible to receive an annual time-vested
stock award consisting of RSUs for shares of Common Stock having a value on the date of grant of not less than $2,000,000 (based
on an assumed stock value of $10.00 per share for the initial grant), subject to continued employment during a three-year cliff
vesting schedule, and a performance-based stock award consisting of 1,619,000 RSUs which can be earned upon the achievement of
pre-established share price milestones, subject to continued employment during a performance period that ends on the third anniversary
of the Closing Date. As of the Effective Time, all unvested stock options then held by Mr. Pike vested in full. Mr. Pike’s
employment agreement contains customary confidentiality, non-solicitation and intellectual property assignment provisions.
Pursuant
to the employment agreement, in the event of an Involuntary Termination (as defined
in the agreement) of Mr. Pike’s employment and subject to Mr. Pike’s
delivery of an effective release of claims and ongoing compliance with certain post-termination restrictive covenants, including
a two-year non-compete and non-solicit covenants and a non-disparagement covenant,
Mr. Pike will be entitled to receive: (1) a lump sum cash payment in an amount equal to $945,000, less applicable withholding taxes;
(2) a lump sum cash payment equal to 18 months of COBRA benefits coverage, less applicable withholding taxes; (3)
the acceleration in full of all unvested equity and equity-based awards, other than Mr. Pike’s performance-based award (and
the post-termination exercise period for unexercised stock options will be extended to three years following his termination date);
and (4) following certification by the Board, Mr. Pike’s performance-based stock award will vest in an amount based upon
the achievement of the share price milestones prior to his termination date, pro-rated for the length of his employment during
the performance period.
Agreement
with Britton M. Worthen
On
June 3, 2020, Britton M. Worthen entered into an amended and restated employment agreement with the Company to serve as
Chief Legal Officer. Mr. Worthen’s employment will continue until terminated in accordance with the terms of the employment
agreement. Pursuant to the employment agreement, Mr. Worthen’s annual base salary is $1. Mr. Worthen’s employment
agreement provides that he is eligible to participate in the Company’s health and welfare benefit plans maintained for the
benefit of Company employees. Mr. Worthen has declined to participate in any annual cash bonus program provided by the Company,
without regard to his eligibility for any such program. Subject to Board approval, Mr. Worthen is eligible to receive an annual
time-vested stock award consisting of RSUs for shares of Common Stock having a value on the date of grant of not less than $3,000,000
(based on an assumed stock value of $10.00 per share for the initial grant), subject to continued employment during a three-year
cliff vesting schedule, and a performance-based stock award consisting of 2,428,000 RSUs which can be earned upon the achievement
of pre-established share price milestones, subject to continued employment during a performance period that ends on the third anniversary
of the Closing Date. As of the Effective Time, all unvested stock options then held by Mr. Worthen vested in full. Mr. Worthen’s
employment agreement contains customary confidentiality, non-solicitation and intellectual property assignment provisions.
Pursuant
to the employment agreement, in the event of an Involuntary Termination (as defined
in the agreement) of Mr. Worthen’s employment and subject to Mr. Worthen’s
delivery of an effective release of claims and ongoing compliance with certain post-termination restrictive covenants, including
a two-year non-compete and non-solicit covenants and a non-disparagement covenant, Mr.
Worthen will be entitled to receive: (1) a lump sum cash payment in an amount equal
to $1,050,000, less applicable withholding taxes; (2) a lump sum cash payment equal to 18 months of COBRA benefits coverage, less
applicable withholding taxes; (3) the acceleration in full of all unvested equity and equity-based
awards, other than Mr. Worthen’s performance-based award (and the post-termination exercise period for unexercised stock
options will be extended to three years following his termination date); and (4) following certification by the Board, Mr.
Worthen’s performance-based stock award will vest in an amount based upon the achievement of the share price milestones prior
to his termination date, pro-rated for the length of his employment during the performance period.
The
foregoing descriptions of each of the employment agreements with Messrs. Milton, Russell, Brady, Pike and Worthen is a summary
only and is qualified in their entirety by the full text of the employment agreements, copies of which are attached hereto as Exhibit
10.12, Exhibit 10.13, Exhibit 10.14, Exhibit 10.15 and Exhibit 10.16, respectively, and are incorporated herein by reference.
Security Ownership of Certain Beneficial
Owners and Management
The following table
sets forth information known to the Company regarding the beneficial ownership of the Common Stock as of June 3, 2020, after giving
effect to the Closing and the M&M Redemption, by:
|
·
|
each person who is known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding shares of the Common Stock;
|
|
·
|
each current named executive officer and director of the Company; and
|
|
·
|
all current executive officers and directors of the Company, as a group.
|
Beneficial ownership
is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if
he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently
exercisable or exercisable within 60 days.
The beneficial
ownership percentages set forth in the table below are based on approximately 360,904,478 shares of Common Stock issued and
outstanding as of June 3, 2020 and do not take into account the issuance of any shares of Common Stock upon the exercise of
warrants to purchase up to approximately 23,890,000 shares of Common Stock that remain outstanding.
Unless otherwise noted
in the footnotes to the following table, and subject to applicable community property laws, the persons and entities named in the
table have sole voting and investment power with respect to their beneficially owned common stock and preferred stock.
Name and Address of Beneficial Owner
|
|
Number of Shares of
Common Stock
Beneficially Owned
|
|
|
Percentage of
Outstanding
Common Stock
%
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
Trevor R. Milton(1)(2)(3)
|
|
|
91,602,734
|
|
|
|
25.4
|
|
Mark A. Russell(3)(4)
|
|
|
49,774,487
|
|
|
|
13.5
|
|
Kim J. Brady(5)
|
|
|
10,275,414
|
|
|
|
2.8
|
|
Stephen J. Girsky(6)
|
|
|
1,754,354
|
|
|
|
0.4
|
|
Sophia Jin(7)
|
|
|
—
|
|
|
|
—
|
|
Michael L. Mansuetti(8)
|
|
|
—
|
|
|
|
—
|
|
Gerrit A. Marx(9)
|
|
|
—
|
|
|
|
—
|
|
Lon Stalsberg(10)
|
|
|
—
|
|
|
|
—
|
|
DeWitt C. Thompson, V(11)
|
|
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21,593,927
|
|
|
|
6.0
|
|
Jeffrey W. Ubben(12)
|
|
|
20,362,024
|
|
|
|
5.6
|
|
Directors and Executive Officers as a Group (12 Individuals)(13)
|
|
|
200,194,063
|
|
|
|
52.0
|
|
|
|
|
|
|
|
|
|
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Five Percent Holders:
|
|
|
|
|
|
|
|
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M&M Residual, LLC(1)
|
|
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91,602,734
|
|
|
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25.4
|
|
T&M Residual, LLC(3)
|
|
|
39,876,497
|
|
|
|
11.0
|
|
Iveco S.p.A.(14)
|
|
|
25,661,448
|
|
|
|
7.1
|
|
Nimbus Holdings LLC(15)
|
|
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23,081,451
|
|
|
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6.4
|
|
Green Nikola Holdings, LLC(16)
|
|
|
22,130,385
|
|
|
|
6.1
|
|
WI Ventures, LLC(17)
|
|
|
19,048,020
|
|
|
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5.3
|
|
|
(1)
|
Consists of 91,602,734 shares held by
M&M Residual, LLC, which includes 3,158,949 shares subject to options held by certain employees pursuant to the Founder’s
Stock Option Plan (as defined in the Proxy Statement). M&M Residual, LLC is wholly-owned by Trevor A. Milton. Mr. Milton
has sole voting and dispositive power over shares held by M&M Residual, LLC. Reflects the transfer of 1,266,102 shares of Legacy
Nikola Common Stock to VA Spring NM, LLC (“VA Spring”), which occurred on May 18, 2020 and the transfer of 315,624
shares of Legacy Nikola Common Stock to VA Spring, which occurred on May 28, 2020. Also reflects the redemption of 7,000,000 shares
of Legacy Nikola Common Stock at a purchase price of $10.00 per share, which occurred on June 3, 2020 immediately following the
Effective Time. The business address of this stockholder is 4141 E Broadway Road, Phoenix, AZ 85040.
|
|
(2)
|
Does not include shares held by T&M Residual, LLC.
|
|
(3)
|
T&M Residual, LLC is owned by Trevor R. Milton and Mark A. Russell. Mr. Russell is the
manager of T&M Residual, LLC, and has sole dispositive power over the shares held by T&M Residual, LLC. Mr. Milton
has sole voting power over the shares held by T&M Residual, LLC. Reflects the transfer of 14,109,607 shares of Legacy
Nikola Common Stock from T&M Residual, LLC to M&M Residual, LLC, which occurred on June 2, 2020. The business
address of this stockholder is 4141 E Broadway Road, Phoenix, AZ 85040.
|
|
(4)
|
Consists of (i) 1,054,691 shares held by Mr. Russell, (ii) 39,876,497 shares held by T&M Residual, LLC
and (iii) exercisable options of Mr. Russell to purchase 8,843,299 shares vesting within 60 days of June 3, 2020. Reflects the
transfer of 200,000 shares of Legacy Nikola Common Stock to VA Spring, which occurred on May 18, 2020.
|
|
(5)
|
Includes exercisable options to purchase 10,275,414 shares vesting within 60 days of June
3, 2020. Reflects the transfer of 200,000 shares of Legacy Nikola Common Stock to VA Spring, which occurred on May 18, 2020.
|
|
(6)
|
Consists of (i) 11,449 shares and 1,441 shares underlying Warrants owned directly by Mr. Girsky and (ii) 1,561,459 shares
and 180,005 shares underlying Warrants owned, as of June 3, 2020, by VectoIQ Holdings, LLC (“Sponsor”). Mr. Girsky
is the manager of Sponsor and, as such, may be deemed to beneficially own all of the 4,586,132 shares and 525,909 shares underlying
Warrants owned directly by Sponsor as of June 3, 2020. Mr. Girsky disclaims beneficial ownership securities held by Sponsor
except to the extent of his pecuniary interest therein (as described in clause (ii) of this footnote). The business address
of this stockholder is 1354 Flagler Drive, Mamaroneck, New York 10543.
|
|
(7)
|
Does not include shares held by Green Nikola Holdings LLC. Ms. Jin is affiliated with Green Nikola
Holdings LLC but has no voting or dispositive power over the shares held by Green Nikola Holdings LLC.
|
|
(8)
|
Does not include shares held by Nimbus Holdings LLC. Mr. Mansuetti is affiliated with Nimbus Holdings
LLC but has no voting or dispositive power over the shares held by Nimbus Holdings LLC.
|
|
(9)
|
Does not include shares held by Iveco. Mr. Marx is affiliated with Iveco S.p.A. but has no voting
or dispositive power over the shares held by Iveco.
|
|
(10)
|
Does not include 918,816 shares held by H2M NFund LLC. Mr. Stalsberg has an interest in H2M
NFund LLC, but has no voting or dispositive power over these shares.
|
|
(11)
|
Consists of (i) 5,674,485 shares held by Thompson Nikola, LLC, (ii) 3,520,370 shares held
by Thompson Nikola II, LLC, and (iii) 12,399,072 shares held by Legend Capital Partners, each of which Mr. Thompson has sole
voting and dispositive power with respect to. As President of Thompson Nikola,
LLC, Thompson Nikola II, LLC, and Legend Capital Partners, Mr. Thompson may be deemed
to indirectly beneficially own shares held by such entities and disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein. The business address of this stockholder is 1245 Bridgestone Blvd., LaVergne, TN 37086.
|
|
(12)
|
Consists of (i) 8,686,587 shares held by VA Spring
and (ii) 6,675,437 shares beneficially owned by ValueAct Spring Master Fund, L.P., and reflects ValueAct Spring Master Fund, L.P.’s
purchase of 5,000,000 shares at a price of $10.00 per share, pursuant to a private placement, which occurred on June 3, 2020. As
managing member of VA Spring NM, LLC, Mr. Ubben may be deemed to indirectly beneficially own shares held by VA Spring. Shares held
by ValueAct Spring Master Fund, L.P. may be deemed to be indirectly beneficially owned by (i) VA Partners I, LLC as General Partner
of ValueAct Spring Master Fund, L.P., (ii) ValueAct Capital Management, L.P. as the manager of ValueAct Spring Master Fund, L.P.,
(iii) ValueAct Capital Management, LLC as General Partner of ValueAct Capital Management, L.P., (iv) ValueAct Holdings, L.P. as
the majority owner of the membership interests of VA Partners I, LLC, (v) ValueAct Holdings II, L.P. as the sole owner of the membership
interests of ValueAct Capital Management, LLC and as the majority owner of the limited partnership interests of ValueAct Capital
Management, L.P., and (vi) ValueAct Holdings GP, LLC as General Partner of ValueAct Holdings, L.P. and ValueAct Holdings II, L.P.
Mr. Ubben disclaims beneficial ownerships of securities held by VA Spring and ValueAct Spring Master Fund, L.P., except to the
extent of his pecuniary interest therein. The business address of this stockholder is One Letterman Drive, Building D, Fourth Floor,
San Francisco, CA 94129.
|
|
(13)
|
Consists of (i) 175,881,025 shares beneficially owned by the Company’s current
executive officers and directors, which include 489,636 shares held by M&M Residual, LLC that are subject to options held
by certain executive officers pursuant to the Founder’s Stock Option Plan (as defined in the Proxy Statement),
(ii) exercisable options to purchase 24,131,592 shares vesting within 60 days of June 3, 2020, and (iii) 181,446
shares underlying Warrants that become exercisable 30 days after the Closing Date. Reflects the transfer of an aggregate
of 1,900,578 shares of Legacy Nikola Common Stock held by executive officers to VA Spring, which occurred on May 18, 2020 and
May 28, 2020.
|
|
(14)
|
Iveco is a wholly-owned subsidiary of CNHI. The business address of this stockholder is 25 St. James’
Street, London, SW1A 1HA, United Kingdom.
|
|
(15)
|
Reflects the repurchase of 1,499,700 shares of Legacy Nikola Series B preferred stock at a
purchase price of $16.67 per share, which occurred immediately prior to the Effective Time. Nimbus Holdings LLC is 100% owned
by Robert Bosch LLC. Robert Bosch LLC is 100% owned by Robert Bosch North America Corporation. Robert Bosch North America
Corporation is 100% owned by Robert Bosch GmbH. Robert Bosch Industrietreuhand KG (equivalent to an LP) has a 92% voting
interest in Robert Bosch GmbH (CEO: Volkmar Denner). Robert Bosch Industrietreuhand KG has two general partners: Franz Fehrenbach
and Wolfgang Malchow who share voting and investment power. The business address of the stockholder is 38000 Hills Tech Drive,
Farmington Hills, MI 48331.
|
|
(16)
|
Green Nikola Holdings LLC has two members, Hanwha General Chemical USA Corp. and Hanwha Energy
USA Holdings Corp., which also share voting and investment power over the shares. The business address of this stockholder is 300
Frank W. Burr. Blvd., Suite 52, Teaneck, NJ 07666.
|
|
(17)
|
WI Ventures, LLC is a wholly-owned subsidiary of Worthington Steel of Michigan, Inc., which
is a wholly-owned subsidiary of Worthington Industries, Inc. The business address of this stockholder is 200 West Old
Wilson Bridge Road, Columbus, OH 43085.
|
Certain Relationships and Related Transactions
The
certain relationships and related party transactions of the Company are described in the Proxy Statement in the section
entitled “Certain
Nikola Relationships and Related Person Transactions” beginning on page 190 of the Proxy Statement, which is incorporated
herein by reference.
Legal Proceedings
Information
about legal proceedings is set forth in the Proxy Statement in the section entitled “Information
About Nikola—Legal Proceedings” on page 168 of the Proxy Statement, which is incorporated herein by reference.
Market Price of and Dividends on the
Registrant’s Common Equity and Related Stockholder Matters
Market Information and Holders
The
information set forth in the section entitled “Price
Range of Securities and Dividends” on page 248 of the Proxy Statement is incorporated herein by reference. Additional
information regarding holders of the Company’s securities is set forth in the section entitled “Description of Registrant’s
Securities to be Registered” below.
The
Common Stock, the Warrants and VectoIQ units (consisting of one share of Common Stock and one Warrant, the “Units”)
were historically quoted on The Nasdaq Capital Market under the symbols “VTIQ”, “VTIQW” and “VTIQU,”
respectively. At the Effective Time, the Units automatically separated into the component
securities and, as a result, no longer trade as a separate security. On June 4, 2020, the Common Stock and Warrants began
trading on The Nasdaq Global Select Market under the new trading symbols “NKLA” and “NKLAW,” respectively.
As
of the Closing Date and following the completion of the Business Combination, including the M&M Redemption, the Company
had approximately 360,904,478 shares of the Common Stock issued and outstanding held of record by 81 holders, and
approximately 23,890,000 Warrants outstanding held of record by 9 holders.
Dividends
The Company has not
paid any cash dividends on the Common Stock to date. The Company may retain future earnings, if any, for future operations, expansion
and debt repayment and has no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends
in the future will be made at the discretion of the Board and will depend on, among other things, the Company’s results of
operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
In addition, the Company’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness
the Company or its subsidiaries incur. The Company does not anticipate declaring any cash dividends to holders of the Common Stock
in the foreseeable future.
Description of Registrant’s Securities
to be Registered
Common Stock
A
description of the Common Stock is included in the Proxy Statement in the section entitled “Description
of VectoIQ’s Securities—Authorized and Outstanding Stock” beginning on page 231 of the Proxy Statement, which
is incorporated herein by reference.
Warrants
A
description of the Company’s warrants is included in the Proxy Statement in the section entitled “Description
of VectoIQ’s Securities—Warrants” beginning on page 234 of the Proxy Statement, which is incorporated herein
by reference.
Indemnification of Directors and Officers
Information
about indemnification of the Company’s directors and officers is set forth in the Proxy Statement in the section entitled
“Management
After the Business Combination—Limitation on Liability and Indemnification of Directors and Officers” beginning
on page 229 of the Proxy Statement, which is incorporated herein by reference. The disclosure set forth in Item 1.01 of this Current
Report on Form 8-K under the section entitled “Indemnification Agreements” is incorporated by reference into this Item
2.01.
Financial Statements and Supplementary
Data
The information set
forth in Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.