10-Q 1 nkla-20220630.htm 10-Q nkla-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022

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

Commission File Number: 001-38495
Nikola Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware82-4151153
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
4141 E Broadway Road
Phoenix, AZ
85040
(Address of principal executive offices)(Zip Code)
(480) 666-1038
(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 ClassTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par value per shareNKLAThe Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of August 1, 2022, there were 433,476,331 shares of the registrant’s common stock outstanding.




NIKOLA CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS

Summary of Risk Factors
Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company.
We are an early stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future.
We may be unable to adequately control the costs associated with our operations.
Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
We will need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our operations and prospects could be negatively affected.
If we fail to manage our future growth effectively, we may not be able to market and sell our vehicles successfully.
Our bundled lease model may present unique problems that may have an adverse effect on our operating results and business and harm our reputation.
1


We may face legal challenges in one or more states attempting to sell directly to customers which could materially adversely affect our costs.
We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.
Our success will depend on our ability to economically manufacture our trucks at scale and build our hydrogen fueling stations to meet our customers’ business needs, and our ability to develop and manufacture trucks of sufficient quality and appeal to customers on schedule and at scale is unproven.
We may experience significant delays in the design, manufacture, launch and financing of our trucks, including in the expansion of our manufacturing plant, which could harm our business and prospects.
Increases in costs, disruption of supply or shortage of raw materials, including lithium-ion battery cells and packs, chipsets, and displays, could harm our business.
2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NIKOLA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30,December 31,
20222021
(Unaudited)
Assets
Current assets
Cash and cash equivalents$441,765 $497,241 
Accounts receivable, net16,726  
Inventory52,105 11,597 
Prepaid expenses and other current assets34,802 15,891 
Total current assets545,398 524,729 
Restricted cash and cash equivalents87,459 25,000 
Long-term deposits37,740 27,620 
Property, plant and equipment, net311,732 244,377 
Intangible assets, net95,395 97,181 
Investment in affiliates79,726 61,778 
Goodwill5,238 5,238 
Other assets4,287 3,896 
Total assets$1,166,975 $989,819 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$87,479 $86,982 
Accrued expenses and other current liabilities156,610 93,487 
Debt and finance lease liabilities, current9,518 140 
Total current liabilities253,607 180,609 
Long-term debt and finance lease liabilities, net of current portion273,309 25,047 
Operating lease liabilities2,349 2,263 
Warrant liability1,377 4,284 
Other long-term liabilities37,070 84,033 
Deferred tax liabilities, net12 11 
Total liabilities567,724 296,247 
Commitments and contingencies (Note 9)
Stockholders' equity
Preferred stock, $0.0001 par value, 150,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021
  
Common stock, $0.0001 par value, 600,000,000 shares authorized, 433,475,084 and 413,340,550 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
43 41 
Additional paid-in capital2,176,945 1,944,341 
Accumulated deficit(1,576,550)(1,250,612)
Accumulated other comprehensive loss(1,187)(198)
Total stockholders' equity 599,251 693,572 
Total liabilities and stockholders' equity$1,166,975 $989,819 
See accompanying notes to the consolidated financial statements.
3


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenues:
Truck sales$17,383 $ $17,383 $ 
Service and other 751  2,638  
Total revenues18,134  20,021  
Cost of revenues:
Truck sales46,781  46,781  
Service and other 610  2,066  
Total cost of revenues47,391  48,847  
Gross loss(29,257) (28,826) 
Operating expenses:
Research and development63,106 67,726 137,663 122,889 
Selling, general, and administrative79,868 70,672 157,051 136,099 
Total operating expenses142,974 138,398 294,714 258,988 
Loss from operations(172,231)(138,398)(323,540)(258,988)
Other income (expense):
Interest expense, net(2,808)(92)(3,019)(101)
Revaluation of warrant liability3,341 (2,511)2,907 (1,560)
Other income (expense), net(27)(1,102)1,806 (883)
Loss before income taxes and equity in net loss of affiliates(171,725)(142,103)(321,846)(261,532)
Income tax expense2 2 2 3 
Loss before equity in net loss of affiliates(171,727)(142,105)(321,848)(261,535)
Equity in net loss of affiliates(1,270)(1,126)(4,090)(1,920)
Net loss$(172,997)$(143,231)$(325,938)$(263,455)
Net loss per share:
Basic$(0.41)$(0.36)$(0.78)$(0.67)
Diluted$(0.41)$(0.36)$(0.78)$(0.67)
Weighted-average shares outstanding:
Basic425,323,391 394,577,711 420,266,181 393,390,377 
Diluted425,323,391 394,577,711 420,266,181 393,390,377 
See accompanying notes to the consolidated financial statements.
4


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net loss$(172,997)$(143,231)$(325,938)$(263,455)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax(1,318)78 (989)(235)
Comprehensive loss$(174,315)$(143,153)$(326,927)$(263,690)
See accompanying notes to the consolidated financial statements.
5


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Three Months Ended June 30, 2022
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmount
Balance as of March 31, 2022418,344,072 $42 $2,025,552 $(1,403,553)$131 $622,172 
Exercise of stock options105,754  257 — — 257 
Issuance of shares for RSU awards1,420,658 — — — — — 
Common stock issued under Tumim Purchase Agreements13,604,600 1 96,295 — — 96,296 
Stock-based compensation— — 54,841 — — 54,841 
Net loss— — — (172,997)— (172,997)
Other comprehensive loss    (1,318)(1,318)
Balance as of June 30, 2022433,475,084 $43 $2,176,945 $(1,576,550)$(1,187)$599,251 
Six Months Ended June 30, 2022
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmount
Balance as of December 31, 2021413,340,550 $41 $1,944,341 $(1,250,612)$(198)$693,572 
Exercise of stock options285,585  565 — — 565 
Issuance of shares for RSU awards2,600,705 — — — — — 
Common stock issued under Tumim Purchase Agreements17,248,244 2 123,670 — — 123,672 
Stock-based compensation— — 108,369 — — 108,369 
Net loss— — — (325,938)— (325,938)
Other comprehensive loss    (989)(989)
Balance as of June 30, 2022433,475,084 $43 $2,176,945 $(1,576,550)$(1,187)$599,251 

See accompanying notes to the consolidated financial statements.
6


Three Months Ended June 30, 2021
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders'
Equity
SharesAmount
Balance as of March 31, 2021393,745,157 $39 $1,592,716 $(680,398)$(74)$912,283 
Exercise of stock options1,033,250 1 1,212 — — 1,213 
Issuance of shares for RSU awards461,084 — — — — — 
Common stock issued for commitment shares155,703 — 2,625 — — 2,625 
Common stock issued for investment in affiliates, net of common stock with embedded put right1,682,367 — 19,139 — — 19,139 
Stock-based compensation— — 52,670 — — 52,670 
Net loss— — — (143,231)— (143,231)
Other comprehensive income    78 78 
Balance as of June 30, 2021397,077,561 $40 $1,668,362 $(823,629)$4 $844,777 

Six Months Ended June 30, 2021
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders'
Equity
SharesAmount
Balance as of December 31, 2020391,041,347 $39 $1,540,037 $(560,174)$239 $980,141 
Exercise of stock options2,929,917 1 3,625 — — 3,626 
Issuance of shares for RSU awards1,268,227 — — — — — 
Common stock issued for commitment shares155,703 — 2,625 — — 2,625 
Common stock issued for investment in affiliates, net of common stock with embedded put right1,682,367 — 19,139 — — 19,139 
Stock-based compensation— — 102,936 — — 102,936 
Net loss— — — (263,455)— (263,455)
Other comprehensive loss    (235)(235)
Balance as of June 30, 2021397,077,561 $40 $1,668,362 $(823,629)$4 $844,777 
See accompanying notes to the consolidated financial statements.
7


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
20222021
Cash flows from operating activities
Net loss$(325,938)$(263,455)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization9,676 3,710 
Stock-based compensation108,369 102,936 
Non-cash in-kind services 27,723 
Equity in net loss of affiliates4,090 1,920 
Revaluation of financial instruments192 1,560 
Issuance of common stock for commitment shares 2,625 
Inventory write-downs10,890  
Non-cash interest expense2,457  
Other non-cash activity273 1,010 
Changes in operating assets and liabilities:
Accounts receivable, net(16,726) 
Inventory(60,468)(2,267)
Prepaid expenses and other current assets(12,631)(4,024)
Accounts payable, accrued expenses and other current liabilities15,395 9,535 
Long-term deposits(8,281)(7,247)
Other assets(608) 
Operating lease liabilities(277) 
Other long-term liabilities(224) 
Net cash used in operating activities(273,811)(125,974)
Cash flows from investing activities
Purchases and deposits of property, plant and equipment(67,316)(64,787)
Investments in affiliates(23,027)(25,000)
Proceeds from sale of equipment 200 
Net cash used in investing activities(90,343)(89,587)
Cash flows from financing activities
Proceeds from the exercise of stock options565 3,839 
Proceeds from issuance of shares under the Tumim Purchase Agreements123,672  
Proceeds from issuance of Convertible Notes, net of discount and issuance costs183,510  
Proceeds from issuance of Collateralized Promissory Note50,000  
Proceeds from issuance of financing obligation, net of issuance costs38,582  
Repayment of Promissory Note(25,000)(4,100)
Payments on finance lease liabilities and financing obligation(192)(518)
Payments for issuance costs (244)
Net cash provided by (used in) financing activities371,137 (1,023)
Net increase (decrease) in cash and cash equivalents, including restricted cash6,983 (216,584)
Cash and cash equivalents, including restricted cash, beginning of period522,241 849,278 
Cash and cash equivalents, including restricted cash, end of period$529,224 $632,694 
See accompanying notes to the consolidated financial statements.
8


Supplementary cash flow disclosures:
Cash paid for interest$953 $372 
Cash interest received$100 $384 
Supplementary disclosures for noncash investing and financing activities:
Purchases of property, plant and equipment included in liabilities$26,207 $33,389 
Accrued paid in kind interest$1,784 $ 
Embedded derivative asset bifurcated from Convertible Notes$1,500 $ 
Accrued debt issuance costs$294 $ 
Accrued deferred issuance costs$ $352 
Leased assets obtained in exchange for new finance lease liabilities$692 $145 
Common stock issued for commitment shares$ $2,625 
Common stock issued for investments in affiliates, including common stock with embedded put right$ $32,376 
See accompanying notes to the consolidated financial statements.
9

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.BASIS OF PRESENTATION
(a)Overview
Nikola Corporation (‘‘Nikola’’ or the ‘‘Company’’) is a designer and manufacturer of heavy-duty commercial battery-electric and hydrogen-electric vehicles and energy infrastructure solutions.
(b)Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated.
Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes. All dollar amounts are in thousands, unless otherwise noted.
Additionally, prior to the start of production for the Tre battery-electric vehicle ("BEV") trucks late in the first quarter of 2022, pre-production activities, including manufacturing readiness, process validation, prototype builds, freight, inventory write-downs, and operations of the Company's manufacturing facility in Coolidge, Arizona were recorded as research and development activities on the Company's consolidated statements of operations. Commensurate with the start of production, manufacturing costs, including labor and overhead, as well as inventory-related expenses related to the Tre BEV trucks, and related facility costs, are recorded in cost of revenues beginning in the second quarter of 2022.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
(c)Funding Risks and Going Concern
As an early stage growth company, the Company's ability to access capital is critical. Until the Company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the Company will need to raise additional capital.
Additional stock financing may not be available on favorable terms and could be dilutive to current stockholders. Debt financing, if available, may involve restrictive covenants and dilutive financing instruments.
The Company’s ability to access capital when needed is not assured and, if capital is not available to the Company when, and in the amounts needed, the Company could be required to delay, scale back, or abandon some or all of its development programs and other operations, which could materially harm the Company’s business, financial condition and results of operations.
These financial statements have been prepared by management in accordance with GAAP and this basis assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. These financial statements do not include any adjustments that may result from the outcome of this uncertainty.
As of the date of this Quarterly Report on Form 10-Q, the Company’s existing cash resources and existing borrowing availability are sufficient to support planned operations for the next 12 months. As a result, management believes that the Company's existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements.
See accompanying notes to the consolidated financial statements.
10

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Cash, Cash Equivalents and Restricted Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Additionally, the Company considers investments in money market funds with a floating net asset value to be cash equivalents. As of June 30, 2022 and December 31, 2021, the Company had $441.8 million and $497.2 million of cash and cash equivalents, which included cash equivalents of zero and $463.9 million of highly liquid investments as of June 30, 2022 and December 31, 2021, respectively.
As of June 30, 2022 and December 31, 2021, the Company had $87.5 million and $25.0 million, respectively, in non-current restricted cash. Restricted cash represents cash that is restricted as to withdrawal or usage and consists of securitization of the Company's letters of credit and debt. See Note 5, Debt and Finance Lease Liabilities, for additional details.
The reconciliation of cash and cash equivalents and restricted cash and cash equivalents to amounts presented in the consolidated statements of cash flows are as follows:
As of
June 30, 2022December 31, 2021June 30, 2021
Cash and cash equivalents$441,765 $497,241 $632,694 
Restricted cash and cash equivalents – non-current87,459 25,000  
Cash, cash equivalents and restricted cash and cash equivalents$529,224 $522,241 $632,694 
(b)Accounts Receivable, net
Accounts receivable, net, are reported at the invoiced amount, less an allowance for potential uncollectible amounts. The Company had no allowance for uncollectible amounts as of June 30, 2022 and December 31, 2021.
(c)Fair Value of Financial Instruments
The carrying value and fair value of the Company’s financial instruments are as follows:
As of June 30, 2022
Level 1Level 2Level 3Total
Assets
Derivative asset
$ $ $800 $800 
Liabilities
Warrant liability$ $ $1,377 $1,377 
Derivative liability  6,588 6,588 
As of December 31, 2021
Level 1Level 2Level 3Total
Assets
Cash equivalents – money market$463,867 $ $ $463,867 
Liabilities
Warrant liability
$ $ $4,284 $4,284 
Derivative liability
  4,189 4,189 
11

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Warrant liability
As a result of the Company's business combination with VectoIQ Acquisition Corp. ("VectoIQ") in June 2020 (the "Business Combination"), the Company assumed a warrant liability (the "Warrant Liability") related to previously issued private warrants in connection with VectoIQ's initial public offering. The Warrant Liability is remeasured to its fair value at each reporting period and upon settlement. The change in fair value was recognized in "Revaluation of warrant liability" on the consolidated statements of operations. The change in fair value of the Warrant Liability was as follows:
Warrant Liability
Estimated fair value at December 31, 2021
$4,284 
Change in fair value(2,907)
Estimated fair value at June 30, 2022
$1,377 
The fair value of the warrants outstanding was estimated using the Black-Scholes model. The application of the Black-Scholes model requires the use of a number of inputs and significant assumptions including volatility. The following reflects the inputs and assumptions used:
As of
June 30, 2022December 31, 2021
Stock price$4.76 $9.87 
Exercise price$11.50 $11.50 
Remaining term (in years)2.933.42
Volatility90 %90 %
Risk-free rate2.96 %1.03 %
Expected dividend yield % %
Price Differential derivative liability
On September 13, 2021, the Company entered into an Amended Membership Interest Purchase Agreement (the "Amended MIPA") with Wabash Valley Resources ("WVR") and the sellers party thereto (each, a "Seller"), pursuant to which the Company is subject to the first price differential and second price differential (together the "Price Differential"). Pursuant to the terms of the Amended MIPA, the first price differential was settled in the fourth quarter of 2021 for $3.4 million.
The Price Differential was a freestanding financial instrument and accounted for as a derivative liability. The derivative liability was remeasured at each reporting period with changes in its fair value recorded in "Other income (expense), net" on the consolidated statements of operations. The change in fair value of the derivative liability was as follows:
Derivative Liability
Estimated fair value at December 31, 2021$4,189 
Change in fair value2,399 
Estimated fair value at June 30, 2022$6,588 
12

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The fair value of the derivative liability, a level 3 measurement, was estimated using a Monte Carlo simulation model as of December 31, 2021. The application of the Monte Carlo simulation model requires the use of a number of inputs and significant assumptions including volatility. The following reflects the inputs and assumptions used:
As of
December 31, 2021
Stock price$9.87 
Strike price$14.86 
Volatility100 %
Risk-free rate0.18 %
The fair value as of June 30, 2022, was based on the settlement amount that was subsequently paid on July 1, 2022.
Put Premium derivative asset
In June 2022, the Company completed a private placement of $200 million aggregate principal amount of unsecured 8.00% / 11.00% convertible senior paid in kind ("PIK") toggle notes (the “Convertible Notes”). In conjunction with the issuance of the Convertible Notes, the Company entered into a premium letter agreement (the "Put Premium") with the purchasers (the "Purchasers") of the Convertible Notes which requires the Purchasers to pay $9.0 million to the Company if during the period through the date that is thirty months after the closing date of the private placement of Convertible Notes, the last reported sale price of the Company's common stock has been at least $20.00 for at least 20 trading days during any consecutive 40 trading day periods.
The Put Premium is an embedded derivative asset and meets the criteria to be separated from the host contract and carried at fair value. The derivative is measured both initially and in subsequent periods at fair value, with changes in fair value recognized in "Other income (expense), net" on the consolidated statements of operations. The fair value of the derivative asset is included in "Other assets" on the consolidated balance sheets. The change in fair value of the derivative asset was as follows:
Derivative asset
Estimated fair value as of June 1, 2022$1,500 
Change in fair value(700)
Estimated fair value as of June 30, 2022$800 
The fair value of the derivative asset, a level 3 measurement, was estimated using a Monte Carlo simulation model. The application of the Monte Carlo simulation model requires the use of a number of inputs and significant assumptions including volatility. The following reflects the inputs and assumptions used:
As of
June 30, 2022June 1, 2022
Stock price$4.76 $6.77 
Threshold price$20.00 $20.00 
Term (in years)2.42.5
Volatility90 %90 %
Risk-free rate2.93 %2.73 %
Payer cost of debt5.00 %4.30 %
Disclosure of Fair Values
Financial instruments that are not re-measured at fair value include accounts receivable, accounts payable, accrued liabilities, deposits and debt. The carrying values of these financial instruments approximate their fair values, other than debt obligations, including the Convertible Notes and the $50.0 million collateralized promissory note ("Collateralized Note") issued during the second quarter of 2022.
13

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The fair value of debt obligations are estimated using level 2 fair value inputs, including stock price and risk-free rates. The following table presents the carrying value and estimated fair values:

As of June 30, 2022
Carrying ValueFair Value
Convertible Notes$186,805 $141,000 
Collateralized Promissory Note50,000 50,000 
(d)Revenue Recognition
Truck sales
Truck sales consist of revenue recognized on the sales of the Company's BEV trucks. The sale of a truck is recognized as a single performance obligation at the point in time when control is transferred to the customer (dealers). Control is deemed transferred when the product is picked up by the carrier and the customer (dealer) can direct the product's use and obtain substantially all of the remaining benefits from the product. The Company does not offer returns on truck sales.
Payment for trucks sold are made in accordance with the Company's customary payment terms. The Company has elected an accounting policy whereby the Company does not adjust the promised amount of consideration for the effects of a significant financing component because, at contract inception, the Company expects the period between the time when the Company transfers a promised good or service to the customer and the time when the customer pays for that good or service will be one year or less. Sales tax collected from customers is not considered revenue and is accrued until remitted to the taxing authorities. Shipping and handling activities occur after the customer has obtained control of the product, thus the Company has elected to account for those expenses as fulfillment costs in cost of revenues, rather than an additional promised service.
Services and other
Services and other revenues consist of sales of mobile charging trailers ("MCTs"). The sale of MCTs is recognized as a single performance obligation at the point in time when control is transferred to the customer. Control is deemed transferred when the product is delivered to the customer and the customer can direct the product's use and obtain substantially all of the remaining benefits from the asset. The Company does not offer sales returns on MCTs. Payment for products sold are made in accordance with the Company's customary payment terms and the Company's MCT contracts do not have significant financing components. The Company has elected to exclude sales taxes from the measurement of the transaction price.
(e)Warranties
Warranty costs are recognized upon transfer of control of trucks to dealers, and is estimated based on factors including the length of the warranty, product costs, supplier warranties, and product failure rates. Warranty reserves are reviewed and adjusted quarterly to ensure that accruals are adequate to meet expected future warranty obligations. Initial warranty data is limited early in the launch of a new product and accordingly, future adjustments to the warranty accrual may be material.
The change in warranty liability for the three and six months ended June 30, 2022 is summarized as follows:
Three Months EndedSix Months Ended
June 30, 2022June 30, 2022
Accrued warranty - beginning of period$ $ 
Provision for warranty2,203 2,203 
Accrued warranty - end of period$2,203 $2,203 
As of June 30, 2022, warranty accrual for $0.6 million is recorded in "Accrued expenses and other current liabilities" and $1.6 million in "Other long-term liabilities" on the consolidated balance sheets.
14

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(f)Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet adopted
In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-10, Government Assistance, to increase transparency of government assistance which requires annual disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model by analogy. ASU 2021-10 is effective for annual periods beginning after December 15, 2021 and early adoption is permitted. The Company will adopt ASU 2021-10 for the year ended December 31, 2022, which will have an immaterial impact to the Company's consolidated financial statements.
3.BALANCE SHEET COMPONENTS
Inventory
Inventory consisted of the following at June 30, 2022 and December 31, 2021, respectively:
As of
June 30, 2022December 31, 2021
Raw materials$41,213 $7,344 
Work in process5,696 4,253 
Finished goods5,196  
Total inventory$52,105 $11,597 
Inventory cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Inventories are stated at the lower of cost or net realizable value. Inventories are written down for any excess or obsolescence and when net realizable value, which is based upon estimated selling prices, is in excess of carrying value. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at June 30, 2022 and December 31, 2021, respectively:
As of
June 30, 2022December 31, 2021
Deposits$14,397 $5,615 
Non-trade receivables11,815 2,717 
Prepaid expenses7,329 5,116 
Deferred implementation costs1,261 2,443 
Total prepaid expenses and other current assets$34,802 $15,891 
Deferred implementation costs
Deferred implementation costs are amortized on a straight-line basis over the estimated useful life of the related software. During the three months ended June 30, 2022, the Company re-assessed the estimated useful life of its existing enterprise resource planning system as a result of ongoing re-implementation, resulting in a shorter useful life and prospective change in amortization. The Company recorded $1.2 million and $1.3 million of amortization expense on the consolidated statements of operations for the three and six months ended June 30, 2022, respectively. Amortization during the three and six months ended June 30, 2021 was immaterial.
15

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following at June 30, 2022 and December 31, 2021:
As of
June 30, 2022 December 31, 2021
Buildings$127,204 $104,333 
Construction-in-progress126,849 103,515 
Machinery and equipment49,544 36,551 
Demo vehicles9,958 888 
Software8,309 7,562 
Other7,174 3,026 
Leasehold improvements2,886 2,883 
Furniture and fixtures1,480 1,480 
Finance lease assets1,338 646 
Property, plant and equipment, gross334,742 260,884 
Less: accumulated depreciation and amortization(23,010)(16,507)
Total property, plant and equipment, net$311,732 $244,377 
Construction-in-progress on the Company's consolidated balance sheets as of June 30, 2022 relates primarily to the expansion of the Company's manufacturing plant in Coolidge, Arizona, and build-out of the Company's headquarters and R&D facility in Phoenix, Arizona.
Depreciation expense for the three months ended June 30, 2022 and 2021 was $3.5 million and $1.9 million, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 was $6.6 million and $3.6 million, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at June 30, 2022 and December 31, 2021:
As of
June 30, 2022December 31, 2021
Settlement liability$75,000 $50,000 
Inventory received not yet invoiced21,577 8,253 
Accrued purchase of intangible asset20,902 11,344 
Accrued legal expenses17,644 5,664 
Derivative liability6,588 4,189 
Accrued payroll and payroll related expenses3,604 2,521 
Accrued purchases of property, plant and equipment1,630 2,817 
Other accrued expenses9,665 8,699 
Total accrued expenses and other current liabilities$156,610 $93,487 
16

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. INVESTMENTS IN AFFILIATES
Investments in unconsolidated affiliates accounted for under the equity method consist of the following:
As of
OwnershipJune 30, 2022December 31, 2021
Nikola Iveco Europe GmbH50 %$20,832 $4,083 
Wabash Valley Resources LLC20 %57,894 57,695 
Nikola - TA HRS 1, LLC50 %1,000  
$79,726 $61,778 
Equity in net loss of affiliates on the consolidated statements of operations for the three and six months ended June 30, 2022 and 2021, were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Equity in net loss of affiliates:
Nikola Iveco Europe GmbH$(1,201)$(1,126)$(4,039)$(1,920)
Wabash Valley Resources LLC(69) (51) 
Total equity in net loss of affiliates$(1,270)$(1,126)$(4,090)$(1,920)
Nikola Iveco Europe GmbH
In April 2020, the Company and Iveco established a joint venture in Europe, Nikola Iveco Europe GmbH. The operations of the joint venture are located in Ulm, Germany, and consist of manufacturing the BEV and FCEV Class 8 trucks for the European and North American markets.
The agreements provide for a 50/50 ownership of the joint venture and a 50/50 allocation of the joint venture's production volumes and profits between the Company and Iveco. Nikola Iveco Europe GmbH is considered a variable interest entity ("VIE") due to insufficient equity to finance its activities without additional subordinated financial support. The Company is not considered the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE is accounted for under the equity method.
In June 2022, the Company and Iveco executed amended agreements to expand the scope of the joint venture operations to include engineering and development of the Nikola Tre BEV European platform.
During the first quarter of 2022, the Company made a contribution to Nikola Iveco Europe GmbH of €3.0 million (approximately $3.3 million). During the second quarter of 2022, the Company made an additional contribution of €17.0 million (approximately $18.4 million). As of June 30, 2022, the Company's maximum exposure to loss was $31.8 million, which represents the book value of the Company's equity interest and guaranteed debt obligations of $11.0 million.
Wabash Valley Resources LLC
On June 22, 2021, the Company entered into the Membership Interest Purchase Agreement ("MIPA") with WVR and the Sellers, pursuant to which, the Company purchased a 20% equity interest in WVR in exchange for $25.0 million in cash and 1,682,367 shares of the Company’s common stock. WVR is developing a clean hydrogen project in West Terre Haute, Indiana, including a hydrogen production facility. The common stock consideration was calculated based on the 30-day average closing stock price of the Company, or $14.86 per share, and the Company issued 1,682,367 shares of its common stock.
The Company's interest in WVR is accounted for under the equity method and is included in "Investment in affiliates" on the Company's consolidated balance sheets. Included in the initial carrying value was a basis difference of $55.5 million due to the difference between the cost of the investment and the Company's proportionate share of WVR's net assets. The basis difference is primarily comprised of property, plant and equipment and intangible assets.
17

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of June 30, 2022, the Company's maximum exposure to loss was $58.1 million, which represents the book value of the Company's equity interest and a loan to WVR during the second quarter of 2022 for $0.3 million.
Nikola - TA HRS 1, LLC
In March 2022, the Company and Travel Centers of America, Inc. ("TA") entered into a series of agreements which established a joint venture, Nikola - TA HRS 1, LLC. The operations expected to be performed by the joint venture consist of the development, operation and maintenance of a hydrogen fueling station. Operations have not commenced as of June 30, 2022.
The agreements provide for 50/50 ownership of the joint venture. Both parties are entitled to appoint an equal number of board members to the management committee of the joint venture. Pursuant to the terms of the agreements, the Company contributed an initial contribution of $1.0 million to Nikola - TA HRS 1, LLC during the second quarter of 2022.
Nikola - TA HRS 1, LLC is considered a VIE due to insufficient equity to finance its activities without additional subordinated financial support. The Company is not considered the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE is accounted for under the equity method.
The Company does not guarantee debt for, or have other financial support obligations to the entity and its maximum exposure to loss in connection with its continuing involvement with the entity is limited to the carrying value of the investment.
5. DEBT AND FINANCE LEASE LIABILITIES
Debt and finance lease liabilities as of June 30, 2022 and December 31, 2021, were as follows:
As of