Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the SEC.

Unaudited Interim Financial Statements

Unaudited Interim Financial Statements

The condensed consolidated balance sheet as of June 30, 2023, the condensed consolidated statements of operations and the condensed consolidated statements of changes in stockholders’ equity for the six-months ended June 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the six-months ended June 30, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date. The interim condensed consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.

Comprehensive loss is not separately presented as the amounts are equal to net loss for the three and six-months ended June 30, 2023 and 2022.

The interim condensed consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The condensed consolidated financial statements for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods.

Supplier Risk

Supplier Risk

Suppliers have begun production of components for serial production of vehicles, which are scheduled to be assembled in Austria, during the third quarter of 2023. As of June 30, 2023, these supplier contracts do not represent unconditional purchase obligations with take-or-pay or specified minimum quantities provisions. The Company has secured battery capacity with a supplier located in China for the Fisker Ocean SUV. Under the terms of the agreement, from 2023 through 2025, the battery supplier will deliver two different battery solutions for the Fisker Ocean SUV, with an initial battery capacity of over 5 gigawatt-hours annually.

Use of Estimates

Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP required management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the condensed consolidated financial statements and accompanying notes. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

Restricted Cash

Restricted CashCash and cash equivalents that is restricted is primarily related to letters of credit issued to a supplier. The Company's restricted cash balance was $54.2 million as of June 30, 2023. Cash and cash equivalents were unrestricted as of December 31, 2022.

Revenue from Contracts with Customers and Cost of Revenues

Revenue from Contracts with Customers

The Company follows a five-step process in which (i) a contract is identified, (ii), the related performance obligations are identified, (iii) the transaction price is determined, (iv) the transaction price is allocated to the identified performance obligations, and (v) revenue is recognized when (or as) performance obligations are satisfied. The Company's revenue is primarily generated from the sale of electric vehicles and accessories to customers that meet the definition of a performance obligation, including over-the-air ("OTA") software updates as they become available. Revenue recognized in the three- and six-months ended June 30, 2023 and 2022 is immaterial.

The Company recognizes revenue related to the vehicles at a point in time when the customer obtains control of the vehicle either upon completion of delivery or upon pick up of the vehicle by the customer. As the Company has a stand-ready obligation to deliver unspecified OTA software updates when-and-if they become available, the Company recognizes

revenue from the OTA software updates ratably over the basic vehicle warranty term, commencing when control of the vehicles is transferred to the customer. Shipping and handling is considered a fulfillment activity.

Payment for EV sales is typically received at or prior to delivery, or according to agreed upon payment terms. Sales tax is excluded from the measurement of the transaction price. The standalone selling prices of all performance obligations are estimated by considering costs to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available. The transaction price is allocated among the performance obligations in proportion to the standalone selling price of each performance obligation.

Other revenue consists of sales of merchandise and home charging solutions.

Cost of Revenues

Cost of revenues primarily relates to the cost of production of vehicles and includes direct parts, material and labor costs, machinery and tooling depreciation, amortization of capitalized manufacturing costs, shipping and logistics costs, reserves for estimated warranty costs related to the production of vehicles, adjustments to write down the carrying value of inventory when it exceeds its estimated net realizable value (“NRV”) as needed, adjustments for excess and obsolete inventory, and losses on firm purchase commitments, as needed.

Fair Value Measurements

Fair Value Measurements

The Company follows the accounting guidance in ASC 820 Fair Value Measurement ("ASC 820"), for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Inventory Valuation

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. Cost is determined using approximate costs on a first-in, first-out basis. The Company records inventory write-downs for excess or obsolete inventories based upon assumptions about current and future demand forecasts. If inventory on-hand is in excess of future demand forecast, the excess amounts are written-off.

Inventory is also reviewed to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires an assessment to determine the selling price of the vehicles less the estimated cost to convert the inventory on-hand into a finished product. 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. In the event there are changes in our estimates of future selling prices or production costs, additional and potentially material write-downs may be required.

Long-Lived Assets

Long-Lived Assets

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets as follows:

	Useful Life (in years)
Tooling	3-8
Machinery and equipment	5-15
Furniture and fixtures	5-10
IT hardware and software	3-10
Leasehold improvements	Shorter of their estimated life or remaining lease term

Construction in progress is comprised primarily of costs incurred to construct serial production tooling located at affiliates of Magna and our suppliers.

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the related lease. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repair expenditures are expensed as incurred, while major improvements that increase functionality of the asset are capitalized and depreciated ratably to expense over the identified useful life.

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset group to its carrying amount. The Company assesses impairment for asset groups, which represent a combination of assets that produce distinguishable cash flows. If the carrying amount of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. The Company has not recorded any impairment charges during the periods presented.

Income Taxes

Income Taxes

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

There are transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. As of June 30, 2023, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2022.

The Company’s income tax provision consists of an estimate for U.S. federal, foreign 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. The Company maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because the Company believes the recoverability of the tax assets is not more likely than not as of June 30, 2023.

Equity Awards

Equity Awards

The grant date for an option or stock award is established when the grantee has a mutual understanding of the key terms and conditions of the option or award, the award is authorized, including all the necessary approvals unless approval is essentially a formality or perfunctory, and the grantee begins to benefit from, or be adversely affected by, underlying

changes in the price of the Company’s Class A common shares. An award or option is authorized on the date that all approval requirements are completed (e.g., action by the compensation committee approving the award and the number of options, restricted shares or other equity instruments to be issued to individual employees).

Net Loss per Share of Common Stock

Net Loss per Share of Common Stock Basic net loss per share of common stock is calculated using the two-class method under which earnings are allocated to both common shares and participating securities. Undistributed net losses are allocated entirely to common shareholders since the participating security has no contractual obligation to share in the losses. Basic net loss per share is calculated by dividing the net loss attributable to common shares by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of stock-based compensation awards and warrants to purchase common stock (using the treasury stock method).

Foreign Currency Remeasurement and Transactions

Foreign Currency Remeasurement and Transactions

The functional currency of the Company’s foreign subsidiaries is the U.S. Dollar. For these subsidiaries, monetary assets and liabilities denominated in non-U.S. currencies are re-measured to U.S. Dollars using current exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities denominated in non-U.S. currencies are maintained at historical U.S. Dollar exchange rates. Expenses are re-measured at average U.S. Dollar monthly rates.

Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Transaction gains and losses are immaterial for all periods presented.

In April and July 2022, the Company purchased 130.1 million Euros for 140.0 million U.S. dollars, a currency exchange rate of 1 U.S. dollar for 1.076 Euro and 50.0 million Euros for 50.9 million U.S. dollars, a currency exchange rate of 1 U.S. dollar for 1.018 Euro, which are designed to provide an economic hedge against future foreign currency exposures. As of June 30, 2023, the Company has fully utilized these funds for research and development and production of Ocean and future projects.