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As filed with the Securities and Exchange Commission on July 17, 2020

Registration No. 333-            


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Nikola Corporation
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  3711
(Primary Standard Industrial
Classification Code No.)
  82-4151153
(I.R.S. Employer
Identification No.)

4141 E Broadway Road
Phoenix, AZ 85040

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Britton M. Worthen, Esq.
Chief Legal Officer
Nikola Corporation
4141 E Broadway Road
Phoenix, AZ 85040
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Stanley F. Pierson, Esq.
Gabriella A. Lombardi, Esq.
Pillsbury Winthrop Shaw Pittman LLP
2550 Hanover Street
Palo Alto, CA 94304
Tel: (650) 233-4500
Fax: (650) 233-4545



Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box.    ý

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           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 under the Securities Exchange Act of 1934:

Large accelerated filer o   Accelerated filer ý   Non-accelerated filer o   Smaller reporting company o

Emerging growth company ý

           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 7(a)(2)(B) of the Securities Act. o



           The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

CALCULATION OF REGISTRATION FEE

 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed
Maximum
Offering Price
Per Share

  Proposed
Maximum Aggregate
Offering Price

  Amount of
Registration Fee

 
Common Stock, $0.0001 par value per share   249,843,711(2)   $52.28(3)   $13,061,829,212   $1,695,425.43
 
(1)
Pursuant to Rule 416(a), there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from share splits, share dividends or similar transactions.

(2)
Consists of shares of Common Stock registered for sale by the selling securityholders named in this registration statement including, (i) up to 6,640,000 shares held by the Original Holders (as defined below) and (ii) 243,203,711 shares held by certain affiliates of the Company.

(3)
Pursuant to Rule 457(c) under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum offering price per share is $52.28, which is the average of the high and low prices of the Common Stock on July 14, 2020 on the Nasdaq Global Select Market.

   


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The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling securityholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION—DATED JULY 17, 2020

PRELIMINARY PROSPECTUS

GRAPHIC

Nikola Corporation

Up to 249,843,711 Shares of Common Stock



        This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus or their donees, pledgees, transferees or other successors in interest (the "Selling Securityholders") of up to 249,843,711 shares of our common stock, $0.0001 par value per share ("Common Stock"), which includes (i) up to 6,640,000 shares held by certain persons and entities (the "Original Holders") holding shares of Common Stock initially purchased by VectoIQ Holdings, LLC (the "Sponsor") and Cowen Investments II, LLC ("Cowen Investments" and, together with the Sponsor, the "Founders") in a private placement in connection with the initial public offering (the "IPO") of VectoIQ Acquisition Corp. ("VectoIQ") and (ii) 243,203,711 shares held by certain affiliates of the Company. We are registering the shares for resale pursuant to such stockholders' registration rights under a Registration Rights and Lock-Up Agreement between us and such stockholders, which in addition to such registration rights, also provides for certain transfer and lock-up restrictions on such shares. We will not receive any proceeds from the sale of shares of Common Stock by the Selling Securityholders pursuant to this prospectus.

        Our registration of the securities covered by this prospectus does not mean that the Selling Securityholders will offer or sell any of the shares. The Selling Securityholders may sell the shares of Common Stock covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares in the section entitled "Plan of Distribution."

        Our Common Stock and warrants to purchase Common Stock (the "Public Warrants") are listed on the Nasdaq Global Select Market under the symbols "NKLA" and "NKLAW," respectively. On July 16, 2020, the closing price of our Common Stock was $52.53 and the closing price for our Public Warrants was $23.37.



        See the section entitled "Risk Factors" beginning on page 7 of this prospectus to read about factors you should consider before buying our securities.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                , 2020.


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TABLE OF CONTENTS

 
  Page  

ABOUT THIS PROSPECTUS

    1  

FORWARD-LOOKING STATEMENTS

   
2
 

SUMMARY

   
4
 

RISK FACTORS

   
7
 

USE OF PROCEEDS

   
31
 

DETERMINATION OF OFFERING PRICE

   
32
 

MARKET INFORMATION FOR COMMON STOCK AND DIVIDEND POLICY

   
33
 

SELECTED FINANCIAL INFORMATION

   
34
 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   
36
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
48
 

BUSINESS

   
69
 

MANAGEMENT

   
97
 

EXECUTIVE COMPENSATION

   
107
 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   
112
 

PRINCIPAL SECURITYHOLDERS

   
120
 

SELLING SECURITYHOLDERS

   
123
 

DESCRIPTION OF OUR SECURITIES

   
130
 

PLAN OF DISTRIBUTION

   
136
 

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

   
138
 

LEGAL MATTERS

   
142
 

EXPERTS

   
142
 

CHANGE IN AUDITOR

   
142
 

WHERE YOU CAN FIND MORE INFORMATION

   
143
 

INDEX TO FINANCIAL STATEMENTS

   
F-1
 

        You should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus and any applicable prospectus supplement. Neither we nor the Selling Securityholders have authorized anyone to provide you with different information. Neither we nor the Selling Securityholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any applicable prospectus supplement is accurate as of any date other than the date of the applicable document. Since the date of this prospectus and the documents incorporated by reference into this prospectus, our business, financial condition, results of operations and prospects may have changed.

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ABOUT THIS PROSPECTUS

        This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the "SEC") using the "shelf" registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus.

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

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

        On June 3, 2020 (the "Closing Date"), VectoIQ Acquisition Corp., our predecessor company ("VectoIQ"), consummated the previously announced merger pursuant to that certain Business Combination Agreement, dated March 2, 2020 (the "Business Combination Agreement"), by and among the VectoIQ, VCTIQ Merger Sub Corp., a wholly-owned subsidiary of VectoIQ incorporated in the State of Delaware ("Merger Sub"), and Nikola Corporation, a Delaware corporation ("Legacy Nikola"). Pursuant to the terms of the Business Combination Agreement, a business combination between the Company and Legacy Nikola was effected through the merger of Merger Sub with and into Legacy Nikola, with Legacy Nikola surviving as the surviving company and as a wholly-owned subsidiary of VectoIQ (the "Merger" and, collectively with the other transactions described in the Business Combination Agreement, the "Business Combination"). On the Closing Date, and in connection with the closing of the Business Combination (the "Closing"), VectoIQ Acquisition Corp. changed its name to Nikola Corporation.

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

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FORWARD-LOOKING STATEMENTS

        This prospectus and any accompanying prospectus supplement contain forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial plans or performance. When used in this prospectus, the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "project," "forecast," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "seeks," "scheduled," or "will," and similar expressions are intended to identify forward-looking statements, and include but are not limited to:

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

    our financial and business performance following the Business Combination, including financial projections and business metrics;

    changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

    litigation, complaints, product liability claims and/or adverse publicity;

    the implementation, market acceptance and success of our business model;

    developments and projections relating to our competitors and industry;

    the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;

    our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

    our future capital requirements and sources and uses of cash;

    our ability to obtain funding for our operations;

    our business, expansion plans and opportunities;

    changes in applicable laws or regulations; and

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

        These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements, including the following:

    the outcome of any legal proceedings;

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

    costs related to the Business Combination;

    changes in applicable laws or regulations;

    the effect of the COVID-19 pandemic on our business;

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

    our ability to raise capital;

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

    other risks and uncertainties described in this registration statement, including those under the section entitled "Risk Factors."

        Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Additional cautionary statements or discussions of risks and uncertainties that could affect our results or the achievement of the expectations described in forward-looking statements may also be contained in any accompanying prospectus supplement.

        These forward-looking statements made by us in this prospectus and any accompanying prospectus supplement speak only as of the date of this prospectus and the accompanying prospectus supplement. Except as required under the federal securities laws and rules and regulations of the SEC, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. You should, however, review additional disclosures we make in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC.

        You should read this prospectus and any accompanying prospectus supplement completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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SUMMARY

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

The Company

        We are a vertically integrated zero-emissions transportation solution provider that designs and manufactures state-of-the-art battery-electric and hydrogen fuel cell electric vehicles, electric vehicle drivetrains, energy storage systems, and hydrogen fueling stations. Our core product offering is centered around our battery-electric vehicle ("BEV") and hydrogen fuel cell electric vehicle ("FCEV") Class 8 semi-trucks. The key differentiator of our business model is our planned network of hydrogen fueling stations. We are offering a revolutionary bundled lease model, which provides customers with the FCEV truck, hydrogen fuel, and maintenance for a fixed price per mile, locks in fuel demand and significantly de-risks infrastructure development.

Background

        Our Company was originally known as VectoIQ Acquisition Corp. On June 3, 2020, VectoIQ consummated the Business Combination with Legacy Nikola pursuant to the Business Combination Agreement dated as of March 2, 2020 among VectoIQ, Legacy Nikola and Merger Sub. In connection with the Closing of the Business Combination, VectoIQ changed its name to Nikola Corporation. Legacy Nikola was deemed to be the accounting acquirer in the Merger based on an analysis of the criteria outlined in Accounting Standards Codification 805. While VectoIQ was the legal acquirer in the Merger, because Legacy Nikola was deemed the accounting acquirer, the historical financial statements of Legacy Nikola became the historical financial statements of the combined company, upon the consummation of the Merger.

        Immediately prior to the effective time of the Merger (the "Effective Time"), each issued and outstanding share of Legacy Nikola preferred stock converted into the equal number of Legacy Nikola common stock. At the Effective Time, each share of Legacy Nikola common stock issued and outstanding immediately prior to the Effective Time, including the converted Legacy Nikola preferred stock, converted into the right to receive 1.901 shares of Common Stock.

        Our Common Stock and Public Warrants are currently listed on the Nasdaq Global Select Market under the symbols "NKLA" and "NKLAW," respectively.

        The rights of holders of our Common Stock, Public Warrants and 890,000 private warrants to purchase Common Stock (the "Private Warrants" and, collectively with the Public Warrants, the "Warrants") are governed by our second amended and restated certificate of incorporation (the "Certificate of Incorporation"), our amended and restated bylaws (the "Bylaws") and the Delaware General Corporation Law (the "DGCL"), and, in the case of the Warrants, the Warrant Agreement, dated May 15, 2018, between VectoIQ and the Continental Stock Transfer & Trust Company (the "Warrant Agreement"). See the sections entitled "Description of Our Securities" and "Selling Securityholders—Certain Relationships with Selling Securityholders."

Corporate Information

        VectoIQ which was incorporated in the State of Delaware in January 2018 as a special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. VectoIQ completed its initial public offering in May 2018. In June 2020, our wholly-

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owned subsidiary merged with and into Legacy Nikola, with Legacy Nikola surviving the merger as a wholly-owned subsidiary of VectoIQ. In connection with the Merger, we changed our name to Nikola Corporation. Our principal executive offices are located at 4141 E Broadway Road, Phoenix, Arizona 85040. Our telephone number is (480) 666-1038. Our website address is www.nikolamotor.com. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.

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THE OFFERING

Issuer

  Nikola Corporation (f/k/a VectoIQ Acquisition Corp.).

Shares of Common Stock Offered by the Selling Securityholders

 

249,843,711 shares.

Shares of Common Stock Outstanding

 

360,904,478 shares (as of June 3, 2020).

Use of Proceeds

 

We will not receive any proceeds from the sale of shares of Common Stock by the Selling Securityholders.

Lock-Up Restrictions

 

Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See "Selling Securityholders—Certain Relationships with Selling Securityholders" for further discussion.

Market for Common Stock and Warrants

 

Our Common Stock and Public Warrants are currently traded on the Nasdaq Global Select Market under the symbols "NKLA" and "NKLAW," respectively.

Risk Factors

 

See "Risk Factors" and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.

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RISK FACTORS

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

Risks Related to the Company's Business and Industry

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 incurred a net loss of $88.7 million for the year ended December 31, 2019 and have incurred net losses of approximately $188.5 million from our inception through December 31, 2019. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of our trucks, which is not expected to begin until 2021 for our Nikola Tre BEV and 2023 for our Nikola Two FCEV, and may occur later. Even if we are able to successfully develop and sell or lease our trucks, there can be no assurance that they will be commercially successful. Our potential profitability is dependent upon the successful development and successful commercial introduction and acceptance of our trucks and our hydrogen station platform, which may not occur.

        We expect the rate at which we will incur losses to be significantly high in future periods as we:

    design, develop and manufacture our trucks;

    construct and equip our planned manufacturing plant to produce our trucks in Arizona;

    modify and equip the Iveco manufacturing plant in Germany to produce our trucks in Europe;

    build up inventories of parts and components for our trucks;

    manufacture an available inventory of our trucks;

    develop and deploy our hydrogen fueling stations;

    expand our design, development, maintenance and repair capabilities;

    increase our sales and marketing activities and develop our distribution infrastructure; and

    increase our general and administrative functions to support our growing operations.

        Because we will incur the costs and expenses from these efforts before we receive any incremental revenues with respect thereto, our losses in future periods will be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.

We may be unable to adequately control the costs associated with our operations.

        We will require significant capital to develop and grow our business, including developing and manufacturing our trucks, building our manufacturing plant and building our brand. We expect to incur significant expenses which will impact our profitability, including research and development expenses, raw material procurement costs, leases, sales and distribution expenses as we build our brand and market our trucks and bundled leasing model, and general and administrative expenses as we scale our operations. In addition, we may incur significant costs in connection with our services, including

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building our hydrogen fueling stations and honoring our maintenance commitments under our bundled lease package. Our ability to become profitable in the future will not only depend on our ability to successfully market our vehicles and other products and services, but also to control our costs. If we are unable to cost efficiently design, manufacture, market, sell, distribute and service our trucks and services, our margins, profitability and prospects would be materially and adversely affected.

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.

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

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

        You must consider the risks and difficulties we face as an early stage company with a limited operating history. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed. We have a very limited operating history on which investors can base an evaluation of our business, operating results and prospects. We intend to derive substantially all of our revenues from the sale and lease of our vehicle platforms, which are still in the early stages of development. Due to our bundled lease model for our FCEV trucks, our revenues will also depend on the sale of hydrogen fuel at our planned hydrogen fueling stations which we do not expect to be operational until 2022 or later. There are no assurances that we will be able to secure future business with the major trucking companies or with independent truck drivers. We also have a Powersports division and recently announced a passenger truck. While we intend to focus on our commercial trucks and bundled leases, our other business lines may distract management's focus on what we consider our core business.

        It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.

We expect to 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.

        The design, manufacture, lease, sale and servicing of vehicles and related hydrogen fueling stations is capital-intensive. We expect that we will have sufficient capital to fund our planned operations for the next 12 to 18 months. We will need to raise additional capital to scale our manufacturing and roll out our hydrogen refueling stations. We may raise additional funds through the issuance of equity,

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equity related or debt securities, or through obtaining credit from government or financial institutions. This capital will be necessary to fund our ongoing operations, continue research, development and design efforts, improve infrastructure, introduce new vehicles and build hydrogen fueling stations. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially adversely affected.

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

        Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We intend to expand our operations significantly. Our future expansion will include:

    training new personnel;

    forecasting production and revenue;

    controlling expenses and investments in anticipation of expanded operations;

    establishing or expanding design, manufacturing, sales and service facilities; and

    implementing and enhancing administrative infrastructure, systems and processes.

        We intend to continue to hire a significant number of additional personnel, including design and manufacturing personnel and service technicians for our trucks. Because our trucks are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in alternative fuel and electric vehicles may not be available to hire, and as a result, we will need to expend significant time and expense training the employees we do hire. Competition for individuals with experience designing, manufacturing and servicing electric vehicles is intense, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business and prospects.

Our bundled lease model may present unique problems that may have an adverse effect on our operating results and business and harm our reputation.

        Our bundled lease model which provides customers with the FCEV truck hydrogen fuel and maintenance for a fixed price per mile is reliant on our ability to achieve a minimum hydrogen fuel efficiency in our FCEV trucks. If we are unable to achieve or maintain this fuel efficiency, we may be forced to provide our bundled lease customers with fuel at prices below-cost or risk damaging our relationships with our customers. Any such scenario would put our bundled lease model in jeopardy and may have a material adverse effect on our business, prospects, operating results and financial condition.

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

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

        We are currently not registered as a dealer in any state. In many states, it is unclear if, as a manufacturer, we will be able to obtain permission to sell and deliver vehicles directly to customers.

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For customers residing in states in which we will not be allowed to sell or deliver vehicles, we may have to arrange alternate methods of delivery of vehicles. This could include delivering vehicles to adjacent or nearby states in which we are allowed to directly sell and ship vehicles, and arranging for the customer to transport the vehicles to their home states. These workarounds could add significant complexity, and as a result, costs, to our business.

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.

        Our future business depends in large part on our ability to execute our plans to develop, manufacture, market and sell our Nikola Tre BEV and Nikola Two FCEV trucks and to deploy the associated hydrogen fueling stations for our FCEV trucks at sufficient capacity to meet the transportation demands of our business customers. We plan to initially commence manufacturing our trucks in Europe through our joint venture with CNH Industrial N.V. ("CNHI") and Iveco S.p.A. ("Iveco" and, collectively with CNHI, "CNHI/Iveco"), which is expected to commence operations in the third quarter of 2020, and in the future at our planned manufacturing plant in Arizona.

        Our continued development of our truck platforms is and will be subject to risks, including with respect to:

    our ability to secure necessary funding;

    the equipment we plan to use being able to accurately manufacture the vehicles within specified design tolerances;

    long- and short-term durability of our hydrogen fuel cell and electric drivetrain technology related components in the day-to-day wear and tear of the commercial trucking environment;

    compliance with environmental, workplace safety and similar regulations;

    securing necessary components on acceptable terms and in a timely manner;

    delays in delivery of final component designs to our suppliers;

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

    quality controls, particularly as we plan to commence manufacturing in-house;

    delays or disruptions in our supply chain; and

    other delays and cost overruns.

        We have no experience to date in high volume manufacturing of our trucks. We do not know whether we will be able to develop efficient, automated, low-cost manufacturing capabilities and processes, and reliable sources of component supply, that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market our trucks. Even if we are successful in developing our high volume manufacturing capability and processes and reliably source our component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors, or in time to meet our vehicle commercialization schedules or to satisfy the requirements of customers. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines could have a material adverse effect on our business, prospects, operating results and financial condition.

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We may experience significant delays in the design, manufacture, launch and financing of our trucks, including in the build out of our planned manufacturing plant, which could harm our business and prospects.

        Any delay in the financing, design, manufacture and launch of our trucks, including in the build out of our planned manufacturing plant, could materially damage our brand, business, prospects, financial condition and operating results. Vehicle manufacturers often experience delays in the design, manufacture and commercial release of new products. To the extent we delay the launch of our trucks, our growth prospects could be adversely affected as we may fail to grow our market share. Furthermore, we rely on third party suppliers for the provision and development of many of the key components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing necessary components, we could experience delays in delivering on our timelines.

We will rely on complex machinery for our operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.

        We will rely heavily on complex machinery for our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Our truck manufacturing plant will consist of large-scale machinery combining many components. The manufacturing plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, and seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.

If our planned manufacturing plant in Arizona becomes inoperable, we will be unable to produce our trucks and our business will be harmed.

        We expect to begin assembly of our trucks at our manufacturing plant in Arizona after completion of the initial phase of the plant in 2021, at the earliest. We expect to produce all of our trucks at our manufacturing plant in Arizona after completion of the second phase of the plant in 2023, at the earliest. Our plant and the equipment we use to manufacture our trucks would be costly to replace and could require substantial lead time to replace and qualify for use. Our plant may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, or by health epidemics, such as the recent COVID-19 pandemic, which may render it difficult or impossible for us to manufacture our trucks for some period of time. The inability to produce our trucks or the backlog that could develop if our manufacturing plant is inoperable for even a short period of time may result in the loss of customers or harm our reputation. Although we maintain insurance for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.

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Our plan to build a network of hydrogen fueling stations will require significant cash investments and management resources and may not meet our expectations with respect to additional sales of our electric vehicles. In addition, we may not be able to open stations in certain states.

        Our plan to build a network of hydrogen fueling stations in the United States will require significant cash investments and management resources and may not meet our expectations with respect to additional sales of our FCEV trucks. This planned construction of hydrogen stations is essential to persuading customers to pay a higher premium for our trucks. While we have constructed a prototype station, we have very limited experience in the actual provision of our refueling solutions to users and providing these services is subject to challenges, which include the logistics of rolling out our network of refueling stations and teams in appropriate areas, inadequate capacity or over capacity in certain areas, security risks, risk of damage to vehicles during charging or refueling and the potential for lack of customer acceptance of our services. We will need to ensure compliance with any regulatory requirements applicable in jurisdictions where our fueling stations will be located, including obtaining any required permits and land use rights, which could take considerable time and expense and is subject to the risk that government support in certain areas may be discontinued. In addition, given our lack of experience building and operating fueling stations, there could be unanticipated challenges which may hinder our ability to provide our bundled lease to customers or make the provision of our bundled leases costlier than anticipated. If we are unable to build, or experience delays in building, our network of hydrogen fueling stations, we may be unable to meet our fueling commitments under our bundled lease arrangements with customers and experience decreased sales or leases of our vehicles, which may negatively impact our business, prospects, financial condition and operating results.

We may not be able to produce or source the hydrogen needed to establish our planned hydrogen fueling stations.

        As a key component of our business model, we intend to establish a series of hydrogen fueling stations, and we intend to include the cost of hydrogen in the purchase price of our trucks. We intend to produce the hydrogen needed for these stations on site through electrolysis. To the extent we are unable to produce the hydrogen, we may be unable to establish these fueling stations and severely limit the usefulness of our trucks, or, if we are still able to establish these stations, we may be forced to sell hydrogen at a loss in order to maintain our commitments. We believe that this hydrogen incentive will be a significant driver for purchases of our trucks, and therefore, the failure to establish and roll out these hydrogen fueling stations in accordance with our expectations would materially adversely affect our business.

Our inability to cost-effectively source the energy requirements to conduct electrolysis at our fueling stations may impact the profitability of our bundled leases by making our hydrogen uneconomical compared to other vehicle fuel sources.

        Our ability to economically produce hydrogen for our FCEV trucks requires us to secure a reliable source of electricity for each of our fueling stations at a price per kilowatt hour that is below the current retail rates in the geographic areas we target. An increase in the price of energy used to generate hydrogen through electrolysis would likely result in a higher cost of fuel for our FCEV trucks as well as increase the cost of distribution, freight and delivery and other operating costs related to vehicle manufacturing. We may not be able to offset these cost increases or pass such cost increases onto customers in the form of price increases, because of our bundled lease model for FCEV trucks, which could have an adverse impact on our results of operations and financial condition.

Reservations for our trucks are cancellable.

        As of December 31, 2019, we had reservations for 14,000 Nikola Two FCEV trucks, all of which are subject to cancellation by the customer until the customer enters into a lease agreement. At times

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we have indicated that if we are able to sell or lease every truck which has been reserved, we would have $10 billion in projected revenues. Because all of our reservations are cancellable, it is possible that a significant number of customers who submitted reservations for our trucks may cancel those reservations.

        Given the anticipated lead times between customer reservation and delivery of our trucks, there is a heightened risk that customers that have made reservations may not ultimately take delivery of vehicles due to potential changes in customer preferences, competitive developments and other factors. As a result, no assurance can be made that reservations will not be cancelled, or that reservations will ultimately result in the purchase or lease of a vehicle. Any cancellations could harm our financial condition, business, prospects and operating results.

        In addition, the $10 billion in projected revenues is based on a number of assumptions, including a projected purchase price for our trucks. If the purchase price of the trucks ends up being different than anticipated, we may not achieve this level of revenues, even if all of the trucks subject to reservations are sold or leased.

        While we currently have a contract with Anheuser-Busch LLC ("AB"), to lease up to 800 Nikola Two FCEV trucks, if we are unable to deliver our trucks according to the vehicle specifications and delivery timelines set forth in the contract, AB has the right to cancel its order for trucks. Moreover, the AB contract specifies lease terms and rental rates that may be hard for us to meet depending on our ability to develop our trucks and hydrogen network according to current design parameters and cost estimates. Any of these adverse actions related to the AB order could harm our financial condition, business, prospects and operating results.

While we do not currently have any leasing arrangements finalized, in the future we intend to offer a bundled leasing alternative to customers which exposes us to credit risk.

        While we currently intend to offer bundled leasing of our trucks to potential customers through a third-party financing partner, we currently have no agreement in place with any potential financing partner. We can provide no assurance that a third-party financing partner would be able or willing to provide the leasing services on terms that we have stated in our published materials, or to provide financing at all. Furthermore, offering a leasing alternative to customers will expose us to risks commonly associated with the extension of credit. Credit risk is the potential loss that may arise from any failure in the ability or willingness of the customer to fulfil its contractual obligations when they fall due. Competitive pressure and challenging markets may increase credit risk through leases to financially weak customers, extended payment terms and leases into new and immature markets. This could have a material adverse effect on our business, prospects, financial results and results of operations.

We face significant barriers to produce our trucks, and if we cannot successfully overcome those barriers our business will be negatively impacted.

        The trucking industry has traditionally been characterized by significant barriers to entry, including large capital requirements, investment costs of designing and manufacturing vehicles, long lead times to bring vehicles to market from the concept and design stage, the need for specialized design and development expertise, regulatory requirements, establishing a brand name and image and the need to establish sales, leasing, fueling and service locations. If we are not able to overcome these barriers, our business, prospects, operating results and financial condition will be negatively impacted and our ability to grow our business will be harmed.

Our future growth is dependent upon the trucking industry's willingness to adopt BEV and FCEV trucks.

        Our growth is highly dependent upon the adoption by the trucking industry of alternative fuel and electric trucks. If the market for our BEV and FCEV trucks does not develop at the rate or to the

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extent that we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel and electric trucks is new and untested and is characterized by rapidly changing technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.

        Factors that may influence the adoption of alternative fuel and electric vehicles include:

    perceptions about BEV or FCEV truck quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of alternative fuel or electric vehicles;

    perceptions about vehicle safety in general, including the use of advanced technology, such as vehicle electronics, hydrogen fueling and storage and regenerative braking systems;

    the decline of vehicle efficiency resulting from deterioration over time in the ability of the battery to hold a charge;

    concerns about the availability of hydrogen stations, including those we plan to develop and deploy, which could impede our present efforts to promote FCEV trucks as a desirable alternative to diesel trucks;

    improvements in the fuel economy of internal combustion engines;

    the availability of service for alternative fuel or electric trucks;

    volatility in the cost of energy, oil, gasoline and hydrogen;

    government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;

    the availability of tax and other governmental incentives to purchase and operate alternative fuel and electric trucks or future regulation requiring increased use of nonpolluting trucks;

    our ability to sell or lease trucks directly to business or customers dependent on state by state unique regulations and dealership laws;

    the availability of tax and other governmental incentives to sell hydrogen;

    perceptions about and the actual cost of alternative fuel; and

    macroeconomic factors.

        Additionally, we may become subject to regulations that may require us to alter the design of our trucks, which could negatively impact customer interest in our products.

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

        Once production commences, our trucks may contain defects in design and manufacture that may cause them not to perform as expected or may require repair. We currently have no frame of reference by which to evaluate the performance of our trucks upon which our business prospects depend. For example, our trucks will use a substantial amount of software to operate which will require modification and updates over the life of the vehicle. Software products are inherently complex and often contain defects and errors when first introduced.

        There can be no assurance that we will be able to detect and fix any defects in the trucks' hardware or software prior to commencing customer sales. We may experience recalls in the future, which could adversely affect our brand in our target markets and could adversely affect our business, prospects and results of operations. Our trucks may not perform consistent with customers'

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expectations or consistent with other vehicles which may become available. Any product defects or any other failure of our trucks to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.

Although we hope to be among the first to bring BEV and FCEV class 8 semi-trucks to market, competitors may enter the market before our trucks, which could have an adverse effect on our business.

        We face intense competition in trying to be among the first to bring our BEV and FCEV truck platforms to market, including from companies in our target markets with greater financial resources, more extensive development, manufacturing, marketing and service capabilities, greater brand recognition and a larger number of managerial and technical personnel. If competitor's trucks are brought to market before our trucks, we may experience a reduction in potential market share.

        Many of our current and potential competitors, particularly international competitors, have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products.

        We compete in a rapidly evolving and highly competitive industry, and a number of private and public companies have announced plans to offer BEV and/or FCEV semi-trucks, including companies such as Daimler, Hyundai, Tesla, Toyota and Volvo. Based on publicly available information, a number of these competitors have displayed prototype trucks and have announced target availability and production timelines, while others have launched pilot programs in some markets. In addition, we are aware that one potential competitor, BYD, is currently manufacturing and selling a Class 8 BEV truck. While some competitors may choose to offer BEV trucks, others such as Hyundai have announced they plan to offer FCEV trucks and invest in hydrogen stations for refueling. In addition, our principal competition for our trucks will also come from manufacturers of trucks with internal combustion engines powered by diesel fuel.

        We expect competition in our industry to intensify in the future in light of increased demand and regulatory push for alternative fuel and electric vehicles. We cannot provide assurances that our trucks will be among the first to market, or that competitors will not build hydrogen fueling stations. Even if our trucks are among the first to market, we cannot assure you that customers will choose our vehicles over those of our competitors, or over diesel powered trucks.

Developments in alternative technology improvements in the internal combustion engine may adversely affect the demand for our trucks.

        Significant developments in alternative technologies, such as advanced diesel, ethanol, or compressed natural gas or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Other fuels or sources of energy may emerge as customers' preferred alternative to our truck platform. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced alternative fuel and electric trucks, which could result in the loss of competitiveness of our trucks, decreased revenue and a loss of market share to competitors. Our research and development efforts may not be sufficient to adapt to changes in alternative fuel and electric vehicle technology. As technologies change, we plan to upgrade or adapt our trucks and introduce new models in order to continue to provide trucks with the latest technology, in particular battery cell technology.

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We have no experience servicing our vehicles. If we are unable to address the service requirements of our customers, our business will be materially and adversely affected.

        Because we do not plan to begin production of our trucks until 2021 at the earliest, we have no experience servicing or repairing our vehicles. Servicing alternative fuel and electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. We may decide to partner with a third party to perform some or all of the maintenance on our trucks, and there can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider. If we are unable to successfully address the service requirements of our customers, our business and prospects will be materially and adversely affected.

        In addition, the motor vehicle industry laws in many states require that service facilities be available to service vehicles physically sold from locations in the state. While we anticipate developing a service program that would satisfy regulators in these circumstances, the specifics of our service program are still in development, and at some point may need to be restructured to comply with state law, which may impact on our business, financial condition, operating results and prospects.

Future product recalls could materially adversely affect our business, prospects, operating results and financial condition.

        Any product recall in the future may result in adverse publicity, damage our brand and materially adversely affect our business, prospects, operating results and financial condition. In the future, we may voluntarily or involuntarily, initiate a recall if any of our vehicles or electric powertrain components (including the fuel cell or batteries) prove to be defective or noncompliant with applicable federal motor vehicle safety standards. Such recalls involve significant expense and diversion of management attention and other resources, which could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results of operations.

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

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

If we are unable to attract and retain key employees and hire qualified management, technical and vehicle engineering personnel, our ability to compete could be harmed.

        Our success depends, in part, on our ability to retain our key personnel. The unexpected loss of or failure to retain one or more of our key employees could adversely affect our business. Our success also depends, in part, on our continuing ability to identify, hire, attract, train and develop other highly qualified personnel.

        Competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and our failure to do so could adversely affect our business, including the execution of our global business strategy. Any failure by our management team to perform as expected may have a material adverse effect on our business, prospects, financial condition and results of operations.

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We are highly dependent on the services of Trevor R. Milton, our Executive Chairman.

        We are highly dependent on the services of Trevor R. Milton, our Executive Chairman, and largest stockholder. Mr. Milton is the source of many, if not most, of the ideas and execution driving Nikola. If Mr. Milton were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged.

Increases in costs, disruption of supply or shortage of raw materials, particularly lithium-ion battery cells, could harm our business.

        Once we begin commercial production of vehicles, we may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. We use various raw materials including aluminum, steel, carbon fiber, non-ferrous metals (such as copper), and cobalt. The prices for these raw materials fluctuate depending on market conditions and global demand and could adversely affect our business and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for lithium-ion cells. These risks include:

    the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to support the growth of the electric vehicle industry as demand for such cells increases;

    disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and

    an increase in the cost of raw materials, such as cobalt, used in lithium-ion cells.

        Any disruption is the supply of battery cells could temporarily disrupt production of the Nikola Tre BEV truck until a different supplier is fully qualified. Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are not sufficiently safe. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials would increase our operating costs and could reduce our margins if the increased costs cannot be recouped through increased electric vehicle prices. There can be no assurance that we will be able to recoup increasing costs of raw materials by increasing vehicle prices.

Manufacturing in collaboration with partners is subject to risks.

        In 2019, we partnered with Iveco, a subsidiary of CNHI, to manufacture the Nikola Tre truck at the Iveco manufacturing plant in Ulm, Germany through a joint venture with CNHI, which is expected to commence operations in the third quarter of 2020. We currently intend to begin production of the Nikola Tre BEV at the Iveco plant in 2021, with deliveries beginning in the same year. We expect that 40 million Euros will be invested into the manufacturing plant to prepare it for assembly. Collaboration with third parties for the manufacturing of trucks is subject to risks with respect to operations that are outside our control. We could experience delays if our partners do not meet agreed upon timelines or experience capacity constraints. There is risk of potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is related to their collaboration with us. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our partners' products. In addition, although we are involved in each step of the supply chain and manufacturing process, because we also rely on our partners and third parties to meet our quality standards, there can be no assurance that we will successfully maintain quality standards.

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        We may be unable to enter into new agreements or extend existing agreements with manufacturers on terms and conditions acceptable to us and therefore may need to contract with other third parties or significantly add to our own production capacity. There can be no assurance that in such event we would be able to engage other third parties or establish or expand our own production capacity to meet our needs on acceptable terms or at all. The expense and time required to complete any transition, and to assure that vehicles manufactured at facilities of new manufacturers comply with our quality standards and regulatory requirements, may be greater than anticipated. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.

We are or may be subject to risks associated with strategic alliances or acquisitions.

        We have entered into, and may in the future enter into additional, strategic alliances, including joint ventures or minority equity investments with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

        When appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. In addition to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail to do so. Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

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

        While we plan to obtain components from multiple sources whenever possible, many of the components used in our vehicles will be purchased by us from a single source, especially with respect to hydrogen fuel cells and batteries. We refer to these component suppliers as our single source suppliers. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are favorable to us.

        A significant benefit of our joint venture with Iveco is the ability to leverage Iveco's existing assortment of parts, thereby decreasing our purchasing expenses. While this relationship gives us access to use an existing supplier base with the hopes of accelerating procurement of components at favorable prices, there is no guarantee that this will be the case. In addition, we could experience delays if our suppliers do not meet agreed upon timelines or experience capacity constraints.

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The battery efficiency of electric trucks will decline over time, which may negatively influence potential customers' decisions whether to purchase our trucks.

        We anticipate the range of our BEV and FCEV vehicles to be up to 400 to 750 miles before needing to refuel, but that range will decline over time as the battery deteriorates. We currently expect a 3% to 4% decline in the battery life per year, which will decrease the range of our trucks over 5 years by approximately 20%. Other factors such as usage, time and stress patterns may also impact the battery's ability to hold a charge, which would decrease our trucks' range before needing to refuel. Such battery deterioration and the related decrease in range may negatively influence potential customer decisions.

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

        The battery packs within our trucks will make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell's release of energy without spreading to neighboring cells, once our trucks are commercially available, a field or testing failure of our vehicles or other battery packs that we produce could occur, which could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve our trucks, could seriously harm our business and reputation.

        In addition, once we begin manufacturing our trucks, we will need to store a significant number of lithium-ion cells at our facility. Any mishandling of battery cells may cause disruption to the operation of our facility. While we have implemented safety procedures related to the handling of the cells, a safety issue or fire related to the cells could disrupt our operations. Such damage or injury could lead to adverse publicity and potentially a safety recall. Moreover, any failure of a competitor's electric vehicle or energy storage product may cause indirect adverse publicity for us and our products. Such adverse publicity could negatively affect our brand and harm our business, prospects, financial condition and operating results.

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

        Our trucks contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. We have designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks, our trucks and related systems. However, hackers may attempt to gain unauthorized access to modify, alter and use such networks, trucks and systems to gain control of or to change our trucks' functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the truck. Future vulnerabilities could be identified and our efforts to remediate such vulnerabilities may not be successful. Any unauthorized access to or control of our trucks or their systems, or any loss of customer data, could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our trucks, systems or data, as well as other factors that may result in the perception that our trucks, systems or data are capable of being "hacked," could negatively affect our brand and harm our business, prospects, financial condition and operating results.

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

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

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

        Our alternative fuel and electric trucks, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving and we face risks associated with changes to these regulations, including but not limited to:

    increased subsidies for corn and ethanol production, which could reduce the operating cost of vehicles that use ethanol or a combination of ethanol and gasoline; and

    increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote alternative fuel vehicles.

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

We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in building our manufacturing facilities.

        Our operations, will be subject to international, federal, state, and/or local environmental laws and regulations, including laws relating to the use, handling, storage, disposal and human exposure to hazardous materials. Environmental and health and safety laws and regulations can be complex, and we expect that we will be affected by future amendments to such laws or other new environmental and health and safety laws and regulations which may require us to change our operations, potentially resulting in a material adverse effect on our business, prospects, financial condition, and operating results. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury and fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages, suspension of production or a cessation of our operations.

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        Contamination at properties we will own and operate, we formerly owned or operated or to which hazardous substances were sent by us, may result in liability for us under environmental laws and regulations, including, but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating results. We may face unexpected delays in obtaining the required permits and approvals in connection with our planned manufacturing facilities that could require significant time and financial resources and delay our ability to operate these facilities, which would adversely impact our business prospects and operating results.

We intend to retain certain personal information about our customers and may be subject to various privacy laws.

        We intend to use our trucks' electronic systems to log information about each vehicle's use in order to aid us in vehicle diagnostics, repair and maintenance. Our customers may object to the use of this data, which may increase our vehicle maintenance costs and harm our business prospects. Possession and use of our customers' information in conducting our business may subject us to legislative and regulatory burdens in the United States and the European Union that could require notification of data breaches, restrict our use of such information and hinder our ability to acquire new customers or market to existing customers. Non-compliance or a major breach of our network security and systems could have serious negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our vehicles, and harm to our reputation and brand.

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

        We face risks associated with our international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm our business. We anticipate having international operations and subsidiaries in Germany, Austria, and Italy that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. Additionally, as part of our growth strategy, we intend to expand our sales, maintenance and repair services internationally. However, we have no experience to date selling and servicing our vehicles internationally and such expansion would require us to make significant expenditures, including the hiring of local employees and establishing facilities, in advance of generating any revenue. We are subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell our alternative fuel and electric trucks and require significant management attention. These risks include:

    conforming our trucks to various international regulatory requirements where our trucks are sold, or homologation;

    development and construction of our hydrogen refueling network;

    difficulty in staffing and managing foreign operations;

    difficulties attracting customers in new jurisdictions;

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

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

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

    foreign labor laws, regulations and restrictions;

    changes in diplomatic and trade relationships;

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

    the strength of international economies.

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

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

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

        The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. These measures may adversely impact our employees and operations and the operations of our customers, suppliers, vendors and business partners, and may negatively impact our sales and marketing activities, the construction schedule of our hydrogen fueling stations and our manufacturing plant in Arizona, and the production schedule of our trucks. In addition, various aspects of our business, manufacturing plant and hydrogen fueling station building process, cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect our manufacturing and building plans, sales and marketing activities, business and results of operations.

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

        The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. The COVID-19 pandemic could limit the ability of our customers, suppliers, vendors and business partners to perform, including third party suppliers' ability to provide components and materials used in our trucks. We may also experience an increase in the cost of raw

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materials used in our commercial production of trucks. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

        Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as reduced spending by businesses, could have a material adverse effect on the demand for our trucks. Under difficult economic conditions, potential customers may seek to reduce spending by forgoing our trucks for other traditional options, and cancel reservations for our trucks. Decreased demand for our trucks, particularly in the United States and Europe, could negatively affect our business.

        There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of COVID-19's impact on our business, our operations, or the global economy as a whole. However, the effects could have a material impact on our results of operations, and we will continue to monitor the situation closely.

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

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

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

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

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

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

        Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop or sell our vehicles or components, which could make it more difficult for us to operate our business. We may receive inquiries from patent or trademark owners inquiring whether we infringe their proprietary rights. Companies owning patents or other intellectual property rights relating to battery packs, electric motors, fuel cells or electronic power management systems may allege infringement of such rights. In response to a determination that we have infringed upon a third party's intellectual property rights, we may be required to do one or more of the following:

    cease development, sales, or use of vehicles that incorporate the asserted intellectual property;

    pay substantial damages;

    obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all; or

    redesign one or more aspects or systems of our trucks.

        A successful claim of infringement against us could materially adversely affect our business, prospects, operating results and financial condition. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources.

        We also plan to license patents and other intellectual property from third parties, including suppliers and service providers, and we may face claims that our use of this in-licensed technology infringes the intellectual property rights of others. In such cases, we will seek indemnification from our licensors. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses.

Our business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third parties.

        Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage, and a decrease in our revenue which would adversely affect our business, prospects, financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we will rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyright, trademarks, intellectual property licenses and other contractual rights to establish and protect our rights in our technology.

        The protection of our intellectual property rights will be important to our future business opportunities. However, the measures we take to protect our intellectual property from unauthorized use by others may not be effective for various reasons, including the following:

    any patent applications we submit may not result in the issuance of patents;

    the scope of our issued patents may not be broad enough to protect our proprietary rights;

    our issued patents may be challenged and/or invalidated by our competitors;

    the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make aggressive enforcement impracticable;

    current and future competitors may circumvent our patents; and

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    our in-licensed patents may be invalidated, or the owners of these patents may breach our license arrangements.

        Patent, trademark, and trade secret laws vary significantly throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Further, policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States.

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

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

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

        Our trucks will be designed with connectivity for future installation of an autonomous hardware suite and we plan to partner with a third-party software provider in the future to implement autonomous capabilities. However, we cannot guarantee that we will be able to identify a third party to provide the necessary hardware and software to enable driverless Level 4 or Level 5 autonomy in an acceptable timeframe, on terms satisfactory to us, or at all. Autonomous driving technologies are subject to risks and there have been accidents and fatalities associated with such technologies. The safety of such technologies depends in part on user interaction and users, as well as other drivers on the roadways, may not be accustomed to using or adapting to such technologies. To the extent accidents associated with our autonomous driving systems occur, we could be subject to liability, negative publicity, government scrutiny and further regulation. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.

The evolution of the regulatory framework for autonomous vehicles is outside of our control and we cannot guarantee that our trucks will achieve the requisite level of autonomy to enable driverless systems within our projected timeframe, if ever.

        There are currently no federal U.S. regulations pertaining to the safety of self-driving vehicles; however, the National Highway Traffic and Safety Administration has established recommended guidelines. Certain states have legal restrictions on self-driving vehicles, and many other states are considering them. This patchwork increases the difficulty in legal compliance for our vehicles. In Europe, certain vehicle safety regulations apply to self-driving braking and steering systems, and certain treaties also restrict the legality of certain higher levels of self-driving vehicles. Self-driving laws and regulations are expected to continue to evolve in numerous jurisdictions in the U.S. and foreign countries and may restrict autonomous driving features that we may deploy.

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Risks Related to Ownership of Our Common Stock

Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

        As of June 3, after giving effect to the Closing, each of Trevor R. Milton, our Executive Chairman, and Mark A. Russell, our President and Chief Executive Officer, beneficially owns, directly or indirectly, approximately 25.4% and 13.5%, respectively, of our outstanding Common Stock, and our directors and executive officers as a group beneficially own approximately 52.0% of our outstanding Common Stock. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, any amendment of the Certificate of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

Sales of a substantial number of shares of our Common Stock in the public market could cause the price of our Common Stock to fall.

        Sales of a substantial number of shares of our Common Stock in the public market or the perception that these sales might occur could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our Common Stock. In addition, the sale of substantial amounts of our Common Stock could adversely impact its price.

        The shares of Common Stock offered by the Selling Securityholders represent approximately 69.2% of our outstanding Common Stock, not including the shares of Common Stock underlying any of our outstanding Warrants. Outstanding Warrants to purchase an aggregate of 23,000,000 shares of our Common Stock, which we refer to as the "Public Warrants," will become exercisable on the later to occur of July 6, 2020 (as July 3, 2020 is a holiday) and the effectiveness of the registration statement that we have filed with the SEC to register the shares underlying the Public Warrants. The exercise price of the Warrants is currently $11.50 per share. To the extent the Public Warrants are exercised, additional shares of Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales, or the potential sales, of substantial numbers of shares in the public market by the Selling Securityholders upon termination of applicable contractual lock-up agreements or by holders of the Public Warrants, could increase the volatility of the market price of our Common Stock or adversely affect the market price of our Common Stock.

        As of June 3, 2020, after the completion of the Business Combination, we had outstanding approximately 360.9 million shares of our Common Stock, and Warrants to purchase approximately 23.9 millon shares of our Common Stock. In addition, we intend to register for sale shares of our Common Stock issuable under our equity compensation plans, including 20.0 million shares available for future issuance under our 2020 Stock Incentive Plan (the "2020 Plan"), 4.0 million shares available for future issuance under our 2020 Employee Stock Purchase Plan (the "2020 ESPP"), and approximately 39.7 million shares issuable upon the exercise of outstanding options under our 2017 Stock Option Plan. The sale or the availability for sale of a large number of shares of our Common Stock in the public market could cause the price of our Common Stock to decline.

We have never paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future.

        We have never paid dividends on any of our capital stock and currently intend to retain any future earnings to fund the growth of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors (the "Board") and will depend on our financial condition,

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operating results, capital requirements, general business conditions and other factors that the Board may deem relevant. As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for the foreseeable future.

Our stock price is volatile, and you may not be able to sell shares of our Common Stock at or above the price you paid.

        The trading price of our Common Stock is volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include:

    actual or anticipated fluctuations in operating results;

    failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

    issuance of new or updated research or reports by securities analysts or changed recommendations for our stock or the transportation industry in general;

    announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

    operating and share price performance of other companies that investors deem comparable to us;

    our focus on long-term goals over short-term results;

    the timing and magnitude of our investments in the growth of our business;

    actual or anticipated changes in laws and regulations affecting our business;

    additions or departures of key management or other personnel;

    disputes or other developments related to our intellectual property or other proprietary rights, including litigation;

    our ability to market new and enhanced products and technologies on a timely basis;

    sales of substantial amounts of the Common Stock by the Board, executive officers or significant stockholders or the perception that such sales could occur;

    changes in our capital structure, including future issuances of securities or the incurrence of debt; and

    general economic, political and market conditions.

        In addition, the stock market in general, and The Nasdaq Stock Market LLC ("Nasdaq") in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our Common Stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.

        We face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), including the requirements of Section 404, as well as rules and regulations subsequently

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implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board (the "PCAOB") and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require us to carry out activities Legacy Nikola has not done previously. For example, we created new board committees and have adopted new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it. In addition, we have obtained director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on the Board or as executive officers. The additional reporting and other obligations imposed by these rules and regulations increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

Our failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business.

        As a public company, we are required to provide management's attestation on internal controls. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of Legacy Nikola as a private company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that became applicable after the Business Combination. If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities.

We qualify as an "emerging growth company" within the meaning of the Securities Act, and if we takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.

        We qualify as an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we are eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of Common Stock that are held by non-affiliates exceeds $700.0 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of Common Stock in

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VectoIQ's initial public offering of units, consummated on May 15, 2018 (the "IPO"). In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of such extended transition period and, therefore, we may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find our securities less attractive because we will rely on these exemptions, which may result in a less active trading market for the Common Stock and Warrants and the price of such securities may be more volatile.

The unaudited pro forma financial information included herein is not indicative of what our actual financial position or results of operations would have been.

        The unaudited pro forma financial information included herein is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated.

Our management has limited experience in operating a public company.

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

We may amend the terms of the Warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding Public Warrants.

        The Warrants were issued in registered form under the Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The Warrant Agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision but requires the approval by the holders of at least 65% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the Warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Warrants with the consent of at least 65% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, convert the Warrants into stock or cash, shorten the exercise period or decrease the number of warrant shares issuable upon exercise of a Warrant.

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We may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making those Warrants worthless.

        The Private Warrants will be not redeemable by us so long as they are held by their initial purchasers or their permitted transferees. However, if the Private Warrants are sold to you and you are not a permitted transferee under the terms of the Private Warrants, we will have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we give notice of redemption. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force you (i) to exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants.

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

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

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

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

If securities or industry analysts issue an adverse opinion regarding our stock or do not publish research or reports about our company, our stock price and trading volume could decline.

        The trading market for our Common Stock will depend in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts or the content and opinions included in their reports. Securities analysts may elect not to provide research coverage of our company and such lack of research coverage may adversely affect the market price of our Common Stock. The price of our Common Stock could also decline if one or more equity research analysts downgrade our Common Stock, change their price targets, issue other unfavorable commentary or cease publishing reports about us or our business. If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

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USE OF PROCEEDS

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

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DETERMINATION OF OFFERING PRICE

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

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MARKET INFORMATION FOR COMMON STOCK AND DIVIDEND POLICY

Market Information

        Our Common Stock and Public Warrants are currently listed on the Nasdaq Global Select Market under the symbols "NKLA" and "NKLAW," respectively. Prior to the consummation of the Business Combination, our Common Stock and our Public Warrants were listed on the Nasdaq Capital Market under the symbols "VTIQ" and "VTIQW," respectively. As of June 3, 2020 following the completion of the Business Combination, there were 81 holders of record of our Common Stock and 9 holders of record of our Warrants. We currently do not intend to list the Private Warrants on any stock exchange or stock market.

Dividend Policy

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

Securities Authorized for Issuance under Equity Compensation Plans

        As of March 31, 2020, we did not have any securities authorized for issuance under equity compensation plans. In connection with the Business Combination, our stockholders approved the 2020 Plan and the 2020 ESPP.

        We intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of Common Stock issued or issuable under the 2020 Plan, the 2020 ESPP and the assumed Legacy Nikola Options. Any such Form S-8 registration statement will become effective automatically upon filing. We expect that the initial registration statement on Form S-8 will cover shares of Common Stock underlying the 2020 Plan, the 2020 ESPP and the assumed Legacy Nikola Options. Once these shares are registered, they can be sold in the public market upon issuance, subject to applicable restrictions.

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SELECTED FINANCIAL INFORMATION

        The following selected financial information and other data set forth below should be read in conjunction with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements and the related notes thereto contained elsewhere in this prospectus.

        The selected financial information and other data presented below 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 have been derived from our audited consolidated financial statements included in this prospectus. The selected financial information and other data presented below for the three months ended March 31, 2020 and 2019, and as of March 31, 2020 have been derived from the Company's unaudited financial statements included in this prospectus.

 
  Three Months Ended
March 31,
  Years Ended December 31,  
 
  2020   2019   2019   2018   2017  
 
   
   
  (in thousands)
 

Statement of Operations Data:

                               

Total revenue

  $ 58   $ 124   $ 482   $ 173   $ 486  

Total costs and expenses

    (32,074 )   (29,960 )   88,477     70,662     17,768  

Loss from operations

    (32,016 )   (29,836 )   (87,995 )   (70,489 )   (17,282 )

Other income (expense):

                               

Interest income (expense), net

    64     333     1,456     686     (814 )

Gain (loss) on Series A redeemable convertible preferred stock warrant liability

                (3,339 )   3,502     (975 )

        (593 )                  

Loss on forward contract liability

    (1,324 )                

Other income (expense), net

    114     1     1,373     6     (59 )

Loss from operations before income taxes

    (33,162 )   (30,095 )   (88,505 )   (66,295 )   (19,130 )

Income tax expense (benefit)

    1     2     151     (2,002 )   (1,574 )

Net loss

    (33,163 )   (30,097 )   (88,656 )   (64,293 )   (17,556 )

Premium paid on repurchase of redeemable convertible preferred stock

            (16,816 )   (166 )    

Net loss attributable to Common Stockholders, basic and diluted

  $ (33,163 ) $ (30,097 ) $ (105,472 ) $ (64,459 ) $ (17,556 )

 

 
   
  As of December 31,  
 
  As of March 31,
2020
 
 
  2019   2018  
 
   
  (in thousands)
 

Balance Sheet Data:

                   

Cash and cash equivalents

  $ 75,515   $ 85,688   $ 160,653  

Working capital

    70,669     74,343     152,509  

Total assets

    237,970     229,430     221,633  

Total liabilities

    43,633     33,922     35,393  

Total stockholders' deficit

    (220,327 )   (188,479 )   (91,822 )

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  Three Months Ended
March 31,
  Years Ended December 31,  
 
  2020   2019   2019   2018   2017  
 
   
   
  (in thousands)
 

Statement of Cash Flows Data:

                               

Net cash used in operating activities

  $ (22,047 ) $ (32,162 ) $ (80,627 ) $ (54,019 ) $ (13,576 )

Net cash used in investing activities

    (1,439 )   (9,863 )   (39,302 )   (15,410 )   (2,482 )

Net cash provided by financing activities

    13,301         35,805     211,732     45,592  

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

        The following unaudited pro forma condensed combined financial statements of VectoIQ present the combination of the financial information of VectoIQ and Legacy Nikola adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

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

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

    the issuance and sale of 52,500,000 shares of Common Stock for a purchase price of $10.00 per share and an aggregate purchase price of $525.0 million in a private placement pursuant to the Subscription Agreements (the "PIPE");

    the issuance of 2,699,784 shares of Legacy Nikola's Series D redeemable convertible preferred stock in exchange for $50.0 million in cash pursuant to the amended Series D preferred stock purchase agreement and 3,887,657 shares of Legacy Nikola's Series D redeemable convertible preferred stock in exchange for $72.0 million in-kind services provided by CNHI/Iveco under the Master Industrial Agreement (the "CNHI Services Agreement");

    the repurchase of 1,499,700 shares of Legacy Nikola's Series B redeemable convertible preferred stock at the price of $16.67 per share for an aggregate purchase price of $25.0 million pursuant to a Series B preferred stock repurchase agreement (the "Repurchase Agreement") with Nimbus Holdings LLC ("Nimbus");

    the exercise of 935,345 Legacy Nikola stock options; and

    the redemption of 7,000,000 shares of Common Stock from M&M Residual, LLC at a purchase price of $10.00 per share.

        The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events that are: (i) directly attributable to the Business Combination; (ii) factually supportable; and (iii) with respect to the statement of operations, expected to have a continuing impact on VectoIQ's results following the completion of the Business Combination.

        The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

    the accompanying notes to the unaudited pro forma condensed combined financial statements;

    the (i) historical condensed unaudited financial statements of VectoIQ as of and for the three months ended March 31, 2020 and (ii) historical audited financial statements of VectoIQ as of and for the year ended December 31, 2019 and the related notes, each of which is incorporated by reference;

    the (i) historical condensed unaudited financial statements of Legacy Nikola as of and for the three months ended March 31, 2020, which is attached as an exhibit to this filing and

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      incorporated by reference and (ii) historical audited financial statements of Legacy Nikola as of and for the year ended December 31, 2019 and the related notes, which is incorporated by reference; and

    other information relating to VectoIQ and Legacy Nikola contained in this prospectus, including the Business Combination Agreement.

        Pursuant to VectoIQ's amended and restated certificate of incorporation, the holders of shares of Common Stock prior to the completion of the Business Combination (the "Public Stockholders") were offered the opportunity to redeem, upon the Closing, shares of Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account (as defined in the section entitled "Description of Our Securities"). The unaudited condensed combined pro forma financial statements reflect actual redemption of 2,702 shares of Common Stock at $10.37 per share.

        Notwithstanding the legal form of the Business Combination pursuant to the Business Combination Agreement, the Business Combination is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, VectoIQ is treated as the acquired company and Legacy Nikola is treated as the acquirer for financial statement reporting purposes. Legacy Nikola has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

    Legacy Nikola's existing shareholders have the greatest voting interest in the combined entity with over 77% voting interest;

    the largest minority voting shareholder of the combined entity is an existing shareholder of Legacy Nikola;

    Legacy Nikola's directors represent eight of the nine board seats for the combined company's board of directors;

    Legacy Nikola's existing shareholders have the ability to control decisions regarding election and removal of directors and officers of the combined entity's executive board of directors; and

    Legacy Nikola's senior management is the senior management of the combined company.

        Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of VectoIQ following the completion of the Business Combination. The unaudited pro forma adjustments represent management's estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2020
(in thousands)

 
  As of March 31, 2020    
   
  As of March 31,
2020
 
 
  VectoIQ
Acquisition
Corp.
(Historical)
   
   
   
 
 
  Nikola
Corporation
(Historical)
  Pro Forma
Adjustments
   
  Pro Forma
Combined
 

ASSETS

                             

Current assets:

                             

Cash and cash equivalents

  $ 1,150   $ 75,515   $ 668,266   (A)   $ 744,931  

Restricted cash

        4,132             4,132  

Accounts receivable, net

        447             447  

Prepaid in-kind services

        13,269     72,000   (B)     85,269  

Prepaid expenses and other current assets

    7     7,842     (4,656 ) (E)     3,193  

Total current assets

    1,157     101,205     735,610         837,972  

Cash held in Trust Account

    238,378         (238,378 ) (G)      

Investments held in Trust account

                     

Restricted cash and cash equivalents

                     

Long-term deposits

        14,540             14,540  

Property and equipment, net

        54,436             54,436  

Intangible assets, net

        62,497             62,497  

Goodwill

        5,238             5,238  

Other assets

        54             54  

Total Assets

  $ 239,535   $ 237,970   $ 497,232       $ 974,737  

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                             

Current liabilities:

                             

Accounts payable

    139     7,783     (369 ) (E)     7,553  

Accounts payable due to related parties

        285             285  

Accrued expenses and other current liabilities

        16,253     (3,923 ) (J)     12,330  

Accrued expenses due to related parties

        791             791  

Accrued liabilities

    80                 80  

Accrued income tax payable

    695                 695  

Note Payable

    422         (422 ) (L)      

Forward contract liability

        1,324     (1,324 ) (B)      

Term note—current

        4,100             4,100  

Total current liabilities

    1,336     30,536     (6,038 )       25,834  

Term note

                     

Other long-term liabilities

        12,024             12,024  

Deferred tax liabilities, net

        1,073             1,073  

Total liabilities

    1,336     43,633     (6,038 )       38,931  

Commitments and contingencies

                             

Redeemable convertible preferred stock—subject to possible redemption

        414,664     (414,664 ) (M)      

Common shares subject to possible redemption

    233,199         (233,199 ) (N)      

Stockholders' equity (deficit):

                             

Common Stock

    1         35   (O)     36  

Legacy Nikola common stock

        1     (1 ) (Q)      

Additional paid-in capital

    4,999     1,315     1,166,653   (R)     1,172,967  

Accumulated deficit

        (221,643 )   (15,554 ) (V)     (237,197 )

Total stockholders' equity (deficit)

    5,000     (220,327 )   1,151,133         935,806  

Total liabilities and stockholders' equity (deficit)

  $ 239,535   $ 237,970   $ 497,232       $ 974,737  

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2020
(in thousands, except share and per share data)

 
  Three Months Ended March 31, 2020    
   
   
 
 
   
   
  Three Months Ended
March 31, 2020
 
 
  VectoIQ
Acquisition
Corp.
(Historical)
   
   
   
 
 
  Nikola
Corporation
(Historical)
  Pro Forma
Adjustments
   
  Pro Forma
Combined
 

Revenues

  $   $ 58   $       $ 58  

Costs and expenses:

                             

Cost of goods sold

        43             43  

Operating expenses

                             

Research and development

        24,053             24,053  

Selling, general, and administrative

    699     7,978     1,653   (AA)     10,330  

Total costs and expenses

    699     32,074     1,653         34,426  

Loss from operations

    (699 )   (32,016 )   (1,653 )       (34,368 )

Other income (expense)

   
 
   
 
   
 
 

 

   
 
 

Investment income in Trust account

    759         (759 ) (DD)      

Interest income

        64             64  

Loss on forward contract liability

        (1,324 )   1,324   (EE)      

Other income, net

        114             114  

Loss before income taxes

    60     (33,162 )   (1,088 )       (34,190 )

Income tax expense

    185     1     (228 ) (GG)     (42 )

Net income (loss)

  $ (125 ) $ (33,163 ) $ (860 )     $ (34,148 )

Weighted average shares outstanding of common stock

    29,640,000                     360,904,478  

Basic and diluted net income (loss) per share

  $ (0.00 )                 $ (0.09 )

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2019
(in thousands, except share and per share data)

 
  Year Ended
December 31, 2019
   
   
   
 
 
   
   
  Year Ended on
December 31, 2019
 
 
  VectoIQ
Acquisition
Corp.
(Historical)
   
   
   
 
 
  Nikola
Corporation
(Historical)
  Pro Forma
Adjustments
   
  Pro Forma
Combined
 

Revenues

  $   $ 482   $       $ 482  

Costs and expenses:

                             

Cost of goods sold

        271             271  

Operating expenses

                             

Research and development

        67,514             67,514  

Selling, general, and administrative

    910     20,692     6,613   (AA)     28,215  

Total costs and expenses

    910     88,477     6,613         96,000  

Loss from operations

    (910 )   (87,995 )   (6,613 )       (95,518 )

Other income (expense)

   
 
   
 
   
 
 

 

   
 
 

Investment income in Trust account

    5,033         (5,033 ) (DD)      

Interest income

        1,456             1,456  

Loss on Series A redeemable convertible preferred stock warrant liability

        (3,339 )   3,339   (FF)      

Other income, net

        1,373             1,373  

Loss before income taxes

    4,123     (88,505 )   (8,307 )       (92,689 )

Income tax expense

    1,392     151     (1,744 ) (GG)     (201 )

Net income (loss)

    2,731     (88,656 )   (6,563 )       (92,488 )

Premium paid on repurchase of redeemable convertible preferred stock

        (16,816 )   16,816   (HH)      

Net income (loss) attributable to common stockholders

  $ 2,731   $ (105,472 ) $ 10,253       $ (92,488 )

Weighted average shares outstanding of common stock

    29,640,000                     360,904,478  

Basic and diluted net income (loss) per share

  $ 0.09                   $ (0.26 )

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Basis of Presentation

        The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, VectoIQ is treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of Legacy Nikola issuing stock for the net assets of VectoIQ, accompanied by a recapitalization. The net assets of VectoIQ are stated at historical cost, with no goodwill or other intangible assets recorded.

        The unaudited pro forma condensed combined balance sheet as of March 31, 2020 gives pro forma effect to the Business Combination as if it had been consummated on March 31, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 and for the three months ended March 31, 2020 give pro forma effect to the Business Combination as if it had been consummated on January 1, 2019.

        The unaudited pro forma condensed combined balance sheet as of March 31, 2020 has been prepared using, and should be read in conjunction with, the following:

    VectoIQ's unaudited balance sheet as of March 31, 2020 and the related notes, which is incorporated by reference; and

    Legacy Nikola's unaudited balance sheet as of March 31, 2020 and the related notes, which is attached as an exhibit to this filing and incorporated by reference.

        The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 has been prepared using, and should be read in conjunction with, the following:

    VectoIQ's unaudited statement of operations for the three months ended March 31, 2020 and the related notes, which is incorporated by reference; and

    Legacy Nikola's unaudited statement of operations for the three months ended March 31, 2020 and the related notes, which is attached as an exhibit to this filing and incorporated by reference.

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

    VectoIQ's audited statement of operations for the year ended December 31, 2019 and the related notes, which is incorporated by reference; and

    Legacy Nikola's audited statement of operations for the year ended December 31, 2019 and the related notes, which is incorporated by reference.

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

        The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination. The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be

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material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

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

2. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

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

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

        The adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2020 are as follows:

    (A)
    Represents pro forma adjustments to the cash balance to reflect the following:
 
  (in thousands)    
 

Proceeds from amended Series D preferred stock purchase agreement

    50,000     (B )

Repurchase of Series B preferred stock

    (25,000 )   (C )

Proceeds from exercise of Legacy Nikola stock options

    1,871     (D )

Payment of transaction fees for Legacy Nikola

    (6,234 )   (E )

Payment of transaction fees and underwriting fees for VectoIQ

    (45,269 )   (F )

Reclassification of cash and investments held in Trust Account

    238,378     (G )

Proceeds from Subscription Agreements

    525,000     (H )

Redemption of Common Stock from M&M Residual, LLC

    (70,000 )   (I )

Settlement of accrued expenses related to Administrative Support Agreement

    (30 )   (K )

Settlement of VectoIQ related party loan

    (422 )   (L )

Redemptions of Common Stock by Public Stockholders

    (28 )   (W )

    668,266     (A )
    (B)
    Reflects the issuance of an additional 2,699,784 and 3,887,657 Series D redeemable convertible preferred stock in exchange for $50.0 million and $72.0 million in-kind services provided by CNHI and Iveco pursuant to the amended Series D preferred stock purchase agreement, including the settlement of the $1.3 million forward contract liability.

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    (C)
    Reflects the repurchase of 1,499,700 Series B redeemable convertible preferred stock at the price of $16.67 per share for an aggregate purchase price of $25.0 million pursuant to the Series B preferred stock repurchase agreement.

    (D)
    Reflects the proceeds of approximately $1.8 million for the exercise of 935,345 Legacy Nikola stock options.

    (E)
    Represents transaction costs of approximately $6.6 million incurred by Legacy Nikola in consummating the Business Combination. Of the amount, approximately $0.4 million in cash, $4.7 million in prepaid expenses and other current assets, $3.9 million in accrued expenses and other current liabilities, and $0.4 million in accounts payable related to transaction costs were previously incurred and recorded as of March 31, 2020. These costs are not included in the unaudited pro forma condensed combined statement of operations as they are deemed to not have a continuing impact on the results of the post-combination company.

    (F)
    Represents transaction costs and underwriting costs of approximately $45.7 million incurred by VectoIQ in consummating the Business Combination. Of the amount, approximately $0.4 million was previously incurred as of March 31, 2020. These costs are not included in the unaudited pro forma condensed combined statement of operations as they are deemed to not have a continuing impact on the results of the post-combination company.

    (G)
    Reflects the reclassification of $238.4 million of cash and investments held in the Trust Account that becomes available following the Business Combination.

    (H)
    Reflects the net proceeds of $525.0 million from the issuance and sale of 52,500,000 shares of Common Stock at $10.00 per share in a private placement pursuant to the Subscription Agreements.

    (I)
    Reflects share redemption of 7,000,000 shares of Common Stock from M&M Residual, LLC at a purchase price of $10.00 per share.

    (J)
    Represents pro forma adjustments to accrued expenses and other current liabilities to reflect the following:

 
  (in thousands)    
 

Settlement of transaction fees for Legacy Nikola

    (3,893 )   (E )

Settlement of accrued expenses pursuant to Administrative Support Agreement

    (30 )   (K )

    (3,923 )   (J )
    (K)
    Reflects the settlement of accrued expenses pursuant to the Administrative Support Agreement with VectoIQ's Sponsor, which terminated upon consummation of the Business Combination.

    (L)
    Reflects the settlement of VectoIQ's related party loans upon consummation of the merger.

    (M)
    Reflects the conversion of Legacy Nikola preferred stock into Legacy Nikola common stock.

    (N)
    Reflects the reclassification of $233.2 million of Common Stock subject to possible redemption to permanent equity.

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    (O)
    Represents pro forma adjustments to Common Stock balance to reflect the following:
 
  (in thousands)    
 

Issuance of Common Stock from Subscription Agreements

    5     (H )

Redemption of Common Stock from M&M Residual, LLC

    (1 )   (I )

Reclassification of Common Stock subject to redemption

    2     (N )

Recapitalization of Legacy Nikola common stock to Common Stock

    29     (P )

Redemptions of Common Stock by Public Stockholders

        (W )

    35     (O )
    (P)
    Represents recapitalization of Legacy Nikola common stock to Common Stock.

    (Q)
    Represents pro forma adjustments to Legacy Nikola common stock balance to reflect the following:
 
  (in thousands)    
 

Conversion of Legacy Nikola preferred stock to Legacy Nikola common stock

    1     (M )

Recapitalization of Legacy Nikola common stock to Common Stock

    (2 )   (P )

    (1 )   (Q )
    (R)
    Represents pro forma adjustments to additional paid-in capital balance to reflect the following:
 
  (in thousands)    
 

Issuance of Series D preferred stock pursuant to amended Series D preferred stock purchase agreement

    123,324     (B )

Repurchase of Series B preferred stock

    (25,000 )   (C )

Exercise of Legacy Nikola stock options

    1,871     (D )

Payment of transaction fees for Legacy Nikola

    (5,940 )   (E )

Payment of transaction fees and underwriting fees for VectoIQ

    (45,269 )   (F )

Issuance of Common Stock from Subscription Agreements

    524,995     (H )

Redemption of Common Stock from M&M Residual, LLC

    (69,999 )   (I )

Conversion of Legacy Nikola preferred stock to Legacy Nikola common stock

    414,663     (M )

Reclassification of Common Stock subject to redemption

    233,197     (N )

Recapitalization of Legacy Nikola common stock and Common Stock

    (27 )   (P )

Acceleration of vesting of Legacy Nikola stock options

    8,079     (S )

Stock compensation expense for non-employee director compensation program

    1,400     (T )

Settlement of stock options pursuant to the Founder Stock Option Plan

    5,387     (U )

Redemptions of Common Stock by Public Stockholders

    (28 )   (W )

    1,166,653     (R )
    (S)
    Represents the amount of compensation cost related to the acceleration of the vesting for certain existing stock options granted.

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    (T)
    Represents the stock compensation expense that will be recognized for the non-employee director compensation program. These costs are not included in the unaudited pro forma condensed combined statement of operations as the RSUs granted to non-employee directors vest in full on the first anniversary of the grant date. As such, they are deemed to not have a continuing impact on the results of the post-combination company.

    (U)
    Reflects the settlement of stock options pursuant to Legacy Nikola's Founder Stock Option Plan, effective as of December 31, 2018 (the "Founder Stock Option Plan") upon consummation of the Business Combination.

    (V)
    Represents pro forma adjustments to accumulated deficit balance to reflect the following:
 
  (in thousands)    
 

Payment of estimated transaction fees for Legacy Nikola

    (688 )   (E )

Acceleration of vesting of Legacy Nikola stock options

    (8,079 )   (S )

Stock compensation expense for non-employee director compensation program

    (1,400 )   (T )

Settlement of stock options pursuant to the Founder Stock Option Plan

    (5,387 )   (U )

    (15,554 )   (V )
    (W)
    Represents actual redemption of 2,702 shares of Common Stock for approximately $0.03 million allocated to common stock and additional paid-in capital using par value $0.0001 per share and at a redemption price of $10.37 per share. Legacy Nikola common stock not redeemed were rolled over into the combined company's Common Stock.

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

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

    (AA)
    Represents pro forma adjustment to selling, general, and administrative expenses to reflect the following:
 
  Three Months
Ended
March 31, 2020
  Year ended
December 31, 2019
   
 
 
  (in thousands)
   
 

Stock-based compensation expense related to amended and restated employment agreements

    1,683     6,733     (BB )

Elimination of VectoIQ's historical office space and general administrative services

    (30 )   (120 )   (CC )

    1,653     6,613     (AA )
    (BB)
    Effective as of the Closing Date, the Company entered into individual amended and restatement employment agreements with certain executive officers. Subject to Board approval, the executive officers are eligible to receive time-vested stock awards consisting of RSUs for shares of Common Stock having a value on the date of grant of not less than a fixed amount based on the assumed stock value of $10.00 per share, subject to continued employment during a three-year cliff vesting schedule. A sensitivity analysis was performed to quantify the impact of a hypothetical increase of 10% on the potential grant date stock value compared to the assumed stock value of $10.00. A 10% increase in stock value

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      would lead to the recognition of an additional $0.2 million and $0.7 million in stock-based compensation expense for the three months ended March 31, 2020, and the year ended December 31, 2019, respectively.

    (CC)
    Represents pro forma adjustment to eliminate historical expenses related to VectoIQ's office space and general administrative services, which terminated upon consummation of the Merger.

    (DD)
    Represents pro forma adjustment to eliminate investment income related to the investment held in the Trust Account.

    (EE)
    Reflects the elimination of the loss on the forward contract liability. The Company settled the liability in April 2020 with the issuance of Series D redeemable convertible preferred stock, which ceased to exist upon the conversion into Common Stock.

    (FF)
    Reflects the elimination of the loss on Series A redeemable convertible preferred stock warrant liability. As of December 31, 2019, all of the warrants were exercised into Series A redeemable convertible preferred stock, which ceased to exist upon the conversion into Common Stock.

    (GG)
    Reflects income tax effect of pro forma adjustments using the estimated statutory tax rate of 21%.

    (HH)
    Reflects the elimination of the premium paid on repurchase of redeemable convertible preferred stock, which ceased to exist upon the conversion into Common Stock.

3. Loss per Share

        Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2019. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented.

 
  Three Months
Ended
March 31, 2020
  Year ended
December 31, 2019
 

Pro forma net loss (in thousands)

  $ (34,148 ) $ (92,488 )

Weighted average shares outstanding—basic and diluted

    360,904,478     360,904,478  

Net loss per share—basic and diluted(1)

  $ (0.09 ) $ (0.26 )

Weighted average shares outstanding—basic and diluted

             

VectoIQ Public Stockholders

    22,983,872     22,983,872  

Holders of VectoIQ Founder Shares

    6,640,000     6,640,000  

PIPE Investors

    52,500,000     52,500,000  

Legacy Nikola stockholders(2)(3)

    278,780,606     278,780,606  

    360,904,478     360,904,478  

(1)
For the purposes of calculating diluted earnings per share, it was assumed that all outstanding VectoIQ Warrants sold in the IPO and the private placement are exchanged for Common Stock. However, since this results in anti-dilution, the effect of such exchange was not included in calculation of diluted loss per share.

(2)
The pro forma shares attributable to Legacy Nikola stockholders is calculated by applying the exchange ratio of 1.901 to the historical Legacy Nikola common stock and preferred stock that was

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    exchanged in the Business Combination, including additional shares that were issued and repurchased subsequent to the historical financial statements of Legacy Nikola, as follows:

      historical Legacy Nikola common stock of 60.2 million shares as of March 31, 2020,

      historical Legacy Nikola Preferred Stock of 84.1 million shares as of March 31, 2020,

      the issuance of additional Series D redeemable preferred stock of 6.6 million shares as described in note 2(B),

      the exercise of 0.9 million Legacy Nikola grantee stock options as described in note 2(D), less

      the repurchase of Series B redeemable preferred stock of 1.5 million shares as described in note 2(C).

      Pro forma shares attributable to Legacy Nikola stockholder was further adjusted for the redemption of 7.0 million shares of Common Stock from M&M Residual, LLC as described in note 2(I).

(3)
The pro forma basic and diluted shares of Legacy Nikola stockholders exclude 41.1 million of unexercised employee stock options, as these are not deemed a participating security and their effect is antidilutive.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis provides information which Nikola's management believes is relevant to an assessment and understanding of Nikola's consolidated results of operations and financial condition. The discussion should be read together with "Selected Financial Information" and the consolidated financial statements and related notes that are included elsewhere in this prospectus. The discussion and analysis should also be read together with our pro forma financial information for the three months ended March 31, 2020 and the year ended December 31, 2019. See the section entitled "Unaudited Pro Forma Condensed Combined Financial Information." This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this prospectus. Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "we", "us", "our", and the "Company" are intended to mean the business and operations of Nikola and its consolidated subsidiaries.

Overview

        We are a vertically integrated zero-emissions transportation systems provider that designs and manufactures state-of-the-art battery-electric and hydrogen fuel cell electric vehicles, electric vehicle drivetrains, energy storage systems, and hydrogen fueling stations. To date, we have been primarily focused on delivering zero-emission class 8 semi-trucks to the commercial transportation sector in the U.S. and in Europe. Our core product offering includes battery-electric and hydrogen fuel cell electric trucks and hydrogen fuel.

        We operate 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, we 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 us with the manufacturing infrastructure to build BEV trucks for the North American market prior to the completion of our planned greenfield manufacturing facility in Coolidge, Arizona. The operations of the joint venture are expected to commence in the third quarter of fiscal 2020.

        Our plan is to begin construction on our 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 we expect 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 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.

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        We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we:

    construct manufacturing facilities and purchases related equipment;

    commercialize our heavy-duty trucks and other products;

    develop hydrogen fueling stations;

    continue to invest in our technology;

    increase our investment in marketing and advertising, sales, and distribution infrastructure for our products and services;

    maintain and improve our operational, financial and management information systems;

    hire additional personnel;

    obtain, maintain, expand, and protects our intellectual property portfolio; and

    operate as a public company.

Comparability of Financial Information

        Our 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

        We were originally known as VectoIQ Acquisition Corp. On June 3, 2020, VectoIQ consummated the Merger of its wholly-owned subsidiary Merger Sub, with and into Legacy Nikola, pursuant to the Business Combination Agreement, among VectoIQ, Legacy Nikola and Merger Sub. In connection with the Closing, VectoIQ changed its name to Nikola Corporation.

        Following the Closing, Legacy Nikola was deemed the accounting predecessor of the Merger and will be the successor registrant for SEC purposes, meaning that Legacy Nikola's financial statements for previous periods will be disclosed in our 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) as a result of the Business Combination, the PIPE transaction 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 us 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. Our unaudited pro forma condensed combined financial information as of and for the three months ended March 31, 2020 is contained elsewhere in this prospectus.

        As a consequence of the Merger, we are a Nasdaq-listed company, which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional

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internal and external accounting and legal and administrative resources, including increased audit and legal fees.

Key Factors Affecting Operating Results

        We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those set forth in the section entitled "Risk Factors."

Commercial Launch of Nikola heavy duty trucks and other products

        We expect to derive revenue from our BEV trucks in 2021 and FCEV trucks in 2023. Prior to commercialization, we 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, we will require substantial additional capital to develop our products and services and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales and hydrogen FCEV leases, we expect to finance our 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 our future funding requirements will depend on many factors, including the pace and results of our development efforts. Any delays in the successful completion of our manufacturing facility will impact our ability to generate revenue.

Customer Demand

        While not yet commercially available, we have received significant interest from potential customers. Going forward, we expect the size of our committed backlog to be an important indicator of our future performance.

Basis of Presentation

        Currently, we conduct business through one operating segment. All long-lived assets are maintained in, and all losses are attributable to, the United States of America. See Note 2 in the accompanying audited consolidated financial statements for more information about our operating segment.

Components of Results of Operations

Revenues

        To date, we have 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 our products to the market, we expect the significant majority of our revenue to be derived from direct sales of BEV trucks starting in 2021 and from the bundled leases of FCEV trucks beginning in 2023. Our bundled lease offering is inclusive of the cost of the truck, hydrogen fuel and regularly-scheduled maintenance. We expect 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, our cost of revenues has included materials, labor, and other direct costs related to solar installation projects.

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        Once we have reached commercial production, cost of revenues will include direct parts, material and labor costs, manufacturing overhead, including amortized tooling costs and depreciation of our greenfield manufacturing facility, depreciation of our 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 our 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 our engineering and research functions;

    Depreciation for prototyping equipment and research and development facilities.

        During the three months ended March 31, 2020 and fiscal year 2019, our research and development expenses were primarily incurred in the development of the BEV and FCEV trucks.

        As a part of its in-kind investment, Iveco is providing us 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 we reach commercial production.

        We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and develop activities to achieve our technology and product roadmap goals.

Selling, General, and Administrative Expense

        Selling, general, and administrative expenses consist of personnel-related expenses for our 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.

        We expect our selling, general, and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our 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 our cash and cash equivalents balances. Interest expense consists of interest paid on our equipment term loan and financing lease.

Gain (loss) on Series A Redeemable Convertible Preferred Stock Warrant Liability

        The gain (loss) on Series A redeemable convertible preferred stock warrant liability includes gains and losses from the remeasurement of our redeemable convertible preferred stock warrant liability. As of December 31, 2019, all of our outstanding redeemable convertible preferred stock warrants were

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exercised, therefore, going forward, there will not be any impact from the remeasurement of redeemable convertible preferred stock warrants.

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

        Our 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, we maintain a valuation allowance against U.S. and state deferred tax assets. Cash paid for income taxes, net of refunds during the three months ended March 31, 2020 and during the years ended December 31, 2019, 2018, and 2017 was not material.

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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

        Our 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

        Our 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

        Our 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

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headquarters facility. This was primarily offset from lower spend on purchased components due to preparation for Nikola World in 2019.

Selling, General, and Administrative

        Our 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 our new headquarters in Phoenix, Arizona. This was partially offset by a decrease in marketing costs from Nikola World in 2019.

Interest Income, net

        Our 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

        Our 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

        Our 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

        Our 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.

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

        The following table sets forth our historical operating results for the periods indicated:

 
  Years Ended December 31,    
   
 
 
  2019   2018   $ Change   % Change  
 
  (dollar amounts in thousands, except share and per share
data)

 

Revenues

  $ 482   $ 173   $ 309     178.6 %

Cost of revenues

    271     50     221     442.0  

Gross profit

    211     123     88     71.5  

Operating expenses:

                         

Research and development

    67,514     58,374     9,140     15.7  

Selling, general, and administrative

    20,692     12,238     8,454     69.1  

Total operating expenses

    88,206     70,612     17,594     24.9  

Loss from operations

    (87,995 )   (70,489 )   (17,506 )   (24.8 )

Other income (expense):

                         

Interest income, net

    1,456     686     770     112.2  

(Loss) gain on Series A redeemable convertible preferred stock warrant liability

    (3,339 )   3,502     (6,841 )   NM  

Other income, net

    1,373     6     1,367     NM  

Loss before income taxes

    (88,505 )   (66,295 )   (22,210 )   (33.5 )

Income tax expense (benefit)

    151     (2,002 )   2,153     NM  

Net loss

    (88,656 )   (64,293 )   (24,363 )   (37.9 )

Premium paid on repurchase of redeemable convertible preferred stock

    (16,816 )   (166 )   (16,650 )   NM  

Net loss attributable to common stockholders, basic and diluted

  $ (105,472 ) $ (64,459 ) $ (41,013 )   NM  

Net loss attributable per share to common stockholders, basic and diluted

  $ (1.75 ) $ (1.07 ) $ (0.68 )   NM  

Weighted-average shares used to compute net loss attributable per share to common stockholders, basic and diluted

    60,166,799     60,166,667     132     NM %

Revenues

        Our total revenue increased by $0.3 million or 178.6% from $0.2 million in the fiscal year 2018 to $0.5 million in the fiscal year 2019. The increase in revenue was related to an increase in solar installation services.

Cost of Revenues

        Cost of revenues increased by $0.2 million or 442.0% from $0.1 million in the fiscal year 2018 to $0.3 million in the fiscal year 2019. The increase in the cost of revenues was related to an increase in materials used in solar installation projects.

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Research and Development

        Research and development expenses increased by $9.1 million or 15.7% from $58.4 million in the fiscal year 2018 to $67.5 million in the fiscal year 2019. The increase was primarily due to an increase of $13.3 million in personnel and travel expenses, offset by a $4.4 million decrease in outside development expenses.

        The increase in personnel costs and travel expenses was primarily driven by our increased engineering headcount year over year as we continue to advance the development and design of our vehicles and invest in our in-house engineering capabilities.

        Outside development expenses and materials expenses were higher in the fiscal year 2018 to support the development and build of the Nikola Two FCEV trucks, along with the mockup builds of the Nikola Tre BEV, and other vehicles, which were all debuted at Nikola World in April 2019. Additionally, in the fiscal year 2019, we have been able to manage our outside research and development spend by building our internal engineering team and expect to continue to do so going forward.

Selling, General, and Administrative

        Selling, general, and administrative expenses increased by $8.5 million or 69.1% from $12.2 million in the fiscal year 2018 to $20.7 million in the fiscal year 2019, primarily due to a one-time payment of $2.1 million related to consulting services on future manufacturing site selection, and higher marketing expenses of $2.7 million primarily related to the Nikola World event held in April 2019. The remaining $3.7 million increase is attributed to higher personnel expenses driven by growth in headcount and higher general corporate expenses, including depreciation of our new headquarters in Phoenix, Arizona.

Interest Income, net

        Interest income, net increased by $0.8 million or 112.2%, from $0.7 million in the fiscal year 2018 to $1.5 million in the fiscal year 2019. The increase was primarily due to the substantial portion of cash and cash equivalents on hand being moved to a higher interest-bearing investment account in the second quarter of 2019.

(Loss) gain on Series A Redeemable Convertible Preferred Stock Warrant Liability

        The (loss) gain on Series A redeemable convertible preferred stock warrant liability decreased $6.8 million due to a $3.5 million gain recorded in fiscal 2018 on 3.0 million Series A redeemable convertible preferred warrants which expired in March 2018 as opposed to a $3.3 million loss recorded in fiscal year 2019 on 720 thousand Series A warrants which were exercised in December 2019.

Other Income, net

        Other income, net increased by $1.4 million, from $6 thousand in the fiscal year 2018 to $1.4 million in the fiscal year 2019. The increase was primarily related to grants received from the state of Arizona, as well as subcontracting work performed on government contracts.

        During fiscal 2019, Legacy Nikola entered into a $3.5 million grant agreement with Arizona Commerce Authority to relocate our headquarters to Arizona, build manufacturing and research and development operations, create jobs, and enter into capital investments within the state. We met the first milestone of the agreement in the fourth quarter of 2019 and received the initial payment of $1.0 million from the state. We will record future payments in other income as they are received.

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Income Tax Expense (Benefit)

        Our income tax expense increased by $2.2 million, from a benefit of $2.0 million in the fiscal year 2018 to an expense of $0.2 million in the fiscal year 2019. The increase in tax expense is primarily related to changes in deferred tax liabilities recorded for our intangible assets and goodwill.

Comparison of Fiscal Year Ended December 31, 2018 to Fiscal Year Ended December 31, 2017

        The following table sets forth our historical operating results for the periods indicated:

 
  Years Ended December 31,    
   
 
 
  2018   2017   $ Change   % Change  
 
  (dollar amounts in thousands, except share and per share
data)

 

Revenues

  $ 173   $ 486   $ (313 )   (64.4 )%

Cost of revenues

    50     304     (254 )   (83.6 )

Gross profit

    123     182     (59 )   (32.4 )

Operating expenses:

                         

Research and development

    58,374     11,615     46,759     402.6  

Selling, general, and administrative

    12,238     5,849     6,389     109.2  

Total operating expenses

    70,612     17,464     53,148     304.3  

Loss from operations

    (70,489 )   (17,282 )   (53,207 )   (307.9 )

Other income (expense):

                         

Interest income (expense), net

    686     (814 )   1,500     NM  

Gain (loss) on Series A preferred stock warrant liability

    3,502     (975 )   4,477     NM  

Other income (expense), net

    6     (59 )   65     NM  

Loss before income taxes

    (66,295 )   (19,130 )   (47,165 )   (246.5 )

Income tax benefit

    (2,002 )   (1,574 )   (428 )   (27.2 )

Net loss

    (64,293 )   (17,556 )   (46,737 )   (266.2 )

Premium paid on repurchase of redeemable convertible preferred stock

    (166 )       (166 )   NM  

Net loss attributable to common stockholders, basic and diluted

  $ (64,459 ) $ (17,556 ) $ (46,903 )   (266.2 )

Net loss attributable per share to common stockholders, basic and diluted

  $ (1.07 ) $ (0.29 ) $ (0.78 )   NM  

Weighted-average shares used to compute net loss attributable per share to common stockholders, basic and diluted

    60,166,667     60,053,425     113,242     NM %

Revenues

        Our total revenue decreased by $0.3 million or 64.4%, from $0.5 million in the fiscal year 2017 to $0.2 million in the fiscal year 2018. The decrease in revenue was primarily related to a decrease in solar installation services.

Cost of Revenues

        Cost of revenues decreased by $0.2 million or 83.6%, from $0.3 million in the fiscal year 2017 to $0.1 million in the fiscal year 2018. The decrease in cost of revenues was primarily related to a decrease in materials used in solar installation projects.

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Research and Development

        Research and development expenses increased by $46.8 million or 402.6%, from $11.6 million in fiscal year 2017 to $58.4 million in fiscal year 2018. The increase was primarily due to increases of $37.0 million in outside development costs, $7.1 million in material expenses, and $2.5 million in personnel costs.

        The increase in outside development and materials expenses in the fiscal year 2018 was primarily due to the development and build of the Nikola Two FCEV trucks, and other Nikola vehicles, which were debuted at Nikola World in April 2019. The development activities included using third party engineering services to aid in the development of the fuel cell system, powertrain, battery, vehicle controls, and overall vehicle integration.

        The increase in personnel costs was primarily driven by increased headcount year over year as we have continued the internal development of our Nikola Two FCEV truck and Nikola Tre BEV truck, and related components.

Selling, General, and Administrative

        Selling, general, and administrative expenses increased by $6.4 million or 109.2%, from $5.8 million in the fiscal year 2017 to $12.2 million in the fiscal year 2018, primarily driven by an increase of $4.3 million in personnel and travel expenses as a result of higher headcount. The remaining $2.1 million increase is attributed to the rise in professional and legal services and occupancy expenses associated with the relocation of our headquarters from Salt Lake City, Utah to Phoenix, Arizona.

Interest Income (Expense), net

        Interest income (expense), net increased by $1.5 million from interest expense, net of $0.8 million in the fiscal year 2017 to interest income, net of $0.7 million in the fiscal year 2018. The increase was primarily due to an increase in cash and cash equivalents on-hand, associated with Series B and Series C preferred stock financing.

Gain (Loss) on Series A Redeemable Convertible Preferred Stock Warrant Liability

        The gain (loss) on Series A redeemable convertible preferred stock warrant liability increased $4.5 million from $1.0 million loss in fiscal 2017 which was a result of the change in fair value related our Series A redeemable convertible preferred stock warrant liability to $3.5 million gain in fiscal 2018, primarily due to a $2.8 million gain recorded in fiscal 2018 on 3 million Series A warrants which expired in March 2018.

Income Tax Benefit

        Our income tax benefit increased by $0.4 million or 27.2%, from a benefit of $1.6 million in the fiscal year 2017 to the benefit of $2.0 million in the fiscal year 2018. The increase in tax benefit is primarily related to changes in deferred tax liabilities related to our indefinite-lived intangible and goodwill.

Non-GAAP Financial Measures

        In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating operational performance. We use the following non-GAAP financial information to evaluate ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing operating performance.

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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 performance that is neither required by, nor presented in accordance with, GAAP. We believe 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 our 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 we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our 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. We compensate for these limitations by relying primarily on our 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 our 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 )

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        The following table reconciles net loss to EBITDA and Adjusted EBITDA for the years ended December 31, 2019, 2018 and 2017, respectively:

 
  Years Ended December 31,  
 
  2019   2018   2017  
 
  (in thousands)
 

Net loss attributable to common stockholders

  $ (105,472 ) $ (64,459 ) $ (17,556 )

Premium paid on repurchase of redeemable convertible preferred stock

    16,816     166      

Net loss

    (88,656 )   (64,293 )   (17,556 )

Interest (income) expense, net

    (1,456 )   (686 )   814  

Income tax expense (benefit)

    151     (2,002 )   (1,574 )

Depreciation and amortization

    2,323     625     412  

EBITDA

    (87,638 )   (66,356 )   (17,904 )

Stock-based compensation

    4,858     3,843     2,657  

Loss (gain) on Series A redeemable convertible preferred stock warrant liability

    3,339     (3,502 )   975  

Adjusted EBITDA

  $ (79,441 ) $ (66,015 ) $ (14,272 )

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 prospectus, we have yet to generate any material revenues from our business operations. As of March 31, 2020, our current assets were $101.2 million consisting primarily of cash and restricted cash of $79.6 million, and our 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 we 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, LLC for $70.0 million and repurchase of Nimbus Series B convertible redeemable preferred shares for $25.0 million.

        As of May 31, 2020, we had a cash and cash equivalents balance of $105.1 million. Based on the cash balance as of May 31, 2020 and proceeds from the Business Combination and PIPE transactions, we believe this will be sufficient to continue to execute our 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 our greenfield manufacturing facility and equipment;

    the timing and the costs involved in bringing our vehicles to market, mainly the Nikola Tre BEV truck;

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    our ability to manage the costs of manufacturing the Nikola Tre BEV trucks;

    the scope, progress, results, costs, timing and outcomes of our research and development for our fuel cell trucks;

    the costs of maintaining, expanding and protecting our 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;

    our ability to collect revenues; and

    other risks discussed in the section entitled "Risk Factors."

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 we can generate sufficient revenue from BEV truck sales and FCEV leases to cover operating expenses, working capital and capital expenditures, we expect to fund cash needs through a combination of equity and debt financing, including lease securitizations. If we raise 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 we raise 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 our 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, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations.

For the Three Months Ended March 31, 2020 and 2019

        The following table provides a summary of cash flow data:

 
  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

        Our 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.

        Our 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

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$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.

        Our 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

        We continue to experience negative cash flows from investing activities as we expand our business and builds our infrastructure. Cash flows from investing activities primarily relate to capital expenditures to support our growth. Legacy Nikola net cash used in investing activities is expected to continue to increase substantially as we build out and tools the North American truck manufacturing facility in Coolidge, Arizona and develop the network of hydrogen fueling stations.

        Our 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.

        Our 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 our 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 our 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.

For the Years Ended December 31, 2019, 2018, and 2017

        The following table provides a summary of cash flow data:

 
  Years Ended December 31,  
 
  2019   2018   2017  
 
  (in thousands)
 

Net cash used in operating activities

  $ (80,627 ) $ (54,019 ) $ (13,576 )

Net cash used in investing activities

    (39,302 )   (15,410 )   (2,482 )

Net cash provided by financing activities

    35,805     211,732     45,592  

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Cash Flows from Operating Activities

        Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development and selling, general, and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.

        Net cash used in operating activities was $80.6 million for the year ended December 31, 2019. The most significant component of our cash used during this period was a net loss of $88.7 million, which included non-cash expenses of $8.0 million for in-kind services, $4.9 million related to stock-based compensation, loss of $3.3 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability and $2.3 million related to depreciation and amortization, and net cash outflows of $10.6 million from changes in operating assets and liabilities. The net cash outflows from changes in operating assets and liabilities were primarily the result of a decrease in accounts payable due to related parties of $9.3 million, primarily related to the completion of certain outside development projects and settlement of related liabilities.

        Net cash used in operating activities was $54.0 million for the year ended December 31, 2018. The largest component of our cash used during this period was a net loss of $64.3 million, which included non-cash charges of $3.8 million related to stock-based compensation, gains of $3.5 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability, a benefit of $2.0 million related to deferred income taxes, and $0.6 million related to depreciation and amortization expense, and net cash inflows of $11.6 million from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and liabilities were primarily the result of an increase in accounts payable and accrued expenses and other current liabilities of $6.6 million and an increase in accounts payable due to related parties of $8.5 million.

        Net cash used in operating activities was $13.6 million for the year ended December 31, 2017. The largest component of our cash used during this period was a net loss of $17.6 million, which included non-cash charges of $2.7 million related to stock-based compensation, a benefit of $1.6 million related to our deferred income taxes, expense of $1.0 million related to the change in fair value of our Series A redeemable convertible preferred stock warrant liability, $0.4 million in depreciation and amortization expense, and net cash inflows of $1.5 million from changes in operating assets and liabilities.

Cash Flows from Investing Activities

        We continue to experience negative cash flows from investing activities as we expand our business and build our infrastructure. Cash flows from investing activities primarily relate to capital expenditures to support our growth. Net cash used in investing activities is expected to continue to increase substantially as we build out and tool our North American truck manufacturing facility in Coolidge, Arizona and develop the network of hydrogen fueling stations.

        Net cash used in investing activities was $39.3 million for the year ended December 31, 2019, which was primarily due to purchases and deposits on capital equipment of $21.1 million and $18.2 million related to the construction of our headquarters.

        Net cash used in investing activities was $15.4 million for the year ended December 31, 2018, which was primarily due to purchases and deposits on capital equipment of $9.2 million, $3.4 million related to the construction of our headquarters, and the issuance of a note receivable to a related party of $2.5 million.

        Net cash used in investing activities was $2.5 million for the year ended December 31, 2017, which was primarily due to purchases and deposits on capital equipment of $2.0 million and cash paid for acquisitions of $0.5 million.

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Cash Flows from Financing Activities

        Through December 31, 2019, we raised aggregate gross proceeds of approximately $401.8 million, of which $341.8 million was in the form of cash, from sales of redeemable convertible preferred stock. Additionally, in January and February 2020, we received cash of $12.3 million in connection with the issuance of our Series D redeemable convertible preferred stock.

        Net cash provided by financing activities was $35.8 million for the year ended December 31, 2019, which was primarily due to proceeds from the issuance of Series D redeemable convertible preferred stock of $65.0 million and proceeds from the exercise of the Series A redeemable convertible preferred stock warrants of $2.2 million, offset by the repurchase of Series B redeemable convertible preferred stock of $31.4 million.

        Net cash provided by financing activities was $211.7 million for the year ended December 31, 2018, which was primarily due to net proceeds from the issuance of Series C redeemable convertible preferred stock of $209.0 million and proceeds from borrowings of $4.1 million related to the term note, offset by the retirement of Series B redeemable convertible preferred stock of $1.4 million.

        Net cash provided by financing activities was $45.6 million for the year ended December 31, 2017, which was primarily due to net proceeds from the issuance of Series B redeemable convertible preferred stock of $44.0 million, proceeds from borrowings of $2.9 million, and proceeds from the exercise of Series A redeemable convertible preferred stock warrant liability of $1.0 million, offset by the repayment of $3.3 million in borrowings.

Contractual Obligations and Commitments

        The following table summarizes our contractual obligations and other commitments as of December 31, 2019, and the years in which these obligations are due:

 
  Payments Due By period  
 
  Total   Less than
1 Year
  1 - 3
Years
  3 - 5
Years
  More than
5 Years
 
 
  (in thousands)
 

Contractual obligations:

                               

Operating lease obligations

  $ 20,943   $ 1,739   $ 3,638   $ 3,854   $ 11,712  

Purchase obligations

    8,659     5,920     2,489     250      

  $ 29,602   $ 7,659   $ 6,127   $ 4,104   $ 11,712  

        Purchase obligations include purchase orders and agreements with a total term exceeding one year, to purchase goods or services that are enforceable, legally binding, and where the significant terms and minimum purchase obligations are stipulated.

        In addition, we enter into agreements in the normal course of business with vendors for research and development services and outsourced services, which are generally cancelable upon written notice. These payments are not included in this table of contractual obligations.

        As part of our arrangement with Iveco, once we commence commercial production, we are obligated to pay Iveco a royalty of 1.0% on BEV truck revenues and 1.25% on FCEV truck revenues over a period of seven years. We have not included royalty payments with respect to the licensed Iveco technology in the table above as the timing and amount of such obligations are unknown or uncertain. See Note 6 to our consolidated financial statements for further information.

        For the three months ended March 31, 2020, there have been no material changes to Legacy Nikola's significant contractual obligations.

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Waitlist and Reservations

        Potential FCEV customers may reserve slots in our future production schedule by submitting a reservation request on our website. No deposit is required to be paid by the customer. We stopped soliciting FCEV reservations in fiscal 2019 in order to focus on large corporate dedicated customers. We consider 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 we near commercial production in 2023, we expect to convert existing FCEV reservations into binding orders.

        As of March 31, 2020, Legacy Nikola had approximately 14,000 reservations for FCEV trucks.

        We only accept binding orders on BEV trucks, which are negotiated on a case by case basis.

Off-Balance Sheet Arrangements

        Since the date of Legacy Nikola's incorporation, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

        Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

        Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

        While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following accounting policies are most critical to understanding our financial condition and historical and future results of operations:

    stock-based compensation and common stock valuation; and

    intangible assets.

Stock-Based Compensation and Common Stock Valuation

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

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

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

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    Expected Dividend Yield—The dividend rate used is zero as we have never paid any cash dividends on Common Stock or Legacy Nikola common stock and do not anticipate doing so in the foreseeable future.

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

Common Stock Valuations

        The grant date fair value of Legacy Nikola common stock was determined by Legacy Nikola's board of directors with the assistance of management and an independent third-party valuation specialist. The grant date fair value of Legacy Nikola common stock was determined using valuation methodologies which utilizes certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability (Level 3 inputs). Based on our early stage of development and other relevant factors, we determined that an Option Pricing Model ("OPM") was the most appropriate method for allocating our enterprise value to determine the estimated fair value of Legacy Nikola common stock. Application of the OPM involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of future events. Specifically, we have historically used the OPM backsolve method to estimate the fair value of Legacy Nikola common stock, which derives the implied equity value for one type of equity security from a contemporaneous transaction involving another type of security, shares of our redeemable convertible preferred stock in this instance.

        As of June 3, 2020, our stock is publicly traded and the fair value of our Common Stock is based on the closing price of our Common Stock on or around the date of grant.

Intangible Assets

        Intangible assets consist of licenses, in-process research and development, and trademarks, and are stated at cost less accumulated amortization. In-process research and development has an indefinite useful life until completion of the related research and development efforts and will subsequently be amortized over an estimated useful life. All other intangible assets have been determined to have finite lives and are amortized on a straight-line basis over their estimated remaining economic lives.

        For intangible assets acquired in a non-monetary exchange, the estimated fair value of the consideration transferred is used to establish their recorded values.

        Significant judgments are required in assessing impairment of intangible assets and include identifying whether events or changes in circumstances require an impairment assessment, estimating future cash flows, determining appropriate discount and growth rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value whether an impairment exists and if so the amount of that impairment.

        In testing indefinite-lived intangible assets for impairment, we first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if we determine, based on the qualitative assessment, that it is more likely than not that the indefinite-lived intangible asset's fair value is less than its carrying amount. If we determine based on the qualitative assessment that it is more likely than not that the asset is impaired, an impairment test is performed by comparing the fair value of the indefinite-lived intangible asset to its carrying amount.

        Factors considered which could trigger a further impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results, significant

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changes in the manner of use of the acquired assets or our overall business strategy, and significant industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based on the existence of one or more of the above indicators, recoverability is determined by comparing the carrying amount of the asset to net future undiscounted cash flows that the asset is expected to generate. An impairment charge would then be recognized equal to the amount by which the carrying amount exceeds the fair-market value of the asset.

        Definite-lived intangible assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. The events and circumstances we monitor and consider include significant decreases in the market price for similar assets, significant adverse changes to the extent and manner in which the asset is used, an adverse change in legal factors or business climate, an accumulation of costs that exceed the estimated cost to acquire or develop a similar asset, and continuing losses that exceed forecasted costs. When the carrying value of an intangible asset is not recoverable based on the existence of one or more of the above indicators, recoverability is determined by comparing the carrying amount of the asset to net future undiscounted cash flows that the asset is expected to generate. An impairment charge would then be recognized equal to the amount by which the carrying amount exceeds the fair value of the asset.

Emerging Growth Company Status

        We are 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. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our 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, we intend 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, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor's attestation report on our 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 PCAOB 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.

        We will remain an EGC under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the first sale of our Common Stock in our initial public offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the date on which we are 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 we have issued more than $1.0 billion in non-convertible debt securities during the previous three years. We expect this to occur during fiscal 2020.

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Recent Accounting Pronouncements


Note 2 to our unaudited consolidated financial statements and notes thereto, contained elsewhere in this prospectus, provides more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.

Internal Control Over Financial Reporting

        In connection with the audit of our financial statements for the year ended December 31, 2017, our independent registered public accounting firm had identified material weaknesses in our internal controls. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness in our internal control over financial reporting for the year ended and as of December 31, 2017 was as follows:

    We did not maintain adequate processes and controls and accounting expertise to execute, review and approve all aspects of the financial statement close and reporting process. Specifically, we did not maintain adequate controls related to the recording of our stock-based compensation expense or Series A redeemable convertible preferred stock warrants. Additionally, we did not maintain the proper cut-off of expenses.

        Our remediation efforts for these material weaknesses have included:

    We have recruited additional personnel, in addition to utilizing third-party consultants and specialists, to supplement our internal resources.

    We have expanded cross-functional involvement and input into period end expense accruals, as well as implemented process improvements in the procure-to-pay cycle;

    Finally, we have been and continue designing and implementing additional automation and integration in our financially significant systems.

        We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters we identify.

        No material weaknesses were identified in connection with the audit of our financial statements for the years ended December 31, 2018, and 2019.

Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as well as risks to the availability of funding sources, hazard events, and specific asset risks.

Interest Rate Risk

        The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, 2019, and March 31, 2020 we had cash and cash equivalents of $85.7 million and $75.5 million, respectively, consisting of interest-bearing money market accounts for which the fair market value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities and the low-risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents.

Foreign Currency Risk

        There was no material foreign currency risk for the three months ended March 31, 2020 or years ended December 31, 2019, 2018 or 2017.

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BUSINESS

Company Overview

Who We Are

        Nikola's vision is to be the zero-emissions transportation industry leader. We plan to realize this vision through world-class partnerships, groundbreaking R&D, and a revolutionary business model.

        According to the Environmental Protection Agency ("EPA") and the European Environment Agency ("EEA"), the transportation industry causes an estimated 25% to 30% of U.S. and EU greenhouse gas ("GHG") emissions. While heavy-duty trucking represents less than 10% of the overall industry, it is responsible for approximately 40% of transportation industry GHG according to the International Council on Clean Transportation ("ICCT"). With ever-expanding e-commerce freight demands, zero-emission vehicles are believed to be one of the only viable options for a sustainable future.

        We are a vertically integrated zero-emissions transportation systems provider that designs and manufactures state-of-the-art battery-electric and hydrogen, fuel cell electric vehicles, electric vehicle drivetrains, energy storage systems, and hydrogen fueling stations. Our core product offering is centered around our battery-electric vehicle ("BEV") and hydrogen fuel cell electric vehicle ("FCEV") Class 8 semi-trucks.

        We operate in three business units: Truck, Energy and Powersports. The Truck Business Unit is developing and commercializing BEV and FCEV Class 8 trucks that provide environmentally friendly, cost-effective solutions to the short-haul, medium-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 our FCEV customers. The Powersports Business Unit is developing electric vehicle solutions for military and outdoor recreational applications.

        The key differentiator of our business model is our planned network of hydrogen fueling stations. Historically, investing in alternative fuel vehicles represented a high risk for both original equipment manufacturers ("OEMs"), and customers due to the uncertainty of the fueling infrastructure. Existing fuel providers have little incentive to develop an alternative fuel infrastructure due to a lack of known demand. The inability to tackle both sides of this equation has prohibited hydrogen from reaching its potential. Nikola's approach aims to solve "the chicken or the egg" problem.

        For FCEV customers, we are offering a revolutionary bundled lease model, which provides truck, hydrogen fuel, and maintenance for a fixed price per mile, over 7 years or 700,000 miles, whichever comes first. Our bundled lease model significantly de-risks infrastructure development by locking in fuel demand from our dedicated route customers prior to the construction of each station. This locked in demand ensures high station utilization from day one.

        We believe our station network will provide a competitive advantage and help accelerate the adoption of our FCEVs. We believe our product portfolio and hydrogen fueling network provides a key strategic advantage that differentiates Nikola from competitors and will allow us to disrupt the estimated $600 billion global heavy-duty commercial vehicle and the related fueling and maintenance ecosystems.

Market

Total Addressable Market

        Nikola's unique bundled lease which includes the FCEV truck, fuel, and maintenance, will allow us to expand our total addressable market significantly when compared to traditional OEMs.

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        Globally, the total addressable market ("TAM"), is estimated to be a $600 billion per-year with steady growth expected to continue as e-commerce and global economic growth fuel the need for more heavy-duty trucks.

        Based on data provided by ACT Research, the estimated $600 billion TAM is as follows:

    Global Class 8 Truck Sales Market:  Approximately $118 billion ($36 billion U.S. market, $32 billion EU market, $50 billion rest of world ("ROW"))

    Global Fueling Market:  Approximately $367 billion ($63 billion U.S. market, $93 billion EU market, $211 billion ROW)

    Global Service and Maintenance Market:  Approximately $112 billion ($29 billion U.S. market, $26 billion EU market, $57 billion ROW)

        According to ACT Research, the active Class 8 truck population is expected to grow by approximately 5.0% annually from 2019 to 2023. This growth is supported by annual double-digit growth in e-commerce and a healthy global economic outlook.

Class 8 Market Segmentation

Private Fleet vs. For-Hire Fleet Segmentation

        ACT Research segments the on-highway Class 8 freight market between private and for-hire fleets, representing 53% and 47% of the Class 8 market, respectively. Private fleets, such as Anheuser-Busch ("AB"), Walmart, are almost all regular route operations or "dedicated" routes running point-to-point. The for-hire market, such as JB Hunt, XPO Logistics, can be further broken down into: contract 32%, spot 12%, and dedicated 3%. Dedicated for-hire fleets are mostly outsourced private fleets that run point-to-point.

Length of Haul Segmentation

        ACT breaks down the Class 8 truck market by the length-of-haul. The length-of-haul refers to the distance of an outbound load, and does not account for a return trip.

    Short-haul less than 100 miles: applications include agricultural and drayage operations.

    Medium-haul 100-250 miles: applications include Private Fleet Distribution, Less than Truckload operations, and regional for-hire fleets.

    Long-haul over 250 miles: applications include regular and irregular for-hire fleets, and private fleet regular route operations.

E-commerce Driving Expansion of Freight Moved by Trucks

        According to the Freight Analysis Framework and the U.S. Department of Transportation Statistics, in 2017, approximately 40% of all freight was moved by trucks in the U.S. That number is expected to grow to approximately 45% through 2035, and to approximately 50% through 2045. According to Eurostat, in Europe, approximately 52% of all freight in 2017 was moved by trucks. That number is expected to grow approximately 30% through 2030. According to ACT Research, globally, the active Class 8 truck population is expected to increase from 7.3 million in 2018, to 9.2 million in 2023, as emerging markets drive volume growth.

Shift to Zero-Emission Vehicles

        According to the EPA and the EEA the transportation industry causes an estimated 25% to 30% of U.S. and EU greenhouse gas emissions. While heavy-duty trucking represents less than 10% of the

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vehicle population, the ICCT estimates it is responsible for approximately 40% of emissions from the transportation industry, making them disproportionate contributors to pollution. Diesel vehicles are a major source of harmful air pollutants and GHG emissions. The associated local air pollution, particulates of oxides of nitrogen and particulate matter emissions, negatively impacts health and quality of life. Additionally, diesel exhaust has been classified as a potential human carcinogen by the EPA and the International Agency for Research on Cancer. Studies done on exposure to high levels of diesel exhaust indicate a greater risk of lung cancer.

        A significant share of global GHG emissions stem from heavy-duty vehicle transportation. We believe zero-emission vehicles are one of the only viable options to reduce emissions in the transportation sector to meet climate, ozone, and regulatory targets. According to the U.S. Emissions Center for Climate and Energy Solutions, in 2017, U.S. GHG emissions totaled 6,457 million metric tons ("MMT") of CO2 equivalents. Medium and heavy-duty vehicles accounted for 7% of total emissions, equal to 431 MMT of CO2 equivalents. The EEA's report on GHG in Europe found that in 2017, EU GHG emissions totaled 4,481 MMT of CO2 equivalents. Heavy-duty vehicles accounted for 5% of total emissions, equal to 224MMT of CO2 equivalents.

        A strong consensus among the largest governments calls for a global push to shift to zero-emission vehicles and the eventual elimination of internal combustion engine ("ICE") vehicles. According to the Center for Climate Protections "Survey on Global Activities to Phase Out ICE Vehicles" report, actions being taken by national and local governments include:

    The following cities signed the C40 Fossil-Fuel-Free Streets Declaration: Electric buses by 2025, ICE vehicles banned by 2030: Athens, Auckland, Barcelona, Cape Town, Copenhagen, Heidelberg, London, Los Angeles, Madrid, Milan, Mexico City, Paris, Quito and Rome.

    Additionally, Delhi, Hamburg, Oslo, Oxford, and Tokyo, have all began to implement and propose plans to move towards all zero-emissions vehicles.

Countries Phasing Out ICE Vehicles (specific actions vary by country):

    Austria: No new ICE vehicles sold after 2020

    China: End production and sales of ICE vehicles by 2040

    Costa Rica: Initiate complete phase-out of ICE vehicles by 2021

    Denmark: 5,000 EVs on the road by 2019, tax incentive in place

    France: Ban the sale of petrol and diesel cars by 2040

    Germany: No registration of ICE vehicles by 2030 (passed by legislature); cities can ban diesel cars

    India: Official target: No new ICE vehicles sold after 2030; Incentive program in place for EV sales

    Ireland: No new ICE vehicles sold after 2030

    Israel: No new ICE vehicle imports after 2030

    Japan: Incentive program in place for EV sales

    Netherlands: No new ICE vehicles sold after 2030; Phase out begins 2025

    Norway: Sell only electric and hybrid vehicles starting in 2025

    Portugal: Official target and incentive in place for EV Sales

    Scotland: No new ICE vehicles sold after 2032

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    South Korea: EVs account for 30% of auto sales by 2020

    Spain: Incentive package to promote sales of alternative energy vehicles

    Sweden: Ban of ICE vehicles in 2030

    Taiwan: Phase out fossil fuel-powered motorcycles by 2035 and fossil fuel-powered vehicles by 2040. Additionally, the replacement of all government vehicles and public buses with electric versions by 2030.

    United Kingdom: Ban the sale of petrol and diesel cars starting in 2035—No new ICE vehicles sold

        With such strong sentiment to reduce global GHG emissions from leading governments, OEMs will have to spend significant additional R&D on existing models to remain compliant in the near term, or they will face heavy fines. In the EU, there will be a mandatory 15% reduction in CO2 emissions by 2025, and a 30% reduction target by 2030. There will be a financial penalty for failure to achieve these targets. The level of the penalties is 4,250 Euros and 6,800 Euros per gCO2 / tonne-kilometre ("tkm") in 2025 and 2030, respectively. Conventional diesel technology will most likely not be able to meet the EU targets set for 2025 and 2030. These ambitious CO2 targets are likely "technology-forcing" towards alternative powertrains such as battery-electric and hydrogen fuel cell.

        In addition, consumers are increasingly demanding that corporations take action to reduce their carbon footprint. An article by Nielsen cited that nearly half (48%) of U.S. consumers say they would "definitely" or "probably" change their consumption habits to reduce their impact on the environment, placing reducing emissions high on the agenda for large corporates. For example:

    Amazon has pledged to become carbon neutral by 2040;

    BP has pledged to become carbon neutral by 2050;

    DB Schenker plans to reduce specific CO2 emissions by 30% before 2020 and 50% before 2030, compared to 2006 baseline;

    DHL set a goal to reduce all logistics-related emissions to zero by 2050;

    UPS has committed to sourcing 40% of its ground fuel will be sourced from low carbon or alternative fuels by 2025; and

    Walmart set a goal of an 18% emissions reduction in their own operations by 2025 and to work with suppliers to reduce emissions by 1 gigaton by 2030.

Hydrogen Fuel Cell and Battery Technology Momentum

        With the global push to eliminate ICE vehicles, battery-electric and fuel cell technologies stand out as the best alternatives to diesel. Both battery costs, a key cost competent of a BEV, and electricity prices, a key cost component in hydrogen fuel production, have decreased significantly over the past decade, and prices continue to fall. These cost reductions significantly improve the economics of BEVs and FCEVs.

        A January 2020 report published by the Hydrogen Council highlighted how policy and economic forces are converging, creating unprecedented momentum in the hydrogen sector. This momentum is buoyed by:

    66 countries having announced net zero-emissions as a target by 2050;

    Approximately 80% decrease in global average renewable energy prices since 2010; and

    Expected 55 times growth in electrolysis capacity by 2025 compared to 2015.

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Zero-Emission Vehicles Enabled by Significant Reduction in Battery Cost and Renewable Electricity Prices

        The majority of the cost of production of a BEV truck, and a major cost component of a FCEV truck, lie in the cost of the battery. As illustrated in a 2019 report by BloombergNEF, from 2010 to 2018, Lithium-Ion battery prices have fallen from $1,160 per kilowatt-hour ("kWh") to $176 per kWh, representing an 85% cost reduction. As investment in battery technology continues to increase as a result of OEMs allocating more capital to next-generation powertrain technology, this trend in battery cost reduction is expected to continue.

        That being said, vehicles that run on lithium-ion battery-electric power can experience battery capacity and performance loss over time, depending on the use and age of the battery. For example, depending on the battery chemistry of the specific cells inside a vehicle battery pack, after approximately 1,000 to 1,500 charge and discharge cycles, energy capacity retention is about 80%. In moderate weather conditions, a fully charged battery sitting idle can lose about 2% to 5% of its charge over a 30-day period. Also, as a battery ages, it loses approximately 2% of its energy capacity retention, year over year. We anticipate that the lithium-ion battery packs in our BEV and FCEV trucks will perform similar to these current industry standards.

        For hydrogen production, electricity costs account for approximately 75% to 85% of the total cost. Per Lazard's November 2019 Levelized Cost of Energy Analysis, the cost of producing renewable energy has dropped significantly since 2009. In 2009, the global average solar and wind levelized cost of energy was $359 per megawatt-hour ("MWh"), and $135 per MWh, respectively. In 2019, these costs were $40 per MWh for solar and $41 per MWh for wind, representing a cost reduction of 89% and 70%, respectively.

        Renewable energy prices are expected to continue to fall as production capacity is set to double from 2019 to 2024. This trend will further reduce renewable energy prices, which will drive the cost of hydrogen production even lower.

        According to Wood Mackenzie, in the U.S., the world's second-largest solar market, power purchase agreements ("PPAs") are now trending between $20 to $30 per MWh, and on a global scale, prices have been observed as low as $17 per MWh. Lower solar energy production cost is expected to allow us to produce renewable hydrogen at a cost that is competitive with existing diesel solutions.

Industry Focused on TCO

        In the highly competitive trucking industry, when choosing between truck models that meet their technical requirements, customers mainly base their purchasing decision on total cost of ownership ("TCO"). TCO is the total cost of owning the truck through its lifecycle, including lease cost or purchase payment, fuel cost, service, and maintenance. According to ACT Research, traditionally, TCO for diesel trucks (excluding driver wages, benefits, and insurance), is typically broken down into cost of fuel (approximately 50%), purchase or lease payments on truck (approximately 22%), and repairs and maintenance (approximately 28%).

        Historically, diesel fuel comprises 40% to 60% of TCO, depending on prevailing diesel fuel prices. With the incumbent ICE technology, fleet operators are also forced to accept volatility in their largest cost component, creating risk and uncertainty. Our bundled lease will provide customers TCO clarity for the first time in the industry's history.

Industry and Competition

        Competition in the Class 8 heavy-duty truck industry is intense and new regulatory requirements for vehicle emissions, technological advances, and shifting customer demands are causing the industry

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to evolve towards zero-emission solutions. We believe the primary competitive factors in the Class 8 market include, but are not limited to:

    total cost of ownership (TCO);

    product performance and uptime;

    availability of charging or re-fueling network;

    emissions profile;

    vehicle quality, reliability and safety;

    technological innovation;

    improved vehicle operational visibility;

    ease of autonomous capability development; and

    service options.

        Similar to traditional OEMs in the passenger vehicle market, incumbent commercial transportation OEMs are burdened with legacy systems and the need to generate sufficient return on existing infrastructure, which has created a reluctance to embrace new zero-emission drivetrain technology. This reluctance creates opportunity for Nikola and has allowed us to gain a significant head start against our competition.

        However, we believe the global push for lower emissions combined with vast technological improvements in fuel cell and battery-electric powertrain technologies has awakened well-established OEMs to begin investing in zero-emission vehicle platforms.

BEV Competition

        Tesla, Daimler, Volvo, as well as other automotive manufactures, have announced their plans to bring Class 8 BEV trucks to the market over the coming years. Tesla announced its concept vehicle, the Tesla Semi, in November 2017. Daimler announced its plans for the eCascadia, which is the electric version of their flagship Freightliner Cascadia, in June 2018. Volvo announced plans to commercialize its BEV heavy-duty truck, the VNR Electric, in December 2018. Other competitors include BYD, who we believe is currently selling Class 8 BEV trucks, Peterbilt, XOS, and potentially Cummins.

FCEV Competition

        Due to higher barriers to entry, there are fewer competitors in the FCEV Class 8 market. However, Hyundai and Toyota have chosen to focus their efforts on FCEV as the powertrain of the future. Hyundai intends to enter the European market for medium-duty vehicles with their fuel cell truck, the Hyundai Xcient. In addition, others such as Hyundai have announced they plan to offer FCEV trucks and invest in hydrogen stations for refueling. Toyota is collaborating with Kenworth, an American manufacturer for medium- and heavy-duty Class 8 trucks, to jointly develop a hydrogen fuel cell heavy-duty truck, and Daimler and Volvo recently announced a proposed joint venture to develop fuel cell systems for heavy-duty trucks.

Competitors in Context

        Most of our current and potential competitors have greater financial, technical, manufacturing, marketing, and other resources than we do. They may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their electric and hydrogen fuel cell truck programs. Additionally, our competitors also have greater name

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recognition, longer operating histories, larger sales forces, broader customer and industry relationships, and other resources than we do.

        Although our competitors may have certain advantages we do not possess, we believe we are positioned to compete favorably. Although we do not have the same name recognition, or operating histories as our competition, we are free from the burden of legacy infrastructure and design. We believe we have the benefit of a head start and the advantage of beginning from a blank slate, which is critical when introducing revolutionary technology.

        We believe that one potential competitor, BYD, is currently selling Class 8 BEV trucks, while we believe other potential competitors are in various stages of rolling out their vehicles, including pilot programs and providing test vehicles to customers. We cannot provide assurances that our trucks will be among the first to market, or that competitors will not build hydrogen fueling stations that compete with our planned stations. Even if our trucks are first to market, we cannot assure you that customers will choose our vehicles over those of our competitors, or over diesel powered trucks.

Products

        As the commercial transportation sector transitions towards zero-emission solutions, we believe there will be a need to offer tailored solutions that meet the needs of each customer. Unlike the passenger vehicle market, where users typically return home each day, the commercial vehicle market contains multiple use cases often requiring vehicles to be out on the road for days, or weeks at a time. By offering both BEVs (for short-haul) and FCEVs (for medium- and long-haul), we believe Nikola is uniquely positioned to disrupt the commercial transportation sector by providing solutions that address the full range of customer needs.

        BEVs and FCEVs have identical e-Axles and similar truck designs, representing significant synergies in the manufacturing process between BEVs and FCEVs.

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Our Zero-Emission Product Offerings

        We have developed an extensive portfolio of proprietary technologies that are embedded and integrated in our highly specialized BEV and FCEV zero-emission vehicles. In addition, we plan to leverage our zero-emission powertrain expertise to address transportation adjacencies as exemplified with our Powersports product offerings. Our principal vehicle offerings include:

Nikola Tre—Class 8 BEV & FCEV Truck

GRAPHIC

        The Nikola Tre Class 8 truck is based on the new S-WAY platform of Iveco, and integrates our truck technology, controls and infotainment. The cab-over design is desirable for city center applications due to shorter vehicle length, tighter turning radius and better visibility. In the U.S., the Nikola Tre BEV will be marketed for short-haul applications. In Europe, the Nikola Tre BEV will also be sold to the short-haul market. The Nikola Tre FCEV will be marketed to the European medium and long-haul markets.

        The BEV version of Nikola Tre will be the first to market, addressing the near-term market opportunity as this version does not require a roll-out of charging infrastructure. BEVs run on a fully electric drivetrain powered by rechargeable batteries. Nikola's BEV has an estimated range of 250 to 300 miles and is designed to address the short-haul market. During the initial roll-out, customers will be responsible for their own charging needs.

        Sales of the Nikola Tre BEV are expected to begin in 2021, addressing the near-term market opportunity, while sales for the European Nikola Tre FCEV is expected to start in 2023. All BEV sales will be made through direct sales to customers.

Nikola One and Two—Class 8 FCEV Trucks

GRAPHIC   GRAPHIC

        The Nikola One (Class 8 sleeper cab) and Nikola Two (Class 8 day cab) are Nikola's FCEV trucks that are primarily designed for medium and long-haul applications. The FCEV trucks allow Nikola to address the longer-term opportunity by combining Nikola's fuel cell technology and a network of hydrogen stations across the U.S.

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        FCEVs use fuel cells on-board to convert hydrogen into electricity to power the electric motors which transmit power to the wheels. The fuel cell generates electricity through a chemical reaction, supplied from on-board tanks, and oxygen from the atmosphere. A much smaller battery (compared to our BEV) provides supplemental power to the drivetrain, and stores energy recovered during regenerative braking. The voltage and charge of the battery are maintained through a combination of power supplied from the fuel cell and energy captured through regenerative braking.

        Nikola's FCEVs have an estimated range of up to 400 to 750 miles, designed to address the medium and long-haul market. Our FCEVs will be leased to customers via a bundled lease where customers receive an FCEV truck, hydrogen fuel, and maintenance based on a fixed rate per mile, for 700 thousand miles, or 7 years (whichever comes first).

        We also expect that in the longer term as autonomous technologies relieve hours of service restrictions, FCEVs will be an ideal option for longer more continuous hauls.

        The Nikola Two will be marketed in the North American market, with initial production expected in the first quarter of 2023.

        Production plans for the Nikola One will be announced once we have established a robust refueling infrastructure.

Nikola Badger

        Recently we announced the Nikola Badger (the "Badger"), an advanced zero-emission FCEV/BEV hybrid pickup truck. Unlike anything on the market, the Badger is designed to target and exceed every electric or fossil fuel pickup in its class. At this time, we are focused on the production of its Class 8 heavy-duty vehicles and do not expect to develop production plans for the Badger unless we enter into a strategic partnership with an established OEM.

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Powersports

        Our management team is primarily focused on the core semi-truck and hydrogen station programs. However, we believe that we can leverage our zero-emission powertrain expertise to address transportation adjacencies. Our Powersports product offerings provide significant benefits to our core semi-truck and hydrogen station programs, including branding halo, driving awareness of Nikola and our industry-defining technology, and R&D synergies on electric drivetrain, battery technology, and other core components. These offerings include a battery-electric recreational off-highway vehicle, the

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Nikola NZT; a battery-electric military-grade off-highway vehicle, the Nikola Reckless; and a battery-electric sit-down watercraft, the Nikola Wav.

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        Although we are currently focused on the production of Class 8 heavy-duty vehicles, we may choose to partner with an OEM or enter into a joint venture partnership to accelerate production of the Nikola Powersports product portfolio.

Nikola Hydrogen Stations

        In addition to building heavy-duty zero-emission trucks, Nikola is also developing fueling and charging stations in North America and Europe to support our FCEV fleet customers and to help capture first mover advantage with respect to next generation fueling infrastructure. Over the next 8 to 10 years, Nikola intends to collaborate with strategic partners to build up to 700 fueling and charging stations in North America and approximately 70 fueling and charging stations in Europe.

        Hydrogen will normally be produced on-site at each station via electrolysis. The electrolysis process occurs by passing electricity through water in an electrolyzer, thus breaking the water molecule into gaseous hydrogen and oxygen. Nikola's base station is expected to have a daily production capacity of 8,000 kg and will be capable of supporting approximately 210 FCEV trucks per day. Our stations are designed to be scalable to up to 40,000 kg per day of production, if needed. The stations are expected to contain at least 8 heavy-duty (for commercial trucks), and up to 4 light-duty vehicle, hydrogen fueling dispensers. Nikola also plans to install electric fast charging at most of our fueling stations to support BEVs.

First Test Station Installed at Nikola's Phoenix HQ

        Through our partnership with Nel ASA, a Norwegian hydrogen company ("Nel"), we have initiated the development of the hydrogen station infrastructure by completing our first 1,000 kg demo station in the first quarter of 2019 at our corporate headquarters in Phoenix, Arizona. The demo hydrogen station offers hydrogen storage and dispensing and serves as a model for future hydrogen stations.

Nikola Hydrogen Fueling Stations

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Hydrogen Fuel Cell Ecosystem

    Hydrogen fuel will be produced on-site and at scale, via electrolysis, or hydrogen fuel produced off-site via electrolysis and shipped to filling location.

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    Electricity input (grid, solar, wind, nuclear) will be purchased via long-term supply agreements where feasible.

    The single-station strategy allows for maximum capital efficiency. Each station will be highly utilized from the start and is expected to generate substantial revenue and cash flow, which can be used to fund the development of future stations.

Hydrogen Station Rollout Strategy

California-First Hydrogen Station Strategy

        Our initial plan for the station rollout begins with an eight-ton pilot station accessible to the AB brewery in Van Nuys, California. From there, we then plan to build up to 10 to 12 additional stations in California. These stations will supply fuel for our launch customers in those geographies that have dedicated routes in California. California is offering incentives to build out our hydrogen fueling infrastructure and deploy zero-emissions vehicles, including opportunities for funding along major freeway corridors. We expect to rollout these stations in 2022-2023.

        After the California station build-out, we plan to opportunistically target other states offering incentives.

Single-Station Dedicated Route Strategy (Long-Term Strategy)

        After maximizing incentives offered by states, our strategy is to build hydrogen fueling stations one at a time along dedicated routes according to the needs of strategically selected customers. Nikola anticipates building up to 700 stations in North America. This overall strategy is designed to enable a capital-efficient roll-out of hydrogen stations, ensuring high utilization and predictability of demand, while allowing Nikola to also sell hydrogen to third-party purchasers.

        The layout and freight movement along our interstate system provides ample opportunities to expand our hydrogen station network in the U.S., as road freight is concentrated along the relatively few and significant corridors that form the National Highway Freight Network.

First Stations to Support Customers with Dedicated Routes

        Initially, our fueling and charging stations will be built to support carefully selected fleet customers who have dedicated routes along major interstate corridors. For example, we have chosen AB as a launch customer because they have dedicated freight routes between their twelve breweries and six distribution centers. The first stations will be built in Southern California and in Phoenix, Arizona to support AB's freight movements along Interstate 10 from their brewery in Van Nuys, California to their distribution center in Chandler, Arizona. Construction of an 8-ton pilot station accessible to AB's brewery in Van Nuys, California is expected to begin in the fourth quarter of 2020 and be completed by the fourth quarter of 2022.

EU Station Network Strategy

        The EU hydrogen station network will be built following a similar strategy. Several highly trafficked freight corridors exist in Europe, with logistics hubs in proximity to consumption centers, freight ports, and corridor crossroads. Nikola plans to strategically deploy hydrogen stations along the key corridors and logistical hubs to maximize the efficiency of station deployment. Ultimate station roll-out strategy and timing will also consider potential local incentives offered in the EU to ensure the most economically favorable EU station roll-out. We believe that a network of 70 to 90 hydrogen stations will provide approximately 85% coverage of Western European freight corridors.

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Power Sourcing Strategy, and Over Time, 100% Zero-Emission Goal

        During Nikola's initial hydrogen station roll-out, we will source power based on the most economical power mix available at each hydrogen station. Over time, we intend to support each fueling station with 100% zero-emission power, if feasible. For example, where feasible, we will co-locate our stations accessible to solar, wind, and hydro-power generation facilities built, paid for, and operated by third-party partners. We expect to enter into a long-term PPAs with these renewable energy providers whenever practical.

Playing a Key Role in The Future of Energy Generation and Storage

        The steady off-peak demand load of Nikola's hydrogen stations, and our ability to have our power supply temporarily interrupted during peak power demand, makes Nikola a highly attractive customer for utilities, grid operators and other power providers. Our station model also provides the critical advantage of being able to take excess power generated during periods of low power demand. Given this power demand profile, and our ability to help optimize the energy grid, we believe we will have the opportunity to source power at prices below prevailing market rates.

        Given our ability to level out demand and store night-time and other off-peak energy that might otherwise go unused, we believe our hydrogen stations will provide critical solutions to the future of electric energy generation, transmission, and storage and help usher in the next generation of power supply.

Nikola's Service and Maintenance

        Nikola's bundled lease includes maintenance for its vehicles. Service and maintenance of an electric vehicle is expected to be lower than the traditional ICE vehicle which has been proven in the electric passenger vehicle market. Fewer parts and considerably reduced complexity of the key drivetrain components should result in fewer breakdowns and less preventive maintenance, leading to better uptime and lower maintenance cost to operators. Reduced downtime could also lead to increased revenue for fleets as asset productivity increases.

        A key requirement for our fleet customers is knowing there is an available service infrastructure for the maintenance and repair of our vehicles. Nikola is building a strong network of providers, a robust preventive maintenance program, as well as several levels of service depending on the complexity and type of maintenance required.

        Nikola's plans with respect to the service and maintenance of its vehicles is expected to include the following:

    Electric vehicles have a system of sensors and controls that allow for precise monitoring of the vehicle and component operation performance. We will use this data to provide smart predictive maintenance, which will decrease downtime and costs by identifying a potential problem before it results in a breakdown.

    Nikola will have the ability to provide over the air updates and software fixes when the vehicle is stopped. This can significantly reduce the time for repair and improve uptime.

    In cases where a customer has their own maintenance infrastructure, we will identify and provide procedures for items that can be maintained at their shops. This could include procedures such as tire changes, wiper and windshield repair and brake servicing.

    In cases where the customer does not have a maintenance infrastructure or for more complex items, Nikola is leveraging its exclusive partner Thompson Caterpillar for maintenance and warranty work. Customers will have access to an already established network of 800 service stations as well as the ability to deploy a mobile service model. We will also support our partners

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      with technologies like augmented reality and web-enabled video to support technicians for very complex tasks or newly identified issues.

    If a vehicle requires maintenance of a complex system such as the fuel cell or battery, some of those items can be swapped or replaced with relative ease. This allows us to repair the downed component in the background and minimize vehicle downtime. We are also planning to develop a network of trained technicians that can travel to a customer or service partner site as necessary.

Customers and Backlog

Target Customers

        Nikola targets large Class 8 fleet customers with established sustainability goals, as well as fleets operating along dedicated routes that are located in regions offering strong incentives for developing hydrogen infrastructure and/or delivering zero-emission vehicles.

BEV Customer Strategy

        The Nikola Tre BEV truck is designed for short-haul applications, making it ideal for urban metro, inner-city, local delivery, port operations, and drayage applications. Nikola's goal in first targeting large corporates is to establish early market share and strengthen brand identity.

        For BEVs, we expect that most early U.S. sales will be in states such as California or New York where incentive programs already exist.

FCEV Customer Strategy

        For the Nikola Two FCEV, Nikola is planning to develop and construct initial hydrogen stations in Arizona and California. Therefore, early customers will be located in these states, or have extensive transportation routes within or between them.

        We will also target dedicated fleets with either nationwide or significant regional distribution networks and dedicated route networks (i.e., where trucks operate between two fixed points, e.g., production plant and distribution hub) along highly trafficked freight corridors. This strategy allows for gradual, strategic, and capital-efficient development of the hydrogen infrastructure required to support FCEV trucks in operation. Nikola will expand the FCEV offering to the entire Class 8 truck market once the fueling infrastructure is sufficiently developed.

Customer Backlog

        The current backlog of over 14,000 FCEVs non-binding reservations represents more than two years of production and over $10 billion of potential revenue. The FCEV reservation book was frozen in the fall of 2019 in order for Nikola to focus on negotiating with strategic fleet partners for launch. Nikola does not hold deposits related to the FCEV orderbook. Nikola believes a significant portion of the existing backlog will be converted to binding orders, once we have fixed production dates for FCEV trucks as the majority of order book represents large corporate customers with over 100 or more trucks reserved. Additionally, Nikola will likely require a significant deposit to secure final orders at least six months prior to delivery.

        To date, the orderbook for the Nikola Tre BEV has not been publicly opened. Instead, Nikola is working to select its initial BEV customers strategically and is in advanced dialogue with several large blue-chip customers. Nikola will likely select one or two launch customers to participate in fleet testing and the initial production of the Nikola Tre BEV.

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First Ever Zero-Emission Beer Run

        In November 2019, Nikola completed AB's first ever zero-emissions beer-run. The Nikola Two prototype FCEV delivered six pallets of Bud Light weighing approximately 15,000 pounds. The total load hauled, including the trailer, was approximately 27,000 pounds. The delivery was made on city streets and was a true commercial order where the beer was delivered to one of AB's distributors. AB's distributor then delivered the beer to the St. Louis Blues arena for consumption at that night's game.

Partnerships and Suppliers

        Nikola's vision will be realized through a revolutionary business model, groundbreaking R&D, disciplined execution, and world-class partnerships. Our business model is validated and supported by world-class strategic partnerships that significantly reduce execution risk, improve commercialization timeline, and provide a long-term competitive advantage. These world-class partners have accelerated our internal development, growth, and learning and have positioned us to revolutionize the transportation sector. We believe our partnerships help increase the depth and breadth of our competitive advantage as well.

        Our partnership philosophy is a recognition that the world's toughest challenges require bold solutions and a collaborative effort from multiple parties. Our goal is to provide zero-emission solutions to the transportation sector and to usher in next-generation grid solutions. With the help of our partners, we believe our chances of success are greatly improved. At Nikola, we are inspired by the knowledge that if we are successful, the whole world wins.

        The following contains a list of the world-class partners who have chosen to embark upon this journey with us. With their help, we plan to drive out emissions from the transportation sector.

Co-Development Partners

Iveco

        Iveco is a subsidiary of CNH Industrial, which designs, manufactures and distributes under the Iveco brand a wide range of light, medium and heavy commercial vehicles and off-road trucks with over 175,000 units sold annually. Iveco with its affiliates and joint ventures has significant manufacturing presence in Europe, as well as production facilities in Asia, Africa and Latin America, where it produces vehicles equipped with the latest technologies. Iveco can provide technical support in close proximity to their customers, the world over. Iveco is the European market leader in CNG/LNG alternative propulsion technologies for trucks.

        During fiscal year 2019, Legacy Nikola entered into an agreement with Iveco under which it will provide advisory services, including project coordination, drawings and documentation support, engineering support, vehicle integration, product validation support, purchasing, and the implementation of the Iveco World Class Manufacturing Methodology.

        Iveco and its affiliate, FPT Industrial, S.p.A., will provide engineering and manufacturing expertise to industrialize Nikola's BEV and FCEV trucks. In Europe, we established a joint venture with Iveco, and together, Nikola and Iveco are jointly developing cab-over BEV and hydrogen FCEV trucks for sale in the European market. In the U.S., Nikola will be responsible for manufacturing and production at our greenfield facility in Coolidge, Arizona.

    North America Engineering and Production Alliance:  Iveco is providing $100.0 million of engineering and production support and access to intellectual property valued at $50.0 million to help bring Nikola trucks to the North American market. This alliance significantly de-risks Nikola's operational execution by leveraging the expertise and capabilities of one of the world's

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      leading commercial vehicle manufacturers, and Nikola retains 100% of the North American business as a result.

    Europe Joint Venture:  The Nikola and Iveco 50/50 European joint venture will leverage Iveco's engineering expertise and existing production and sales/service footprint. This joint venture allows Nikola to accelerate penetration into the attractive European market while minimizing execution risk and optimizing capital allocation and Nikola's management bandwidth.

        In addition to the manufacturing and production expertise, one of the key benefits of this partnership is Nikola's ability to leverage Iveco's existing assortment of parts, thereby decreasing our purchasing expenses.

Bosch

        Bosch is a leading global supplier of technology and services to automotive, industrial, energy, building technology, and consumer end-markets with approximately 410,000 employees and approximately $90 billion in annual revenue.

        With Bosch's assistance, we have re-imagined the commercial vehicle powertrain from the ground up. Bosch's rotor and stator expertise has enabled Nikola to move quickly on an aggressive path to bring its electric truck e-Axles to market. By utilizing advanced simulation technologies throughout the development process, from system layout to testing and validation, Nikola's trucks will launch with one of the most optimized and state-of-the-art system designs and vehicle controls in the mobility sector.

Other Key Industry Partners

Hanwha

        Hanwha is a world leader in renewable energy and solar panel manufacturing and is partnering with Nikola to assist Nikola in obtaining clean energy for its hydrogen fueling network. Hanwha Q Cells is Nikola's exclusive solar panel provider (to third-party solar farm developers), which will help generate the clean electricity that is critical to the production of renewable hydrogen.

Nel

        Nikola has partnered with Nel for the buildout of Nikola's hydrogen stations. Nel directly manufactures the most advanced hydrogen station components, including the electrolyzers, dispensing systems, and compressors.

AVL

        AVL is one of the world's largest independent companies for the development, simulation and testing of powertrains.

EDAG

        EDAG is a global engineering service provider to the commercial vehicle industry. EDAG provides Nikola cab and chassis engineering services.

WABCO

        WABCO is a leading global supplier of braking control components and air management systems to medium- and heavy-duty trucks. WABCO provides Nikola with industry-leading safety technologies including electronic braking systems, as well as traction and stability control technologies.

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MERITOR

        Meritor is a leading global supplier of suspension and related components for heavy-duty trucks. Meritor provides Nikola with industry leading suspension technologies.

MAHLE

        Mahle is a leading global supplier of thermal management systems for heavy-duty trucks. Mahle provides Nikola with industry leading thermal management system technologies.

Manufacturing and Production

Leveraging Iveco's Excess Capacity for Initial Units

        We plan to produce and sell BEV and FCEV trucks in North America and Europe. Our joint venture with Iveco provides us with manufacturing capacity to build trucks for the U.S. market before the completion of our planned manufacturing plant in Coolidge, Arizona. Beginning in 2021, Nikola expects to utilize existing excess capacity at Iveco's Ulm, Germany plant to begin production of the Nikola Tre BEV for U.S. delivery. These first trucks will be imported into the U.S. to fulfill launch customer orders. Nikola will also build the Nikola Tre (both BEV and FCEV) for the EU market in Iveco's Ulm, Germany facility.

U.S. Production Facility

        In 2019, we acquired an approximately 400-acre parcel of real property in Coolidge, Arizona, which is located about 50 miles south of Phoenix, Arizona. The parcel is well suited for our planned greenfield manufacturing facility due to its proximity to the Interstate 10 highway, the Interstate 8 highway, and a railway spur that abuts the parcel.

        In the third quarter of 2020, we plan to begin construction of the initial phase of its approximately 1 million square foot battery-electric and hydrogen fuel cell electric truck manufacturing plant in Coolidge, Arizona.

Phase 1—Low Volume Production—up to 5,000 units per year:

    Begin construction mid-2020

    Warehouse space (approximately 100,000 - 150,000 square feet)

    Low-volume production capacity (approximately 5,000 units per year)

    Complete construction by the end of 2021

    Commissioning and start-up with Nikola Tre BEV in production in Q1 2022

Phase 2—High Volume Production—up to 50,000 units per year:

    Begin construction early-2021

    Complete manufacturing facility (approximately 1,000,000 square feet)

    High-volume production capacity (approximately 50,000 units per year)

    Complete construction by the end of 2022

    Commissioning and start-up with Nikola Two FCEV in production in Q1 2023

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European Production

        We expect to utilize Iveco's excess capacity for the foreseeable future, giving us the ability to produce 5,000 - 10,000 units per year. The JV may seek to build a greenfield manufacturing facility, once we have sufficient hydrogen station network density in Europe to facilitate sales over 10,000 units per year. We anticipate national and local grants and loan support may be available to help fund a greenfield development in Europe.

Development Timeline

        The development timeline for our BEV and FCEV trucks has accelerated upon entering a production alliance with Iveco. This partnership provides us the benefit of leveraging Iveco's expertise, and the newly updated Class 8 S-WAY truck platform in the design, development, testing and validation of the Nikola Tre. By focusing initial development efforts on the BEV truck, we were able accelerated our go-to-market strategy by approximately 1-2 years.

BEV Development

        Key milestones in the commercialization of the Nikola Tre BEV truck are as follows:

    Start of pilot builds in the first half of 2020

    Showcasing of the BEV truck at the IAA commercial vehicles conference in Hannover, Germany in Fall of 2020

    Start of production at Iveco's facility in Ulm, Germany for sale into the U.S. market in the second half of 2021

    Start of production at our facility in Coolidge, Arizona for sale into the U.S. market in Q1 2022

    Start of production of EU build at Iveco's facility in Ulm, Germany for sale into the EU market in Q1 2022

FCEV Development

        Key U.S. milestones in the commercialization of the Nikola Two FCEV (U.S.) and Nikola Tre FCEV (EU) trucks are as follows:

    Nikola Two FCEV Beta engineering and development began in Q1 2020

    Nikola Two FCEV start of pilot builds in Q3 2021

    Nikola Two FCEV Gamma builds commence in the second half of 2022—low volume production on Nikola's Coolidge, Arizona manufacturing facility

    Nikola Two FCEV start of production at our facility in Coolidge, Arizona for sale into the U.S. market in Q1 2023

    Nikola Tre FCEV start of production at Iveco's facility in Ulm, Germany for sale into the EU market in the second half of 2023

Nikola Badger and Nikola Powersports

        At this time, we are focused on the production of Class 8 heavy-duty vehicles and do not expect to develop production plans for the Badger unless we enter into a strategic partnership with an established OEM. We may choose to partner with another OEM, or enter into a joint venture to accelerate production of the Nikola Powersports product portfolio.

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Strategy

Management Team Focused on Execution and Efficient Capital Allocation

        Given the capital-intensive nature of our business model, we recognize efficient capital allocation will be an important determinant of our long-term success. Nikola's disciplined and creative approach to optimize capital allocation will allow us to execute on our ambitious business plan.

        Capital optimization measures include:

    Nikola's strategic partnerships with world-class automotive suppliers to develop leading next-generation powertrain technology. Nikola's ability to leverage expertise from the most respected OEM and top-tier supplier brands has allowed us to accelerate the production of our product portfolio while minimizing development cost. Our joint venture with Iveco allows us to manufacture trucks, gain market share, and start generating revenue prior to building a greenfield manufacturing facility by utilizing Iveco's excess capacity.

    Nikola's strategy to build its manufacturing facility in two phases.  Our multi-phased approach to building our greenfield production plant in the U.S. allows us to produce up to 5,000 units a year, with minimal investment, allowing us to generate revenue one full year before the completion of our fully scaled manufacturing facility.

    Nikola's hydrogen station roll-out plan.  Our unique hydrogen station roll-out plan allows us to build stations in coordination with FCEV truck deliveries, providing Nikola with revenue and cash flow, which can be used to minimize the amount of outside capital needed during the buildout of our hydrogen station network.

Capture Early Mover Advantage

        Given the speed at which the BEV and FCEV truck market is transforming, Nikola has accelerated the production of our BEV truck to be early to market and expects to generate revenue by 2021. By being one of the first movers in the North American market, Nikola expects to capture a large percentage of customers and any applicable zero-emission vehicle related incentives, including incentives available to those that are early adopters of BEV technology.

Maintain Strategic Partnership Focus to Drive Execution

        Nikola's position as a pioneer in the market has attracted global leaders across Nikola's supply chain, creating an extensive network for us to leverage. Nikola's key partners include Iveco, AVL, Meritor, Bosch, WABCO, EDAG, Mahle, Nel, and others. Nikola believes the expertise and know-how of these partners broaden Nikola's executional capability, reduce time to market, and solidify Nikola's technological leadership. In addition, these leading suppliers and partners will also allow us to manufacture and deliver Nikola's products with high quality standards. For example, Nikola's partnership with Iveco provides us with flexibility, scalability, and speed to market, while product design, supply chain management, and quality control are managed by Nikola's engineering team. Additionally, this partnership has allowed us to enter the European market in a capital efficient manner, and years earlier than we originally anticipated. By entering into strategic partnerships, Nikola can reduce execution risk and increase speed to market, which provides a critical advantage as Nikola looks to execute upon our vision.

Leverage Hydrogen Station Dynamics to Transition Energy Future

        Nikola believes that the hydrogen station network, and the production and distribution of hydrogen, will provide a competitive advantage that drives sustained profitability and stockholder value over the long term. Nikola believes that hydrogen-powered Class 8 trucks will be the product of choice

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in the medium- and long-haul markets. As OEMs begin to widely adopt hydrogen fuel cell technology, and there will be a greater need for hydrogen distribution along key transportation routes, Nikola will be in a strong position to be the leading provider of hydrogen to commercial transportation companies. By owning the world's leading hydrogen station network, we anticipate playing a major role in the energy transformation of the future.

Continued Focus on Technological Innovations

        Nikola intends to continue to attract top talent to further enhance Nikola's talent pool and drive technological innovations. Additionally, Nikola plans to further enhance its battery and fuel cell technology to achieve better performance and shorten charging and fueling time, while increasing the range of its product portfolio.

Future Market Opportunities

Autonomous Driving

        Nikola's trucks are designed with autonomous driving in mind, which may provide revenue to Nikola in the future as well as potential cost savings to customers. All Nikola products will be built with a space claim for an autonomous hardware suite. Given the nature of our dedicated route customers, operating point-to-point interstate routes between our hydrogen stations, we believe Nikola's trucks provide the perfect testing environment for further development and advancement of autonomous technology. When the various regulatory agencies have approved some level of autonomy, we will consider a partnership with one of the autonomous software leaders to deploy its technology on our vehicles.

        Autonomous driving represents significant incremental revenue opportunities for Nikola as we could charge customers an additional fee for each mile driven autonomously. According to the U.S. Federal Motor Carrier Safety Association, in the U.S., truck drivers face total hours restrictions that do not allow them to operate their vehicles more than 11 hours a day. In the EU, drivers are generally restricted to 9 hours a day, according to the European Parliament. Autonomous driving will help achieve higher utilization by removing the limitations on how long a truck driver can operate.

        In addition to the incremental revenue opportunity for Nikola and the potential cost savings available to fleet operators as a result of autonomous technology, we believe autonomy will significantly improve safety and asset utilization which would increase the revenue generating potential for both Nikola and our customers.

Energy Optimization

        The global energy mix is in transition with more than 60% of new capacity coming from renewable energy sources, based on the Global Market Outlook for Solar Power provided by SolarPower Europe. The transition away from fossil fuel-based energy generation, such as coal, natural gas, etc., is beneficial to the environment, but is not without its challenges. As renewable energy makes up a greater share of the energy mix, daily energy production becomes more volatile, and the energy production curve becomes less predictable.

        With fossil-fuel based energy, demand peaks are typically addressed by burning natural gas in turbine-based power plants. With renewable energy, one does not have similar control over energy production, and instead the production curve is determined based on the daily solar cycle and weather patterns, which means daily energy production becomes more volatile. This increased volatility creates a distorted energy production curve, resulting in both predictable (e.g., the sun comes out every day) and unpredictable (e.g., the wind blows stronger on some days compared to others) surplus energy

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production capacity. This surplus energy typically goes un