424B3 1 prospectussupplementno7433.htm 424B3 Document

Filed pursuant to Rule 424(b)(3)
Registration No. 333-239185
PROSPECTUS SUPPLEMENT NO. 74
(to Prospectus dated July 17, 2020)
 
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Nikola Corporation
Up to 53,390,000 Shares of Common Stock
Up to 23,890,000 Shares of Common Stock Issuable Upon Exercise of Warrants
 
This prospectus supplement supplements the prospectus dated July 17, 2020 (the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-239185). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 2, 2023 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.
The Prospectus and this prospectus supplement relates to the issuance by us of up to an aggregate of up to 23,890,000 shares of our common stock, $0.0001 par value per share (“Common Stock”), which consists of (i) up to 890,000 shares of Common Stock that are issuable upon the exercise of 890,000 warrants (the “Private Warrants”) originally issued in a private placement in connection with the initial public offering of VectoIQ and (ii) up to 23,000,000 shares of Common Stock that are issuable upon the exercise of 23,000,000 warrants (the “Public Warrants” and, together with the Private Warrants, the “Warrants”) originally issued in the initial public offering of VectoIQ.
The Prospectus and this prospectus supplement also relate to the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”) of (i) up to 53,390,000 shares of Common Stock (including up to 890,000 shares of Common Stock that may be issued upon exercise of the Private Warrants) and (ii) up to 890,000 Private Warrants.
Our Common Stock is listed on the Nasdaq Global Select Market under the symbol “NKLA”. On November 1, 2023, the closing price of our Common Stock was $1.05.
This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.
See the section entitled “Risk Factors” beginning on page 7 of the 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 supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is November 2, 2023.




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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023

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

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

Delaware82-4151153
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
4141 E Broadway Road
Phoenix, AZ
85040
(Address of principal executive offices)(Zip Code)
(480) 666-1038
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par value per shareNKLAThe Nasdaq Stock Market LLC

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

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





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

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

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

As of October 30, 2023, there were 1,016,409,878 shares of the registrant’s common stock outstanding.




NIKOLA CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
1



Summary of Risk Factors
Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company.
We are an early stage company with a history of losses, expect to incur significant expenses and continuing losses for the foreseeable future, and there is substantial doubt that we will have sufficient funds to satisfy our obligations through the next 12 months from the date of this report.
We may be unable to adequately control the costs associated with our operations.
We need to raise additional capital, which may not be available to us when we need it. If we cannot raise additional capital when needed, our operations and prospects will be negatively 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.
Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
Our future success is dependent upon the trucking industry's willingness to adopt hydrogen-electric ("FCEV") trucks and battery-electric ("BEV") trucks and timing of the adoption.
If we fail to manage our future growth effectively, we may not be able to market and sell our vehicles successfully.
We may face legal challenges in one or more states attempting to sell directly to customers, which could materially and adversely affect our costs.
We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.
Product recalls have and may in the future materially and adversely affect our business prospects, operating results and financial condition.
Our success will depend on our ability to economically manufacture our trucks at scale and develop hydrogen fueling infrastructure to meet our customers’ business needs, and our ability to develop and manufacture trucks of sufficient quality and appeal to customers on schedule and at scale is unproven.
We may experience significant delays in the design, manufacture and financing of our trucks, which could harm our business and prospects.
Increases in costs, disruption of supply or shortage of raw materials and delays in the manufacturing and servicing of battery-packs for our BEV and FCEV trucks could harm our business.
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 FCEV trucks. In addition, we may not be able to open fueling stations in certain states.
We may not be able to produce or source the hydrogen needed to establish our planned hydrogen fueling stations, or may not be able to produce or source the hydrogen needed at competitive prices.
Reservations for the purchase or lease for our trucks are cancellable.
Collaboration with strategic partners is subject to risks.
2


We are or may be subject to risks associated with strategic alliances or acquisitions.
We may face challenges related to perceptions of safety for commercial electric vehicles, especially if adverse events or accidents occur that are linked to the quality or safety of commercial electric vehicles.
We identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial results.
Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
3


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NIKOLA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30,December 31,
20232022
(Unaudited)
Assets
Current assets
Cash and cash equivalents$362,850 $225,850 
Restricted cash and cash equivalents1,224 10,600 
Accounts receivable, net10,707 31,638 
Inventory56,958 111,870 
Prepaid expenses and other current assets38,978 27,943 
Assets subject to assignment for the benefit of creditors, current portion— 29,025 
Total current assets470,717 436,926 
Restricted cash and cash equivalents28,026 77,459 
Long-term deposits16,681 34,279 
Property, plant and equipment, net469,851 417,785 
Intangible assets, net87,712 92,473 
Investment in affiliates58,193 62,816 
Goodwill5,238 6,688 
Other assets11,868 8,107 
Assets subject to assignment for the benefit of creditors— 100,125 
Total assets$1,148,286 $1,236,658 
Liabilities and stockholders' equity
Current liabilities
Accounts payable$48,809 $93,242 
Accrued expenses and other current liabilities205,155 179,571 
Debt and finance lease liabilities, current (including $32.4 million and $50.0 million measured at fair value, respectively)
39,177 61,675 
Liabilities subject to assignment for the benefit of creditors, current portion— 49,102 
Total current liabilities293,141 383,590 
Long-term debt and finance lease liabilities, net of current portion232,371 290,128 
Operating lease liabilities5,023 6,091 
Other long-term liabilities14,168 6,684 
Deferred tax liabilities, net15 15 
Liabilities subject to assignment for the benefit of creditors— 23,671 
Total liabilities544,718 710,179 
Commitments and contingencies (Note 12)
Stockholders' equity
Preferred stock, $0.0001 par value, 150,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022
— — 
Common stock, $0.0001 par value, 1,600,000,000 and 800,000,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively, 992,033,979 and 512,935,485 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
99 51 
Additional paid-in capital3,520,890 2,562,855 
Accumulated deficit(2,917,473)(2,034,850)
Accumulated other comprehensive loss52 (1,577)
Total stockholders' equity603,568 526,479 
Total liabilities and stockholders' equity$1,148,286 $1,236,658 
See accompanying notes to the consolidated financial statements.
4


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenues:
Truck sales$(2,368)$23,853 $19,693 $41,236 
Service and other 636 388 4,614 3,026 
Total revenues(1,732)24,241 24,307 44,262 
Cost of revenues:
Truck sales122,679 54,080 195,902 100,861 
Service and other 1,092 330 4,236 2,396 
Total cost of revenues123,771 54,410 200,138 103,257 
Gross loss(125,503)(30,169)(175,831)(58,995)
Operating expenses:
Research and development41,966 66,683 168,286 204,346 
Selling, general, and administrative57,982 132,865 159,443 289,916 
Loss on supplier deposits716 — 18,433 — 
Total operating expenses100,664 199,548 346,162 494,262 
Loss from operations(226,167)(229,717)(521,993)(553,257)
Other income (expense):
Interest expense, net(52,680)(7,735)(71,262)(10,754)
Revaluation of warrant liability— 586 315 3,493 
Gain on divestiture of affiliate— — 70,849 — 
Loss on debt extinguishment— — (20,362)— 
Other income (expense), net(146,654)2,617 (152,284)4,423 
Loss before income taxes and equity in net loss of affiliates(425,501)(234,249)(694,737)(556,095)
Income tax expense
Loss before equity in net loss of affiliates(425,502)(234,250)(694,738)(556,098)
Equity in net loss of affiliates(262)(1,984)(16,287)(6,074)
Net loss from continuing operations(425,764)(236,234)(711,025)(562,172)
Discontinued operations:
Loss from discontinued operations— — (76,726)— 
Loss from deconsolidation of discontinued operations— — (24,935)— 
Net loss from discontinued operations— — (101,661)— 
Net loss$(425,764)$(236,234)$(812,686)$(562,172)
Basic and diluted net loss per share:
Net loss from continuing operations$(0.50)$(0.54)$(1.01)$(1.32)
Net loss from discontinued operations$— $— $(0.14)$— 
Net loss$(0.50)$(0.54)$(1.15)$(1.32)
Weighted-average shares outstanding, basic and diluted857,213,992 438,416,393 706,325,212 426,382,736 
See accompanying notes to the consolidated financial statements.
5


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net loss$(425,764)$(236,234)$(812,686)$(562,172)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax145 (1,237)1,629 (2,226)
Comprehensive loss$(425,619)$(237,471)$(811,057)$(564,398)
See accompanying notes to the consolidated financial statements.
6


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Three Months Ended September 30, 2023
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmount
Balance as of June 30, 2023769,300,317 $77 $2,944,504 $(2,421,772)$(93)$522,716 
Exercise of stock options5,967,257 6,352 — — 6,353 
Issuance of shares for RSU awards3,143,110 — — — — — 
Common stock issued under Equity Distribution Agreement, net27,662,880 53,136 — — 53,139 
Issuance of common stock upon conversion of Senior Convertible Notes
134,101,626 13 139,237 — — 139,250 
Common stock issued for conversion of April 2023 Toggle Convertible Notes
72,458,789 115,145 — — 115,152 
Common stock received for contingent stock consideration
(20,600,000)(2)— (69,937)— (69,939)
Reclassification of conversion features embedded in Toggle Convertible Notes to equity
— — 241,851 — — 241,851 
Reclassification of share-based payment awards from liability to equity
— — 20,992 — — 20,992 
Reclassification of share-based payment awards from equity to liability
— — (8,395)— — (8,395)
Stock-based compensation— — 8,068 — — 8,068 
Net loss— — — (425,764)— (425,764)
Other comprehensive loss    145 145 
Balance as of September 30, 2023992,033,979 $99 $3,520,890 $(2,917,473)$52 $603,568 

See accompanying notes to the consolidated financial statements.
7


Nine Months Ended September 30, 2023
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
SharesAmount
Balance as of December 31, 2022512,935,485 $51 $2,562,855 $(2,034,850)$(1,577)$526,479 
Exercise of stock options6,723,629 7,154 — — 7,155 
Issuance of shares for RSU awards10,915,751 — — — — — 
Common stock issued under Tumim Purchase Agreements32,211,777 67,584 — — 67,587 
Common stock issued under Equity Distribution Agreement, net66,690,443 115,586 — — 115,593 
Issuance of common stock upon conversion of Senior Convertible Notes
221,412,391 23 246,408 — — 246,431 
Common stock issued in public offering29,910,715 32,241 — — 32,244 
Common stock issued in registered direct offering59,374,999 63,150 — — 63,156 
Common stock issued for conversion of April 2023 Toggle Convertible Notes
72,458,789 115,145 — — 115,152 
Common stock received for contingent stock consideration
(20,600,000)(2)— (69,937)— (69,939)
Reclassification of conversion features embedded in Toggle Convertible Notes to equity
— — 241,851 — — 241,851 
Reclassification of share-based payment awards from liability to equity
— — 20,992 — — 20,992 
Reclassification of share-based payment awards from equity to liability
— — (10,401)— — (10,401)
Stock-based compensation— — 58,325 — — 58,325 
Net loss— — — (812,686)— (812,686)
Other comprehensive loss    1,629 1,629 
Balance as of September 30, 2023992,033,979 $99 $3,520,890 $(2,917,473)$52 $603,568 
See accompanying notes to the consolidated financial statements.
8


Three Months Ended September 30, 2022
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders'
Equity
SharesAmount
Balance as of June 30, 2022433,475,084 $43 $2,176,945 $(1,576,550)$(1,187)$599,251 
Exercise of stock options1,296,206 1,404 — — 1,405 
Issuance of shares for RSU awards1,425,182 — — — — — 
Common stock issued under Equity Distribution Agreement, net19,009,227 97,997 — — 97,999 
Stock-based compensation— — 102,845 — — 102,845 
Net loss— — — (236,234)— (236,234)
Other comprehensive loss— — — — (1,237)(1,237)
Balance as of September 30, 2022455,205,699 $46 $2,379,191 $(1,812,784)$(2,424)$564,029 

Nine Months Ended September 30, 2022
Common StockAdditional Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total Stockholders'
Equity
SharesAmount
Balance as of December 31, 2021413,340,550 $41 $1,944,341 $(1,250,612)$(198)$693,572 
Exercise of stock options1,581,791 1,969 — — 1,970 
Issuance of shares for RSU awards4,025,887 — — — — — 
Common stock issued under Tumim Purchase Agreements17,248,244 123,670 — — 123,672 
Common stock issued under Equity Distribution Agreement, net19,009,227 97,997 — — 97,999 
Stock-based compensation— — 211,214 — — 211,214 
Net loss— — — (562,172)— (562,172)
Other comprehensive loss— — — — (2,226)(2,226)
Balance as of September 30, 2022455,205,699 $46 $2,379,191 $(1,812,784)$(2,424)$564,029 
See accompanying notes to the consolidated financial statements.
9


NIKOLA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
20232022
Cash flows from operating activities
Net loss$(812,686)$(562,172)
Less: Loss from discontinued operations(101,661)— 
Loss from continuing operations(711,025)(562,172)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation and amortization28,758 16,472 
Stock-based compensation68,916 211,214 
Equity in net loss of affiliates16,287 6,074 
Revaluation of financial instruments195,132 (94)
Revaluation of contingent stock consideration(43,981)— 
Inventory write-downs64,500 16,617 
Non-cash interest expense72,846 8,890 
Loss on supplier deposits18,433 — 
Gain on divestiture of affiliate(70,849)— 
Loss on debt extinguishment20,362 — 
Other non-cash activity3,888 476 
Changes in operating assets and liabilities:
Accounts receivable, net20,932 (37,662)
Inventory(9,983)(97,952)
Prepaid expenses and other current assets(48,332)(10,371)
Other assets(2,384)(912)
Accounts payable, accrued expenses and other current liabilities(1,672)25,128 
Long-term deposits(1,377)(8,356)
Operating lease liabilities(1,191)(416)
Other long-term liabilities2,316 1,605 
Net cash used in operating activities(378,424)(431,459)
Cash flows from investing activities
Purchases and deposits of property, plant and equipment(108,409)(118,436)
Divestiture of affiliate35,000 — 
Proceeds from the sale of assets
20,742 18 
Payments to Assignee(2,725)— 
Investments in affiliates(250)(23,027)
Issuance of senior secured note receivable and prepaid acquisition-related consideration— (21,910)
Settlement of Second Price Differential— (6,588)
Net cash used in investing activities(55,642)(169,943)
See accompanying notes to the consolidated financial statements.
10


Cash flows from financing activities
Proceeds from the exercise of stock options7,393 1,645 
Proceeds from issuance of shares under the Tumim Purchase Agreements67,587 123,672 
Proceeds from registered direct offering, net of underwriter's discount
63,456 — 
Proceeds from public offering, net of underwriter's discount
32,244 — 
Proceeds from issuance of common stock under Equity Distribution Agreement, net of commissions paid115,027 100,512 
Proceeds from issuance of convertible notes, net of discount and issuance costs217,075 183,504 
Proceeds from issuance of Collateralized Promissory Notes— 54,000 
Proceeds from issuance of financing obligation, net of issuance costs53,548 44,007 
Proceeds from insurance premium financing5,223 6,637 
Repayment of debt and promissory notes(45,287)(28,125)
Payments on insurance premium financing(3,550)(2,635)
Payments on finance lease liabilities and financing obligation(459)(266)
Net cash provided by financing activities512,257 482,951 
Net increase (decrease) in cash and cash equivalents, including restricted cash and cash equivalents78,191 (118,451)
Cash and cash equivalents, including restricted cash and cash equivalents, beginning of period313,909 522,241 
Cash and cash equivalents, including restricted cash and cash equivalents, end of period$392,100 $403,790 
Cash flows from discontinued operations:
Operating activities(4,964)— 
Investing activities(1,804) 
Financing activities(572)— 
Net cash used in discontinued operations$(7,340)$ 
Supplementary cash flow disclosures:
Cash paid for interest$5,561 $2,643 
Cash interest received$7,153 $257 
Supplementary disclosures for noncash investing and financing activities:
Conversion of Senior Convertible Notes into common stock
$246,431 $— 
Reclassification of conversion features embedded in Toggle Convertible Notes to equity
$241,851 $— 
Conversion of April 2023 Toggle Convertible Notes
$115,152 $— 
Contingent stock consideration for divestiture of affiliate$25,956 $— 
Embedded derivative liability bifurcated from April 2023 Toggle Convertible Notes$21,180 $— 
Reclassification from liability to equity for certain share-based awards
$20,992 $— 
PIK interest$16,263 $7,284 
Purchases of property, plant and equipment included in liabilities$13,551 $28,912 
Leased assets obtained in exchange for new finance lease liabilities$10,982 $698 
Reclassification from equity to liability for certain share-based awards$10,401 $— 
Accrued commissions under Equity Distribution Agreement$1,114 $2,513 
Accrued issuance costs
$300 $— 
Embedded derivative asset bifurcated from June 2022 Toggle Convertible Notes$— $1,500 
Stock option proceeds receivable$— $325 
Accrued debt issuance costs$— $311 
Accrued deferred issuance costs$— $— 
See accompanying notes to the consolidated financial statements.
11

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.BASIS OF PRESENTATION
(a)Overview
Nikola Corporation (‘‘Nikola’’ or the ‘‘Company’’) is a designer and manufacturer of heavy-duty commercial battery-electric and hydrogen-electric vehicles and energy infrastructure solutions.
(b)Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company's financial position, results of operations and cash flows for the periods indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as amended.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated.
Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes. All dollar amounts are in thousands, unless otherwise noted.
Prior to the start of production for the Tre BEV trucks late in the first quarter of 2022, pre-production activities, including manufacturing readiness, process validation, prototype builds, freight, inventory write-downs, and operations of the Company's manufacturing facility in Coolidge, Arizona were recorded as research and development activities on the Company's consolidated statements of operations. Commensurate with the start of production, manufacturing costs, including labor and overhead, as well as inventory-related expenses related to the Tre BEV trucks, and related facility costs, are recorded in cost of revenues beginning in the second quarter of 2022.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
On October 14, 2022, the Company completed the acquisition of all of the outstanding common stock of Romeo Power, Inc. (“Romeo”) (the "Romeo Acquisition") for a total purchase price of $78.6 million. See Note 3, Business Combination. On June 30, 2023, pursuant to a general assignment (the “Assignment”), the Company transferred ownership of all of Romeo’s right, title and interest in and to all of its tangible and intangible assets, subject to certain agreed upon exclusions (collectively, the “Assets”) to SG Service Co., LLC, in its sole and limited capacity as Assignee for the Benefit of Creditors of Romeo (“Assignee”), and also designated Assignee to act as the assignee for the benefit of creditors of Romeo, such that Assignee succeeded to all of Romeo’s right, title and interest in and to the Assets. The results of operations of Romeo are reported as discontinued operations for the three and nine months ended September 30, 2023. See Note 10, Deconsolidation of Subsidiary, for additional information.
All references made to financial data in this Quarterly Report on Form 10-Q are to the Company's continuing operations, unless otherwise specifically noted.
(c)Funding Risks and Going Concern
In accordance with Accounting Standards Codification ("ASC") 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASC 205-40”) the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
As an early stage growth company, the Company's ability to access capital is critical. Until the Company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the Company will need to raise
12

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
additional capital. Additional stock financing may not be available on favorable terms, or at all, and would be dilutive to current stockholders. Debt financing, if available, may involve restrictive covenants and dilutive financing instruments.
The Company has secured and intends to employ various strategies to obtain the required funding for future operations such as continuing to access capital through the amended and restated equity distribution agreement with Citigroup Global Markets Inc. ("Citi"), as sales agent, see Note 8, Capital Structure. However, the ability to access the amended and restated equity distribution agreement is dependent on common stock trading volumes and the market price of the Company’s common stock, which cannot be assured, and as a result cannot be included as sources of liquidity for the Company’s ASC 205-40 analysis.
If capital is not available to the Company when, and in the amounts needed, the Company would be required to delay, scale back, or abandon some or all of its development programs and operations, which could materially harm the Company’s business, financial condition and results of operations. The result of the Company’s ASC 205-40 analysis, due to uncertainties discussed above, is that there is substantial doubt about the Company’s ability to continue as a going concern through the next twelve months from the date of issuance of these consolidated financial statements.
These financial statements have been prepared by management in accordance with GAAP and this basis assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. These financial statements do not include any adjustments that may result from the outcome of this uncertainty.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Cash, Cash Equivalents and Restricted Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Additionally, the Company considers investments in money market funds to be cash equivalents. As of September 30, 2023 and December 31, 2022, the Company had $362.9 million and $225.9 million of cash and cash equivalents, respectively. Cash equivalents included $14.3 million and zero of highly liquid investments as of September 30, 2023 and December 31, 2022, respectively.
As of September 30, 2023 and December 31, 2022, the Company had $29.3 million and $88.1 million, respectively, in current and non-current restricted cash. Restricted cash represents cash that is restricted as to withdrawal or usage and primarily consists of securitization of the Company's letters of credit, leases, and debt. See Note 7, Debt and Finance Lease Liabilities, for additional details.
The reconciliation of cash and cash equivalents and restricted cash and cash equivalents to amounts presented in the consolidated statements of cash flows are as follows:
As of
September 30, 2023December 31, 2022September 30, 2022
Cash and cash equivalents$362,850 $225,850 $315,731 
Restricted cash and cash equivalents – current1,224 10,600 600 
Restricted cash and cash equivalents – non-current28,026 77,459 87,459 
Cash, cash equivalents and restricted cash and cash equivalents$392,100 $313,909 $403,790 
13

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(b)Fair Value of Financial Instruments
The carrying value and fair value of the Company’s financial instruments are as follows:
As of September 30, 2023
Level 1Level 2Level 3Total
Assets
Cash equivalents – money market
$14,339 $— $— $14,339 
Derivative asset
— — 124 124 
Liabilities
Warrant liability$— $— $65 $65 
Senior Convertible Notes
— — 32,381 32,381 
As of December 31, 2022
Level 1Level 2Level 3Total
Assets
Derivative asset
$— $— $170 $170 
Liabilities
Warrant liability
$— $— $380 $380 
Senior Convertible Notes
— — 50,000 50,000 
Put Premium Derivative Asset
In June 2022, the Company completed a private placement of $200.0 million aggregate principal amount of unsecured 8.00% / 11.00% convertible senior paid in kind ("PIK") toggle notes (the “June 2022 Toggle Convertible Notes”). In conjunction with the issuance of the June 2022 Toggle Convertible Notes, the Company entered into a premium letter agreement (the "Put Premium") with the purchasers (the "Note Purchasers") of the June 2022 Toggle Convertible Notes which requires the Note Purchasers to pay $9.0 million to the Company if during the period through the date that is thirty months after the closing date of the private placement of June 2022 Toggle Convertible Notes, the last reported sale price of the Company's common stock has been at least $20.00 for at least 20 trading days during any consecutive 40 trading day period.
The Put Premium was determined to be an embedded derivative asset and met the criteria to be separated from the host contract and carried at fair value. The derivative is measured both initially and in subsequent periods at fair value, with changes in fair value recognized in other income (expense), net on the consolidated statements of operations. The fair value of the derivative asset is included in other assets on the consolidated balance sheets. The change in fair value of the derivative asset was as follows:
Three months Ended
Nine Months Ended
September 30, 2022September 30, 2022
Estimated fair value - beginning of period$800 $— 
Recognition of derivative asset
— 1,500 
Change in fair value(300)(1,000)
Estimated fair value - end of period
$500 $500 
The fair value of the derivative asset was immaterial as of September 30, 2023 and December 31, 2022.
14

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Derivative Liabilities
Embedded conversion features derivative liability
On April 11, 2023, the Company completed an exchange (the "Exchange") of $100.0 million aggregate principal amount of the Company's existing June 2022 Toggle Convertible Notes for the issuance of $100.0 million aggregate principal amount of 8.00% / 11.00% Series B convertible senior PIK toggle notes (the "April 2023 Toggle Convertible Notes"). The April 2023 Toggle Convertible Notes were issued pursuant to an indenture dated as of April 11, 2023 (the "April 2023 Toggle Convertible Notes Indenture").
Additionally, in June 2023, the Company completed a private placement of $11.0 million aggregate principal amount of unsecured 8.00% / 8.00% Series C convertible senior PIK toggle notes (the "June 2023 Toggle Convertible Notes"). The June 2023 Toggle Convertible Notes were issued pursuant to an indenture dated as of June 23, 2023 (the "June 2023 Toggle Convertible Notes Indenture").
The April 2023 Toggle Convertible Notes Indenture and June 2023 Toggle Convertible Notes Indenture, among other things, limits conversion of the notes in certain instances until the earlier to occur of (x) an increase in the number of authorized shares in an amount sufficient to, among other things, allow for the issuance of common stock underlying the notes and (y) October 11, 2023, and provides that the Company shall elect to settle conversions of the notes in cash until such increase in the number of authorized shares has occurred, and the Company obtains the stockholder approval contemplated by Rule 5635 of the Nasdaq listing rules ("Nasdaq Rule").
The conversion features embedded to the April 2023 Toggle Convertible Notes were bifurcated and recognized separately at fair value due to the temporary requirement to settle conversions in cash, in certain instances, until stockholder approval as contemplated by Nasdaq Rule 5635 is obtained to increase the number of authorized shares. Upon the Exchange, the Company recognized $21.2 million for the embedded conversion features as a derivative liability within accrued expenses and other current liabilities on the consolidated balance sheets.
During the third quarter of 2023, and commensurate with the approval to increase the number of authorized shares on August 3, 2023, the Company reassessed the conversion features bifurcated from the April 2023 Toggle Convertible Notes and June 2023 Toggle Convertible Notes. As of August 3, 2023, the conversion features met all equity classification criteria, and as a result, the derivative liabilities were remeasured as of August 3, 2023, and reclassified from accrued expenses and other current liabilities to additional paid-in capital on the consolidated balance sheets. Changes in the fair value of the derivative liabilities are recorded within other income (expense) on the consolidated statements of operations.
During the three and nine months ended September 30, 2023, the change in fair value of the derivative liabilities was as follows:
Three months Ended
Nine Months Ended
September 30, 2023September 30, 2023
Estimated fair value - beginning of period
$29,340 $— 
Recognition of derivative liability
— 21,180 
Change in estimated fair value212,511 220,671 
Reclassification to equity
(241,851)(241,851)
Estimated fair value - end of period
$— $— 
15

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The fair value of the conversion features were estimated by applying a with-and-without approach to a binomial lattice model. The following reflects the ranges of inputs and assumptions used:
For the three months ended September 30, 2023
For the three months ended June 30, 2023
Stock price
$1.09 - $3.40
$1.09 - $1.38
Conversion price
$1.46 - $1.48
$1.46
Risk free rate
3.76% - 4.58%
3.76% - 4.49%
Equity volatility
47.50% - 60%
60% - 70%
Expected dividend yield
0%
—%
Credit spread
14.9% - 20.1%
16.4% - 17.2%
Put right and price differential derivative liabilities
On September 13, 2021, the Company entered into an Amended Membership Interest Purchase Agreement (the "Amended MIPA") with Wabash Valley Resources ("WVR") and the sellers party thereto (each, a "Seller"), pursuant to which the Company was subject to the first price differential and second price differential (together the "Price Differential").
The Price Differential was a freestanding financial instrument and accounted for as a derivative liability. The derivative liability was remeasured at each reporting period with changes in its fair value recorded in other income (expense), net on the consolidated statements of operations. The first price differential was settled in the fourth quarter of 2021. The second price differential was settled in the third quarter of 2022 for $6.6 million, eliminating the Company's derivative liability balance as of September 30, 2022. During the three and nine months ended September 30, 2022, the change in fair value of the derivative liability was as follows:
Three Months EndedNine Months Ended
September 30, 2022September 30, 2022
Estimated fair value - beginning of the period$6,588 $4,189 
Change in estimated fair value— 2,399 
Settlement of second price differential(6,588)(6,588)
Estimated fair value - end of the period$— $— 
Liability Classified Awards
During the second and third quarters of 2023, the Company reclassified certain share-based payment awards from equity to liabilities that would require cash settlement upon distribution or exercise. The fair value of these awards was determined based on the closing price of the Company's stock or a Black-Scholes model as of the measurement date and as of the end of each reporting period. Changes in the fair value of the liabilities were recognized as compensation cost over the requisite service period.
As of August 3, 2023, the share-based payment awards classified as liabilities no longer required cash settlement upon distribution or exercise. The Company reclassified the share-based payment awards into additional paid in capital on the
16

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Company's consolidated balance sheets at their fair value. Changes in the fair value of liability classified awards during the three and nine months ended September 30, 2023, were as follows:

Three Months EndedNine Months Ended
September 30, 2023September 30, 2023
Liability classified awards - beginning of the period
$2,006 $— 
Reclassification of share-based payment awards to liability
8,395 10,401 
Change in fair value
10,591 10,591 
Reclassification of share-based payment awards to equity
(20,992)(20,992)
Liability classified awards - end of the period
$— $— 
(c)Revenue Recognition
Truck sales
Truck sales consist of revenue recognized on the sales of the Company's trucks. The sale of a truck is generally recognized as a single performance obligation at the point in time when control is transferred to the customer (dealers). Control is deemed transferred when the product is picked up by the carrier and the customer (dealer) can direct the product's use and obtain substantially all of the remaining benefits from the product. The Company may offer certain after-market upgrades at the request of the dealers. If a contract contains more than one distinct performance obligation, the transaction price is allocated to each performance obligation based on the standalone selling price of each performance obligation. The Company does not offer returns on truck sales. The Company may be required to repurchase dealer inventory in the event a dealer agreement is terminated.
Revenue is recognized based on the transaction price, which is measured as the amount of consideration that the Company expects to receive in exchange for transferring the product pursuant to the terms of the contract with its customer. The transaction price may be adjusted, if applicable, for variable consideration, such as customer rebates and financing costs on floor plan arrangements, which requires the Company to make estimates for the portion of these allowances that have yet to be credited to customers.
Payments for trucks sold are made in accordance with the Company's customary payment terms. The Company has elected an accounting policy whereby the Company does not adjust the promised amount of consideration for the effects of a significant financing component because, at contract inception, the Company expects the period between the time when the Company transfers a promised good or service to the customer and the time when the customer pays for that good or service will be one year or less. Sales tax collected from customers is not considered revenue and is accrued until remitted to the taxing authorities. Shipping and handling activities occur after the customer has obtained control of the product, thus the Company has elected to account for those expenses as fulfillment costs in cost of revenues, rather than an additional promised service.
Services and other
Services and other revenues primarily consists of sales of charging products, service parts, after-market parts, and hydrogen. Sales are generally recognized as a single performance obligation at the point in time when control is transferred to the customer. Control is deemed transferred when the product is delivered to the customer and the customer can direct the product's use and obtain substantially all of the remaining benefits from the asset. The Company does not offer sales returns on products. Payment for products sold are made in accordance with the Company's customary payment terms and the Company's contracts do not have significant financing components. The Company has elected to exclude sales taxes from the measurement of the transaction price.
(d)Product Warranties and Recall Campaigns
Product warranty costs are recognized upon transfer of control of trucks to dealers, and are estimated based on factors including the length of the warranty, product costs, supplier warranties, and product failure rates. Warranty reserves are reviewed and adjusted quarterly to ensure that accruals are adequate to meet expected future warranty obligations. Initial
17

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
warranty data is limited early in the launch of a new product and accordingly, future adjustments to the warranty accrual may be material.
Recall campaign costs are recognized when a product recall liability is probable and related amounts are reasonably estimable. Costs are estimated based on the number of trucks to be repaired and the required repairs including engineering and development, product costs, labor rates, and shipping. Estimating the cost to repair the trucks is highly subjective and requires significant management judgment. Based on information that is currently available, management believes that the accruals are adequate. It is possible that substantial additional charges may be required in future periods based on new information, changes in facts and circumstances, and actions the Company may commit to or be required to undertake.
During the third quarter of 2023, the Company filed a voluntary recall with the National Highway Traffic Safety Administration for 209 of the Company's BEV trucks. The recall was initiated as a result of preliminary results of the Company's battery pack thermal event investigation. The investigation was in response to a thermal event caused by a battery pack defect. The Company is transporting all BEV trucks to the Company's Coolidge manufacturing facility where the BEV trucks will be retrofit with battery packs from another supplier. The Company accrued recall campaign costs of $61.8 million for the BEV trucks that are expected to be returned to dealers and customers once the recall work is complete. The Company placed a temporary hold on new BEV truck shipments until its BEV truck inventory has been retrofit with alternative battery packs. See Note 12, Commitments and Contingencies, for additional information.
The change in warranty liability for the three and nine months ended September 30, 2023 and 2022 is summarized as follows:
Three Months Ended September 30,Nine months ended September 30,
2023202220232022
Accrued warranty - beginning of period$11,057 $2,203 $7,788 $— 
Warranties issued in period - product warranty
172 2,611 4,245 4,601 
Warranties issued in period - recall campaign
61,848 — 61,848 — 
Net changes in liability for pre-existing warranties(1,084)(213)(1,304)— 
Warranty costs incurred
(1,665)(200)(2,249)(200)
Accrued warranty - end of period$70,328 $4,401 $70,328 $4,401 
As of September 30, 2023, warranty accrual of $62.0 million was recorded in accrued expenses and other current liabilities and $8.4 million in other long-term liabilities on the consolidated balance sheets. As of December 31, 2022, warranty accrual of $1.5 million was recorded in accrued expenses and other current liabilities and $6.3 million in other long-term liabilities on the consolidated balance sheets.
(e)Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet adopted
In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2023-06 to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC's regulations. The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated statements.
3.BUSINESS COMBINATION
Romeo Acquisition
On October 14, 2022, the Company completed the Romeo Acquisition. Under the terms of the acquisition, the Company acquired all of the issued and outstanding shares of common stock, par value 0.0001 per share, of Romeo (“Romeo Common Stock”) in exchange for 0.1186 of a share (the "Romeo Exchange Ratio") of the Company's common stock, rounded down to the nearest whole number of shares.
18

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Total consideration for the acquisition of Romeo is summarized as follows:
Purchase consideration
Fair value of Nikola common stock issued to Romeo stockholders(1)
$67,535 
Settlement of pre-existing relationships in the form of loan forgiveness(2)
27,923 
Settlement of pre-existing relationships in the form of accounts payable(18,216)
Fair value of outstanding stock compensation awards attributable to pre-acquisition services(3)
1,345 
Total purchase consideration$78,587 
(1)Represents the acquisition date fair value of 22.1 million shares of Nikola common stock issued to Romeo stockholders, based on the Romeo Exchange Ratio, at the October 14, 2022 closing price of $3.06 per share.
(2)The Company entered into an Agreement and Plan of Merger and Reorganization dated July 30, 2022 (the "Merger Agreement") with Romeo. Concurrently with the execution of the Merger Agreement, Romeo entered into a loan agreement (the "Loan Agreement") with the Company as the lender. The Loan Agreement provided for a facility in an aggregate principal amount of up to $30.0 million (subject to certain incremental increases of up to $20.0 million), which were available for drawing subject to certain terms and conditions set forth in the Loan Agreement. Interest was payable on borrowings under the facility at the secured overnight financing rate ("SOFR") plus 8.00%. Upon closing, the loan and related accrued interest were forgiven and considered part of the purchase price. As of acquisition close, Romeo had drawn $12.5 million on the loan and accrued $0.1 million in interest.
Additionally, as part of the Loan Agreement entered into with Romeo, the Company agreed to a short-term battery price increase. Through the acquisition close, the Company recorded $15.3 million in prepaid expenses and other current assets on the consolidated balance sheets related to the incremental pack price increase, which was considered part of the purchase consideration upon close.
(3)Represents the portion of the fair value of the replacement awards related to services provided prior to the acquisition. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period.
The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. The acquisition resulted in goodwill due to the purchase consideration exceeding the estimated fair value of the identifiable net assets acquired by $1.5 million.
During the second quarter of 2023, the Company transferred ownership of all of Romeo’s right, title and interest in and to all of its tangible and intangible assets to an Assignee, who is designated Assignee to act as the assignee for the benefit of creditors of Romeo. Refer to Note 10, Deconsolidation of Subsidiary, for additional information.
4.BALANCE SHEET COMPONENTS
Inventory
Inventory consisted of the following at September 30, 2023 and December 31, 2022, respectively:
As of
September 30, 2023December 31, 2022
Raw materials$18,707 $52,442 
Work in process22,120 9,646 
Finished goods10,437 47,677 
Service parts5,694 2,105 
Total inventory$56,958 $111,870 
19

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Inventory cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Inventories are stated at the lower of cost or net realizable value. Inventories are written down for any excess or obsolescence and when net realizable value, which is based upon estimated selling prices, is in excess of carrying value. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration of or increase in that newly established cost basis.
During the third quarter of 2023, the Company reclassified all BEV truck finished goods inventory to work in process to be retrofit with alternative battery packs related to the Company's voluntary recall. Additionally, during the third quarter of 2023, the Company wrote down BEV inventory related to the existing battery packs, cells and other BEV components which were deemed excess or obsolete due to the voluntary recall.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at September 30, 2023 and December 31, 2022, respectively:
As of
September 30, 2023December 31, 2022
Inventory deposits
$14,810 $415 
Prepaid expenses7,941 5,333 
Non-trade receivables5,827 6,064 
Prepaid insurance premiums3,409 3,611 
Headquarters sale agreement receivable2,600 5,487 
Deposits2,052 3,917 
Prepaid software1,879 1,015 
Deferred implementation costs460 2,101 
Total prepaid expenses and other current assets$38,978 $27,943 
Deferred implementation costs
Deferred implementation costs are amortized on a straight-line basis over the estimated useful life of the related software. The Company recorded an immaterial amount of amortization expense on the consolidated statements of operations for the three and nine months ended September 30, 2023, related to deferred implementation costs.
During the second quarter of 2022, the Company re-assessed the estimated useful life of its existing enterprise resource planning system as a result of ongoing re-implementation. The Company recorded $1.2 million and $2.4 million of amortization expense on the consolidated statements of operations for the three and nine months ended September 30, 2022, respectively, related to deferred implementation costs.

20

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following at September 30, 2023 and December 31, 2022:
As of
September 30, 2023 December 31, 2022
Construction-in-progress$217,899 $209,187 
Buildings162,795 127,797 
Equipment49,535 35,257 
Tooling38,833 17,693 
Finance lease assets14,887 2,193 
Software8,617 8,568 
Land7,957 24,762 
Other3,683 3,501 
Leasehold improvements3,082 2,953 
Furniture and fixtures1,483 1,492 
Demo vehicles— 15,215 
Property, plant and equipment, gross508,771 448,618 
Less: accumulated depreciation and amortization(38,920)(30,833)
Total property, plant and equipment, net$469,851 $417,785 
Construction-in-progress on the Company's consolidated balance sheets as of September 30, 2023 relates primarily to the expansion of the Company's manufacturing plant in Coolidge, Arizona, and development of hydrogen infrastructure.
Depreciation expense for the three months ended September 30, 2023 and 2022 was $15.1 million and $3.9 million, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022 was $23.9 million and $10.5 million, respectively.
In July 2023, the Company executed a membership interest and asset purchase agreement (the "Purchase Agreement") with FFI Phoenix Hub Holdings, LLC, a wholly-owned subsidiary of Fortescue Future Industries ("FFI"). Pursuant to the terms of the Purchase Agreement, FFI Phoenix Hub Holdings, LLC, acquired 100% of the interests in Phoenix Hydrogen Hub, LLC, the Company's wholly owned subsidiary holding the assets related to the Phoenix hydrogen hub project, including land and construction-in-progress. The Company received net proceeds of $20.7 million during the third quarter of 2023 pursuant to the terms of the Purchase Agreement. The Company's proceeds are net of a $3.7 million holdback, related to which the Company recorded $1.2 million in prepaid expenses and other current assets, and $2.5 million in other assets on the consolidated balance sheets.
During the third quarter of 2023, the Company reassessed the useful lives of its BEV demo vehicles, and subsequently retired all demo vehicles.
21

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at September 30, 2023 and December 31, 2022:
As of
September 30, 2023December 31, 2022
SEC settlement$85,500 $90,000 
Warranty liability, current61,953 1,484 
Accrued purchase of intangible asset13,216 32,126 
Inventory received not yet invoiced12,696 18,167 
Accrued outsourced engineering services7,845 8,056 
Accrued legal expenses6,618 2,041 
Accrued payroll and payroll related expenses5,797 8,298 
Other accrued expenses4,264 2,152 
Accrued purchases of property, plant and equipment3,718 3,587 
Operating lease liabilities, current2,434 1,979 
Accrued Equity Distribution Agreement fees1,114 1,681 
Supply agreement revision commitment— 10,000 
Total accrued expenses and other current liabilities$205,155 $179,571 
5.INVESTMENTS IN AFFILIATES
Investments in unconsolidated affiliates accounted for under the equity method consisted of the following:
As of
Ownership as of September 30, 2023
September 30, 2023December 31, 2022
Nikola Iveco Europe GmbH— %$— $4,142 
Wabash Valley Resources LLC20 %57,193 57,674 
Nikola - TA HRS 1, LLC50 %1,000 1,000 
$58,193 $62,816 
Equity in net loss of affiliates on the consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022, were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Equity in net loss of affiliates:
Nikola Iveco Europe GmbH$— $(1,959)$(15,556)$(5,998)
Wabash Valley Resources LLC(262)(25)(731)(76)
Total equity in net loss of affiliates$(262)$(1,984)$(16,287)$(6,074)
Nikola Iveco Europe GmbH
In April 2020, the Company and Iveco S.P.A. ("Iveco") became parties to a series of agreements which established a joint venture in Europe, Nikola Iveco Europe GmbH. The operations of the joint venture are located in Ulm, Germany, and consist of manufacturing the FCEV and BEV Class 8 trucks for the European market. The agreements provided for a 50/50 ownership of the joint venture and a 50/50 allocation of the joint venture's production volumes and profits between the
22

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Company and Iveco. Nikola Iveco Europe GmbH was considered a variable interest entity ("VIE") due to insufficient equity to finance its activities without additional subordinated financial support. The Company was not considered the primary beneficiary as it did not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE was accounted for under the equity method.
On June 29, 2023 (the "Divestiture Closing"), the Company and Iveco executed the European Joint Venture Transaction Agreement (the "Transaction Agreement") whereby the Company sold its 50% equity interest in Nikola Iveco Europe GmbH to Iveco for $35.0 million. In conjunction with the Transaction Agreement, the Company issued an intellectual property license agreement (the “License Agreement”), which grants Iveco and Nikola Iveco Europe GmbH a non-exclusive, perpetual, irrevocable, fully sublicensable, transferable, and fully assignable license ("Licensed Software") to software and controls technology related to the BEV and FCEV. According to the terms of the Transaction Agreement, the Company was eligible to receive 20.6 million shares of its own common stock from Iveco, contingent on successful due diligence ("Software Due Diligence") performed by Iveco and its consultants on the Licensed Software delivered to Iveco on the Divestiture Closing pursuant to the License Agreement. The Software Due Diligence was evaluated based on mutually agreed criteria between Iveco and the Company.
On the Divestiture Closing, the Company recognized a gain equal to the difference between the consideration received and its basis in the Nikola Iveco Europe GmbH investment, consisting of a liability balance of $11.4 million for investment in affiliates, and cumulative currency translation losses of $1.5 million. The delivery of the Licensed Software on the Divestiture Closing was determined to represent a right to use the Licensed Software and the performance obligation was satisfied upon the delivery of the Licensed Software on Divestiture Closing. The Company recognized gains related to the derecognition of its basis in Nikola Iveco Europe GmbH and delivery of the Licensed Software in gain on divestiture of affiliate on the consolidated statements of operations. During the nine months ended September 30, 2023, the Company recognized a gain of $70.8 million in gain on divestiture of affiliates consisting of the following:
Nine Months Ended
September 30, 2023
Cash consideration received$35,000 
Contingent stock consideration receivable25,956 
Derecognition of investment in affiliate11,428 
Derecognition of cumulative currency translation losses(1,535)
Gain on divestiture of affiliate$70,849 
Contingent stock consideration received
The contingent stock consideration was accounted for as variable consideration and included in total consideration as of Divestiture Closing, as it was not probable that a significant reversal of such consideration would occur upon resolution of the contingency. On August 3, 2023, the Software Due Diligence was deemed successful and Iveco transferred to the Company 20.6 million shares of Nikola common stock, which were immediately retired. The Company recognized the fair value of the common stock upon receipt in accumulated deficit on the consolidated balance sheets. The fair value of the contingent stock consideration was measured based on the closing price of the Company's common stock price, with changes in fair value recognized in other income (expense), net on the consolidated statements of operations.
23

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During the three and nine months ended September 30, 2023, the change in fair value of the contingent stock consideration was as follows:
Three Months Ended
Nine Months Ended
September 30, 2023September 30, 2023
Fair value - beginning of the period
$28,428 $— 
Contingent stock consideration recognized on Divestiture Closing
— 25,956 
Change in fair value
41,509 43,981 
Delivery of shares for stock consideration
(69,937)(69,937)
Fair value - end of the period
$— $— 
Wabash Valley Resources LLC
On June 22, 2021, the Company entered into a Membership Interest Purchase Agreement (the "MIPA") with WVR and the Sellers, pursuant to which, the Company purchased a 20% equity interest in WVR in exchange for $25.0 million in cash and 1,682,367 shares of the Company’s common stock. WVR is developing a clean hydrogen project in West Terre Haute, Indiana, including a hydrogen production facility. The common stock consideration was calculated based on the Company's 30-day average closing stock price, or $14.86 per share, and the Company issued 1,682,367 shares of its common stock.
The Company's interest in WVR is accounted for under the equity method and is included in investment in affiliates on the Company's consolidated balance sheets. Included in the initial carrying value was a basis difference of $55.5 million due to the difference between the cost of the investment and the Company's proportionate share of WVR's net assets. The basis difference is primarily comprised of property, plant and equipment and intangible assets.
As of September 30, 2023, the Company's maximum exposure to loss was $57.7 million, which represents the book value of the Company's equity interest and loans to WVR for $0.5 million.
Nikola - TA HRS 1, LLC
In March 2022, the Company and Travel Centers of America, Inc. ("TA") entered into a series of agreements which established a joint venture, Nikola - TA HRS 1, LLC. The operations expected to be performed by the joint venture consist of the development, operation and maintenance of a hydrogen fueling station. Operations have not commenced as of September 30, 2023.
The agreements provide for 50/50 ownership of the joint venture. Both parties are entitled to appoint an equal number of board members to the management committee of the joint venture. Pursuant to the terms of the agreements, the Company contributed $1.0 million to Nikola - TA HRS 1, LLC in 2022.
Nikola - TA HRS 1, LLC is considered a VIE due to insufficient equity to finance its activities without additional subordinated financial support. The Company is not considered the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE is accounted for under the equity method.
The Company does not guarantee debt for, or have other financial support obligations to the entity and its maximum exposure to loss in connection with its continuing involvement with the entity is limited to the carrying value of the investment.
24

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6.INTANGIBLE ASSETS, NET
The gross carrying amount and accumulated amortization of separately identifiable intangible assets are as follows:
As of September 30, 2023
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Licenses:
S-WAY Product and Platform license$50,000 $10,714 $39,286 
FCPM license47,181 — 47,181 
Other intangibles1,650 405 1,245 
Total intangible assets$98,831 $11,119 $87,712 
As of December 31, 2022
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Licenses:
S-WAY Product and Platform license$50,000 $5,357 $44,643 
FCPM license47,181 — 47,181 
Other intangibles800 151 649 
Total intangible assets$97,981 $5,508 $92,473 
Amortization expense related to intangible assets for the three and nine months ended September 30, 2023 was $1.9 million and $5.6 million, respectively. Amortization expense related to intangible assets for the three and nine months ended September 30, 2022 was $1.7 million and $3.6 million, respectively.
In 2021, the Company acquired a license for fuel cell power modules ("FCPMs") for use in the production of FCEVs. The Company expects to amortize the license beginning at the start of in-house FCPM production, expected to commence in the first half of 2024. As of September 30, 2023, the Company has not started amortizing the license.
7.DEBT AND FINANCE LEASE LIABILITIES
A summary of debt and finance lease liabilities as of September 30, 2023 and December 31, 2022, were as follows:
As of
September 30, 2023December 31, 2022
Current:
Senior Convertible Notes
$32,381 $50,000 
Insurance premium financing3,673 1,999 
Finance lease liabilities2,370 367 
Promissory notes686 9,309 
Financing obligations67 — 
Debt and finance lease liabilities, current$39,177 $61,675 
25

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of
September 30, 2023December 31, 2022
Non-current:
Toggle Convertible Notes$119,291 $199,786 
Financing obligations101,233 50,359 
Promissory notes2,501 39,165 
Finance lease liabilities9,346 818 
Long-term debt and finance lease liabilities, net of current portion$232,371 $290,128 
The fair values of the following debt obligations are estimated using level 2 fair value inputs, including stock price and risk-free rates. The following table presents the carrying value and estimated fair values:
As of September 30, 2023
Carrying ValueFair Value
June 2022 Toggle Convertible Notes$111,003 $93,788 
June 2023 Toggle Convertible Notes8,288 13,220 
Second Collateralized Note3,187 3,086 
Insurance Premium financing2,372 2,370 
September 2023 Insurance Premium financing
1,224 1,220 
Toggle Convertible Notes
In June 2022, the Company completed a private placement of $200.0 million aggregate principal amount of the Company's June 2022 Toggle Convertible Notes, which will mature on May 31, 2026. The June 2022 Toggle Convertible Notes were issued pursuant to an indenture, dated as of June 1, 2022 (the "June 2022 Toggle Convertible Notes Indenture").
In April 2023, the Company completed an exchange of $100.0 million aggregate principal amount of the Company's June 2022 Toggle Convertible Notes for the issuance of $100.0 million aggregate principal amount of April 2023 Toggle Convertible Notes, which will mature on May 31, 2026. The April 2023 Toggle Convertible Notes were issued pursuant to the April 2023 Toggle Convertible Notes Indenture. In conjunction with the issuance of the April 2023 Toggle Convertible Notes, the Company executed the first supplemental indenture to the June 2022 Toggle Convertible Notes Indenture dated as of April 3, 2023 (the "First Supplemental Indenture to June 2022 Notes"), and the second supplemental indenture to the June 2022 Toggle Convertible Notes Indenture dated as of April 10, 2023 (the "Second Supplemental Indenture to June 2022 Notes"), which First Supplemental Indenture to June 2022 Notes, among other things, amended the conversion provisions of the June 2022 Toggle Convertible Notes Indenture to limit conversions of the June 2022 Toggle Convertible Notes in certain instances until the earlier to occur of (x) an increase in the number of authorized shares in an amount sufficient to, among other things, allow for the issuance of common stock underlying the June 2022 Toggle Convertible Notes and (y) October 11, 2023, and provide that the Company shall elect to settle conversions of the June 2022 Toggle Convertible Notes in cash prior to such increase in the number of authorized shares.
Additionally, in June 2023, the Company completed a private placement of $11.0 million aggregate principal amount of the Company's June 2023 Toggle Convertible Notes (together with the June 2022 Toggle Convertible Notes and the April 2023 Toggle Convertible Notes, the "Toggle Convertible Notes"), which will mature on May 31, 2026. The June 2023 Toggle Convertible Notes were issued pursuant to the June 2023 Toggle Convertible Notes Indenture (together with the June 2022 Toggle Convertible Notes Indenture and the April 2023 Toggle Convertible Notes Indenture, the "Toggle Convertible Notes Indentures"). The June 2023 Toggle Convertible Notes were issued in consideration as a consent fee to the holders for execution of the third supplemental indenture to the June 2022 Toggle Convertible Notes Indenture dated as of June 23, 2023 (the "Third Supplemental Indenture to June 2022 Notes"), and the first supplemental indenture to the April 2023 Toggle Convertible Notes Indenture dated as of June 23, 2023 (the "First Supplemental Indenture to April 2023 Notes"), which, among other things, released Romeo as a guarantor of the June 2022 Toggle Convertible Notes and the April 2023 Toggle Convertible Notes, respectively.
26

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Below is a summary of certain terms of the Toggle Convertible Notes:
Interest Payments
The Company can elect to make any interest payment on the Toggle Convertible Notes in cash ("Cash Interest"), through the issuance of additional Toggle Convertible Notes in the form of the Toggle Convertible Notes with respect to which such interest is due ("PIK Interest"), or any combination thereof. Interest on the Toggle Convertible Notes is payable semi-annually in arrears. The interest rates and payment dates for each of the Toggle Convertible Notes is summarized below:
June 2022 Toggle Convertible NotesApril 2023 Toggle Convertible NotesJune 2023 Toggle Convertible Notes
PIK interest rate (per annum)11.00%11.00%8.00%
Cash interest rate (per annum)8.00%8.00%8.00%
Semi-annual interest payable datesMay 31 and November 30 of each yearMay 31 and November 30 of each yearJune 30 and December 31 of each year
First interest payment dateNovember 30, 2022May 31, 2023December 31, 2023
The April 2023 Toggle Convertible Note and June 2023 Toggle Convertible Note shall bear interest at the applicable Cash Interest rate or PIK Interest rate from November 30, 2022 and June 23, 2023, respectively.
Conversions
Based on the applicable conversion rates, the Toggle Convertible Notes are convertible into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. However, conversions of the Toggle Convertible Notes are limited in certain instances until the earlier to occur of (x) an increase in the number of authorized shares in an amount sufficient to, among other things, allow for the issuance of common stock underlying such Toggle Convertible Notes and (y) October 11, 2023, and the Company shall elect to settle conversions of the Toggle Convertible Notes in cash until such increase in the number of authorized shares has occurred and in the case of conversions of the April 2023 Toggle Convertible Notes, the Company obtains the stockholder approval contemplated by Nasdaq Rule 5635. The Company amended its Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 800,000,000 to 1,600,000,000, following approval by the stockholders at the Company's annual meeting of stockholders on August 3, 2023.
The initial conversion rates are 114.3602 and 686.8132 shares per $1,000 principal amount of the June 2022 Toggle Convertible Notes and April 2023 Toggle Convertible Notes, respectively, subject to customary anti-dilution adjustments in certain circumstances, which represent initial conversion prices of approximately $8.74 and $1.46 per share, respectively.
With respect to the June 2023 Toggle Convertible Notes, the initial conversion rate shall be an amount equal to (a) 674.4258 divided by (b) a quotient, (i) the numerator of which is the sum of (x) the initial principal amount of the June 2023 Toggle Convertible Notes outstanding immediately prior to such conversion and (y) the aggregate amount capitalized related to PIK Interest issuances in respect of interest that came due on the June 2023 Toggle Convertible Notes and (ii) the denominator of which is the initial principal amount of the June 2023 Toggle Convertible Notes.
The Toggle Convertible Notes Indentures provide that prior to February 28, 2026, the Toggle Convertible Notes will be convertible at the option of the holders only upon the occurrence of specified events and during certain periods, and will be convertible on or after February 28, 2026, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Toggle Convertible Notes.
Holders of the Toggle Convertible Notes will have the right to convert all or a portion of their Toggle Convertible Notes prior to the close of business on the business day immediately preceding February 28, 2026 only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2022 for the June 2022 Toggle Convertible Notes, during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2023 for the April 2023 Toggle Convertible Notes, during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2023 for the June 2023 Toggle Convertible Notes (and only during such fiscal quarter), if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and
27

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Toggle Convertible Notes on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the Toggle Convertible Notes for each trading day of that ten consecutive trading day period was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate of the Toggle Convertible Notes on each such trading day; (iii) if the Company calls such Toggle Convertible Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events.
Redemption
Except with respect to the June 2023 Toggle Convertible Notes as described in the immediately succeeding paragraph, the Company may not redeem the Toggle Convertible Notes prior to June 1, 2025. The Company may redeem the Toggle Convertible Notes in whole or in part, at its option, on or after such date and prior to the 26th scheduled trading day immediately preceding the maturity date, for a cash purchase price equal to the aggregate principal amount of any Toggle Convertible Notes to be redeemed plus accrued and unpaid interest.
The June 2023 Toggle Convertible Notes provide for an additional optional redemption period from the initial issuance of such Toggle Convertible Notes through the first interest payment date of December 31, 2023, in whole and not in part for a cash purchase price equal to the aggregate principal amount of the June 2023 Toggle Convertible Notes.
In addition, following certain corporate events that occur prior to the maturity date or following issuance by the Company of a notice of redemption, in certain circumstances, the Company will increase the conversion rate for a holder who elects to convert its Toggle Convertible Notes (other than the June 2023 Toggle Convertible Notes) in connection with such a corporate event or who elects to convert any such Toggle Convertible Notes called for redemption during the related redemption period. Additionally, in the event of a fundamental change or a change in control transaction, holders of the Toggle Convertible Notes will have the right to require the Company to repurchase all or a portion of their Toggle Convertible Notes at a price equal to 100% of the capitalized principal amount of such Toggle Convertible Notes, in the case of a fundamental change, or 130% of the capitalized principal amount of such Toggle Convertible Notes, in the case of change in control transactions, in each case plus any accrued and unpaid interest to, but excluding, the repurchase date.
The Toggle Convertible Notes Indentures include restrictive covenants that, subject to specified exceptions, limit the ability of the Company and its subsidiaries to incur secured debt in excess of $500.0 million, incur other subsidiary guarantees, and sell equity interests of any subsidiary that guarantees the Toggle Convertible Notes. In addition, the Toggle Convertible Notes Indentures include customary terms and covenants, including certain events of default after which the holders may accelerate the maturity of the Toggle Convertible Notes issued thereunder and cause them to become due and payable immediately upon such acceleration.
In conjunction with the issuance of the June 2022 Toggle Convertible Notes, the Company executed the Put Premium which was determined to be an embedded derivative that met the criteria for bifurcation from the host. The total proceeds received were first allocated to the fair value of the bifurcated derivative asset, and the remaining proceeds allocated to the host resulting in an adjustment to the initial purchasers' debt discount.
The net proceeds from the sale of the June 2022 Toggle Convertible Notes were $183.2 million, net of initial purchasers' discounts and debt issuance costs. Unamortized debt discount and issuance costs were reported as a direct deduction from the face amount of the June 2022 Toggle Convertible Notes.
During the second quarter of 2023, the exchange of $100.0 million of June 2022 Toggle Convertible Notes for the issuance of $100.0 million of April 2023 Toggle Convertible Notes was determined to represent a substantial change in terms and extinguishment accounting was applied. The Company recognized a loss on debt extinguishment of $20.4 million for the nine months ended September 30, 2023. As part of the assessment of the exchange, the Company bifurcated the conversion features on the April 2023 Toggle Convertible Notes and recognized a derivative liability of $21.2 million as of the exchange date, resulting in an adjustment to the debt discount.
Additionally, during the second quarter of 2023, the execution of the Third Supplemental Indenture to June 2022 Notes and First Supplemental Indenture to April 2023 Notes were deemed modifications to the Toggle Convertible Notes outstanding under the June 2022 Toggle Convertible Notes Indenture and April 2023 Toggle Convertible Notes Indenture, respectively, as the amended terms did not substantially change the terms of the respective notes. The consideration paid to the holders in the
28

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
form of the issuance of the June 2023 Toggle Convertible Notes was recognized as an issuance cost upon modification and is amortized as an adjustment of interest expense over the remaining terms of the June 2022 Toggle Convertible Notes and April 2023 Toggle Convertible Notes.
On August 4, 2023, the holders of the April 2023 Toggle Convertible Notes exercised their conversion right for all the outstanding principal amount. The Company elected to settle the conversion with the issuance of 72,458,789 shares of common stock. The remaining unamortized discount was recognized in interest expense, net on the consolidated statements of operations due to the reclassification of the conversion feature to equity.
The net carrying amounts of the debt component of the Toggle Convertible Notes as of September 30, 2023 were as follows:
June 2022 Toggle Convertible NotesJune 2023 Toggle Convertible Notes
Principal amount$117,041 $11,000 
Accrued PIK interest4,327 237 
Unamortized discount(2,502)(2,949)
Unamortized issuance costs(7,863)— 
Net carrying amount$111,003 $8,288 
The net carrying amounts of the debt component of the Toggle Convertible Notes as of December 31, 2022 were as follows:
June 2022 Toggle Convertible Notes
Principal amount$210,939 
Accrued PIK interest1,998 
Unamortized discount(6,443)
Unamortized issuance costs(6,708)
Net carrying amount$199,786 
As of September 30, 2023, the effective interest rates on the June 2022 Toggle Convertible Notes and June 2023 Toggle Convertible Notes were 13.90% and 8.00%, respectively. Amortization of the debt discount and issuance costs is reported as a component of interest expense and is computed using the straight-line method over the term of the applicable Toggle Convertible Notes, which approximates the effective interest method.
The following table presents the Company's interest expense related to the June 2022 Toggle Convertible Notes:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Contractual interest expense$3,219 $5,500 $12,464 $7,284 
Amortization of debt discount and issuance costs785 922 2,520 1,228 
Total interest expense$4,004 $6,422 $14,984 $8,512 
29

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the Company's interest expense related to the April 2023 Toggle Convertible Notes:
Three Months EndedNine Months Ended
September 30, 2023September 30, 2023
Contractual interest expense$1,096 $3,562 
Amortization of debt discount and issuance costs41,530 42,242 
Total interest expense$42,626 $45,804 
For the three and nine months ended September 30, 2023, the Company recognized an immaterial amount of interest expense on the June 2023 Toggle Convertible Notes.
Senior Convertible Notes
First Purchase Agreement Notes
On December 30, 2022, the Company entered into a securities purchase agreement (the “First Purchase Agreement”) with the investors named therein for the sale of up to $125.0 million in initial principal amount of senior convertible notes (the “First Purchase Agreement Notes”), in a registered direct offering. The First Purchase Agreement Notes are convertible into shares of the Company’s common stock, subject to certain conditions and limitations. The Company consummated an initial closing for the sale of $50.0 million in aggregate principal amount of First Purchase Agreement Notes on December 30, 2022 (the "Series A Notes").
Subsequent to the initial closing, the Company entered into amended securities purchase agreements (the "Amended Purchase Agreements") pursuant to which the Company consummated additional closings on March 17, 2023 for the sale of $25.0 million in aggregate principal amount of First Purchase Agreement Notes (the "Series B-1 Notes"), on May 10, 2023 for the sale of $15.0 million in aggregate principal amount of First Purchase Agreement Notes (the "Series B-2 Notes"), and on May 25, 2023 for the sale of $12.1 million in aggregate principal amount of First Purchase Agreement Notes (the "Series B-3 Notes").
The purchase price for the First Purchase Agreement Notes is $1,000 per $1,000 principal amount. Subject to certain conditions being met or waived, at the option of the Company, one or more additional closings for up to the remaining principal amount of First Purchase Agreement Notes may occur.
Each First Purchase Agreement Note will accrue interest at a rate of 5% per annum, payable in arrears on the first calendar day of each calendar quarter, beginning April 1, 2023 for the Series A Notes, June 1, 2023 for the Series B-1 Notes and July 1, 2023 for the Series B-2 and Series B-3 Notes. Interest will be payable in cash or shares of the Company's common stock or in a combination of cash and shares of common stock, at the Company’s option. The interest rate will increase to an annual rate of 12.5% per annum upon the occurrence and during the continuance of an event of default under the term of the First Purchase Agreement Notes. Each First Purchase Agreement Note issued pursuant to the First Purchase Agreement and Amended Purchase Agreements will have a maturity date of one year from issuance, which may be extended at the option of the noteholders in certain instances. Upon any conversion, redemption or other repayment of a First Purchase Agreement Note, a “make-whole” amount equal to the amount of additional interest that would accrue under such First Purchase Agreement Note at the interest rate then in effect assuming that the outstanding principal of such First Purchase Agreement Notes remained outstanding through and including the maturity date of such First Purchase Agreement Note.
At any time on or after January 9, 2023, all or any portion of the principal amount of each First Purchase Agreement Note, plus accrued and unpaid interest, any make-whole amount and any late charges thereon (the “Conversion Amount”), is convertible at any time, in whole or in part, at the noteholder’s option, into shares of the Company's common stock at a conversion price per share (the “Conversion Price”) equal to the lower of (i) the applicable “reference price”, subject to certain adjustments (the “Reference Price”), (ii) the greater of (x) the applicable “floor price” (the “Floor Price”) and (y) the volume weighted average price (“VWAP”) of the Common Stock as of the conversion date, and (iii) the greater of (x) the Floor Price, and as elected by the converting noteholder, (y) either (X) depending on the delivery time of the applicable conversion notice, (1) the VWAP as of the applicable conversion date or (2) the VWAP immediately prior to the applicable conversion date and (Y) 95% of the average VWAP for the three trading days commencing on, and including, the applicable conversion date,
30

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
subject to adjustment in accordance with the terms of the Notes. The Reference Price and Floor Price applicable to each issuance of First Purchase Agreement Notes is summarized below:
Reference PriceFloor Price
Series A Notes$5.975 $0.478 
Series B-1 Notes$4.050 $0.478 
Series B-2 Notes$2.140 $0.478 
Series B-3 Notes$1.952 $0.478 
At any time during an Event of Default Redemption Right Period (as defined below), a noteholder may alternatively elect to convert all or any portion of the First Purchase Agreement Notes at an alternate conversion rate (the “Alternate Conversion Rate”) equal to the quotient of (i) 115% of the Conversion Amount divided by (ii) the Conversion Price.
Upon a change of control, a noteholder may, subject to certain exceptions, require the Company to redeem all, or any portion, of the First Purchase Agreement Notes in cash at a price equal to 115% of the greatest of: (i) the Conversion Amount, (ii) the product of (x) the Conversion Amount and (y) the quotient of (I) the greatest closing sale price of the common stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation of a change of control and (2) the public announcement of such change of control, and ending on the date the noteholder notifies the Company of its exercise of its right to redeem pursuant to the change of control divided by (II) the Conversion Price, and (iii) the product of (x) the Conversion Amount and (y) the quotient of (I) the aggregate consideration per share of common stock to be paid to the holders of the Common Stock upon consummation of such change of control divided by (II) the Conversion Price.
At any time an “Equity Conditions Failure” (as defined in the First Purchase Agreement Notes) exists at the time of consummation of certain “Subsequent Placements” (as defined in the Purchase Agreement), the noteholders have the right, subject to certain exceptions, to require that the Company redeem all, or any portion, of the Conversion Amount of the Notes not in excess of the gross proceeds of such Subsequent Placement at a redemption price of 100% of the Conversion Amount to be redeemed. If the noteholder is participating in such Subsequent Placement, the noteholder may require the Company to apply all, or any part, of any amounts that would otherwise be payable to the noteholder in such redemption, on a dollar-for-dollar basis, against the purchase price of the securities to be purchased by the noteholder in such Subsequent Placement.
A noteholder will not have the right to convert any portion of the First Purchase Agreement Notes, to the extent that, after giving effect to such conversion, the noteholder (together with certain of its affiliates and other related parties) would beneficially own in excess of 4.99% of the shares of common stock outstanding immediately after giving effect to such conversion (the “Maximum Percentage”). The noteholder may from time to time increase the Maximum Percentage to 9.99%, provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase.
The First Purchase Agreement Notes provide for certain Events of Default, including certain types of bankruptcy or insolvency events of default involving the Company after which the First Purchase Agreement Notes become automatically due and payable. At any time after the earlier of (x) a noteholder’s receipt of a required notice of an event of default, and (y) the noteholder becoming aware of an event of default, and ending on the twentieth trading day after the later of (I) the date such event of default is cured, and (II) the investor’s receipt of an event of default notice from the Company (such period, the “Event of Default Redemption Rights Period”), the noteholder may require the Company to redeem, subject to certain exceptions, all or any portion of its Notes at a price equal to 115% of the greater of (i) the Conversion Amount and (ii) the product of the Alternate Conversion Rate and the greatest closing sale price of the common stock on any trading day during the period commencing on the date immediately preceding such Event of Default and ending on the trading day immediately prior to the date the Company makes the entire redemption payment.
The Company will be subject to certain customary affirmative and negative covenants regarding the rank of the Senior Convertible Notes, the incurrence of certain indebtedness, the repayment of certain indebtedness, transactions with affiliates, and restrictions on certain issuance of securities, among other customary matters.
31

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes conversions of the First Purchase Agreement Notes during the nine months ended September 30, 2023:
Series A NotesSeries B-1 NotesSeries B-2 NotesSeries B-3 Notes
Shares of common stock issued for conversions21,785,618 21,127,720 21,758,268 22,639,159 
Principal balance converted$50,000 $25,000 $15,000 $12,075 
Make-whole interest converted$2,500 $1,250 $750 $604 
Average conversion price$2.41 $1.24 $0.72 $0.56 
The Company elected to account for the First Purchase Agreement pursuant to the fair value option under ASC 825. ASC 825-10-15-4 provides for the “fair value option” (“FVO”) election, to the extent not otherwise prohibited by ASC 825-10-15-5, to be afforded to financial instruments, wherein the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The Company believes that the fair value option better reflects the underlying economics of the First Purchase Agreement Notes. As of December 31, 2022, the Company recognized $50.0 million on the consolidated balance sheets for the fair value of First Purchase Agreement Notes outstanding. The First Purchase Agreement was terminated in the third quarter of 2023.
Second Purchase Agreement Notes
On August 21, 2023, the Company entered into a securities purchase agreement (the "Second Purchase Agreement") with the investors named therein for the sale of up to $325.0 million in initial principal amount of senior convertible notes (the “Second Purchase Agreement Notes”), in a registered direct offering. Pursuant to Nasdaq Rule 5635, the Company is limited to the issuance of an aggregate of 171,179,577 shares under the terms of the Second Purchase Agreement. The Second Purchase Agreement Notes (together with the First Purchase Agreement Notes, the "Senior Convertible Notes") are convertible into shares of the Company’s common stock, subject to certain conditions and limitations. The Company consummated an initial closing for the sale of $125.0 million in aggregate principal amount of Second Purchase Agreement Notes on August 21, 2023 (the "Series A-1 Notes").
Subsequent to the initial closing, the Company entered into a supplemental indenture pursuant to which the Company consummated an additional closing on September 22, 2023 for the sale of $40.0 million in aggregate principal amount of Second Purchase Agreement Notes (the "Series A-2 Notes").
The purchase price for the Second Purchase Agreement Notes is $1,000 per $1,000 principal amount. Subject to certain conditions being met or waived, at the option of the Company, one or more additional closings for up to the remaining principal amount of Second Purchase Agreement Notes may occur. The aggregate principal amount of Second Purchase Agreement Notes that may be offered in the additional closings may not be more than $160.0 million and the Company’s option to sell additional Second Purchase Agreement Notes will be exercisable until the 18 month anniversary of the date of the Second Purchase Agreement.
Each Second Purchase Agreement Note will accrue interest at a rate of 5% per annum, payable in arrears on the first calendar day of each calendar quarter, beginning January 1, 2024 for the Series A-1 Notes and for the Series A-2 Notes. Interest will be payable in cash or shares of the Company's common stock or in a combination of cash and shares of common stock, at the Company’s option. The interest rate will increase to an annual rate of 12.5% per annum upon the occurrence and during the continuance of an event of default under the term of the Second Purchase Agreement Notes. Each Second Purchase Agreement Note issued pursuant to the Second Purchase Agreement will have a maturity date of one year from issuance, which may be extended at the option of the noteholders in certain instances. Upon any conversion, redemption or other repayment of a Second Purchase Agreement Note, a “make-whole” amount equal to the amount of additional interest that would accrue under such Second Purchase Agreement Note at the interest rate then in effect assuming that the outstanding principal of such Second Purchase Agreement Notes remained outstanding through and including the maturity date of such Second Purchase Agreement Note.
32

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
At any time on or after August 21, 2023, the Conversion Amount is convertible at any time, at the Conversion Price. The Reference Price and Floor Price applicable to each issuance of Second Purchase Agreement Notes is summarized below:
Reference PriceFloor Price
Series A-1 Notes
$2.940 $0.380 
Series A-2 Notes
$2.940 $0.380 
The following table summarizes conversions of the Second Purchase Agreement Notes during the three and nine months ended September 30, 2023:
Series A-1 Notes
Series A-2 Notes
Shares of common stock issued for conversions128,380,608 5,721,018 
Principal balance converted$125,000 $7,619 
Make-whole interest converted$6,250 $381 
Average conversion price$1.02 $1.40 
The Company elected to account for the Second Purchase Agreement Notes pursuant to the fair value option under ASC 825. As of September 30, 2023, the Company recognized $32.4 million on the consolidated balance sheets for the fair value of Second Purchase Agreement Notes outstanding.
Financing Obligations
On May 10, 2022 (the "Sale Date"), the Company entered into a sale agreement (the "Sale Agreement"), pursuant to which the Company sold the land and property related to the Company's headquarters in Phoenix, Arizona for a purchase price of $52.5 million. As of the Sale Date, $13.1 million was withheld from the proceeds received related to portions of the headquarters undergoing construction. The Company receives the remaining proceeds throughout the completion of construction pursuant to the terms of the Sale Agreement. Concurrent with the sale, the Company entered into a lease agreement (the "Lease Agreement"), whereby the Company leased back the land and property related to the headquarters for an initial term of 20 years with four extension options for 7 years each. As of the Sale Date, the Company considered one extension option reasonably certain of being exercised.
The buyer is not considered to have obtained control of the headquarters because the lease is classified as a finance lease. Accordingly, the sale of the headquarters is not recognized and the property and land continue to be recognized on the Company's consolidated balance sheets. As of the Sale Date, the Company recorded $38.3 million as a financing obligation on the Company's consolidated balance sheets representing proceeds received net of debt issuance costs of $1.1 million. Rent payments under the terms of the Lease Agreement will be allocated between interest expense and principal repayments using the effective interest method. Additionally, debt issuance costs will be amortized to interest expense over the lease term.
After the Sale Date and through September 30, 2023, the Company recognized an additional $13.1 million for financing obligations on the Company's consolidated balance sheets for construction completed after the Sale Date. As of September 30, 2023, the Company has recognized a HQ Sale Agreement receivable of $2.6 million for funds not yet received for construction completed in prepaid expenses and other current assets. Additionally, for the three and nine months ended September 30, 2023, the Company recognized $0.9 million and $2.7 million, respectively, of interest expense related to interest on the financing obligation and amortization of debt issuance costs. For the three and nine months ended September 30, 2022, the Company recognized $0.9 million and $1.4 million, respectively, of interest expense related to interest on the financing obligation and amortization of debt issuance costs.
On June 29, 2023 (the "Land Sale Date"), the Company entered into a sale agreement (the "Land Sale Agreement"), pursuant to which the Company sold the land in Coolidge, Arizona on which the Company's manufacturing facility is located for a purchase price of $50.4 million. Concurrent with the sale, the Company entered into a lease agreement (the "Land Lease Agreement"), whereby the Company leased back the land for an initial term of 99 years. The Land Lease Agreement grants the Company an option to repurchase the land upon the fiftieth (50th) anniversary of the Land Sale Date for a price equal to the
33

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
greater of the fair market value, or 300% of the purchase price. As of the Land Sale Date, the Company considered the purchase option reasonably certain of being exercised.
The buyer is not considered to have obtained control of the land because the lease is classified as a finance lease. Accordingly, the sale of the land in Coolidge, Arizona is not recognized and the land continues to be recognized on the Company's consolidated balance sheets. As of the Land Sale Date, the Company recorded $49.4 million as a financing obligation on the Company's consolidated balance sheets representing proceeds received net of debt issuance costs of $1.0 million. Rent payments under the terms of the Land Lease Agreement will be allocated between interest expense and principal repayments using the effective interest method. Additionally, debt issuance costs will be amortized to interest expense over the lease term.
For the three and nine months ended September 30, 2023, the Company recognized $1.3 million and $1.3 million, respectively, of interest expense related to interest on the financing obligation and amortization of debt issuance costs.
Collateralized Promissory Notes
On June 7, 2022, the Company executed a promissory note and a master security agreement (the "Master Security Agreement") for $50.0 million at a stated interest rate of 4.26% (the "Collateralized Note"). The Collateralized Note was fully collateralized by certain personal property assets as fully described in the Master Security Agreement. The Collateralized Note carried a 60 month term and was payable in 60 equal consecutive monthly installments due in arrears.
For the three and nine months ended September 30, 2023, the Company recognized $0.2 million and $1.1 million of interest expense, respectively, on the Collateralized Note. For the three and nine months ended September 30, 2022, the Company recognized $0.5 million and $0.7 million, respectively, of interest expense on the Collateralized Note. The Company repaid $39.3 million during the third quarter of 2023, representing the outstanding principal balance of the Collateralized Note.
On August 4, 2022, the Company executed a promissory note and a security agreement for $4.0 million at an implied interest rate of 7.00% (the "Second Collateralized Note"). The Second Collateralized Note is fully collateralized by certain personal property assets as fully described in the security agreement. The Second Collateralized Note carries a 60 month term and is payable in 60 equal monthly installments due in arrears.
For the three and nine months ended September 30, 2023 and 2022, interest expense related to the Second Collateralized Note was immaterial.
Insurance Premium Financing
The Company executed an insurance premium financing agreement pursuant to which the Company financed certain annual insurance premiums for $6.6 million, primarily consisting of premiums for directors' and officers' insurance. The insurance premium payable incurred interest at 2.95%, and matured on March 27, 2023.
During the second and third quarters of 2023, the Company executed additional insurance premium financing agreements pursuant to which the Company financed certain annual insurance premiums for $3.9 million and $1.2 million, respectively, primarily consisting of premiums for directors' and officers' insurance. The insurance premium payables each incurred interest at 6.64%, and is due in monthly installments maturing on March 27, 2024.
For the three and nine months ended September 30, 2023 and 2022, the Company recognized an immaterial amount of interest expense on the insurance premium financing agreements.
Letters of Credit
During the third quarter of 2022, the Company executed a $0.6 million letter of credit to secure a customs bond through August 31, 2023. During the third quarter of 2023, the Company executed a $1.2 million letter of credit to secure a customs bond through September 14, 2024. As of September 30, 2023, no amounts have been drawn on the letter of credit.
During the second quarter of 2022, and in conjunction with the execution of the Lease Agreement, the Company executed an irrevocable standby letter of credit for $12.5 million to collateralize the Company's lease obligation. The Lease Agreement was subsequently amended, increasing the amount of the letter of credit to $13.1 million. The letter of credit is subject to annual increases commensurate with base rent increases pursuant to the Lease Agreement. The letter of credit will
34

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
expire upon the expiration of the Lease Agreement, but may be subject to reduction or early termination upon the satisfaction of certain conditions as described in the Lease Agreement.
During the fourth quarter of 2021, the Company executed an irrevocable standby letter of credit for $25.0 million through December 31, 2024 in connection with the execution of a product supply agreement with a vendor. The supply agreement was subsequently amended, reducing the amount of the letter of credit to $15.0 million. As of September 30, 2023, no amounts have been drawn on the letter of credit.
8.CAPITAL STRUCTURE
Shares Authorized
As of September 30, 2023, the Company had authorized a total of 1,750,000,000 shares consisting of 1,600,000,000 shares designated as common stock and 150,000,000 shares designated as preferred stock.
Warrants
As of September 30, 2023 and December 31, 2022, the Company had 841,183 and 1,137,850 private warrants outstanding, respectively. The Company assumed the private warrants previously issued by VectoIQ Acquisition Corp. ("VectoIQ") and Romeo through the Business Combination and Romeo Acquisition, respectively, and each private warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 or $96.96 per share, respectively, subject to adjustment.
The exercise price and number of common shares issuable upon exercise of the private warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the private warrants will not be adjusted for the issuance of common stock at a price below their exercise price.
For the three months ended September 30, 2023 and 2022, the Company recorded zero, and a $0.6 million gain, respectively, for revaluation of warrant liability on the consolidated statement of operations. For the nine months ended September 30, 2023 and 2022, the Company recorded gains of $0.3 million and $3.5 million, respectively, for revaluation of warrant liability on the consolidated statement of operations. As of September 30, 2023 and December 31, 2022, the Company had $0.1 million and $0.4 million, respectively, for warrant liability related to the private warrants outstanding on the consolidated balance sheets.
Stock Purchase Agreements
First Purchase Agreement with Tumim Stone Capital LLC
On June 11, 2021, the Company entered into a common stock purchase agreement (the "First Tumim Purchase Agreement") and a registration rights agreement (the "Registration Rights Agreement") with Tumim Stone Capital LLC ("Tumim"), pursuant to which Tumim committed to purchase up to $300.0 million in shares of the Company's common stock, subject to certain limitations and conditions set forth in the First Tumim Purchase Agreement. The Company shall not issue or sell any shares of common stock under the First Tumim Purchase Agreement which, when aggregated with all other shares of common stock beneficially owned by Tumim, would result in beneficial ownership of more than 4.99% of the Company's outstanding shares of common stock.
Under the terms of the First Tumim Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim, shares of common stock over the period commencing on the date of the First Tumim Purchase Agreement (the “Tumim Closing Date”) and ending on the first day of the month following the 36-month anniversary of the Tumim Closing Date. The purchase price will be calculated as 97% of the volume weighted average prices of the Company's common stock during normal trading hours for three consecutive trading days commencing on the purchase notice date.
Concurrent with the signing of the First Tumim Purchase Agreement, the Company issued 155,703 shares of its common stock to Tumim as a commitment fee ("Commitment Shares"). The total fair value of the shares issued for the commitment fee of $2.6 million was recorded in selling, general, and administrative expense on the Company's consolidated statements of operations.
35

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
During the nine months ended September 30, 2023, the Company sold 3,420,990 shares of common stock, for proceeds of $8.4 million, and terminated the First Tumim Purchase Agreement during the first quarter of 2023. During the nine months ended September 30, 2022, the Company sold 17,248,244 shares of common stock under the First Tumim Purchase Agreement for proceeds of $123.7 million.
Second Purchase Agreement with Tumim
On September 24, 2021, the Company entered into a second common stock purchase agreement (the "Second Tumim Purchase Agreement") and a registration rights agreement with Tumim, pursuant to which Tumim committed to purchase up to $300.0 million in shares of the Company's common stock, subject to certain limitations and conditions set forth in the Second Tumim Purchase Agreement. The Company will not issue or sell any shares of common stock under the Second Tumim Purchase Agreement which, when aggregated with all other shares of common stock beneficially owned by Tumim, would result in beneficial ownership of more than 4.99% of the Company's outstanding shares of common stock.
Under the terms of the Second Tumim Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim, shares of common stock over the period commencing on the date of the Second Tumim Purchase Agreement (the “Second Tumim Closing Date”) and ending on the first day of the month following the 36-month anniversary of the Second Tumim Closing Date, provided that certain conditions have been met. These conditions include effectiveness of a registration statement covering the resale of shares of common stock that have been and may be issued under the Second Tumim Purchase Agreement and termination of the First Tumim Purchase Agreement. The registration statement covering the offer and sale of up to 29,042,827 shares of common stock, including the commitment shares, to Tumim was declared effective on November 29, 2021. The purchase price will be calculated as 97% of the volume weighted average prices of the Company's common stock during normal trading hours for three consecutive trading days commencing on the purchase notice date.
Concurrent with the signing of the Second Tumim Purchase Agreement, the Company issued 252,040 shares of its common stock to Tumim as a commitment fee. The total fair value of the shares issued for the commitment fee of $2.9 million was recorded in selling, general, and administrative expense on the Company's consolidated statement of operations.
During the nine months ended September 30, 2023, the Company sold 28,790,787 shares of common stock, for proceeds of $59.2 million, to Tumim under the Second Tumim Purchase Agreement, and terminated the Second Tumim Purchase Agreement during the third quarter of 2023.
Equity Distribution Agreement
In August 2022, the Company entered into an equity distribution agreement with Citi as sales agent, pursuant to which the Company can issue and sell shares of its common stock with an aggregate maximum offering price of $400.0 million. In August 2023, the Company amended and restated the equity distribution agreement (as amended and restated, the "Equity Distribution Agreement") with Citi as a sales agent, pursuant to which the Company increased the aggregate maximum offering price by $200.0 million, resulting in an aggregate offering price of up to $600.0 million.
The Company pays Citi a fixed commission rate of 2.5% of gross offering proceeds of shares sold under the Equity Distribution Agreement. During the three and nine months ended September 30, 2023, the Company sold 27,662,880 and 66,690,443 shares, respectively, of common stock under the Equity Distribution Agreement at an average price per share of $1.97 and $1.78, respectively, for gross proceeds of $54.5 million and $118.6 million, and net proceeds of approximately $53.1 million and $115.6 million, after $1.4 million and $3.0 million in commissions to the sales agent. During the three and nine months ended September 30, 2022, the Company sold 19,009,227 shares of common stock under the Equity Distribution Agreement at an average price per share of $5.29 for gross proceeds of $100.5 million and net proceeds of approximately $98.0 million, after $2.5 million in commissions to the sales agent. Commissions incurred in connection with the Equity Distribution Agreement are reflected as a reduction of additional paid-in capital on the Company's consolidated balance sheets. As of September 30, 2023 and December 31, 2022, $1.1 million and $1.7 million, respectively, in commissions were recognized in accrued expenses and other current liabilities on the Company's consolidated balance sheets.
Public Offering
The Company sold 29,910,715 shares of common stock in an underwritten public offering (the "Public Offering") at an offering price of $1.12 per share. The Public Offering closed on April 4, 2023, and the Company received net proceeds of $32.2 million after underwriter's discounts and offering costs.
36

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Direct Offering
The Company entered into a stock purchase agreement with an investor (the "Investor") pursuant to which the investor agreed to purchase up to $100.0 million of shares of the Company's common stock in a registered direct offering (the "Direct Offering"), with the actual amount of shares of common stock purchased in the Direct Offering reduced to the extent of the total number of shares issued pursuant to the Public Offering. The Direct Offering closed on April 11, 2023, and the Company sold 59,374,999 shares of common stock at the Public Offering price of $1.12 per share to the Investor for net proceeds of $63.2 million, after deducting placement agent fees and offering expenses.
9.STOCK BASED COMPENSATION EXPENSE
2017 and 2020 Stock Plans
The 2017 Stock Option Plan (the “2017 Plan”) provides for the grant of incentive and nonqualified options to purchase common stock to officers, employees, directors, and consultants. Options were granted at a price not less than the fair market value on the date of grant and generally became exercisable between one and four years after the date of grant. Options generally expire ten years from the date of grant. Outstanding awards under the 2017 Plan continue to be subject to the terms and conditions of the 2017 Plan.
On June 2, 2020, the stockholders approved the Nikola Corporation 2020 Stock Incentive Plan (the "2020 Plan") and the Nikola Corporation 2020 Employee Stock Purchase Plan (the "2020 ESPP"). The 2020 Plan provides for the grant of incentive and nonqualified stock options, restricted stock units ("RSUs"), restricted share awards, stock appreciation awards, and cash-based awards to employees, outside directors, and consultants of the Company. The 2020 Plan and the 2020 ESPP became effective immediately upon the closing of the Business Combination. No offerings have been authorized to date by the Company's board of directors under the ESPP.
Stock Options
The Company utilizes the Black-Scholes option pricing model for estimating the fair value of options granted. Options vest in accordance with the terms set forth in the grant letter. Time-based options generally vest ratably over a period of approximately 36 months. Changes in stock options are as follows:
OptionsWeighted
Average
Exercise Price
Per share
Weighted Average
Remaining
Contractual Term
(Years)
Outstanding at December 31, 202222,470,585 $1.31 5.33
Granted— — 
Exercised6,723,629 1.06 
Cancelled588,508 2.24 
Outstanding at September 30, 202315,158,448 3.86
Vested and exercisable as of September 30, 202315,158,448 $1.39 3.86
Restricted Stock Units
The fair value of RSUs is based on the closing price of the Company’s common stock on the grant date. The time-based RSUs generally vest in increments over a three-year period or, in the case of executive officers, cliff-vest following the third anniversary from the date of grant. The RSUs to directors have a vesting cliff of one year after the grant date.
37

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Changes in RSUs are as follows:
Number of RSUs
Balance at December 31, 2022
19,574,800 
Granted11,631,426 
Released10,915,751 
Cancelled6,188,682 
Balance at September 30, 2023
14,101,793 
Market Based RSUs
The Company's market based RSUs contained a stock price index as a benchmark for vesting. Through the second quarter of 2022, these awards were issued with three milestones that vest depending upon a consecutive 20-trading day stock price target of the Company’s common stock. The Company's stock price targets ranged from $25 to $55 per share.
During the third quarter of 2022, the market based RSUs subject to the $40 and $55 stock price milestones were cancelled and the Company expensed $55.8 million related to the cancelled awards representing the remaining unamortized expense as of the cancellation date.
During the second quarter of 2023, the market based RSUs subject to the $25 stock price milestone were cancelled and the Company expensed $6.8 million related to the cancelled awards representing the remaining unamortized expense as of the cancellation date.
On April 24, 2023, the Company granted 2,900,000 performance-based RSUs to the Company's executive officers, which entitle them to receive a specified number of shares of the Company's common stock upon vesting. Additionally, during the third quarter of 2023, the Company granted 1,500,000 performance-based RSUs in connection with the appointment of new executive officers.
The number of shares earned could range between 0% and 200% of the target award depending upon the Company's performance at the conclusion of the three-year performance period, ending December 31, 2025. The performance condition of the awards is based on total shareholder return ("TSR") of the Company's common stock relative to a broad group of green energy companies. The TSR performance condition is deemed a market condition. The fair value of the TSR awards on the grant date was determined using a Monte Carlo simulation model, which utilizes significant assumptions including stock volatility and risk free rates, and does not change throughout the vesting period. The grant date fair value of the TSR awards was determined to be $11.1 million and is recognized over the vesting period. The following represents the significant assumptions used to determine the grant date fair value for the TSR awards:
During the three months ended September 30, 2023
During the three months ended June 30, 2023
Stock price
$1.40 - $3.40
$0.82
Term (years)
2.30 - 2.40
2.70
Risk-free interest rate
4.8% - 5.0%
3.9%
Expected volatility
116% - 127%
99.0%
Expected dividend yield—%—%
38

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Changes in market based RSUs are as follows:
Number of Market Based RSUs
Balance at December 31, 2022
2,071,058 
Granted4,400,000 
Released— 
Cancelled3,571,058 
Balance at September 30, 2023
2,900,000 
Stock Compensation Expense
The following table presents the impact of stock-based compensation expense on the consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of revenues$414 $— $1,813 $— 
Research and development3,383 10,105 19,043 28,112 
Selling, general, and administrative14,862 92,740 48,060 183,102 
Total stock-based compensation expense$18,659 $102,845 $68,916 $211,214 
As of September 30, 2023, total unrecognized compensation expense was as follows:
Unrecognized Compensation Expense
Market based RSUs$8,331 
RSUs38,530 
Total unrecognized compensation expense at September 30, 2023
$46,861 
10.DECONSOLIDATION OF SUBSIDIARY
As discussed in Note 1, Basis of Presentation, on June 30, 2023, the Company transferred ownership of all of Romeo's right, title and interest in and to all of its tangible and intangible assets, subject to certain agreed upon exclusions, to the Assignee. The Company received no cash consideration related to the Assignment.
The Company deconsolidated Romeo as of the Assignment as the Company no longer held a controlling financial interest in Romeo as of that date. The Company did not have any amounts included in accumulated other comprehensive loss associated with Romeo at the time of deconsolidation. The Assignment of Romeo represents a strategic shift and its results are reported as discontinued operations for the prior year periods presented. Following the Assignment, the Company retained no interest in Romeo, and Romeo is not deemed a related party.
39

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In connection with the deconsolidation, the Company recognized a loss from deconsolidation of subsidiaries of $24.9 million which is recorded in loss from deconsolidation of discontinued operations in the consolidated statements of operations for the nine months ended September 30, 2023 and consisted of the following:

As of deconsolidation
Assets deconsolidated:
Cash and cash equivalents$213 
Accounts receivable, net— 
Inventory7,271 
Prepaid expenses and other current assets3,351 
Restricted cash and cash equivalents, non-current1,500 
Property, plant and equipment, net17,555 
Intangible assets, net656 
Investments in affiliates10,000 
Other assets23,364 
Total assets deconsolidated$63,910 
Liabilities deconsolidated:
Accounts payable$15,583 
Accrued expenses and other current liabilities57,612 
Debt and finance lease liabilities, current1,206 
Long-term debt and finance lease liabilities, net of current portion1,160 
Operating lease liabilities21,664 
Warrant liability
Other non-current liabilities— 
Total liabilities deconsolidated97,233 
Net liabilities derecognized from deconsolidation(33,323)
Less: intercompany balances derecognized54,084 
Less: cash payments directly related to deconsolidation2,724 
Less: derecognition of goodwill1,450 
Loss from deconsolidation of discontinued operation$24,935 
40

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

As of December 31, 2022, the assets and liabilities of Romeo subject to assignment for the benefit of creditors have been reflected as assets subject to assignment for the benefit of creditors and liabilities subject to assignment for the benefit of creditors on the Company's consolidated balance sheets and consisted of the following:
December 31, 2022
Assets:
Current assets
Cash and cash equivalents$7,555 
Accounts receivable, net262 
Inventory11,327 
Prepaid expenses and other current assets9,881 
Total current assets subject to assignment for the benefit of creditors29,025 
Non-current assets
Restricted cash and cash equivalents, non-current1,500 
Property, plant and equipment, net19,221 
Intangible assets, net621 
Investments in affiliates10,000 
Prepayment - Long-term Supply Agreement44,835 
Other assets23,948 
Total non-current assets subject to assignment for the benefit of creditors100,125 
Total assets subject to assignment for the benefit of creditors$129,150 
Liabilities:
Current liabilities
Accounts payable$24,672 
Accrued expenses and other current liabilities22,990 
Debt and finance lease liabilities, current1,440 
Total current liabilities subject to assignment for the benefit of creditors49,102 
Long-term liabilities
Long-term debt and finance lease liabilities, net of current portion1,499 
Operating lease liabilities22,132 
Warrant liability40 
Total long-term liabilities subject to assignment for the benefit of creditors23,671 
Total liabilities subject to assignment for the benefit of creditors$72,773 
41

NIKOLA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following represents the major components of loss from discontinued operations presented in the consolidated statements of operations:
For the nine months ended September 30, 2023
Revenues$1,665 
Cost of revenues12,926 
Gross loss(11,261)
Operating expenses:
Research and development5,673 
Selling, general and administrative14,937 
Loss on supplier deposits44,835 
Total operating expenses65,445 
Loss from operations(76,706)
Other income (expense), net
Interest expense, net(53)
Revaluation of warrant liability33 
Loss from discontinued operations$(76,726)

11.INCOME TAXES
To calculate the interim tax provision, at the end of each interim period the Company estimates the annual effective tax rate and applies that to its ordinary quarterly earnings. The effect of changes in the enacted tax laws or rates is recognized in the interim period in which the change occurs. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and judgments including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in foreign jurisdictions, permanent differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or the tax environment changes.
Beginning in 2022, the Tax Cuts and Jobs Act ("TCJA") requires taxpayers to capitalize certain research and development costs and amortize them over five or fifteen years pursuant to Internal Revenue Code Section 174. Previously, such costs could be deducted in the period they were incurred. This provision is not anticipated to impact our effective tax rate or result in any cash payments for our federal income taxes.
Income tax expense was immaterial for the three and nine months ended September 30, 2023 and 2022 due to cumulative tax losses.
12.COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is subject to legal and regulatory actions that arise from time to time. The assessment as to whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable, often involves significant judgment about future events, and the outcome of litigation is inherently uncertain. The Company expenses professional legal fees as incurred, which are included in selling, general, and administrative expense on the consolidated financial statements. Other than as described below, there is no material pending or threatened litigation against the Company that remains outstanding as of September 30, 2023.
Regulatory and Governmental Investigations
By order dated December 21, 2021, the Company and the SEC reached a settlement arising out of the SEC’s investigation of the Company related to a short-seller article published in September 2020. Under the terms of the settlement,
42