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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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: 001-39408
Lucid Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
85-0891392
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
7373 Gateway Boulevard, Newark, CA 94560
(Address of principal executive offices) (Zip code)
(510) 648-3553
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per shareLCID
The 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.    x  Yes   o  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).    x  Yes    o  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 Filero
Accelerated Filer
o
Non-accelerated Filerx
Smaller Reporting Company
o
Emerging Growth Company
x

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).    o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o  Yes    x  No
Number of shares of the registrant’s Class A common stock outstanding at November 9, 2021: 1,646,366,945



INDEX TO FORM 10-Q
Page
Item 5.
2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this quarterly report on Form 10-Q and include statements regarding our intentions, beliefs or current expectations concerning, among other things our ability to recognize the anticipated benefits of the business combination between Atieva, Inc.and Churchill Capital Corp. IV, in which Atieva, Inc. became a wholly owned subsidiary of Churchill Capital Corp IV, results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which we operate, including estimates and forecasts of financial and operational metrics, projections of market opportunity, market share and product sales, expectations and timing related to commercial product launches and production volumes and launch of commercial production, including with respect to energy storage systems and automotive partnerships, the start of deliveries, future manufacturing capabilities and facilities, studio openings, future sales channels and strategies, future vehicle programs, expansion and the potential success of our go-to-market strategy and our financial and operating guidance, and future capital expenditures and other operating expenses. Such forward-looking statements are based on available current market material and our current expectations, beliefs and forecasts concerning future developments. Factors that may impact such forward-looking statements include:
changes in domestic and foreign business, market, financial, political and legal conditions;
risks relating to the uncertainty of our projected financial information, including conversion of reservations into binding orders;
risks related to the timing of expected business milestones and commercial launch, including our ability to mass produce the Lucid Air and complete the tooling of our manufacturing facility;
risks related to the expansion of our manufacturing facility and the increase of our production capacity;
risks related to future market adoption of our offerings;
the effects of competition and the pace and depth of electric vehicle adoption generally on our future business;
changes in regulatory requirements, governmental incentives and fuel and energy prices;
our ability to rapidly innovate;
future changes to vehicle specifications which may impact performance, pricing, and other expectations;
our ability to enter into or maintain partnerships with original equipment manufacturers, vendors and technology providers;
our ability to effectively manage our growth and recruit and retain key employees, including our chief executive officer and executive team;
our ability to establish our brand, expand our brand to Europe and the Middle East and capture additional market share and forecast projected market share and demand, and the risks associated with negative press or reputational harm;
our ability to manage expenses;
our ability to effectively utilize zero emission vehicle credits and obtain and utilize certain tax and other incentives;
our ability to issue equity or equity-linked securities in the future;
the outcome of any potential litigation, government and regulatory proceedings, investigations and inquiries;
the impact of the global COVID-19 pandemic on our projected results of operations, financial performance or other financial metrics, or on any of the foregoing risks; and
other factors disclosed in this quarterly report on Form 10-Q or our other filings with the Securities and Exchange Commission (the “SEC”).
The forward-looking statements contained in this quarterly report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking
3


statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in Part II, Item 1A. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Frequently Used Terms
Unless otherwise stated in Item 1. Financial Statements and accompanying footnotes, or the context otherwise requires, references in this Quarterly Report on Form 10-Q to:
Ayar” are to Ayar Third Investment Company, an affiliate of PIF;

Churchill” are to Churchill Capital Corp IV, a Delaware corporation and our predecessor company prior to the consummation of the Transactions, which changed its name to Lucid Group, Inc. following the consummation of the Transactions, and its consolidated subsidiaries;
Churchill IPO” are to the initial public offering by Churchill which closed on August 3, 2020;
Closing” are to the consummation of the Transactions;
Closing Date” are to July 23, 2021, the date on which the Transactions were consummated;

“Exchange Ratio” are to the quotient as defined in, and calculated in accordance with, the Merger Agreement, which is 2.644;
Legacy Lucid” are to Atieva, Inc., d/b/a Lucid Motors, an exempted company incorporated with limited liability under the laws of the Cayman Islands, and its consolidated subsidiaries before the Closing Date;
Merger” are to the merger of a merger subsidiary of Churchill and Atieva, Inc., with Atieva, Inc. surviving such merger as a wholly owned subsidiary of Churchill;
Merger Agreement” are to that certain Agreement and Plan of Merger, dated as of February 22, 2021, by and among Churchill, Lucid and Merger Sub, as the same has been or may be amended, modified, supplemented or waived from time to time;
PIF” are to the Public Investment Fund;
PIPE Investment” are to the private placement subscription agreements that Churchill entered into contemporaneously with the execution of the Merger Agreement whereby Churchill has agreed to issue and sell to certain investors $2.5 billion of Churchill’s Class A common stock at a purchase price of $15.00 per share. The PIPE Investment closed simultaneously with the Closing of the Merger; and

Transactions” are to the Merger, together with the other transactions contemplated by the Merger Agreement and the related agreements.

Unless the context otherwise requires, all references in this section to “Lucid,” the “Company,” “we,” “us,” “our,” and other similar terms refer to Legacy Lucid and its subsidiaries prior to the Closing, and Lucid Group, Inc., a Delaware corporation, and its subsidiaries after the Closing.
4


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
LUCID GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(in thousands, except share and per share data)
September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$4,796,880 $614,412 
Accounts receivable, net261 260 
Other receivable27,434  
Short-term investments505 505 
Inventory61,155 1,043 
Prepaid expenses80,353 21,840 
Other current assets20,213 24,496 
Total current assets4,986,801 662,556 
Property, plant and equipment, net965,901 713,274 
Right-of-use assets143,782  
Other noncurrent assets42,700 26,851 
TOTAL ASSETS$6,139,184 $1,402,681 
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable$8,914 $17,333 
Accrued compensation28,949 16,197 
Finance lease liabilities, current portion3,268  
Other current liabilities228,277 151,753 
Total current liabilities269,408 185,283 
Convertible preferred stock warrant liability 2,960 
Finance lease liabilities, net of current portion4,687  
Common stock warrant liability836,835  
Other long-term liabilities183,096 39,139 
Total liabilities1,294,026 227,382 
Commitments and contingencies (Note 14)
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock, $0.0001 par value; 0 and 1,058,949,780 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 0 and 957,159,704 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; liquidation preference of $0, and $3,497,913 as of September 30, 2021 and December 31, 2020, respectively
 2,494,076 
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, par value $0.0001; 10,000,000 and 0 shares authorized as of September 30, 2021 and December 31, 2020, respectively; no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
  
Common stock, par value $0.0001; 15,000,000,000 and 1,189,800,259 shares authorized as of September 30, 2021 and December 31, 2020, respectively; 1,641,642,816 and 28,791,702 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
164 3 
Additional paid-in capital9,865,186 38,113 
Accumulated deficit(5,020,192)(1,356,893)
Total stockholders' equity (deficit)4,845,158 (1,318,777)
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)$6,139,184 $1,402,681 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


LUCID GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Unaudited
(in thousands, except share and per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Revenue$232 $334 $719 $342 
Cost of revenue3,320 609 3,424 550 
Gross profit(3,088)(275)(2,705)(208)
Operating expenses
Research and development242,408 133,890 586,579 341,589 
Selling, general and administrative251,554 27,935 455,478 57,719 
Total operating expenses493,962 161,825 1,042,057 399,308 
Loss from operations(497,050)(162,100)(1,044,762)(399,516)
Other income (expense), net
Change in fair value of forward contracts  (454,546)(8,719)
Change in fair value of convertible preferred stock warrant liability (57)(6,976)(171)
Change in fair value of common stock warrant liability(24,787) (24,787) 
Transaction costs expensed(2,717) (2,717) 
Interest expense(76)(10)(111)(20)
Other income (expense), net249 785 (151)76 
Total other income (expense), net(27,331)718 (489,288)(8,834)
Loss before provision for (benefit from) income taxes(524,381)(161,382)(1,534,050)(408,350)
Provision for (benefit from) income taxes22 (145)31 (245)
Net loss and comprehensive loss(524,403)(161,237)(1,534,081)(408,105)
Deemed dividend related to the issuance of Series E convertible preferred stock  (2,167,332) 
Net loss attributable to common stockholders$(524,403)$(161,237)$(3,701,413)$(408,105)
Weighted average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted1,217,032,285 24,279,817 432,654,607 20,889,062 
Net loss per share attributable to common stockholders, basic and diluted$(0.43)$(6.64)$(8.56)$(19.54)















The accompanying notes are an integral part of these condensed consolidated financial statements.
6


LUCID GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (DEFICIT)
Unaudited
(in thousands, except share and per share data)
Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
Three Months Ended September 30, 2021
Shares(1)
Amount
Shares(1)
Amount
Balance as of June 30, 20211,155,909,367 $5,836,785 36,799,150 $4 $26,613 $(4,495,789)$(4,469,172)
Net loss— — — — — (524,403)(524,403)
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization(1,155,909,367)(5,836,785)1,155,909,367 116 5,836,669 — 5,836,785 
Issuance of common stock and common stock warrants upon the reverse recapitalization, net of issuance costs— — 425,395,023 42 3,590,914 — 3,590,956 
Issuance of common stock upon exercise of common stock warrants— — 22,651,424 2 173,271 — 173,273 
Issuance of common stock upon exercise of stock options— — 887,852 — 762 — 762 
Stock-based compensation— — — — 236,957 — 236,957 
Balance as of September 30, 2021 $ 1,641,642,816 $164 $9,865,186 $(5,020,192)$4,845,158 

Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
Three Months Ended September 30, 2020
Shares(1)
Amount
Shares(1)
Amount
Balance as of June 30, 2020667,574,747 $1,513,573 22,842,891 $2 $18,736 $(884,381)$(865,643)
Net loss— — — — — (161,237)(161,237)
Repurchase of Series C convertible preferred stock(9,656,589)(20,398)— — 10,537 — 10,537 
Issuance of Series E convertible preferred stock167,273,525 498,931 — — — — — 
Issuance of common stock upon exercise of stock options— — 4,989,779 1 2,562 — 2,563 
Stock-based compensation— — — — 1,276 — 1,276 
Balance as of September 30, 2020825,191,683 $1,992,106 27,832,670 $3 $33,111 $(1,045,618)$(1,012,504)
(1) The number of shares of convertible preferred stock and common stock issued and outstanding prior to the Merger have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Merger. See Note 1 - Description of Business and Note 3 - Reverse Capitalization for more information.

















The accompanying notes are an integral part of these condensed consolidated financial statements.
7


LUCID GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (DEFICIT) - continued
Unaudited
(in thousands, except share and per share data)
Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
Nine Months Ended September 30, 2021
Shares(1)
Amount
Shares(1)
Amount
Balance as of December 31, 2020957,159,704 $2,494,076 28,791,702 $3 $38,113 $(1,356,893)$(1,318,777)
Net loss— — — — — (1,534,081)(1,534,081)
Repurchase of Series B convertible preferred shares(3,525,365)— — — — —  
Issuance of Series D convertible preferred stock upon exercise of warrants1,546,799 12,936 — — — — — 
Issuance of Series E convertible preferred stock200,728,229 3,206,159 — — (22,395)(2,129,218)(2,151,613)
Share-based compensation related to Series E convertible preferred stock— 123,614 — — — — — 
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization(1,155,909,367)(5,836,785)1,155,909,367 116 5,836,669 — 5,836,785 
Issuance of common stock and common stock warrants upon the reverse recapitalization, net of issuance costs— — 425,395,023 42 3,590,914 — 3,590,956 
Issuance of common stock upon exercise of common stock warrants— — 22,651,424 2 173,271 — 173,273 
Issuance of common stock upon exercise of stock options— — 8,895,300 1 6,028 — 6,029 
Stock-based compensation— — — — 242,586 — 242,586 
Balance as of September 30, 2021 $ 1,641,642,816 $164 $9,865,186 $(5,020,192)$4,845,158 

Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
Nine Months Ended September 30, 2020
Shares(1)
Amount
Shares(1)
Amount
Balance as of December 31, 2019502,582,534 $1,074,010 21,288,741 $2 $16,432 $(637,513)$(621,079)
Net loss— — — — — (408,105)(408,105)
Issuance of Series D convertible preferred stock164,992,213 400,000 — —  —  
Settlement of Series D contingent forward contract liability— 39,563 — — — — — 
Repurchase of Series C convertible preferred stock(9,656,589)(20,398)— — 10,537 — 10,537 
Issuance of Series E convertible preferred stock167,273,525 498,931 — — — — — 
Issuance of common stock upon exercise of stock options— — 6,543,929 1 2,885 — 2,886 
Stock-based compensation— — — — 3,257 — 3,257 
Balance as of September 30, 2020825,191,683 $1,992,106 27,832,670 $3 $33,111 $(1,045,618)$(1,012,504)

(1) The number of shares of convertible preferred stock and common stock issued and outstanding prior to the Merger have been retroactively adjusted by the Exchange Ratio to give effect to the reverse recapitalization treatment of the Merger. See Note 1 - Description of Business and Note 3 - Reverse Capitalization for more information.












The accompanying notes are an integral part of these condensed consolidated financial statements.
8


LUCID GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities
Net loss$(1,534,081)$(408,105)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization26,621 5,447 
Amortization of insurance premium7,184  
Non-cash operating lease cost8,629 — 
Stock-based compensation366,200 3,257 
Loss on disposal of property and equipment56 139 
Change in fair value of contingent forward contract liability454,546 8,719 
Change in fair value of preferred stock warrant liability6,976 171 
Change in fair value of common stock warrant liability24,787  
Changes in operating assets and liabilities:
Accounts receivable(1)(163)
Inventory(60,112)(1,863)
Financed insurance premium(41,935) 
Prepaid expenses(23,762)9,556 
Other current assets8,299 3,254 
Other noncurrent assets and security deposit(5,861)(9,324)
Accounts payable(14,175)(30,109)
Accrued compensation12,752 8,880 
Operating lease liability(4,516)— 
Other liabilities and accrued liabilities17,834 22,732 
Other long-term liabilities5,158 10,002 
Net cash used in operating activities(745,401)(377,407)
Cash flows from investing activities:
Purchases of property, equipment, and software(299,313)(355,860)
Proceed from sale of property, equipment, and software19  
Net cash used in investing activities(299,294)(355,860)
                                











The accompanying notes are an integral part of these condensed consolidated financial statements.
9


LUCID GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
Unaudited
(in thousands)
Nine Months Ended
September 30,
20212020
Cash flows from financing activities:
Payment for short-term insurance financing note $(16,819)$ 
Payment for capital lease liabilities— (174)
Payment for finance lease liabilities(1,915)— 
Proceeds from short-term insurance financing note
41,935  
Repurchase of Series B convertible preferred stock(3,000) 
Repurchase of Series C convertible preferred stock (9,861)
Proceeds from issuance of Series D convertible preferred stock3,000 400,000 
Proceeds from issuance of Series E convertible preferred stock600,000 499,724 
Proceeds from exercise of stock options6,027 2,886 
Proceeds from the exercise of public warrants173,273  
Proceeds from the reverse recapitalization4,439,153  
Payment of transaction costs related to the reverse recapitalization(4,811) 
Net cash provided by financing activities5,236,843 892,575 
Net increase in cash, cash equivalents, and restricted cash4,192,148 159,308 
Beginning cash, cash equivalents, and restricted cash640,418 379,651 
Ending cash, cash equivalents, and restricted cash$4,832,566 $538,959 
Supplemental disclosure of cash flow information:
Cash paid for interest$324 $21 
Supplemental disclosure of non-cash investing and financing activity:
Property and equipment included in accounts payable and accrued expense$5,756 $81,011 
Property and equipment and right-of-use assets obtained through leases70,756 — 
Issuance of Series D convertible preferred stock upon settlement of contingent forward contracts— 39,563 
Issuance of Series D convertible preferred stock upon exercise of preferred stock warrants9,936 — 
Issuance of Series E convertible preferred stock contingent forward contracts2,167,332 793 
Capital contribution upon forfeit of Series E awards15,719  
Issuance of Series E convertible preferred stock upon settlement of contingent forward contracts2,621,878  
Issuance of common stock upon conversion of preferred stock in connection with the reverse recapitalization5,836,785  
Transaction costs related to the reverse recapitalization not yet paid$34,054 $ 










The accompanying notes are an integral part of these condensed consolidated financial statements.
10


LUCID GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 1DESCRIPTION OF BUSINESS
Overview
Lucid Group, Inc. (“Lucid”) is a vertically-integrated technology and automotive company focused on designing, developing, manufacturing, and selling the next generation of electric vehicle (“EV”), EV powertrains and battery systems.
Lucid was originally incorporated in Delaware on April 30, 2020 under the name Churchill Capital Corp IV (formerly known as Annetta Acquisition Corp) (“Churchill”) as a special purpose acquisition company with the purpose of effecting a merger with one or more operating businesses. On February 22, 2021, Churchill entered into a definitive merger agreement (the “Merger Agreement”) with Atieva, Inc. (“Legacy Lucid”) in which Legacy Lucid would become a wholly owned subsidiary of Churchill (the “Merger”). Upon the closing of the Merger on July 23, 2021 (the “Closing”), Churchill was immediately renamed to “Lucid Group, Inc.” The Merger between Churchill and Legacy Lucid was accounted for as a reverse recapitalization. See Note 3 Reverse Recapitalization for more information.
Throughout the notes to the consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us” or “our” and similar terms refer to Legacy Lucid and its subsidiaries prior to the consummation of the Merger, and Lucid and its subsidiaries after the consummation of the Merger.

Liquidity and Going Concern
The Company devotes its efforts to business planning, research and development, recruiting of management and technical staff, acquiring operating assets, and raising capital.
From inception through September 30, 2021, the Company has incurred operating losses and negative cash flows from operating activities. For the nine months ended September 30, 2021 and 2020, the Company has incurred operating losses, including net losses of $1.5 billion and $408.1 million, respectively. The Company has an accumulated deficit of $5.0 billion as of September 30, 2021.
During the quarter ended June 30, 2021, the Company completed the first phase of the construction of its newly built manufacturing plant in Casa Grande, Arizona (the “Arizona plant”). The Company began commercial production of its first vehicle, the Lucid Air, in September 2021 and delivered its first vehicles in late October 2021. The Company continues to expand the Arizona plant and build-out of a network of retail sales and service locations. The Company has plans for continued development of additional vehicle model types for future release. The aforementioned activities will require considerable capital, above and beyond the expected cash inflows from the initial sales of the Lucid Air. As such, the future operating plan involves considerable risk if secure funding sources are not identified and confirmed.
The Company’s existing sources of liquidity include cash and cash equivalents. Prior to the Merger, the Company historically funded operations primarily with issuances of convertible preferred stock and convertible notes. Upon the completion of the Merger, the Company received $4,400.3 million in cash proceeds, net of transaction costs. The Company believes the Merger eliminated the substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of this quarterly report on Form 10-Q (the “Quarterly Report”).
Certain Significant Risks and Uncertainties
The Company’s current business activities consist of research and development efforts to design and develop a high-performance fully electric vehicle and advanced electric vehicle powertrain components, including battery pack systems; building of the Company’s production operations in Casa Grande, Arizona; and build-out of the Company’s retail stores and service centers for distribution of the vehicles to customers. The Company is subject to the risks associated with such activities, including the need to further develop its technology, its marketing, and distribution channels; further develop its supply chain and manufacturing; and hire additional management and other key personnel. Successful completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future events, including its ability to access potential markets, and secure long-term financing.
The Company participates in a dynamic high-technology industry. Changes in any of the following areas could have a material adverse impact on the Company’s future financial position, results of operations, and/or cash flows: advances and trends in new technologies; competitive pressures; changes in the overall demand for its products and services; acceptance of the Company’s products and services; litigation or claims against the Company based on intellectual property, patent, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.
11


In late 2019, a novel strain of coronavirus (COVID-19) began to affect the population of China and expanded into a worldwide pandemic during 2020, leading to significant business and supply chain disruptions, as well as broad-based changes in supply and demand. The Company’s operations have experienced disruptions, such as temporary closure of its offices, and those of its customers and suppliers, and product research and development. The Company was able to proceed with the construction of the Arizona plant while still meeting all COVID-19 restrictions and required safety measures. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak. Nevertheless, COVID-19 presents a material uncertainty and risk with respect to the Company, its performance, and its financial results and could adversely affect the Company’s financial position and results of operations.
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2020 and 2019 included in the final prospectus and definitive proxy statement filed on June 25, 2021 with the SEC pursuant to Rule 424(b)(3) under the Securities Act.
In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2021 and the results of operations for the three and nine months ended September 30, 2021 and 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any other future interim or annual period.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates, assumptions and judgments made by management include, among others, the determination of the useful lives of property and equipment, fair value of preferred stock warrants, fair value of common stock warrants, fair value of contingent forward contracts liability, valuation of deferred income tax assets and uncertain tax positions, fair value of common stock and other assumptions used to measure stock-based compensation expense, and estimated incremental borrowing rates for assessing operating and financing lease liabilities. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original or remaining maturity at the date of purchase of three months or less to be cash equivalents.
Restricted cash in the other current assets is comprised primarily of customer reservation payments for electric vehicles and other escrow deposit for building of the Arizona plant. Restricted cash included in other non-current assets is primarily related to letters of credit issued to the landlord for the Company’s headquarter in Newark, California and retail locations, and escrow deposit required under the escrow agreement for the lease with Pinal county, Arizona, related to the Arizona plant.
12


The following table provides a reconciliation of cash and restricted cash to amounts shown in the statements of cash flows (in thousands):
September 30,
2021
December 31,
2020
September 30,
2020
December 31,
2019
Cash $4,796,880 $614,412 $512,675 $351,684 
Restricted cash included in other current assets10,970 11,278 16,998 19,767 
Restricted cash included in other noncurrent assets24,716 14,728 9,286 8,200 
Total cash and restricted cash$4,832,566 $640,418 $538,959 $379,651 
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, short-term investments, and accounts receivable. The Company places its cash primarily with domestic financial institutions that are federally insured within statutory limits, but at times its deposits may exceed federally insured limits. Further, accounts receivable primarily consists of current trade receivables from a single customer as of September 30, 2021 and December 31, 2020, and the Company’s revenue is primarily from the same customer for each of the three and nine months ended September 30, 2021 and 2020.

Common Stock Warrants

The Company accounts for warrants for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet. Liability-classified common stock warrants are subject to remeasurement to fair value as of any respective exercise date and as of each subsequent balance sheet date with changes in fair value recorded in the Company’s statement of operations. For issued or modified common stock warrants outstanding that meet all of the criteria for equity classification, the common stock warrants are recorded as a component of additional paid-in capital and are not remeasured to fair value in subsequent reporting periods.

The Company’s publicly traded common stock warrants (the “public warrants”) are equity-classified instruments because they are deemed indexed to the Company’s own common stock and did not contain any provision that could require net cash settlement unless the holders of the underlying shares would also receive the same form of consideration as the holders of public warrants. The Company’s privately placed common stock warrants (the “private warrants”) are liability-classified instruments because they are not deemed indexed to the Company’s own common stock.

Other Significant Accounting Policies

As of September 30, 2021, there were no material changes in the other significant accounting policies disclosed in Note 2 of the audited consolidated financial statements as of and for each of the years ended December 31, 2020 and 2019 included in Lucid’s final prospectus and definitive proxy statement filed on June 25, 2021 with the SEC pursuant to Rule 424(b)(3) under the Securities Act.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02 (“ASC 842”), Leases, to require lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvements for Lessors, and ASU 2019-01, Codification Improvements, to clarify and amend the guidance in ASU No. 2016-02. ASC 842 eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. This standard is effective for interim and annual periods beginning after December 15, 2018 for public business entities. Private companies are required to adopt the new leases standard for annual periods beginning after December 15, 2021 and interim periods in annual periods beginning after December 15, 2022. Early adoption is permitted for all entities. The Company adopted ASC 842 as of January 1, 2021 using the modified retrospective approach (“adoption of the new lease standard”). This approach allows entities to either apply the new lease standard to the beginning of the earliest period presented or only to the consolidated financial statements in the period of adoption without restating prior periods. The Company has elected to apply the new guidance at the date of adoption without restating prior periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented. The finance lease classification under ASC 842 includes leases previously classified as capital leases under ASC 840.
The Company has lease agreements with lease and non-lease components, including embedded leases, and has elected not to utilize the practical expedient to account for lease and non-lease components together, rather the Company is accounting for the lease and non-lease components separately on the consolidated financial statements.
13


Operating lease assets are included within operating lease right-of-use (“ROU”) assets. Finance lease assets are included within property, plant and equipment, net. The corresponding operating lease liabilities and finance lease liabilities are included within other current liabilities and other long-term liabilities on the Company’s consolidated balance sheet as of September 30, 2021.
The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the later of ASC 842 adoption date or lease commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at adoption date or lease commencement date in determining the present value of lease payments.
Adoption of the new lease standard on January 1, 2021 had a material impact on the Company’s interim unaudited condensed consolidated financial statements. The most significant impacts related to the (i) recording of ROU asset of $94.2 million, and (ii) recording lease liability of $126.0 million, as of January 1, 2021 on the consolidated balance sheets. The Company also reclassified prepaid expenses of $0.2 million and deferred rent balance, including tenant improvement allowances, and other liability balances of $31.8 million relating to the Company’s existing lease arrangements as of December 31, 2020, into the ROU asset balance as of January 1, 2021. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The standard did not materially impact the Company’s consolidated statement of operations and consolidated statement of cash flows.
The cumulative effect of the changes made to the Company’s consolidated balance sheet as of January 1, 2021 for the adoption of the new lease standard was as follows (in thousands):
Balances at December 31, 2020Adjustments from
Adoption of New Lease
Standard
Balances at
January 1, 2021
Assets
Prepaid expenses$21,840 $(180)$21,660 
Property, plant and equipment, net713,274 3,237 716,511 
Operating lease right-of-use assets 90,932 90,932 
Liabilities
Other current liabilities151,753 8,030 159,783 
Other long-term liabilities39,139 86,152 125,291 
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Topic 740, Income Taxes in order to reduce cost and complexity of its application. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. For nonpublic entities, the guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted if financial statements have not yet been issued (for public business entities) or have not yet been made available for issuance (for all other entities). The Company adopted this ASU starting on January 1, 2021. The adoption of this ASU did not have an immediate impact to the consolidated financial statements and related disclosure.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements or notes thereto.
NOTE 3 REVERSE RECAPITALIZATION
On July 23, 2021, upon the consummation of the Merger, all holders of 451,295,965 issued and outstanding Legacy Lucid common stock received shares of Lucid common stock at a deemed value of $10.00 per share after giving effect to the exchange ratio of 2.644 (the “Exchange Ratio”) resulting in 1,193,226,511 shares of Lucid common stock issued and outstanding as of the Closing and all holders of 42,182,931 issued and outstanding Legacy Lucid equity awards received Lucid equity awards covering 111,531,080 shares of Lucid common stock at a deemed value of $10.00 per share after giving effect to the Exchange Ratio, based on the following events contemplated by the Merger Agreement:
the cancellation and conversion of all 437,182,072 issued and outstanding shares of Legacy Lucid preferred stock into 437,182,072 shares of Legacy Lucid common stock at the conversion rate as calculated pursuant to Legacy Lucid’s memorandum and articles of association at the date and time that the Merger became effective (“Effective Time”);
14


the surrender and exchange of all 451,295,965 issued and outstanding shares of Legacy Lucid common stock (including Legacy Lucid common stock resulting from the conversion of the Legacy Lucid preferred stock) into 1,193,226,511 shares of Lucid common stock as adjusted by the Exchange Ratio;
the cancellation and exchange of all 25,764,610 granted and outstanding vested and unvested Legacy Lucid options, which became 68,121,210 Lucid options exercisable for shares of Lucid common stock with the same terms and vesting conditions except for the number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio; and
the cancellation and exchange of all 16,418,321 granted and outstanding vested and unvested Legacy Lucid RSUs, which became 43,409,870 Lucid RSUs for shares of Lucid common stock with the same terms and vesting conditions except for the number of shares, which was adjusted by the Exchange Ratio.
The other related events that occurred in connection with the Closing are summarized below:
Churchill entered into separate private placement subscription agreements (the “PIPE Investment”) contemporaneously with the execution of the Merger Agreement pursuant to which Churchill agreed to sell and issue an aggregate of 166,666,667 shares of common stock at a purchase price of $15.00 per share for an aggregate purchase price of $2,500.0 million. The PIPE Investment closed simultaneously with the Closing of the Merger;
Churchill Sponsor IV LLC (the “Churchill Sponsor”) exercised its right to convert the outstanding and unpaid amount of $1.5 million under the working capital loan provided by the Churchill Sponsor to Churchill into an additional 1,500,000 private warrants at a price of $1.00 per warrant in satisfaction of such loan;
Churchill and the Churchill Sponsor entered into a letter agreement (the “Sponsor Agreement”), pursuant to which the Churchill Sponsor agreed that 17,250,000 shares of Churchill’s issued and outstanding common stock beneficially held by the Churchill Sponsor (the “Sponsor Earnback Shares”) and 14,783,333 private warrants beneficially held by the Churchill Sponsor (the “Sponsor Earnback Warrants”) to purchase shares of the Churchill’s common stock shall become subject to transfer restrictions and contingent forfeiture provisions upon the Closing of the Merger until Lucid’s stock price exceeded certain predetermined levels in the post-Merger period. Any such shares and warrants not released from these transfer restrictions during the earnback period, which expires on the fifth anniversary of the Closing, will be forfeited back to Lucid for no consideration. See Note 11 - Earnback Shares and Warrants for more information; and
Churchill redeemed 21,644 public shares of Churchill’s Class A common stock at approximately $10.00 per share for an aggregate payment of $0.2 million.

After giving effect to the Merger and the redemption of Churchill shares as described above, the number of shares of common stock issued and outstanding immediately following the consummation of the Merger was as follows:
Shares
Churchill public shares, prior to redemptions207,000,000 
Less redemption of Churchill shares(21,644)
Churchill public shares, net of redemptions206,978,356 
Churchill Sponsor shares(1)
51,750,000 
PIPE shares(2)
166,666,667 
Total shares of Churchill common stock outstanding immediately prior to the Merger425,395,023 
Legacy Lucid shares1,193,226,511 
Total shares of Lucid common stock outstanding immediately after the Merger(3)(4)
1,618,621,534 
(1)The 51,750,000 shares beneficially owned by the Churchill Sponsor as of the Closing of the Merger includes the 17,250,000 Sponsor Earnback Shares.
(2)Reflects the sale and issuance of 166,666,667 shares of common stock to the PIPE Investors at $15.00 per share.
(3)Excludes 111,531,080 shares of common stock as of the Closing of the Merger to be reserved for potential future issuance upon the exercise of Lucid options or settlement of Lucid RSUs.
(4)Excludes the 85,750,000 warrants issued and outstanding as of the Closing of the Merger, which includes the 41,400,000 public warrants and the 44,350,000 private warrants held by the Churchill Sponsor. The 44,350,000 private warrants beneficially owned by the Churchill Sponsor as of the consummation of the Merger includes the 14,783,333 Sponsor Earnback Warrants.
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The Merger has been accounted for as a reverse recapitalization under U.S. GAAP. Under this method of accounting, Churchill has been treated as the acquired company for financial reporting purposes. The reverse recapitalization accounting treatment was primarily determined based on the stockholders of Legacy Lucid having a relative majority of the voting power of Lucid and having the ability to nominate the majority of the members of the Lucid board of directors, senior management of Legacy Lucid comprise the senior management of Lucid, and the strategy and operations of Legacy Lucid prior to the Merger comprise the only ongoing strategy and operations of Lucid. Accordingly, for accounting purposes, the financial statements of Lucid represent a continuation of the financial statements of Legacy Lucid with the Merger being treated as the equivalent of Legacy Lucid issuing shares for the net assets of Churchill, accompanied by a recapitalization. The net assets of Churchill were recognized as of the Closing at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger are presented as those of Legacy Lucid and the accumulated deficit of Legacy Lucid has been carried forward after Closing.
All periods prior to the Merger have been retrospectively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Closing to effect the reverse recapitalization.
In connection with the Closing of the Merger, the Company raised $4,439.2 million of gross proceeds, including the contribution of $2,070.1 million of cash held in Churchill’s trust account from its initial public offering along with $2,500.0 million of cash raised by Churchill in connection with the PIPE Investment and $0.4 million of cash held in the Churchill operating cash account. The gross proceeds were net of $0.2 million paid to redeem 21,644 shares of Churchill Class A common stock held by public stockholders and $131.4 million in costs incurred by Churchill prior to the Closing. The Company additionally incurred $38.9 million of transaction costs, consisting of banking, legal, and other professional fees, of which $36.2 million was recorded as a reduction to additional paid-in capital of proceeds and the remaining $2.7 million was expensed in the condensed consolidated statements of operations. The total net cash proceeds to the Company were $4,400.3 million.
NOTE 4 – BALANCE SHEETS COMPONENTS
INVENTORY
Inventory as of September 30, 2021 and December 31, 2020 were as follows (in thousands):

September 30,
2021
December 31,
2020
Raw materials$48,588 $661 
Work in progress11,891 70 
Finished goods676 312 
Total inventory$61,155 $1,043 

Inventory as of September 30, 2021 is primarily related to raw materials and work in progress related to the production of vehicles for sale. The inventory as of September 30, 2021 and December 31, 2020 also includes battery pack systems with its customers.

PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment as of September 30, 2021 and December 31, 2020 were as follows (in thousands):
September 30,
2021
December 31,
2020
Land and land improvements$1,050 $1,050 
Building and improvements190,417  
Machinery480,259 28,830 
Computer equipment and software26,174 15,716 
Leasehold improvements89,106 47,187 
Furniture and fixtures10,442 4,503 
Capital leases 3,908 
Finance leases9,857  
Construction in progress208,331 636,851 
Total property, plant, and equipment1,015,636 738,045 
Less accumulated depreciation and amortization(49,735)(24,771)
Property, plant, and equipment — net$965,901 $713,274 
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Construction in progress represents the costs incurred in connection with the construction of buildings or new additions to the Company’s plant facilities including tooling, which is with outside vendors. Costs classified as construction in progress include all costs of obtaining the asset and bringing it to the location in the condition necessary for its intended use. No depreciation is provided for construction in progress until such time as the assets are completed and are ready for use. Construction in progress consisted of the following (in thousands):
September 30,
2021
December 31,
2020
Tooling$106,402 $203,241 
Construction of Arizona plant10,806 171,532 
Leasehold improvements67,965 50,790 
Machinery and equipment23,158 211,288 
Total construction in progress$208,331 $636,851 
Depreciation and amortization expense for the three months ended September 30, 2021 and 2020, was approximately $14.9 million and $2.1 million, respectively, and for the nine months ended September 30, 2021 and 2020, was approximately $26.6 million and $5.4 million, respectively.
OTHER CURRENT AND LONG-TERM LIABILITIES
Other current liabilities and long-term liabilities as of September 30, 2021 and December 31, 2020 were as follows (in thousands):
September 30,
2021
December 31,
2020
Engineering, design, and testing accrual$31,271 $42,518 
Construction in progress21,638 43,115 
Retail leasehold improvements accrual15,203 6,114 
Other professional services accrual6,029 9,083 
Tooling liability12,338 15,243 
Payroll tax liability32,728  
Series B convertible preferred stock repurchase liability 3,000 
Short-term insurance financing note
24,674 980 
Operating lease liabilities, current portion14,611  
Transaction cost liability40,981  
Other liabilities28,804 31,700 
Total other current liabilities$