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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022

OR

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

Commission file number 001-39546

Proterra Inc
(Exact name of registrant as specified in its charter)

Delaware
98-1551379
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1815 Rollins Road
Burlingame, California
94010
(Address of Principal Executive Offices)
(Zip Code)
(864) 438-0000
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 sharePTRAThe 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  x    No  o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes  x  No  o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerxAccelerated filer
o
Non-accelerated filer  
o
Smaller reporting company
o
Emerging growth company
o
                
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 Act).     Yes   o     No  x


The registrant had outstanding 225.1 million shares of common stock as of July 29, 2022.





TABLE OF CONTENTS
2


Explanatory Note – Certain Defined Terms
Unless otherwise stated in this Quarterly Report on Form 10-Q (the “Quarterly Report”) or the context otherwise requires, references to:
“ArcLight” means ArcLight Clean Transition Corp., a Cayman Islands exempted company, prior to the consummation of the Domestication;
“Business Combination” means the Domestication, the Merger and the other transactions contemplated by the Merger Agreement, collectively, including the PIPE Financing;
“Class A ordinary shares” means the Class A ordinary shares, par value $0.0001 per share, of ArcLight, prior to the Domestication, which automatically converted, on a one-for-one basis, into shares of common stock in connection with the Domestication;
“Class B ordinary shares” means the Class B ordinary shares, par value $0.0001 per share, of ArcLight that were initially issued to the Sponsor (a portion of which were subsequently transferred to the other initial shareholders) in a private placement prior to ArcLight’s initial public offering, and, in connection with the Domestication, which automatically converted, on a one-for-one basis, into shares of common stock;
“Closing” means the closing of the Business Combination;
“Closing Date” means June 14, 2021;
“common stock” means the common stock, par value $0.0001 per share, of Proterra;
“Domestication” means the transfer by way of continuation and deregistration of ArcLight from the Cayman Islands and the continuation and domestication of ArcLight as a corporation incorporated in the State of Delaware;
“initial public offering” means ArcLight’s initial public offering that was consummated on September 25, 2020;
“Legacy Proterra” means Proterra Inc, a Delaware corporation, prior to the consummation of the Business Combination;
“Merger” means the merger of Phoenix Merger Sub with and into Legacy Proterra pursuant to the Merger Agreement, with Legacy Proterra as the surviving company in the Merger and, after giving effect to such Merger, Legacy Proterra becoming a wholly-owned subsidiary of Proterra;
“Merger Agreement” means that certain Merger Agreement, dated as of January 11, 2021 (as may be amended, supplemented or otherwise modified from time to time), by and among ArcLight, Phoenix Merger Sub and Legacy Proterra;
“Phoenix Merger Sub” refers to Phoenix Merger Sub, Inc., a Delaware corporation and a wholly-owned direct subsidiary of ArcLight;
“PIPE Financing” means the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors collectively subscribed for 41,500,000 shares of common stock for an aggregate purchase price of $415,000,000 in connection with the Closing;
“PIPE Investors” means the investors who participated in the PIPE Financing and entered into the Subscription Agreements;
“private placement warrants” means the 7,550,000 private placement warrants outstanding as of September 30, 2021 that were issued to the Sponsor as part of ArcLight’s initial public offering, which were substantially identical to the public warrants, subject to certain limited exceptions; the Sponsor
3


exercised the private placement warrants on a “cashless” basis in connection with our redemption of our remaining outstanding public warrants on October 26, 2021;
“Proterra” means ArcLight upon and after Closing;
“public warrants” means the 13,874,994 redeemable warrants to purchase common stock outstanding as of September 30, 2021 that were issued by ArcLight in its initial public offering; on October 29 2021, we redeemed the remaining outstanding public warrants that had not previously been exercised at a redemption price of $0.10 per public warrant;
“Sponsor” means ArcLight CTC Holdings, L.P., a Delaware limited partnership; and
“Subscription Agreements” means the subscription agreements, entered into by ArcLight and each of the PIPE Investors in connection with the PIPE Financing.
In addition, unless otherwise indicated or the context otherwise requires, references in this Quarterly Report to the “Company,” “we,” “us,” “our” and other similar terms refer to Legacy Proterra prior to the Business Combination and to Proterra and its consolidated subsidiaries after giving effect to the Business Combination.
4


Forward-Looking Statements
This Quarterly Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This Quarterly Report contains forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. These statements are based on the beliefs and assumptions of our management. We also may provide forward-looking statements in oral statements or other written materials released to the public. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes”, “estimates”, “expects”, “projects”, “forecasts”, “may”, “will”, “should”, “seeks”, “plans”, “scheduled”, “anticipates” or “intends” or similar expressions. Forward-looking statements contained in this Quarterly Report may include, for example, statements about:
our financial and business performance, including business metrics;
the ability to maintain the listing of our common stock on the Nasdaq Global Select Market (“Nasdaq”), and the potential liquidity and trading of our common stock;
changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
substantial regulations, which are evolving, and unfavorable changes or failure by us to comply with these regulations;
expectations regarding corporate, state, federal and international mandates/commitments;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors, and our ability to attract and retain key personnel;
the anticipated success of our most recent business expansion with Proterra Powered and Proterra Energy, and our ability to attract the customers and business partners we expect;
forecasts regarding long-term end-customer adoption rates and demand for our products in markets that are new and rapidly evolving and our ability to meet demand for our products;
our ability to compete successfully against current and future competitors in light of intense and increasing competition in the transit bus and commercial vehicle electrification market;
the availability of government economic incentives and government funding for public transit upon which our transit business is significantly dependent;
willingness of corporate and other public transportation providers to adopt and fund the purchase of electric vehicles for mass transit;
availability of a limited number of suppliers for our products and services;
material losses and costs from product warranty claims, recalls, or remediation of electric transit buses for real or perceived deficiencies or from customer satisfaction campaigns;
increases in costs, disruption of supply, or shortage of materials, particularly lithium-ion cells;
our dependence on a small number of customers that fluctuate from year to year, and failure to add new customers or expand sales to our existing customers;
5


our dependence on our business suppliers, particularly as we build out new facilities;
rapid evolution of our industry and technology, and related unforeseen changes, including developments in alternative technologies and powertrains or improvements in the internal combustion engine that could adversely affect the demand for our electric transit buses;
development, maintenance and growth of strategic relationships in the Proterra Powered or Proterra Energy business, identification of new strategic relationship opportunities, or formation strategic relationships;
competition for the business of both small and large transit agencies, which place different demands on our business, including the need to build an organization that can serve both types of transit customers;
accident or safety incidents involving our buses, battery systems, electric drivetrains, high-voltage systems or charging solutions;
product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims;
changes to U.S. trade policies, including new tariffs or the renegotiation or termination of existing trade agreements or treaties;
various environmental and safety laws and regulations that could impose substantial costs upon us and negatively impact our ability to operate our manufacturing facilities; outages and disruptions of our services if we fail to maintain adequate security and supporting infrastructure as we scale our information technology systems;
availability of additional capital to support business growth;
failure to protect our intellectual property;
intellectual property rights claims by third parties, which could be costly to defend, related significant damages and resulting limits on our ability to use certain technologies;
developments and projections relating to our competitors and industry;
our anticipated growth rates and market opportunities;
the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements;
the potential for our business development efforts to maximize the potential value of our portfolio;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
the inability to develop and maintain effective internal controls;
the diversion of management’s attention and consumption of resources as a result of potential acquisitions of other companies;
failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows;
cyber-attacks and security vulnerabilities; and
6


the effect of the COVID-19 pandemic, macroeconomic conditions, such as rising inflation rates, uncertain credit and global financial markets and supply chain disruptions, and geopolitical events, such as the conflict between Russia and Ukraine and related sanctions, on the foregoing.
These forward-looking statements are based on information available as of the date of this Quarterly Report, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements such as those contained in documents we have filed with the Securities and Exchange Commission (the “SEC”). Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or similar transactions.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. For a discussion of the risks involved in our business and investing in our common stock, see Part II, Item 1A. titled “Risk Factors.”
Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.
7


Summary of Risk Factors
The below summary of risk factors provides an overview of many of the risks we are exposed to in the normal course of our business activities. As a result, the following summary of risks does not contain all of the information that may be important to you, and you should read the summary of risks together with the more detailed discussion of risks set forth in Part II, Item 1A under the heading “Risk Factors,” and elsewhere in this Quarterly Report. Additional risks, beyond those summarized below or discussed elsewhere in this Quarterly Report, may apply to our activities or operations as currently conducted or as we may conduct them in the future or in the markets in which we operate or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including risks associated with the following:
Our limited history of selling battery systems, electrification and charging solutions, fleet and energy management systems, electric transit buses, and related technologies makes it difficult to evaluate our business and prospects and may increase the risks associated with your investment.
Our most recent business expansion with Proterra Powered and Proterra Energy may not be as successful as anticipated, may not attract the customers and business partners we expect, and the assumptions underlying the growth prospects of these businesses may not prove to be accurate.
Because many of the markets in which we compete are new and rapidly evolving, including possible consolidation of industry players, it is difficult to forecast long-term end-customer adoption rates and demand for our products, and our ability to meet demand for our products.
We face intense and increasing competition in the transit bus market and may not be able to compete successfully against current and future competitors, which could adversely affect our business, revenue growth, and market share.
We have been and may continue to be impacted by macroeconomic conditions resulting from the global COVID-19 pandemic including supply chain disruptions.
Our transit business is significantly dependent on government funding for public transit, and the unavailability, reduction, or elimination of government economic incentives would have an adverse effect on our business, prospects, financial condition, and operating results.
The growth of our transit business is dependent upon the willingness of corporate and other public transportation providers to adopt and fund the purchase of electric vehicles for mass transit.
Our dependence on a limited number of suppliers introduces significant risk that could have adverse effects on our financial condition and operating results.
We have a long sales, production, and technology development cycle for new public transit customers, which may create fluctuations in whether and when revenue is recognized and may have an adverse effect on our business.
We have a history of net losses, have experienced rapid growth and anticipate increasing our operating expenses in the future, and may not achieve or sustain positive gross margin or profitability in the future.
We could incur material losses and costs from product warranty claims, recalls, or remediation of electric transit buses for real or perceived deficiencies or from customer satisfaction campaigns.
Increases in costs, disruption of supply, or shortage of materials, particularly lithium-ion cells, could harm our business.
Our annual revenue has in the past depended, and will likely continue to depend, on a small number of customers that fluctuate from year to year, and failure to add new customers or expand sales to our existing customers could have an adverse effect on our operating results for a particular period.
8


Our industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies and powertrains or improvements in the internal combustion engine may adversely affect the demand for our electric transit buses and our electric battery solutions for commercial vehicles.
We may not be able to develop, maintain and grow strategic relationships in the Proterra Powered or Proterra Energy business, identify new strategic relationship opportunities, or form strategic relationships, in the future.
We are competing for the business of both small and large transit agencies, which place different demands on our business, and if we do not build an organization that can serve both types of transit customers by scaling our internal resources to meet varying customer needs, our business, prospects, financial condition and operating results may be harmed.
Our business is subject to substantial regulations and compliance programs, which are evolving, and unfavorable changes or failure by us to comply with these regulations and compliance programs could have an adverse effect on our business.
The use of lithium-ion cells may become disfavored as a result of the availability, or perceived superiority of, other types of batteries or yet undeveloped or unknown technologies.
Our business could be adversely affected from an accident or safety incident involving our battery systems, electrification and charging solutions, fleet and energy management systems, electric transit buses or defaults in the materials or workmanship of our composite bus bodies or other components.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
Changes to U.S. trade policies, including new tariffs or the renegotiation or termination of existing trade agreements or treaties, may adversely affect our financial performance.
We are subject to various environmental and safety laws and regulations that could impose substantial costs upon us and negatively impact our ability to operate our manufacturing facilities if we fail in our efforts to abide by these laws and regulations.
We may experience outages and disruptions of our services if we fail to maintain adequate security and supporting infrastructure as we scale our information technology systems.
We may require additional capital to support business growth, and such capital might not be available on terms acceptable to us, if at all.
Failure to protect our intellectual property could adversely affect our business.
We may be subject to intellectual property rights claims by third parties, which could be costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.
Our loan and security agreements contain covenants that may restrict our business and financing activities.
If we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable law and regulations could be impaired.
Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.
Our management team has limited experience managing a public company.
9


Part I. Financial Information
Item 1. Financial Statements
PROTERRA INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
June 30, 2022December 31, 2021
(Unaudited)(Note 1)
Assets:
Cash and cash equivalents$52,722 $170,039 
Accounts receivable, net82,682 81,644 
Short-term investments470,490 490,967 
Inventory149,050 114,556 
Prepaid expenses and other current assets17,015 15,300 
Deferred cost of goods sold3,956 1,816 
Restricted cash, current12,105 12,105 
Total current assets788,020 886,427 
Property, plant, and equipment, net82,204 62,246 
Operating lease right-of-use assets
25,745 24,282 
Restricted cash, non-current460 460 
Long-term inventory prepayment10,000  
Other assets10,261 8,472 
Total assets$916,690 $981,887 
Liabilities and Stockholders’ Equity:
Accounts payable$55,816 $53,404 
Accrued liabilities20,286 20,634 
Deferred revenue, current13,536 13,821 
Operating lease liabilities, current6,618 4,084 
Total current liabilities96,256 91,943 
Debt, non-current111,457 110,999 
Deferred revenue, non-current26,836 22,585 
Operating lease liabilities, non-current20,264 20,963 
Other long-term liabilities15,427 15,245 
Total liabilities270,240 261,735 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.0001 par value; 500,000 shares authorized and 224,979 shares issued and outstanding as of June 30, 2022 (unaudited); 500,000 shares authorized and 221,960 shares issued and outstanding as of December 31, 2021
22 22 
Preferred stock, $0.0001 par value; 10,000 shares authorized and zero shares issued and outstanding as of June 30, 2022 (unaudited); 10,000 shares authorized, zero shares issued and outstanding as of December 31, 2021
  
Additional paid-in capital
1,599,246 1,578,943 
Accumulated deficit
(950,124)(858,225)
Accumulated other comprehensive loss(2,694)(588)
Total stockholders’ equity
646,450 720,152 
Total liabilities and stockholders’ equity
$916,690 $981,887 
See accompanying notes to unaudited condensed consolidated financial statements.
10


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Product revenue$70,256 $56,072 $124,427 $107,494 
Parts and other service revenue4,308 2,430 8,718 5,014 
Total revenue74,564 58,502 133,145 112,508 
Product cost of goods sold69,109 54,948 126,335 105,479 
Parts and other service cost of goods sold4,900 2,241 9,258 4,845 
Total cost of goods sold74,009 57,189 135,593 110,324 
Gross profit (loss)555 1,313 (2,448)2,184 
Research and development14,904 10,315 26,706 20,015 
Selling, general and administrative31,705 20,744 60,092 39,204 
Total operating expenses46,609 31,059 86,798 59,219 
Loss from operations(46,054)(29,746)(89,246)(57,035)
Interest expense, net6,951 29,129 13,830 37,926 
Gain on debt extinguishment(10,201) (10,201) 
Loss on valuation of derivative and warrant liabilities 129,789  146,110 
Other expense (income), net(983)363 (976)118 
Loss before income taxes(41,821)(189,027)(91,899)(241,189)
Provision for income taxes    
Net loss$(41,821)$(189,027)$(91,899)$(241,189)
Net income (loss) per share of common stock:
Basic$(0.19)$(4.24)$(0.41)$(9.49)
Diluted$(0.38)$(4.24)$(0.56)$(9.49)
Weighted average shares used in per share computation:
Basic223,745 44,571 223,015 25,403 
Diluted248,876 44,571 247,870 25,403 
See accompanying notes to unaudited condensed consolidated financial statements.

11


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Net loss$(41,821)$(189,027)$(91,899)$(241,189)
Other comprehensive loss, net of taxes:
Available-for-sales securities:
Unrealized losses on available-for-sale securities(465) (2,106) 
Other comprehensive loss, net of taxes(465) (2,106) 
Total comprehensive loss, net of taxes$(42,286)$(189,027)$(94,005)$(241,189)
See accompanying notes to unaudited condensed consolidated financial statements.
12


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal
Three Months Ended June 30, 2022SharesAmountSharesAmount
Balance, March 31, 2022 $ 222,703 $22 $1,585,418 $(908,303)$(2,229)$674,908 
Stock issuance for exercise of stock options, net of costs— — 1,951 — 6,011 — — 6,011 
Stock issuance for employee stock purchase plan— — 325 — 1,502 — — 1,502 
Stock-based compensation— — — — 6,315 — — 6,315 
Net loss— — — — — (41,821)— (41,821)
Other comprehensive loss, net of taxes— — — — — — (465)(465)
Balance, June 30, 2022
 $ 224,979 $22 $1,599,246 $(950,124)$(2,694)$646,450 
Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal
Three Months Ended June 30, 2021SharesAmountSharesAmount
Balance, March 31, 2021115,136 $13 6,244 $1 $687,692 $(660,381)$ $27,325 
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization(115,136)(13)115,576 11 2 — —  
Conversion of Convertible Notes into common stock— — 7,424 1 48,780 — — 48,781 
Issuance of common stock upon the reverse recapitalization, net of issuance costs— — 76,172 8 502,419 — — 502,427 
Issuance of stock upon exercise of options and warrants, net of costs— — 2,205 — 1,778 — — 1,778 
Reclassification of derivative liability upon the reverse recapitalization— — — — 182,554 — — 182,554 
Reclassification of Legacy Proterra warrant liability upon the reverse recapitalization— — — — 87,016 — — 87,016 
Stock-based compensation— — — — 5,090 — — 5,090 
Net loss— — — — — (189,027)— (189,027)
Balance, June 30, 2021
 $ 207,621 $21 $1,515,331 $(849,408)$ $665,944 
Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal
Six Months Ended June 30, 2022SharesAmountSharesAmount
Balance, December 31, 2021 (Note 1)
 $ 221,960 $22 $1,578,943 $(858,225)$(588)$720,152 
Stock issuance for exercise of stock options, net of costs— — 2,694 — 7,844 — — 7,844 
Stock issuance for employee stock purchase plan— — 325 — 1,502 — — 1,502 
Stock-based compensation— — — — 10,957 — — 10,957 
Net loss— — — — — (91,899)— (91,899)
Other comprehensive loss, net of taxes— — — — — — (2,106)(2,106)
Balance, June 30, 2022
 $ 224,979 $22 $1,599,246 $(950,124)$(2,694)$646,450 
Convertible Preferred StockCommon StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal
Six Months Ended June 30, 2021SharesAmountSharesAmount
Balance, December 31, 2020 (Note 1)115,136 $13 5,678 $1 $682,671 $(608,219)$ $74,466 
Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization(115,136)(13)115,576 11 2 — —  
Conversion of Convertible Notes into common stock— — 7,424 1 48,780 — — 48,781 
Issuance of common stock upon the reverse recapitalization, net of issuance costs— — 76,172 8 502,419 — — 502,427 
Issuance of stock upon exercise of options and warrants, net of costs— — 2,771 — 3,802 — — 3,802 
Reclassification of derivative liability upon the reverse recapitalization— — — — 182,554 — — 182,554 
Reclassification of Legacy Proterra warrant liability upon the reverse recapitalization— — — — 87,016 — — 87,016 
Stock-based compensation— — — — 8,087 — — 8,087 
Net loss— — — — — (241,189)— (241,189)
Balance, June 30, 2021
 $ 207,621 $21 $1,515,331 $(849,408)$ $665,944 
See accompanying notes to unaudited condensed consolidated financial statements.
13


PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net loss$(91,899)$(241,189)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization6,672 7,737 
Stock-based compensation10,957 8,087 
Amortization of debt discount and issuance costs6,833 28,346 
Accretion of debt end of term charge and PIK interest3,665 4,564 
Gain on debt extinguishment(10,007) 
Loss on valuation of derivative and warrant liabilities 146,110 
Others53 521 
Changes in operating assets and liabilities:
Accounts receivable(1,026)(13,325)
Inventory(33,979)(2,582)
Prepaid expenses and other current assets(1,792)(1,500)
Deferred cost of goods sold(2,139)878 
Operating lease right-of-use assets and liabilities372 (55)
Other assets(11,830)(984)
Accounts payable and accrued liabilities3,259 11,397 
Deferred revenue, current and non-current3,966 4,161 
Other non-current liabilities197 949 
Net cash used in operating activities(116,698)(46,885)
Cash flows from investing activities:
Purchase of investments(297,672)(137,087)
Proceeds from maturities of investments316,000 79,000 
Purchase of property and equipment(27,577)(5,321)
Net cash used in investing activities(9,249)(63,408)
Cash flows from financing activities:
Proceeds from reverse recapitalization, net of transaction costs 646,441 
Repayment of debt and prepayment penalty
 (17,083)
Repayment of finance obligation(16)(242)
Proceeds from (repayment of) government grants(700)1,079 
Proceeds from exercise of stock options7,844 3,802 
Proceeds from employee stock purchase plan1,502  
Net cash provided by financing activities8,630 633,997 
Net increase (decrease) in cash and cash equivalents, and restricted cash(117,317)523,704 
Cash and cash equivalents, and restricted cash at the beginning of period182,604 123,697 
Cash and cash equivalents, and restricted cash at the end of period$65,287 $647,401 
Supplemental disclosures of cash flow information:
Cash paid for interest$4,155 $4,853 
Cash paid for income taxes  
Non-cash investing and financing activity:
Assets acquired through accounts payable and accrued liabilities$4,545 $947 
Non-cash transfer of assets to inventory515 465 
Reclassification of Convertible Notes warrants liability upon exercise  17,696 
Conversion of Convertible Notes into common stock  48,607 
Reclassification of remaining Convertible Notes warrants liability upon the reverse recapitalization  69,320 
Reclassification of derivative liability upon the reverse recapitalization  182,554 
Conversion of convertible preferred stock into common stock 627,315 
See accompanying notes to unaudited condensed consolidated financial statements.
14

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.    Summary of Significant Accounting Policies
Organization and Description of Business
Proterra Inc (“Proterra”), formerly known as ArcLight Clean Transition Corp. (“ArcLight”), is a leading developer and producer of electric vehicle technology for commercial applications. Proterra designs, develops, manufactures, and sells electric transit buses as an original equipment manufacturer for North American public transit agencies, airports, universities, and other commercial transit fleets. It also designs, develops, manufactures, sells, and integrates proprietary battery systems and electrification solutions for global commercial vehicle manufacturers. Additionally, Proterra provides fleet-scale, high-power charging solutions for its customers.
Legacy Proterra (as defined below) was originally formed in June 2004 as a Colorado limited liability company and converted to a Delaware corporation in February 2010. Proterra operates from its headquarters and battery production facility in Burlingame, California. Proterra also has manufacturing and product development facilities in Greenville and Greer, South Carolina and City of Industry, California.
On June 11, 2021, ArcLight filed a notice of deregistration with the Cayman Islands Registrar of Companies, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which ArcLight was domesticated and continued as a Delaware corporation. On June 14, 2021 (the “Closing Date”), ArcLight consummated a merger with Phoenix Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of ArcLight (“Phoenix Merger Sub”), and Proterra Inc, a Delaware corporation (“Legacy Proterra”), with Legacy Proterra surviving as the surviving company and as a wholly-owned subsidiary of ArcLight (the “Merger” and, collectively with the other transactions described in the Agreement and Plan of Merger (the “Merger Agreement”), the “Business Combination”). In connection with the Business Combination, Legacy Proterra changed its name to “Proterra Operating Company, Inc.” and ArcLight changed its name to “Proterra Inc”.
The Merger was accounted for as a reverse merger and a recapitalization with Legacy Proterra being the accounting acquirer. Accordingly, all historical financial information presented in the unaudited condensed consolidated financial statements of Proterra represents the accounts of Legacy Proterra and its wholly owned subsidiaries as if Legacy Proterra is the predecessor to Proterra. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (0.8925 shares of Legacy Proterra common stock for 1 share of Proterra common stock) (the “Exchange Ratio”). Unless otherwise specified or unless the context otherwise requires, references in these notes to the “Company,” “we,” “us,” or “our” refer to Legacy Proterra prior to the Business Combination and to Proterra following the Business Combination.
Prior to the closing of the Business Combination (the “Closing”), ArcLight’s Class A ordinary shares and public warrants were listed on the Nasdaq Capital Market under the symbols “ACTC” and “ACTCW,” respectively. Proterra’s common stock is currently listed on the Nasdaq Global Select Market under the symbol “PTRA”. See Note 3 “Reverse Recapitalization” for further details of the Merger. The Company’s public warrants were previously listed on the Nasdaq Global Select Market under the symbol “PTRAW.” On October 29, 2021, the Company redeemed its remaining outstanding public warrants at a redemption price of $0.10 per public warrant.
The Company has incurred net losses and negative cash flows from operations since inception. As of June 30, 2022, the Company has an accumulated deficit of $950.1 million. The Company has $523.2 million of cash and cash equivalents and short-term investments as of June 30, 2022. The Company has funded operations primarily through a combination of equity and debt financing. Management believes that the Company’s currently available resources will be sufficient to fund its cash requirements for at least the next twelve months. However, there can be no assurance that future financings will be successfully completed or completed on terms acceptable to the Company. These financial statements do not include any adjustments that may result from the outcome of this uncertainty.
15

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 and the related notes incorporated by referenced in the Company’s Annual Report (the “Annual Report”) on Form 10-K, filed with SEC on March 14, 2022, which provides a more complete discussion of the Company’s accounting policies and certain other information. The information as of December 31, 2021 and 2020 was derived from the Company’s audited financial statements. The condensed consolidated financial statements were prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2022 and the results of operations and cash flows for the three and six months ended June 30, 2022 and 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Use of Estimates
In preparing the condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC, the Company must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ materially from these estimates.
Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies described in the Annual Report.
The Company has not experienced any significant impact to estimates or assumptions as a result of the COVID-19 pandemic. However, the Company’s financial results have been impacted by ongoing constraints and inefficiencies in production largely driven by shortages of component parts and shipment delays, and workforce absences due to illness or quarantines during the pandemic experienced by the Company or its suppliers. The Company will continue to monitor impacts of the COVID-19 pandemic on an ongoing basis. While the COVID-19 pandemic has not had a material adverse impact on the Company’s financial condition and results of operations to date, the gravity of the impact of the COVID-19 pandemic and related macroeconomic and geopolitical conditions on the Company’s future operational and financial performance will depend on certain developments, including the duration of the pandemic and spread of COVID-19 (including the variant strains of the virus), the impact on the Company’s customers and the effect on the Company’s suppliers, all of which are uncertain and cannot be predicted.
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Segments
The Company operates in the United States and has sales to the European Union, Canada, United Kingdom, Australia, Japan and Turkey. Revenue disaggregated by geography, based on the addresses of the Company’s customers, consists of the following (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
United States$61,673 $51,921 $113,640 $104,490 
Rest of World12,891 6,581 19,505 8,018 
74,564 58,502 $133,145 $112,508 
The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented at the entity level. Accordingly, the Company has determined that it has a single reportable segment.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for credit losses based on historical write-off experience, an analysis of the aging of outstanding receivables, customer payment patterns and expectations of changes in macroeconomic conditions that may affect the collectability of outstanding receivables. The allowance for credit losses was not material as of June 30, 2022 and December 31, 2021.
Credit Risk and Concentration
The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments, and accounts receivable. Cash and cash equivalents and short-term investments are maintained primarily at one financial institution as of June 30, 2022, and deposits exceed federally insured limits. Risks associated with cash and cash equivalents, and short-term investments are mitigated by banking with creditworthy financial institutions. The Company has not experienced any losses on its deposits of cash and cash equivalents or its short-term investments.
Cash equivalents and short-term investments consist of short-term money market funds, corporate debt securities, and debt securities issued by the U.S. Treasury, which are deposited with reputable financial institutions. The Company’s cash management and investment policy limits investment instruments to securities with short-term credit ratings at the timing of purchase of P-2 and A-2 or better from Moody’s Investors Service and Standard & Poor’s Financial Services, LLC, respectively, with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations.
Accounts receivable are typically unsecured and are generally derived from revenue earned from transit agencies, universities and airports in North America and global commercial vehicle manufacturers in North America, the European Union, the United Kingdom, Australia, Japan and Turkey. The Company periodically evaluates the collectability of its accounts receivable and provides an allowance for potential credit losses as necessary. 
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Given the large order value for customers and the relatively low number of customers, revenue and accounts receivable have typically been concentrated with a limited number of customers.
RevenueAccounts Receivable
Three Months Ended June 30, Six Months Ended June 30, June 30,December 31,
202220212022202120222021
Number of customers accounted for 10% or more*212221
__________________
*No individual customer accounted for more than 20% of the Company’s revenue for the three and six months ended June 30, 2022 and 2021, or accounts receivable as of June 30, 2022 and December 31, 2021.
Single source suppliers provide the Company with a number of components that are required for manufacturing of its current products. In other instances, although there may be multiple suppliers available, many of the components are purchased from a single source. If these single source suppliers fail to meet the Company’s requirements on a timely basis at competitive prices, the Company could suffer manufacturing delays, a possible loss of revenue, or incur higher cost of sales, any of which could adversely impact the Company’s operating results.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of property, plant, and equipment and right-of-use assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.
In addition to the recoverability assessment, the Company periodically reviews the remaining estimated useful lives of property, plant, and equipment. If the estimated useful life assumption for any asset is reduced, the remaining net book value is depreciated over the revised estimated useful life.
The Company reviews long-lived assets for impairment at the lowest level for which separate cash flows can be identified. No impairment charge was recognized in the three and six months ended June 30, 2022 and 2021.
Deferred Revenue
Deferred revenue consists of billings or payments received in advance of revenue recognition that are recognized as revenue once the revenue recognition criteria are met. In some instances, progress billings are issued upon meeting certain milestones stated in the contracts. Accordingly, the deferred revenue balance does not represent the total contract value of non-cancelable arrangements. Invoices are typically due within 30 to 40 days.
The changes in deferred revenue consisted of the following (in thousands):
Deferred revenue as of December 31, 2021
$36,406 
Revenue recognized from beginning balance during the six months ended June 30, 2022
(8,624)
Deferred revenue added during the six months ended June 30, 2022
12,590 
Deferred revenue as of June 30, 2022
$40,372 
The current portion of deferred revenue represents the amount that is expected to be recognized as revenue within one year from the balance sheet date.
Revenue Recognition
The Company derives revenue primarily from the sale of vehicles and charging systems, the installation of charging systems, the sale of battery systems and powertrain components to other vehicle manufacturers, as well
18

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as the sale of spare parts and other services provided to customers. Product revenue consists of revenue earned from vehicles and charging systems, battery systems and powertrain components, installation of charging systems, and revenue from leased vehicles, charging systems, and batteries under operating leases. Leasing revenue recognized over time was approximately $0.3 million and $0.5 million in the three months ended June 30, 2022 and 2021, respectively, and $0.6 million and $1.1 million in the six months ended June 30, 2022 and 2021, respectively. Parts and other service revenue includes revenue earned from spare parts, the design and development of battery systems and powertrain systems for other vehicle manufacturers, and extended warranties.
The Company recognizes revenue when or as it satisfies a performance obligation by transferring control of a product or service to a customer. Revenue from product sales is recognized when control of the underlying performance obligations is transferred to the customer. Revenue from sales of vehicles is typically recognized upon delivery when the Company can objectively demonstrate that the criteria specified in the contractual acceptance provisions are achieved prior to delivery. In cases, where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue is recognized upon acceptance by the customer. Revenue from sales of charging systems is recognized at a point in time, generally upon acceptance by the customer or commissioning. Under certain contract arrangements, the control of the performance obligations related to the charging systems is transferred over time, and the associated revenue is recognized over the installation period using an input measure based on costs incurred to date relative to total estimated costs to completion. Spare parts revenue is recognized upon shipment. Extended warranty revenue is recognized over the life of the extended warranty using the time elapsed method. Development service contracts typically include the delivery of prototype products to customers. The performance obligation associated with the development of prototype products as well as battery systems and powertrain components to other vehicle manufacturers, is satisfied at a point in time, typically upon shipping.
Revenue derived from performance obligations satisfied over time from charging systems and installation was zero and $1.3 million for the three months ended June 30, 2022 and 2021, respectively, and $2.1 million and $5.1 million for the six months ended June 30, 2022 and 2021, respectively. Extended warranty revenue was $0.7 million and $0.3 million for the three months ended June 30, 2022 and 2021, respectively, and $1.1 million and $0.6 million for the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022 and December 31, 2021, the contract assets balance was $2.8 million and $1.3 million, respectively. The contract assets are expected to be billed within the next twelve months and are recorded in prepaid expenses and other current assets on the Company’s balance sheets.
As of June 30, 2022, the amount of remaining performance obligations that have not been recognized as revenue was $408.6 million, of which 80% were expected to be recognized as revenue over the next 12 months and the remainder thereafter. This amount excludes the value of remaining performance obligations for contracts with an original expected length of one year or less.
Our business is organized into two business units with three business lines, each of which addresses a critical component of the commercial vehicle electrification value proposition in a complementary and self-reinforcing manner:
Proterra Transit designs, develops, manufactures, and sells electric transit buses as an original equipment manufacturer (“OEM”) for North American public transit agencies, airports, universities, and other commercial transit fleets.
Proterra Powered & Energy includes Proterra Powered, which designs, develops, manufactures, sells, and integrates proprietary battery systems and electrification solutions into vehicles for global commercial vehicle OEMs, and Proterra Energy, which provides turnkey fleet-scale, high-power charging solutions and software services, ranging from fleet and energy management software-as-a-service, to fleet planning, hardware, infrastructure, installation, utility engagement, and charging optimization.
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The revenue of business units are as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2022202120222021
Proterra Transit$50,819 $47,808 $86,200 $90,012 
Proterra Powered & Energy23,745 10,694 46,945 22,496 
Total$74,564 $58,502 $133,145 $112,508 
Product Warranties
Warranty expense is recorded as a component of cost of goods sold. Accrued warranty activity consisted of the following (in thousands):
Six Months Ended June 30, 2022
Warranty reserve - beginning of period$23,274 
Warranty costs incurred(4,445)
Net changes in liability for pre-existing warranties, including expirations(2,499)
Provision for warranty7,039 
Warranty reserve - end of period$23,369 
2.    Adoption of New Accounting Standards
ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt—Debt with Conversion and Other Options. This standard updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, this standard made amendments to the EPS guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted earnings per share calculation, and no longer allowing the net share settlement method. This standard also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. The Company adopted this standard on January 1, 2022, and it had no material impact on the condensed consolidated financial statements.
3.    Reverse Recapitalization
On June 14, 2021, Phoenix Merger Sub merged with Legacy Proterra, with Legacy Proterra surviving as a wholly-owned subsidiary of ArcLight. In connection with the Business Combination, Legacy Proterra changed its name to “Proterra Operating Company, Inc.” and ArcLight changed its name to “Proterra Inc”.
The following transactions occurred upon the Closing:
each share of outstanding Legacy Proterra convertible preferred stock was converted into shares of Proterra common stock in accordance with the applicable conversion ratio immediately prior to the effective time, and each share of Legacy Proterra common stock (including shares issued upon conversion of Legacy Proterra convertible preferred stock and warrants net exercised upon Closing) was converted into shares of common stock after giving effect to the Exchange Ratio of 0.8925 and resulting in the issuance of 123,752,882 shares of common stock;
certain holders of Convertible Notes (as defined in Note 6 “Debt”) with an original aggregate principal amounts of $46.5 million elected to convert their outstanding Convertible Notes balances including
20

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
accrued PIK interest and cash interest at the Closing resulting in the issuance of 7.4 million shares of common stock;
each outstanding Legacy Proterra option was converted into an option to purchase shares of Proterra common stock by multiplying the number of underlying shares by the Exchange Ratio, rounded down to the nearest whole share, resulting in such options being exercisable to purchase for an aggregate of 22,532,619 shares of Proterra common stock; the exercise price of each converted option was determined by dividing the per share exercise price of the respective Legacy Proterra options by the Exchange Ratio of 0.8925, rounded up to the nearest whole cent;
each outstanding Legacy Proterra warrant to purchase Legacy Proterra common stock and convertible preferred stock was converted into a warrant to purchase shares of Proterra common stock by multiplying the number of underlying shares by the Exchange Ratio, rounded down to the nearest whole share, resulting in such warrants being exercisable to purchase an aggregate of 3,504,523 shares of Proterra common stock; the exercise price of each converted warrant will be determined by dividing the per share exercise price of the respective Legacy Proterra warrant by the Exchange Ratio of 0.8925, rounded up to the nearest whole cent;
each outstanding Convertible Note that was not optionally converted in connection with the Closing remained outstanding and became convertible into shares of Proterra common stock in accordance with the terms of such Convertible Notes;
15,172 public shares were redeemed by ArcLight shareholders, and an aggregate of $0.2 million was paid from the trust account to these redeeming holders; and each ArcLight Class A and Class B ordinary share was converted into the right to receive one share of Proterra’s common stock resulting in the issuance of 34,671,900 shares of common stock;
pursuant to the subscription agreements between ArcLight and certain investors (the “PIPE Investors”), the PIPE Investors purchased 41.5 million shares of Proterra common stock at a purchase price of $10.00 per share for aggregate gross proceeds of $415.0 million (the “PIPE Financing”);
each ArcLight warrant outstanding immediately prior to the consummation was converted into a warrant exercisable into an equivalent number of shares of Proterra common stock, resulting in such warrants being exercisable for an aggregate of 21,424,994 shares of Proterra common stock; and
the 669,375 shares of Proterra common stock underlying certain Milestone Options (as defined below) fully vested upon the Closing.
Upon the occurrence of any of the following events during the first five years following the Closing (“earnout period”), up to an additional 22,809,500 shares of Proterra common stock (the “Earnout Stock”) may be issued to former holders of Legacy Proterra convertible preferred stock, common stock, warrants, vested options and Convertible Notes as of immediately prior to the Closing, as follows:
a.21.0526% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the volume-weighted average price (“VWAP”) of the Proterra common stock is greater than or equal to $15.00 per share or there occurs any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $15.00 per share (the “First Earnout Shares”);
b.an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the VWAP of the Proterra common stock is greater than or equal to $20.00 per share or there occurs any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $20.00 per share;
c.an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the VWAP of the Proterra common stock is greater than or equal to $25.00 per share or there occurs any
21

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $25.00 per share; and
d.an additional 26.3158% of the Earnout Stock if over any 20 trading days within any 30 trading day period, the VWAP of the Proterra common stock is greater than or equal to $30.00 per share or there occurs any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $30.00 per share.
Pursuant to a letter agreement with ArcLight CTC Holdings, L.P. (the “Sponsor”), 10% of the Proterra common stock received by the Sponsor upon consummation of the Merger in exchange for its outstanding ArcLight Class B ordinary shares, excluding 140,000 shares owned by the ArcLight board of directors (the “ArcLight Board”), was subject to vesting and forfeiture (the “Sponsor Earnout Stock”). Such shares of Sponsor Earnout Stock would vest if over any 20 trading days within any 30 trading day period during the five-year earnout period, the VWAP of the Proterra common stock was greater than or equal to $15.00 per share or there occurred any transaction resulting in a change in control with a valuation of the Proterra common stock that is greater than or equal to $15.00 per share.
In July 2021, the conditions for the issuance of the First Earnout Shares and the vesting of the Sponsor Earnout Stock were satisfied, resulting in an aggregate of 4,800,563 shares of common stock being issued and the 679,750 shares of Sponsor Earnout Stock fully vesting.
The Earnout Stock and Sponsor Earnout Stock met indexation and other criteria under Topic 815, Derivatives and Hedging, and are considered as equity-classified instruments.
The number of shares of Proterra common stock issued immediately following the consummation of the Merger was (in thousands):
Shares
ArcLight Class A ordinary shares, outstanding prior to Merger27,750 
Less redemption of ArcLight shares(15)
Sponsor6,257 
Sponsor Earnout Stock680
Common stock of ArcLight34,672
PIPE Investors41,500
Legacy Proterra shares131,176
Total shares of common stock immediately after Merger207,348
Immediately after the Merger, Proterra is authorized to issue 510.0 million shares, with a par value of $0.0001 per share. As of the Closing, the authorized shares consisted of 500.0 million shares of common stock and 10.0 million shares of preferred stock, and there were 207.3 million shares of common stock issued and outstanding, and no shares of preferred stock issued and outstanding. In addition, as of the Closing, there were 24.9 million warrants issued and outstanding, including 13.9 million public warrants, 7.6 million private placement warrants, and 3.5 million Legacy Proterra warrants.
As of the Closing, a total of 82.3 million shares were reserved for future issuance upon the exercise of stock options, warrants and the issuance of Earnout Stock, of which 10.4 million shares were reserved for issuance under Proterra’s 2021 Equity Incentive Plan, 22.5 million shares were reserved under Legacy Proterra’s 2010 Equity Incentive Plan and 1.6 million shares reserved under Proterra’s 2021 Employee Stock Purchase Plan.
The Merger has been accounted for as a reverse merger and a recapitalization under U.S. GAAP with Legacy Proterra being the accounting acquirer, based on evaluation of the following facts and circumstances:
Legacy Proterra’s stockholders have a majority of the voting power of Proterra following the Merger;
22

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Legacy Proterra initially designated a majority of the board of directors of Proterra (the “Board”);
Legacy Proterra’s management comprised the management of Proterra;
Legacy Proterra comprised the ongoing operations of Proterra;
Legacy Proterra was the larger entity based on historical revenues and business operations; and
Proterra assumed Legacy Proterra’s name.
Under this method of accounting, ArcLight is treated as the “acquired” company for accounting and financial reporting purposes. Accordingly, for accounting purposes, this merger transaction is treated as the equivalent of Legacy Proterra issuing equity for the net assets of ArcLight, accompanied by a recapitalization. The net assets of ArcLight have been stated at historical cost, with no goodwill or other intangible assets recorded.
The Company received aggregate cash proceeds of $649.3 million at the Closing, net of $13.8 million of PIPE Financing fees, $18.5 million of other transaction costs paid at Closing, $9.7 million of ArcLight IPO deferred underwriting fees payable, $1.3 million of other ArcLight’s accrued expenses, and $0.1 million of ArcLight’s related party payable. The unbilled ArcLight expenses incurred prior to the Closing were paid from the cash proceeds received by the Company. The transaction costs including advisory, legal and other professional services directly related to the Merger were recorded in the additional paid-in capital in the balance sheet to offset against proceeds. The deferred transaction costs of approximately $2.9 million paid by the Company prior to the Closing were recorded to the additional paid-in capital and classified as financing activities in the consolidated statement of cash flow for the six months ended June 30, 2021.
4.    Fair Value of Financial Instruments
The Company measures certain financial assets and liabilities at fair value. Fair value is determined based on the exit price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy:
Level 1 – Quoted prices in active markets for identical assets or liabilities; 
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and 
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. 
Financial assets measured at fair value on a recurring basis using the above input categories were as follows (in thousands):
Pricing CategoryFair Value at
June 30, 2022December 31, 2021
Assets:
Cash equivalents and marketable securities:
Money market fundsLevel 1$47,250 $102,978 
U.S. Treasury securitiesLevel 1 49,996 
Short-term investments:
U.S. Treasury securitiesLevel 1470,490 330,053 
Corporate debt securitiesLevel 2 160,914 
Total$517,740 $643,941 
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PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s short-term investments were primarily comprised of U.S. Treasury and corporate debt securities, and classified as available-for-sale at the time of purchase because it is intended that these investments are available for current operations. Investments are reported at fair value and are subject to periodic impairment review. Unrealized gains and losses related to changes in the fair value of these securities are recognized in accumulated other comprehensive loss. The ultimate value realized on these securities is subject to market price volatility until they are sold. Realized gains or losses from short-term investments are recorded in other expense (income), net.
The following is a summary of cash equivalents and marketable securities as of June 30, 2022 (in thousands):
Amortized CostUnrealized LossesEstimated Fair Value
Cash equivalents:
Money market funds$47,250 $— $47,250 
Short-term investments:
U.S. Treasury securities473,184 (2,694)470,490 
Total$520,434 $(2,694)$517,740 
As of June 30, 2022, the contractual maturities of the short-term investments were less than one year.
The following is a summary of cash equivalents and marketable securities as of December 31, 2021 (in thousands):
Amortized CostUnrealized LossesEstimated Fair Value
Cash equivalents:
Money market funds$102,978 $— $102,978 
U.S. Treasury securities49,996 — 49,996 
Short-term investments:
U.S. Treasury securities330,618 (565)330,053 
Corporate debt securities160,937 (23)160,914 
Total$644,529 $(588)$643,941 
The unrealized losses as of June 30, 2022 and December 31, 2021 were primarily related to U.S. Treasury securities with original maturities longer than one year due to recent changes in interest rates and are considered temporary in nature.
The fair value of the Convertible Notes was $215.3 million as of June 30, 2022. The carrying value of the Convertible Notes of $111.5 million, net of $55.5 million unamortized debt discount and issuance costs, as of June 30, 2022, was recorded in Debt, non-current on the balance sheets.

5.    Balance Sheet Components
Cash and cash equivalents consisted of the following (in thousands):
June 30, 2022December 31, 2021
Cash
$5,472 $17,065 
Cash equivalents
47,250 152,974 
Total cash and cash equivalents
$52,722 $170,039 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets to the total of such amounts shown on the statements of cash flows. The restricted cash is
24

PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
primarily collateral for performance bonds issued to certain customers. The collateral is provided in the form of a cash deposit to either support the bond directly or to collateralize a letter of credit that supports the performance bonds.
June 30, 2022December 31, 2021
Cash and cash equivalents
$52,722 $170,039 
Restricted cash, current portion
12,105 12,105 
Restricted cash, net of current portion
460 460 
Total restricted cash
12,565 12,565 
Total cash and cash equivalents, and restricted cash
$65,287 $182,604 
Inventories consisted of the following (in thousands):
June 30, 2022December 31, 2021
Raw materials
$85,507 $65,225 
Work in progress
31,284 25,062 
Finished goods
25,248 18,269 
Service parts
7,011