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Financial report summary
?Competition
ProterraRisks
- Risks Related to Ownership of Our Common Stock
- Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
- Our operations may be adversely affected by the COVID-19 pandemic, and we face risks that could impact our business.
- Our management has performed an analysis of our ability to continue as a going concern. In addition, our independent registered public accounting firm’s report contains an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern.
- Our business and future growth depends on the growth in demand for EVs, hybrid vehicles and alternative fuel.
- Our future depends on the needs and success of our customers, as well as the demand for our customers’ products or services.
- We are currently dependent on a limited number of customers for a significant portion of our revenues.
- Our customers may fail to fulfill their purchase commitments.
- Many of our target customers are large commercial vehicle OEM customers and large volume customers, and the failure to obtain such customers, loss of sales to such customers or failure to negotiate acceptable terms in contract renewal negotiations could have an adverse impact on our business.
- We may not be able to engage target customers successfully and to convert such contacts into meaningful orders in the future.
- Under certain circumstances, our customers can cancel or terminate our contracts.
- If we are unable to establish and maintain confidence in our long-term business prospects among customers and analysts and within our industry or are subject to negative publicity, then our financial condition, operating results, business prospects and access to capital may suffer materially.
- If any of our battery products fails to perform as expected, our ability to develop, market and sell our current products or future technology could be harmed.
- We operate in an extremely competitive industry and are subject to pricing pressures. Further, many other battery manufacturers have significantly greater resources than we have.
- Entering into strategic alliances and relying on third-party manufacturing, including from suppliers of components we include in our finished products, exposes us to risks.
- We may be restricted from growing sales of battery packs for stationary applications.
- Legacy Romeo was obligated to disclose to BorgWarner all of its technology that existed as of the date that Romeo purchased BorgWarner’s interest in the BorgWarner JV and may not be able to (i) effectively monitor whether BorgWarner is using such technology in accordance with applicable restrictions (i.e., for non-commercial purposes only) or (ii) obtain adequate compensation for any infringement or misappropriation of our intellectual property rights in such technology.
- BorgWarner could obtain a broad commercial license to Legacy Romeo’s intellectual property that existed as of the date that Romeo acquired BorgWarner’s interest in the BorgWarner JV in the event of Legacy Romeo’s insolvency or breach of any debt covenant.
- The Legacy Romeo intellectual property is arguably pledged to BorgWarner to secure Legacy Romeo’s performance of all of its obligations to BorgWarner relating to the BorgWarner JV that survive the dissolution and termination of the IP License.
- BorgWarner’s acquisition of one of our competitors means that a competitor may have access to Romeo’s confidential information that existed as of the date that Legacy Romeo acquired BorgWarner’s interest in the BorgWarner JV.
- We are dependent on our suppliers to fulfill our customers’ orders, and if we fail to manage our relationships effectively with, or lose the services of, these suppliers and we cannot substitute suitable alternative suppliers, our operations would be materially adversely affected.
- Increases in costs, disruption of supply or shortage of any of our battery components, such as cells, electronic and mechanical parts, or raw materials used in the production of such parts could harm our business.
- Our failure to keep up with rapid technological changes and evolving industry standards may cause our products to become obsolete and less marketable, resulting in loss of market share to our competitors or a decrease in demand for our battery packs and modules due to substitute products.
- We may experience significant delays in the design, production and launch of our new products, which could harm our business, prospects, financial condition and operating results.
- If we cannot continue to develop new products in a timely manner and at favorable margins, we may not be able to compete effectively.
- Developments in alternative technology may adversely affect the demand for our battery modules, packs, and BMS for EVs.
- Lithium-ion battery cells have been observed to catch fire or vent smoke and flame.
- Manufacturing or use of our products may cause accidents, which could result in significant production interruption, delay or claims for substantial damages.
- 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.
- As components of EVs, our products as installed in the products of our customers are subject to motor vehicle standards, and the failure of the vehicles to satisfy such mandated safety standards could have a material adverse effect on the demand for our products, our business and our operating results.
- Future product recalls could materially adversely affect our business, prospects, financial condition and operating results.
- Third-party claims or litigation alleging infringement of patents or infringement or misappropriation of other proprietary rights, or seeking to invalidate our patents may adversely affect our business.
- Our patent applications may not result in issued patents and our patents may be invalidated or narrowly interpreted, in which event our competitiveness and value may be undermined.
- If the estimates and assumptions we use to determine the size of our total addressable market are inaccurate, our future growth rate may be affected and our business would be harmed.
- Maintaining our manufacturing operations will require significant capital expenditures, and our inability or failure to maintain our operations would have a material adverse impact on our market share and ability to generate revenue.
- We rely on complex machinery for our operations, and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
- We may be negatively impacted by an early obsolescence of our manufacturing equipment.
- We are currently dependent on a single manufacturing facility. If our facility becomes inoperable, we will be unable to produce our battery products and our business will be harmed.
- We are in the process of transitioning from our current manufacturing facility in Vernon, California to a new manufacturing facility in Cypress, California. If there are delays or other problems with this transition, our business might be disrupted and it might adversely affect our results of operations and financial condition.
- Our efforts to increase the scale and capacity of our manufacturing processes and systems could be disruptive to our operations and adversely affect our results of operations and financial condition.
- We may be unable to successfully expand our operations or manage our growth effectively.
- We may not be able to accurately plan our production based on our sales contracts, which may result in carrying excess raw material inventory.
- Our operations are subject to a variety of environmental, health and safety rules that can bring scrutiny from regulatory agencies and increase our costs.
- We may be subject to declining average selling prices, which may harm our revenue and gross profits.
- Our battery packs and BMS rely on software and hardware that are highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful in addressing or mitigating technical limitations in our systems, our business could be adversely affected.
- Inability to leverage vehicle and customer data could impact our software algorithms and impact our R&D efforts.
- The unavailability, reduction or elimination of government and economic incentives due to policy changes or government regulation could have a material adverse effect on our business, prospects, financial condition and operating results.
- We will face risks associated with potential international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.
- Our business could be adversely affected by trade tariffs or other trade barriers.
- We are exposed to fluctuations in interest rates and changes in credit risk which could have a material adverse impact on the market value of our investment portfolio.
- We are exposed to fluctuations in currency exchange rates.
- We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.
- We are subject to governmental export and import control laws and regulations. Our failure to comply with these laws and regulations could have an adverse effect on our business, prospects, financial condition and operating results.
- Our products might fail to qualify as “domestic origin” for purposes of “Buy America” requirements imposed on the recipients of U.S. Government grants.
- Changes in public policies affecting the development and more widespread adoption of EVs could affect the demand for our products.
- If we fail to manage our growth effectively, including failing to attract and integrate qualified personnel, we may not be able to develop, produce, market and sell our battery pack, modules, or BMS software and services successfully.
- Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and harm our financial results.
- We may need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating results could be negatively affected.
- We previously were the victim of a data breach resulting in publication of proprietary source code.
- We rely on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents or security breaches, could harm our ability to operate our business effectively.
- Our employees, distributors, consultants and other commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our business, prospects, financial condition and operating results.
- Our insurance coverage strategy may not be adequate to protect us from all business risks.
- Our business depends substantially on the continuing efforts of our key executive officers and senior management team and the loss of one or more of these employees could adversely affect our business.
- Our management may not be successful in operating a public company.
- The requirements of being a public company may strain our resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than we anticipate.
- We do not expect to declare any dividends in the foreseeable future.
- Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.
- We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.
- We may issue additional shares of Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of our Common Stock.
- Future resales of our Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.
- Our Certificate of Incorporation and Amended and Restated Bylaws (“Bylaws”) contain anti-takeover provisions that could adversely affect the rights of our stockholders.
- Our Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or our directors, officers, employees or stockholders.
- The uncertainty in global economic conditions could negatively affect our operating results.
- If we are unable to grow, or if we fail to manage future growth effectively, our revenue may not increase and we may be unable to implement our business strategy.
- A change in our product mix may cause our results of operations to differ substantially from the anticipated results in any particular period.
- We experience fluctuations in quarterly and annual operating results.
- Failure to fully implement and maintain adequate financial, information technology and management processes and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies, which could lead to errors in our financial reporting and adversely affect our business.
- Changes in tax laws may materially adversely affect our business, prospects, financial condition and operating results.
- Our business and operations could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of our business and growth strategy and impact the price of our Common Stock.
Management Discussion
- Product revenues increased approximately $9.5 million, or 326%, for the year ended December 31, 2021, as compared to the prior year. The increase in product revenues relates primarily to increased delivery on the four supply contracts that started production and delivery during 2021, resulting in recognition of approximately $7.9 million of product revenues. The term of the four supply contracts run through 2025. In addition, we generated $0.5 million more related party product revenues during the year ended December 31, 2021, as compared to the prior year. During the year ended December 31, 2021, the average selling prices per unit were similar to the prior year.
- Minimum quantity commitments related to contracts signed through December 31, 2021 represent approximately $392.2 million of revenue backlog. With the completion of the delivery of engineering and prototype services, we expect to recognize approximately $35.2 million of this backlog revenue during fiscal year ending December 31, 2022.
- Service revenues decreased approximately $1.7 million, or 27%, for the year ended December 31, 2021, as compared to the prior year. The decrease is primarily related to a $1.2 million reduction in engineering labor services provided to the