UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-K
_________________________
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the fiscal year ended December 31, 2023
or
| o | 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: 001-39160
_________________________
FISKER INC.
(Exact name of registrant as specified in its charter)
_________________________
| Delaware | 82-3100340 | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| 1888 Rosecrans Avenue, Manhattan Beach, CA | 90266 | ||||
| (Address of principal executive offices) | (ZIP Code) | ||||
Registrant’s telephone number, including area code: (833) 434-7537
_________________________
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, par value of $0.00001 per share | FSRN | OTC Pink Current Information | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
_________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | x | Accelerated filer | o | ||||||||
| Non-accelerated filer | Smaller reporting company | ☐ | |||||||||
| Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. x (See Note 6. Property and Equipment, net)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1.2 billion as of June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter) based upon the closing sale price on The New York Stock Exchange reported for such date. Shares of Class A Common Stock held by each officer and director and by each person who may be deemed to be an affiliate have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of April 15, 2024, the registrant had 1,385,486,856 shares of Class A Common Stock, par value $0.00001 per share and 132,354,128 shares of Class B Common Stock, par value $0.00001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain information from the registrant’s definitive proxy statement (the “Proxy Statement”) relating to its 2024 Annual Meeting of Stockholders. The Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
FISKER INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
| Page | ||||||||
| Item 1. | 3 | |||||||
| Item 1C. | 52 | |||||||
| Item 9C. | ||||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “report”) contains 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”), that are forward-looking and as such are not historical facts. These forward-looking statements include, without limitation, statements regarding future financial performance, business strategies, expansion plans, future results of operations, estimated revenues, losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on our management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events, and are not guarantees of performance or future events. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this report, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:
•our ability to continue as a going concern;
•our ability to grow and manage growth profitably;
•our ability to enter into additional manufacturing and other contracts with Magna, OEMs or tier-one suppliers in order to execute on our business plan;
•our ability to execute our business model, including market acceptance of our planned products (e.g., Alaska, PEAR and Ronin) and services;
•our expansion plans and opportunities;
•our expectations regarding future expenditures;
•our ability to raise capital in the future;
•our ability to attract and retain qualified employees and key personnel;
•the possibility that we may be adversely affected by other economic, business or competitive factors;
•changes in applicable laws or regulations;
•the outcome of any known and unknown litigation and regulatory proceedings;
•our transition to a Dealer Partnership model; and
•other factors described in this report, including those described in the section entitled “Risk Factors” under Part I, Item 1A of this report.
The forward-looking statements contained in this report 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 statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors” under Part I, Item 1A of this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the effect of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. 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.
The forward-looking statements made by us in this report speak only as of the date of this report. Except to the extent required under the federal securities laws and rules and regulations of the U.S. Securities and Exchange Commission
1
(“SEC”), we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.
WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (www.fiskerinc.com) and various social media channels as a means of disclosing information about the company and its products to its customers, investors and the public (e.g., @fiskerinc, @fiskerofficial, #fiskerinc, #henrikfisker and #fisker on Twitter, Facebook, Instagram, YouTube, TikTok and LinkedIn). The information posted on social media channels is not incorporated by reference in this report or in any other report or document we file with the SEC. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about the Company when you enroll your e-mail address by visiting the “Investor Email Alerts” section of our website at https://investors.fiskerinc.com.
ADDITIONAL INFORMATION
Unless the context indicates otherwise, references in this Annual Report on Form 10-K to the “Company,” “Fisker,” “we,” “us,” “our” and similar terms refer to Fisker Inc. (f/k/a Spartan Energy Acquisition Corp.) and its consolidated subsidiaries (including Fisker Group Inc. or Legacy Fisker). References to “Spartan” refer to our predecessor company prior to the consummation of the Business Combination (as defined below).
2
PART I
Item 1. Business.
The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Form 10-K, particularly in Part I, Item 1A, Risk Factors. We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments or otherwise, except to the extent that such disclosure is required by applicable law.
Our Vision
A clean future for all.
Our Mission
Create the world’s most emotional and sustainable vehicles.
Overview
We have built a technology-enabled, capital-light automotive business model that we believe is among the first of its kind and aligned with the future state of the automotive industry. This involves innovations in vehicle development, customer experience, and sales and service that improve the personal mobility experience through technological innovation, ease of use and flexibility. Fisker brings the legendary design and product development expertise of Henrik Fisker – the visionary behind such iconic vehicles as the BMW Z8 sports car and the famed Aston Martin DB9 and V8 Vantage – to deliver high quality, sustainable, affordable electric vehicles that create a strong emotional connection with customers. Central to our business model is the development of platforms designed with engineering flexibility for high content carryover to reduce development time and lower cost to bring multiple derivatives to the market. Our Ocean SUV and Alaska mid-size EV pick up are derived from the same F platform. Fisker also designed the world’s first, low-cost EV platform with 35% fewer parts versus comparable EV’s in the market for lower weight and cost. This, combined with rapid decision-making, focused supply chain management and outsourced manufacturing, reduces development cost and time to market, creating a new business model for the industry and one that gives Fisker an advantage in bringing vehicles to market faster, more efficiently, and with more modern and advanced technology than many competitors.
3
Our first model, the all-electric Fisker Ocean, has already garnered numerous awards for its design. As of April 16, 2024, the Company has delivered over 6,400 Oceans.
The Fisker Ocean is an all-electric SUV and targets the large and rapidly expanding “premium with volume” segment (meaning a premium automaker producing more than 100,000 units of a single model, such as the BMW X3 Series or Tesla Model 3) of the SUV market. The Fisker Ocean is a five-passenger vehicle with a certified range, depending on specification, of between 231 and a class-leading 360-miles (depending on the customer’s chosen battery pack, driving conditions, wheel size and testing procedures).
Our goal is to revolutionize how customers view personal mobility and vehicle ownership by employing an innovative customer-focused Dealer Partnership model offering a seamless haggle-free (where permitted) buying experience with an efficient easy-to-access vehicle service network. Fisker’s transformative strategic efforts will offer outstanding customer service with easy to access test drives to meet customers’ demand for the Fisker Ocean and to prepare for the launch of additional future models.
Through our design and engineering process combined with rapid product development decision-making and an intense focus on supply chain management, our goal is to significantly reduce the capital intensity and investments typically associated with a new car manufacturing business, accelerate the development cycle of new products, and expedite the adoption of advanced technology in several ways, including:
•Launching with a highly respected brand name in the automotive and EV categories. The Fisker name is a recognized part of automotive industry history and has established premium EV brand value in the global EV marketplace. Henrik Fisker, Fisker’s co-founder, Chairman, President and Chief Executive Officer, is a pioneer in the EV industry, having launched the world’s first luxury plug-in hybrid EV, and has a track record of successful designs as the former Chief Executive Officer and President of BMW Designworks USA and the former Design Director for Aston Martin. We enter the market with an established brand name that is associated with automotive innovation and superior design.
4
•Magna collaboration. We entered into a cooperation agreement with Magna International Inc. (“Magna”), an industry-leading supplier, and manufacturer of premium high-quality vehicles. The cooperation agreement sets out the main terms and conditions for certain operational agreements related to manufacturing engineering, component sourcing and manufacturing for the Fisker Ocean. By working with an established contract manufacturer such as Magna Steyr, we accelerated our time to market, reduced risk for quality vehicle assembly, and gained access to an established global supply chain. We previously entered into a Non-Exclusive Car Platform Sharing Agreement with a Magna subsidiary and while that agreement remains in place, we have substantially re-engineered an original platform proposal with the Fisker owned FM29 platform, which we have the right to commercialize accordingly.
•Fisker EV Platforms. We created FM29, a unique EV platform, that has unique Fisker intellectual property. Our proprietary FF-PAD process is hardware agnostic which will enable us to collaborate with multiple suppliers for development of new, advanced EV platforms. Fisker FM29 Platform is a premium, cross-over SUV platform developed for global markets that we are exploring to adapt into other derivatives, such as a pickup truck FT32 (Project Alaska/Kayak). SLV1 (Project PEAR) is a brand new cost-efficient platform which we plan to adapt into other potential derivatives. A third platform is conceptualized (Project Ronin) for high-end luxury vehicles at low volumes.
•Using an existing manufacturing facility. We are leveraging contract manufacturers with existing modern manufacturing facilities and trained workforce, which positions us well to meet timing, cost, and quality expectations while optimally matching our cost structure with our projected production ramp. Partnering with Magna on manufacturing is intended to position us to meet our projected production and delivery targets and will enable us to focus on what we believe will be the key differentiators for a new car company: delivering truly innovative design features, a superior customer experience, and a leading user interface that leverages sophisticated software and other technology advancements.
•New Dealer Partnership model. As a high-growth startup, Fisker is transforming its strategic efforts by offering customers a no haggle (where permitted), transparent sales experience and improved access to vehicle test drive, delivery and service. As a company, Fisker intends to improve customer satisfaction, increase sales for the Fisker Ocean and prepare the foundation for successful new product launches. In keeping with our asset light strategy, the Dealer Partnership model should enable Fisker to expand its sales and delivery network at a faster pace.
Manufacturing Approach
We decided to seek out partnerships with existing manufacturers rather than constructing new production capacity. On June 12, 2021, we executed a binding Contract Manufacturing Agreement with Magna Steyr Fahrzeugtechnik AG & Co KG (“Magna Steyr”) for the manufacture of the Fisker Ocean. This contract manufacturing approach is intended to lower our upfront costs, while also supporting our ESG mission by reducing the carbon footprint of our operations.
A significant advantage of working with established manufacturing partners is that such enterprises are already connected to the existing automotive supply chain. The maturity of supply chain relationships is critical and is reflected in the connectivity of business systems and IT infrastructure. A typical vehicle consists of over 5,000 individual parts and assemblies, each of which is sourced from an extended supply chain consisting of thousands of suppliers. Compounding this further is the fact that there is complexity in the vehicle build specifications to suit customer choice. These parts must be delivered to the final point of assembly at a rate and in a sequence that matches planned vehicle production. Considering that a typical automotive facility will assemble more than 5,000 parts into a complete vehicle at a rate of one vehicle every 45-120 seconds, the smooth running of that logistics effort becomes critical to the running of the operation. Such organizational efficiency is the result of decades of experience and cannot be easily replicated. These critical relationships extend beyond the simple supply of parts and into areas such as local government, where support and cooperation are vital to ensure that local infrastructure updates are considered at a strategic local government level. Such partnerships are also decades in the making and are critical to the ongoing success of the enterprise.
Growth Strategy
We intend to implement the following strategies to drive stakeholder value from the following actions:
5
•Re-imagine the customer experience for personal transportation and car ownership. We believe immense opportunities exist to re-imagine the customer experience for personal transportation and car ownership. We plan to continue to design EVs that will be differentiated in the marketplace by proprietary design innovation and a customer experience delivered through a state-of-the-art, software-based user interface and experience. We plan to also continue to develop our proprietary Fisker App to improve the customer experience throughout the entire personal transportation lifecycle. In addition, we are designing our EVs to be compliant with the CCS standard and adaption of the NACS standard in North America, where we have already signed an agreement with Tesla that will allow all Fisker Ocean owners in North America to use the Tesla charging network by January 1, 2025. This will allow our vehicles to charge with existing public charging infrastructure in North America. We have executed charging network agreements with ChargePoint in North America and Deftpower in Europe. We've entered into an agreement with ChargePoint and their roaming partners, who are committed to utilizing renewable energy for their charging stations.
•Develop additional high value, sustainable EV models. We believe the combination of our superior design expertise, along with the power and versatility of platforms engineered with industry-leading OEMs and tier-one automotive suppliers, will enable us to efficiently achieve our goal of providing the world with a range of high value, sustainable EVs. We intend to utilize one or more platforms over time to develop a lifestyle pickup truck and a sport crossover to complement the Fisker Ocean. In addition, we also plan to explore additional EV platform opportunities that will facilitate the company’s mission to revolutionize the personal transportation industry.
Fisker Vehicles 
6
Our first vehicle is the Fisker Ocean, an all-electric premium SUV that we launched with one of the lowest entry price points in the EV SUV segment. The Fisker Ocean offers an electric range of 231 to 360 miles per U.S. EPA standard or 288 to 435 miles per WLTP standard (used in Europe), depending on the battery pack in the customer’s chosen trim, driving conditions, wheel size and testing procedures.
The Fisker Ocean has many selling points that set Fisker apart from its competitors, including:
•California Mode. Patented California Mode delivers an open-air experience with the push of “one button”. With California Mode, customers can drop the front door windows, both rear-seat door windows, both rear Doggie windows next to the D-pillar, and the Rear Lift Gate Window while opening the SolarSky roof at the same time. The rear liftgate window opening is particularly appealing for an EV SUV as there are no exhaust fumes from the vehicle that could enter the cabin. The rear liftgate window opening allows for long items to be transported without having to drive with an open hatch.
•Extra wide track. For the size of the vehicle and category, we believe the Ocean’s extra wide track, among other technical features, gives the Ocean best-in-class ride and handling while maintaining the same tire aspect ratios. The wide track on sports cars contribute to a visually powerful “stance,” and we believe this further distinguishes the Ocean’s design. It has also allowed for a more dramatically sculptured body side design and, combined with the dynamic silhouette, we believe it has achieved a class-leading aesthetically arresting and emotional design.
•User Interface. The Ocean features a revolve screen with integrated physical buttons. We have done extensive design development on the highest quality user interface (“UI”) to enhance the driving experience. We believe combining Ocean’s large 17.1” touch screen with several physical buttons provides drivers a user-friendly interface that allows drivers to access the most-often-used functions while maintaining their eyes on the road.
•Autonomy. The Ocean is engineered with hardware to support future upgrades delivered through post-production software-based updates. Fisker and Magna are working together to develop an industry-unique feature set and a suite of software packages powered by a scalable domain controller architecture. We intend to equip Fisker Ocean
7
with a class-competitive suite of Advanced Driving Assistance System (ADAS) features supported by a sensor suite that includes state-of-the-art computer vision technology and digital imaging radar.
•SolarSky roof. The Fisker brand is a pioneer and leader in full length curved photo voltaic roof design and integration into a passenger vehicle. The photo voltaic roof makes a strong personal statement for those customers that want to fully optimize for zero emissions and sustainability. Fisker Ocean’s SolarSky roof produces up to 1,500 clean, emissions-free miles per year. Under ideal conditions may increase to beyond 2,000 miles, all powered by pure sunshine.
•Vegan interior. We offer a full vegan interior in the Fisker Ocean without any leather or animal sourced materials.
•Recycled materials throughout the vehicle. Sustainability is represented throughout the Fisker Ocean. Specifically, the interior has carpeting and acoustical backing made from recycled polyester and recycled nylon, seating made from recycled plastic bottles, and coatings derived from plant-based materials. Like our carbon neutral manufacturing, some of our key suppliers also produce materials through full carbon neutral processes.
•Sustainability. We designed the Fisker Ocean to be the world’s most sustainable vehicle, measured through the entire life cycle, from upstream sourcing of low carbon and recycled materials, through logistics, manufacturing, use phase and re-use and recycling when the vehicles finally come off the road. Use of recycled materials is enhanced by other features, such as offering a full-length photo-voltaic roof, and the fact that we are using existing manufacturing rather than building new plants as part of our asset-light strategy. In addition, we work with our suppliers to source and produce through highly sustainable methods. The sustainability features extend to the full vehicle, where Fisker utilizes innovative materials. Our available SolarSky roof can add over 1,500 miles of clean, free charging from the sun and materials that reinforce our focus on recycling and reuse. For example, through the reuse of tire manufacturing by-products, recycled and bio-based materials, we significantly reduce the amount of process waste that would otherwise go to landfill and reduce the overall CO2 footprint of the Fisker Ocean. In the Fisker Ocean, this deliberate effort delivered the lowest published carbon footprint of any electric SUV, using over 110 lbs. of recycled and bio-based materials. We are also working with suppliers who recover and repurpose materials such as plastics and carbon fiber. These suppliers recover materials that are landfill and ocean-bound, such as plastic bottles and fishing nets, and reprocess them into automotive grade feedstock which can then be used to produce new interior trim, fabrics, acoustic backing, and moldings. In doing so, we reinforce our requirement to minimize ‘new’ hydrocarbon-based feedstock, while simultaneously providing an outlet for, and supporting, those suppliers who are investing in ocean clean up and potentially landfill commodities as an alternate source of raw material.
Fisker has plans to introduce new vehicles in the next three years. For these vehicles, we plan to use our own platforms and in-house design and engineering processes with one or more industry-leading OEMs and suppliers.
New Electronics Architecture
The Fisker Ocean electronics architecture is based around a small number of key domain controllers, for advanced driver assistance functions, drivetrain and battery management, and infotainment. A traditional vehicle electronics architecture typically contains a high number of independent and self-contained modules, each a black box to the rest of the car. This architecture, based on domain computers, opens new avenues for integration, sensor fusion, and an adaptive and evolving user experience. A connectivity module enables full communication with the Fisker cloud and the possibility for edge computing, while over-the-air (“OTA”) software updates ensure the in-car experience can stay ahead of market expectations.
We anticipate that future generations of Fisker architecture will integrate automotive requirements into customized electronic boards, with hardware accelerators for AI, machine-learning, and computer-vision. This further reduction in electronics component counts is designed to lower power consumption, increase computational power, and allow for even greater scope for feature integration and optimization.
8
Digital Car of the Future: Delivered Over the Air
The new electric, digital car is more technologically sophisticated than its predecessors. Many immediate benefits to the customer of this always-online car will be evident in the infotainment system. Entertainment and productivity apps, mobility services, and navigation aids can keep pace with the latest regional trends. The integrated and fully connected nature of the digital car opens new opportunities for innovation, and enables functions previously impossible, such as predictive maintenance and remote fault diagnosis.
Through edge computing and 4G, later ultra-low latency 4G connectivity, it also becomes possible for cloud computing resources to be used as a seamless extension of the computing power in the car. Continuous software updates, both for embedded systems in the car and functions hosted in the cloud, let the digital car grow and become smarter over its lifetime. Fisker automotive design is meeting all functional safety requirements as outlined by ISO 26262 and SO/SAE 21434, which covers security management, and cybersecurity within the Fisker product development lifecycle.
We intend to fully utilize software to improve the powertrain performance, making the cars more efficient, allowing more instantaneous power output, and improving the charging experience. In the future, the powertrain parameters could be tailored to each driver in real time, optimal characteristics of the motors could be constantly measured and altered, and the level of the recuperation system could be adjusted. On-board diagnostics, combined with predictive models and anomaly detection could guide the customer to schedule a service appointment before they even perceive any symptoms, possibly averting a costly repair.
We are designing our EVs to always be “connected” Our next-generation connectivity platform is already heavy at work seamlessly integrating online services and functions, Fisker-unique as well as third party services. Features that are visualized on the large 17.1” high-definition center touchscreen or digital instrument cluster meet strict driver-distraction guidelines with Fisker’s custom UI framework. The My Fisker app seamlessly connects to the car, ensuring the customer’s digital life and driving experience meet in the car.
With data analysis, cloud computing, and the ability to push OTA updates to the vehicle, we expect the in-car experience will evolve over time for the driver and passengers and not the other way around as has traditionally been the case.
9
Sales - Go To Market Strategy
We believe over the next several years, the EV markets in the U.S. and EU will be broken down into three fundamental segments: the white space segment, the value segment and the conservative premium segment. All three segments will attract customers from traditional ICE vehicles, but the largest growth, by volume, will be the white space segment and the value segment.
| EV Segment | Attributes of Segment | Fisker Plan within Segment | ||||||||||||
| White space segment | Currently occupied by Tesla globally and by a few Chinese EV independent start-ups operating in China only. Appeals to customers who want to be part of the new EV movement, who value sustainability and ESG. Can only be occupied by pure EV brands that only produce EVs with a clear commitment towards zero emission vehicles. | We believe we will be the primary alternative to Tesla in this segment with the Fisker Ocean priced around the base price of the Tesla Model 3 and Model Y. We believe other EV startups will move into the higher premium priced segments due to the lack of volume pricing of components. We expect to sell approximately 50% of our vehicles into this segment. | ||||||||||||
| Value segment | Focus on price and value proposition—customers will buy vehicles in this segment when the purchase price and cost of maintaining/running fits the budget and is better than an ICE vehicle. Yet to be dominated by any auto maker. | We believe we will penetrate the upper end of this segment by offering a compelling and differentiated price/ performance vehicle, compared to other traditional car makers struggling to compete due to lack of volume pricing. We expect to sell approximately 10% of our vehicles into this segment. | ||||||||||||
| Conservative premium segment | Emerging segment currently occupied by several traditional auto makers that are trying to keep their own customers from defecting to EV makers like Tesla. Vehicles in this segment, produced by the traditional premium automakers, are struggling with a clear EV identity as they try to bridge the traditional ICE attributes with new EV attributes. | We believe our vehicles will be very attractive to customers sitting “on the fence” in this segment, ready to leave their ICE brand, but needing assurance of quality and reliability. This is a segment where we believe we can attract new customers that will come from traditional ICE brands. We believe we will sell approximately 40% of our vehicles into this segment, but it will grow rapidly, as we will be able to offer a more emotional design, an exclusive EV brand, a larger battery and better equipment for the price due to our volume pricing versus the lower volume traditional brands | ||||||||||||
Service, Marketing and Insurance
Media coverage, digital and non-traditional marketing, and word-of-mouth have been the primary drivers of Fisker’s sales leads, helping us achieve a high volume of reservations without traditional marketing efforts and with a relatively low marketing budget. In 2024, we plan to increase our marketing budget as we roll out our new Dealer Partnership model, while decreasing our internal spending through the elimination of costs associated with the direct-to-consumer business model. We plan to continue to expand our social media presence as a key part of our marketing efforts. We plan to attend and participate in global events and to activate pop-up show rooms to give customers the opportunity to experience Fisker vehicles. We support our customers by providing reference to reputable third-party automotive insurance options.
10
Direct Sales, Service, and Vehicle Financing
We historically marketed and sold our vehicles directly to customers using our proprietary digital platforms, including the “My Fisker App” and website. During 2024, we will be transitioning to a dealer model from a direct-to-consumer model but expect to operate under both models during 2024. Europe will operate under both models.
New Dealer Partnership
Fisker is making this move to scale for significant acceleration of Fisker Ocean deliveries and higher volume production of additional future models. The Dealer Partnership model also aligns with its asset light business strategy.
The Fisker dealer strategy is multi-faceted, designed to benefit customers and dealers, as well as Fisker. Fisker dealers will provide retail, service, test drive and delivery functions for Fisker vehicles. Fisker dealers will be able to open at a faster pace due to the lower amounts of upfront capital investment versus traditional dealer strategies employed by other OEMs. The reduced facilities related capital investment is consistent with Fisker’s commitment to sustainability principles: use-less, and re-use. Fisker will offer dealers large market areas and no cost sales and service training programs for early dealer partners for a period of time. Dealers may have service area, back-of-house, and administrative functions for a period of time until the dealer’s operation requires dedicated non-customer facing functions. However, customer facing dealership personnel will be dedicated to Fisker.
Fisker is selecting its dealers based upon multiple criteria, including a dealer’s ability to deliver a high level of customer satisfaction. Customer satisfaction will be a key performance metric that dealers will be expected to achieve.
Vehicle Maintenance
Our vehicles are designed to have no “first mandatory service”. We expect service will be needed for mainly two reasons: (1) a fault shows up in the on-board diagnostics/request to go to service, or (2) the customer notices something needs to be “fixed” and service is needed. In each case, we will be alerted by either the vehicle’s on-board diagnostics or the customer and we will then refer the customer to their nearest Fisker dealership.
Fisker Added Value
Fisker's Platform Strategy supports its growth plan objectives, firstly by intelligent re-use of the Ocean platform to define a new EV market segment with the Alaska mid-size EV pick up (labelled the Kayak in the EU); followed by the introduction of an all new, lower cost, higher volume, global platform for the PEAR and future derivatives. This new platform features Fisker's novel 'Steel++' body structure which has 35% less parts than the industry norm due to an intensive focus on component integration and advanced tooling methods. Finally, the ultra low volume, bonded aluminum
11
Ronin platform concept will be a technology test bed for future Fisker products, and features a novel, structurally integrated battery amongst many other innovations.
Key among the attributes defining Fisker-brand design and engineering is exterior and interior design language. The Fisker Ocean is establishing the look and feel of Fisker products going forward—an evolution of the design language Henrik Fisker developed over his career and with which he has become synonymous. A key element of this design language is the broad shouldered, “muscular” stance of the vehicle. In creating an exterior design with these proportions, our team has taken some key decisions intended to move typical autobody engineering solutions, such as a fixed hood, to a position more relevant to EVs. Not only does this give our vehicles a distinctive, unique look, it also simplifies an otherwise complex manufacturing build tolerance issue. This approach provides greater control of the front-end package and removes certain hardware, ultimately facilitating our desire to design a vehicle with class-leading frontal high-speed impact and pedestrian impact safety.
12
Fisker-brand design and engineering also encompasses our goal to build the world’s most sustainable vehicles. Fisker Ocean offers SolarSky, a large photo-voltaic glass roof. Our internal testing indicates that this feature has the capability to deliver annually the equivalent of up to 1,500 miles of completely carbon free miles in optimum conditions.
Our design language extends further into the interior of the vehicle with the deployment of our unique UI. In addition to seamless integration of user devices, such as mobile phones and tablets, Fisker has developed a central screen display that is the largest in its class. This screen is the centerpiece of the Fisker UI and will integrate all main vehicle electrical functions and settings into a single, simple interface. The ergonomics of the central screen are further enhanced by combining user programmable “soft keys” on the touch screen surface, with five fixed switches that control the five most frequently used functions. In this way we expect to deliver a futuristic EV “glass cockpit” without the annoyance of searching through several menus to find that critical function, which has been a criticism of similar systems. The combination of this unique central screen and the digital driver’s display will ensure a class-leading user experience.
Research and Development
Our research and development activities primarily take place at our facilities located in La Palma, San Francisco, and Culver City, California. The majority of our current activities are primarily focused on the research and development of our EVs and software technology platforms. We undertake significant testing and validation of our products in order to ensure that we will meet the demands of our future customers. We are working with various strategic partners to improve the Ocean and to bring other future EV models into commercialization.
13
Sustainability Actions
As demonstrated in our vision and mission, we are committed to sustainability, which includes our dedication not only to the environment, but also our communities and other stakeholders. ESG is foundational to Fisker and, as a purpose driven company, it is embedded in everything we do. We engage with our community through direct actions such as beach clean-ups and employee food drives. We are currently evaluating incentives and other programs to support sustainability and social accountability throughout our corporate activities.
Fisker’s Commitment to Building a Leading ESG, Digital Mobility Company
Our commitment is to build the world’s leading, digital-first, next generation mobility company. We are building towards that vision with a commitment to a broad foundation of environmental, sustainability and ethical governance policies. Through this approach, we believe we will create a company that can better serve the needs of all our stakeholders and ultimately deliver greater returns.
We are committed to leading the automotive industry in alignment with our mission, from the thorough analysis of the full life-cycle impact of our vehicles to creating solutions that minimize our carbon footprint and ensuring we responsibly source all of our materials. Our focus is on the total environmental and social impacts of our business throughout our supply chain. We seek to optimize our internal practices and build mutually beneficial relationships with the communities in which we operate.
We have set strong performance standards through our policies, such as our Human Rights and Labor Policy and our Responsible Supplier Policy, including conflict materials chain of custody, of which we will validate. We have aligned with the United Nations Sustainable Development Goals (UNSDG’s), as a guidance framework for our internal targets and are using Sustainability Accounting Standards Board (SASB) requirements for measurement and reporting of our vehicles and related metrics. Through dedicated work streams and detailed research with investors, we are focused on providing best-in-class metrics and public ESG disclosures. We published our first ESG Impact Report in 2022.
In June 2023 we released our 2023 Fisker Ocean Life Cycle Assessment (LCA) detailing the progress we've made toward our mission of creating the world's most emotional and sustainable electric vehicles.
Our diverse management team and board of directors is a testament to our commitment to diversity and inclusion. We will continue to evaluate our governance structure, hiring practices and pay equity, in accordance with our company policies, industry benchmarks and reporting agencies. We have also created an ESG Advisory Council, comprised of non-company ESG leaders, who will help shape our strategy, our commitments and, work with us to engage in dialogue with NGO’s and other stakeholders on important civic issues. In addition to the ESG Advisory Board, we have an internal ESG governance structure, led by the head of ESG, with a leadership planning team that meets weekly, a monthly executive management strategy review team and review of critical material by the Board of Directors.
Intellectual Property
Our success depends in part upon our ability to protect its core technology and intellectual property. We attempt to protect our intellectual property rights, both in the U.S. and abroad, through a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure and invention assignment agreements with our consultants and employees, and we seek to control access to and distribution of our proprietary information through non-disclosure agreements with our vendors and business partners. Unpatented research, development and engineering skills make an important contribution to our business, but we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property.
As of March 6, 2024, we owned 16 issued U.S. patents, have 56 pending or allowed U.S. patent applications, 51 issued foreign designs and 16 pending foreign design applications. In addition, we have 162 registered trademarks, and 13 pending trademark applications. Our patents and patent applications are directed to, among other things, vehicle design, engineering and battery technology.
Government Regulation and Credits
We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which we are subject govern, among others, water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the
14
protection of the environment, natural resources and endangered species; and the remediation of environmental contamination. Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue our operations.
Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, standards adopted by regulatory agencies and the permits and licenses granted. Each of these sources is subject to periodic modifications and what we anticipate will be increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, and possibly orders to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses.
Emissions
In the U.S., EU and China, there are vehicle emissions performance standards that will provide an opportunity for us to sell emissions credits.
United States
In the U.S., the U.S. Environmental Protection Agency (“EPA”) promulgates and enforces emissions standards for motor vehicles under the Clean Air Act. The EPA requires that Fisker obtain a Certificate of Conformity concerning emissions for its vehicles before offering them for sale. California also regulated motor vehicle emissions even before the Clean Air Act’s passage. Therefore, California is permitted to issue its own emissions standards, and other states may adopt California’s standards instead of the EPA’s standards. The California Air Resources Board (“CARB”) is responsible for setting California’s emissions standards. CARB requires Fisker to obtain an Executive Order, confirming that its vehicles conform to California’s emissions standards.
Greenhouse Gases
Both the EPA and California have greenhouse gas emissions standards for motor vehicles. These regulations restrict the amount of carbon dioxide (CO2) and non-methane organic gases and nitrous oxide gas (NMOG+NOx) that a vehicle is permitted to emit. California’s greenhouse gas emissions standards were established in 2012 under California’s “Advanced Clean Cars I” program; Advanced Clean Cars II (“ACCII”) was adopted in 2022. California continues to consider potential amendments to ACCII to further scale down emissions of new motor vehicles sold in California (and the states which have adopted California’s standards). Both the EPA and CARB enforce their greenhouse gas standards by issuing credits for over-compliance with the given standard and penalizing a manufacturer’s failure to meet the standard. Manufacturers who have an excess of these credits may transfer or sell them to a manufacturer which is deficient in the credits. Because Fisker vehicles are all-electric, Fisker vehicles will necessarily comply (and over-comply) with these standards, offering Fisker significant opportunity to sell these credits to other manufacturers. Fisker already has one such agreement in place. Finally, because these standards become more stringent over time, Fisker’s opportunity to sell these credits will also increase over time.
Zero Emission Vehicles
California also requires manufacturers to maintain a certain percentage of zero-emission vehicles (“ZEVs”) as part of their overall number of new vehicles sold in that state. The ZEV program assigns ZEV credits to each vehicle sold in California. The number of credits is based on the drivetrain type and the all-electric range (“AER”) of the vehicle under the Urban Dynamometer Driving Schedule Test Cycle. Plug-in hybrid vehicles (“PHEVs”) receive between 0.4 and 1.3 credits per vehicle. Battery electric and fuel cell vehicles receive between 1 and 4 credits per vehicle, based on range. The Fisker Ocean receives 3.4 credits or 4.0 credits, depending on trim and wheel options.
Vehicle manufacturers are then required to maintain ZEV credits equal to a set percentage of non-electric vehicles sold in California. By 2035, all new passenger vehicles sold in California must be a ZEV. Similar to the greenhouse gas standards, CARB permits manufacturers who over-comply with the ZEV standard of a given model year to sell those credits to a manufacturer who is not in compliance. CARB has established a $5,000 penalty for each credit that a manufacturer is short of the standard for that year.
Other states have adopted California’s ZEV sales requirements including Colorado, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont (the “ZEV states”). Additionally, some states
15
have legislation to adopt California’s ZEV standard beginning in 2025 including Minnesota, Nevada, Virginia, and Washington. New Mexico will adopt these standards in 2026.
Because of the increasingly stringent ZEV sales requirements and the increasing number of states adopting these standards, we believe Fisker has significant opportunity to sell its ZEV credits to manufacturers who do not meet their quotas.
European Union
Regulation (EU) No. 443/2009 setting emissions performance standards for new passenger cars in the EU (as amended) provides that if the average CO2 emissions of a manufacturer’s fleet exceed its limit value in any Calendar Year from Calendar Year 2019 onwards, the manufacturer will have to pay to the European Commission an excess emissions premium of €95 for each subsequent CO2 g/km of exceedance per vehicle registered in the EU.
In the EU, manufacturers of passenger cars may act jointly through a pooling arrangement to collectively meet their CO2 emissions targets.
The indicative average EU fleet-wide emissions target for new passenger cars for the calendar year 2019 was 130 CO2 g/km. From 1 January 2020 this target has been reduced to 95 CO2 g/km. From 1 January 2020 until 31 December 2024 this target will be complemented by additional measures corresponding to a reduction of 10 CO2 g/km. Between 2025 and 2029 the target will be 15% stricter compared to 2021. From 1 January 2030, the target will be equal to a 37.5% reduction of the target in 2021.
The European Commission adjusts the Specific Emissions Target each year for each manufacturer on the basis of the average mass of the relevant passenger cars using a limit value curve. This is laid down in Implementing Decisions.
Manufacturers of passenger cars are given additional incentives to put on the European market zero and low-emission passenger cars emitting less than 50 CO2 g/km through a “super-credits” system. These are taken into account for the calculation of a manufacturer’s specific average emissions. Such passenger cars are to be counted as 2 vehicles in 2020, 1.67 vehicles in 2021, 1.33 vehicles in 2022, and 1 vehicle from 2023 onwards (subject to a cap of 7.5 CO2 g /km over the 2020-2022 period for each manufacturer).
Given that the specific average emissions of CO2 of Fisker’s electric passenger cars will be 0.000 CO2 g/km per vehicle registered in the EU, this will provide an opportunity for other manufacturers, which may not otherwise meet their specific CO2 emissions targets, to pay Fisker to consolidate their fleets with those of Fisker via a pooling arrangement for CO2 emissions compliance purposes.
Fuel Economy
The United States Department of Transportation, through its agency the National Highway Transportation Safety Administration (“NHTSA”), sets fuel economy standards for new vehicles sold in the U.S. NHTSA does so by setting standards for Corporate Average Fuel Economy (“CAFE”). The CAFE program assesses a manufacturer’s fleet of vehicles for its fuel economy, expressed in miles per gallon.
Manufacturers who over-comply with NHTSA’s CAFE standards are given a credit for every one-tenth of a mile per gallon by which they exceed the standard. For manufacturers whose fleet fails to meet the year’s standard, NHTSA set a penalty of $14 per credit deficiency. This penalty increased to $15 per credit in model year 2022.
Because Fisker vehicles are all electric, they not only comply with NHTSA standards but also generate CAFE credits. Fisker continues to engage manufacturers on selling these credits.
Vehicle Safety and Testing
Our vehicles are subject to, and will be required to comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”), including applicable U.S. federal motor vehicle safety standards (“FMVSS”). We intend for the Fisker Ocean to fully comply with all applicable FMVSSs without the need for
16
any exemptions, and expect future Fisker vehicles to either fully comply or comply with limited exemptions related to new technologies. Additionally, there are regulatory changes being considered for several FMVSSs, and while we anticipate compliance, there is no assurance until final regulation changes are enacted.
On January 11, 2024, NHTSA opened a Preliminary Evaluation regarding the Ocean’s braking performance. On February 14, 2024, NHTSA opened a Preliminary Evaluation regarding alleged unintended movement. And on April 1, 2024, NHTSA opened a Preliminary Evaluation regarding alleged failure of the Ocean’s latch and handle that prevents doors from opening. The Company is fully cooperating with NHTSA with respect to these matters.
As a manufacturer, Fisker must self-certify that its vehicles meet all applicable FMVSSs, as well as the NHTSA bumper standard, or otherwise are exempt, before the vehicles can be imported or sold in the U.S. Numerous FMVSSs will apply to Fisker’s vehicles, such as crash-worthiness requirements, crash avoidance requirements and EV requirements. We will also be required to comply with other federal laws administered by NHTSA, including the CAFE standards, Theft Prevention Act requirements, consumer information labeling requirements, Early Warning Reporting requirements regarding warranty claims, field reports, death and injury reports and foreign recalls and owner’s manual requirements.
The Automobile Information and Disclosure Act requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing. In addition, this law allows inclusion of city and highway fuel economy ratings, as determined by EPA, as well as crash test ratings as determined by NHTSA if such tests are conducted.
Fisker vehicles sold outside of the U.S. are subject to similar foreign safety, environmental and other regulations. Many of those regulations are different from those applicable in the U.S. and may require redesign and/or retesting. The EU established new rules regarding additional compliance oversight, and there is also regulatory uncertainty related to the United Kingdom’s withdrawal from the EU. These changes could impact the rollout of new vehicle features in the EU. Fisker has completed the homologation testing process in the EU and U.S. during 2023. The Company has received regulatory approvals including the European Whole Vehicle Type Approval Certificate, EPA Certificate of Conformity, and CARB Executive Order, after which we commenced retail customer deliveries in both the U.S. and EU in 2023.
In addition to the various territorial legal requirements we are obligated to meet, the Fisker Ocean is engineered to deliver 5-star performance in the two main voluntary vehicle safety performance assessment programs, U.S. New Car Assessment Program (“NCAP”) and Euro NCAP. Five-star is the maximum attainable score. These independent organizations have introduced a number of additional safety related tests aimed at improving the safety of passenger vehicles, both for occupants and pedestrians involved in collisions with vehicles. Some of these tests are derived from the legal tests, such as side impact, but have higher performance requirements. Others are unique to the program. Areas covered by these tests in 2020 include:
•Mobile Progressive Deformable Barrier
•Full Width Rigid Barrier
•Mobile Side Impact Barrier
•Side Pole
•Far Side Impact
•Whiplash
•Vulnerable Road Users (Pedestrians and Cyclists)
•Safety Assist
•Rescue and Extrication
17
Strategic Collaborations
Magna
On October 14, 2020, Legacy Fisker and Spartan entered into a cooperation agreement with Magna setting forth certain terms for the development of a full electric vehicle (the “Cooperation Agreement”). The Cooperation Agreement sets out the main terms and conditions of the operational phase agreements (the “Operational Phase Agreements”) that will extend from the Cooperation Agreement and other agreements with Magna that are expected to be entered into by and between us and Magna (or its affiliates). The upcoming Operational Phase Agreements referenced in the Cooperation Agreement relate to various platform and manufacturing agreements. The Cooperation Agreement provides that we would issue to Magna warrants to purchase Class A Common Stock in an amount equal to six percent (6%) of our capital stock on a fully diluted basis (which means for these purposes, after giving effect to the deemed conversion or exercise of all of our options, warrants and other convertible securities outstanding on the issuance date; provided, however, that the “public warrants” sold as part of the units issued by Spartan in its initial public offering which closed on August 14, 2018 shall not be deemed to be exercised for these purposes) after giving effect to the Business Combination and issuance of the warrants to purchase such shares to Magna, with an exercise price of $0.01 per share of (the “Magna Warrants”). On October 29, 2020, we issued to Magna 19,474,454 Magna Warrants. The Magna Warrants were subject to the satisfaction of certain vesting criteria related to the development and start of production of the Fisker Ocean, all of which have been satisfied as of December 31, 2023.
The shares of Class A Common Stock underlying the Magna Warrants are entitled to registration rights pursuant to the Amended and Restated Registration Rights Agreement dated as of October 29, 2020, among us, Spartan Energy Acquisition Sponsor LLC, Magna, Henrik Fisker, Dr. Geeta Gupta-Fisker and certain former stockholders of Legacy Fisker.
On December 17, 2020, we announced that our wholly-owned operating subsidiary, Fisker Group Inc., entered into (i) a non-exclusive car platform sharing agreement with Steyr USA LLC (an affiliate of Magna), and (ii) an initial contract manufacturing agreement with Magna, which were originally contemplated by the Cooperation Agreement. On April 27, 2021 we entered into a Supplement No 1 to Development Services Agreement with Magna Steyr which provides for the completion of the development and launch of Fisker Ocean. On June 12, 2021 Fisker entered into the Detailed Manufacturing Agreement with Magna Steyr which provides for the contract manufacturing of the Fisker Ocean by Magna Steyr.
Human Capital Resources
We pride ourselves on the quality of our diverse team by seeking to hire only employees that are dedicated and aligned with our strategic mission. We work to leverage partnerships and modulate hiring based on our product roadmap. We employed approximately 1,560 full-time employees as of December 31, 2023, 760 as of December 31, 2022 and 327 as of December 31, 2021 based primarily in our California, Munich and Hyderabad facilities. The majority of our employees are engaged in marketing, sales and service with research and development and related functions close behind. To date, we have not experienced any work stoppages and consider our relationships with our employees to be in good standing. None of our employees are either represented by a labor union or subject to a collective bargaining agreement.
As of April 19, 2024, we employed approximately 1,135 employees. The decrease since December 31, 2023 primarily reflects actions taken to reduce our headcount.
We strive to attract a pool of diverse and exceptional candidates and support their career growth once they become employees. In addition, we seek to hire based on talent rather than solely on educational pedigree. We also emphasize in our evaluation and career development efforts internal mobility opportunities for employees to drive professional development.
We also believe that our ability to retain our workforce is dependent on our ability to foster an environment that is sustainably safe, respectful, fair and inclusive of everyone and promotes diversity, equity and inclusion inside and outside of our business. We engage diverse networks as key business resources and sources of actionable feedback. We are also working on diversity efforts in our supply chain to expand our outreach and support to small- and large-scale suppliers from underrepresented communities to emphasize this culture with our own employees.
18
Corporate Information
We were originally incorporated in Delaware in October 2017 as a special purpose acquisition company f/k/a Spartan Energy Acquisition Corp. In October 2020, we consummated our business combination with Fisker Group Inc. (f/k/a Fisker Inc.) through a reverse merger (the “Business Combination”). In connection with the closing of the Business Combination, we changed our name to Fisker Inc.
Our principal executive offices are located at 1888 Rosecrans Avenue, Manhattan Beach, California 90266. Our telephone number at that location is (833) 434-7537. Our corporate website address is www.fiskerinc.com. Information contained on, or that may be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report on Form 10-K.
Fisker is a registered trademark of Fisker Inc. All other brand names or trademarks appearing in this Annual Report on Form 10-K are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Available Information
We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.
The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors.
Our operations and financial results are subject to various risks and uncertainties, including those described below that could adversely affect our business, financial condition, results of operations, cash flows and the trading price of our Class A Common Stock. You should carefully consider the following risks, together with all of the other information in this Annual Report on Form 10-K, including our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
RISK FACTORS SUMMARY
Investing in our securities involves a high degree of risk. Below please find a summary of the principal risks we face. These risks are discussed more fully below:
Operational Risks
•There is substantial doubt about our ability to continue as a going concern.
•Our ability to develop, manufacture and obtain required regulatory approvals for a car of sufficient quality and appeal to customers on schedule and on a large scale is unproven.
•We are substantially reliant on our relationships with suppliers and service providers for the parts and components in our vehicles, as well as for the manufacture of our initial vehicles. If any of these suppliers or service partners choose to not do business with us, then we would have significant difficulty in procuring and producing our vehicles and our business prospects would be significantly harmed.
•Our relationship with automotive suppliers is integral to our platform procurement and manufacturing plan, and we may not be able to obtain such commitments in the future. We therefore may seek alternative arrangements with a number of component suppliers, and contract manufacturers, which we may not be successful in obtaining.
•If we are unable to continue to contract with OEMs or suppliers on manufacturing of our future vehicles, we would need to develop our own platform and manufacturing facilities, which may not be feasible and, if feasible at all, would significantly increase our capital expenditure and would significantly delay production of our vehicles.
19
•There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for our electric vehicles, and there can be no assurance such systems will be successfully developed.
•We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.
•We are dependent on our suppliers, a significant number of which are single or limited source suppliers, and the inability of our suppliers to deliver necessary components for our vehicles in a timely manner and at prices and volumes acceptable to us could have a material adverse effect on our business, prospects and operating results.
•Our vehicles make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.
•We have a limited operating history and face significant challenges as a new entrant into the automotive industry.
•We are an early-stage company with a history of losses, and we expect to incur significant expenses and continuing losses in the future.
•Our limited operating history makes evaluating our business and future prospects difficult and will increase the risk of investing in us.
•If our vehicles fail to perform as expected, our ability to develop, market, and sell or lease our electric vehicles could be harmed.
•We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of its vehicles and components and its business, revenues and prospects.
•Our direct-to-consumer distribution model which we historically deployed has been different from the predominant current distribution model for automobile manufacturers. We are transitioning to a dealer sales model, which makes evaluating our business, operating results and future prospects difficult.
•We depend on revenue generated from a single model and in the foreseeable future will be significantly dependent on a limited number of models.
Macroeconomic, Market, and Strategic Risks
•Our asset-light business model is unique in the automotive industry and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
•We could experience cost increases or disruptions in supply of raw materials or other components used in our vehicles. The automotive market is highly competitive, and we may not be successful in competing in this industry.
•Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.
•Doing business internationally creates operational and financial risks for our business.
•We have identified material weaknesses in our internal control over financial reporting. If our remediation of such material weaknesses is not effective, or if we experience additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired, which could adversely affect investor confidence in the accuracy and completeness of our financial statements and adversely affect our business and operating results and the market price for our Class A common stock.
•The issuance of shares of our Class A Common Stock upon the conversion of the 2025 Notes or the exercise of the outstanding Magna Warrants would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
Financial Risks
•Our operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.
•Retail vehicle sales depend significantly on affordable interest rates and availability of credit for vehicle financing and a substantial increase in interest rates could adversely affect our business, prospects, financial condition, results of operations, and cash flows.
•Our business plans require a significant amount of capital. In addition, our future capital needs are likely to require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.
20
•Absent relief, as a result of our failure to timely file a periodic report with the SEC, we are currently ineligible to file a registration statement on Form S-3, which is likely to impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
•Our Class A Common Stock is currently traded on the OTC Market Pink Sheets, which may have an unfavorable impact on our stock price and liquidity.
Legal and Regulatory Risks
•Compliance with and changes to state dealer franchise laws could adversely impact our ability to successfully move to a dealership sales model.
•We retain certain information about our users and may be subject to various privacy and consumer protection laws.
•We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
•Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
•Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a material adverse effect on our business 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.
•The dual class structure of our Common Stock has the effect of concentrating voting with Henrik Fisker and Dr. Geeta Gupta-Fisker, our co-founders, members of our Board of Directors and Chief Executive Officer and Chief Financial Officer, respectively. This may limit or preclude other stockholders' ability to influence corporate matters, including the outcome of important transactions, including a change in control.
Risks Related to Our Convertible Senior Notes
•The 2026 Notes are effectively subordinated to our existing and future secured indebtedness and structurally subordinated to the liabilities of our subsidiaries.
•We did not make a required interest payment of approximately $8.4 million payable in cash on March 15, 2024 with respect to the 2026 Notes. Under the indenture governing the 2026 Notes, such non-payment is a default and we had a 30-day grace period to make the interest payment which now has elapsed. Such non-payment constitutes an Event of Default with respect to the 2026 Notes. For the quarter ended March 31, 2024, the 2026 Notes (in addition to the 2025 Notes) are expected to be classified as a current liability.
•We may be unable to raise the funds necessary to repurchase the 2026 Notes for cash following a fundamental change (as defined in the Indenture) or to pay any cash amounts due upon conversion, and our other indebtedness limits our ability to repurchase the 2026 Notes or pay cash upon their conversion.
•Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition, and results of operations and impair our ability to satisfy our obligations under the Notes.
•Our obligations to the Investor pursuant to the 2025 Notes are secured by a first priority security interest in all of the existing and future assets of the Company and certain of our subsidiaries, and because of a default, the Investor could foreclose on, liquidate and/or take possession of such assets. If that were to happen, we could be forced to curtail, or even to cease, our operations.
21
We have listed below the material risk factors applicable to us grouped into the following categories: Operational Risks; Macroeconomic, Market, and Strategic Risks; Financial Risks; Legal and Regulatory Risks; and Risks Related to Our Convertible Notes.
Operational Risks
There is substantial doubt about our ability to continue as a going concern.
We used $904.9 million in cash in operating and investing activities in 2023, and our cash balance reduced from $736.5 million at December 31, 2022 to $325.5 million at December 31, 2023. Our cash and cash equivalents balance further reduced to $53.9 million of unrestricted and $11.2 million of restricted at April 16, 2024, reflecting significant payments to certain suppliers. We expect to require additional cash in 2024 for debt service and investment needs, and our ability to generate cash from operating activities will depend on our ability to transition to a dealer model and sell vehicles. Accordingly, we have concluded there is substantial doubt as to our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to raise additional debt or equity financings, enter into a strategic partnership with an OEM, and generate cash from the sale of vehicles. We need significant additional funding in the near term to execute our business plan and to continue our operations. We continue to seek and evaluate opportunities to raise additional funds through the issuance of our securities, through one or more potential strategic partnerships, and from the sale of vehicles. If capital is not available to us when, and in the amounts needed, we could be required to further curtail our operations. Moreover, if we do not raise capital in the near term or receive a forbearance agreement and/or waivers from our debt holders (for relief from current defaults), we will be unable to satisfy our debt service obligations and expect to seek protection under applicable bankruptcy laws.
Our ability to develop, manufacture and obtain required regulatory approvals for a car of sufficient quality and appeal to customers on schedule and on a large scale is unproven.
Our business depends in large part on our ability to develop, manufacture, market and sell or lease our electric vehicles. Initially, we plan to manufacture vehicles in collaboration with contract manufacturers such as Magna Steyr, automotive component and large tier-one automotive suppliers.
Our ability to successfully manufacture vehicles, including the Fisker Ocean, is subject to risks, including with respect to:
•securing necessary funding;
•negotiating and executing definitive agreements with various suppliers for hardware, software, or services;
•manufacturing vehicles within specified design tolerances;
•obtaining required regulatory approvals and certifications;
•complying with environmental, safety, and similar regulations;
•securing necessary components, services, or licenses on acceptable terms and in a timely manner;
•timely delivering final component designs to our suppliers;
•attracting, recruiting, hiring, retaining, and training skilled employees;
•utilizing quality controls;
•timely receipt of supplies, including raw materials;
•maintaining arrangements on reasonable terms with its manufacturing partners and suppliers, engineering service providers, delivery partners, and after sales service providers; and
•avoiding delays in manufacturing and research and development of new models, and cost overruns.
Our ability to develop, manufacture and obtain required regulatory approvals for a vehicle of sufficient quality and appeal to customers on schedule and on a large scale is unproven, and our business plan may continue to evolve. We may be required to introduce new vehicle models and enhanced versions of existing models. To date, we have limited
22
experience, as a company, designing, testing, manufacturing, marketing and selling or leasing our electric vehicles and therefore cannot assure you that we will be able to meet customer expectations. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines would have a material adverse effect on our business, prospects, operating results and financial condition.
We are substantially reliant on our relationships with suppliers and service providers for the parts and components in our vehicles, as well as for the manufacture of our initial vehicles. If any of these suppliers or service partners choose to not do business with us, then we would have significant difficulty in procuring and producing our vehicles and our business prospects would be significantly harmed.
We have entered into a number of definitive agreements with third parties in order to implement our capital-light business model and will need to enter into definitive agreements with one or more suppliers in order to produce other vehicles in a manner contemplated by our business plan. Furthermore, we have explored and intend to secure alternative suppliers and providers for many of the most material aspects of our business model.
Collaboration with third parties for the manufacturing of vehicles is subject to risks with respect to operations that are outside our control. We could experience delays to the extent our current or future partners do not continue doing business with us, meet agreed upon timelines, experience capacity constraints or otherwise are unable to deliver components or manufacture vehicles as expected. There is risk of potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is related to their collaboration with us. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our partners’ vehicles or other vehicles manufactured by the same partner. In addition, although we intend to be involved in material decisions in the supply chain and manufacturing process, given that we also rely on our partners to meet our quality standards, there can be no assurance that we will be able to maintain high quality standards.
We may in the future enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party, and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business.
To sell or lease Fisker vehicles as currently contemplated, we will need to enter into certain additional agreements and arrangements, some of which are not currently in place. These include entering into definitive agreements with third party service partners for fleet management, vehicle storage, dockside collection, mobile fleet servicing, financing and end of lease collections. If we are unable to enter into such definitive agreements, or if we are only able to do so on terms that are unfavorable to us, we may have a material adverse effect on our business, prospects, operating results and financial condition.
Our relationship with automotive suppliers is integral to our platform procurement and manufacturing plan, and we may not be able to obtain such commitments in the future. We therefore may seek alternative arrangements with a number of component suppliers, and contract manufacturers, which we may not be successful in obtaining.
To manufacture our vehicles as currently contemplated, we will need to enter into definitive agreements and arrangements in the future. If we are unable to enter into definitive agreements or are only able to do so on terms that are unfavorable to us, we may not be able to timely identify adequate strategic relationship opportunities, or form strategic relationships, and consequently, we may not be able to fully carry out our business plans.
If we are unable to continue to contract with OEMs or suppliers on manufacturing of our future vehicles, we would need to develop our own platform and manufacturing facilities, which may not be feasible and, if feasible at all, would significantly increase our capital expenditure and would significantly delay production of our vehicles.
We may be unable to continue to enter into definitive agreements with OEMs and suppliers for manufacturing on terms and conditions acceptable to us and therefore we may need to contract with other third parties or establish our own production capacity. There can be no assurance that in such event that we would be able to partner with other third parties or establish our own production capacity to meet our needs on acceptable terms, or at all. The expense and time required to complete any transition and to assure that vehicles manufactured at facilities of new third-party partners comply with our quality standards and regulatory requirements would likely be greater than currently anticipated. If we need to develop our
23
own manufacturing and production capabilities, which may not be feasible, it would significantly increase our capital expenditures and would significantly delay production of our vehicles. This may require that we attempt to raise or borrow money, which may not be successful. Also, it may require that we change the anticipated pricing of our vehicles, which would adversely affect our margins and cash flows. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.
Manufacturing in collaboration with partners is subject to risks.
Our business model relies on outsourced manufacturing of our vehicles. Collaboration with third parties to manufacture vehicles is subject to risks that are outside of our control. We could experience delays if our partners do not meet agreed upon timelines or experience capacity constraints. There is risk of potential disputes with partners, which could stop or slow vehicle production, and we could be affected by adverse publicity related to our partners, whether or not such publicity is related to such third parties’ collaboration with us. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our partners’ products. In addition, we cannot guarantee that our suppliers will not deviate from agreed-upon quality standards.
We may be unable to continue to enter into agreements with manufacturers on terms and conditions acceptable to us and therefore we may need to contract with other third parties or significantly add to our own production capacity. We may not be able to engage other third parties or establish or expand our own production capacity to meet our needs on acceptable terms, or at all. The expense and time required to adequately complete any transition may be greater than anticipated. Any of the foregoing could adversely affect our business, results of operations, financial condition and prospects.
There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for our electric vehicles, and there can be no assurance such systems will be successfully developed.
Fisker vehicles will use a substantial amount of third-party and in-house software codes and complex hardware to operate. The development of such advanced technologies is inherently complex, and we will need to coordinate with our vendors and suppliers in order to reach production for our electric vehicles. A late software delivery by one or more of our vendors may cause resulting delay in whole vehicle integration and validation. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. Thus, our potential inability to develop the necessary software and technology systems may harm our competitive position. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing and volume requirements to support our business plan. In addition, such technology may not satisfy the cost, performance useful life and warranty characteristics we anticipate in our business plan, which could materially adversely affect our business, prospects and results of operations.
We are relying on third-party suppliers to develop a number of emerging technologies for use in our products, including lithium-ion battery technology. These technologies may not be commercially viable. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics we anticipate in our business plan. As a result, our business plan could be significantly impacted and we may incur significant liabilities under warranty claims which could adversely affect our business, prospects, and results of operations.
We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.
Any delay in the financing, design, manufacture, regulatory approval or launch of our vehicles, including entering into agreements for supply of component parts, and manufacturing, could materially damage our brand, business, prospects, financial condition and operating results and could cause liquidity constraints. Vehicle manufacturers often experience delays in the design, manufacture and commercial release of new products. To the extent we delay the launch of our vehicles, our growth prospects could be adversely affected as we may fail to establish or grow our market share. We rely on third-party suppliers for the provision and development of the key components and materials used in our vehicles.
24
To the extent our suppliers experience any delays in providing us with or developing necessary components, we could experience delays in delivering on our timelines.
We are dependent on our suppliers, a significant number of which are single or limited source suppliers, and the inability of our suppliers to deliver necessary components for our vehicles in a timely manner and at prices and volumes acceptable to us could have a material adverse effect on our business, prospects and operating results.
While we obtain components from multiple sources whenever possible, many of the components used in our vehicles are purchased from a single source. We believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for many single sourced components, but we may be unable to do so in the near term (or at all) at prices or quality levels that are acceptable to us for some single sourced components. In addition, we could experience delays if our suppliers do not meet agreed upon timelines or they experience production constraints that in turn limit our production.
Any disruption in the supply of components, including semiconductor shortages, whether or not from a single source supplier, could temporarily disrupt production of our vehicles until an alternative supplier is able to supply the required components. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control could also affect our suppliers’ ability to deliver components to us on a timely basis. Any of the foregoing could materially and adversely affect our ability to produce vehicles, increase our costs and negatively affect our liquidity and financial performance. For example, the consequences of the conflict between Russia and Ukraine or the conflicts in the Middle East, including international sanctions, the potential impact on inflation and increased disruption to supply chains may impact us, result in an economic downturn or recession either globally or locally within the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional military action, reignited “cold” wars or in the form of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on our results of operations, financial condition and prospects. Such consequences also may increase our funding cost or limit our access to the capital markets.
If any of our significant suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, we may be required to provide financial support or take other measures in an effort to ensure components and materials remain available to us. Financial support provided by us to distressed suppliers could adversely impact our liquidity and results of operations.
Our vehicles make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.
The battery packs within our vehicles make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, once our vehicles are commercially available, a field or testing failure of battery packs in our vehicles could occur, which could result in bodily injury or death and could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive and could harm our brand image. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications, the social and environmental impacts of cobalt mining, or any future incident involving lithium-ion cells, such as a vehicle or other fire, could seriously harm our business and reputation.
We have a limited operating history and face significant challenges as a new entrant into the automotive industry.
Fisker was incorporated in September 2016 and we have a short operating history in the automobile industry, which is continuously evolving. We may not be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market the Fisker Ocean and future vehicles. We face significant risks as a new entrant into the automotive industry, including, among other things, with respect to our ability to:
•design and produce safe, reliable and quality vehicles on an ongoing basis;
•obtain the necessary regulatory approvals in a timely manner;
•build a well-recognized and respected brand;
25
•establish and expand our customer base;
•successfully market not just our vehicles but also our other services, including our Flexee lease and other services we intend to provide;
•properly price our services, including our charging solutions, financing and lease options, and successfully anticipate the take-rate and usage of such services by users;
•successfully service our vehicles after sales and maintain a good flow of spare parts and customer goodwill;
•improve and maintain our operational efficiency;
•maintain a reliable, secure, high-performance and scalable technology infrastructure;
•predict our future revenues and appropriately budget for our expenses;
•attract, retain and motivate talented employees;
•anticipate trends that may emerge and affect our business;
•anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and
•navigate an evolving and complex regulatory environment.
If we fail to adequately address any or all of these risks and challenges, our business may be materially and adversely affected.
We are an early-stage company with a history of losses, and we expect to incur significant expenses and continuing losses in the future.
We have incurred a net loss since our inception. We expect to incur losses in future periods as we, among other things, design, develop and manufacture our vehicles; build up inventories of parts and components for our vehicles; increase our sales and marketing activities; develop our distribution infrastructure; and increases our selling, general and administrative functions to support our growing operations. We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in expected revenues, which would further increase our losses.
We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.
It is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. We are required to provide forecasts of our demand to our suppliers several months prior to the scheduled delivery of products to our prospective customers. Currently, there is no historical basis for making judgments on the demand for our vehicles or our ability to develop, manufacture, and deliver vehicles, or our profitability in the future. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt the manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to our customers could be delayed, which would harm our business, financial condition and operating results.
Our limited operating history makes evaluating our business and future prospects difficult and will increase the risk of investing in us.
As an early-stage company with a limited operating history, we face various risks and difficulties. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed. We have a very limited operating history on which investors can base an evaluation of our business, operating results and prospects. It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our
26
estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.
If our vehicles fail to perform as expected, our ability to develop, market, and sell or lease our electric vehicles could be harmed.
Our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair, recalls, and design changes. Our vehicles use a substantial amount of software code to operate and software products are inherently complex and often contain defects and errors when first introduced. We have a limited frame of reference by which to evaluate the long-term performance of our systems and vehicles. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. If any of our vehicles fail to perform as expected, we may need to delay deliveries or initiate product recalls, which could adversely affect our brand in our target markets and could adversely affect our business, prospects, and results of operations.
Our services may not be generally accepted by our users. If we are unable to provide quality customer service, our business and reputation may be materially and adversely affected.
Our servicing may primarily be carried out through third parties certified by us or dealers. Although such servicing partners may have experience in servicing other vehicles, they will initially have limited experience in servicing Fisker vehicles. There can be no assurance that our service arrangements will adequately address the service requirements of our customers to their satisfaction, or that we and our partners will have sufficient resources to meet these service requirements in a timely manner as the volume of vehicles we deliver increases.
We have received various complaints relating to the timing of delivery of titles and registration paperwork. These claims – and any other complaints or negative publicity about our business practices, our marketing, and advertising campaigns, our compliance with applicable laws and regulations, the integrity of the data that we provide to users, our cybersecurity measures and privacy practices and other aspects of our business – could diminish customer confidence in our business and adversely affect our brand. Moreover, the use of social media increases the speed that information, misinformation, and opinions can be shared and thus the speed that our reputation can be affected.
In addition, if we are unable to roll out and establish a widespread dealership and/or service network that complies with applicable laws, user satisfaction could be adversely affected, which in turn could materially and adversely affect our reputation and thus our sales, results of operations, and prospects.
Reservations for our vehicles are cancellable.
Deposits paid to reserve our vehicles are cancellable by our customers. Because all of our reservations are cancellable, it is possible that a significant number of customers who submitted reservations may not purchase Fisker vehicles. Such cancellations could harm our financial condition, business, prospects, and operating results.
If we fail to manage our future growth effectively, we may not be able to market and sell or lease our vehicles successfully direct to consumers or through dealerships.
Assuming we are able to secure sufficient capital, we may expand our operations, which would require hiring, retaining and training new personnel, controlling expenses, establishing facilities and experience centers, and implementing administrative infrastructure, systems and processes. In addition, because our electric vehicles are based on a different technology platform than traditional ICE vehicles, individuals with sufficient training in electric vehicles may not be available to be hired, and we will need to expend significant time and expense training employees we hire. We also require sufficient talent in additional areas such as software development. Furthermore, as we are a relatively young company, our ability to train and integrate new employees into its operations may not meet the growing demands of our business, which may affect our ability to grow. Any failure to effectively manage our growth could materially and adversely affect our business, prospects, operating results and financial condition.
27
We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of its vehicles and components and its business, revenues and prospects.
Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Fisker brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Our ability to develop, maintain and strengthen the Fisker brand will depend heavily on the success of our marketing efforts. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of our current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan, the European Union and China, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.
Our direct-to-consumer distribution model which we historically deployed has been different from the predominant current distribution model for automobile manufacturers. We are transitioning to a dealer sales model, which makes evaluating our business, operating results and future prospects difficult.
We initially began sales of our vehicles through a direct-to-consumer distribution model, which is different from the predominant current distribution model for automobile manufacturers. In January 2024, we announced that we would begin using a dealer sales model more aligned with the traditional dealer distribution model used by automobile manufacturers. The historical use of a direct-to-consumer distribution model and the change to using a dealer sales model makes evaluating our business, operating results and future prospects difficult. Our historical direct-to-consumer distribution model is not common in the automotive industry today. While the dealer sales model is common in the automotive industry, there are limited instances where an automobile company has changed its distribution model, which makes it difficult to assess the impact of such change. Consumers may have been attracted to our historical direct-to-consumer model and may determine not to move forward with the purchase of a vehicle for which they have made a deposit if required to purchase through a dealership. There may be delays in arranging for all necessary licenses and/or permits to enable us to use a dealer sales model. During any such delay, we may also be unable to sell cars in a direct-to-consumer format due to state restrictions on competition with franchise dealers. Any such delays or restrictions will negatively impact our ability to sell vehicles and generate revenue. If we are unable to successfully transition our distribution model, including minimizing loss of sales to existing deposit holders during the transition, it would have a material adverse effect on our business, prospects, financial results and results of operations.
We depend on revenue generated from a single model and in the foreseeable future will be significantly dependent on a limited number of models.
We depend on revenue generated from a single vehicle model, the Fisker Ocean, and in the foreseeable future will be significantly dependent on a limited number of models. Historically, automobile customers have come to expect a variety of vehicle models offered in a manufacturer’s fleet and new and improved vehicle models to be introduced frequently. Given that for the foreseeable future our business will depend on a single or limited number of models, to the extent a particular model is not well-received by the market, our sales volume, business, prospects, financial condition, and operating results could be materially and adversely affected.
We are highly dependent on the services of Henrik Fisker, our Chief Executive Officer.
We are highly dependent on the services of Henrik Fisker, our co-founder and Chief Executive Officer, and, together with his wife, our Chief Financial Officer, our largest stockholder. Mr. Fisker is the source of many, if not most, of the ideas and execution driving Fisker. If Mr. Fisker were to discontinue his service to Fisker due to death, disability or any other reason, we would be significantly disadvantaged.
Our business depends substantially on the continuing efforts of our executive officers and qualified personnel, and our operations may be severely disrupted if we lose their services.
Our success depends substantially on the continued efforts of our executive officers and qualified personnel, and our operations may be severely disrupted if we lose their services. As we build our brand and we become more well known, the risk that competitors or other companies may poach our talent increases. The failure to attract, integrate, train, motivate and retain these personnel could seriously harm our business and prospects.
28
Failure of information security and privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.
We expect to face significant challenges with respect to information security and privacy, including the storage, transmission and sharing of confidential information. We will transmit and store confidential and private information of our customers, such as personal information, including names, accounts, user IDs and passwords, and payment or transaction related information.
We have adopted strict information security policies and deployed advanced measures to implement the policies, including, among others, advanced encryption technologies, and plans to continue to deploy additional measures as we grow. However, advances in technology, an increased level of sophistication and diversity of our products and services, an increased level of expertise of hackers, new discoveries in the field of cryptography or others can still result in a compromise or breach of the measures that it uses. If we are unable to protect our systems, and hence the information stored in our systems, from unauthorized access, use, disclosure, disruption, modification or destruction, such problems or security breaches could cause a loss, give rise to our liabilities to the owners of confidential information or even subject us to fines and penalties. In addition, complying with various laws and regulations could cause us to incur substantial costs or require it to change our business practices, including our data practices, in a manner adverse to our business.
In addition, we are required to comply with complex and rigorous regulatory standards enacted to protect business and personal data in the United States, Europe and elsewhere. For example, the European Union adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018 and the State of California adopted the California Consumer Privacy Act of 2018 (“CCPA”), both as amended. Both the GDPR and the CCPA impose additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and recently enacted laws (including implementation of the privacy and process enhancements called for under the GDPR) and regulations can be costly; any failure to comply with these regulatory standards could subject us to legal and reputational risks.
Compliance with any additional laws and regulations could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with our customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, and damage to our reputation and credibility, and could have a negative impact on revenues and profits.
Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, could cause our customers to lose trust in us and could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online retail and other online services generally, which may reduce the number of orders we receive.
Any unauthorized control or manipulation of our vehicles’ systems could result in loss of confidence in us and our vehicles and harm our business.
Our vehicles contain complex information technology systems. For example, our vehicles are outfitted with built-in data connectivity to accept and install periodic remote updates from us to improve or update the functionality of our vehicles. We have designed, implemented and tested security measures intended to prevent cybersecurity breaches or unauthorized access to our information technology networks, our vehicles and their systems, and we intend to implement additional security measures as necessary. However, hackers may attempt in the future to gain unauthorized access to modify, alter and use such networks, vehicles and systems to gain control of, or to change, our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle. Vulnerabilities could be identified in the future, and our remediation efforts may not be successful. Any unauthorized access to or control of our vehicles or their systems or any loss of data could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our vehicles, their systems or data, as well as other factors that may result
29
in the perception that our vehicles, their systems or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects, financial condition and operating results.
Interruption or failure of our information technology and communications systems could impact our ability to effectively provide our services.
We outfit our vehicles with in-vehicle services and functionality that utilize data connectivity to monitor performance and timely capture opportunities for cost-saving preventative maintenance. The availability and effectiveness of our services depend on the continued operation of information technology and communications systems, which we have yet to fully develop. Our systems will be vulnerable to damage or interruption from, among others, fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks, cyber attacks or other attempts to harm our systems. Our data centers could also be subject to break-ins, sabotage and intentional acts of vandalism causing potential disruptions. Some of our systems will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any problems at our data centers could result in lengthy interruptions in our service. In addition, our vehicles are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in our business or the failure of our systems.
We need to continue to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so will adversely affect our billing and reporting.
To manage the expected growth of our operations and increasing complexity, we will need to continue to improve our operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.
Our management has limited experience in operating a public company.
Our executive officers have limited experience in the management of a publicly traded company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the combined company. The development and implementation of the standards and controls necessary for the combined company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Macroeconomic, Market, and Strategic Risks
Our asset-light business model is unique in the automotive industry and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses while establishing or entering new markets, setting up operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays, and the competitive environment in which we operate. There is, therefore, little at this time upon which to base an assumption that our asset-light business model will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, it can be expected to continue to sustain substantial operating expenses without
30
generating sufficient revenues to cover expenditures. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.
We could experience cost increases or disruptions in supply of raw materials or other components used in our vehicles.
We may be unable to adequately control the costs associated with our operations. We expect to incur significant costs related to procuring raw materials required to manufacture and assemble our vehicles. We expect to use various raw materials in our vehicles including steel, recycled rubber, recycled polyester, carpeting from fishing nets and bottles recycled from ocean waste. The prices for these raw materials fluctuate depending on factors beyond our control. Our business also depends on the continued supply of battery cells for our vehicles. We are exposed to multiple risks relating to availability and pricing of quality lithium-ion battery cells.
Furthermore, currency fluctuations, tariffs or shortages in petroleum and other economic or political conditions may result in significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components would increase our operating costs, and could reduce our margins. In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result in shortages, which would result in increased costs in raw materials to us or impact of prospects.
The automotive market is highly competitive, and we may not be successful in competing in this industry.
Both the automobile industry generally, and the electric vehicle segment in particular, are highly competitive, and we will be competing for sales with both ICE vehicles and other EVs. Many of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of our products, including our electric vehicles. We expect competition for electric vehicles to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results, and prospects.
The automotive industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies, including but not limited to hydrogen, may adversely affect the demand for our electric vehicles.
We may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a fuel source and, as a result, our competitiveness may suffer. Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the ICE, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Any failure by us to successfully react to changes in existing technologies could materially harm our competitive position and growth prospects.
We may be subject to risks associated with autonomous driving technology.
Our vehicles will be designed with connectivity for future installation of an autonomous hardware suite and our plans to partner with a third-party software provider in the future to implement autonomous capabilities. However, we cannot guarantee that we will be able to identify a third party to provide the necessary hardware and software to enable autonomous capabilities in an acceptable timeframe, on terms satisfactory to us, or at all. Autonomous driving technologies are subject to risks and there have been accidents and fatalities associated with such technologies. The safety of such technologies depends in part on drive interactions, and drivers may not be accustomed to using or adapting to such technologies. To the extent accidents associated with our autonomous driving systems occur, we could be subject to liability, negative publicity, government scrutiny, and further regulation. Any of the foregoing could materially and adversely affect our results of operations, financial condition, and growth prospects.
31
Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.
Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt electric vehicles, and even if electric vehicles become more mainstream, consumers choosing us over other EV manufacturers. Demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect our business, prospects, financial condition, and operating results.
In addition, the demand for our vehicles and services will highly depend upon the adoption by consumers of new energy vehicles in general and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards, and changing consumer demands and behaviors.
•Other factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:
•perceptions about electric vehicle quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles, whether or not such vehicles are produced by us or other manufacturers;
•range anxiety;
•the availability of new energy vehicles, including plug-in hybrid electric vehicles;
•the availability of service and charging stations for electric vehicles;
•the environmental consciousness of consumers, and their adoption of EVs;
•perceptions about and the actual cost of alternative fuel; and
•macroeconomic factors.
Any of the factors described above may cause current or potential customers not to purchase electric vehicles in general, and Fisker electric vehicles in particular. If the market for electric vehicles does not develop as we expect or develop more slowly than we expect, our business, prospects, financial condition and operating results will be affected.
Doing business internationally creates operational and financial risks for our business.
Our business plan includes operations in international markets, including initial manufacturing and supply activities in Europe, initial sales in North America and Europe, and eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If we fail to coordinate and manage these activities effectively, our business, financial condition or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which we sell our products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.
Our business may be adversely affected by labor and union activities.
Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We may also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results.
32
We face risks related to public health issues, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.
We continue to face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the pandemic of respiratory illness caused by COVID-19. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, and has led to a global decrease in vehicle sales in markets around the world.
The spread of COVID-19 caused us to modify our business practices, and we may take further actions as may be required by government authorities or that we determine is in the best interests of our employees, customers, suppliers, vendors and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, our operations will be impacted.
Difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment, or a decline in consumer confidence as a result of the COVID-19 pandemic could have a material adverse effect on the demand for our vehicles. Under difficult economic conditions, potential customers may seek to reduce spending by forgoing our vehicles for other traditional options or may choose to keep their existing vehicles and cancel reservations.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
Our facilities or operations could be adversely affected by events outside of our control, such as natural disasters, wars, health epidemics (as more fully described in the risk factor “We face risks related to public health issues, including the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations” located elsewhere in these Risk Factors), and other calamities. Although we have servers that are hosted in an offsite location, our backup system does not capture data on a real-time basis, and we may be unable to recover certain data in the event of a server failure. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services.
The military conflicts in Ukraine, Israel, Iran and Gaza, including the related disruptions to international shipping in the Red Sea and the global response to these conflicts, may adversely affect our business and results of operations.
In response to the military conflict between Russia and Ukraine, the U.S., U.K. EU, and others have imposed significant new sanctions and export controls against Russia and certain Russian individuals and entities. This conflict has also resulted in significant volatility and disruptions to the global markets. It is not possible to predict the short- or long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rates and energy prices, supply chain challenges and adverse effects on currency exchange rates and financial markets. In addition, the U.S. government has reported that U.S. sanctions against Russia in response to the conflict could lead to an increased threat of cyberattacks (including increased risk of data breach and other threats from ransomware, destructive malware, distributed denial-of-service attacks, as well as fraud, spam, and fake accounts, or other illegal activity conducted generally by bad actors seeking to take advantage of us, our partners or end-customers) against U.S. companies. These increased threats could pose risks to the security of our information technology systems, our network and our product offerings and/or service offerings for our products, as well as the confidentiality, availability and integrity of our data.
We have operations, as well as potential new customers, in Europe. If the conflict extends beyond Ukraine or further intensifies, it could have an adverse impact on our operations in Europe or other affected areas. While we do not offer any services in Ukraine, we are continuing to monitor the situation in that country and globally as well as assess its
33
potential impact on our business, including the supply of natural gas in Europe. Although neither Russia nor Belarus constitutes a material portion of our business (if any), a significant escalation or further expansion of the conflict's current scope or related disruptions to the global markets could have a material adverse effect on our results of operations.
Our dual class structure may depress the trading price of our Class A Common Stock.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, pursuant to which companies with multiple classes of shares of common stock are excluded. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our Common Stock may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause Fisker to change our capital structure. Any such exclusion from indices or any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could adversely affect the value and trading market of our Class A Common Stock.
Henrik Fisker and Dr. Geeta Gupta-Fisker are married to each other. The separation or divorce of the couple in the future could adversely affect our business.
Henrik Fisker and Dr. Geeta Gupta-Fisker, Fisker’s co-founders, members of the Board of Directors and Chief Executive Officer, and Chief Financial Officer, respectively, are married to each other. They are two of our executive officers and are a vital part of our operations. If they were to become separated or divorced or could otherwise not amicably work with each other, one or both of them may decide to cease his or her employment with Fisker or it could negatively impact our working environment. Alternatively, their work performance may not be satisfactory if they become preoccupied with issues relating to their personal situation. In these cases, our business could be materially harmed.
Future sales of shares by existing stockholders may adversely affect the market price of our Class A common stock.
Sales of a substantial number of shares of our Class A Common Stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our Class A Common Stock and may make it more difficult for you to sell your shares of our Class A Common Stock at a time and price that you deem appropriate.
We are unable to predict the effect that these sales, particularly sales by our directors, executive officers and significant stockholders, may have on the prevailing market price of our Class A Common Stock. If holders of these shares sell, or indicate an intent to sell, substantial amounts of our Class A Common Stock in the public market, the trading price of our Class A Common Stock could decline significantly and make it difficult for us to raise funds through securities offerings in the future.
We have identified material weaknesses in our internal control over financial reporting. If our remediation of such material weaknesses is not effective, or if we experience additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired, which could adversely affect investor confidence in the accuracy and completeness of our financial statements and adversely affect our business and operating results and the market price for our Class A common stock.
As a public company, we are required to establish and periodically evaluate procedures with respect to our disclosure controls and procedures and our internal control over financial reporting. As discussed in Item 9A, we have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in our internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. We will not be able to fully remediate these material weaknesses until appropriate steps have been completed and controls have been operating effectively for a sufficient period of time.
34
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, additional weaknesses in our disclosure controls and procedures and internal control over financial reporting may be discovered in the future. If we are unable to remediate the material weaknesses in a timely manner and further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could result in material misstatements in our financial statements that may continue undetected or a restatement of our financial statements for prior periods. This may negatively impact the public perception of the Company and cause investors to lose confidence in the accuracy and completeness of our financial reports, which could negatively affect the market price of our common stock, harm our ability to raise capital on favorable terms, or at all, in the future, and subject us to litigation or investigations by regulatory authorities, which could require additional financial and management resources or otherwise have a negative impact on our financial condition.
If securities or industry analysts do not continue to publish research or reports about our business or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our Class A Common Stock will depend on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover Fisker downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of Fisker company or fail to regularly publish reports on Fisker, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
The issuance of shares of our Class A Common Stock upon the conversion of the 2025 Notes or the exercise of the outstanding Magna Warrants would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
The holder of the 2025 Notes has and in the future may receive a substantial number of shares of Class A Common Stock upon conversion of the 2025 Notes. The conversions are expected to cause a significant dilution in the relative percentage interests of the Company’s stockholders and lead to volatility in the price of shares of Class A Common Stock. Moreover, the Investor may seek to sell their shares. Sales of substantial amounts of Class A Common Stock in the public market, or the perception that these sales could occur, coupled with the increase in the outstanding number of shares of Class A Common Stock, could cause the market price of Class A Common Stock to decline.
The Magna Warrants entitle Magna to purchase an aggregate of approximately 19,474,454 million shares of our Class A Common Stock. The exercise price of these warrants are $0.01 per share. To the extent such warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to holders of our Class A Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class A Common Stock.
Financial Risks
Our operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.
Our projected financial and operating information reflects current estimates of future performance. Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecast depends on a number of factors, many of which are outside our control, including, but not limited to:
• whether we can obtain sufficient capital to sustain and grow our business;
•our ability to manage its growth;
•whether we can manage relationships with key suppliers;
•the ability to obtain necessary regulatory approvals;
35
•demand for our products and services;
•the timing and costs of new and existing marketing and promotional efforts;
•competition, including from established and future competitors;
•our ability to retain existing key management, to integrate recent hires and to attract, retain and motivate qualified personnel;
•the overall strength and stability of domestic and international economies;
•regulatory, legislative and political changes; and
•consumer spending habits.
Unfavorable changes in any of these or other factors could materially and adversely affect our business, results of operations and financial results.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.
Any reduction, elimination, or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results. For example, recent German and U.S. legislative efforts, including the Inflation Reduction Act (the “IRA”), have eliminated certain tax incentives for purchasers of Fisker vehicles in those markets.
While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, our financial position could be harmed.
Retail vehicle sales depend significantly on affordable interest rates and availability of credit for vehicle financing and a substantial increase in interest rates could adversely affect our business, prospects, financial condition, results of operations, and cash flows.
In certain regions, including North America and Europe, financing for new vehicle sales has been available at relatively low interest rates for several years due to, among other things, expansive government monetary policies. As interest rates have risen, market rates for new vehicle financing have also risen, which may make our vehicles less affordable to customers or steer customers to less expensive vehicles that would be less profitable for us, adversely affecting our business, prospects, financial condition, results of operations, and cash flows. Additionally, if consumer interest rates continue to increase substantially or if financial service providers tighten lending standards or restrict their lending to certain classes of credit, customers may not desire or be able to obtain financing to purchase our vehicles. As a result, a continuing substantial increase in customer interest rates or tightening of lending standards could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
We may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which we may apply. As a result, our business and prospects may be adversely affected.
We may apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies. We anticipate that in the future there will be new opportunities for it to apply for grants, loans and other incentives from the United States, state and foreign governments. Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives. If we are not successful in obtaining any of these additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.
36
Insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and operating results.
We need to maintain warranty reserves to cover warranty-related claims. If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be materially and adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that our warranty reserves will be sufficient to cover all claims.
Our business plans require a significant amount of capital. In addition, our future capital needs are likely to require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.
We expect our expenditures to continue to be significant in the foreseeable future. The fact that we have a limited operating history means we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. We need to seek equity or debt financing to finance our capital expenditures. Such financing might not be available to us in a timely manner or on terms that are acceptable, or at all.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our asset-light business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.
In addition, our future capital needs and other business reasons require us to sell additional equity or debt securities or obtain a credit facility, which is not feasible with the 2025 Notes outstanding. The sale of additional equity or equity-linked securities could dilute our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our stockholders.
If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected.
Absent relief, as a result of our failure to timely file a periodic report with the SEC, we are currently ineligible to file a registration statement on Form S-3, which is likely to impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
Form S-3 permits eligible issuers to conduct registered offerings using a short form registration statement that allows the issuer to incorporate by reference its past and future filings and reports made under the Exchange Act. In addition, Form S-3 enables eligible issuers to conduct primary offerings under Rule 415 of the Securities Act. The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditions and efficient manner than raising capital in a standard registered offering pursuant to a registration statement on Form S-3. The ability to newly register securities for resale may also be limited as a result of the loss of Form S-3 eligibility with respect to such registrations.
As a result of our failure to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, absent a waiver of the Form S-3 eligibility requirements, we are ineligible to file new registration statements on Form S-3 until no earlier than March 1, 2025. In the event of the absence of a waiver, our S-3 ineligibility may significantly impair our ability to raise necessary capital needed for our business. If we seek to access the capital markets through a registered offering pursuant to a new registration statement on Form S-1, we would be required to disclose the proposed offering and the material terms thereof before the offering commences. As a result of such disclosure and potential for SEC review of such registration statement on Form S-1, we may experience delays in the offering process and we may incur increased offering and transaction costs and other considerations. If we are unable to raise capital through a registered offering, we would be required to raise capital on a private placement basis, which may be subject to pricing, size and other limitations, or seek other sources of capital. In addition, absent a waiver of the Form S-3 eligibility
37
requirements, we will not be permitted to conduct sales in an “at the market offering” as defined in Rule 415 under the Securities Act. Any of the foregoing may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
Our Class A Common Stock is currently traded on the OTC Market Pink Sheets, which may have an unfavorable impact on our stock price and liquidity.
Our Class A Common Stock is currently quoted on the OTC Markets Pink Sheets. The OTC Markets Pink Sheets is significantly more limited market than the national securities exchanges such as the New York Stock Exchange, or Nasdaq stock exchange, and there are lower financial or qualitative standards that a company must meet to have its stock quoted on the OTC Markets Pink Sheets. OTC Markets pink Sheets is an inter-dealer quotation system much less regulated than the major exchanges, and trading in our Class A Common Stock may be subject to abuses and volatility, which may have little to do with our operations or business prospects. This volatility could depress the market price of our Class A Common Stock for reasons unrelated to operating performance. These factors may result in investors having difficulty reselling any shares of our Class A Common Stock and could have a long-term adverse impact on our ability to raise capital in the future.
Legal and Regulatory Risks
Compliance with and changes to state dealer franchise laws could adversely impact our ability to successfully move to a dealership sales model.
Compliance with and changes to state dealer franchise laws could adversely affect our ability to successfully move to a dealership sales model. Certain manufacturers have been challenging state dealer franchise laws in many states and some have expressed interest in selling directly to customers, including us prior to our transition to a dealership sales model. Our future dealership sales model could be adversely affected if new vehicle sales are allowed to be conducted on the internet without the involvement of franchised dealers, or by increased market share by direct-to-consumer competitors.
We retain certain information about our users and may be subject to various privacy and consumer protection laws.
We intend to use our vehicles’ electronic systems to log information about each vehicle’s use, such as charge time, battery usage, mileage and driving behavior, in order to aid us in vehicle diagnostics, repair and maintenance, as well as to help us customize and optimize the driving and riding experience. Our users may object to the use of this data, which may harm our business. Possession and use of our users’ driving behavior and data in conducting our business may subject us to legislative and regulatory burdens in the United States and other jurisdictions that could require notification of any data breach, restrict our use of such information, and hinder our ability to acquire new customers or market to existing customers. If users allege that we have improperly released or disclosed their personal information, we could face legal claims and reputational damage. We may incur significant expenses to comply with privacy, consumer protection and security standards and protocols imposed by laws, regulations, industry standards or contractual obligations. If third parties improperly obtain and use the personal information of our users, we may be required to expend significant resources to resolve these problems.
We may need to defend against patent or trademark infringement claims brought against us, which may be time-consuming and would cause us to incur substantial costs.
Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell, leasing or market our vehicles or components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. Our applications and uses of trademarks relating to our design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. In addition, if we are
38
determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
•cease selling or leasing, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;
•pay substantial damages;
•seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, or at all;
•redesign our vehicles or other goods or services; or
•establish and maintain alternative branding for our products and services.
In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses, and other contractual rights to establish and protect our rights in its technology. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take will prevent misappropriation. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.
Patent, trademark, and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue which, would adversely affect our business, prospects, financial condition and operating results.
Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application for the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition or operating results.
As our patents may expire and may not be extended, our patent applications may not be granted and our patent rights may be contested, circumvented, invalidated or limited in scope, our patent rights may not protect us effectively. In particular, we may not be able to prevent others from developing or exploiting competing technologies, which could have a material and adverse effect on our business operations, financial condition and results of operations.
We cannot assure you that we will be granted patents pursuant to our pending applications. Even if our patent applications succeed and we are issued patents in accordance with them, we are still uncertain whether these patents will be contested, circumvented or invalidated in the future. In addition, the rights granted under any issued patents may not
39
provide us with meaningful protection or competitive advantages. The claims under any patents that issue from our patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar us from licensing and exploiting any patents that issue from our pending applications. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and are developing our technology. These patents and patent applications might have priority over our patent applications and could subject our patent applications to invalidation. Finally, in addition to those who may claim priority, any of our existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable.
We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.
Many of our employees were previously employed by other automotive companies or by suppliers to automotive companies. We may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or our work product could hamper or prevent our ability to commercialize our products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.
Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a material adverse effect on our business and operating results.
All vehicles sold must comply with international, federal, and state motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by us to have the Fisker Ocean or any future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on our business and operating results.
We are subject to substantial regulation and unfavorable changes to, or our failure to comply with, these regulations could substantially harm our business and operating results.
Our electric vehicles, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving, and we face risks associated with changes to these regulations.
To the extent the laws change, our vehicles may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.
Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell or lease vehicles directly to consumers could have a negative and material impact on our business, prospects, financial condition and results of operations.
We will face risks associated with potential international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.
We will face risks associated with any potential international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm our business. We anticipate having international operations and subsidiaries that are subject to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. We have no experience to date selling or leasing and servicing our vehicles internationally and such expansion would require us to make significant expenditures, including the hiring of local employees and establishing
40
facilities, in advance of generating any revenue. We will be subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell or lease our EVs and require significant management attention. These risks include:
•conforming our vehicles to various international regulatory requirements where our vehicles are sold which requirements may change over time;
•difficulty in staffing and managing foreign operations;
•difficulties attracting customers in new jurisdictions;
•foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon it in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United States;
•fluctuations in foreign currency exchange rates and interest rates, including risks related to any foreign currency swap or other hedging activities we undertake;
•United States and foreign government trade restrictions, tariffs and price or exchange controls;
•foreign labor laws, regulations and restrictions;
•changes in diplomatic and trade relationships;
•political instability, natural disasters, war or events of terrorism; and
•the strength of international economies.
If we fail to successfully address these risks, our business, prospects, operating results and financial condition could be materially harmed.
Our business could be adversely affected by trade tariffs or other trade barriers.
In recent years, both China and the United States have each imposed tariffs indicating the potential for further trade barriers. These tariffs may escalate a nascent trade war between China and the United States. Tariffs could potentially impact our raw material prices and impact any plans to sell vehicles in China. In addition, these developments could have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.
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.
We may become subject to product liability claims, even those without merit, which could harm our business, prospects, operating results, and financial condition. The automobile industry experiences significant product liability claims, and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given we have limited field experience of our vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of other future vehicle candidates, which would have material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we face liability for our products and are forced to make a claim under our policy.
We are or will be 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,
41
collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.
We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, and other anti-corruption laws and regulations. The FCPA and the U.K. Bribery Act 2010 prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K. Bribery Act also prohibits non-governmental “commercial” bribery and soliciting or accepting bribes. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation. Our policies and procedures designed to ensure compliance with these regulations may not be sufficient, and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business.
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 chosen judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our Certificate of Incorporation requires to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Certificate of Incorporation. In addition, our Certificate of Incorporation and Bylaws provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, operating results and financial condition.
Charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.
Our Certificate of Incorporation and Bylaws contain provisions that could delay or prevent a change in control of Fisker. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:
•authorizing our Board of Directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control;
•prohibiting cumulative voting in the election of directors;
•providing that vacancies on its Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum;
42
•prohibiting the adoption, amendment or repeal of our Bylaws or the repeal of the provisions of our Certificate of Incorporation regarding the election and removal of directors without the required approval of at least two-thirds of the shares entitled to vote at an election of directors;
•limiting the persons who may call special meetings of stockholders; and
•requiring advance notification of stockholder nominations and proposals.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, the provisions of Section 203 of the General Corporation Law of the State of Delaware (“DGCL”) govern Fisker. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with Fisker for a certain period of time without the consent of its Board of Directors.
These and other provisions in our Certificate of Incorporation and Bylaws and under Delaware law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of Class A Common Stock and result in the market price of Class A Common Stock being lower than it would be without these provisions.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our Certificate of Incorporation and Bylaws provides that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the DGCL, our Bylaws and our indemnification agreements that we entered into with our directors and officers provide that:
•We will indemnify our directors and officers for serving Fisker in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
• We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;
•We will be required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
•We will not be obligated pursuant to our Bylaws to indemnify a person with respect to proceedings initiated by that person against Fisker or our other indemnitees, except with respect to proceedings authorized by our Board of Directors or brought to enforce a right to indemnification;
•the rights conferred in our Bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and
•We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
The dual class structure of our Common Stock has the effect of concentrating voting with Henrik Fisker and Dr. Geeta Gupta-Fisker, our co-founders, members of our Board of Directors and Chief Executive Officer and Chief Financial Officer, respectively. This may limit or preclude other stockholders' ability to influence corporate matters, including the outcome of important transactions, including a change in control.
Shares of our Class B common stock, par value $0.00001 per share (“Class B Common Stock”) have 10 votes per share, while shares of our Class A Common Stock have one vote per share. Henrik Fisker and Dr. Geeta Gupta-Fisker, Fisker’s co-founders, members of our Board of Directors and Chief Executive Officer and Chief Financial Officer,
43
respectively, hold all of the issued and outstanding shares of our Class B Common Stock. Mr. Fisker and Dr. Gupta-Fisker may have interests that differ from other stockholders. This may have the effect of delaying, preventing or deterring a change in control of Fisker, could deprive its stockholders of an opportunity to receive a premium for their capital stock as part of a sale of Fisker, and might ultimately affect the market price of shares of our Class A Common Stock.
Our ability to utilize our net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If we have experienced an ownership change at any time since our incorporation, we may already be subject to limitations on our ability to utilize our existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, the Business Combination and future changes in our stock ownership, which may be outside of our control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, even if we earn net taxable income in the future, our ability to use our pre-change NOL carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to us.
Changes to applicable U.S. tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.
New laws and policy relating to taxes may have an adverse effect on our business, financial condition and results of operations. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”), and certain provisions of the Tax Act may adversely affect us. Changes under the Tax Act include, but are not limited to, a federal corporate income tax rate decrease to 21% for tax years beginning after December 31, 2017, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017 and the elimination of carrybacks of net operating losses. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which modified the Tax Act, U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. The Tax Act is unclear in many respects and could be subject to potential amendments and technical corrections, and is subject to interpretations and implementing regulations by the Treasury and IRS, any of which could mitigate or increase certain adverse effects of the legislation. Furthermore, the U.S. government recently enacted the IRA, which includes changes to the U.S. corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income” for certain large corporations, which is effective in 2023, and a 1% excise tax on share repurchases after December 31, 2022. The IRA also provides financial incentives in the form of tax credits to incentivize the purchase of clean vehicles including electric vehicles. To claim the retail tax credit, the IRA establishes multiple prerequisites, including that the vehicle must be assembled in North America; the vehicle must be under specified manufacturer suggested retail prices (“MSRP”); purchaser income limitations; have a specified percentage of critical minerals that are “extracted or produced” in the United States, in a country with which the United States has a Free Trade Agreement, or that is “recycled” in North America, and that have a specified percentage of “value” of its battery “components” that are “manufactured or assembled” in North America. The Fisker Ocean is manufactured in Austria and therefore not eligible for the retail tax credit. In addition, the current administration has announced a proposal to increase such excise tax to 4%. While Fisker does not believe that the aforementioned provisions of the IRA will have a material impact on its consolidated financial statements, any future corporate tax legislation could have that effect. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation. Generally, future changes in applicable U.S. tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial condition and results of operations.
44
Risks Related to Our Convertible Senior Notes
The 2026 Notes are effectively subordinated to our existing and future secured indebtedness and structurally subordinated to the liabilities of our subsidiaries.
In August 2021, we entered into a purchase agreement with certain counterparties for the sale of an aggregate of $667.5 million principal amount of 2.50% convertible senior notes due in September 2026 (the “2026 Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2026 Notes have been designated as green bonds, whose proceeds will be allocated in accordance with the Company’s green bond framework. The 2026 Notes consisted of a $625 million initial placement and an over-allotment option that provided the initial purchasers of the 2026 Notes with the option to purchase an additional $100.0 million aggregate principal amount of the 2026 Notes, of which $42.5 million was exercised. The 2026 Notes were issued pursuant to an indenture dated August 17, 2021. The net proceeds from the issuance of the 2026 Notes were $562.2 million, net of debt issuance costs and cash used to purchase the capped call transactions (“2026 Capped Call Transactions”) discussed below. The debt issuance costs are amortized to interest expense using the effective interest rate method.
The 2026 Notes are unsecured obligations which bear regular interest at 2.50% annually and will be payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2022. The 2026 Notes will mature on September 15, 2026, unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2026 Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election, at an initial conversion rate of 50.7743 shares of Class A common stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $19.70 per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2026 Notes. We may redeem for cash all or any portion of the 2026 Notes, at our option, on or after September 20, 2024 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The 2026 Notes are our senior, unsecured obligations and rank equal in right of payment with our existing and future senior, unsecured indebtedness, senior in right of payment to our existing and future indebtedness that is expressly subordinated to the Notes and effectively subordinated to our existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.
In addition, because none of our subsidiaries guarantee the 2026 Notes, the 2026 Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries. As of December 31, 2023 we had approximately $1,227.0 million in total indebtedness. Our subsidiaries had no outstanding indebtedness as of December 31, 2023. The Indenture governing the 2026 Notes does not prohibit us or our subsidiaries from incurring additional indebtedness, including senior or secured indebtedness, in the future.
If a bankruptcy, liquidation, dissolution, reorganization, or similar proceeding occurs with respect to us, then the holders of any of our secured indebtedness may proceed directly against the assets securing that indebtedness. Accordingly, those assets will not be available to satisfy any outstanding amounts under our unsecured indebtedness, including the 2026 Notes, unless the secured indebtedness is first paid in full. The remaining assets, if any, would then be allocated pro rata among the holders of our senior, unsecured indebtedness, including the 2026 Notes. There may be insufficient assets to pay all amounts then due.
If a bankruptcy, liquidation, dissolution, reorganization, or similar proceeding occurs with respect to any of our subsidiaries, then we, as a direct or indirect common equity owner of that subsidiary (and, accordingly, holders of our indebtedness, including the 2026 Notes), will be subject to the prior claims of that subsidiary’s creditors, including trade creditors and preferred equity holders, if any. We may never receive any amounts from that subsidiary to satisfy amounts due under the 2026 Notes.
45
We may be unable to raise the funds necessary to repurchase the 2026 Notes for cash following a fundamental change (as defined in the Indenture) or to pay any cash amounts due upon conversion, and our other indebtedness limits our ability to repurchase the 2026 Notes or pay cash upon their conversion.
Noteholders may require us to repurchase their 2026 Notes following a fundamental change (as defined in the Indenture), such as the fundamental change related to the formal delisting of our Class A Common Stock from the NYSE, at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any. In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our Class A common stock. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the 2026 Notes or pay the cash amounts due upon conversion. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the Notes or pay the cash amounts due upon conversion. Our failure to repurchase 2026 Notes or to pay the cash amounts due upon conversion when required will constitute a default under the Indenture.
A default under the Indenture or a fundamental change (as defined in the Indenture) itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the 2026 Notes.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition, and results of operations and impair our ability to satisfy our obligations under the Notes.
As of December 31, 2023, we had $1,227.0 million indebtedness. We may anticipate incurring dditional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our stockholders and our business, results of operations and financial condition by, among other things:
•increasing our vulnerability to adverse economic and industry conditions;
•limiting our ability to obtain additional financing;
•requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;
•limiting our flexibility to plan for, or react to, changes in our business;
•diluting the interests of our existing stockholders as a result of issuing shares of our Class A common stock upon conversion of the 2025 Notes or the 2026 Notes; and
•placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
We cannot provide assurance that we will maintain sufficient cash reserves or that our business will generate cash flow from operations at levels sufficient to permit us to pay principal, premium, if any, and interest on our indebtedness, or that our cash needs will not increase.
If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various requirements of our existing indebtedness or any indebtedness which we may incur in the future, we would be in default, which would permit the acceleration of the maturity of such indebtedness, which could have a material adverse effect on our business, results of operations and financial condition.
The accounting method for the 2026 Notes could adversely affect our reported financial condition and results.
In August 2020, the Financial Accounting Standards Board published an Accounting Standards Update, which we refer to as ASU 2020-06, which amends the accounting standards for convertible debt instruments that may be settled entirely or partially in cash upon conversion. ASU 2020-06 eliminates requirements to separately account for liability and equity components of such convertible debt instruments and eliminates the ability to use the treasury stock method for calculating diluted earnings per share for convertible instruments whose principal amount may be settled using shares. Instead, ASU 2020-06 requires (i) the entire amount of the security to be presented as a liability on the balance sheet and
46
(ii) application of the “if-converted” method for calculating diluted earnings per share. Under the “if-converted” method, diluted earnings per share will generally be calculated assuming that all the 2026 Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share. However, if the principal amount of the convertible debt security being converted is required to be paid in cash and only the excess is permitted to be settled in shares, the if-converted method will produce a similar result as the “treasury stock” method prior to the adoption of ASU 2020-06 for such convertible debt security.
We early adopted ASU 2020-06 as of January 1, 2021 and as such we did not bifurcate the liability and equity components of the 2026 Notes on our balance sheet and used the if-converted method of calculating diluted earnings per share. In order to qualify for the alternative treatment of calculating diluted earnings per share under the if-converted method, we would have to irrevocably fix the settlement method for conversions to combination settlement with a specified dollar amount of at least $1,000, which would impair our flexibility to settle conversions of notes, require us to settle conversions in cash in an amount equal to the principal amount of notes converted and could adversely affect our liquidity.
Furthermore, if any of the conditions to the convertibility of the 2026 Notes are satisfied, then, under certain conditions, we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a noncurrent, liability. This reclassification could be required even if no noteholders convert their Notes and could materially reduce our reported working capital.
The Capped Call transactions may affect the value of the 2026 Notes and our common stock.
In connection with the 2026 Notes, we entered into Capped Call transactions with certain financial institutions, which we refer to as the “option counterparties”. The Capped Call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2026 Notes and/or offset any potential cash payments we are required to make in excess of the principal amount upon conversion of any 2026 Notes, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the Capped Call transactions, the “option counterparties” and/or their respective affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our Class A common stock. This activity could have increased (or reduced the size of any decrease in) the market price of our Class A common stock or the 2026 Notes at that time.
In addition, the “option counterparties” and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock in secondary market transactions (and are likely to do so following any conversion of 2026 Notes, any repurchase of the 2026 Notes by us on any fundamental change (as defined in the indenture governing the 2026 Notes) repurchase date, any redemption date, or any other date on which the 2026 Notes are retired by us). This activity could also cause or avoid an increase or a decrease in the market price of our Class A common stock or the 2026 Notes.
The potential effect, if any, of these transactions and activities on the market price of our common stock or the 2026 Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our Class A common stock.
We are subject to counterparty risk with respect to the Capped Call transactions, and the Capped Calls may not operate as planned.
The “option counterparties” are financial institutions, and we will be subject to the risk that they might default under the Capped Call transactions. Our exposure to the credit risk of the “option counterparties” will not be secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors, but, generally, the increase in our exposure will be correlated with increases in the market price or the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our Class A common stock. We can provide no assurances as to the financial stability or viability of any option counterparty.
47
In addition, the Capped Call transactions are complex and they may not operate as planned. For example, the terms of the Capped Call transactions may be subject to adjustment, modification, or, in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these transactions may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the Capped Call transactions.
The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and our notes.
We may conduct future offerings of our common stock, preferred stock or other securities that are convertible into or exercisable for our common stock to finance our operations or fund acquisitions, or for other purposes. If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock, and, accordingly, our 2026 Notes may significantly decline. In addition, our issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholders, including noteholders who have received shares of our common stock upon conversion of their 2026 Notes.
The terms of the 2025 Notes restrict our current and future operations, particularly our ability to respond to changes or take certain actions, including some of which may affect completion of our strategic plan.
The 2025 Notes contain a number of restrictive covenants that impose operating restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to incur indebtedness, incur liens, enter into mergers or consolidations, dispose of assets, enter into affiliate transactions, pay dividends, make acquisitions and make investments, loans and advances.
These restrictions may affect our ability to execute on our business strategy, limit our ability to raise additional debt or equity financing to operate our business, including during economic or business downturns, and limit our ability to compete effectively or take advantage of new business opportunities.
Provisions in the 2025 Notes may deter or prevent a business combination that may be favorable to you.
Under the terms of the 2025 Notes we are prohibited from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the 2025 Notes. These and other provisions could prevent or deter a third party from acquiring us, even where the acquisition could be beneficial to you.
We may not have the ability to pay the installments on the 2025 Notes or to redeem the 2025 Notes.
The amortization payments with respect to the principal amount of the 2025 Notes were due and payable on July 11, 2023 for the Series A-1 Notes, September 29, 2023 for the Series B-1 Notes and then on each three-month anniversary thereafter until each maturity date in 2025. If we are unable to satisfy certain equity conditions, we will be required to pay all amounts due on any installment date in cash. As previously disclosed, the Company did not pay amortization payments due on the March 29, 2024 Installment Date under the Series B-1 Notes or on the April 11, 2024 Installment Date due under the Series A-1 Notes, resulting in an event of default under such Notes and the Company entering the Forbearance Agreement with the Investor as described below. If a change of control occurs, the Investor may require us to repurchase, for cash, all or a portion of their 2025 Notes. Our ability to pay amortization payments and interest on the 2025 Notes, to repurchase the 2025 Notes, to fund working capital needs, and fund planned capital expenditures depends on our ability to generate cash flow in the future. To some extent, this is subject to general economic, financial, competitive, legislative and regulatory factors, and other factors that are beyond our control. We cannot assure you that we will maintain sufficient cash reserves or that our business will generate cash flow from operations at a level sufficient to permit us to pay the interest on the 2025 Notes or to repurchase or redeem the 2025 Notes or that our cash needs will not increase.
The Investor can defer an installment payment due on any installment date to another installment date and may, on any installment date accelerate the payment of amounts due on up to an additional two times the installment payment of the 2025 Notes at the current installment price until the next installment date. Therefore, we may be required to repay the entire principal amount in one lump sum on the maturity date of the 2025 Note. If we are unable to satisfy certain equity conditions, we will be required to pay all amounts due whether by deferral or acceleration in cash and we may not have sufficient funds to repay the 2025 Notes under such circumstances.
48
Our failure to make the required payments on the 2025 Notes would permit the Investor to accelerate our obligations under the 2025 Notes. Such default may also lead to a default under our agreements governing any of our current and future indebtedness.
If we are unable to generate sufficient cash flow from our operations in the future to service our indebtedness and meet our other needs, we may have to refinance all or a portion of the indebtedness, seek forbearance of a waiver, obtain additional financing, reduce expenditures, or sell assets that we deem necessary to our business. We cannot assure you that any of these measures would be possible or that additional financing could be obtained on favorable terms, if at all. The inability to obtain additional financing on commercially reasonable terms would have a material adverse effect on our financial condition and our ability to meet our obligations to you under the 2025 Notes.
49
We are party to a Forbearance Agreement which expires on May 1, 2024, unless extended by the Investor, and if we are unable to comply with the Forbearance Agreement, then the Investor could require us to immediately repay the amounts due under the 2025 Notes.
On April 22, 2024, the Company, certain subsidiaries of the Company who are guarantors of the 2025 Notes (the “Guarantors” and together with the Company, the “Obligors”) and the Investor (in its capacity as collateral agent and noteholder) entered into a Forbearance Agreement (the “Forbearance Agreement”) pursuant to which the Investor agreed to, among other things, forbear from enforcing its right to immediate redemption and forbear from exercising any of its other rights or remedies (including enforcement and collection actions) under the Transaction Documents until May 1, 2024, by operation of law or otherwise against the Obligors or any of the Collateral or other property owned by the Obligors (including, without limitation, via set-off or recoupment) with respect to certain defaults and events of default that have occurred, or that may occur, as described further in the Forbearance Agreement.
A termination event under the Forbearance Agreement consists of, among other things, the occurrence of a new event of default under the 2025 Notes or the 2026 Notes, or the Company engaging in any transaction (including the incurrence of Indebtedness), making any divided, investment, payment or transfer, or taking any other action, in each case, outside the ordinary course of business (taking into consideration the current circumstances of the Company and its subsidiaries).
If we fail to comply with the terms of the Forbearance Agreement, or fail to get the Forbearance Agreement extended as needed, the Investor could declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, since the borrowings under the 2025 Notes are secured by a first priority lien on our assets, upon such acceleration, the Investor may foreclose on our assets, which would have a material adverse effect on our business, results of operations and financial condition.
The market price of shares of Class A Common Stock may decline in the future as a result of the sale of Class A Common Stock held by the Investor, and the issuance of shares upon conversion of the 2025 Notes in accordance with the terms thereof is expected to cause a significant dilution in the relative percentage interests of the Company’s stockholders and may lead to volatility in the price of shares of Class A Common Stock.
The Investor has and in the future may receive a substantial number of shares of Class A Common Stock. While the number of shares of Class A Common Stock that will be issued is uncertain, the issuance of shares upon conversion of the 2025 Notes in accordance with the terms thereof is expected to cause a significant dilution in the relative percentage interests of the Company’s stockholders and may lead to volatility in the price of shares of Class A Common Stock. The Investor may seek to sell their shares. Sales of substantial amounts of Class A Common Stock in the public market, or the perception that these sales could occur, coupled with the increase in the outstanding number of shares of Class A Common Stock, could cause the market price of Class A Common Stock to decline.
The Company has incurred, and will continue to incur, significant costs in connection with the offering of 2025 Notes, which may be in excess of those anticipated by the Company.
The Company has incurred and will continue to incur substantial non-recurring costs and expenses in connection with the offering of the 2025 Notes. These costs and expenses include, without limitation, expenses associated with its entry into the definitive documentation and financial and legal advisory and other professional fees incurred related to the transactions and costs associated related to the Forbearance Agreement and any additional forbearance if needed. Furthermore, the cost to the Company of defending any potential litigation or other proceeding relating to the transactions could be substantial. These costs and expenses, as well as other unanticipated costs and expenses, could have an adverse effect on our financial condition and operating results.
Our obligations to the Investor pursuant to the 2025 Notes are secured by a first priority security interest in all of the existing and future assets of the Company and certain of our subsidiaries, and if we default on those obligations, the Investor could foreclose on, liquidate and/or take possession of such assets. If that were to happen, we could be forced to curtail, or even to cease, our operations.
On December 28, 2023, the Company and certain of its direct and indirect wholly owned subsidiaries entered into an Amended Pledge Agreement, in favor of the Investor as collateral agent, pursuant to which the entirety of the Pledge Agreement was amended and restated to, among other things, amend and define the scope of the security interest created by the Pledge Agreement in all of the existing and future assets of the Company and certain of its subsidiaries. In addition, on December 28, 2023, certain subsidiaries of the Company entered into the Guaranty in favor of the Investor as collateral
50
agent, pursuant to which, among other things, such subsidiaries have guaranteed the Company’s outstanding obligations in respect of the 2025 Notes. As a result, if we default on our obligations under the 2025 Notes, the Investor could foreclose on their security interest and liquidate or take possession of some or all of the assets of the Company and certain of our subsidiaries, which would harm our business, financial condition and results of operations and could require us to curtail, or even to cease our operations.
The value of the collateral securing the 2025 Notes may not be sufficient to pay the amounts owed under the 2025 Notes.
The proceeds of any sale of collateral securing the 2025 Notes following an event of default with respect thereto may not be sufficient to satisfy, and may be substantially less than, amounts due on the 2025 Notes. No appraisal of the value of the collateral securing the 2025 Notes has been made. The value of the collateral in the event of liquidation will depend upon market and economic conditions, the availability of buyers and similar factors. The value of the collateral could be impaired in the future as a result of changing economic and market conditions, our failure to successfully implement our business strategy, competition and other factors. By its nature, some or all of the collateral may not have a readily ascertainable market value or may not be salable or, if salable, there may be substantial delays in its liquidation. Bankruptcy laws and other laws relating to foreclosure and sale also could substantially delay or prevent the ability of the collateral agent or any holder of the 2025 Notes to obtain the benefit of any collateral securing the 2025 Notes. Such delays could have a material adverse effect on the value of the collateral.
Some of the collateral is located in foreign jurisdictions, and thus subject to the laws, procedures and market conditions of such jurisdictions and applicable bankruptcy laws.
Some of the collateral is located in jurisdictions outside of the United States. As a result, enforcement of the security interests and any foreclosure or realization against such collateral will be subject to and depend upon the laws, procedures and economic and market conditions of such foreign jurisdictions. Such laws and procedures may vary significantly from jurisdiction to jurisdiction and may be less favorable than those applicable in the United States. Additionally, the timing, expense and procedural hurdles related to enforcement of security interests in foreign jurisdictions may vary and are difficult to predict.
The rights of the collateral agent and the holders of the 2025 Notes to enforce remedies may be significantly impaired by application of foreign bankruptcy, insolvency and restructuring laws. There also can be no assurance that courts outside of the United States would recognize the jurisdiction of a U.S. bankruptcy court. Accordingly, difficulties may arise in administering a U.S. bankruptcy proceeding against the Company or any of its subsidiaries with respect to collateral and other property located outside of the United States, and any orders or judgments of a bankruptcy court in the United States may not be enforceable in certain foreign jurisdictions.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity
While no organization can eliminate cybersecurity risk entirely, we devote significant resources to our security program that we believe is reasonably designed to mitigate our cybersecurity and information technology risk. Our efforts focus on protecting and enhancing the security of our information systems, software, networks, and other assets. These efforts are designed to protect against, and mitigate the effects of, among other things, cybersecurity incidents where unauthorized parties attempt to access confidential, sensitive, or personal information; potentially hold such information for ransom; destroy data; disrupt or degrade service or our operations; sabotage systems; or otherwise cause harm to the Company, our customers, suppliers, or dealers, or other key stakeholders.
We employ capabilities, processes, and other security measures we believe are designed to reduce and mitigate these risks and have requirements for our suppliers to do the same. Despite having thorough due diligence, onboarding, and cybersecurity assessment processes in place for our suppliers, the responsibility ultimately rests with our suppliers to establish and uphold their respective cybersecurity programs. Our ability to monitor the cybersecurity practices of our suppliers is limited and there can be no assurance that we can prevent or mitigate the risk of any compromise or failure in the information systems, software, networks, and other assets owned or controlled by our suppliers. When we become aware that a supplier’s cybersecurity has been compromised, we attempt to mitigate the risk to the Company, including, if
51
appropriate and feasible, by terminating the supplier’s connection to our information systems. Notwithstanding our efforts to mitigate any such risk, there can be no assurance that the compromise or failure of supplier information systems, technology assets, or cybersecurity programs would not have an adverse effect on the security of the Company’s information systems.
To effectively prevent, detect, and respond to cybersecurity threats, we employ a multi-layered cybersecurity risk management program supervised by our Chief Information Security Officer, whose team is responsible for leading enterprise-wide cybersecurity strategy, policy, architecture, education, and risk management processes. This responsibility includes identifying, considering, and assessing potentially material cybersecurity incidents on an ongoing basis, establishing processes designed to prevent and monitor potential cybersecurity risks, implementing mitigation and remediation measures, and maintaining our cybersecurity program.
Our cybersecurity program aligns to internationally recognized standards and best practices for cybersecurity and data protection. We perform, internal and externally sourced, security testing, 3rd party attack simulations, application scanning, and IT Security Controls Assessments, to identify vulnerabilities and evaluate cyber defense capabilities in the enterprise and in our vehicle product systems. We also perform phishing and social engineering simulations and provide cybersecurity training to Company personnel with access to Company information and/or digital assets. We disseminate security awareness newsletters to employees to highlight emerging or urgent cybersecurity threats and best practices. Externally, we monitor notifications from the U.S. Computer Emergency Readiness Team (“CERT”), Automotive Information Sharing and Analysis Center (“Auto ISAC”), FBI InfraGard; and review customer, media, and third-party, cybersecurity reports; and respond to third-parties or security researchers who notify us of vulnerabilities they can detect in our cyber defenses.
Our capabilities, processes, and other security measures also include, without limitation:
•Security Information and Event Management (“SIEM”) cloud incident management platform, that provides a log aggregation and analytics solution for threat and vulnerability monitoring.
•Endpoint Detection and Response (“EDR”) software, which monitors for malicious activities on endpoints.
•Cloud Security Posture and Workload Protection (CSPM/CWPP) infrastructure, container, and workload monitoring for threats and compliance posture; and
•Corporate incident response plans, including a product security incident response plan.
•Supplier Risk Management processes to monitor contractual cybersecurity requirements, assess and manage 3rd party cyber and data risk in service and technical engagements.
We invest in enhancing our cybersecurity capabilities and strengthening our partnerships with key business partners, service providers, government, and law enforcement agencies, to understand the range of cybersecurity risks in the global operating environment, enhance defenses, and improve resiliency against cybersecurity threats. Additionally, our CISO is a member of the FBI InfraGard and FBI Executive Advisory Board. Our membership in these public and private sector groups assists in our efforts to protect the Company against both enterprise and in-vehicle security risks.
The Company’s global cybersecurity incident response is overseen by our Chief Information Security Officer. Our Chief Information Security Officer has served in that role for over 2 years and has over 2 decades of cybersecurity governance, engineering, and operations experience for large global brands. Our Chief Information Security Officer reports to the Vice President of IT. The Vice President of IT reports directly to the Senior Vice President of Enterprise, Digital Operations, and Transformation.
When a cybersecurity threat or incident is identified, our policy is to review and triage the threat or incident, and to then manage it to conclusion in accordance with our cybersecurity incident response processes. When a cybersecurity incident is determined to be significant, it is addressed by senior management and/or disclosure committee using processes that leverage subject-matter expertise from across the Company. Furthermore, we may engage third-party advisors as part of our incident management processes. Any cybersecurity incident that is identified as having the potential to be highly significant or material to the Company are brought to the attention of the Chief Technology Officer and /or General Counsel by the Chief Information Security Officer as part of our cybersecurity incident response processes.
Cybersecurity risk management is an integral part of our overall enterprise risk management program. As part of its enterprise risk management efforts, the Board meets with senior management, including the executive leadership team,
52
to assess and respond to critical business risks. Critical enterprise risks are assessed by senior management annually and discussed with the Board. Once identified, each of the risks we view as most significant is assigned an executive risk owner who is responsible to oversee risk assessment, develop and implement mitigation plans, and provide regular updates to the Board (and/or Board committee assigned to the risk). Cybersecurity threats have been and continue to be identified as one of the Company’s top risks, with our Chief Technology Officer and Chief Information Security Officer assigned as the executive risk owners. The Board has delegated primary responsibility for the oversight of cybersecurity and information technology risks, and the Company’s preparedness for these risks, to the Audit Committee. Our Chief Information Security Officer briefs the Board annually.
As part of its oversight duties, the Audit Committee receives regular updates on our cybersecurity posture and information security risks from our Chief Information Security Officer. These regular updates include topics related to cybersecurity practices, cyber risks, and risk management processes, such as updates to our cybersecurity programs and mitigation strategies, and other cybersecurity developments. In addition to these regular updates, as part of our incident response processes, the Chief Technology Officer, in collaboration with the Chief Information Security Officer and General Counsel, provides updates on certain cybersecurity incidents to the Audit Committee and, in some cases, the Board. The Audit Committee reviews and provides input into, and oversight of our cybersecurity processes, and in the event the Company determines it has experienced a material cybersecurity incident, the Audit Committee is notified about the incident in advance of filing a Current Report on Form 8-K.
In 2023, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite the capabilities, processes, and other security measures we employ, that we believe are designed to prevent, detect, reduce, and mitigate the risk of cybersecurity incidents, we may not be aware of all vulnerabilities or might not accurately assess the probability or risk of an incident. Risk management measures cannot provide absolute security, and may not be sufficient in all circumstances, or mitigate all potential risks.
Our Cybersecurity program makes a reasonable and ongoing effort to keep pace with a rapidly changing threat and regulatory landscape.
Item 2. Properties.
Our corporate headquarters are located in Manhattan Beach, California where we occupy approximately 78,500 square feet of space which we use for an automobile design studio and general office purposes for its management, technology, product design, sales and marketing, finance, legal, human resources, general administrative and information technology teams. The lease will terminate on November 1, 2026, with no option to extend the lease term.
Fisker's global footprint includes leases for Center+ vehicle viewing locations, service centers, mixed-use properties and Fisker lounges located throughout North America, Europe and Asia.
We believe our existing facilities are adequate for our current requirements. We also believe we will be able to obtain additional or alternative space at other locations at commercially reasonable terms to support our continuing expansion.
Item 3. Legal Proceedings.
For a description of any material pending legal proceedings, please see Note 19, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
From time to time, we may become involved in legal proceedings arising in the ordinary course of business. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.
Item 4. Mine Safety Disclosures.
Not applicable.
53
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
On October 29, 2020, our Class A Common Stock and warrants were listed on the NYSE under the trading symbols of “FSR” and “FSR WS,” respectively. On April 19, 2021, we redeemed all of the outstanding Public Warrants and the NYSE filed a Form 25-NSE with respect to the Public Warrants; the formal delisting of the Public Warrants became effective ten days thereafter.
On March 25, 2024, the NYSE notified us that it had determined to (A) immediately suspend trading in our Class A common stock due to “abnormally low” trading price levels pursuant to Section 802.01D of the NYSE Listed Company Manual, and (B) commence proceedings to delist our Class A Common Stock. On April 10, 2024, the NYSE filed a Form 25-NSE with respect to our Class A common stock; the formal delisting of the Class A common stock became effective ten days thereafter.
Our Class A common stock is quoted on the OTC Pink platform.
Holders of Common Stock and Warrants
As of April 16, 2024, there were 36 holders of record of our Class A Common Stock, two holders of our Class B Common Stock, and one holder of the Magna Warrants. The actual number of stockholders of our Class A Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
54
Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
The following graph shows a comparison, from December 31, 2018 through December 31, 2023, of the cumulative total return on our common stock, the NYSE Composite Index, and the NASDAQ OMX Global Automobile Index. Such returns are based on historical results and are not intended to suggest future performance. Data for the NYSE Composite Index and the NASDAQ OMX Global Automobile Index assumes an investment of $100 on December 31, 2018 and reinvestment of dividends. We have never declared or paid cash dividends on our common stock nor do we anticipate paying any such cash dividends in the foreseeable future.
The following table summarizes stock performance graph data points in dollars:
55
Dividend Policy
We have never declared or paid any cash dividends on our Common Stock or any other securities. We anticipate that we will retain all available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. In addition, future debt instruments may materially restrict our ability to pay dividends on our Common Stock. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant.
Recent Sales of Unregistered Securities
None.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For discussion related to changes in financial condition and the results of operations for fiscal year 2022-related items compared to the fiscal year ended December 31, 2021, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2022, which was filed with the Securities and Exchange Commission on March 1, 2023
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Form 10-K, particularly in Part I, Item 1A, Risk Factors. We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments or otherwise, except to the extent that such disclosure is required by applicable law.
OVERVIEW
Fisker has built a technology-enabled, asset-light automotive business model that it believes is among the first of its kind and aligned with the future state of the automotive industry. This involves a focus on vehicle development, customer experience, sales and service intended to change the personal mobility experience through technological innovation, ease of use and flexibility. Fisker has three important brand pillars - sustainability, design and innovation. The Company combines the legendary design and engineering expertise of Henrik Fisker to develop high quality electric vehicles with strong emotional appeal. Central to Fisker’s business model is the Fisker Flexible Platform Agnostic Design (“FF-PAD”), a proprietary process that allows the development and design of a vehicle to be adapted to any given electric vehicle (“EV”) platform in the specific segment size. The process focuses on selecting industry leading vehicle specifications and adapting the design to crucial hard points on an EV platform and outsourced manufacturing to reduce development cost and time to market. The first example of this is Fisker’s development of a distinctive base vehicle platform that started with an architecture provided by Magna Steyr Fahrzeugtechnik AG & Co KG, a limited liability partnership established and existing under the laws of Austria (“Magna Steyr”), an affiliate of Magna International, Inc. (“Magna”), but that Fisker substantially modified and re-engineered into Fisker's FM29 Platform. Fisker believes it is well-positioned through its global premium EV brand, its renowned design capabilities, its sustainability focus, and its asset-light and low overhead cost structure, which enables products like the Fisker Ocean to be priced roughly equivalent to internal combustion engine-powered SUV’s from premium brand competitors.
56
The Fisker Ocean is targeting a large and rapidly expanding “premium with volume” segment (meaning a premium automaker producing more than 100,000 units of a single model such as the BMW X3 Series or Tesla Model Y) of the electric SUV market. The Fisker Ocean, a five-passenger vehicle with a 250- to over 350-mile range and state-of-the-art advanced driver assistance capabilities, will be differentiated in the marketplace by its innovative and timeless design and a re-imagined customer experience delivered through an advanced software-based user interface. The Fisker Ocean is made with a high degree of sustainability, measured across the full vehicle life-cycle. We have prioritized the proximity of suppliers and materials, and emphasize recycled and bio-based content. Our vehicle is produced in a carbon-neutral factory and we are working hard to provide renewable energy sourced charging options and will have options for remanufacturing, re-using and recycling over 90% of our vehicle when it finally comes off the road. The optional features for the Ocean, including the patented California Mode and a solar photovoltaic roof, resulted in the Fisker Ocean prototype being the most awarded new automobile at CES 2020 by Time, Newsweek, Business Insider, CNET and others.
Through an innovative partnership strategy, Fisker believes that it will be able to significantly reduce the capital intensity typically associated with developing and manufacturing vehicles, while maintaining flexibility and optionality in component sourcing and manufacturing due to Fisker’s FF-PAD proprietary process. Through Fisker’s FF-PAD proprietary process, Fisker, in collaboration with Magna, has developed a proprietary electric vehicle platform called FM29 that will underpin Fisker Ocean and at least one additional nameplate. Fisker intends to cooperate with one or more additional industry-leading original equipment manufacturers (“OEMs”), technology companies, and/or tier-one automotive suppliers for access to procurement networks, while focusing on key differentiators in innovative design, software and user interface. Multiple platform-sharing partners are intended to accelerate growth in Fisker’s portfolio of electric vehicle offerings. Fisker recently announced its new Dealer Partnership model in North America and a hybrid model of dealer partner and direct to consumer sales in Europe.
The Business Combination
Fisker Inc. (“Fisker” or the “Company”) was originally incorporated in the State of Delaware on October 13, 2017 as a special purpose acquisition company under the name Spartan Energy Acquisition Corp. (“Spartan”), formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. Spartan completed its IPO in August 2018. In October 2020, Spartan’s wholly-owned subsidiary merged with and into Fisker Inc., a Delaware corporation (“Legacy Fisker”), with Legacy Fisker surviving the merger as a wholly-owned subsidiary of Spartan (the “Business Combination”).
In connection with the consummation of the Business Combination (the “Closing”), the registrant changed its name from Spartan Energy Acquisition Corp. to Fisker Inc. The Business Combination was accounted for as a reverse recapitalization, in accordance with GAAP. Under this method of accounting, Spartan was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of Legacy Fisker issuing stock for the net assets of Spartan, accompanied by a recapitalization, whereby no goodwill or other intangible assets was recorded. Operations prior to the Business Combination are those of Legacy Fisker.
Key Trends, Opportunities and Uncertainties
The Company believes that its future performance and success depends to a substantial extent on the ability to capitalize on the following opportunities, which in turn is subject to significant risks and challenges, including those discussed below and in the section of this Form 10-K titled “Risk Factors.”
57
Industry-Leading Tier-One Automotive Suppliers
On October 14, 2020, the Company and Spartan entered into a Cooperation Agreement with Magna setting forth certain terms for the development of a full electric vehicle (the “Cooperation Agreement”). The Cooperation Agreement set out the main terms and conditions of operational phase agreements (the “Operational Phase Agreements”) that will extend from the Cooperation Agreement and other agreements with Magna (or its affiliates). On December 17, 2020, the Company entered into the platform-sharing and initial manufacturing Operational Phase Agreements referenced in the Cooperation Agreement. The Company and Magna Steyr Fahrzeugtechnik AG & Co KG entered into a Development Services Agreement on October 22, 2020 and Addendum to Development Services Agreement on April 7, 2021 providing for the full development and industrialization of the Company's proprietary FM29 Platform and Fisker Ocean as the first Fisker vehicle from the Company's proprietary FM29 Platform. The Company and Magna Steyr also entered into a Contract Manufacturing Agreement on June 12, 2021 for the launch and manufacture of the Fisker Ocean.
These co-operations allow the Company to focus on vehicle design, strong brand affiliation and a differentiated customer experience. Fisker intends to leverage multiple EV platforms to accelerate its time to market, reduce vehicle development costs and gain access to an established global supply chain of batteries and other components.
The Company believes it has been able to accelerate its time to market. Production of the Fisker Ocean commenced in November 2022 and the Company intends to meet timing, cost and quality expectations while optimally matching its cost structure with its projected production ramp by leveraging such partnerships and a trained workforce. Remaining hardware agnostic allows for selection of partners, components, and manufacturing decisions to be based on both timeline and cost advantages and enables Fisker to focus on delivering truly innovative design features, a superior customer experience, and a leading user interface that leverages sophisticated software and other technology advancements.
While the Company has entered into agreements with Magna and several other leading tier-one automotive suppliers, unanticipated events, delays in execution by third parties and any required changes in the Company’s current business plans could materially and adversely affect its business, margins and cash flows.
58
Market Trends and Competition
The cadence of EV adoption by consumers is likely to vary from year-to-year. While many independent forecasts suggest that EVs as a percentage of global auto sales will grow from 3% in 2020 to more than 30% in 2030, growth is unlikely to be linear. For example, many OEMs experienced softer EV growth in 2023 than initially projected and, as a result, had to lower prices and reduce their volume forecasts. Over time, EV penetration is expected to grow with the introduction of more purpose-built EV platforms such as the Fisker Ocean, a reduction in manufacturing costs that will come with scale, and the continued build-out of the infrastructure for vehicle charging.
The Company is also working to quantify the sustainability advancements and claims that the Fisker brand would produce the most sustainable vehicles in the world, which it believes will be an increasingly important differentiator among a growing subset of consumers. In the Company’s pursuit of these objectives, it will be in competition with substantially larger and better capitalized vehicle manufacturers. While the Company believes that the low-capital-intensity partnership strategy, together with its sales strategies, provides the Company with an advantage relative to traditional and other established auto manufacturers. The Company's better capitalized competitors may seek to undercut the pricing or compete directly with the Company’s designs by replicating their features. In addition, while the Company believes that its strong management team forms the necessary backbone to execute on its strategy, the Company expects to compete for talent, as future growth will depend on hiring qualified and experienced personnel to operate all aspects of the business.
Commercialization
The Company and its dealer partners have started to establish Fisker Lounges and dealership or Center+ locations in select cities in North America and Europe, which has enabled prospective customers to experience Fisker vehicles through showroom visits, personal interactions with Fisker advisors and test drives. Fisker, in each launch market, has teamed with dealers and/or vehicle service organizations with established service facilities, operations and technicians. This existing setup will be further expanded through our current and future retail partners and their own service organizations. The Company offers third-party financing and leasing options in select countries provided by financial institutions.
Regulatory Landscape
The Company operates in an industry that is subject to and benefits from environmental regulations, which have generally become more stringent over time, particularly across developed markets. Regulations in Fisker’s target markets include economic incentives to purchasers of EVs, tax credits for EV manufacturers, and economic penalties that may apply to a car manufacturer based on its fleet-wide emissions ratings. See “Information about Fisker—Government Regulation and Credits.” Further, the registration and sale of Zero Emission Vehicles (“ZEVs”) in California will earn Fisker ZEV credits, which it may be able to sell to other OEMs or tier-one automotive suppliers seeking to access the state’s market. Several other U.S. states have adopted similar standards. In the European Union, where European car manufacturers are penalized for excessive fleet-wide emissions on the one hand and incentivized to produce low emission vehicles on the other, Fisker believes it will have the opportunity to monetize the ZEV technology through fleet emissions pooling arrangements with car manufacturers that may not otherwise meet their CO2 emissions targets. On August 16, 2022, the IRA was signed into law. While waiting on pending Department of Treasury regulatory guidance, the Company is continuing to evaluate the ultimate impact of the tax credits on our financial results, including our net earnings and cash flow. The IRA impacts taxes and environmental regulations, such as providing financial incentives in the form of tax credits to incentivize the purchase of clean vehicles including electric vehicles. To claim the retail tax credit, the IRA establishes multiple prerequisites, including that the vehicle must be assembled in North America; the vehicle must be under specified manufacturer suggested retail prices (“MSRP”); purchaser income limitations; have a specified percentage of critical minerals that are “extracted or produced” in the United States, in a country with which the United States has a Free Trade Agreement, or that is “recycled” in North America; and that have a specified percentage of “value” of its battery “components” that are “manufactured or assembled” in North America. Currently the Fisker Ocean is manufactured in Austria and therefore not eligible for the retail tax credit. Over time, the Company expects the IRA to benefit Fisker and the automotive industry in general, but automakers that optimize their eligibility for their vehicles as compared to Fisker may have a competitive advantage. While Fisker expects environmental regulations to provide a tailwind to its growth, it is possible for certain regulations to result in margin pressures. For example, regulations that effectively impose EV production quotas on auto manufacturers may lead to an oversupply of EVs, which in turn could promote price decreases. As a pure play EV company, Fisker’s margins could be particularly and adversely impacted by such regulatory developments. Trade restrictions and tariffs, while historically minimal between the European Union and the United States
59
where most of Fisker’s production and sales are expected, are subject to unknown and unpredictable change that could impact Fisker’s ability to meet projected sales or margins.
Basis of Presentation
The Company currently conducts its business through one operating segment. Beginning in June 2023, the Company commenced its core operations - the serial production and commercialization of its vehicles - in the U.S. and EU. The Company's historical results are reported under United States generally accepted accounting principles (“GAAP”) and in U.S. dollars. The Company expects to continue its global operations substantially in the U.S. and the European Union, and as a result the Company expects future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its historical financial statements. As a result, the Company expects that the financial results it reports for periods after 2023 will not be comparable to the financial results included in this Form 10-K or those incorporated by reference from the proxy statement.
Components of Results of Operations
The Company is an early stage company and its historical results may not be indicative of its future results for reasons that may be difficult to anticipate. Accordingly, the drivers of the Company’s future financial results, as well as the components of such results, may not be comparable to the Company’s historical or projected results of operations.
Revenues
The Company generates a significant majority of its revenue from direct sales of Fisker Ocean SUVs. The Company launched its merchandise “Fisker Edition” where it sells direct to consumers Fisker branded apparel and goods. The Company is also a reseller of home charging solutions which started in December 2022. Merchandise sales and home charging solutions are not a significant portion of the Company’s results.
In accordance with ASC 606, Revenue from Contracts with Customers, the Company follows a five-step process in which (i) a contract is identified, (ii) the related performance obligations are identified, (iii) the transaction price is determined, (iv) the transaction price is allocated to the identified performance obligations, and (v) revenue is recognized when (or as) performance obligations are satisfied. The Company’s revenue is primarily generated from the sale of electric vehicles and accessories to customers, as well as specific services provided that meet the definition of a performance obligation under ASC 606, including over-the-air ( “OTA”) software updates as they become available, premium connectivity, roadside assistance, service packages, specified vehicle upgrades and charging station benefits.
Cost of Goods Sold
Cost of goods sold primarily include vehicle components and parts, including batteries, direct and indirect costs related to production, including labor, freight and duties, depreciation and amortization of tooling and capitalized manufacturing costs, and reserves for estimated warranty expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist mainly of personnel-related expenses for Fisker’s executive and other administrative functions involved in general corporate, selling and marketing functions, legal, human resources, facilities and real estate, accounting, finance, tax, and information technology, and outside professional services, including legal, accounting and other advisory services.
Research and Development Expenses
The Company’s research and development expenses consist primarily of contracted engineering services incurred in connection with the design, testing and development of new products, related technologies, and services and improving existing products and services. Research and development expenses are expensed as incurred.
Provision for Income Taxes
The Company’s provision for income taxes consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and
60
liabilities, and changes in the tax law. Fisker maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because the Company believes the recoverability of the tax assets is not more likely than not.
Results of Operations
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
The following table sets forth the Company’s historical operating results for the periods indicated:
Year Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
| (dollar amounts in thousands) | |||||||||||||||||||||||
| Revenue | $ | 272,883 | $ | 342 | $ | 272,541 | 79690 | % | |||||||||||||||
| Costs of goods sold | 558,821 | 263 | $ | 558,558 | 212379 | % | |||||||||||||||||
| Gross margin | (285,938) | 79 | $ | (286,017) | (362047) | % | |||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 249,160 | 106,417 | $ | 142,743 | 134 | % | |||||||||||||||||
| Research and development | 67,357 | 423,907 | $ | (356,550) | (84) | % | |||||||||||||||||
| Total operating costs and expenses | 316,517 | 530,324 | $ | (213,807) | (40) | % | |||||||||||||||||
| Loss from operations | (602,455) | (530,245) | $ | (72,210) | 14 | % | |||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Other expense | (7,190) | (119) | $ | (7,071) | 5942 | % | |||||||||||||||||
| Interest income | 24,745 | 10,378 | $ | 14,367 | 138 | % | |||||||||||||||||
| Interest expense | (18,745) | (18,426) | $ | (319) | 2 | % | |||||||||||||||||
| Foreign currency loss | (5,389) | (2,039) | $ | (3,350) | 164 | % | |||||||||||||||||
| Unrealized loss recognized on equity securities | (1,791) | (6,860) | $ | 5,069 | (74) | % | |||||||||||||||||
| Fair value adjustment on convertible senior notes and derivative liabilities | (327,823) | — | $ | (327,823) | 100 | % | |||||||||||||||||
| Total other expense | (336,193) | (17,066) | $ | (319,127) | 1870 | % | |||||||||||||||||
| Loss before income taxes | $ | (938,648) | $ | (547,311) | $ | (391,337) | 72 | % | |||||||||||||||
| Provision for income taxes | $ | (1,299) | (185) | $ | (1,114.0) | 602 | % | ||||||||||||||||
| Net Loss | $ | (939,947) | $ | (547,496) | $ | (392,451) | 72 | % | |||||||||||||||
n.m. = not meaningful.
Revenue and cost of goods sold
In the second quarter of 2023, the Company began producing vehicles for deliveries to its customers and, accordingly, recognized vehicle revenues from the sale of Fisker Ocean SUVs. Merchandise sales and home charging solutions are not intended to comprise a significant portion of the Company’s revenues. Over the course of the second half of 2023, the Company continued to ramp production volumes at a measured pace to ensure the supplier base could deliver high-quality components in line with our serial production run-rate.
During the year ended December 31, 2023, the Company delivered 4,847 vehicles, net of returns and recognized net revenue of $272.9 million with related cost of revenues totaling $558.8 million resulting in negative gross profit of $285.9 million. The increase in revenue, cost of goods sold and negative gross profit is due the first partial year of sales for the Company. The Company had no vehicle sales during the corresponding year ended December 31, 2022. During the year ended December 31, 2023, the Company recorded a net realizable value write down of $232.7 million. Cost of goods sold also included stock-based compensation expense of $0.9 million for the year ended December 31, 2023 and Depreciation and amortization of $46.4 million for the year ended December 31, 2023.
61
Sales of branded apparel, goods and home charging solutions totaled $0.8 million with related costs of revenue of $1.1 million resulting in a gross profit of $0.3 million during the year ended December 31, 2023 compared to branded apparel, goods and home charging solutions sales of $0.3 million with related costs of goods sold of $0.3 million resulting in a gross profit of $79 thousand during the December 31, 2022.
Since the Company commenced production and sale of its vehicles, cost of goods sold includes mainly vehicle components and parts, including batteries, labor costs, amortized tooling costs and capitalized costs associated with the Magna warrants, shipping and logistics costs, and reserves for estimated warranty expenses.
Selling, General and Administrative
Selling, general and administrative expenses increased by $142.7 million, or 134.1%, to $249.2 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily attributable to an increase headcount primarily in our sales and marketing team, resulting in increased compensation, including improved benefits designed to attract and retain well-qualified employees. In addition, we increased our spending for targeted marketing, event advertising, openings of Center+ showrooms, and customer pick-up and service locations, in anticipation of our launch of the Ocean SUV in the second half of 2023. As we transition to a dealership model in 2024, we expect certain of our locations under lease will be converted to subleases. Selling, general and administrative expenses included stock-based compensation expense of $3.3 million and $6.9 million for the years ended December 31, 2023 and 2022, respectively.
Research and Development
Research and development expenses decreased by $356.6 million or 84.1% to $67.4 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was primarily attributable to reductions in design, development and testing of the Ocean after its start of production. The Company had a change in estimate based on a settlement reached with a supplier that further reduced expenses. Research and development expenses incurred during 2022 were associated with the development phase of our prototype Oceans, and included $107.7 million of prototype parts, testing and trial production runs to assemble vehicles. The vehicles produced were used for engineering testing and optimizing vehicle assembly as we completed the final steps toward achievement of production for serial production in 2023. Research and development expenses include stock-based compensation expense of $4.0 million and $12.7 million for the years ended December 31, 2023 and 2022, respectively.
Other Expense
Other expense, net of $7.2 million during the year ended December 31, 2023 primarily relates to a $8.4 million provision for a loan made to a supplier.
Interest Income
Interest income increased by $14.4 million, or 138%, from $10.4 million to $24.7 million during the year ended December 31, 2022 as compared to the year ended December 31, 2023. The increase was due to higher yields from money market funds.
Interest Expense
Interest expense was $18.7 million during the year ended December 31, 2023 and $18.4 million during the year ended December 31, 2022. The increase is attributable to the amortization of debt issuance costs of the 2026 Senior Unsecured Convertible Notes.
Foreign Currency Loss
The Company recorded foreign currency losses of $5.4 million during the year ended December 31, 2023, compared to losses of $2.0 million during the year ended December 31, 2022 due to the remeasurement of Euro denominated monetary assets caused by fluctuating Euro currency rates. In 2024, the Company expects Euro denominated transactions
62
associated with the Company's foreign operations and services provided by suppliers will increase and will further subject the Company to greater realized gain and losses from foreign currencies.
Unrealized Losses on Equity Securities
Unrealized losses recognized on equity securities held as of December 31, 2023 totaled $1.8 million during the year ended December 31, 2023 and $6.9 million during the year ended December 31, 2022.
Fair Value Adjustment on 2025 Convertible Notes and Derivative Liability
During July and September of 2023 the Company issued convertible notes due in 2025 to a single investor via Series A-1 notes and Series B-1 notes (collectively the “2025 Notes”), with a combined principal amount of $510.0 million. During 2023, $145.5 million in principal value of the 2025 notes was converted at a fair value of $213.4 million and charged to Additional paid in capital. The reduction of outstanding 2025 convertible notes due to conversions recorded at fair value were offset by a $327.8 million increase in the fair market value of the remaining unconverted 2025 Notes. The increase in fair value of the 2025 Notes resulted in a loss of $327.8 million recorded in Change in fair value measurements on the Consolidated Statements of Operations for the year ended December 31, 2023. The fair value of the 2025 Notes at December 31, 2023 was $564.4 million.
The primary driver of the loss recorded to Change in fair value measurement was the result of an enriched conversion feature which became available to the Investor upon the event of default which occurred on November 13, 2023 related to the Company's late filing of Form 10-Q for the period ended September 30, 2023.
Provision for Income Taxes
The Company's provision for income taxes consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. The Company maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because it believes the recoverability of the tax assets is not more likely than not.
Provision for income taxes totaled $1.3 million for the year ended December 31, 2023 and $0.2 million for the year ended December 31, 2022. The increase is due to the start of production and European sales.
Liquidity and Capital Resources
See “Item 1A. Risk Factors” for a discussion of the risk associated with the Company's ability to continue as going concern and Note 20, Subsequent events for a discussion on covenant waivers.
During the second quarter of 2023, the Company began to generate revenue from its core business operations. To date, the Company has funded its capital expenditure and working capital requirements through proceeds received from the issuance of equity and convertible notes, as further discussed below. The Company’s ability to successfully fund its primary commercial operations and expand its business may depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.
As of December 31, 2023, the Company’s cash and cash equivalents totaled $325.5 million and the Company had $70.4 million of restricted cash.
In July and September 2023, the Company entered into purchase agreements for the sale of an aggregate of $510.0 million principal amount of convertible senior notes due in 2025. The net proceeds from the issuance of the 2025 Notes was $445.1 million, net of debt issuance costs. The 2025 Notes mature in July 2025 and September 2025, unless repurchased, redeemed, or converted in accordance with their terms prior to such date.
In May 2022, the Company established an “at the market” equity offering program (the “ATM Program”) under which J.P. Morgan Securities LLC and Cowen and Company, LLC act as sales agents (the “Agents”), pursuant to a distribution agreement that the Company entered into with the Agents (the “Distribution Agreement”). Pursuant to the ATM Program, the Company may, at its discretion and from time to time during the term of the Distribution Agreement, sell, through the Agents, shares of its Class A Common Stock as would result in aggregate gross proceeds to the Company
63
of up to $350.0 million by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made directly on the New York Stock Exchange, on any other existing trading market for the Class A Common Stock or to or through a market maker. In addition, the Agents may also sell the shares of Class A Common Stock by any other method permitted by law, including, but not limited to, negotiated transactions. The Company issued 21,153,154 shares of Class A common stock during the year ended December 31, 2023 for gross proceeds of $135.9 million, before $2.0 million of commissions and other direct incremental issuance costs. Effective July 12, 2023, the Company terminated the Distribution Agreement. As a result, the Company will not offer or sell any further shares under the May 2022 ATM Program.
In August 2021, the Company entered into a purchase agreement for the sale of an aggregate of $667.5 million principal amount of convertible senior notes due in 2026. The net proceeds from the issuance of the 2026 Notes were $562.2 million, net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 12. The 2026 Notes mature on September 15, 2026, unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2026 Notes were not convertible as of December 31, 2023.
The Company used $904.9 million of cash in operating and investing activities during the year ended December 31, 2023. While it raised $565.7 million in financing activities during such period, this usage left the Company with cash and cash equivalents, net of restricted cash, of $325.5 million as of December 31, 2023. Since then, the Company has had to make significant payments to certain suppliers under its existing contracts and continued to use cash in operating activities, leaving it with cash and cash equivalents, net of restricted cash of $53.9 million as of April 16, 2024.
The Company did not make a required interest payment of approximately $8.4 million payable in cash on March 15, 2024 with respect to the 2026 Notes. At the conclusion of a 30-day grace period, the non-payment became an Event of Default with respect to the 2026 Notes, and resulted in a cross default with respect to the 2025 Notes. The Company's current forbearance agreement expires May 1, 2024. If the Company does not receive adequate relief from its debt holders and additional sufficient liquidity from potential liquidity providers to meet its current obligations, it expects to seek protection under applicable bankruptcy laws in multiple jurisdictions within 30 days from the issuance of these financial statements (see further discussion of, among other items, waivers, forbearance of the 2025 Notes and delisting considerations within Note 20, Subsequent Events).
The Company believes that its available liquidity will not be sufficient to meet its current obligations for a period of at least twelve months from the date of the filing of this Annual Report on Form 10-K. Accordingly, the Company has concluded there is substantial doubt about its ability to continue as a going concern.
The Company has been seeking additional financing, attempting to restructure its current debt obligations and continues to discuss financing alternatives with potential providers. In addition to reducing expenses, the Company intends to further reduce its workforce and streamline its operations, including reducing its physical footprint. There is no assurance that the Company will be able to restructure its obligations and/or obtain additional financing on acceptable terms and conditions.
Cash Flows
The following table provides a summary of the Company’s cash flow data for the periods indicated:
Years Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
(dollar amounts in thousands) | |||||||||||||||||
| Net cash used in operating activities | $ | (668,931) | $ | (452,537) | $ | (301,270) | |||||||||||
| Net cash used in investing activities | (235,944) | (200,989) | (134,386) | ||||||||||||||
| Net cash provided by financing activities | $ | 565,694 | $ | 187,636 | $ | 646,937 | |||||||||||
Cash Flows used in Operating Activities
The Company’s net cash flows used in operating activities to date have been primarily comprised of costs related to research and development, payroll and other selling, general and administrative activities. Operating lease commitments at
64
December 31, 2023 will result in cash payments of $22.1 million in 2024, $21.4 million for 2025 and $59.8 million for 2026 and thereafter. The Company expects its cash used in operating activities will increase as a decrease in development costs of the Ocean are offset by higher working capital throughout 2024. The year over year change in operating cash outflow was $216.4 million for the year ended December 31, 2023 which is primarily attributable to the Company's net loss, increase in inventory year over year, change in the fair value of the 2025 derivative liability and an increase in accounts payable balances. The increase in accounts payable balance is primarily due to the corresponding increase of inventory and components purchased for vehicle production and invoices as it relates to the ramp up in deliveries.
The year over year increase of $19.9 million in our cash flows relates to a decrease in Prepaid expenses primarily due to a decrease in advances to vendors for vehicle components.
In total, the Company is projecting to use cash in a range of $260.0 million to $310.0 million for combined Selling, general and administrative expenses and Research and development expenses, excluding stock-based compensation expense, during 2024.
Net cash used in operating activities increased by approximately $216.4 million from $452.5 million during the year ended December 31, 2022 to $668.9 million during the year ended December 31, 2023. Net cash used in operating activities increased by approximately $151.3 million from $301.3 million during the year ended December 31, 2021 to $452.5 million during the year ended December 31, 2022.
Cash Flows used in Investing Activities
The Company’s cash flows used in investing activities, historically, have been comprised mainly of purchases of property and equipment which is under construction. During the year ended December 31, 2023, the Company acquired assets related to the production of the Ocean and its components that totaled $227.6 million compared to $191.0 million during the year ended December 31, 2022. The Company expects 2024 capital expenditures for tooling and manufacturing equipment to range between $60.0 million to $80.0 million of which the Company expect's at least 50% is denominated in foreign currencies, as serial production tooling and equipment continue at both vehicle assembly and supplier facilities during 2024.
The Company used cash of $235.9 million for investing activity during the year ended December 31, 2023 compared to $201.0 million of cash used during the year ended December 31, 2022.
On July 28, 2021, the Company made a $10.0 million commitment for a private investment in public equity (PIPE) supporting the planned merger of leading European EV charging network, Allego with Spartan Acquisition Corp. III (NYSE: SPAQ), a publicly-listed special purpose acquisition company. The merger closed in the first quarter of 2022 which triggered our investment commitment resulting in a $10.0 million cash payment to acquire 1,000,000 class A common shares of Allego (NYSE: ALLG). Fisker was the exclusive electric vehicle automaker in the PIPE and, in parallel, has agreed to terms on a strategic partnership to deliver a range of charging options for its customers in Europe.
Cash Flows from Financing Activities
Through December 31, 2023, the Company has financed its operations primarily through the sale of equity securities with the ATM Equity Program and issuance of convertible senior notes.
Net cash from financing activities was $565.7 million during the year ended December 31, 2023, which was primarily due to the proceeds from the issuance of the 2025 convertible note of $445.1 million, net of issuance costs of $4.9 million, the issuance of the ATM equity program of $135.9 million, net of stock issuance costs of $1.9 million as well as aggregate proceeds from the exercise of stock options and collection of related statutory withholding taxes of $0.0 million.
Net cash from financing activities was $187.6 million during the year ended December 31, 2022, which was primarily due to the proceeds from the issuance of the ATM equity program of $190.5 million as well as aggregate proceeds from the exercise of stock options and collection of related statutory withholding taxes of $2.2 million.
65
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements, as defined under SEC rules.
Critical Accounting Estimates
The Company’s financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these financial statements, the Company is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. The Company considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements. The Company routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from original estimates, and any effects on the Company's business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
The Company’s significant accounting policies are described in Note 2 to its audited consolidated financial statements included elsewhere in this Form 10-K.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost for vehicles, which approximates actual cost on a first-in, first-out basis. The Company records inventory write-downs for excess or obsolete inventories based upon assumptions about current and future demand forecasts. If inventory on-hand is in excess of future demand forecast and market conditions, the excess amounts are written-off.
Inventory is also reviewed to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires the Company to determine the selling price of vehicles less the estimated cost to convert the inventory on-hand into a finished product. Once inventory is written-down, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
In the event there are changes in estimates of future selling prices or production costs, the Company may be required to record additional and potentially material write-downs. A small change in estimates may result in a material change in the reported financial results.
2025 Convertible Note
The Company analyzed the purchase option related the Securities Purchase Agreement dated as of July 10, 2023 and determined that the purchase option for the Additional Optional Note and Additional Mandatory Note represents a freestanding instrument that should be classified as a derivative. The Company has recorded the Option to Purchase Additional Notes as a derivative liability, which is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any change in fair value is recorded as a component of the income statement. The Company fair values the derivative using a Monte Carlo simulation pricing model. The 2025 convertible notes are valued using an embedded lattice technique.
As permitted under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments (“ASC 825”), the Company elected to account for its convertible promissory notes with changes in fair value recorded as a component of non-operating loss in the consolidated statements of operations. As a result of electing the fair value option, direct costs and fees related to the convertible notes were expensed as incurred.
The 2025 Convertible Note value is directly related to the fair value of the Class A common stock. As the value of the common stock increases, the value of the note increases, and as the value of common stock decreases, the value of the note decreases.
66
Revenue from Contracts with Customers
In accordance with ASC 606, Revenue from Contracts with Customers, the Company follows a five-step process in which (i) a contract is identified, (ii) the related performance obligations are identified, (iii) the transaction price is determined, (iv) the transaction price is allocated to the identified performance obligations, and (v) revenue is recognized when (or as) performance obligations are satisfied. The Company’s revenue is primarily generated from the sale of electric vehicles and accessories to customers, as well as specific services provided that meet the definition of a performance obligation under ASC 606, including over-the-air ( “OTA”) software updates as they become available, premium connectivity, roadside assistance, service packages, specified vehicle upgrades and charging station benefits.
The value of performance obligations related to the Company's sales represent stand-alone selling prices estimated by considering the cost to develop and deliver the service plus margin, third-party pricing of similar services and other information that may be available. The transaction price is allocated among the performance obligations based on the proportion of the stand alone selling prices of the Company’s performance obligations to the sum of the standalone selling prices of all performance obligations in the arrangement. Payment for EV sales is typically received at or prior to delivery, or according to agreed upon payment terms.
The Company also recognizes a sales return reserve on vehicle sales, which is recorded as an offset to revenue.
Warranty
The Company provides base warranties on the vehicles we sell for specific periods of time and/or mileage and accrues the estimated cost of base warranty coverages at the time of sale.
The Company establishes an estimate of base warranty obligations using industry information and historical trends. The Company uses industry information with regards to the nature, frequency, and average cost of claims. The Company will reevaluate the estimate of base warranty obligations on a regular basis and as the Company collects sufficient data. Experience has shown that initial data for the first year of the Ocean may be volatile; therefore, the process relies on industry data until sufficient historical data is available. The Company will then compare the resulting accruals with present spending and current industry data to assess whether the warranty reserve is expected to meet future obligations. Based on this data, the Company will update warranty estimates as necessary.
Due to the uncertainty and potential volatility of the factors used in establishing estimates, changes in assumptions can materially affect the Company's financial condition and results of operations.
Long-Lived Asset Impairment
As of December 31, 2023, the Company's long-lived assets were comprised primarily of $570.9 million, $220.7 million and $87.3 million of net property, plant and equipment, intangible assets and operating lease right-of-use assets, respectively.
The Company tests long-lived assets for recoverability annually or whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of an asset group is assessed by comparing its carrying amount to the estimated future undiscounted net cash flows expected to be generated by the asset group through operation or disposition, calculated utilizing the lowest level of identifiable cash flows. If this comparison indicates that the carrying amount of an asset group is not recoverable, we are required to recognize an impairment loss. The impairment loss is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value. The Company considers recoverability in respect to evolving business strategy and planned use of assets.
In estimating the recoverability of asset groups for purposes of the Company's long-lived asset impairment testing when indicators or events are present, we will utilize future cash flow projections that are generally developed internally. During the second quarter of 2023, the Company commenced retail deliveries of the Ocean and generated revenues from vehicle sales. Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates. In arriving at cash flow projections, the Company will consider approved budgets and business plans, existing paid reservations and projected reservations, estimated asset holding periods, and other relevant factors.
67
Determining the future cash flows of an asset group involves the use of significant estimates and assumptions that are unpredictable and inherently uncertain. These estimates and assumptions include revenue and expense growth rates and operating margins used to calculate projected future cash flows. Future events may indicate differences from management’s current judgments and estimates which could, in turn, result in future impairments. Future events that may result in impairment charges include not achieving program gateways, regulatory standards, detailed development and manufacturing agreements or delays in production milestones, the start of production and/or ramp up production or a reduction in projected sales volumes. Significant adverse changes in our future revenues and/or operating margins caused by higher-than-expected bill-of-material costs, as well as other events and circumstances, including, but not limited to, increased competition and changing economic or market conditions, could result in changes in estimated future cash flows and the determination that long-lived assets are impaired.
Each quarter, the Company evaluates the net carrying amounts of long-term assets for impairment when impairment indicators are present. The Company evaluates for impairment triggers based on qualitative factors such as macroeconomic trends, trends related to EV demand and current and projected trends related to market conditions. The Company also evaluates for impairment triggers based on quantitative factors such as historical and projected revenue and profitability performance trends. The existence of an individual indicator is not automatically conclusive that the asset may not be recoverable. The Company exercises judgement and considers the combined effect of all indicators and developments, both positive and negative when determining whether an asset may not be recoverable. Management has assessed whether indicators of impairment exist as of December 31, 2023, considering the Company's recent start of production in May 2023, concluding that there were no identified triggering events as of December 31, 2023 that would be conclusive that the asset may not be recoverable. The recoverability of long-lived assets continues to be dependent on the market acceptance of the Company's vehicles.
As a result of a sustained drop in our stock price in violation of NYSE rules, the NYSE commenced delisting proceedings with the Company on March 25, 2024. As a result step one of our impairment test was triggered which may result in impairment of the Company's property and equipment and intangible assets during our first quarter of 2024. Also, during first quarter 2024 the Company is exiting certain lease property and this may result in an impairment in first quarter of 2024 reporting of our right of use assets.
Recent Accounting Pronouncements
See Note 2 to the audited consolidated financial statements included elsewhere in this Form 10-K for more information about recent accounting pronouncements, the timing of their adoption, and the Company’s assessment, to the extent it has made one, of their potential impact on the Company’s financial condition and its results of operations and cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. The Company's market risk exposure is primarily the result of fluctuations in foreign currency rates, inflationary pressure, interest rates and supply risk.
Foreign Currency Risk
The Company’s functional currency is the U.S. dollar, while the Company's subsidiaries have functional currencies other than the U.S Dollar representing their principal operating markets. Translation of such subsidiaries’ results of operations in the Company’s consolidated financial statements may result in revenue and earnings volatility from period to period in response to exchange rates fluctuations.
Many of the Company's significant contracts with OEMs and/or tier-one automotive suppliers are transacted in Euro or other foreign currencies and any adverse changes in those currencies relative the U.S. Dollar may result in foreign currency exchange losses. To date, the Company has not had material exposure to foreign currency fluctuations and has not hedged such exposure, although it may do so in the future.
Inflationary Pressure
68
The U.S. economy has experienced increased inflation recently. The Company's cost to manufacture a vehicle is heavily influenced by the cost of the key components and materials used in the vehicle, and cost of labor. The Company expects inflationary pressure to persist for the foreseeable future.
Supply Risk
We are dependent on our suppliers, the majority of which are single-source suppliers, and the inability of these suppliers to deliver necessary components of our products according to the schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components, could have a material adverse effect on our results of operations and financial condition.
69
Item 8. Financial Statements and Supplementary Data.
FISKER INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |||||
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 238) | |||||
70
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Fisker Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Fisker Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company did not design and maintain (i) an effective control environment commensurate with its financial reporting requirements, specifically a lack of a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately and to achieve complete, accurate and timely financial accounting, reporting and disclosures, as well as effective controls over the preparation and review of account reconciliations, (ii) effective controls for communicating and sharing information between the operations, accounting, information technology, finance, and legal departments, (iii) effective controls in response to the risks of material misstatement over the accounting for (a) inventory and related income statement accounts and (b) revenue and related balance sheet accounts, and (iv) effective controls related to the accounting for certain non-routine, complex or unusual events or transactions.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company, among other things, (i) did not make a required interest payment in March 2024, which resulted in events of default and (ii) does not believe that its available liquidity will be sufficient to meet its current obligations for a period of at least twelve months from the date of the issuance of the financial statements, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. As discussed in Note 2, if management’s plans are not successful, the Company expects to seek protection under applicable bankruptcy laws. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management’s report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
71
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accounting for Inventory
As described in Notes 2 and 4 to the consolidated financial statements, as of December 31, 2023, the Company’s inventory balance was $406.5 million. Inventories are stated at the lower of cost or net realizable value and consist of raw materials, work in progress and finished goods. Inventory value is determined using standard cost, which approximates actual cost on a first-in, first-out basis. Fixed production overhead costs are allocated to inventory based on the estimated normal level of production. For the year ended December 31, 2023, the Company recorded a write down of total inventory to net realizable value totaling $232.7 million. As disclosed by management, inventory is reviewed by management to determine whether its carrying value exceeds its net realizable value (NRV) upon the ultimate sale of the inventory. This requires management to determine the selling price of the vehicles less the estimated cost to convert the inventory on-hand into a finished product.
The principal considerations for our determination that performing procedures relating to accounting for inventory is a critical audit matter are (i) the significant judgment by management in developing estimates for inventory related to accounting for fixed production overhead costs and in determining inventory write-downs for lower of cost or net realizable value and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the existence, accuracy, and valuation of inventory. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter.
72
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, testing the existence, accuracy, and valuation of inventory. Testing the existence of inventory involved (i) conducting physical inventory observation procedures, on a sample basis, by performing test counts of inventory quantities and testing movements of inventory between the time of the inventory observations and December 31, 2023 and (ii) confirming, for certain locations, the inventory balance as of December 31, 2023. Testing the accuracy of the cost of inventory items involved, on a sample basis, obtaining and inspecting third-party invoices and other supporting documents and recalculating the cost of inventory on a first-in, first-out basis. Testing the valuation of inventory involved testing management’s process for developing estimates for inventory related to accounting for fixed production overhead costs and in determining inventory write-downs for lower of cost or net realizable value. Testing management’s process included evaluating the appropriateness of the methods used by management to estimate future production levels, evaluating the reasonableness of estimates related to the normalized production capacity, and selling price of the vehicles less the estimated cost to convert the inventory on-hand into a finished product, and testing the completeness and accuracy of the underlying data used by management in the estimates.
Accounting for Revenue
As described in Note 2 to the consolidated financial statements, for the year ended December 31, 2023, the Company recognized revenues of $272.9 million. The Company’s revenue is primarily generated from the sale of electric vehicles (EV) and accessories to customers, as well as specific services provided that meet the definition of a performance obligation under ASC 606, Revenue from Contracts with Customers, including over-the-air (OTA) software updates as they become available, premium connectivity, roadside assistance, service packages, specified vehicle upgrades and charging station benefits. Revenue from the stand-ready obligation to deliver unspecified OTA software updates when-and-if they become available is recognized ratably over the basic vehicle warranty term, commencing when control of the vehicles is transferred to the customer. Revenue from other performance obligations, including premium connectivity, roadside assistance and service packages are recognized over the requisite performance periods. Revenue from specified vehicle upgrades is recognized at the point in time when the upgrade is complete and delivered to the customer. The Company recognizes revenue related to the vehicles at a point in time when the customer obtains control of the vehicle either upon completion of delivery or upon pick up of the vehicle by the customer. The value of performance obligations related to the Company’s sales represent stand-alone selling prices estimated by considering the costs to develop and deliver the service plus margin, third-party pricing of similar services and other information that may be available. Payment for EV sales is typically received at or prior to delivery, or according to agreed upon payment terms.
The principal considerations for our determination that performing procedures relating to accounting for revenue is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to revenue recognized. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) testing, on a sample basis, revenue recognized during the year and subsequent to year end by obtaining and inspecting source documents, such as sales orders, invoices, proof of delivery, and cash receipts; (ii) confirming, on a sample basis, outstanding customer balances as of December 31, 2023 and, for confirmations not returned, obtaining and inspecting source documents, such as sales orders, invoices, proof of delivery, and subsequent cash receipts; and (iii) testing management’s process for developing the stand-alone selling price for the identified performance obligations. Testing management’s process included evaluating the appropriateness of the calculations used by management to determine the amount of revenue for deferral and testing the completeness and accuracy of the underlying data used by management in the calculation of stand-alone selling price.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
April 22, 2024
We have served as the Company’s auditor since 2021.
73
Fisker Inc.
Consolidated Balance Sheets
(In thousands, except share data)
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 325,452 | $ | 736,549 | |||||||
| Restricted cash | 70,447 | — | |||||||||
| Accounts receivable | 18,018 | — | |||||||||
| Inventory | 406,505 | 4,276 | |||||||||
| Prepaid expenses and other current assets | 103,732 | 87,489 | |||||||||
| Equity investment | — | 3,140 | |||||||||
| Total current assets | 924,154 | 831,454 | |||||||||
| Non-current assets: | |||||||||||
| Property and equipment, net | 570,907 | 387,137 | |||||||||
| Intangible asset, net | 220,743 | 246,922 | |||||||||
| Right-of-use asset, net | 87,309 | 33,424 | |||||||||
| Other non-current assets | 28,574 | 16,489 | |||||||||
| Total non-current assets | 907,533 | 683,972 | |||||||||
| Total assets | $ | 1,831,687 | $ | 1,515,426 | |||||||
| Liabilities and stockholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 181,839 | $ | 58,871 | |||||||
| Accrued expenses and other | 364,691 | 260,065 | |||||||||
| Customer advances and deposits | 29,453 | 4,860 | |||||||||
| Convertible senior notes | 291,715 | — | |||||||||
| Deferred revenue | 19,882 | — | |||||||||
| Operating leases liabilities | 15,049 | 7,085 | |||||||||
| Total current liabilities | 902,629 | 330,881 | |||||||||
| Non-current liabilities: | |||||||||||
| Operating leases liabilities, less current portion | 65,723 | 27,884 | |||||||||
| Other non-current liabilities | 516 | 15,334 | |||||||||
| Convertible senior notes | 935,228 | 660,822 | |||||||||
| Deferred revenue, net of current portion | 25,673 | — | |||||||||
| Total non-current liabilities | 1,027,140 | 704,040 | |||||||||
| Total liabilities | 1,929,769 | 1,034,921 | |||||||||
| Commitments and contingencies (Note 19) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.00001 par value; 15,000,000 shares authorized; no shares issued and outstanding as of December 31, 2023 and 2022 | — | — | |||||||||
| Class A Common stock, $0.00001 par value; 1,250,000,000 shares authorized; 316,589,859 and 187,599,812 shares issued and outstanding as of December 31, 2023 and 2022, respectively | 3 | 2 | |||||||||
| Class B Common stock, $0.00001 par value; 150,000,000 shares authorized; 132,354,128 and 132,354,128 shares issued and outstanding as of December 31, 2023 and 2022 | 1 | 1 | |||||||||
| Additional paid-in capital | 2,008,602 | 1,650,196 | |||||||||
| Accumulated deficit | (2,106,688) | (1,166,741) | |||||||||
| Receivable for “At-the-market” offering | — | (2,953) | |||||||||
| Total stockholders’ equity | (98,082) | 480,505 | |||||||||
| Total liabilities and shareholders' equity | $ | 1,831,687 | $ | 1,515,426 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
74
Fisker Inc.
Consolidated Statements of Operations
(In thousands, except share and per share data)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Revenue | $ | 272,883 | $ | 342 | $ | 106 | |||||||||||
| Costs of goods sold | 558,821 | 263 | 88 | ||||||||||||||
| Gross margin | (285,938) | 79 | 18 | ||||||||||||||
| Operating costs and expenses: | |||||||||||||||||
| Selling, general and administrative | 249,160 | 106,417 | 42,398 | ||||||||||||||
| Research and development | 67,357 | 423,907 | 286,856 | ||||||||||||||
| Total operating costs and expenses | 316,517 | 530,324 | 329,254 | ||||||||||||||
| Loss from operations | (602,455) | (530,245) | (329,236) | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Other expense, net | (7,190) | (119) | (402) | ||||||||||||||
| Interest income | 24,745 | 10,378 | 627 | ||||||||||||||
| Interest expense | (18,745) | (18,426) | (6,546) | ||||||||||||||
| Change in fair value of derivatives | — | — | (138,436) | ||||||||||||||
| Foreign currency (loss) gain | (5,389) | (2,039) | 2,667 | ||||||||||||||
| Unrealized (loss) gain recognized on equity securities | (1,791) | (6,860) | — | ||||||||||||||
| Change in fair value measurements | (327,823) | — | — | ||||||||||||||
| Total other expense | (336,193) | (17,066) | (142,090) | ||||||||||||||
| Loss before income taxes | $ | (938,648) | $ | (547,311) | $ | (471,326) | |||||||||||
| Provision for income taxes | (1,299) | (185) | (15) | ||||||||||||||
| Net loss attributable to common shareholders | $ | (939,947) | $ | (547,496) | $ | (471,341) | |||||||||||
| Net loss per common share | |||||||||||||||||
| Net loss per share attributable to Class A and Class B Common shareholders- Basic and Diluted | $ | (2.73) | $ | (1.80) | $ | (1.61) | |||||||||||
| Weighted average shares outstanding | |||||||||||||||||
| Weighted average Class A and Class B Common shares outstanding- Basic and Diluted | 343,978,989 | 303,366,068 | 292,004,136 | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
75
Fisker Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
| Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Receivable For Warrant Exercises | Receivable for “At-the-market” Offering | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 144,912,362 | $ | 1 | 132,354,128 | $ | 1 | $ | 1,055,128 | $ | (96) | $ | — | $ | (147,904) | $ | 907,130 | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 5,622 | — | — | — | 5,622 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock awards, net of statutory tax withholding | 1,656,424 | — | — | — | 403 | — | — | — | 403 | ||||||||||||||||||||||||||||||||||||||||||||
| Receivable for warrant exercises collected | — | — | — | — | — | 459 | — | — | 459 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | 27,751,587 | 1 | — | — | 365,464 | (385) | — | — | 365,080 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares surrendered upon exercise of warrants | (9,943,067) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock issuance costs and redemption payments | — | — | — | — | (22) | 22 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of capped call option | — | — | — | — | (96,788) | — | — | — | (96,788) | ||||||||||||||||||||||||||||||||||||||||||||
| Recognition of Magna warrants | — | — | — | — | 89,477 | — | — | — | 89,477 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (471,341) | (471,341) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 164,377,306 | $ | 2 | 132,354,128 | $ | 1 | $ | 1,419,284 | $ | — | $ | — | $ | (619,245) | $ | 800,042 | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 19,602 | — | — | — | 19,602 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock awards, net of statutory tax withholding | 704,565 | — | — | — | 592 | — | — | — | 592 | ||||||||||||||||||||||||||||||||||||||||||||
| Recognition of Magna warrants | — | — | — | — | 20,778 | — | — | — | 20,778 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued under “At-the-market” offering, net of stock issuance costs | 22,517,941 | — | — | — | 189,940 | — | (2,953) | — | 186,987 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (547,496) | (547,496) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 187,599,812 | $ | 2 | 132,354,128 | $ | 1 | $ | 1,650,196 | $ | — | $ | (2,953) | $ | (1,166,741) | $ | 480,505 | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 8,176 | — | — | — | 8,176 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options and restricted stock awards, net of statutory tax withholding | 1,707,065 | — | — | — | 89 | — | — | — | 89 | ||||||||||||||||||||||||||||||||||||||||||||
| Recognition of Magna warrants | — | — | — | — | 6,000 | — | — | — | 6,000 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued under “At-the-market” offering, net of stock issuance costs | 21,153,154 | — | — | — | 130,704 | — | 2,953 | — | 133,657 | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of 2025 Senior Notes | 106,129,828 | 1 | — | — | 213,437 | 213,438 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (939,947) | (939,947) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 316,589,859 | $ | 3 | 132,354,128 | $ | 1 | $ | 2,008,602 | $ | — | $ | — | $ | (2,106,688) | $ | (98,082) | |||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
76
Fisker Inc.
Consolidated Statements of Cash Flows
(In thousands, except share data)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Cash Flows from Operating Activities: | |||||||||||||||||
| Net loss | $ | (939,947) | $ | (547,496) | $ | (471,341) | |||||||||||
| Reconciliation of net loss to net cash used in operating activities: | |||||||||||||||||
| Stock-based compensation | 8,176 | 19,602 | 5,622 | ||||||||||||||
| Amortization of debt discount | 1,734 | 1,474 | 373 | ||||||||||||||
| Allowance for note receivable | 8,357 | — | — | ||||||||||||||
| Depreciation and amortization | 88,878 | 7,285 | 699 | ||||||||||||||
| Amortization of right-of-use asset | 10,235 | 4,463 | 2,576 | ||||||||||||||
| Inventory write down | 233,929 | — | — | ||||||||||||||
| Change in fair value measurements | 327,823 | — | — | ||||||||||||||
| Change in fair value of warrants liability | — | — | 138,436 | ||||||||||||||
| Unrealized loss recognized on equity securities | 1,791 | 6,860 | — | ||||||||||||||
| Unrealized (gain) loss on foreign currency transactions | 5,947 | 3,975 | (1,469) | ||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Inventory | (636,156) | — | — | ||||||||||||||
| Accounts receivable | (17,528) | — | — | ||||||||||||||
| Deferred revenue | 45,555 | — | — | ||||||||||||||
| Prepaid expenses and other assets | (33,442) | (53,194) | (43,797) | ||||||||||||||
| Accounts payable and accrued expenses | 205,471 | 99,578 | 66,253 | ||||||||||||||
| Customer deposits | 26,677 | 9,034 | 2,773 | ||||||||||||||
| Change in operating lease liability | (6,431) | (4,118) | (1,395) | ||||||||||||||
| Net cash used in operating activities | (668,931) | (452,537) | (301,270) | ||||||||||||||
| Cash Flows from Investing Activities: | |||||||||||||||||
| Acquisition of equity investment | — | (10,000) | — | ||||||||||||||
| Funding of notes receivable | (8,357) | — | — | ||||||||||||||
| Purchase of property and equipment and intangible asset | (227,587) | (190,989) | (134,386) | ||||||||||||||
| Net cash used in investing activities | (235,944) | (200,989) | (134,386) | ||||||||||||||
| Cash Flows from Financing Activities: | |||||||||||||||||
| Proceeds from issuance of convertible notes | 450,000 | — | 667,500 | ||||||||||||||
| Payments for debt issuance costs | 25 | — | (209) | ||||||||||||||
| Payments made for capped call options | — | — | (96,788) | ||||||||||||||
| Payments made to initial purchasers for convertible notes | — | — | (8,314) | ||||||||||||||
| Proceeds from exercise of warrants | — | — | 89,023 | ||||||||||||||
| Payments for stock issuance costs and redemption of unexercised warrants | — | — | (22) | ||||||||||||||
| Payments of finance lease obligations | (18,303) | — | — | ||||||||||||||
| Payments to tax authorities for statutory withholding taxes | (63) | (1,562) | (9,869) | ||||||||||||||
| Proceeds from the exercise of stock options | (26) | 2,154 | 5,616 | ||||||||||||||
| Proceeds from stock issuance under “At-the-market” offering | 135,928 | 190,492 | — | ||||||||||||||
| Payments for “At-the-market” issuance costs | (1,867) | (3,448) | — | ||||||||||||||
| Net cash provided by financing activities | 565,694 | 187,636 | 646,937 | ||||||||||||||
| Effect of exchange rate changes on cash | (1,469) | — | — | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents, and restricted cash | (340,650) | (465,890) | 211,281 | ||||||||||||||
77
| Cash and cash equivalents, and restricted cash, beginning of the period | 736,549 | 1,202,439 | 991,158 | ||||||||||||||
| Cash and cash equivalents and restricted cash, end of the period | $ | 395,899 | $ | 736,549 | $ | 1,202,439 | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Cash and cash equivalents, beginning of period | $ | 736,549 | $ | 1,202,439 | $ | 991,158 | |||||||||||
| Restricted cash, beginning of period | — | — | — | ||||||||||||||
| Total cash and cash equivalents and restricted cash, beginning of the period | 736,549 | 1,202,439 | 991,158 | ||||||||||||||
| Cash and cash equivalents | $ | 325,452 | $ | 736,549 | $ | 1,202,439 | |||||||||||
| Restricted cash | 70,447 | — | — | ||||||||||||||
| Total cash and cash equivalents and restricted cash, end of the period | 395,899 | 736,549 | 1,202,439 | ||||||||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | $ | (340,650) | $ | (465,890) | $ | 211,281 | |||||||||||
| Supplemental disclosure of cash flow information | |||||||||||||||||
| Cash paid for interest | $ | 16,688 | $ | 17,985 | $ | — | |||||||||||
| Cash paid for income taxes | $ | 338 | $ | 46 | $ | — | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
78
Fisker Inc.
Notes to Consolidated Financial Statements
1. Overview of the Company
Fisker Inc. (“Fisker” or the “Company”) is an independent automotive company known for its design, innovation and sustainability of electric vehicles (“EV”).
Fisker was originally incorporated in the State of Delaware on October 13, 2017 as a special purpose acquisition company under the name Spartan Energy Acquisition Corp. (“Spartan”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. Spartan completed its IPO in August 2018. On October 29, 2020, Spartan’s wholly-owned subsidiary merged with and into Fisker Holdings Inc., a Delaware corporation (“Legacy Fisker”), with Legacy Fisker surviving the merger as a wholly-owned subsidiary of Spartan (the “Business Combination”). In connection with the Business Combination, Spartan changed its name to Fisker Inc.
The Company’s common stock was listed on the New York Stock Exchange under the symbols “FSR”. The Company’s warrants previously traded on the NYSE under the symbol “FSR WS” and on April 19, 2021, the NYSE filed a Form 25-NSE with respect to the warrants; the formal delisting of the warrants became effective ten days thereafter. On March 25, 2024 trading in the Company's Class A common stock on the NYSE was suspended and the Class A common stock was delisted from the NYSE. The Company's Class A common stock is currently quoted on the OTC Pink platform as operated by OTC Markets Group Inc. (the “OTC”). The OTC is a significantly more limited market than the NYSE, and quotation on the OTC will result in a less liquid market for existing and potential holders of the Class A Common Stock to trade the Class A Common Stock.
Throughout the notes to the consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us” or “our” and similar terms refer to Legacy Fisker and its subsidiaries prior to the consummation of the Business Combination, and Fisker and its subsidiaries after the consummation of the Business Combination.
Basis of Presentation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period's presentation. For all periods presented, net loss equals comprehensive loss.
Principles of Consolidation
The consolidated financial statements include the accounts of Fisker Inc. and its wholly owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP required management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities in the consolidated financial statements and accompanying notes. Significant estimates, assumptions and judgments made by management include, inventory valuation, warranty reserve and calculating the standalone selling price for revenue recognition, fair value of convertible notes payable and other items requiring judgment. Estimates are based on assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.
79
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.
Going Concern, Liquidity and Capital Resources
The Company did not make a required interest payment of approximately $8.4 million payable in cash on March 15, 2024 with respect to the 2026 Notes. At the conclusion of a 30-day grace period, the non-payment became an Event of Default with respect to the 2026 Notes, and resulted in a cross default with respect to the 2025 Notes. The Company's current forbearance agreement expires May 1, 2024 and the Company is seeking additional waivers and/or a forbearance agreement from the holder of the 2025 Notes. If the Company does not receive adequate relief from its debt holders and additional sufficient liquidity from potential liquidity providers to meet its current obligations, it expects to seek protection under applicable bankruptcy laws in multiple jurisdictions within 30 days from the issuance of these financial statements (see further discussion of, among other items, waivers, forbearance of the 2025 Notes and delisting considerations within Note 20, Subsequent Events).
The Company believes that its available liquidity will not be sufficient to meet its current obligations for a period of at least twelve months from the date of the filing of this Annual Report on Form 10-K. Accordingly, the Company has concluded there is substantial doubt about its ability to continue as a going concern.
The Company has been seeking additional financing, attempting to restructure its current debt obligations and continues to discuss financing alternatives with potential providers. In addition to reducing expenses, the Company intends to further reduce its workforce and streamline its operations, including reducing its physical footprint. There is no assurance that the Company will be able to restructure its obligations and/or obtain additional financing on acceptable terms and conditions.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and money market mutual funds, which are unrestricted and available for the Company's general use.
Restricted Cash
Restricted cash is primarily related to letters of credit issued to suppliers. The Company's restricted cash balance was $70.4 million as of December 31, 2023. There was no restricted cash as of December 31, 2022.
Concentrations of Credit Risk and Off-balance Sheet Risk
Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s cash and cash equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. The Company has no financial instruments with off-balance sheet risk of loss.
Revenue from Contracts with Customers
In accordance with ASC 606, Revenue from Contracts with Customers, the Company follows a five-step process in which (i) a contract is identified, (ii) the related performance obligations are identified, (iii) the transaction price is determined, (iv) the transaction price is allocated to the identified performance obligations, and (v) revenue is recognized when (or as) performance obligations are satisfied. The Company’s revenue is primarily generated from the sale of electric vehicles and accessories to customers, as well as specific services provided that meet the definition of a performance obligation under ASC 606, including over-the-air ( “OTA”) software updates as they become available, premium connectivity, roadside assistance, service packages, specified vehicle upgrades and charging station benefits.
The Company recognizes revenue related to the vehicles at a point in time when the customer obtains control of the vehicle either upon completion of delivery or upon pick up of the vehicle by the customer. Revenue from the stand-ready
80
obligation to deliver unspecified OTA software updates when-and-if they become available is recognized ratably over the basic vehicle warranty term, commencing when control of the vehicles is transferred to the customer and was not material. Revenue from other performance obligations, including premium connectivity, roadside assistance and service packages are recognized over the requisite performance periods and was not material to the financial statements.
The Company's revenue from the United States was approximately 68% for the year ended December 31, 2023. The rest of the world as a percentage was approximately 32%.
The value of performance obligations related to the Company's sales represent stand-alone selling prices estimated by considering the cost to develop and deliver the service plus margin, third-party pricing of similar services and other information that may be available. The transaction price is allocated among the performance obligations based on the proportion of the stand alone selling prices of the Company’s performance obligations to the sum of the standalone selling prices of all performance obligations in the arrangement. Payment for EV sales is typically received at or prior to delivery, or according to agreed upon payment terms.
The Company also recognizes a sales return reserve on vehicle sales, which is recorded as an offset to revenue. The reserve is estimated based on historical experience and was not material.
Any fees that are paid or payable by the Company to a customer’s lender when financing is arranged are recognized as an offset to vehicles sales. Shipping and handling is considered a fulfillment activity. Sales taxes collected from customers are excluded from the transaction price of electric vehicle contracts.
Deferred revenue is the amount of unrecognized revenue attributable to performance obligations as of the balance sheet date. Deferred revenue related to undelivered OTA software updates, premium connectivity, roadside assistance, service packages, and specified vehicle upgrades consist of the following (in thousands):
| As of December 31, 2023 | |||||
| Deferred revenue - January 1, 2023 | $ | — | |||
| Additions | 46,577 | ||||
| Revenue Recognized | (1,022) | ||||
| Deferred Revenue - December 31, 2023 | $ | 45,555 | |||
Of the total deferred revenue balance as of December 31, 2023, the Company expects to recognize $19.9 million of revenue in the next 12 months, The remaining balance will be recognized over the respective requisite performance periods ranging from 4 to 10 years.
Other revenue consists of sales of merchandise and home charging solutions and is not material.
Warranties
The Company provides a basic six year manufacturer’s warranty on all vehicles sold that covers the costs to repair or replace faulty parts or components, including those costs incurred under recalls. The Company records a warranty reserve based on industry benchmarks and/or actual claims incurred to date and after consideration of the nature, frequency and costs of future claims. The warranty does not cover any item where failure is due to normal wear and tear. This assurance-type warranty does not create a performance obligation as part of the sale of the vehicle. The amount of warranty claims is included within Accrued expenses and other in the Consolidated Balance Sheets. The warranty expense is recorded as a component of Cost of goods sold in the Consolidated Statements of Operations.
Customer Deposits and Advances
Customer deposits are required in order to complete the sales order process, which includes the selection of the vehicle model, trim and options and will be applied to the sales price of the vehicle and recognized as revenue when the vehicle is sold and delivered to the customer. Such deposits are generally not refundable.
81
In the third quarter of 2022, the Company began accepting customer deposits for Ocean Ones, a limited-edition trim level of the Ocean. The Company also entered into a contract for global payment processing with JPMorgan Chase Bank, N.A. Customer deposits paid directly to the Company are received in the Company’s bank account and available for its use in the subsequent month after the month in which the customer deposits were placed. For customer deposits made through credit card transactions, the Company’s bank holds cash received from customers until the vehicle is delivered to the customer at which time the cash is deposited and available for use.
Advance payments from customers will be received before delivery of a vehicle, in addition to reservation payments for the future right of a customer to order an Ocean, PEAR, Alaska or Ronin.
Cost of Goods Sold
Cost of goods sold primarily relates to the cost of production of vehicles and includes direct parts, material and labor costs, depreciation of machinery and tooling, amortization of capitalized manufacturing costs, shipping and logistics costs, reserves for estimated warranty costs related to the production of vehicles, adjustments related to write down the carrying value of inventory when it exceeds its estimated net realizable value, as needed, provisions for excess and obsolete inventory, adjustments associated with lower levels of production during the ramp-up phase, and losses on firm purchase commitments, as needed.
Fair Value Measurements
The Company follows the accounting guidance in ASC 820, Fair Value Measurement, for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The accounting guidance requires fair value measurements to be classified and disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Fair Value Option
Under the ASC 825-10, Financial Instruments - Overall, the Company has the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument basis. The Company elected the fair value option to account for the 2025 Notes due to the embedded derivative that would require bifurcation and separate accounting if the fair value option was not elected. Also, the Company believes the fair value option provides users of the financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the Common Stock underlying the conversion and redemption features (See Note 12).
The 2025 convertible notes are valued using an embedded lattice technique, which represent Level 3 measurements. Significant assumptions include the expected premium for conversion. The 2025 Notes are presented at fair value in the Consolidated Balance Sheets and changes in fair value are recorded as a component of non-operating loss in
82
the consolidated statements of operations. There were no material changes in fair value attributable to instrument-specific credit risk during the period associated with the 2025 Notes.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates all of its financial instruments, including notes payable, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company applies significant judgment to identify and evaluate complex terms and conditions in its contracts and agreements to determine whether embedded derivatives exist. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period. Bifurcated embedded derivatives are classified with the related host contract on the Company’s balance sheet.
The Company enters into contracts that meet the definitions of a freestanding instrument, such as capped call options with equity-linked features, and a derivative. A freestanding instrument that is a derivative is evaluated by the Company to determine if it qualifies for an exception to derivative accounting. The Company determines whether the equity-linked feature is indexed to the Company's Class A common stock and whether the settlement provision in the contract is consistent with a fixed-for-fixed equity instrument. To qualify for classification in stockholder's equity, the Company evaluates whether the contract requires physical settlement, net share settlement, or a combination thereof and, when the Company has a choice of net cash settlement or settlement in the Company's shares, additional criteria are evaluated to determine whether equity classification is appropriate.
The Company’s derivative instrument is related to the investor’s rights to purchase additional 2025 Notes. The derivative is valued using the Monte Carlo simulation pricing model.
Refer to Note 12 for additional information regarding the accounting for the convertible senior notes and capped call options.
Accounts Receivable
Accounts receivable consist of receivables from our customers and from financial institutions offering financing products to our customers for the sale of vehicles. The Company provides an allowance against accounts receivable for any potential uncollectible amounts. No allowance was recorded for the Company for the years ended December 31, 2023 and 2022.
Inventory
Inventories are stated at the lower of cost or net realizable value and consists of raw materials, work in progress and finished goods. Inventory value is determined using standard cost, which approximates actual cost on a first-in, first-out basis. The Company records inventory write-downs for excess or obsolete inventories based upon assumptions about current and future demand forecasts. If inventory on-hand is in excess of future demand forecast, the excess amounts are written-off. During 2023, the Company recorded a provision for excess or obsolete inventory totaling $1.2 million.
Inventory is also reviewed to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires an assessment to determine the selling price of the vehicles less the estimated cost to convert the inventory on-hand into a finished product. Once inventory is written down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In the event there are changes in our estimates of future selling prices or production costs, additional and potentially material write-downs may be required. During 2023, the Company recorded a write down of inventory totaling $232.7 million which includes consideration for reductions in the selling price of vehicles in inventory.
83
Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets as follows:
| Useful Life (in years) | |||||
| Tooling | 3-8 | ||||
| Machinery and equipment | 5-15 | ||||
| Furniture and fixtures | 5-10 | ||||
| IT hardware and software | 3-10 | ||||
| Vehicles | 3-7 | ||||
| Leasehold improvements | Shorter of their estimated life or remaining lease term | ||||
Upon retirement or sale, the cost and related accumulated depreciation of an asset are removed from the balance sheet and the resulting gain or loss is reflected in the statement of operations. Maintenance and repair expenditures are expensed as incurred, while major improvements that increase functionality of the asset are capitalized and depreciated ratably to expense over the identified useful life.
Construction in progress is comprised primarily of costs incurred to construct serial production tooling located at affiliates of Magna and our suppliers. No depreciation is provided for construction in progress until such time the assets are completed and are ready for use, as intended.
The Company assesses impairment for asset groups, which represent a combination of assets that produce distinguishable cash flows. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.
Each quarter, the Company evaluates the net carrying amounts of long-term assets for impairment when impairment indicators are present. The Company evaluates for impairment triggers based on qualitative factors such as macroeconomic trends, trends related to EV demand and current and projected trends related to market conditions. The Company also evaluates for impairment triggers based on quantitative factors such as historical and projected revenue and profitability performance trends. The existence of an individual indicator is not automatically conclusive that the asset may not be recoverable. The Company exercises judgement and consider the combined effect of all indicators and developments, both positive and negative, when determining whether an asset may not be recoverable. Management has assessed whether indicators of impairment exist as of December 31, 2023, considering the Company's recent start of production in May 2023, and concluded there were no such triggering events. The recoverability of long-lived assets continues to be dependent on the market acceptance of the Company's vehicles.
Leases
The Company classifies arrangements meeting the definition of a lease as operating or financing leases, and leases are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.
In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components for all classes of assets. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and instead recognizes rent expense on a straight-line basis over the lease term.
The current portion of the Company’s lease liability is based on lease payments due within twelve months of the balance sheet date. Variable lease payments are included in lease payments when the contingency upon which the payment is dependent is resolved.
84
Asset Retirement Obligations
We record an asset retirement obligation (“ARO”) when it represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development or normal operation of that long-lived asset. The Company recognizes an asset retirement obligations if a reasonable estimate of the fair value can be made. The Company's ARO represents the estimated costs to remove tooling at the Magna facility at the end of the contractual arrangement with Magna. The ARO is recorded in Other non-current liabilities in the Consolidated Balance Sheets, while a comparable amount is capitalized as part of the carrying cost of the tooling asset and depreciated over its useful life.
Debt Issuance Costs
Direct and incremental costs, including amounts paid to initial purchasers of the Company’s convertible notes, are directly attributed to efforts to obtain debt financing and are debt issuance costs. Upon issuance of debt, the carrying value is the principal amount of debt reduced by any debt issuance costs. Debt issuance costs are attributed to interest expense and accreted over the expected term of the debt using the effective interest rate method when the fair value option has not been elected. Debt issuance costs incurred with respect to the 2025 convertible senior notes were expensed as incurred since the Company elected the fair value option.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
Equity Awards
The grant date for an option or stock award is established when the grantee has a mutual understanding of the key terms and conditions of the option or award, the award is authorized, including all the necessary approvals unless approval is essentially a formality or perfunctory, and the grantee begins to benefit from, or be adversely affected by, underlying changes in the price of the Company’s Class A common shares. An award or option is authorized on the date that all approval requirements are completed (e.g., action by the compensation committee approving the award and the number of options, restricted shares or other equity instruments an individual employee will be issued).
Foreign Currency Transactions and Remeasurement
The functional currency of the Company’s foreign subsidiaries is the U.S. Dollar. For these subsidiaries, monetary assets and liabilities denominated in non U.S. currencies are re-measured to U.S. Dollars using current exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities denominated in non-U.S. currencies are maintained at historical U.S. Dollar exchange rates. Expenses are re-measured at average U.S. Dollar monthly rates.
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Gains and losses arising from foreign currency transactions and the effects of remeasurements are recorded within Foreign currency (loss) gain, in the Company’s Consolidated Statements of Operations. Foreign currency transaction gains and losses were not material for the years ended December 31, 2023, 2022 and 2021.
Stock-based Compensation
The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. The Company recognizes non-employee compensation costs over the requisite service period based on a measurement of fair value for each stock award.
85
From inception through December 31, 2023, the Company has primarily granted service and performance based awards. Stock-based compensation expense is recognized for awards with graded-vesting schedules that are recognized on a straight-line basis over the requisite service period for each vesting tranche. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. For stock-based awards with vesting subject to performance conditions, stock-based compensation expense is recognized over the requisite service period when the performance conditions become probable of achievement. Stock-based compensation expense is recorded in Costs of goods sold, Selling, general and administrative expenses or Research and development expenses in the Consolidated Statements of Operations based upon the underlying individual’s role at the Company except for the capitalization of costs associated with the Magna warrants (see Note 14).
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses consist primarily of payroll, benefits and stock-based compensation of those employees engaged in research, design and development activities, costs related to design and prototype tools, prototype development work, and related supplies and services.
Advertising Expense
Advertising costs are expensed as incurred and included in Selling, general and administrative expenses in the Consolidated Statements of Operations. For the years ended December 31, 2023, 2022 and 2021, advertising expense was $28.0 million, $9.3 million, and $6.3 million, respectively.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.
The Company’s income tax provision consists of an estimate for U.S. federal, foreign and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. The Company maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because the Company believes the recoverability of the tax assets is not more likely than not as of December 31, 2023.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount within a range of loss can be reasonably estimated. When no amount within the range is a better estimate than any other amount, the Company accrues for the minimum amount within the range. Legal costs incurred in connection with loss contingencies are expensed as incurred.
Net Loss per Share of Common Stock
86
Basic net loss per share of common stock is calculated using the two-class method under which earnings are allocated to both common shares and participating securities. Undistributed net losses are allocated entirely to common shareholders since the participating security has no contractual obligation to share in the losses. Basic net loss per share is calculated by dividing the net loss attributable to common shares by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of stock options and warrants to purchase common stock (using the treasury stock method).
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU requires 1) specific categories in the rate reconciliation and to provide additional information for reconciling items that meet certain quantitative thresholds, 2) additional information on income taxes paid by tax jurisdiction, and 3) additional disclosures of pretax income (or loss) and income tax expense (or benefit) by tax jurisdiction. ASU 2023-09 also eliminates the requirement for all entities to (1) disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or (2) make a statement that an estimate of the range cannot be made. The amendments in this Update are effective for fiscal years beginning after December 15, 2024 and are not expected to have a material impact on the Company’s financial statements or notes thereto.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. This ASU requires 1) enhanced disclosures about significant segment expenses that are provided to the chief operating decision maker (“CODM”), 2) disclosures on segment profitability, 3) disclosures of a reportable segments profitability and assets in interim periods, and 4) disclosures on other measures used to assess segment performance and deciding how to allocate resources. The amendments in this Update are effective for fiscal years beginning after December 15, 2023 and are not expected to have a material impact on the Company’s financial statements or notes thereto.
All other ASUs issued but not yet adopted were assessed and determined to be not applicable or are not expected to have a material impact on the Company's consolidated financial statements or financial statement disclosures.
3. Fair Value Measurements
Cash and cash equivalents
The fair value of the Company’s money market mutual funds are determined using quoted market prices in active markets for identical assets. The carrying amounts included in Cash and cash equivalents approximate fair value because of the short-term maturity of these instruments and are classified within Level 1 of the fair value hierarchy.
Equity Investment
On July 28, 2021, the Company made a commitment for a private investment in public equity (PIPE) supporting the planned merger of European EV charging network, Allego B.V. (“Allego”) with Spartan Acquisition Corp. III (NYSE: SPAQ), a publicly-listed special purpose acquisition company. Fisker Inc. was the exclusive electric vehicle automaker in the PIPE and, in parallel, agreed to terms to deliver a range of charging options for its customers in Europe. On March 16, 2022, the merger closed and the Company delivered cash of $10.0 million in exchange for 1,000,000 shares of Allego's Class A common stock (NYSE:ALLG). The Company's ownership percentage is less than 5% and does not result in significant influence. Allego filed with the SEC a registration statement registering the resale of the shares acquired (the “Registration Statement”) that was declared effective by the SEC during the second quarter of 2022. The Company has classified its equity investment in Allego as of December 31, 2023 as a Other non-current asset on the Consolidated Balance Sheets. Unrealized losses recognized during the years ended December 31, 2023 and 2022 on equity securities held totaled $1.8 million and $6.9 million, respectively, as shown separately in the Consolidated Statement of Operations.
2026 Senior Unsecured Convertible Notes
The Company's 2026 senior unsecured convertible notes (the “2026 Notes”) are carried at face value less unamortized debt issuance costs on the Consolidated Balance Sheets. As of December 31, 2023, the fair value of the 2026
87
Notes was $142.2 million. The estimated fair value of the 2026 Notes are classified as Level 2 financial instruments and are determined based on bid prices of the convertible senior notes in an over-the-counter market on the last business day of the period.
2025 Senior Secured Convertible Notes
Under the ASC 825-10, Financial Instruments - Overall, the Company has the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument basis. The Company elected the fair value option to account for the 2025 convertible senior notes due to the embedded derivative that would require bifurcation and separate accounting if the fair value option was not elected. Also, the Company believes the fair value option provides users of the financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the Common Stock underlying the conversion and redemption features. The 2025 convertible notes are valued using an embedded lattice technique with a Monte Carlo simulation for the embedded derivative, which represent Level 3 measurements. Significant assumptions include the expected premium for conversion, and the expected life of the instrument. The 2025 convertible senior notes are presented at fair value in the Consolidated Balance Sheet, with changes in fair value recognized in Change in Fair Value measurements in the Consolidated Statements of Operations.
Magna Warrants
Upon closing the Business Combination on October 29, 2020, the Company recognized a $62.7 million liability for its private and public warrants and a corresponding non-cash reduction of additional paid-in capital for the same amount. The Company’s derivative liability for its private and public warrants are measured at fair value on a recurring basis. The private warrants fair value is determined based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the private warrants uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company uses an option pricing simulation to estimate the fair value of its private warrants, all of which were exercised in March 2021. The public warrants fair value is determined using its publicly traded prices (Level 1). During 2021, the Company completed its redemption of all outstanding public warrants (refer to Note 14). Changes in the fair value of the derivative liability related to updated assumptions and estimates are recognized within the Consolidated Statements of Operations as a non-operating expense. For the year ended December 31, 2021, the changes in the fair value of the derivative liability resulted from changes in the fair values of the underlying Class A common shares and its associated volatility upon exercise in March and April 2021. The change in fair value of derivatives amounted to a non-cash loss of $138.4 million attributed to public and private warrants during the year ended December 31, 2021.
Recurring Fair Value Measurements
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
| December 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets included in: | |||||||||||||||||||||||
| Money market mutual funds included in cash and cash equivalents | $ | 192,921 | $ | — | $ | — | $ | 192,921 | |||||||||||||||
| Equity investment | 1,350 | — | — | 1,350 | |||||||||||||||||||
| Total fair value | $ | 194,271 | $ | — | $ | — | $ | 194,271 | |||||||||||||||
| Liabilities included in: | |||||||||||||||||||||||
| 2025 senior secured convertible notes | $ | — | $ | — | $ | 564,386 | $ | 564,386 | |||||||||||||||
| Total fair value | $ | — | $ | — | $ | 564,386 | $ | 564,386 | |||||||||||||||
88
| December 31, 2022 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets included in: | |||||||||||||||||||||||
| Money market mutual funds included in cash and cash equivalents | $ | 601,045 | $ | — | $ | — | $ | 601,045 | |||||||||||||||
| Equity investment | 3,140 | — | — | 3,140 | |||||||||||||||||||
| Total fair value | $ | 604,185 | $ | — | $ | — | $ | 604,185 | |||||||||||||||
The following table summarizes financial instruments carried at fair value for the year ended December 31, 2023 (in thousands):
| 2025 Notes, at fair value | |||||
| Fair value - December 31, 2022 | $ | — | |||
| Initial recognition of 2025 Notes | 450,000 | ||||
| Conversion of 2025 Notes to Class A Common Stock | (213,437) | ||||
| Fair value measurement adjustments | 327,823 | ||||
| Fair value - December 31, 2023 | $ | 564,386 | |||
4. Inventory
Inventory consists of the following as of December 31, 2023 and 2022 (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Raw materials | $ | 183,754 | $ | 698 | |||||||
| Work in progress | 2,825 | — | |||||||||
| Finished goods | 219,926 | 3,578 | |||||||||
| Total | $ | 406,505 | $ | 4,276 | |||||||
Inventory is comprised of raw materials, work in progress related to the production of vehicles for sale and finished goods inventory including new vehicles available for sale. Expenditures related to services performed subsequent to the start of production of salable vehicles in the second quarter of 2023 are expensed when sold in Cost of goods sold in the Consolidated Statements of Operations.
The Company writes-down inventory for any excess or obsolete inventories or when the net realizable value of inventories is less than the carrying value. The Company recorded an excess and obsolescence reserve on inventories of $1.2 million and recorded a write down of total inventory to net realizable value totaling $232.7 million for the year ended December 31, 2023. Fixed production overhead costs are allocated to inventory based on the estimated normal level of production.
89
5. Prepaid expenses and other current assets
Prepaid expenses and other current assets consists of the following as of December 31, 2023 and 2022 (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Advance payments to suppliers | $ | 34,845 | $ | 46,107 | |||||||
| Value-added tax receivables | 64,066 | 27,928 | |||||||||
| Prepaid insurance | 2,784 | 2,951 | |||||||||
| Prepaid rent | 332 | 4,999 | |||||||||
| Other current assets | 1,705 | 5,504 | |||||||||
| Total | $ | 103,732 | $ | 87,489 | |||||||
The Company paid value-added taxes on certain capital expenditures and submitted requests for refunds from tax authorities in foreign countries with a concentration in Europe that are pending repayment as of December 31, 2023 and 2022.
6. Property and Equipment, net
Property and equipment, net, consists of the following as of December 31, 2023 and 2022 (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Tooling | $ | 483,685 | $ | — | |||||||
| Machinery and equipment | 95,974 | 9,298 | |||||||||
| Vehicles | 27,442 | — | |||||||||
| Furniture and fixtures | 844 | 470 | |||||||||
| IT hardware and software | 12,905 | 6,427 | |||||||||
| Leasehold improvements | 2,477 | 634 | |||||||||
| Construction in progress | 6,760 | 372,789 | |||||||||
| Total property and equipment | 630,087 | 389,618 | |||||||||
| Less: Accumulated depreciation and amortization | (59,180) | (2,481) | |||||||||
| Property and equipment, net | $ | 570,907 | $ | 387,137 | |||||||
Construction in progress is comprised primarily of costs incurred to construct serial production tooling located at affiliates of Magna and our suppliers. Such assets will be depreciated over the estimated useful lives of the assets once the asset is in the condition necessary for it to operate as intended. Property and equipment is primarily located in Europe.
Depreciation and amortization for the years ended December 31, 2023, 2022, and 2021 was $56.7 million, $1.9 million and $0.8 million, respectively. As of December 31, 2023 and 2022, accounts payable and accrued liabilities includes property and equipment of $161.5 million and $144.8 million, respectively, which is excluded from net cash used in investing activities as reported in the Consolidated Statement of Cash Flows. Total depreciation expense capitalized to inventory for the years ended December 31, 2023 and 2022 was $43.8 million and nil, respectively.
In 2023, the Company recognized an asset retirement obligation (“ARO”) totaling $0.5 million, which represents the estimated costs to remove tooling at the Magna facility at the end of the contractual arrangement with Magna. The ARO is recorded in Other non-current liabilities in the Consolidated Balance Sheets, while a comparable amount is capitalized as part of the cost of the tooling asset above and depreciated over its useful life.
90
The amounts in the table above as of December 31, 2022 have been updated to correct a disclosure classification error between fixed asset categories such that Machinery and equipment was overstated and Construction in progress was understated by $33.0 million. The Company determined the error was not material to its previously issued financial statements as it did not affect the Company's financial position as of December 31, 2022 or its results from operations and cash flows for the year ended December 31, 2022.
7. Intangible asset
The Company has the following intangible assets (in thousands):
| As of December 31, 2023 | |||||||||||||||||||||||
| Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
| Capitalized manufacturing costs | 8 years | $ | 258,304 | $ | (37,561) | $ | 220,743 | ||||||||||||||||
| $ | 258,304 | $ | (37,561) | $ | 220,743 | ||||||||||||||||||
| As of December 31, 2022 | |||||||||||||||||||||||
| Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
| Capitalized manufacturing costs | 8 years | $ | 252,304 | $ | (5,257) | $ | 247,047 | ||||||||||||||||
| $ | 252,304 | $ | (5,257) | $ | 247,047 | ||||||||||||||||||
The amount of capitalized manufacturing costs includes platform licensing costs paid to Magna and the value of warrants granted to Magna related to the commercialization of the Fisker Ocean. See Note 14 for additional information on the Magna warrants.
The Company amortizes these capitalized costs over the expected life of the current contractual arrangements, which began upon initial production in the fourth quarter of 2022. Amortization expense of capitalized manufacturing costs for the years ended December 31, 2023 and 2022 was $32.3 million and $5.3 million, respectively, and was considered in the valuation of our finished goods inventory. The Company will continually assess the reasonableness of the estimated life and consider the extent to which the Company enters into new arrangements that extend the estimated useful life.
Estimated aggregate amortization expense for future years is as follows (in thousands):
| Amount | |||||
| 2024 | $ | 32,304 | |||
| 2025 | 32,304 | ||||
| 2026 | 32,304 | ||||
| 2027 | 32,304 | ||||
| 2028 | 32,304 | ||||
| Thereafter | 59,223 | ||||
| $ | 220,743 | ||||
8. Leases
The Company has entered into various operating and finance lease agreements for office space, manufacturing and warehouse facilities, retail and customer services locations, equipment, and vehicles. The Company determines whether a contractual arrangement is or contains a lease, including embedded leases, at inception and records the lease when the underlying assets is made available for us by the lessor, or the date of commencement.
91
At lease commencement, the Company measures the lease liability at the present value of lease payments not yet paid. For purposes of calculating lease liabilities, lease terms include options to extend or renew the lease when it is reasonably certain that we will exercise such options. Certain operating leases provide for annual increases to lease payments based on an index or rate. Lease expense for finance lease payments is recognized as amortization expense of the finance lease right-of-use asset over the lease term.
Operating leases
During 2023 and 2022, the Company recorded non-cash lease right-of-use assets of $87.3 million and $33.4 million and non-cash lease liabilities of $80.8 million and $35.0 million, respectively, on its Consolidated Balance Sheet.
The tables below present information regarding the Company’s lease assets and liabilities (in thousands):
| As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Assets: | |||||||||||
| Operating lease right-of-use assets | 87,309 | 33,424 | |||||||||
| Liabilities: | |||||||||||
| Operating Lease—Current | 15,049 | 7,085 | |||||||||
| Operating Lease—Long term | 65,723 | 27,884 | |||||||||
The components of lease related expense are as follows (in thousands):
Year Ended December 31, | Year Ended December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Lease costs: | |||||||||||
| Operating lease expense | $ | 16,421 | $ | 5,690 | |||||||
| Variable lease expense | 2,279 | 962 | |||||||||
| Total lease costs | $ | 18,700 | $ | 6,652 | |||||||
Other information related to operating leases is as follows (in thousands):
Year Ended December 31, | Year Ended December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Weighted average remaining lease term (in years) | 5.6 | 4.9 | |||||||||
| Weighted average discount rate | 9.60 | % | 5.66 | % | |||||||
The components of supplemental cash flow information related to leases are as follows (in thousands):
Year Ended December 31, | Year Ended December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Cash flow information: | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows used by operating leases | $ | 15,088 | $ | 4,348 | |||||||
| Non-cash activity: | |||||||||||
| ROU asset obtained in exchange for operating lease obligations | $ | 65,151 | $ | 19,076 | |||||||
92
As of December 31, 2023, future minimum payments of our operating lease liabilities during the next five years and thereafter are as follows (in thousands):
| Fiscal year | Operating Leases | ||||
| 2024 | $ | 22,147 | |||
| 2025 | 21,355 | ||||
| 2026 | 20,440 | ||||
| 2027 | 12,064 | ||||
| 2028 | 9,516 | ||||
| Thereafter | 17,789 | ||||
| Total | 103,311 | ||||
| Less: Present value discount | (22,539) | ||||
| Total lease liability | $ | 80,772 | |||
The Company’s lease agreements do not provide an implicit rate, so the Company used an estimated incremental borrowing rate, which was derived from third-party information available at lease inception, in determining the present value of lease payments. The rate used is for a secured borrowing of a similar term as the lease.
Finance leases
During 2023 and 2022 the Company recorded gross embedded finance lease right-of-use assets of $21.2 million and $4.3 million, respectively, on its consolidated balance sheet related to certain equipment and tooling that is controlled and used by the Company for vehicle manufacturing.
The Company paid for a majority of the costs during 2022 with a remaining liability of $2.9 million as of December 31, 2023 to be paid in 2024 which is recorded to Accrued expenses and other in the Consolidated Balance Sheets.
Amortization of embedded finance lease right-of-use assets is recognized over a lease term of approximately 8 to 15 years and totaled $1.7 million and $0.1 million for the years ended December 31, 2023 and 2022.
As of December 31, 2023 and 2022, the embedded finance lease right-of-use assets net of depreciation, totaled $19.4 million and $4.5 million and are included in Other non-current assets within the Consolidated Balance Sheets.
9. Other non-current assets
Non-current assets consists of the following as of December 31, 2023 and 2022 (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Lease deposits | $ | 5,267 | $ | 3,079 | |||||||
Finance leases - right of use assets | 19,375 | 4,481 | |||||||||
| Other | 3,932 | 8,929 | |||||||||
| Total | $ | 28,574 | $ | 16,489 | |||||||
10. Accrued expenses and other
A summary of the components of accrued expenses and other is as follows (in thousands):
93
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Vendor liabilities | $ | 321,579 | $ | 251,291 | |||||||
| Indirect taxes payable | 23,373 | — | |||||||||
| Warranty reserve | 7,054 | — | |||||||||
| Interest payable | 4,867 | 4,867 | |||||||||
| Payroll and related costs | 5,507 | 1,627 | |||||||||
| Professional fees | 1,976 | 1,145 | |||||||||
| Other current liabilities | 335 | 1,135 | |||||||||
| Total accrued expenses and other | $ | 364,691 | $ | 260,065 | |||||||
Vendor liabilities include amounts owed to vendors but not yet invoiced in exchange for vendor purchases, inventory purchases, and research and development services. Certain estimates of accrued vendor expenses are based on costs incurred to date.
11. Other non-current liabilities
Other non-current liabilities consists of the following as of December 31, 2023 and 2022 (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Reservations from customers | $ | — | $ | 15,334 | |||||||
| Asset retirement obligation | 516 | — | |||||||||
| Total other non-current liabilities | $ | 516 | $ | 15,334 | |||||||
Asset Retirement Obligation
The asset retirement obligation (“ARO”) represents the fair value of costs to remove tooling at the Magna facility at the end of the contractual arrangement with Magna. The balance of the ARO will increase over time until the costs to remove the assets are incurred. The increase in the ARO is attributable to an accretion expense recorded in Selling, general and administrative expenses in the Consolidated Statement of Operations, which was not material in 2023.
12. Convertible Senior Notes
The Company has existing debt agreements with third parties, which consist of the following (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Convertible Senior Notes | |||||||||||
| Current liabilities | |||||||||||
| 2025 Notes - secured, carried at fair value | $ | 291,715 | $ | — | |||||||
| Net carrying amount | $ | 291,715 | $ | — | |||||||
| Non-current liabilities: | |||||||||||
| 2025 Notes - secured, carried at fair value | 272,671 | — | |||||||||
| 2026 Notes - unsecured, carried at unamortized cost | 662,557 | 660,822 | |||||||||
| Net carrying amount | $ | 935,228 | $ | 660,822 | |||||||
94
2026 Senior Unsecured Convertible Notes
In August 2021, the Company issued an aggregate of $667.5 million principal amount of 2.50% convertible senior notes due in September 2026 (the “2026 Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2026 Notes have been designated as green bonds, whose proceeds will be allocated in accordance with the Company’s green bond framework. The 2026 Notes consisted of a $625.0 million initial placement and an over-allotment option that provided the initial purchasers of the 2026 Notes with the option to purchase an additional $100.0 million aggregate principal amount of the 2026 Notes, of which $42.5 million was exercised. The 2026 Notes were issued pursuant to an indenture dated August 17, 2021. The proceeds from the issuance of the 2026 Notes were $562.2 million, net of debt issuance costs and cash used to purchase the capped call transactions (“2026 Capped Call Transactions”) discussed below. The debt issuance costs are amortized to interest expense. (refer to subsequent events, other in Note 20).
The 2026 Notes are unsecured obligations which bear regular interest at 2.50% annually and will be payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2022. The 2026 Notes will mature on September 15, 2026, unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2026 Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at the Company's election, at an initial conversion rate of 50.7743 shares of Class A common stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $19.70 per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2026 Notes. The Company may redeem for cash all or any portion of the 2026 Notes, at our option, on or after September 20, 2024 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
Holders of the 2026 Notes may convert all or a portion of their 2026 Notes at their option prior to June 15, 2026, in multiples of $1,000 principal amounts, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on September 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•during the five-business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the applicable conversion rate of the 2026 Notes on such trading day;
•if the Company calls the 2026 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called (or deemed called) for redemption; or
•on the occurrence of specified corporate events.
On or after June 15, 2026, the 2026 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the 2026 Notes who convert the 2026 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2026 Notes, or in connection with a redemption may be entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the 2026 Notes may require us to repurchase all or a portion of the 2026 Notes at a price equal to 100% of the principal amount of 2026 Notes, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Company accounted for the issuance of the 2026 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.
95
The 2026 Notes consisted of the following (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Convertible Senior 2026 Notes | |||||||||||
| Principal | $ | 667,500 | $ | 667,500 | |||||||
| Unamortized debt issuance costs | (4,943) | (6,678) | |||||||||
| Net carrying amount | $ | 662,557 | $ | 660,822 | |||||||
Interest expense related to the amortization of debt issuance costs was $1.7 million and $1.5 million for year ended December 31, 2023 and 2022. Contractual interest expense was $16.8 million and $16.7 million for the years ended December 31, 2023 and 2022.
As of December 31, 2023, the if-converted value of the 2026 Notes did not exceed the principal amount. The 2026 Notes were not eligible for conversion as of December 31, 2023 (see Note 20, Subsequent Events). No sinking fund is provided for the 2026 Notes, which means that the Company is not required to redeem or retire them periodically.
Capped Call Transactions
In connection with the offering of the 2026 Notes, the Company entered into the 2026 Capped Call Transactions with certain counterparties at a net cost of $96.8 million. The 2026 Capped Call Transactions are purchased capped call options on 33.9 million shares of Class A common stock, that, if exercised, can be net share settled, net cash settled, or settled in a combination of cash or shares consistent with the settlement elections made with respect to the 2026 Notes if converted. The cap price is initially $32.57 per share of the Company's Class A common stock and subject to certain adjustments under the terms of the 2026 Capped Call Transactions. The exercise price is $19.70 per share of Class A common stock, subject to customary anti-dilution adjustments that mirror corresponding adjustments for the 2026 Notes.
The 2026 Capped Call Transactions are intended to reduce potential dilution to holders of our Class A common stock upon conversion of the 2026 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount, as the case may be, with such reduction or offset subject to a cap. The cost of the Capped Call Transactions was recorded as a reduction of our Additional paid-in capital in our Consolidated Balance Sheets. The Capped Call Transactions will not be remeasured as long as they continue to meet the conditions for equity classification.
2025 Senior Secured Convertible Notes
On July 10, 2023, the Company entered into the Securities Purchase Agreement (the “Original Purchase Agreement”) with an institutional investor pursuant to which the Company sold, and the Investor purchased, $340.0 million in aggregate principal amount of 0% senior convertible notes due in 2025 (the “Series A-1 Notes”) in a registered direct offering. The Series A-1 Notes were sold at an original issue discount of 12% resulting in gross proceeds to the Company of $300.0 million. Total transaction costs incurred by the Company totaled $4.9 million and are included in Selling, general and administrative expenses in the Consolidated Statements of Operations.
Pursuant to the terms of the Original Purchase Agreement, during the six-month period beginning on the one-year anniversary of the issuance of the Series A-1 Notes and ending on the eighteen-month anniversary of the issuance of the Series A-1 Notes, the Investor could purchase up to an additional $226.7 million in aggregate principal amount of senior convertible notes due two years after the date of issuance (the “Investor AIR Notes”) in one or more registered direct offerings. If the Investor elected, during the AIR Period, to purchase the full amount of Investor AIR Notes, the Company could, at its option, require the Investor to purchase up to an additional $113.3 million in aggregate principal amount of senior convertible notes due 2 years after the date of issuance (the “Issuer AIR Notes” and, together with the Investor AIR Notes, the “Additional Notes”).
96
The Series A-1 Notes and the Series B-1 Notes (collectively, the “2025 Notes”) are convertible into common stock at any time, in whole or in part, at the Investor’s option at an initial conversion price of $7.80 with respect to the Series A-1 Notes and $7.60 with respect to the Series B-1 Notes. The conversion prices are subject to proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination, and/or similar transactions. Additionally, the conversion prices are subject to a full-ratchet adjustment in connection with a subsequent offering at a per share price less than the fixed conversion price in effect. Furthermore, in the event of default, the 2025 Notes may be converted using an alternative conversion price equal to the lower of (i) the conversion price in effect or (ii) 80% of the average stock price preceding conversion.
The 2025 Notes were issued as senior obligations of the Company under an indenture dated July 11, 2023, by and between the Company and Wilmington Savings Fund Society, FSB, as the trustee, as supplemented by that certain Second Supplemental Indenture dated September 29, 2023. The Notes bear interest at the rate of 0% per annum, however, the interest rate of the Notes will automatically increase to 18% per annum (the “Default Rate”) upon the occurrence and continuance of an event of default. The Notes are subject to certain covenants, including a financial test covenant, that requires the Company to have available cash equal to or greater than $340.0 million at the end of each quarter.
The 2025 Notes are repayable in nine equal installments on each three-month anniversary beginning July 11, 2023, with respect to the Series A-1 Notes and September 29, 2023 with respect to the Series B-1 Notes. The Company may elect to settle each installment in cash based on 103% of the principal amount (plus any accrued default interest or late charges) or in shares of Class A Common Stock, subject to the satisfaction of certain conditions including trading volume and continued NYSE listing requirements (see Note 20, Subsequent Events), priced at the lower of (i) the conversion price in effect of (ii) 93% of the average stock price preceding such settlement, subject to a floor price of $1.16 which is subject to adjustment to stock splits, dividends, combinations, or other similar events. The investor may elect to defer installments to future periods.
The Investor’s right to purchase the Investor AIR Notes provided for in the Original Purchase Agreement, and as amended in the Purchase Agreement Amendment (a net written call option) was determined to be a separate financial instrument from the 2025 Notes issued to the Investor, as the Investor could detach and sell the 2025 Notes to other investors while retaining the rights to purchase the Investor AIR Notes. As a result, the Company concluded that the written option is required to be accounted for as a derivative liability which is required to be remeasured to fair value each balance sheet date with changes in fair value recorded in earnings. The Company elected the fair value option to account for the 2025 Notes and the call option, which will subsequently be remeasured to their respective fair values at the end of each reporting period. The fair value of the derivative liability was zero as of December 31, 2023.
Amendment No. 1 to the Original Purchase Agreement
On September 29, 2023, the Company and the Investor entered into Amendment No. 1 to the Original Purchase Agreement the “Purchase Agreement Amendment”), in order to:
•Increase the aggregate principal amount of Investor AIR Notes available for purchase to $566.7 million, to be purchased at any time after (A) with respect to the initial $170.0 million of Investor AIR Notes, September 27, 2023, (B) with respect to the next $226.7 million of Investor AIR Notes, December 29, 2023 or (C) with respect to the remaining $170.0 million of Investor AIR Notes, March 29, 2024;
•Extend the Investor’s right to effect a closing of Investor AIR Notes to March 29, 2026;
•Increase the aggregate principal amount of Issuer AIR Notes to $226.7 million;
•Increase the amount of Common Stock required to be reserved by the Company prior to obtaining the stockholder approval described below to 782,000,000 shares of Class A Common Stock; and
•Require that the Company either obtain the prior written consent of requisite stockholders or seek and obtain stockholder approval at a special meeting (in each case no later than January 31, 2024), in order to (x) approve the issuance of securities issued or issuable in an Additional Closing (as defined in the Securities Purchase Agreement) and (y) increase the authorized shares of the Company from 1,250,000,000 to 2,000,000,000. If the Company fails to obtain such approval, it will seek approval at an additional stockholder meeting on or prior to March 31, 2024 and, if necessary, semi-annually thereafter.
97
On September 29, 2023, pursuant to the terms of the Purchase Agreement Amendment, the Company sold, and the Investor purchased, $170.0 million of the “Series B-1 Notes” in a registered direct offering. The Series B-1 Notes were issued at an original issue discount of 12% resulting in gross proceeds to the Company of $150.0 million.
As the Purchase Agreement Amendment amended the terms and conditions of the investor’s call option, the Purchase Agreement Amendment was evaluated as a modification to the freestanding derivative instrument. The effect of the modified terms resulted in no gain or loss recorded in the Consolidated Statements of Operations.
Pledge Agreement
On November 22, 2023 the Company entered into a Pledge Agreement (the “Pledge Agreement”) pursuant to which the 2025 Notes will be secured by a first priority security interest in all of the existing and future assets of the Company and certain of its subsidiaries, including a pledge of all of the share capital of certain subsidiaries of the Company.
Amendment and Waiver Agreement
On November 22, 2023, the Company entered into an amendment and waiver agreement (the “Waiver”) with the Investor. Pursuant to the Waiver, the Investor agreed to waive a covenant event of default resulting from the late filing of the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2023. The Investor also agreed to reduce the amount of cash required under the Financial Test to $250.0 million from $340.0 million. The Company assessed the amendment under the modification guidance and it had no impact. Refer to Note 20, Subsequent events, for further discussion on covenant waivers.
Amended and Restated Security and Pledge Agreement
On December 28, 2023, the Company entered into an Amended and Restated Security and Pledge Agreement (the “Amended Pledge Agreement”), pursuant to which the entirety of the original Pledge Agreement was amended and restated to define the scope of the security interest in all of the existing and future assets of the Company and certain of its subsidiaries. An accompanying guaranty agreement (the “Guaranty”) guaranteed the Company’s outstanding obligations in respect of the Notes.
A reconciliation of the beginning and ending balances for the 2025 Notes, which are measured at fair value is as follows for the year ended December 31, 2023 (in thousands):
| 2025 Notes, at fair value | |||||
| Fair value - December 31, 2022 | $ | — | |||
| Initial recognition of 2025 Notes | 450,000 | ||||
| Conversion of 2025 Notes to Class A Common Stock | (213,437) | ||||
| Fair value measurement adjustments | 327,823 | ||||
| Fair value - December 31, 2023 | $ | 564,386 | |||
Conversion of 2025 Notes
Between July 11, 2023 and December 29, 2023, the Investor converted $145.5 million aggregate principal of the outstanding 2025 Notes issued by the Company at a conversion price of $1.17 to $5.57 per share into 106,129,828 shares of Class A Common Stock. Conversions of the 2025 Notes to Additional paid-in capital for the year ended December 31, 2023 totaled $213.4 million, which represents the conversion at fair value.
Schedule of Principal Maturities of Convertible Senior Notes
The future scheduled principal maturities of convertible senior notes as of December 31, 2023 are as follows (in thousands):
98
Year Ended December 31, 2023 | |||||
| 2024 | 312,833 | ||||
| 2025 | 51,667 | ||||
| 2026 | 667,500 | ||||
| $ | 1,032,000 | ||||
The Company may elect to settle each installment on the 2025 Notes in cash based on 103% of the principal amount (plus any accrued default interest or late charges) or in shares of Class A Common Stock. The Company's election is subject to the satisfaction of certain conditions including trading volume and continued NYSE listing requirements. The Company has classified the 2024 maturities in the Consolidated Balance Sheets as current liabilities, as the probability of the Company having the ability to settle in cash or shares is not probable and will continue to be evaluated in future periods (see Note 20, Subsequent Events).
13. Stockholders’ equity
Common Stock
On October 29, 2020, the Company’s common stock and warrants began trading on the New York Stock Exchange under the symbol “FSR” and “FSR WS” respectively. Pursuant to the terms of the Amended and Restated Certificate of Incorporation, the Company is authorized and has available for issuance the following shares and classes of capital stock, each with a par value of $0.00001 per share: (i) 750,000,000 shares of Class A Common Stock; (ii) 150,000,000 shares of Class B Common Stock; (iii) 15,000,000 shares of preferred stock. Immediately following the Business Combination, there were 144,750,524 shares of Class A Common Stock with a par value of $0.00001, 132,354,128 shares of Class B Common Stock, and 47,074,454 warrants outstanding.
The Company has adjusted the shares issued and outstanding prior to October 29, 2020 to give effect to the exchange ratio established in the Business Combination Agreement.
Class A Common Stock
Holders of Class A Common Stock are entitled to one vote per share on matters to be voted upon by stockholders. Holders of Class A Common Stock have no preemptive rights to subscribe for or to purchase any additional shares of Class A Common Stock or other obligations convertible into shares of Class A Common Stock which the Company may issue in the future.
All of the outstanding shares of Class A Common Stock are fully paid and non-assessable. Holders of Class A Common Stock are not liable for further calls or assessments.
Class B Common Stock
Holders of Class B Common Stock are entitled to ten votes per share on matters to be voted upon by stockholders.
Preferred Stock
As of December 31, 2023 and 2022, the Company is authorized to issue 15,000,000 shares of Preferred Stock with a par value of $0.00001, of which no shares are issued and outstanding.
Common Stock Outstanding
In conjunction with the Business Combination, Spartan obtained commitments from certain PIPE Investors to purchase shares of Spartan Class A common stock, which were automatically converted into 50,000,000 shares of Spartan’s Class A common stock for a purchase price of $10.00 per share, which were automatically converted into shares of the Company’s common stock on a one-for-one basis upon the closing of the Business Combination.
99
14. Warrants
Magna Warrants
On October 29, 2020, the Company granted Magna International, Inc. (“Magna”) up to 19,474,454 warrants, each with an exercise price of $0.01, to acquire underlying Class A common shares of Fisker Inc., which represents approximately 6% ownership in Fisker Inc. on a fully diluted basis as of the grant date. The right to exercise vested warrants expires on October 29, 2030. The warrants are accounted for as an award issued to non-employees measured on October 29, 2020 and three interrelated performance conditions that are separately evaluated for achievement:
| Milestone | Percentage of Warrants that Vest Upon Achievement | Number of Warrants that Vest Upon Achievement | ||||||||||||
| (a) (i) Achievement of the “preliminary production specification” gateway as set forth in the Development Agreement; (ii) entering into the Platform Agreement; and (iii) entering into the Initial Manufacturing Agreement | 33.3 | % | 6,484,993 | |||||||||||
| (b) (i) Achievement of the “target agreement” gateway as set forth in the Development Agreement and (ii) entering into the Detailed Manufacturing Agreement, which will contain terms and conditions agreed to in the Initial Manufacturing Agreement | 33.3 | % | 6,484,993 | |||||||||||
| (c) Start of pre-serial production | 33.4 | % | 6,504,468 | |||||||||||
| 19,474,454 | ||||||||||||||
The cost upon achievement of each milestone is recognized when it is probable that a milestone will be met. The cost for awards to Magna is recognized in the same period and in the same manner as if the Company had paid cash for the goods or services. At December 31, 2022, Magna satisfied the first and second milestones and the Company capitalized costs as an intangible asset representing the future economic benefit to Fisker Inc. As of December 31, 2022, the Company determined the third milestone is probable of achievement and capitalized a portion of the award's fair value corresponding to the service period beginning at the grant date and ended in the first quarter of 2023. For the year ended December 31, 2023, the Company capitalized costs totaling $6.0 million (a non-cash transaction) associated with achievement of the third milestone. The Company will continually assess the reasonableness of the estimated life and consider the extent to which the Company enters arrangements that extend the estimated useful life. The Company will also assess the intangible asset for impairment. If an indicator of impairment exists, the undiscounted cash flows will be estimated and then if the carrying amount of the intangible asset is not recoverable, determine its fair value and, to the extent the fair value is less than the intangible asset's carrying value, the Company will record an impairment loss. At December 31, 2023, no indicator of impairment existed.
The fair value of each warrant is equal to the intrinsic value (e.g., stock price on grant date less exercise price) as the exercise price is $0.01. The terms of the warrant agreement require net settlement when exercised. Using the measurement date stock price of $8.96 for a share of Class A common stock, the warrant fair values for each tranche is shown below. Capitalized cost also results in an increase to additional paid in capital equal to the fair value of the vested warrants. Awards vest when a milestone is met. Magna has 19,474,454 vested and exercisable warrants to acquire underlying Class A common stock of Fisker as of December 31, 2023, none of which are exercised.
| Fair value | Capitalized at December 31, 2023 | ||||||||||
| Milestone (a) | $ | 58,041 | $ | 58,041 | |||||||
| Milestone (b) | 58,041 | 58,041 | |||||||||
| Milestone (c) | 58,215 | 58,215 | |||||||||
| $ | 174,297 | $ | 174,297 | ||||||||
At-the-market Equity Program
100
In May 2022, the Company entered into an at-the-market distribution agreement, dated May 24, 2022 with J.P. Morgan Securities LLC and Cowen and Company, LLC as the sales agents (the “Distribution Agreement”), pursuant to which the Company established an at-the-market equity program (the “ATM Program”). Pursuant to the ATM Program, Fisker may, at its discretion and from time to time during the term of the Distribution Agreement, sell, through the Agents, shares of its Class A Common Stock as would result in aggregate gross proceeds to the Company of up to $350.0 million by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made directly on the New York Stock Exchange, on any other existing trading market for the Class A Common Stock or to or through a market maker. In addition, the sales agents may also sell the shares of Class A Common Stock by any other method permitted by law, including, but not limited to, negotiated transactions. The Class A Common Stock sold under the ATM Program is registered with the SEC under the Company's effective shelf registration statement that permits the Company to issue various securities for proceeds of up to $2.0 billion. The Company issued 21,153,154 shares of Class A common stock during the year ended December 31, 2023 for gross proceeds of $133.7 million, before $2.0 million of commissions and other direct incremental issuance costs. Effective July 12, 2023, the Company terminated the Distribution Agreement. As a result, the Company will not offer or sell any more shares under the ATM Program.
15. Loss Per Share
Founders Convertible Preferred Stock are participating securities as the Founders Convertible Preferred Stock participates in undistributed earnings on an as-if-converted basis. The Company computes earnings (loss) per share of Class A Common Stock and Class B Common Stock using the two-class method required for participating securities. Basic and diluted earnings per share was the same for each period presented as the inclusion of all potential Class A Common Stock and Class B Common Stock outstanding would have been anti-dilutive. Basic and diluted earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights. The following table sets forth the computation of basic and diluted loss per Class A Common Stock and Class B Common Stock:
Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Numerator: | |||||||||||||||||
| Net loss | $ | (939,947) | $ | (547,496) | $ | (471,341) | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted average Class A common shares outstanding | 211,624,861 | 171,011,940 | 159,650,008 | ||||||||||||||
| Weighted average Class B common shares outstanding | 132,354,128 | 132,354,128 | 132,354,128 | ||||||||||||||
| Weighted average Class A and Class B common shares outstanding- Basic | 343,978,989 | 303,366,068 | 292,004,136 | ||||||||||||||
| Net loss per share attributable to Class A and Class B Common shareholders- Basic and Diluted | $ | (2.73) | $ | (1.80) | $ | (1.61) | |||||||||||
The following table presents the potential common shares outstanding that were excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been antidilutive:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Convertible senior notes | 359,338,274 | 33,891,845 | 33,891,845 | ||||||||||||||
| Stock options and warrants | 36,714,669 | 37,155,050 | 30,665,546 | ||||||||||||||
| Total | 396,052,943 | 71,046,895 | 64,557,391 | ||||||||||||||
16. Stock Based Compensation
Upon completion of the Business Combination, the 2016 Stock Plan was renamed the 2020 Equity Incentive Plan (the “Plan”). All outstanding awards under the 2016 Stock Plan are modified to adopt the terms under the 2020 Equity Incentive Plan. The modifications are administrative in nature and have no effect on the valuation inputs, vesting conditions or equity classification of any of the outstanding original awards immediately before and after the close of the
101
Business Combination. The Plan is a stock-based compensation plan which provides for the grants of options and restricted stock to employees and consultants of the Company. Options granted under the Plan may be either incentive options (“ISO”) or non-qualified stock options (“NSO”). The Plan added 24,097,751 shares of Class A Common Stock on October 29, 2020 to increase the maximum aggregate number of shares that may be issued under the Plan to approximately 48 million shares (subject to adjustments upon changes in capitalization, merger or certain other transactions). Also, upon completion of the Business Combination, the Company established a 2020 Employee Stock Purchase Plan (the “ESPP”) under which up to 3,213,034 Class A Common Stock may be issued. As of December 31, 2023, no shares have been issued under the ESPP.
Stock-based compensation expense was classified in the Consolidated Statements of Operations as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Selling, general and administrative | $ | 3,277 | $ | 6,861 | $ | 1,135 | |||||||||||
| Research and development | 3,974 | 12,741 | 4,487 | ||||||||||||||
| Cost of goods sold | 925 | — | — | ||||||||||||||
| Total | $ | 8,176 | $ | 19,602 | $ | 5,622 | |||||||||||
Stock options
Options under the Plan may be granted at prices as determined by the Board of Directors, provided, however, that (i) the exercise price of an ISO and NSO shall not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a 15% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. The fair value of the shares is determined by the Board of Directors on the date of grants. Stock options generally have a contractual life of 10 years. Upon exercise, the Company issues new shares.
In 2016 and 2017, the Company’s founders were granted an aggregate of 15,882,711 options which are fully vested and are not related to performance. Options granted to other employees and consultants become vested and are exercisable over a range of up to six years from the date of grant.
The following table summarizes option activity under the Plan:
| Options | Weighted Average Exercise Price | Weighted Average Contractual Term (in Years) | |||||||||||||||
| Balance as of December 31, 2021 | 17,695,560 | $ | 1.44 | 5.6 | |||||||||||||
| Granted | 495,700 | 10.15 | |||||||||||||||
| Exercised | (213,048) | 2.13 | |||||||||||||||
| Forfeited | (297,616) | 12.09 | |||||||||||||||
| Balance as of December 31, 2022 | 17,680,596 | $ | 1.51 | 4.7 | |||||||||||||
| Granted | 7,000 | 7.05 | |||||||||||||||
| Exercised | (60,340) | 0.44 | |||||||||||||||
| Forfeited | (387,041) | 11.87 | |||||||||||||||
| Balance as of December 31, 2023 | 17,240,215 | $ | 1.29 | 3.3 | |||||||||||||
102
The fair value of each stock option grant under the Plan was estimated on the date of grant using the Black-Scholes option pricing model, with the following range of assumptions:
Year Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Expected term (in years) | 6.3 | 6.3 | |||||||||
| Volatility | 74.5% to 75.2% | 74.9% to 76.4% | |||||||||
| Dividend yield | 0.0% | 0.0% | |||||||||
| Risk-free interest rate | 3.4% to 4.0% | 3.7% to 4.3% | |||||||||
| Common stock price | $6.98 to $7.10 | $6.95 to $7.99 | |||||||||
The Black-Scholes option pricing model requires various highly subjective assumptions that represent management’s best estimates of the fair value of the Company’s common stock, volatility, risk-free interest rates, expected term, and dividend yield. As the Company’s shares have actively traded for a short period of time subsequent to the Business Combination, volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.
The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules. Since the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future; therefore, the Company used an expected dividend yield of zero. The risk-free interest rate is based on U.S. Treasury rates in effect during the expected term of the grant. The expected volatility is based on historical volatility of publicly-traded peer companies.
Additional information regarding stock options exercisable as of December 31, 2023 is summarized below:
| Options Exercisable at December 31, 2023 | ||||||||||||||||||||
| Range of Exercise Price | Number | Weighted Average Exercise Price | Weighted Average Contractual Term (in Years) | |||||||||||||||||
| $0.06 - $24.48 | 17,240,215 | $ | 1.29 | 3.3 | ||||||||||||||||
The aggregate intrinsic value represents the total pretax intrinsic value (i.e., the difference between the fair value of the Company’s common stock price and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options. The aggregate intrinsic value of options outstanding as of December 31, 2023 was $25.8 million. The intrinsic value of options exercisable was $25.8 million as of December 31, 2023. The total intrinsic value of options exercised was $0.4 million, $1.8 million, and $26.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The weighted-average grant date fair value per share for the stock option grants during the years ended December 31, 2023, 2022, and 2021 was $7.05, $10.25, and $15.96, respectively. As of December 31, 2023, the total unrecognized compensation related to unvested stock option awards granted was $22.2 million, which the Company expects to recognize over a weighted-average period of approximately 3.3 years.
Restricted stock unit awards
The Company granted employees, who rendered services during the years ended December 31, 2021 and December 31, 2020 and were employees of the Company on the respective grant dates, a restricted stock unit (“RSU”) award based in proportion to the service period beginning from the employee’s hire date to the end of the year. The restricted stock unit awards vested on the grant dates occurring in May of 2021 and March of 2022 for the respective preceding years resulted in stock-based compensation expense of $1.1 million recognized for the year ended December 31, 2023 and $4.6 million for the year ended December 31, 2022. The Company’s founders declined to receive an award related to performance in 2020 and 2021. In accordance with the Company’s Outside Director Compensation Policy, each
103
outside Board of Directors member received an annual RSU equal to $200,000 granted on the date of the Company’s annual shareholders’ meeting which vests in 25% increments at the end of each calendar quarter. Each Outside Director may elect to convert all or a portion of his or her annual Board of Directors retainer, excluding any annual retainer that an Outside Director may receive for serving as Lead Director and any annual retainers for committee service, into RSUs in lieu of the applicable cash retainer payment (“RSU Election”).
The number of Class A common shares granted to Outside Directors annually are based on the 30-day average closing trading price of Class A common stock on the day preceding the grant date (“RSU Value”). When an Outside Director exercises his or her RSU Election, the number of Class A common shares equal the amount of cash subject to such RSU Election divided by the applicable RSU Value and are fully vested.
The following table summarizes RSU activity under the Plan:
| RSU Awards | Weighted Average Grant Date Fair Value | |||||||||||||
| Unvested at December 31, 2021 | 17,174 | $ | 13.47 | |||||||||||
| Awarded | 494,091 | 10.25 | ||||||||||||
| Vested | (498,497) | 11.19 | ||||||||||||
| Forfeited | (1,016) | 11.46 | ||||||||||||
| Unvested at December 31, 2022 | 11,752 | $ | 12.45 | |||||||||||
| Awarded | 24,009,880 | 2.14 | ||||||||||||
| Vested | (331,873) | 7.65 | ||||||||||||
| Forfeited | (487,519) | 4.76 | ||||||||||||
| Unvested at December 31, 2023 | 23,202,240 | $ | 2.16 | |||||||||||
Performance-based restricted stock unit awards
In the third quarter of 2021, the Company’s compensation committee ratified and approved performance-based restricted stock units (“PRSUs”) to all employees (“Grantee”) the value of which is determined based on the Grantee’s level within the Company (“PRSU Value”). Each PRSU is equal to one underlying share of Class A common stock. Also, PRSUs were awarded to any new employee hired in the fourth quarter of 2021 and during 2022 on a pro-rata basis based on a reduction in time of service. The number of shares subject to a Grantee’s PRSU award equals the Grantee’s PRSU Value divided by the closing price per Class A common share on the service inception date, or if the service inception date is not a trading day, the closing price per Share on the closest trading day immediately prior to the service inception date; in each case rounded down to the nearest whole number. Each PRSU award shall vest as to 50% of the PRSU Value upon the Committee’s determination, in its sole discretion, and certification of the occurrence of the Ocean Start of Production and shall vest as to 50% of the PRSUs upon the first anniversary of the Ocean Start of Production, in each case, subject to (i) the Grantee’s continuous service through the applicable vesting date, (ii) the Grantee’s not committing any action or omission that would constitute Cause for termination through the applicable vesting date, as determined in the sole discretion of the Company, and (iii) the Ocean Start of Production occurring on or before December 31, 2022. The compensation committee has discretion to reduce or eliminate the number of PRSUs that shall vest pursuant to each PRSU award upon the certification of the occurrence of the Ocean Start of Production and/or upon the first anniversary of the Ocean Start of Production, after considering, any factors that it deems relevant, which could include but are not limited to (i) Company performance against key performance indicators, and (ii) departmental performance against goals. The service inception date precedes the grant dates for both performance conditions. The grant date for each of the performance conditions is the date Grantees have a mutual understanding of the key terms and conditions of the PRSU, which will occur when the performance condition is objectively determinable and measurable, and the compensation committee has determined whether it will exercise its discretion to adjust the PRSU award. Recognition of stock-based compensation occurs when performance conditions are probable of achievement. Measurement of stock-based compensation attributed to the PRSU awards will be based on the fair value of the underlying Class A Common Stock once the grant date is determined (e.g., variable accounting).
104
As of December 31, 2023, the Company has approved and authorized PRSUs equal to 1,446,943 shares of Class A common stock with a PRSU value of $3.4 million of which 1,278,465 awards vested on March 24, 2023, the grant and vesting date for the first tranche of the PRSU award. As of December 31, 2022, achievement of the first tranche of the PRSU awards was deemed probable resulting in recognition of cumulative expense of $10.1 million. During the year ended December 31, 2023, the Company measured the cumulative expense to be recognized upon vesting based on the closing stock price on the grant and vesting date, which resulted in cumulative expense of $7.3 million, a reduction of $2.8 million from the Company's measurement of compensation expense as of the end of 2022.
As of December 31, 2023, achievement of the second tranche of the PRSU awards was deemed probable resulting in the recognition of compensation expense of $3.4 million for the year ending December 31, 2023. However, a grant date has not yet been established for the second tranche because there has not been a mutual understanding of the key terms and conditions with the grantees. Measurement of PRSU compensation expense is based on the closing price on the last day of the quarter multiplied by the outstanding approved and authorized PRSUs.
17. Income taxes
The Company's income/(loss) before provision for income taxes was subject to taxes in the following jurisdictions for the following periods (in thousands):
| For the years ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| United States | $ | (943,801) | $ | (549,514) | $ | (470,603) | |||||||||||
| International | 5,153 | 2,203 | (723) | ||||||||||||||
| Total | $ | (938,648) | $ | (547,311) | $ | (471,326) | |||||||||||
The Company has increasing foreign operations and pre-tax income from its foreign operations has no material impact on Income tax. Income tax expense attributable to income/(loss) from continuing operations consists of the following (in thousands):
| For the years ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | — | — | ||||||||||||||
| International | 1,271 | 221 | 15 | ||||||||||||||
| Total current tax provision | $ | 1,271 | $ | 221 | $ | 15 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | — | — | ||||||||||||||
| International | 28 | (36) | — | ||||||||||||||
| Total deferred tax provision | $ | 28 | $ | (36) | $ | — | |||||||||||
| Provision for income taxes | $ | 1,299 | $ | 185 | $ | 15 | |||||||||||
105
The effective tax rate of the Company’s (provision) benefit for income taxes differs from the federal statutory rate as follows:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Expected federal income tax benefit | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State taxes net of federal benefit | 2.9 | % | 4.2 | % | 3.7 | % | |||||||||||
| Tax credits | (1.3) | % | 0.9 | % | 0.8 | % | |||||||||||
| Valuation allowance | (14.5) | % | (25.3) | % | (20.0) | % | |||||||||||
| Fair value of derivatives | (7.3) | % | 0.0% | (6.2) | % | ||||||||||||
| Other | (0.9) | % | (0.8) | % | 0.7 | % | |||||||||||
| Provision for income taxes | (0.1) | % | 0.0% | 0.0% | |||||||||||||
Effective January 1, 2022, provisions in the Tax Cuts and Jobs Act of 2017 will require the Company to capitalize and amortize research and development costs rather than deducting the costs as incurred. Unless the effective date is deferred or the law is modified or repealed, we expect an increase to our effective tax rate in future years through increased future cash taxes.
Deferred tax assets and liabilities
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
The Company records income tax expense for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records valuation allowances to reduce its deferred tax assets to the net amount that it believes is more likely than not to be realized. Its assessment considers the recognition of deferred tax assets on a jurisdictional basis. The Company has placed a full valuation allowance against U.S. federal and state deferred tax assets since the recovery of the assets is uncertain.
106
The tax effects of significant items comprising the Company’s deferred taxes are as follows (in thousands):
| As of December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 255,442 | $ | 147,789 | |||||||
| Tax credits | 507 | 11,461 | |||||||||
| Lease liability | 14,033 | 6,793 | |||||||||
| Capitalized research and development costs | 111,985 | 82,084 | |||||||||
| Other | 18,274 | 7,042 | |||||||||
| Total deferred tax assets | 400,241 | 255,169 | |||||||||
| Deferred tax liabilities: | |||||||||||
| ROU asset | (16,196) | (6,902) | |||||||||
| Other | — | — | |||||||||
| Total deferred tax liabilities | (16,196) | (6,902) | |||||||||
| Valuation allowance | (384,037) | (248,230) | |||||||||
| Net deferred tax asset | $ | 8 | $ | 37 | |||||||
ASC 740 requires that the tax benefit of net operating losses (“NOLs”), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits from operating loss carryforwards is currently not likely to be realized and, accordingly, has provided a valuation allowance against its deferred tax assets.
The changes in the valuation allowance related to current year operating activity was an increase in the amount of $$135.8 million during the year ended December 31, 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Beginning of the year | $ | 248,230 | $ | 108,794 | 14,562 | ||||||||||||
| Increase—income tax benefit | 135,807 | 139,436 | 94,232 | ||||||||||||||
| End of the year | $ | 384,037 | $ | 248,230 | $ | 108,794 | |||||||||||
Net Operating Losses
Federal and state laws impose substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Depending on the significance of past and future ownership changes, the Company’s ability to realize the potential future benefit of tax losses and tax credits that existed at the time of the ownership change may be significantly reduced.
As of December 31, 2023, the Company has approximately $962.0 million and $798.0 million of federal and state NOLs respectively. Federal NOLs generated prior to 2017 begin expiring in the calendar year 2036. Under the new Tax Cuts and Jobs Act, all NOLs incurred after December 31, 2017 are carried forward indefinitely for federal tax purposes. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed in to law on March 27, 2020, provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020, may now be carried back five years and forward indefinitely. In addition, the 80% taxable income limitation was temporarily removed, allowing NOLs to fully offset net taxable income. California has not conformed to the indefinite carryforward period for NOLs. The NOLs begin expiring in the calendar year 2036 for state purposes.
In the ordinary course of its business, the Company incurs costs that, for tax purposes, are determined to be qualified research and development (“R&D”) expenditures within the meaning of IRC §41. The R&D tax credit carryforward as of
107
December 31, 2023 is $0.3 million and $0.4 million for Federal and State, respectively. The R&D tax credit carryforwards begin expiring in the calendar year 2036 for federal purposes. The Company has adjusted the deferred tax assets related to Federal R&D credit carryover to account for any expiring tax credits.
Uncertain tax positions
The Company recognizes tax benefits from uncertain tax positions only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. As the Company expands, it will face increased complexity in determining the appropriate tax jurisdictions for revenue and expense items. The Company’s policy is to adjust these reserves when facts and circumstances change, such as the closing of a tax audit or refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the income tax expense in the period in which such determination is made and could have a material impact on its financial condition and operating results. The income tax expense includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest and penalties.
As of December 31, 2023, the Company has total uncertain tax positions of $0.1 million, which is related to R&D tax credits and recorded as a reduction of the deferred tax asset. No interest or penalties have been recorded related to the uncertain tax positions. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Beginning of the year | $ | 2,975 | $ | 968 | $ | 229 | |||||||||||
| Increase related to current year tax positions | — | 2,007 | 871 | ||||||||||||||
| Increase related to prior year tax positions | — | — | — | ||||||||||||||
| Decrease for tax positions of prior years | (2,875) | — | (129) | ||||||||||||||
| Decrease due to expiration of statute of limitations | — | — | (3) | ||||||||||||||
| End of the year | $ | 100 | $ | 2,975 | $ | 968 | |||||||||||
It is not expected that there will be a significant change in uncertain tax positions in the next 12 months. The Company is subject to U.S. federal and state income tax and three foreign jurisdictions. In the normal course of business, the Company is subject to examination by tax authorities. There are no tax examinations in progress as of December 31, 2023. The Company’s federal and state tax years for 2017 and forward are subject to examination by taxing authorities.
18. Related party transactions
In July 2019 and in June 2020, the Company entered into bridge note payables with Roderick K. Randall, a member of the Company’s Board of Directors, and The Randall Group Fisker Series C, for which Mr. Randall is the Managing Director, for the principal sum of $100,000 and $220,000, respectively. In addition, Legacy Fisker sold 1,236,610 shares of Series A preferred stock to Mr. Randall and Series Fisker, a separate series of The Randall Group, LLC, for which Mr. Randall is the Series Manager, for $924,984. The bridge notes and Series A preferred stock were converted into 3,402,528 shares of Class A Common Stock at an exchange ratio of 2.7162 upon completion of the Business Combination. The Company also had a consulting agreement with Mr. Randall dated May 1, 2017. In connection with the consulting agreement, he received an option grant to purchase 159,769 shares (post business combination) of our Class A common stock. Also, Mr. Randall received option grants to purchase 67,905 and 13,581 shares (post business combination) of our Class A common stock on June 22, 2020. He also received annual Board of Directors restricted stock unit awards for 25,658 and 24,271 shares of Class A common stock vesting quarterly over twelve months from the date of our annual shareholders’ meetings held on June 6, 2023 and June 7, 2022, respectively.
In 2018, Legacy Fisker sold 135,000 shares of Series A preferred stock to the Nadine I. Watt Jameson Family Trust, a trust controlled by Mrs. Watt, a member of the Company’s Board of Directors, and her spouse, G. Andrew Jameson, for $100,980. The Series A preferred stock were converted into 366,690 shares of Class A Common Stock at an exchange ratio of 2.7162 upon completion of the Business Combination. Mrs. Watt received an option grant to purchase 13,581 shares (post business combination) of our Class A common stock on June 22, 2020 and Mr. Jameson received an option grant to
108
purchase 14,939 shares (post business combination) of our Class A common stock on September 21, 2020 in exchange for providing consulting services. Under the Company’s Outside Director Compensation Policy, Mrs. Watt received an annual Board of Directors restricted stock unit award for 36,653 and 24,271 shares of Class A common stock vesting quarterly over twelve months from the date of our annual shareholders’ meetings held on June 6, 2023 and June 7, 2022, respectively.
On March 8, 2021, the Company appointed Mitchell Zuklie to its Board of Directors and granted him a restricted stock unit representing 2,711 shares of Class A common stock, which vested on the date of the Company’s annual meeting held on June 8, 2021. Mr. Zuklie is the chairman of the law firm of Orrick, Herrington & Sutcliff LLP (‘‘Orrick’’), which provides various legal services to the Company. During the years ended December 31, 2023, 2022 and 2021, the Company incurred expenses for legal services rendered by Orrick totaling approximately $1.5 million, $9.1 million, and $1.8 million, respectively. Mr. Zuklie also held 54,461 shares of Class A Common Stock at the time of his appointment to the Board of Directors. Under the Company’s Outside Director Compensation Policy, Mr. Zuklie received an annual Board of Directors restricted stock unit award for 40,805 and 24,271 shares of Class A common stock vesting quarterly over twelve months from the date of the Company’s annual shareholders’ meetings held on June 6, 2023 and June 7, 2022, respectively.
19. Commitments and contingencies
Legal matters
In the normal course of our business, we are named from time to time as a defendant in various legal actions, including arbitration. The Company accrues for matters when losses are probable and can be reasonably estimated. At December 31, 2023 and 2022, the Company's accruals for legal matters were immaterial. For certain matters, it is inherently difficult to determine whether a loss is probable or reasonably possible or to estimate the size or range of the possible loss. While the Company believes that appropriate accruals have been established for losses that are probable and can be reasonably estimated, it is possible that adverse outcomes from such proceedings could exceed the amounts accrued by an amount that could be material to our results of operations or cash flows in any particular reporting period.
A putative class action lawsuit is pending against the Company in the United States District Court for the Central District of California that alleges claims under the federal securities laws, including that the Company made false and/or misleading statements and/or omissions concerning operations, prospects, and internal control over financial reporting. The Company is currently unable to estimate any reasonably possible material loss or range of loss that may result from this action.
Various other legal actions, claims, and proceedings are pending against the Company, including, but not limited to, matters arising out of alleged product defects; employment-related matters; product warranties; and consumer protection laws. The Company also from time to time receives subpoenas and other inquiries or requests for information from agencies or other representatives of U.S. federal, state, and foreign governments.
In November 2021, the Company entered into a long-term supply agreement with a minimum volume commitment with a third party, which provides raw materials. Any purchase order issued under this supply agreement will be non-cancellable. To the extent the Company fails to order the minimum volume defined in the contract at the end of each year, the Company is required to pay the counterparty in the subsequent year an amount equal to the shortfall, if any, multiplied by a fee. Based on the facts and circumstances at this time, the Company believes that the inability to meet the future minimum volume commitments is probable and an accrual for the shortfall amount has been accrued. As of December 31, 2023 the Company recognized as an NRV write down of approximately $25.6 million estimated shortfall within "Cost of Goods Sold" financial statement line item on the Statement of operations as of December 31, 2023.
109
20. Subsequent events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the Consolidated Financial Statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Consolidated Financial Statements.
2025 Notes Conversions
Between January 1, 2024 and the date this Annual Report on Form 10-K was filed, the Investor converted portions of the aggregate principal amount of the outstanding 2025 Notes of $181.5 million of principal at a conversion price between $0.01 to $1.23 per share into 1,039,773,708 shares of Class A Common Stock.
Second Amendment to the 2025 Notes
On January 21, 2024, the Company and the institutional investor that holds the Company’s 2025 Notes entered into a Second Amendment and Waiver Agreement (the “Second Waiver”), pursuant to which, among other things:
(i) in connection with one or more future transactions with a strategic automotive partner, the Company has secured a release of all liens previously granted to the Investor on the intellectual property required by any such transactions;
(ii) all financial covenants relating to the Company’s cash reserves were waived; and
(iii) the Company obtained a waiver of the use by the Investor of any remaining remedies arising from the Company’s previous late filing of its quarterly report on Form 10-Q for the quarter ended September 30, 2023.
Amended and Restated Certificate of Incorporation
On March 5, 2024, the Company held a Special Meeting of Stockholders at which the stockholders approved an amendment to the Company’s certificate of incorporation to increase the total number of shares of Class A Common Stock that the Company will have the authority to issue from 1,250,000,000 to 2,000,000,000 shares.
Cash on hand
The Company had cash and cash equivalents of $53.9 million unrestricted and $11.2 million restricted, as of April 16, 2024, reflecting several large payments to suppliers in the first quarter of 2024.
Commitment Letter for 2024 Notes
On March 18, 2024 the Company entered into a financing commitment with an investor providing for the sale of up to $166.7 million in aggregate principal amount of senior secured convertible notes (the “2024 Notes”). The 2024 Notes will have a 10% original issue discount for gross proceeds of up to $150.0 million. The 2024 Notes will be sold pursuant to a securities purchase agreement (the “SPA”) and issued in four tranches. The first tranche equal to $35.0 million and the remaining three tranches in equal amounts up to the principal amount.
All amounts due under the 2024 Notes will be convertible at any time into shares of the Company’s Class A common stock at a conversion price equal to the market price of the Company's Class A common stock as of the SPA closing date or at the market price as of the date of maturity if both elected and less than the original conversion price. The 2024 Notes are subject to full-ratchet anti-dilution protection and standard conversion rate adjustments upon the occurrence of certain events. The 2024 Notes are secured by substantially all of the assets and properties of the Company.
The 2024 Notes will mature upon the earlier of (i) three months from the date of issuance of the First Tranche, (ii) the effective date of a registration statement for the primary sale of registered securities by the Company, or (iii) July 31,
110
2024. Interest will accrue at a rate equal to the 3-month secured overnight financing rate plus 12% per annum, payable at the Maturity Date.
A fee to the Investor on the undrawn portion of the aggregate principal will accrue daily until the date of the applicable closing at an interest rate of the 3-month secured overnight financing rate (SOFR) plus 4% per annum, payable at the Maturity Date. The Undrawn Investor Fee with respect to the First Tranche commenced on the date of the Commitment with additional fees based on the timing of the remaining tranches.
The 2024 Notes will be subject to various covenants and upon the occurrence of an event of default or a change of control, subject to redemption at the noteholders election. Through the date of this report no amounts have yet been funded for the 2024 Notes.
Forbearance Agreements for the 2025 Notes
On April 4, 2024, the Company and the investor entered into a Forbearance Agreement pursuant to which it was agreed the investor would not enforce the right to immediate redemption of the 2025 Notes, a right granted to the investor upon the event of delay in payment of interest due under the 2026 Notes. It was further agreed that the investor would not enforce nor exercise any of its other rights or remedies including enforcement or collection actions with respect to any events of default that have occurred or may occur on the 2025 Notes and 2026 Notes through April 21, 2024. Pursuant to the terms of the Forbearance Agreement a total fee of $0.5 million was incurred. On April 21, 2024, the Company and the investor entered into a second forbearance agreement (the “Second Forbearance Agreement”) pursuant to which the investor agreed, to continue to temporarily forbear from enforcing its right to immediate redemption as demanded in an Event of Default Redemption Notice and from exercising any of its other default-related rights and remedies against the Company with respect to the specified defaults, for a period commencing on April 21, 2024 and ending on the earlier of (a) May 1, 2024 and (b) the occurrence of any Forbearance Default (as defined in the Second Forbearance Agreement).
Other
The Company did not make a required interest payment of approximately $8.4 million payable in cash on March 15, 2024 with respect to the 2026 Notes. Under the indenture governing the 2026 Notes, such non-payment is a default and the Company had a 30-day grace period to make the interest payment which now has elapsed, such non-payment constitutes an Event of Default (as such term is defined in the 2026 Notes Indenture) with respect to the 2026 Notes. The non-payment of interest due resulted in a cross default under the indenture governing the 2025 Notes. On March 18, 2024, the holder of the 2025 Notes waived the cross default, but not the ability to continue to exercise the enriched conversion feature that will remain in place until a periodic report is filed within the time allowed by the SEC, excluding any extension permitted pursuant to Rule 12b-25.
On March 25, 2024 trading in the Company's Class A common stock on the NYSE was suspended and the Class A common stock commenced delisting proceedings with the NYSE. The Company's Class A common stock is currently quoted on the OTC Pink platform as operated by OTC Markets Group Inc. (the “OTC”). The OTC is a significantly more limited market than the NYSE, and quotation on the OTC will result in a less liquid market for existing and potential holders of the Class A Common Stock to trade the Class A Common Stock.
The delisting triggered a requirement to offer to repurchase our unsecured 2026 Notes and caused an event of default under the terms of our 2025 Notes. Accordingly, in the quarter ended March 31, 2024, the 2026 Notes are expected to be classified as a current liability in addition to the 2025 Notes.
The Company initiated a process to explore a range of strategic alternatives to maximize shareholder value and have engaged professional advisors. Management can make no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value. If the strategic process is unsuccessful, our Board may need to approve a liquidation or obtain relief under the US Bankruptcy Code. The Company has hired advisors to explore strategic alternatives including, if needed, filing for bankruptcy protection.
As a result of a sustained drop in our stock price in violation of NYSE rules, the NYSE commenced delisting proceedings with the Company on March 25, 2024. As a result step one of our impairment test was triggered which may result in impairment of the Company's property and equipment and intangible assets during our first quarter of 2024. Also,
111
during first quarter 2024 the Company is exiting certain lease property and this may result in an impairment in first quarter of 2024 reporting of our right of use assets.
112
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure controls and procedures
The Company maintains disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosures.
Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation (pursuant to Rule 13a-15(b) under the Exchange Act) of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. In designing and evaluating the disclosure controls and procedures, the Company's management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgement in evaluating the benefits of our controls and procedures relative to their costs. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses in internal control over financial reporting described below in “Management’s Report on Internal Control over Financial Reporting”, the Company’s disclosure controls and procedures were not effective as of December 31, 2023.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment using this criteria, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2023 due to the material weaknesses identified below.
•The Company did not design and maintain an effective control environment commensurate with its financial reporting requirements. Specifically, the Company has experienced a change in key accounting personnel and, as a result, lacked a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and to achieve complete financial accounting, reporting and disclosures. Additionally, we did not design and maintain effective controls over the preparation and review of account reconciliations.
•The Company did not design and maintain effective controls for communicating and sharing information between the operations, accounting, information technology, finance and legal departments. Specifically, there are insufficient controls to ensure that the accounting department is consistently provided with complete and adequate support, documentation and information, and that matters are resolved in a timely and effective manner.
•The Company did not design and maintain effective controls in response to the risks of material misstatement over the accounting for (i) inventory and related income statement accounts and (ii) revenue and related balance sheet accounts. Specifically, controls over the accounting for (i) inventory and related income statement accounts and
113
(ii) revenue and related balance sheet accounts were not sufficient to respond to changes to the risks of material misstatement to financial reporting due to changes in the business.
These material weaknesses contributed to the following additional material weakness:
•The Company did not design and maintain effective controls related to the accounting for certain non-routine, complex or unusual events or transactions. Specifically, the Company did not design and maintain effective controls to timely analyze and account for the financial statement effects of variable interest entities and valuation of convertible debt and the related derivative liability.
These material weaknesses resulted in material audit adjustments to revenue, accounts receivable, deferred revenue, inventory, costs of goods sold, convertible debt and derivative liability balances during the year ended December 31, 2023. Additionally, each of the material weaknesses described above could result in a misstatement of substantially all account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
The effectiveness of our internal control over financial reporting as of December 31, 2023, was audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report appearing under Item 8.
Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting
In order to address the identified material weaknesses, the Company has established a remediation plan which includes the following measures:
•Evaluating skill set gaps and hiring additional accounting, financial reporting, and compliance personnel (including both internal and external resources), as needed, with public company experience to develop and implement additional policies, procedures, and controls;
•Designing and implementing controls and processes to facilitate effective communication sharing between departments, along with accurate documentation and timely support;
•Designing and implementing a comprehensive and continuous risk assessment process that identifies and assesses risks of material misstatement across the entity and helps ensure that related internal controls are properly designed and in place to respond to those risks in the Company’s financial reporting; and
•Designing and implementing controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including the accounting for variable interest entities and valuation of convertible debt and the related derivative liability.
The Company is committed to remediating the material weaknesses and the actions the Company is taking are subject to ongoing senior management review, as well as oversight from the Company’s Board of Directors. When fully implemented and operational, the Company believes the measures described above will remediate the underlying causes of the control deficiencies that gave rise to the material weaknesses and strengthen the Company’s internal control over financial reporting. The Company will not be able to fully remediate these material weaknesses until these steps have been completed and operate effectively for a sufficient period of time. The Company may also identify additional measures that may be required to remediate the material weaknesses in the Company’s internal control over financial reporting, necessitating further action.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the three months ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
114
Item 9B. Other Information.
During the quarter ended December 31, 2023, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
115
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item is incorporated by reference to, and will be contained in, our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to, and will be contained in, our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference to, and will be contained in, our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to, and will be contained in, our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated by reference to, and will be contained in, our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders.
116
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)The following documents are filed as part of this report:
1.Financial Statements
See Index to Financial Statements in Part II Item 8 of this Annual Report on Form 10-K.
2.Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3.Exhibits
The documents listed in the Exhibit Index are incorporated by reference or are filed with this report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
The following list of exhibits are filed as part of this document.
| Incorporated by reference | Filed or furnished herewith | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit title | Form | File No. | Exhibit No. | Filing date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1.1 | 8-K | 001-38625 | 1.1 | 5/24/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2.1* | 8-K | 001-38625 | 10.3 | 7/13/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3.1 | 8-K | 001-38625 | 3.1 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3.2 | 8-K | 001-38625 | 3.1 | 9/22/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3.3 | 8-K | 001-38625 | 3.1 | 3/8/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3.4 | 8-K | 001-38625 | 3.2 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.1 | S-1/A | 333-226274 | 4.2 | 7/27/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.2 | S-1/A | 333-226274 | 4.1 | 7/27/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
117
| Incorporated by reference | Filed or furnished herewith | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit title | Form | File No. | Exhibit No. | Filing date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.3 | 8-K | 001-38625 | 4.4 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.4 | S-1/A | 333-226274 | 4.3 | 7/27/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.5 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.6 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.7 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.8 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.9 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.10 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4.11* | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.1 | 8-K | 001-38625 | 10.1 | 7/13/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.2 | 8-K | 001-38625 | 10.2 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.3 | 8-K | 001-38625 | 10.3 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.4 | 8-K | 001-38625 | 10.2 | 7/13/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.5 | 8-K | 001-38625 | 10.5 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.6* | 8-K | 001-38625 | 10.1 | 10/15/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
118
| Incorporated by reference | Filed or furnished herewith | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit title | Form | File No. | Exhibit No. | Filing date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.7* | 8-K | 001-38625 | 10.7 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.8 | 8-K | 001-38625 | 10.8 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.9† | 8-K | 001-38625 | 10.9 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.10† | 8-K | 001-38625 | 10.10 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.11† | 8-K | 001-38625 | 10.11 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.12† | 8-K | 001-38625 | 10.12 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.13† | 8-K | 001-38625 | 10.13 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.14† | 8-K | 001-38625 | 10.14 | 11/4/2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.15 | 8-K | 001-38625 | 10.1 | 8/14/2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.16 | 8-K | 001-38625 | 10.1 | 2/9/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.17* | 10-Q | 001-38625 | 10.1 | 5/17/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.18* | 8-K | 001-38625 | 10.1 | 6/17/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.19 | 8-K | 001-38625 | 10.1 | 8/17/2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.20* | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.21 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
119
| Incorporated by reference | Filed or furnished herewith | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit title | Form | File No. | Exhibit No. | Filing date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.22 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.23 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.24 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.25 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.26 | 8-K | 001-38625 | — | 3/18/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.27 | 8-K | 001-38625 | 10.1 | 4/4/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10.28 | 8-K | 001-38625 | 10.1 | 4/22/2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31.1 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 31.2 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32.1** | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 32.2** | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
120
| Incorporated by reference | Filed or furnished herewith | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit title | Form | File No. | Exhibit No. | Filing date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 97 | X | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document. | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in exhibit 101) | X | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
_______________
* The schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). Fisker Inc. agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon its request.
** Furnished and not filed.
† Indicates a management contract or compensatory plan, contract or arrangement.
Item 16. Form 10-K Summary
None.
121
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FISKER INC. | |||||||||||
| Date: April 22, 2024 | /s/ Henrik Fisker | ||||||||||
| Name: | Henrik Fisker | ||||||||||
| Title: | Chairman of the Board, President and Chief Executive Officer | ||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||||||||||||
| /s/ Henrik Fisker | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) | April 22, 2024 | ||||||||||||
| Henrik Fisker | ||||||||||||||
| /s/ Geeta Gupta-Fisker | Chief Financial Officer, Chief Operating Officer and Director (Principal Financial Officer) | April 22, 2024 | ||||||||||||
| Geeta Gupta-Fisker | ||||||||||||||
| /s/ Angel Salinas | Chief Accounting Officer (Principal Accounting Officer) | April 22, 2024 | ||||||||||||
| Angel Salinas | ||||||||||||||
| /s/ John S. Dubel | Director | April 22, 2024 | ||||||||||||
| John S. Dubel | ||||||||||||||
| /s/ Wendy J. Greuel | Director | April 22, 2024 | ||||||||||||
| Wendy J. Greuel | ||||||||||||||
| /s/ Roderick K. Randall | Director | April 22, 2024 | ||||||||||||
| Roderick K. Randall | ||||||||||||||
| /s/ Nadine I. Watt | Director | April 22, 2024 | ||||||||||||
| Nadine I. Watt | ||||||||||||||
| /s/ Mitchell S. Zuklie | Director | April 22, 2024 | ||||||||||||
| Mitchell S. Zuklie | ||||||||||||||
122