Filed pursuant to Rule 424(b)(3)
Registration No. 333-264346
PROSPECTUS SUPPLEMENT NO. 6
(to Prospectus dated April 26, 2022)
Proterra Inc
125,389,111 Shares of Common Stock
26,317,092 Shares of Common Stock Underlying Warrants and
Convertible Notes
This prospectus supplement supplements the prospectus dated April
26, 2022, as supplemented by Prospectus Supplement No. 1, dated May
6, 2022, Prospectus Supplement No. 2, dated June 2, 2022,
Prospectus Supplement No. 3, dated June 15, 2022, and Prospectus
Supplement No. 4 and Prospectus Supplement No. 5, each dated August
3, 2022 (the “Prospectus”), which forms a part of our registration
statement on Form S-1 (File No. 333-264346). This prospectus
supplement is being filed to update and supplement the information
in the Prospectus with the information contained in
our quarterly report on Form 10-Q for the period ended
September 30, 2022, filed with the Securities and Exchange
Commission on November
3,
2022 (the “Q3 2022 Quarterly Report”). Accordingly, we have
attached the Q3 2022 Quarterly Report to this
prospectus supplement.
The Prospectus and this prospectus supplement relate to the offer
and sale from time to time by the selling securityholders named in
the Prospectus (the “Selling Securityholders”) of up to 125,389,111
shares of common stock, par value $0.0001 per share (“common
stock”), consisting of (i) up to 16,334,868 shares of common stock
issued in a private placement of 41,500,000 shares of common stock
pursuant to subscription agreements entered into on January 11,
2021; (ii) up to 1,904,692 shares of common stock held by ArcLight
CTC Holdings, L.P.; and (iii) up to 107,149,551 shares of common
stock issued or issuable to certain former stockholders and other
security holders of Legacy Proterra (the “Legacy Proterra Holders”)
in connection with or as a result of the consummation of the
Business Combination, consisting of (a) up to 56,766,043 shares of
common stock; (b) up to 26,316,200 shares of common stock (the
“Note Shares”) issuable upon the conversion of outstanding
convertible promissory notes (the “Convertible Notes”); (c) up to
892 shares of common stock issuable upon the exercise of certain
warrants (the “Legacy Proterra warrants”); (d) 11,171,287 shares of
common stock issued or issuable upon the exercise of certain equity
awards; and (e) up to 12,895,129 shares of common stock (“Earnout
Shares”), comprising both Earnout Shares that were issued to
certain Legacy Proterra Holders in July 2021 and Earnout Shares
that certain Legacy Proterra Holders have the contingent right to
receive upon the achievement of certain stock price-based vesting
conditions.
In addition, the Prospectus and this prospectus supplement relate
to the offer and sale of (i) up to 892 shares of common stock
issuable by us upon exercise of the Legacy Proterra warrants that
were previously registered, and (ii) up to 26,316,200 Note Shares
issuable by us upon conversion of the Convertible Notes, certain of
which were previously registered. The number of shares issuable
upon conversion of Convertible Notes is calculated assuming that
the Convertible Notes convert pursuant to their mandatory
conversion terms on December 31, 2022. The actual number of shares
issued upon conversion will depend on the actual date of
conversion.
Our common stock is listed on the Nasdaq Global Select Market under
the symbol “PTRA.” On November 2, 2022, the last reported sale
price of our common stock was $5.87 per share.
This prospectus supplement updates and supplements the information
in the Prospectus and is not complete without, and may not be
delivered or utilized except in combination with, the Prospectus,
including any amendments or supplements thereto. This prospectus
supplement should be read in conjunction with the Prospectus and if
there is any inconsistency between the information in the
Prospectus and this prospectus supplement, you should rely on the
information in this prospectus supplement.
Investing in our common stock involves risks. See the section
entitled “Risk Factors” beginning on page 7 of the Prospectus to
read about factors you should consider before buying our common
stock.
The registration statement to which the Prospectus and this
prospectus supplement relates registers the resale of a substantial
number of shares of our common stock by the Selling
Securityholders. Sales in the public market of a large number of
shares, or the perception in the market that the holders of a large
number of shares intend to sell shares, could reduce the market
price of our common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus supplement is November 3,
2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
|
|
|
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
|
|
|
|
|
|
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from _________ to
_________
Commission file number 001-39546
Proterra Inc
(Exact name of registrant as specified in its charter)
|
|
|
|
|
|
|
|
|
|
Delaware
|
98-1551379
|
|
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
1815 Rollins Road
Burlingame, California
|
94010
|
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
|
(864) 438-0000
Registrant's telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the
Act:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
Common Stock, $0.0001 par value per share |
|
PTRA |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports); and (2) has been subject to such filing requirements
for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check
one):
|
|
|
|
|
|
|
|
|
|
|
|
|
Large accelerated filer |
x |
Accelerated filer |
o
|
|
Non-accelerated filer |
o
|
Smaller reporting company |
o
|
|
|
Emerging growth company |
o
|
If
an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
Yes o No x
The registrant had outstanding 225.5 million shares of common stock
as of October 31, 2022.
TABLE OF CONTENTS
Explanatory Note – Certain Defined Terms
Unless otherwise stated in this Quarterly Report on Form 10-Q (the
“Quarterly Report”) or the context otherwise requires, references
to:
•“ArcLight”
means ArcLight Clean Transition Corp., a Cayman Islands exempted
company, prior to the consummation of the
Domestication;
•“Business
Combination” means the Domestication, the Merger and the other
transactions contemplated by the Merger Agreement, collectively,
including the PIPE Financing;
•“Class
A ordinary shares” means the Class A ordinary shares, par value
$0.0001 per share, of ArcLight, prior to the Domestication, which
automatically converted, on a one-for-one basis, into shares of
common stock in connection with the Domestication;
•“Class
B ordinary shares” means the Class B ordinary shares, par value
$0.0001 per share, of ArcLight that were initially issued to the
Sponsor (a portion of which were subsequently transferred to the
other initial shareholders) in a private placement prior to
ArcLight’s initial public offering, and, in connection with the
Domestication, which automatically converted, on a one-for-one
basis, into shares of common stock;
•“Closing”
means the closing of the Business Combination;
•“Closing
Date” means June 14, 2021;
•“common
stock” means the common stock, par value $0.0001 per share, of
Proterra;
•“Domestication”
means the transfer by way of continuation and deregistration of
ArcLight from the Cayman Islands and the continuation and
domestication of ArcLight as a corporation incorporated in the
State of Delaware;
•“initial
public offering” means ArcLight’s initial public offering that was
consummated on September 25, 2020;
•“Legacy
Proterra” means Proterra Inc, a Delaware corporation, prior to the
consummation of the Business Combination;
•“Merger”
means the merger of Phoenix Merger Sub with and into Legacy
Proterra pursuant to the Merger Agreement, with Legacy Proterra as
the surviving company in the Merger and, after giving effect to
such Merger, Legacy Proterra becoming a wholly-owned subsidiary of
Proterra;
•“Merger
Agreement” means that certain Merger Agreement, dated as of January
11, 2021 (as may be amended, supplemented or otherwise modified
from time to time), by and among ArcLight, Phoenix Merger Sub and
Legacy Proterra;
•“Phoenix
Merger Sub” refers to Phoenix Merger Sub, Inc., a Delaware
corporation and a wholly-owned direct subsidiary of
ArcLight;
•“PIPE
Financing” means the transactions contemplated by the Subscription
Agreements, pursuant to which the PIPE Investors collectively
subscribed for 41,500,000 shares of common stock for an aggregate
purchase price of $415,000,000 in connection with the
Closing;
•“PIPE
Investors” means the investors who participated in the PIPE
Financing and entered into the Subscription
Agreements;
•“private
placement warrants” means the 7,550,000 private placement warrants
outstanding as of September 30, 2021 that were issued to the
Sponsor as part of ArcLight’s initial public offering, which were
substantially identical to the public warrants, subject to certain
limited exceptions; the Sponsor
exercised the private placement warrants on a “cashless” basis in
connection with our redemption of our remaining outstanding public
warrants on October 26, 2021;
•“Proterra”
means ArcLight upon and after Closing;
•“public
warrants” means the 13,874,994 redeemable warrants to purchase
common stock outstanding as of September 30, 2021 that were issued
by ArcLight in its initial public offering; on October 29 2021, we
redeemed the remaining outstanding public warrants that had not
previously been exercised at a redemption price of $0.10 per public
warrant;
•“Sponsor”
means ArcLight CTC Holdings, L.P., a Delaware limited partnership;
and
•“Subscription
Agreements” means the subscription agreements, entered into by
ArcLight and each of the PIPE Investors in connection with the PIPE
Financing.
In addition, unless otherwise indicated or the context otherwise
requires, references in this Quarterly Report to the “Company,”
“we,” “us,” “our” and other similar terms refer to Legacy Proterra
prior to the Business Combination and to Proterra and its
consolidated subsidiaries after giving effect to the Business
Combination.
Forward-Looking Statements
This Quarterly Report contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). This
Quarterly Report contains forward-looking statements regarding,
among other things, our plans, strategies and prospects, both
business and financial. These statements are based on the beliefs
and assumptions of our management. We also may provide
forward-looking statements in oral statements or other written
materials released to the public. Although we believe that our
plans, intentions and expectations reflected in or suggested by
these forward-looking statements are reasonable, we cannot assure
you that we will achieve or realize these plans, intentions or
expectations. Forward-looking statements are inherently subject to
risks, uncertainties and assumptions. Generally, statements that
are not historical facts, including statements concerning possible
or assumed future actions, business strategies, events or results
of operations, are forward-looking statements. These statements may
be preceded by, followed by or include the words “believes”,
“estimates”, “expects”, “projects”, “forecasts”, “may”, “will”,
“should”, “seeks”, “plans”, “scheduled”, “anticipates” or “intends”
or similar expressions. Forward-looking statements contained in
this Quarterly Report may include, for example, statements
about:
•our
financial and business performance, including business
metrics;
•the
ability to maintain the listing of our common stock on the Nasdaq
Global Select Market (“Nasdaq”), and the potential liquidity and
trading of our common stock;
•changes
in our strategy, future operations, financial position, estimated
revenues and losses, projected costs, prospects and
plans;
•substantial
regulations, which are evolving, and unfavorable changes or failure
by us to comply with these regulations;
•expectations
regarding corporate, state, federal and international
mandates/commitments;
•our
success in retaining or recruiting, or changes required in, our
officers, key employees or directors, and our ability to attract
and retain key personnel;
•the
anticipated success of our most recent business expansion with
Proterra Powered and Proterra Energy, and our ability to attract
the customers and business partners we expect;
•forecasts
regarding long-term end-customer adoption rates and demand for our
products in markets that are new and rapidly evolving and our
ability to meet demand for our products;
•our
ability to compete successfully against current and future
competitors in light of intense and increasing competition in the
transit bus and commercial vehicle electrification
market;
•the
availability of government economic incentives and government
funding for public transit upon which our transit business is
significantly dependent;
•willingness
of corporate and other public transportation providers to adopt and
fund the purchase of electric vehicles for mass
transit;
•availability
of a limited number of suppliers for our products and services and
their desire and/or ability to satisfy our supply
demands;
•material
losses and costs from product warranty claims, recalls, or
remediation of electric transit buses or our battery systems for
real or perceived deficiencies or from customer satisfaction
campaigns;
•increases
in costs, disruption of supply, or shortage of materials,
particularly lithium-ion cells;
•our
dependence on a small number of customers that fluctuate from year
to year, and failure to add new customers or expand sales to our
existing customers;
•our
dependence on our business suppliers, particularly as we build out
new facilities;
•rapid
evolution of our industry and technology, and related unforeseen
changes, including developments in alternative technologies and
powertrains or improvements in the internal combustion engine that
could adversely affect the demand for our electric transit
buses;
•development,
maintenance and growth of strategic relationships in the Proterra
Powered or Proterra Energy business, identification of new
strategic relationship opportunities, or formation strategic
relationships;
•competition
for the business of both small and large transit agencies, which
place different demands on our business, including the need to
build an organization that can serve both types of transit
customers;
•accident
or safety incidents involving our buses, battery systems, electric
drivetrains, high-voltage systems or charging
solutions;
•product
liability claims, which could harm our financial condition and
liquidity if we are not able to successfully defend or insure
against such claims;
•changes
to U.S. trade policies, including new tariffs or the renegotiation
or termination of existing trade agreements or
treaties;
•various
environmental and safety laws and regulations that could impose
substantial costs upon us and negatively impact our ability to
operate our manufacturing facilities; outages and disruptions of
our services if we fail to maintain adequate security and
supporting infrastructure as we scale our information technology
systems;
•availability
of additional capital to support business growth;
•failure
to protect our intellectual property;
•intellectual
property rights claims by third parties, which could be costly to
defend, related significant damages and resulting limits on our
ability to use certain technologies;
•developments
and projections relating to our competitors and
industry;
•our
anticipated growth rates and market opportunities;
•the
period over which we anticipate our existing cash and cash
equivalents will be sufficient to fund our operating expenses and
capital expenditure requirements;
•the
potential for our business development efforts to maximize the
potential value of our portfolio;
•our
estimates regarding expenses, future revenue, capital requirements
and needs for additional financing;
•the
inability to develop and maintain effective internal
controls;
•the
diversion of management’s attention and consumption of resources as
a result of potential acquisitions of other companies;
•failure
to maintain adequate operational and financial resources or raise
additional capital or generate sufficient cash flows;
•cyber-attacks
and security vulnerabilities; and
•the
effect of the COVID-19 pandemic, macroeconomic conditions, such as
rising inflation rates, uncertain credit and global financial
markets and supply chain disruptions, and geopolitical events, such
as the conflict between Russia and Ukraine and related sanctions,
on the foregoing.
These forward-looking statements are based on information available
as of the date of this Quarterly Report, and current expectations,
forecasts and assumptions, and involve a number of judgments, risks
and uncertainties. Important factors could cause actual results to
differ materially from those indicated or implied by
forward-looking statements such as those contained in documents we
have filed with the Securities and Exchange Commission (the “SEC”).
Accordingly, forward-looking statements should not be relied upon
as representing our views as of any subsequent date, and we do not
undertake any obligation to update forward-looking statements to
reflect events or circumstances after the date they were made,
whether as a result of new information, future events or otherwise,
except as may be required under applicable securities laws. Our
forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures,
investments or similar transactions.
As a result of a number of known and unknown risks and
uncertainties, our actual results or performance may be materially
different from those expressed or implied by these forward-looking
statements. For a discussion of the risks involved in our business
and investing in our common stock, see Part II, Item 1A. titled
“Risk Factors.”
Should one or more of these risks or uncertainties materialize, or
should any of the underlying assumptions prove incorrect, actual
results may vary in material respects from those expressed or
implied by these forward-looking statements. You should not place
undue reliance on these forward-looking statements.
Summary of Risk Factors
The below summary of risk factors provides an overview of many of
the risks we are exposed to in the normal course of our business
activities. As a result, the following summary of risks does not
contain all of the information that may be important to you, and
you should read the summary of risks together with the more
detailed discussion of risks set forth in Part II, Item 1A under
the heading “Risk Factors,” and elsewhere in this Quarterly Report.
Additional risks, beyond those summarized below or discussed
elsewhere in this Quarterly Report, may apply to our activities or
operations as currently conducted or as we may conduct them in the
future or in the markets in which we operate or may in the future
operate. Consistent with the foregoing, we are exposed to a variety
of risks, including risks associated with the
following:
•Our
limited history of selling battery systems, electrification and
charging solutions, fleet and energy management systems, electric
transit buses, and related technologies makes it difficult to
evaluate our business and prospects and may increase the risks
associated with your investment.
•Our
most recent business expansion with Proterra Powered and Proterra
Energy may not be as successful as anticipated, may not attract the
customers and business partners we expect, and the assumptions
underlying the growth prospects of these businesses may not prove
to be accurate.
•Because
many of the markets in which we compete are new and rapidly
evolving, including possible consolidation of industry players, it
is difficult to forecast long-term end-customer adoption rates and
demand for our products, and our ability to meet demand for our
products.
•We
face intense and increasing competition in the transit bus market
and may not be able to compete successfully against current and
future competitors, which could adversely affect our business,
revenue growth, and market share.
•We
have been and may continue to be impacted by macroeconomic
conditions resulting from the global COVID-19 pandemic and
geopolitical events, including supply chain disruptions, rising
inflation and uncertain credit and financial markets.
•Our
transit business is significantly dependent on government funding
for public transit, and the unavailability, reduction, or
elimination of government economic incentives would have an adverse
effect on our business, prospects, financial condition, and
operating results.
•The
growth of our transit business is dependent upon the willingness of
corporate and other public transportation providers to adopt and
fund the purchase of electric vehicles for mass
transit.
•Our
dependence on a limited number of suppliers introduces significant
risk that could have adverse effects on our financial condition and
operating results.
•We
have a long sales, production, and technology development cycle for
new public transit customers, which may create fluctuations in
whether and when revenue is recognized and may have an adverse
effect on our business.
•We
have a history of net losses, have experienced rapid growth and
anticipate increasing our operating expenses in the future, and may
not achieve or sustain positive gross margin or profitability in
the future.
•We
could incur material losses and costs from product warranty claims,
recalls, or remediation of electric transit buses for real or
perceived deficiencies or from customer satisfaction
campaigns.
•Further
increases in costs, disruption of supply, or shortage of materials,
particularly lithium-ion cells, could continue to harm our
business.
•Our
annual revenue has in the past depended, and will likely continue
to depend, on a small number of customers that fluctuate from year
to year, and failure to add new customers or expand sales to our
existing customers could have an adverse effect on our operating
results for a particular period.
•Our
industry and its technology are rapidly evolving and may be subject
to unforeseen changes. Developments in alternative technologies and
powertrains or improvements in the internal combustion engine may
adversely affect the demand for our electric transit buses and our
electric battery solutions for commercial vehicles.
•We
may not be able to develop, maintain and grow strategic
relationships in the Proterra Powered or Proterra Energy business,
identify new strategic relationship opportunities, or form
strategic relationships, in the future.
•We
are competing for the business of both small and large transit
agencies, which place different demands on our business, and if we
do not build an organization that can serve both types of transit
customers by scaling our internal resources to meet varying
customer needs, our business, prospects, financial condition and
operating results may be harmed.
•Our
business is subject to substantial regulations and compliance
programs, which are evolving, and unfavorable changes or failure by
us to comply with these regulations and compliance programs could
have an adverse effect on our business.
•The
use of lithium-ion cells may become disfavored as a result of the
availability, or perceived superiority of, other types of batteries
or yet undeveloped or unknown technologies.
•Our
business could be adversely affected from an accident or safety
incident involving our battery systems, electrification and
charging solutions, fleet and energy management systems, electric
transit buses or defaults in the materials or workmanship of our
composite bus bodies or other components.
•We
may become subject to product liability claims, which could harm
our financial condition and liquidity if we are not able to
successfully defend or insure against such claims.
•Changes
to U.S. trade policies, including new tariffs or the renegotiation
or termination of existing trade agreements or treaties, may
adversely affect our financial performance.
•We
are subject to various environmental and safety laws and
regulations that could impose substantial costs upon us and
negatively impact our ability to operate our manufacturing
facilities if we fail in our efforts to abide by these laws and
regulations.
•We
may experience outages and disruptions of our services if we fail
to maintain adequate security and supporting infrastructure as we
scale our information technology systems.
•We
likely will require additional capital to support business growth,
and such capital might not be available on terms acceptable to us,
if at all.
•Failure
to protect our intellectual property could adversely affect our
business.
•We
may be subject to intellectual property rights claims by third
parties, which could be costly to defend, could require us to pay
significant damages and could limit our ability to use certain
technologies.
•Our
loan and security agreements contain covenants that may restrict
our business and financing activities.
•If
we fail to develop and maintain an effective system of disclosure
controls and internal control over financial reporting, our ability
to produce timely and accurate financial statements or comply with
applicable law and regulations could be impaired.
•Regulations
related to “conflict minerals” may force us to incur additional
expenses, may make our supply chain more complex and may result in
damage to our reputation with customers.
•Our
management team has limited experience managing a public
company.
Part I. Financial Information
Item 1. Financial Statements
PROTERRA INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
(Unaudited) |
|
(Note 1) |
|
Assets: |
|
|
|
|
Cash and cash equivalents |
$ |
59,610 |
|
|
$ |
170,039 |
|
|
Accounts receivable, net |
102,361 |
|
|
81,644 |
|
|
Short-term investments |
348,938 |
|
|
490,967 |
|
|
Inventory |
164,834 |
|
|
114,556 |
|
|
Prepaid expenses and other current assets |
28,731 |
|
|
15,300 |
|
|
Deferred cost of goods sold |
3,578 |
|
|
1,816 |
|
|
Restricted cash, current |
12,105 |
|
|
12,105 |
|
|
Total current assets |
720,157 |
|
|
886,427 |
|
|
Property, plant, and equipment, net |
93,656 |
|
|
62,246 |
|
|
Operating lease right-of-use assets
|
24,169 |
|
|
24,282 |
|
|
Restricted cash, non-current |
460 |
|
|
460 |
|
|
Long-term inventory prepayment |
10,000 |
|
|
— |
|
|
Other assets |
36,453 |
|
|
8,472 |
|
|
Total assets |
$ |
884,895 |
|
|
$ |
981,887 |
|
|
Liabilities and Stockholders’ Equity: |
|
|
|
|
Accounts payable |
$ |
69,938 |
|
|
$ |
53,404 |
|
|
Accrued liabilities |
25,919 |
|
|
20,634 |
|
|
Deferred revenue, current |
11,815 |
|
|
13,821 |
|
|
Operating lease liabilities, current |
6,354 |
|
|
4,084 |
|
|
|
|
|
|
Total current liabilities |
114,026 |
|
|
91,943 |
|
|
Debt, non-current |
116,995 |
|
|
110,999 |
|
|
Deferred revenue, non-current |
29,692 |
|
|
22,585 |
|
|
Operating lease liabilities, non-current |
18,992 |
|
|
20,963 |
|
|
Other long-term liabilities |
16,695 |
|
|
15,245 |
|
|
Total liabilities |
296,400 |
|
|
261,735 |
|
|
Commitments and contingencies (Note 8) |
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Common stock, $0.0001 par value; 500,000 shares authorized and
225,532 shares issued and outstanding as of September 30, 2022
(unaudited); 500,000 shares authorized and 221,960 shares issued
and outstanding as of December 31, 2021
|
22 |
|
|
22 |
|
|
Preferred stock, $0.0001 par value; 10,000 shares authorized and
zero shares issued and outstanding as of September 30, 2022
(unaudited); 10,000 shares authorized, zero shares issued and
outstanding as of December 31, 2021
|
— |
|
|
— |
|
|
Additional paid-in capital
|
1,605,727 |
|
|
1,578,943 |
|
|
Accumulated deficit
|
(1,015,185) |
|
|
(858,225) |
|
|
Accumulated other comprehensive loss |
(2,069) |
|
|
(588) |
|
|
Total stockholders’ equity
|
588,495 |
|
|
720,152 |
|
|
Total liabilities and stockholders’ equity
|
$ |
884,895 |
|
|
$ |
981,887 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Product revenue |
$ |
89,769 |
|
|
$ |
59,907 |
|
|
$ |
214,196 |
|
|
$ |
167,401 |
|
|
Parts and other service revenue |
6,454 |
|
|
2,034 |
|
|
15,172 |
|
|
7,048 |
|
|
Total revenue |
96,223 |
|
|
61,941 |
|
|
229,368 |
|
|
174,449 |
|
|
Product cost of goods sold |
91,408 |
|
|
57,034 |
|
|
217,743 |
|
|
162,513 |
|
|
Parts and other service cost of goods sold |
6,091 |
|
|
2,244 |
|
|
15,349 |
|
|
7,089 |
|
|
Total cost of goods sold |
97,499 |
|
|
59,278 |
|
|
233,092 |
|
|
169,602 |
|
|
Gross profit (loss) |
(1,276) |
|
|
2,663 |
|
|
(3,724) |
|
|
4,847 |
|
|
Research and development |
18,165 |
|
|
11,296 |
|
|
44,871 |
|
|
31,311 |
|
|
Selling, general and administrative |
38,554 |
|
|
21,123 |
|
|
98,646 |
|
|
60,327 |
|
|
Total operating expenses |
56,719 |
|
|
32,419 |
|
|
143,517 |
|
|
91,638 |
|
|
Loss from operations |
(57,995) |
|
|
(29,756) |
|
|
(147,241) |
|
|
(86,791) |
|
|
Interest expense, net |
7,361 |
|
|
6,362 |
|
|
21,191 |
|
|
44,288 |
|
|
Gain on debt extinguishment |
— |
|
|
— |
|
|
(10,201) |
|
|
— |
|
|
(Gain) loss on valuation of derivative and warrant
liabilities |
— |
|
|
(73,197) |
|
|
— |
|
|
72,913 |
|
|
Other expense (income), net |
(295) |
|
|
758 |
|
|
(1,271) |
|
|
876 |
|
|
Income (loss) before income taxes |
(65,061) |
|
|
36,321 |
|
|
(156,960) |
|
|
(204,868) |
|
|
Provision for income taxes |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net income (loss) |
$ |
(65,061) |
|
|
$ |
36,321 |
|
|
$ |
(156,960) |
|
|
$ |
(204,868) |
|
|
Net income (loss) per share of common stock: |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.29) |
|
|
$ |
0.17 |
|
|
$ |
(0.70) |
|
|
$ |
(2.30) |
|
|
Diluted |
$ |
(0.45) |
|
|
$ |
(0.42) |
|
|
$ |
(0.79) |
|
|
$ |
(2.30) |
|
|
Weighted average shares used in per share computation: |
|
|
|
|
|
|
|
|
Basic |
225,291 |
|
|
212,071 |
|
|
223,782 |
|
|
89,233 |
|
|
Diluted |
250,704 |
|
|
236,965 |
|
|
248,637 |
|
|
89,233 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income (loss) |
$ |
(65,061) |
|
|
$ |
36,321 |
|
|
$ |
(156,960) |
|
|
$ |
(204,868) |
|
|
Other comprehensive income (loss), net of taxes: |
|
|
|
|
|
|
|
|
Available-for-sales securities: |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities |
625 |
|
|
— |
|
|
(1,481) |
|
|
— |
|
|
Other comprehensive income (loss), net of taxes |
625 |
|
|
— |
|
|
(1,481) |
|
|
— |
|
|
Total comprehensive income (loss), net of taxes |
$ |
(64,436) |
|
|
$ |
36,321 |
|
|
$ |
(158,441) |
|
|
$ |
(204,868) |
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock |
|
Common Stock |
|
Additional Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total |
|
Three Months Ended September 30, 2022 |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|
|
|
|
Balance, June 30, 2022 |
|
— |
|
|
$ |
— |
|
|
224,979 |
|
|
$ |
22 |
|
|
$ |
1,599,246 |
|
|
$ |
(950,124) |
|
|
$ |
(2,694) |
|
|
$ |
646,450 |
|
|
Issuance of common stock upon exercise of options |
|
— |
|
|
— |
|
|
553 |
|
|
— |
|
|
1,125 |
|
|
— |
|
|
— |
|
|
1,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,356 |
|
|
— |
|
|
— |
|
|
5,356 |
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(65,061) |
|
|
— |
|
|
(65,061) |
|
|
Other comprehensive gain, net of taxes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
625 |
|
|
625 |
|
|
Balance, September 30, 2022
|
|
— |
|
|
$ |
— |
|
|
225,532 |
|
|
$ |
22 |
|
|
$ |
1,605,727 |
|
|
$ |
(1,015,185) |
|
|
$ |
(2,069) |
|
|
$ |
588,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock |
|
Common Stock |
|
Additional Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total |
|
Three Months Ended September 30, 2021 |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|
|
|
|
Balance, June 30, 2021 |
|
— |
|
|
$ |
— |
|
|
207,621 |
|
|
$ |
21 |
|
|
$ |
1,515,331 |
|
|
$ |
(849,408) |
|
|
$ |
— |
|
|
$ |
665,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise of options |
|
— |
|
|
— |
|
|
470 |
|
|
— |
|
|
1,666 |
|
|
— |
|
|
— |
|
|
1,666 |
|
|
Issuance of Earnout Shares, net of repurchase |
|
— |
|
|
— |
|
|
4,736 |
|
|
— |
|
|
(634) |
|
|
— |
|
|
— |
|
|
(634) |
|
|
Issuance of common stock upon the reverse recapitalization, net of
issuance costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(112) |
|
|
— |
|
|
— |
|
|
(112) |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,178 |
|
|
— |
|
|
— |
|
|
3,178 |
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
36,321 |
|
|
— |
|
|
36,321 |
|
|
Balance, September 30, 2021
|
|
— |
|
|
$ |
— |
|
|
212,827 |
|
|
$ |
21 |
|
|
$ |
1,519,429 |
|
|
$ |
(813,087) |
|
|
$ |
— |
|
|
$ |
706,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock |
|
Common Stock |
|
Additional Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total |
|
Nine Months Ended September 30, 2022 |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|
|
|
|
Balance, December 31, 2021 (Note 1)
|
|
— |
|
|
$ |
— |
|
|
221,960 |
|
|
$ |
22 |
|
|
$ |
1,578,943 |
|
|
$ |
(858,225) |
|
|
$ |
(588) |
|
|
$ |
720,152 |
|
|
Issuance of common stock upon exercise of options |
|
— |
|
|
— |
|
|
3,247 |
|
|
— |
|
|
8,969 |
|
|
— |
|
|
— |
|
|
8,969 |
|
|
Stock issuance for employee stock purchase plan |
|
— |
|
|
— |
|
|
325 |
|
|
— |
|
|
1,502 |
|
|
— |
|
|
— |
|
|
1,502 |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,313 |
|
|
— |
|
|
— |
|
|
16,313 |
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(156,960) |
|
|
— |
|
|
(156,960) |
|
|
Other comprehensive loss, net of taxes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,481) |
|
|
(1,481) |
|
|
Balance, September 30, 2022
|
|
— |
|
|
$ |
— |
|
|
225,532 |
|
|
$ |
22 |
|
|
$ |
1,605,727 |
|
|
$ |
(1,015,185) |
|
|
$ |
(2,069) |
|
|
$ |
588,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock |
|
Common Stock |
|
Additional Paid-in Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Loss |
|
Total |
|
Nine Months Ended September 30, 2021 |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|
|
|
|
Balance, December 31, 2020 (Note 1) |
|
115,136 |
|
|
$ |
13 |
|
|
5,678 |
|
|
$ |
1 |
|
|
$ |
682,671 |
|
|
$ |
(608,219) |
|
|
$ |
— |
|
|
$ |
74,466 |
|
|
Conversion of convertible preferred stock into common stock in
connection with the reverse recapitalization |
|
(115,136) |
|
|
(13) |
|
|
115,576 |
|
|
11 |
|
|
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
Conversion of Convertible Notes into common stock |
|
— |
|
|
— |
|
|
7,424 |
|
|
1 |
|
|
48,780 |
|
|
— |
|
|
— |
|
|
48,781 |
|
|
Issuance of common stock upon the reverse recapitalization, net of
issuance costs |
|
— |
|
|
— |
|
|
76,172 |
|
|
8 |
|
|
502,307 |
|
|
— |
|
|
— |
|
|
502,315 |
|
|
Reclassification of derivative liability upon the reverse
recapitalization |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
182,554 |
|
|
— |
|
|
— |
|
|
182,554 |
|
|
Reclassification of Legacy Proterra warrant liability upon the
reverse recapitalization |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
87,016 |
|
|
— |
|
|
— |
|
|
87,016 |
|
|
Issuance of stock upon exercise of options and warrants |
|
— |
|
|
— |
|
|
3,241 |
|
|
— |
|
|
5,468 |
|
|
— |
|
|
— |
|
|
5,468 |
|
|
Issuance of Earnout Shares, net of repurchase |
|
— |
|
|
— |
|
|
4,736 |
|
|
— |
|
|
(634) |
|
|
— |
|
|
— |
|
|
(634) |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,265 |
|
|
— |
|
|
— |
|
|
11,265 |
|
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(204,868) |
|
|
— |
|
|
(204,868) |
|
|
Balance, September 30, 2021
|
|
— |
|
|
$ |
— |
|
|
212,827 |
|
|
$ |
21 |
|
|
$ |
1,519,429 |
|
|
$ |
(813,087) |
|
|
$ |
— |
|
|
$ |
706,363 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PROTERRA INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
Cash flows from operating activities: |
|
|
|
|
Net loss |
$ |
(156,960) |
|
|
$ |
(204,868) |
|
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
Depreciation and amortization |
9,583 |
|
|
11,675 |
|
|
Loss on disposal of fixed assets
|
169 |
|
|
411 |
|
|
Stock-based compensation |
16,313 |
|
|
11,265 |
|
|
Amortization of debt discount and issuance costs |
10,497 |
|
|
31,519 |
|
|
Accretion of debt end of term charge and PIK interest |
5,559 |
|
|
6,375 |
|
|
Gain on debt extinguishment |
(10,007) |
|
|
— |
|
|
Loss on valuation of derivative and warrant liabilities |
— |
|
|
72,913 |
|
|
Others |
(857) |
|
|
991 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
(20,717) |
|
|
(8,223) |
|
|
Inventory |
(49,762) |
|
|
(9,622) |
|
|
Prepaid expenses and other current assets |
(13,508) |
|
|
(5,231) |
|
|
Deferred cost of goods sold |
(1,761) |
|
|
175 |
|
|
Operating lease right-of-use assets and liabilities |
412 |
|
|
(84) |
|
|
Other assets |
(13,042) |
|
|
(1,785) |
|
|
Accounts payable and accrued liabilities |
19,922 |
|
|
21,977 |
|
|
Deferred revenue, current and non-current |
5,100 |
|
|
(673) |
|
|
Other non-current liabilities |
1,473 |
|
|
934 |
|
|
Net cash used in operating activities |
(197,586) |
|
|
(72,251) |
|
|
Cash flows from investing activities: |
|
|
|
|
Purchase of investments |
(395,596) |
|
|
(472,953) |
|
|
Proceeds from maturities of investments |
512,000 |
|
|
94,000 |
|
|
Purchase of property and equipment |
(41,833) |
|
|
(12,912) |
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
74,571 |
|
|
(391,865) |
|
|
Cash flows from financing activities: |
|
|
|
|
Merger and PIPE financing |
— |
|
|
644,809 |
|
|
Payment of tax withholding obligations on earnout
Shares |
— |
|
|
(634) |
|
|
|
|
|
|
Repayment of debt |
— |
|
|
(17,083) |
|
|
|
|
|
|
Proceeds from (repayment of) government grants |
(700) |
|
|
1,323 |
|
|
Proceeds from exercise of stock options and warrants |
8,969 |
|
|
5,468 |
|
|
Proceeds from employee stock purchase plan |
1,502 |
|
|
— |
|
|
Other financing activities |
2,815 |
|
|
(362) |
|
|
Net cash provided by financing activities |
12,586 |
|
|
633,521 |
|
|
Net increase (decrease) in cash and cash equivalents, and
restricted cash |
(110,429) |
|
|
169,405 |
|
|
Cash and cash equivalents, and restricted cash at the beginning of
period |
182,604 |
|
|
123,697 |
|
|
Cash and cash equivalents, and restricted cash at the end of
period |
$ |
72,175 |
|
|
$ |
293,102 |
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
Cash paid for interest |
$ |
6,289 |
|
|
$ |
4,912 |
|
|
Cash paid for income taxes |
— |
|
|
— |
|
|
Non-cash investing and financing activity: |
|
|
|
|
|
|
|
|
Assets acquired through accounts payable and accrued
liabilities |
$ |
4,798 |
|
|
$ |
1,532 |
|
|
|
|
|
|
Non-cash transfer of assets to inventory |
515 |
|
|
743 |
|
|
Reclassification of Convertible Notes warrants liability upon
exercise |
— |
|
|
17,696 |
|
|
Conversion of Convertible Notes into common stock |
— |
|
|
48,607 |
|
|
Reclassification of remaining Convertible Notes warrants liability
upon the reverse recapitalization |
— |
|
|
69,320 |
|
|
Reclassification of derivative liability upon the reverse
recapitalization |
— |
|
|
182,554 |
|
|
Conversion of convertible preferred stock into common
stock |
— |
|
|
627,315 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Summary of Significant Accounting
Policies
Organization and Description of Business
Proterra Inc (“Proterra”), formerly known as ArcLight Clean
Transition Corp. (“ArcLight”), is a leading developer and producer
of electric vehicle technology for commercial applications.
Proterra designs, develops, manufactures, and sells electric
transit buses as an original equipment manufacturer for North
American public transit agencies, airports, universities, and other
commercial transit fleets. It also designs, develops, manufactures,
sells, and integrates proprietary battery systems and
electrification solutions for global commercial vehicle
manufacturers. Additionally, Proterra provides fleet-scale,
high-power charging solutions for its customers.
Legacy Proterra (as defined below) was originally formed in June
2004 as a Colorado limited liability company and converted to a
Delaware corporation in February 2010. Proterra operates from its
headquarters and battery production facility in Burlingame,
California. Proterra also has manufacturing and product development
facilities in Greenville and Greer, South Carolina and City of
Industry, California.
On June 11, 2021, ArcLight filed a notice of deregistration with
the Cayman Islands Registrar of Companies, and filed a certificate
of incorporation and a certificate of corporate domestication with
the Secretary of State of the State of Delaware, under which
ArcLight was domesticated and continued as a Delaware corporation.
On June 14, 2021 (the “Closing Date”), ArcLight consummated a
merger with Phoenix Merger Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of ArcLight (“Phoenix Merger Sub”), and
Proterra Inc, a Delaware corporation (“Legacy Proterra”), with
Legacy Proterra surviving as the surviving company and as a
wholly-owned subsidiary of ArcLight (the “Merger” and, collectively
with the other transactions described in the Agreement and Plan of
Merger (the “Merger Agreement”), the “Business Combination”). In
connection with the Business Combination, Legacy Proterra changed
its name to “Proterra Operating Company, Inc.” and ArcLight changed
its name to “Proterra Inc”.
The Merger was accounted for as a reverse merger and a
recapitalization with Legacy Proterra being the accounting
acquirer. Accordingly, all historical financial information
presented in the unaudited condensed consolidated financial
statements of Proterra represents the accounts of Legacy Proterra
and its wholly owned subsidiaries as if Legacy Proterra is the
predecessor to Proterra. The shares and net loss per common share,
prior to the Merger, have been retroactively restated as shares
reflecting the exchange ratio established in the Merger (0.8925
shares of Legacy Proterra common stock for 1 share of Proterra
common stock) (the “Exchange Ratio”). Unless otherwise specified or
unless the context otherwise requires, references in these notes to
the “Company,” “we,” “us,” or “our” refer to Legacy Proterra prior
to the Business Combination and to Proterra following the Business
Combination.
Prior to the closing of the Business Combination (the “Closing”),
ArcLight’s Class A ordinary shares and public warrants were listed
on the Nasdaq Capital Market under the symbols “ACTC” and “ACTCW,”
respectively. Proterra’s common stock is currently listed on the
Nasdaq Global Select Market under the symbol “PTRA”. See Note 3
“Reverse Recapitalization” for further details of the Merger. The
Company’s public warrants were previously listed on the Nasdaq
Global Select Market under the symbol “PTRAW.” On October 29, 2021,
the Company redeemed its remaining outstanding public warrants at a
redemption price of $0.10 per public warrant.
The Company has incurred net losses and negative cash flows from
operations since inception. As of September 30, 2022, the
Company has an accumulated deficit of $1.0 billion. The Company has
$408.5 million of cash and cash equivalents and short-term
investments as of September 30, 2022. The Company has funded
operations primarily through a combination of equity and debt
financing. Management believes that the Company’s currently
available resources will be sufficient to fund its cash
requirements for at least the next twelve months. However, there
can be no assurance that future financings will be successfully
completed or completed on terms acceptable to the Company. Global
economic conditions have been worsening, with disruptions to, and
volatility in, the credit and financial markets in the U.S. and
worldwide. If these conditions persist, the Company’s ability to
access additional capital or our liquidity could be impacted. If
the Company is unable to raise capital when needed or on attractive
terms, the Company would be forced to delay, reduce or eliminate
our research and development programs and/or other efforts. These
financial statements do not include any adjustments that may result
from the outcome of this uncertainty.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Basis of Presentation
The unaudited condensed consolidated financial statements and
accompanying notes have been prepared in accordance with U.S.
generally accepted accounting principles (“U.S. GAAP”) and the
rules and regulations of the U.S. Securities and Exchange
Commission (the “SEC”).
The Company’s condensed consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
intercompany transactions and balances have been eliminated upon
consolidation. Certain information and footnote disclosures
normally included in consolidated financial statements prepared in
accordance with U.S. GAAP have been condensed or omitted pursuant
to such rules and regulations. Accordingly, these condensed
consolidated financial statements should be read in conjunction
with the audited financial statements for the year ended December
31, 2021 and the related notes incorporated by referenced in the
Company’s Annual Report (the “Annual Report”) on Form 10-K, filed
with SEC on March 14, 2022, which provides a more complete
discussion of the Company’s accounting policies and certain other
information. The information as of December 31, 2021 and 2020 was
derived from the Company’s audited financial statements. The
condensed consolidated financial statements were prepared on the
same basis as the audited financial statements and, in the opinion
of management, reflect all adjustments, which include only normal
recurring adjustments necessary for a fair presentation of the
Company’s financial position as of September 30, 2022 and the
results of operations and cash flows for the three and nine months
ended September 30, 2022 and 2021. The results of operations for
the three and nine months ended September 30, 2022 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2022.
Use of Estimates
In preparing the condensed consolidated financial statements and
related disclosures in conformity with U.S. GAAP and pursuant to
the rules and regulations of the SEC, the Company must make
estimates and judgments that affect the amounts reported in the
condensed consolidated financial statements and accompanying notes.
Actual results may differ materially from these
estimates.
Significant Accounting Policies
There have been no material changes to the Company’s significant
accounting policies described in the Annual Report.
The Company has not experienced any significant impact to estimates
or assumptions as a result of the COVID-19 pandemic. However, the
Company’s financial results have been impacted by ongoing
constraints and inefficiencies in production largely driven by
shortages of component parts and shipment delays, and workforce
absences due to illness or quarantines during the pandemic
experienced by the Company or its suppliers. The Company will
continue to monitor impacts of the COVID-19 pandemic on an ongoing
basis. While the COVID-19 pandemic has not had a material adverse
impact on the Company’s financial condition and results of
operations to date, the gravity of the impact of the COVID-19
pandemic and related macroeconomic and geopolitical conditions on
the Company’s future operational and financial performance will
depend on certain developments, including the duration of the
pandemic and spread of COVID-19 (including the variant strains of
the virus), the impact on the Company’s customers and the effect on
the Company’s suppliers, all of which are uncertain and cannot be
predicted.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Segments
The Company operates in the United States and has sales to the
European Union, Canada, United Kingdom, Australia, Japan and
Turkey. Revenue disaggregated by geography, based on the addresses
of the Company’s customers, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
United States |
$ |
82,040 |
|
|
$ |
59,482 |
|
|
$ |
195,680 |
|
|
$ |
163,972 |
|
|
Rest of World |
14,183 |
|
|
2,459 |
|
|
33,688 |
|
|
10,477 |
|
|
|
96,223 |
|
|
61,941 |
|
|
$ |
229,368 |
|
|
$ |
174,449 |
|
The Company’s chief operating decision maker is its Chief Executive
Officer, who reviews financial information presented at the entity
level. Accordingly, the Company has determined that it has a single
reportable segment.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount and do not
bear interest. The Company determines the allowance for credit
losses based on historical write-off experience, an analysis of the
aging of outstanding receivables, customer payment patterns and
expectations of changes in macroeconomic conditions that may affect
the collectability of outstanding receivables. The allowance for
credit losses was not material as of September 30, 2022 and
December 31, 2021.
Credit Risk and Concentration
The Company’s financial instruments that are potentially subject to
concentrations of credit risk consist primarily of cash, cash
equivalents, restricted cash, short-term investments, and accounts
receivable. Cash and cash equivalents and short-term investments
are maintained primarily at one financial institution as of
September 30, 2022, and deposits exceed federally insured
limits. Risks associated with cash and cash equivalents, and
short-term investments are mitigated by banking with creditworthy
financial institutions. The Company has not experienced any losses
on its deposits of cash and cash equivalents or its short-term
investments.
Cash equivalents and short-term investments consist of short-term
money market funds, corporate debt securities, and debt securities
issued by the U.S. Treasury, which are deposited with reputable
financial institutions. The Company’s cash management and
investment policy limits investment instruments to securities with
short-term credit ratings at the timing of purchase of P-2 and A-2
or better from Moody’s Investors Service and Standard & Poor’s
Financial Services, LLC, respectively, with the objective to
preserve capital and to maintain liquidity until the funds can be
used in business operations.
Accounts receivable are typically unsecured and are generally
derived from revenue earned from transit agencies, universities and
airports in North America and global commercial vehicle
manufacturers in North America, the European Union, the United
Kingdom, Australia, Japan and Turkey. The Company periodically
evaluates the collectability of its accounts receivable and
provides an allowance for potential credit losses as
necessary.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Given the large order value for customers and the relatively low
number of customers, revenue and accounts receivable have typically
been concentrated with a limited number of customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
Accounts Receivable |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
September 30, |
|
December 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Number of customers accounted for 10% or more |
2 |
|
2 |
|
2 |
|
— |
|
|
2 |
|
1 |
|
Total % for customers accounted for 10% or more |
40 |
% |
|
30 |
% |
|
27 |
% |
|
— |
% |
|
40 |
% |
|
18 |
% |
Single source suppliers provide the Company with a number of
components that are required for manufacturing of its current
products. In other instances, although there may be multiple
suppliers available, many of the components are purchased from one
single source. If these single source suppliers fail to meet the
Company’s requirements on a timely basis at competitive prices or
are unable to provide components for any reason, the Company could
suffer manufacturing delays, a possible loss of revenue, or incur
higher cost of sales, any of which could adversely impact the
Company’s operating results.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of property, plant, and
equipment and right-of-use assets for possible impairment whenever
events or circumstances indicate that the carrying amount of such
assets may not be recoverable. Recoverability of these assets is
measured by a comparison of the carrying amounts to the future
undiscounted cash flows the assets are expected to generate. If
such review indicates that the carrying amount of long-lived assets
is not recoverable, the carrying amount of such assets is reduced
to fair value.
In addition to the recoverability assessment, the Company
periodically reviews the remaining estimated useful lives of
property, plant, and equipment. If the estimated useful life
assumption for any asset is reduced, the remaining net book value
is depreciated over the revised estimated useful life.
The Company reviews long-lived assets for impairment at the lowest
level for which separate cash flows can be identified. No
impairment charge was recognized in the three and nine months ended
September 30, 2022 and 2021.
Deferred Revenue
Deferred revenue consists of billings or payments received in
advance of revenue recognition that are recognized as revenue once
the revenue recognition criteria are met. In some instances,
progress billings are issued upon meeting certain milestones stated
in the contracts. Accordingly, the deferred revenue balance does
not represent the total contract value of non-cancelable
arrangements. Invoices are typically due within 30 to 40
days.
The changes in deferred revenue consisted of the following (in
thousands):
|
|
|
|
|
|
|
Deferred revenue as of December 31, 2021
|
$ |
36,406 |
|
|
Revenue recognized from beginning balance during the nine months
ended September 30, 2022
|
(10,972) |
|
|
Deferred revenue added during the nine months ended September 30,
2022
|
16,073 |
|
|
Deferred revenue as of September 30, 2022
|
$ |
41,507 |
|
The current portion of deferred revenue represents the amount that
is expected to be recognized as revenue within one year from the
balance sheet date.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Revenue Recognition
The Company derives revenue primarily from the sale of vehicles and
charging systems, the installation of charging systems, the sale of
battery systems and powertrain components to other vehicle
manufacturers, as well as the sale of spare parts and other
services provided to customers. Product revenue consists of revenue
earned from vehicles and charging systems, battery systems and
powertrain components, installation of charging systems, and
revenue from leased vehicles, charging systems, and batteries under
operating leases. Leasing revenue recognized over time was
approximately $0.2 million and $0.5 million in the three months
ended September 30, 2022 and 2021, respectively, and $0.9 million
and $1.6 million in the nine months ended September 30, 2022 and
2021, respectively. Parts and other service revenue includes
revenue earned from spare parts, the design and development of
battery systems and powertrain systems for other vehicle
manufacturers, and extended warranties.
The Company recognizes revenue when or as it satisfies a
performance obligation by transferring control of a product or
service to a customer. Revenue from product sales is recognized
when control of the underlying performance obligations is
transferred to the customer. Revenue from sales of vehicles is
typically recognized upon delivery when the Company can objectively
demonstrate that the criteria specified in the contractual
acceptance provisions are achieved prior to delivery. In cases,
where the Company cannot objectively demonstrate that the criteria
specified in the contractual acceptance provisions have been
achieved prior to delivery, revenue is recognized upon acceptance
by the customer. Revenue from sales of charging systems is
recognized at a point in time, generally upon delivery or
commissioning when control of the underlying performance
obligations are transferred to the customer. Under certain contract
arrangements, the control of the performance obligations related to
the charging systems is transferred over time, and the associated
revenue is recognized over the installation period using an input
measure based on costs incurred to date relative to total estimated
costs to completion. Spare parts revenue is recognized upon
shipment. Extended warranty revenue is recognized over the life of
the extended warranty using the time elapsed method. Development
service contracts typically include the delivery of prototype
products to customers. The performance obligation associated with
the development of prototype products as well as battery systems
and powertrain components to other vehicle manufacturers, is
satisfied at a point in time, typically upon shipping.
Revenue derived from performance obligations satisfied over time
from charging systems and installation was $3.7 million and $0.2
million for the three months ended September 30, 2022 and 2021,
respectively, and $5.8 million and $5.3 million for the nine months
ended September 30, 2022 and 2021, respectively. Extended warranty
revenue was $0.4 million and $0.6 million for the three months
ended September 30, 2022 and 2021, respectively, and $1.5 million
and $1.3 million for the nine months ended September 30, 2022
and 2021, respectively.
As of September 30, 2022 and December 31, 2021, the
contract assets balance was $10.2 million and $1.3 million,
respectively. The contract assets are expected to be billed within
the next twelve months and are recorded in prepaid expenses and
other current assets on the Company’s balance sheets.
As of September 30, 2022, the amount of remaining performance
obligations that have not been recognized as revenue was $413.8
million, of which 85% were expected to be recognized as revenue
over the next 12 months and the remainder thereafter. This amount
excludes the value of remaining performance obligations for
contracts with an original expected length of one year or
less.
Our business is organized into two business units with three
business lines, each of which addresses a critical component of the
commercial vehicle electrification value proposition in a
complementary and self-reinforcing manner:
•Proterra
Transit
designs, develops, manufactures, and sells electric transit buses
as an original equipment manufacturer (“OEM”) for North American
public transit agencies, airports, universities, and other
commercial transit fleets.
•Proterra
Powered & Energy
includes Proterra Powered, which designs, develops, manufactures,
sells, and integrates proprietary battery systems and
electrification solutions into vehicles for global commercial
vehicle OEMs, and Proterra Energy, which provides turnkey
fleet-scale, high-power charging solutions
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
and software services, ranging from fleet and energy management
software-as-a-service, to fleet planning, hardware, infrastructure,
installation, utility engagement, and charging
optimization.
The revenue of business units are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Proterra Transit |
|
$ |
56,363 |
|
|
$ |
50,175 |
|
|
$ |
142,563 |
|
|
$ |
140,187 |
|
|
Proterra Powered & Energy |
|
39,860 |
|
|
11,766 |
|
|
86,805 |
|
|
34,262 |
|
|
Total |
|
$ |
96,223 |
|
|
$ |
61,941 |
|
|
$ |
229,368 |
|
|
$ |
174,449 |
|
Product Warranties
Warranty expense is recorded as a component of cost of goods sold.
Accrued warranty activity consisted of the following (in
thousands):
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
Warranty reserve - beginning of period |
$ |
23,274 |
|
|
Warranty costs incurred |
(6,759) |
|
|
Net changes in liability for pre-existing warranties, including
expirations |
(2,625) |
|
|
Provision for warranty |
11,153 |
|
|
Warranty reserve - end of period |
$ |
25,043 |
|
2. Adoption of New Accounting
Standards
ASU No. 2020-06,
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity.
This standard simplifies the accounting for convertible instruments
by removing certain separation models in ASC 470- 20,
Debt—Debt with Conversion and Other Options.
This standard updates the guidance on certain embedded conversion
features that are not required to be accounted for as derivatives
under Topic 815,
Derivatives and Hedging,
or that do not result in substantial premiums accounted for as
paid-in capital, such that those features are no longer required to
be separated from the host contract. The convertible debt
instruments will be accounted for as a single liability measured at
amortized cost. This will also result in the interest expense
recognized for convertible debt instruments to be typically closer
to the coupon interest rate when applying the guidance in Topic
835,
Interest.
Further, this standard made amendments to the EPS guidance in Topic
260 for convertible instruments, the most significant impact of
which is requiring the use of the if-converted method for diluted
earnings per share calculation, and no longer allowing the net
share settlement method. This standard also made revisions to Topic
815-40, which provides guidance on how an entity must determine
whether a contract qualifies for a scope exception from derivative
accounting. The amendments to Topic 815-40 change the scope of
contracts that are recognized as assets or liabilities. The Company
adopted this standard on January 1, 2022, and it had no material
impact on the condensed consolidated financial
statements.
3. Reverse Recapitalization
On June 14, 2021, Phoenix Merger Sub merged with Legacy Proterra,
with Legacy Proterra surviving as a wholly-owned subsidiary of
ArcLight. In connection with the Business Combination, Legacy
Proterra changed its name to “Proterra Operating Company, Inc.” and
ArcLight changed its name to “Proterra Inc”.
The following transactions occurred upon the Closing:
•each
share of outstanding Legacy Proterra convertible preferred stock
was converted into shares of Proterra common stock in accordance
with the applicable conversion ratio immediately prior to the
effective time, and each share of Legacy Proterra common stock
(including shares issued upon conversion of Legacy Proterra
convertible preferred stock and warrants net exercised upon
Closing) was
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
converted into shares of common stock after giving effect to the
Exchange Ratio of 0.8925 and resulting in the issuance of
123,752,882 shares of common stock;
•certain
holders of Convertible Notes (as defined in Note 6 “Debt”) with an
original aggregate principal amounts of $46.5 million elected to
convert their outstanding Convertible Notes balances including
accrued PIK interest and cash interest at the Closing resulting in
the issuance of 7.4 million shares of common stock;
•each
outstanding Legacy Proterra option was converted into an option to
purchase shares of Proterra common stock by multiplying the number
of underlying shares by the Exchange Ratio, rounded down to the
nearest whole share, resulting in such options being exercisable to
purchase for an aggregate of 22,532,619 shares of Proterra common
stock; the exercise price of each converted option was determined
by dividing the per share exercise price of the respective Legacy
Proterra options by the Exchange Ratio of 0.8925, rounded up to the
nearest whole cent;
•each
outstanding Legacy Proterra warrant to purchase Legacy Proterra
common stock and convertible preferred stock was converted into a
warrant to purchase shares of Proterra common stock by multiplying
the number of underlying shares by the Exchange Ratio, rounded down
to the nearest whole share, resulting in such warrants being
exercisable to purchase an aggregate of 3,504,523 shares of
Proterra common stock; the exercise price of each converted warrant
will be determined by dividing the per share exercise price of the
respective Legacy Proterra warrant by the Exchange Ratio of 0.8925,
rounded up to the nearest whole cent;
•each
outstanding Convertible Note that was not optionally converted in
connection with the Closing remained outstanding and became
convertible into shares of Proterra common stock in accordance with
the terms of such Convertible Notes;
•15,172
public shares were redeemed by ArcLight shareholders, and an
aggregate of $0.2 million was paid from the trust account to these
redeeming holders; and each ArcLight Class A and Class B ordinary
share was converted into the right to receive one share of
Proterra’s common stock resulting in the issuance of 34,671,900
shares of common stock;
•pursuant
to the subscription agreements between ArcLight and certain
investors (the “PIPE Investors”), the PIPE Investors purchased 41.5
million shares of Proterra common stock at a purchase price of
$10.00 per share for aggregate gross proceeds of $415.0 million
(the “PIPE Financing”);
•each
ArcLight warrant outstanding immediately prior to the consummation
was converted into a warrant exercisable into an equivalent number
of shares of Proterra common stock, resulting in such warrants
being exercisable for an aggregate of 21,424,994 shares of Proterra
common stock; and
•the
669,375 shares of Proterra common stock underlying certain
Milestone Options (as defined below) fully vested upon the
Closing.
Upon the occurrence of any of the following events during the first
five years following the Closing (“earnout period”), up to an
additional 22,809,500 shares of Proterra common stock (the “Earnout
Stock”) may be issued to former holders of Legacy Proterra
convertible preferred stock, common stock, warrants, vested options
and Convertible Notes as of immediately prior to the Closing, as
follows:
a.21.0526%
of the Earnout Stock if over any 20 trading days within any 30
trading day period, the volume-weighted average price (“VWAP”) of
the Proterra common stock is greater than or equal to $15.00 per
share or there occurs any transaction resulting in a change in
control with a valuation of the Proterra common stock that is
greater than or equal to $15.00 per share (the “First Earnout
Shares”);
b.an
additional 26.3158% of the Earnout Stock if over any 20 trading
days within any 30 trading day period, the VWAP of the Proterra
common stock is greater than or equal to $20.00 per share or there
occurs any
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
transaction resulting in a change in control with a valuation of
the Proterra common stock that is greater than or equal to $20.00
per share;
c.an
additional 26.3158% of the Earnout Stock if over any 20 trading
days within any 30 trading day period, the VWAP of the Proterra
common stock is greater than or equal to $25.00 per share or there
occurs any transaction resulting in a change in control with a
valuation of the Proterra common stock that is greater than or
equal to $25.00 per share; and
d.an
additional 26.3158% of the Earnout Stock if over any 20 trading
days within any 30 trading day period, the VWAP of the Proterra
common stock is greater than or equal to $30.00 per share or there
occurs any transaction resulting in a change in control with a
valuation of the Proterra common stock that is greater than or
equal to $30.00 per share.
Pursuant to a letter agreement with ArcLight CTC Holdings, L.P.
(the “Sponsor”), 10% of the Proterra common stock received by the
Sponsor upon consummation of the Merger in exchange for its
outstanding ArcLight Class B ordinary shares, excluding 140,000
shares owned by the ArcLight board of directors (the “ArcLight
Board”), was subject to vesting and forfeiture (the “Sponsor
Earnout Stock”). Such shares of Sponsor Earnout Stock would vest if
over any 20 trading days within any 30 trading day period during
the five-year earnout period, the VWAP of the Proterra common stock
was greater than or equal to $15.00 per share or there occurred any
transaction resulting in a change in control with a valuation of
the Proterra common stock that is greater than or equal to $15.00
per share.
In July 2021, the conditions for the issuance of the First Earnout
Shares and the vesting of the Sponsor Earnout Stock were satisfied,
resulting in an aggregate of 4,800,563 shares of common stock being
issued and the 679,750 shares of Sponsor Earnout Stock fully
vesting.
The Earnout Stock and Sponsor Earnout Stock met indexation and
other criteria under Topic 815, Derivatives and Hedging, and are
considered as equity-classified instruments.
The number of shares of Proterra common stock issued immediately
following the consummation of the Merger was (in
thousands):
|
|
|
|
|
|
|
Shares |
|
ArcLight Class A ordinary shares, outstanding prior to
Merger |
27,750 |
|
|
Less redemption of ArcLight shares |
(15) |
|
|
Sponsor |
6,257 |
|
|
Sponsor Earnout Stock |
680 |
|
Common stock of ArcLight |
34,672 |
|
PIPE Investors |
41,500 |
|
Legacy Proterra shares |
131,176 |
|
Total shares of common stock immediately after Merger |
207,348 |
Immediately after the Merger, Proterra is authorized to issue 510.0
million shares, with a par value of $0.0001 per share. As of the
Closing, the authorized shares consisted of 500.0 million shares of
common stock and 10.0 million shares of preferred stock, and there
were 207.3 million shares of common stock issued and outstanding,
and no shares of preferred stock issued and outstanding. In
addition, as of the Closing, there were 24.9 million warrants
issued and outstanding, including 13.9 million public warrants, 7.6
million private placement warrants, and 3.5 million Legacy Proterra
warrants.
As of the Closing, a total of 82.3 million shares were reserved for
future issuance upon the exercise of stock options, warrants and
the issuance of Earnout Stock, of which 10.4 million shares were
reserved for issuance under Proterra’s 2021 Equity Incentive Plan,
22.5 million shares were reserved under Legacy Proterra’s 2010
Equity Incentive Plan and 1.6 million shares reserved under
Proterra’s 2021 Employee Stock Purchase Plan.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The Merger has been accounted for as a reverse merger and a
recapitalization under U.S. GAAP with Legacy Proterra being the
accounting acquirer, based on evaluation of the following facts and
circumstances:
•Legacy
Proterra’s stockholders have a majority of the voting power of
Proterra following the Merger;
•Legacy
Proterra initially designated a majority of the board of directors
of Proterra (the “Board”);
•Legacy
Proterra’s management comprised the management of
Proterra;
•Legacy
Proterra comprised the ongoing operations of Proterra;
•Legacy
Proterra was the larger entity based on historical revenues and
business operations; and
•Proterra
assumed Legacy Proterra’s name.
Under this method of accounting, ArcLight is treated as the
“acquired” company for accounting and financial reporting purposes.
Accordingly, for accounting purposes, this merger transaction is
treated as the equivalent of Legacy Proterra issuing equity for the
net assets of ArcLight, accompanied by a recapitalization. The net
assets of ArcLight have been stated at historical cost, with no
goodwill or other intangible assets recorded.
The Company received aggregate cash proceeds of $649.3 million at
the Closing, net of $13.8 million of PIPE Financing fees, $18.5
million of other transaction costs paid at Closing, $9.7 million of
ArcLight IPO deferred underwriting fees payable, $1.3 million of
other ArcLight’s accrued expenses, and $0.1 million of ArcLight’s
related party payable. The unbilled ArcLight expenses incurred
prior to the Closing were paid from the cash proceeds received by
the Company. The transaction costs including advisory, legal and
other professional services directly related to the Merger were
recorded in the additional paid-in capital in the balance sheet to
offset against proceeds. The deferred transaction costs of
approximately $2.9 million paid by the Company prior to the
Closing were recorded to the additional paid-in capital and
classified as financing activities in the consolidated statement of
cash flow for the nine months ended September 30,
2021.
4. Fair Value of Financial
Instruments
The Company measures certain financial assets and liabilities at
fair value. Fair value is determined based on the exit price that
would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. Fair value is estimated by applying the
following hierarchy:
Level 1 –
Quoted prices in active markets for identical assets or
liabilities;
Level 2 –
Observable inputs other than quoted prices in active markets for
identical assets and liabilities, quoted prices for identical or
similar assets or liabilities in inactive markets, or other inputs
that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities;
and
Level 3 –
Inputs that are generally unobservable and typically reflect
management’s estimate of assumptions that market participants would
use in pricing the asset or liability.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Financial assets measured at fair value on a recurring basis using
the above input categories were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing Category |
|
Fair Value at |
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Assets: |
|
|
|
|
|
|
Cash equivalents and marketable securities: |
|
|
|
|
|
|
Money market funds |
Level 1 |
|
$ |
44,696 |
|
|
$ |
102,978 |
|
|
U.S. Treasury securities |
Level 1 |
|
7,962 |
|
|
49,996 |
|
|
Short-term investments: |
|
|
|
|
|
|
U.S. Treasury securities |
Level 1 |
|
348,938 |
|
|
330,053 |
|
|
Corporate debt securities |
Level 2 |
|
— |
|
|
160,914 |
|
|
Total |
|
|
$ |
401,596 |
|
|
$ |
643,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company’s short-term investments were primarily comprised of
U.S. Treasury and corporate debt securities, and classified as
available-for-sale at the time of purchase because it is intended
that these investments are available for current operations.
Investments are reported at fair value and are subject to periodic
impairment review. Unrealized gains and losses related to changes
in the fair value of these securities are recognized in accumulated
other comprehensive loss. The ultimate value realized on these
securities is subject to market price volatility until they are
sold. Realized gains or losses from short-term investments are
recorded in other expense (income), net.
As of September 30, 2022, the Company has $26.6 million of
long-term investments recorded in other assets in the condensed
consolidated balance sheets, comprised of minority ownership of
equity investments in privately held entities. In the third quarter
of 2022, the Company made a $25.0 million strategic equity
investment in an entity that the Company expects to produce lithium
iron phosphate (LFP) battery cells in the United States in the
coming years which will provide the Company with development
opportunities for battery packs with another cell chemistry to
address additional segments of the commercial vehicle market. These
investments do not have a readily determinable fair value and are
accounted for under a measurement alternative at cost, less
impairment, adjusted for observable price changes. No impairment
charges or observable price changes were recognized in the three
and nine months ended September 30, 2022 and 2021. There are no
unrealized gains or losses associated with these investments as of
September 30, 2022.
The following is a summary of cash equivalents and marketable
securities as of September 30, 2022 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost |
|
Unrealized Loss |
|
Estimated Fair Value |
|
Cash equivalents: |
|
|
|
|
|
|
|
Money market funds |
|
$ |
44,696 |
|
|
$ |
— |
|
|
$ |
44,696 |
|
|
U.S. Treasury securities |
|
7,962 |
|
|
— |
|
|
7,962 |
|
|
Short-term investments: |
|
|
|
|
|
|
|
U.S. Treasury securities |
|
351,007 |
|
|
(2,069) |
|
|
348,938 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
403,665 |
|
|
$ |
(2,069) |
|
|
$ |
401,596 |
|
As of September 30, 2022, the contractual maturities of the
short-term investments were less than one year.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following is a summary of cash equivalents and marketable
securities as of December 31, 2021 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost |
|
Unrealized Loss |
|
Estimated Fair Value |
|
Cash equivalents: |
|
|
|
|
|
|
|
Money market funds |
|
$ |
102,978 |
|
|
$ |
— |
|
|
$ |
102,978 |
|
|
U.S. Treasury securities |
|
49,996 |
|
|
— |
|
|
49,996 |
|
|
Short-term investments: |
|
|
|
|
|
|
|
U.S. Treasury securities |
|
330,618 |
|
|
(565) |
|
|
330,053 |
|
|
Corporate debt securities |
|
160,937 |
|
|
(23) |
|
|
160,914 |
|
|
Total |
|
$ |
644,529 |
|
|
$ |
(588) |
|
|
$ |
643,941 |
|
The unrealized losses as of September 30, 2022 and
December 31, 2021 were primarily related to U.S. Treasury
securities with original maturities longer than one year due to
recent changes in interest rates and are considered temporary in
nature.
The fair value of the Convertible Notes was $213.6 million as
of September 30, 2022. The carrying value of the Convertible
Notes of $117.0 million, net of $51.9 million unamortized
debt discount and issuance costs, as of September 30, 2022,
was recorded in Debt, non-current on the balance
sheets.
5. Balance Sheet Components
Cash and cash equivalents consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Cash
|
$ |
6,952 |
|
|
$ |
17,065 |
|
|
Cash equivalents
|
52,658 |
|
|
152,974 |
|
|
Total cash and cash equivalents
|
$ |
59,610 |
|
|
$ |
170,039 |
|
The following table provides a reconciliation of cash, cash
equivalents, and restricted cash reported within the balance sheets
to the total of such amounts shown on the statements of cash flows.
The restricted cash is primarily collateral for performance bonds
issued to certain customers. The collateral is provided in the form
of a cash deposit to either support the bond directly or to
collateralize a letter of credit that supports the performance
bonds.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Cash and cash equivalents
|
$ |
59,610 |
|
|
$ |
170,039 |
|
|
Restricted cash, current portion
|
12,105 |
|
|
12,105 |
|
|
Restricted cash, net of current portion
|
460 |
|
|
460 |
|
|
Total restricted cash
|
12,565 |
|
|
12,565 |
|
|
Total cash and cash equivalents, and restricted cash
|
$ |
72,175 |
|
|
$ |
182,604 |
|
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Raw materials
|
$ |
110,185 |
|
|
$ |
65,225 |
|
|
Work in progress
|
29,470 |
|
|
25,062 |
|
|
Finished goods
|
18,044 |
|
|
18,269 |
|
|
Service parts
|
7,135 |
|
|
6,000 |
|
|
Total inventories
|
$ |
164,834 |
|
|
$ |
114,556 |
|
The write-down of excess or obsolete inventories to cost of goods
sold was immaterial for the three and nine months ended September
30, 2022, and $0.6 million and $1.3 million for the three and nine
months ended September 30, 2021, respectively.
Property, plant, and equipment, net, consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Computer hardware
|
$ |
5,273 |
|
|
$ |
5,195 |
|
|
Computer software
|
9,753 |
|
|
9,561 |
|
|
Internally used vehicles and charging systems
|
14,761 |
|
|
16,459 |
|
|
Leased vehicles and batteries
|
5,142 |
|
|
6,863 |
|
|
Leasehold improvements
|
10,679 |
|
|
10,516 |
|
|
Machinery and equipment
|
28,575 |
|
|
28,302 |
|
|
Office furniture and equipment
|
1,942 |
|
|
1,861 |
|
|
Tooling
|
21,859 |
|
|
21,726 |
|
|
Finance lease right-of-use assets
|
179 |
|
|
179 |
|
|
Construction in progress
|
59,174 |
|
|
20,243 |
|
|
|
157,337 |
|
|
120,905 |
|
|
Less: Accumulated depreciation and amortization
|
(63,681) |
|
|
(58,659) |
|
|
Total
|
$ |
93,656 |
|
|
$ |
62,246 |
|
Construction in progress was comprised of various assets that are
not available for their intended use as of the balance sheet date,
and mainly related to the equipment and facility build out at the
battery manufacturing facility (Powered 1) in Greer, South
Carolina.
For the three and nine months ended September 30, 2022,
depreciation and amortization expense were $2.9 million and $9.6
million, respectively. For the three and nine months ended
September 30, 2021, depreciation and amortization expense were $3.9
million and $11.7 million, respectively.
Accrued liabilities consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Accrued payroll and related expenses
|
$ |
10,821 |
|
|
$ |
8,069 |
|
|
Accrued sales and use tax
|
1,102 |
|
|
885 |
|
|
Warranty reserve
|
8,413 |
|
|
8,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued expenses
|
5,583 |
|
|
3,564 |
|
|
Total
|
$ |
25,919 |
|
|
$ |
20,634 |
|
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Other long-term liabilities consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Warranty reserve |
$ |
16,630 |
|
|
$ |
15,158 |
|
|
Finance lease liabilities, non-current |
65 |
|
|
87 |
|
|
Total |
$ |
16,695 |
|
|
$ |
15,245 |
|
6. Debt
Debt, net of debt discount and issuance costs, consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
|
|
PPP loan
|
$ |
— |
|
|
$ |
10,000 |
|
|
Convertible Notes
|
116,995 |
|
|
100,999 |
|
|
Total debt
|
116,995 |
|
|
110,999 |
|
|
Less debt, current
|
— |
|
|
— |
|
|
Debt, non-current
|
$ |
116,995 |
|
|
$ |
110,999 |
|
Senior Credit Facility
In May 2019, the Company entered into a Loan, Guaranty and Security
Agreement for a senior secured asset-based lending facility (the
“Senior Credit Facility”) with borrowing capacity up to $75.0
million. The commitment under the Senior Credit Facility is
available to the Company on a revolving basis through the earlier
of May 2024 or 91 days prior to the stated maturity of any
subordinated debt in aggregate amount of $7.5 million or more. The
maximum availability under the Senior Credit Facility is based on
eligible accounts receivable and inventory, subject to certain
reserves, to be determined in accordance with the Senior Credit
Facility. The commitment under the Senior Credit Facility includes
a $20.0 million letter of credit sub-line as of September 30,
2022. Subject to certain conditions, the commitment may be
increased by $50.0 million upon approval by the lender, and at the
Company’s option, the commitment can be reduced to $25.0 million or
terminated upon at least 15 days’ written notice.
The Senior Credit Facility is secured by a security interest in
substantially all of the Company’s assets except for intellectual
property and other restricted property.
Borrowings under the Senior Credit Facility bear interest at per
annum rates equal to, at the Company’s option, either (i) the base
rate plus an applicable margin for base rate loan, or (ii) the
London Interbank Offered Rate (“LIBOR”) plus an applicable margin
for LIBOR loan. The base rate is calculated as the greater of
(a) the Lender prime rate, (b) the federal funds rate plus 0.5%,
and (c) one-month LIBOR plus 1.0%. The applicable margin is
calculated based on a pricing grid linked to quarterly average
excess availability (as a percentage of borrowing capacity). For
base rate loans, the applicable margin ranges from 0.0% to 1.5%,
and for LIBOR loans, it ranges from 1.5% to 3.0%. The Senior Credit
Facility contains certain customary non-financial covenants. In
addition, the Senior Credit Facility requires the Company to
maintain a fixed charge coverage ratio of at least 1.00:1.00 during
such times as a covenant trigger event shall
exist.
There was no outstanding balance for borrowings under this Senior
Credit Facility as of September 30, 2022 and December 31,
2021. There was an aggregate of $15.9 million in letters of
credit outstanding as of September 30, 2022.
Small Business Administration Loan
In May 2020, the Company received Small Business Administration
(the “SBA”) loan proceeds of $10.0 million from Town Center Bank
pursuant to the Paycheck Protection Program (“the PPP loan”) under
the “Coronavirus Aid, Relief and Economic Security (CARES) Act”.
The PPP loan was in the form of a note with an original
maturity
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
in May 2022, and was extended to May 2025 based on the SBA’s
interim final rule. The interest rate was 1.0% per
annum.
In May 2022, the SBA approved the Company’s PPP loan forgiveness
application, and the PPP loan of $10.0 million was forgiven in full
and the previously paid interest of approximately $0.2 million was
refunded. A total of $10.2 million was recorded as gain on debt
extinguishment in the Company’s consolidated statements of
operations.
Convertible Notes
In August 2020, the Company entered into a Note Purchase Agreement
for Secured Convertible Promissory Notes (the “Convertible Notes”).
The Convertible Notes had an aggregate principal amount of $200.0
million, with cash interest of 5.0% per annum payable at each
quarter end and a paid-in-kind interest of 4.5% per annum payable
by increasing the principal balance at each quarter end. The
Convertible Notes will mature in August 2025, and the Company may
not make prepayment unless approved by the required holders of the
Convertible Notes.
Each of the Convertible Notes shall rank equally without preference
or priority of any kind over one another, but senior in all rights,
privileges and preferences to all other shares of the Company’s
capital stock and all other securities of the Company that are
convertible into or exercisable for the Company’s capital stock
directly or indirectly.
Prior to the maturity date or prior to the payment or conversion of
the entire balance of the Convertible Notes, in the event of a
liquidation or sale of the Company, the Company shall pay to the
holders of Convertible Notes the greater of (i) 150% of the
principal balance of the Convertible Notes or (ii) the
consideration that the holders would have received had the holders
elected to convert the Convertible Notes into common stock
immediately prior to such liquidation event.
The Convertible Notes do not entitle the holders to any voting
rights or other rights as a stockholder of the Company, unless and
until the Convertible Notes are actually converted into shares of
the Company’s capital stock in accordance with their
terms.
The Note Purchase Agreement contains certain customary
non-financial covenants. In addition, the Note Purchase Agreement
requires the Company to maintain liquidity at quarter end of not
less than the greater of (i) $75.0 million and (ii) four times
of cash burn for the three-month period then ended.
The Convertible Notes will mature in August 2025 or will be settled
by issuing common stock, and accordingly are classified as a
non-current liability on the Company’s balance sheets.
In connection with the issuance of the Convertible Notes, the
Company issued warrants to the holders of Convertible Notes to
purchase 4.6 million shares of Company stock at an exercise
price of $0.02 per share. The warrants are freestanding financial
instruments and, prior to the Closing, were classified as a
liability due to the possibility that they could become exercisable
into Legacy Proterra convertible preferred stock. Upon the
consummation of the Merger, the stock issuable upon exercise of the
warrants is Proterra common stock, with no possibility to convert
to Legacy Proterra convertible preferred stock. As a result, the
carrying amount of the warrant liability was reclassified to
stockholders’ equity. The warrant liability of $29.0 million was
initially measured at fair value on its issuance date and recorded
as a debt discount and amortized during the term of the Convertible
Notes to interest expense using the effective-interest method. The
warrant liability was remeasured on a recurring basis at each
reporting period date, with the change in fair value reported in
the statement of operations. Upon any exercise of the warrants to
common stock, the carrying amount of the warrant liability is
reclassified to stockholders’ equity.
Prior to the Closing, the embedded features of the Convertible
Notes were composed of conversion options that had the economic
characteristics of a contingent early redemption feature settled in
a variable number of shares of Company stock. These conversion
options were bifurcated and accounted for separately from the host
debt instrument. The derivative liability of $68.5 million was
initially measured at fair value on the issuance date of the
Convertible Notes and recorded as a debt discount and was amortized
during the term of the Convertible
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Notes to interest expense using the effective-interest method. The
derivative liability was remeasured on a recurring basis at each
reporting period date, with the change in fair value reported in
the statement of operations. Upon the consummation of the Merger,
the embedded conversion features associated with the Convertible
Notes no longer qualify for derivative accounting since the
conversion price became fixed. The carrying amount of the embedded
derivative, the fair value as of the Closing Date, was reclassified
to stockholders’ equity in accordance with Topic 815, Derivatives
and Hedging.
Issuance costs of $5.1 million were also recorded as debt discount
and are amortized during the term of the Convertible Notes to
interest expense using the effective interest method.
On June 14, 2021, certain Convertible Note holders with an original
aggregate principal amount of $46.5 million elected to convert
their Convertible Notes at the Closing. An aggregate of
$48.8 million principal and interest was reclassified to
additional paid-in capital, and $21.0 million of remaining
related debt issuance costs were expensed to interest
expense.
The outstanding Convertible Notes including accrued interest will
be automatically converted to common stock at $6.5712 per share
pursuant to the mandatory conversion provisions, if and when the
VWAP exceeds $9.86 over 20 consecutive days subsequent to January
13, 2022.
The amortization expense of debt discount and issuance costs were
$3.6 million and $10.4 million for the three and nine months ended
September 30, 2022, respectively. The amortization expense of debt
discount and issuance costs were $3.2 million and $31.5 million for
the three and nine months ended September 30, 2021,
respectively.
The Convertible Notes, net of debt discount and issuance costs,
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Principal
|
$ |
153,500 |
|
|
$ |
153,500 |
|
|
PIK interest
|
15,385 |
|
|
9,826 |
|
|
Total principal
|
168,885 |
|
|
163,326 |
|
|
Less debt discount and issuance costs
|
(51,890) |
|
|
(62,327) |
|
|
Total Convertible Notes
|
$ |
116,995 |
|
|
$ |
100,999 |
|
As of September 30, 2022, the contractual future principal
repayments of the total debt were as follows (in
thousands):
|
|
|
|
|
|
|
2022
|
$ |
— |
|
|
|
|
2025
(1)
|
168,885 |
|
|
Total debt
|
$ |
168,885 |
|
__________________
(1)Including
PIK interest added to principal balance through September 30,
2022.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
7. Leases
As a Lessor
The net investment in leases were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Net investment in leases, current |
$ |
658 |
|
|
$ |
411 |
|
|
Net investment in leases, non-current |
8,722 |
|
|
5,179 |
|
|
Total net investment in leases |
$ |
9,380 |
|
|
$ |
5,590 |
|
Interest income from accretion of net investment in lease was not
material in the three and nine months ended September 30, 2022 or
2021.
Future minimum payments receivable from operating and sales-type
leases as of September 30, 2022 for each of the next five
years were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
Sales-type leases |
|
Remainder of 2022 |
$ |
175 |
|
|
$ |
145 |
|
|
2023 |
384 |
|
|
749 |
|
|
2024 |
— |
|
|
1,010 |
|
|
2025 |
— |
|
|
1,528 |
|
|
2026 |
— |
|
|
1,528 |
|
|
Thereafter
|
— |
|
|
5,541 |
|
|
Total minimum lease payments
|
$ |
559 |
|
|
$ |
10,501 |
|
As a Lessee
The Company leases its office and manufacturing related facilities
in Burlingame and City of Industry, California, Greenville and
Greer, South Carolina, and Rochester Hills, Michigan under
operating lease agreements with various expiration dates from 2023
through 2033.
The Company had no material capital leases as of September 30,
2022.
Maturities of operating lease liabilities as of September 30,
2022 were as follows (in thousands):
|
|
|
|
|
|
|
Remainder of 2022 |
$ |
2,065 |
|
|
2023 |
6,893 |
|
|
2024 |
4,224 |
|
|
2025 |
3,487 |
|
|
2026 |
2,615 |
|
|
Thereafter
|
12,096 |
|
|
Total undiscounted lease payment |
31,380 |
|
|
Less: imputed interest |
(6,034) |
|
|
Total operating lease liabilities |
$ |
25,346 |
|
Operating lease expense was $1.9 million and $5.4 million
for the three and nine months ended September 30, 2022,
respectively. Operating lease expense was $1.0 million and
$3.0 million for the three and nine months ended September 30,
2021, respectively.
Short-term and variable lease expenses for the nine months ended
September 30, 2022 and 2021 were not material.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Supplemental cash flow information related to leases were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
Cash paid for amounts included in the measurement of lease
liabilities:
|
|
|
|
|
Operating cash flows for operating leases
|
$ |
(4,822) |
|
|
$ |
(3,050) |
|
Operating lease right-of-use assets and liabilities consisted of
the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Operating leases
|
|
|
|
|
Operating lease right-of-use assets
|
$ |
24,169 |
|
|
$ |
24,282 |
|
|
Operating lease liabilities, current
|
6,354 |
|
|
4,084 |
|
|
Operating lease liabilities, non-current
|
18,992 |
|
|
20,963 |
|
|
Total operating lease liabilities
|
$ |
25,346 |
|
|
$ |
25,047 |
|
The weighted average remaining lease term and discount rate of
operating leases were 6.6 years and 5.7%, respectively, as of
September 30, 2022. The weighted average remaining lease term
and discount rate of operating leases were 7.6 years and 5.8%,
respectively, as of December 31, 2021.
As of September 30, 2022, the Company had no significant
additional operating leases and finance leases that have not yet
commenced.
8. Commitments and
Contingencies
Purchase Commitments
As of September 30, 2022, the Company had outstanding
inventory and other purchase commitments of $2.3 billion. Most of
the commitments relate to the expected purchase of cylindrical
cells manufactured at a yet to be built LG Energy Solution battery
cell plant in the United States, pursuant to a long-term supply
agreement through 2028. The terms of the agreement require the
Company to make certain prepayments that vary in size and that are
made as milestones are met on the construction of the US facility.
As of September 30, 2022, the Company has made a $10.0 million
prepayment, which was recorded as the long-term inventory
prepayment on the consolidated balance sheets. We expect our next
prepayment to be made within the next six to twelve months. The
prepayments will be recouped by the Company by offsetting a
predetermined amount per unit on cells purchased from LG Energy
Solution.
Letters of Credit
As of September 30, 2022, the Company had letters of credit
outstanding totaling $16.1 million.
Legal Proceedings
The Company accrues contingent liabilities when it is probable that
future expenditures will be made and such expenditures can be
reasonably estimated. From time to time in the normal course of
business, various claims and litigation have been asserted or
commenced. Due to uncertainties inherent in litigation and other
claims, the Company can give no assurance that it will prevail in
any such matters, which could subject the Company to significant
liability or damages. Any claims or litigation could have an
adverse effect on the Company’s business, financial position,
operating results, or cash flows in or following the period that
claims or litigation are resolved.
As of September 30, 2022 and December 31, 2021, the
Company was not a party to any legal proceedings that would have a
material adverse effect on its business.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
9. Stockholders’ Equity
On June 14, 2021, the Merger was consummated and, following the
Closing, the Company is authorized to issue 510,000,000 shares of
capital stock, with a par value of $0.0001 per share. The
authorized shares consist of 500,000,000 shares of common stock and
10,000,000 shares of preferred stock. As of September 30,
2022, 225,532,429 shares of common stock were issued and
outstanding, and no shares of preferred stock were issued and
outstanding. The holders of each share of common stock are entitled
to one vote per share.
The Company has retroactively adjusted the shares of Legacy
Proterra stock issued and outstanding prior to June 14, 2021 to
give effect to the Exchange Ratio of 0.8925 established in the
Merger Agreement to determine the number of shares of Proterra
common stock into which they were converted. Immediately prior to
the Merger, Legacy Proterra was authorized to issue 271,920,636
shares of stock, with a par value of $0.0001 per share, with
156,276,750 shares designated as common stock and 115,643,886
shares of convertible preferred stock. All of the outstanding
Legacy Proterra convertible preferred stock was converted to Legacy
Proterra common stock immediately prior to the Merger. See Note 3,
Reverse Recapitalization.
As of September 30, 2022, the Company had reserved shares of
common stock for issuance as follows (in thousands):
|
|
|
|
|
|
|
2010 Equity Incentive Plan
|
17,072 |
|
|
2021 Equity Incentive Plan
|
20,455 |
|
|
2021 Employee Stock Purchase Plan
|
3,524 |
|
|
Warrants
|
1 |
|
|
Earnout Stock
|
18,009 |
|
|
Convertible notes |
26,316 |
|
|
Total
|
85,377 |
|
10. Equity Plans and Stock-based
Compensation
2010 Equity Incentive Plan
In 2010, Legacy Proterra adopted the 2010 Equity Incentive Plan
(the “2010 Plan”), which provided for the grant of stock options,
stock appreciation rights, restricted stock, and restricted stock
units. Upon Closing, the then outstanding options under the 2010
Plan were converted into options exercisable to purchase an
aggregate of 22,532,619 shares of common stock. Following the
Closing, such options continue to be subject to the terms of the
2010 Plan and applicable award agreements; however, no further
awards can be granted under the 2010 Plan. As of September 30,
2022, options to purchase 17,072,030 shares of common stock
remained outstanding under the 2010 Plan.
2021 Equity Incentive Plan
The 2021 Plan was adopted by the ArcLight Board prior to the
Closing, approved by ArcLight’s shareholders on June 11, 2021, and
became effective upon the Closing Date. The Equity Incentive Plan
allows the Company to grant awards of stock options, restricted
stock awards, stock appreciation rights, restricted stock units
(“RSUs”), performance awards, and stock bonus awards to officers,
employees, directors and consultants.
The Company initially reserved 10,000,000 shares of common stock,
plus 387,531 reserved shares not issued under the 2010 Plan on the
effective date of the 2021 Plan. The number of shares reserved for
issuance under the 2021 Plan increases automatically on January 1
of each of 2022 through 2031 by the number of shares equal to the
lesser of 4% of the total number of outstanding shares of all
classes of common stock as of the immediately preceding December
31, or a number as may be determined by the Board. In the first
quarter of 2022, the shares reserved for issuance were increased by
8,878,388 additional shares.
Stock option and RSU awards generally vest annually over a
four-year period.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
2021 Employee Stock Purchase Plan
Proterra’s 2021 Employee Stock Purchase Plan (the “ESPP”),
including the authorization of the initial share reserve
thereunder, was adopted by the ArcLight Board prior to the Closing,
approved by ArcLight’s shareholders on June 11, 2021, and became
effective upon the Closing Date.
An aggregate of 1,630,000 shares of common stock were reserved and
available for sale under the ESPP. The aggregate number of shares
reserved for sale under the ESPP increases automatically on January
1 of each of 2022 through 2031 by a number of shares equal to the
lesser of 1% of the total number of outstanding shares of common
stock as of the immediately preceding December 31 or a number of
shares as may be determined by the Board or the compensation
committee. The aggregate number of shares issued over the term of
the ESPP, subject to certain adjustments, may not exceed 16,300,000
shares. In the first quarter of 2022, the shares reserved for
issuance were increased by 2,219,597 additional
shares.
The ESPP allows eligible employees to purchase shares of common
stock at a discount through payroll deductions of up to 15% of
their eligible compensation, at not less than 85% of the fair
market value, as defined in the ESPP, subject to any plan
limitations. A participant may purchase a maximum of 2,500 shares
during each 6-month offering period and $25,000 in any one calendar
year. The offering periods generally start on the first trading day
on or after November 15th and May 15th of each year.
The first offering period started in the fourth quarter of 2021.
The Company calculated the fair value of the employees’ purchase
rights relating to the ESPP using the Black-Scholes model and
recorded approximately $1.0 million of stock-based compensation
expense for the nine months ended September 30, 2022. In the nine
months ended September 30, 2022, the Company issued 325,106 shares
of common stock under the ESPP with a purchase price of $4.62 per
share.
A summary of the Company’s stock option activity and related
information was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
Number of Stock Options Outstanding |
|
Weighted- Average Exercise Price |
|
Weighted-Average Remaining Contractual Life
(Years) |
|
Aggregate Intrinsic Value
(in thousands) |
|
Balance as of December 31, 2021
(1)
|
18,101,584 |
|
|
4.08 |
|
|
5.5 |
|
$ |
87,425 |
|
|
Granted
|
758,528 |
|
|
7.70 |
|
|
|
|
|
|
Exercised
|
(2,912,066) |
|
|
3.04 |
|
|
|
|
|
|
Cancelled/forfeited/expired
|
(1,262,183) |
|
|
6.10 |
|
|
|
|
|
|
Balance as of September 30, 2022
(1)
|
14,685,863 |
|
|
4.30 |
|
|
5.7 |
|
$ |
17,159 |
|
|
Exercisable as of September 30, 2022
(2)
|
11,757,906 |
|
|
3.80 |
|
|
5.0 |
|
$ |
16,790 |
|
__________________
(1)Excluding
Equity Awards of 2,677,500 shares and Milestone Options of 669,375
shares. See below for further details.
(2)Excluding
1,673,436 shares exercisable under the Equity Awards with weighted
average exercise price of $19.61 per share as of September 30,
2022.
In March 2020, in conjunction with Mr. Allen’s appointment as the
then President and Chief Executive Officer, the board of directors
of Legacy Proterra approved a grant to Mr. Allen of stock option
awards with respect to 4,685,624 shares, comprised of (1) 1,338,749
shares of a time-based award with an exercise price of $5.33 per
share vesting quarterly over four years, (2) 2,677,500 shares of a
time-based award consisting of four tranches with an exercise price
of $11.21, $16.81, $22.41 and $28.02 per share, respectively, and
vesting quarterly over four years (“Equity Awards”), and (3)
669,375 shares of milestone-based award with an exercise price of
$5.33 per share vesting entirely and becoming exercisable on the
first trading day following the expiration of the lockup period of
the Company’s initial public offering or the consummation of a
change in control of the Company or upon the consummation of a
merger involving a special purpose acquisition company (“Milestone
Options”).
The stock-based compensation expense for Milestone Options was
recognized at the time the performance milestone became probable of
achievement, which was at the time of Closing. Upon Closing, the
669,375 shares
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
underlying the Milestone Options fully vested, and $2.1 million
stock-based compensation expense was recognized in June
2021.
Aggregate intrinsic value represents the difference between the
estimated fair value of the underlying common stock and the
exercise price of outstanding, in-the-money stock options. The
total intrinsic value of stock options exercised was $10.0 million
for the nine months ended September 30, 2022. The total estimated
grant date fair value of stock options vested was $7.4 million for
the nine months ended September 30, 2022. As of September 30,
2022, the total unrecognized stock-based compensation expense
related to outstanding stock options was $15.2 million, which is
expected to be recognized over a weighted-average period of 2.0
years.
The fair value of stock options granted is estimated on the date of
grant using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
Expected term (in years)
|
6.3 |
|
6.2 |
|
Risk-free interest rate
|
2.0 |
% |
|
1.0 |
% |
|
Expected volatility
|
55.1 |
% |
|
53.9 |
% |
|
Expected dividend rate
|
— |
|
— |
Restricted Stock Units
A summary of the Company's RSU activity and related information is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs |
|
Weighted Average Grant Date Fair Value |
|
Aggregate Intrinsic Value
(in thousands) |
|
Balance as of December 31, 2021
|
|
1,324,960 |
|
|
$ |
10.67 |
|
|
$ |
11,699 |
|
|
Granted |
|
4,589,454 |
|
|
6.91 |
|
|
|
|
Released |
|
(335,546) |
|
|
10.25 |
|
|
|
|
Forfeited |
|
(514,260) |
|
|
8.96 |
|
|
|
|
Balance as of September 30, 2022
|
|
5,064,608 |
|
|
$ |
7.46 |
|
|
$ |
25,222 |
|
The Company started granting RSUs to employees in the third quarter
of 2021. As of September 30, 2022, the total unrecognized
stock-based compensation expense related to outstanding RSUs was
$33.0 million, which is expected to be recognized over a
weighted-average period of 3.2 years.
Stock-based Compensation Expense
Stock-based compensation expense included in operating results was
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Cost of goods sold
|
|
$ |
456 |
|
|
$ |
319 |
|
|
$ |
1,350 |
|
|
$ |
865 |
|
|
Research and development
|
|
1,409 |
|
|
567 |
|
|
3,690 |
|
|
1,625 |
|
|
Selling, general and administrative
|
|
3,491 |
|
|
2,292 |
|
|
11,273 |
|
|
8,775 |
|
|
Total stock-based compensation expense
|
|
$ |
5,356 |
|
|
$ |
3,178 |
|
|
$ |
16,313 |
|
|
$ |
11,265 |
|
11. Net Income (Loss) Per Share
Basic net loss per share is computed by dividing the net loss by
the weighted-average number of shares of common stock outstanding
during the period, less the weighted-average unvested common stock
subject to repurchase or forfeiture as they are not deemed to be
issued for accounting purposes. Diluted net loss per share is
computed by giving effect to all potential shares of common stock,
including stock options, RSUs and warrants, to the extent they are
dilutive.
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The computation of basic and diluted net income (loss) per share of
common stock attributable to common stockholders was as follows (in
thousands, except for per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss)
|
$ |
(65,061) |
|
|
$ |
36,321 |
|
|
$ |
(156,960) |
|
|
$ |
(204,868) |
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Gain on valuation of warrant liabilities |
— |
|
|
(73,197) |
|
|
— |
|
|
— |
|
|
Interest expense to be recognized upon conversion of Convertible
Notes
(1)
|
(47,891) |
|
|
(61,774) |
|
|
(40,154) |
|
|
— |
|
|
Numerator for diluted EPS - Net loss after the effect of dilutive
securities |
$ |
(112,952) |
|
|
$ |
(98,650) |
|
|
$ |
(197,114) |
|
|
$ |
(204,868) |
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average shares used in computing net loss per share of
common stock, basic
|
225,291 |
|
|
212,071 |
|
|
223,782 |
|
|
89,233 |
|
|
Dilutive impact of public and private placement
warrants |
— |
|
|
594 |
|
|
— |
|
|
— |
|
|
Convertible Notes
(1)
|
25,413 |
|
|
24,300 |
|
|
24,855 |
|
|
— |
|
|
Diluted weighted average shares |
250,704 |
|
|
236,965 |
|
|
248,637 |
|
|
89,233 |
|
|
Net income (loss) per share of common stock:
|
|
|
|
|
|
|
|
|
Basic
|
$ |
(0.29) |
|
|
$ |
0.17 |
|
|
$ |
(0.70) |
|
|
$ |
(2.30) |
|
|
Diluted |
$ |
(0.45) |
|
|
$ |
(0.42) |
|
|
$ |
(0.79) |
|
|
$ |
(2.30) |
|
__________________
(1)Adjustment
is under the “if-converted” method. Adjustment for the three months
ended September 30, 2022 includes write-off of $55.5 million
unamortized debt discount of the Convertible Notes as of
September 30, 2022, offset by the $7.6 million interest
expense recorded in net loss of three months ended September 30,
2022. Adjustment for the nine months ended September 30, 2022
includes write-off of $62.3 million unamortized debt discount
of the Convertible Notes as of December 31, 2021, offset by
the $22.2 million interest expense recorded in net loss of
nine months ended September 30, 2022.
As a result of the Merger, the Company has retroactively adjusted
the weighted-average number of shares of common stock outstanding
prior to the Closing Date by multiplying them by the Exchange Ratio
of 0.8925 used to determine the number of shares of common stock
into which they converted.
Prior to the Closing Date, the Company applied the two-class method
to calculate its basic and diluted net loss per share of common
stock, as the convertible preferred stock were participating
securities. The two-class method is an earnings allocation formula
that treats a participating security as having rights to earnings
that otherwise would have been available to common stockholders.
However, the two-class method did not impact the net loss per share
of common stock as the Company was in a loss position and holders
of convertible preferred stock did not participate in losses.
Following the Closing Date, the Company applies the treasury stock
method when calculating the diluted net income (loss) per share of
common stock and “if-converted” method for Convertible Notes when
applicable.
The outstanding Convertible Notes including accrued interest will
be automatically converted to common stock at $6.5712 per share
pursuant to the mandatory conversion provisions, if and when the
VWAP exceeds $9.86 over 20 consecutive days subsequent to January
13, 2022.
Since the Company was in a loss position after the effect of
dilutive securities, no adjustment is required to the
weighted-average shares used in computing the diluted net loss per
share as the inclusion of the remaining
PROTERRA INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
potential common stock shares outstanding would have been
anti-dilutive. The potentially dilutive securities were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
|
|
|
|
|
|
Stock options and RSUs to purchase common stock |
23,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants to purchase common stock |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,098 |
|
|
|
|
|
|
|
12. 401(k) Plan
The Company sponsors a 401(k) defined contribution plan covering
all eligible employees and provides a matching contribution for the
first 4% of their salaries. The matching contribution costs
incurred were $0.9 million and $2.4 million in the three and nine
months ended September 30, 2022, respectively. The matching
contribution costs incurred were $0.6 million and $1.8 million in
the three and nine months ended September 30, 2021,
respectively.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
You should read the following discussion and analysis of our
financial condition and results of operations together with our
condensed consolidated financial statements and related notes
appearing elsewhere in this Quarterly Report and our audited
financial statements for the year ended December 31, 2021 and the
related notes incorporated by referenced in our Annual Report (the
“Annual Report”) on Form 10-K, filed with SEC on March 14, 2022.
This discussion contains forward-looking statements and involves
numerous risks and uncertainties. As a result of many factors,
including those factors set forth in Part II, Item 1A titled “Risk
Factors,”
our actual results could differ materially from the results
described in or implied by the forward-looking statements contained
in the following discussion and analysis. You should carefully read
Part II, Item 1A titled “Risk Factors” to gain an understanding of
the important factors that could cause actual results to differ
materially from our forward-looking statements.
Overview
We are a leading developer and producer of commercial electric
vehicle technology with an integrated business model focused on
providing end-to-end solutions that enable commercial vehicle
electrification.
Driven by factors including emissions targets and regulations, and
lower operating costs, commercial and industrial fleets are
expected to adopt electric vehicles at increasingly higher rates
over the next two decades. More than 200,000 new electric buses,
medium-duty trucks, and heavy-duty trucks are expected to be sold
by 2030 and approximately 650,000 by 2040 in our core markets of
North America and Europe. Assuming average battery capacity per
vehicle of 225 kWh for medium-duty trucks, 300 kWh for buses and
750 kWh for heavy-duty trucks, we estimate this could translate
into demand for heavy-duty commercial and industrial-scale
batteries of approximately 90 GWh in 2030 and approximately 300 GWh
in 2040. Our business strategy is to capitalize on this
opportunity.
Our business is organized into two business units comprised of
three business lines, with each business line addressing a critical
component of the commercial vehicle electrification.
•Proterra
Powered & Energy
is our business unit that provides our technology solutions to
commercial vehicle manufacturers and owners of commercial fleets,
and is comprised of two business lines.
▪Proterra
Powered
designs, develops, manufactures, sells, and integrates proprietary
battery systems and electrification solutions into vehicles for
global commercial vehicle original equipment manufacturer (“OEM”)
customers serving the Class 3 to Class 8 vehicle segments,
including delivery trucks, school buses, and coach buses, as well
as construction and mining equipment, and other
applications.
•Proterra
Energy
provides turnkey fleet-scale, high-power charging solutions and
software services, ranging from fleet and energy management
software-as-a-service, to fleet planning, hardware, infrastructure,
installation, utility engagement, and charging optimization. These
solutions are designed to optimize energy use and costs, and to
provide vehicle-to-grid functionality.
•Proterra
Transit
is our business unit that designs, develops, manufactures, and
sells electric transit buses as an OEM for North American public
transit agencies, airports, universities, and other commercial
transit fleets. Proterra Transit vehicles showcase and validate our
electric vehicle technology platform through rigorous daily use by
a large group of sophisticated customers focused on meeting the
wide-ranging needs of the communities they serve.
The first application of Proterra Powered commercial vehicle
electrification technology was through Proterra Transit’s
heavy-duty electric transit bus, which we designed from the ground
up for the North American market. Our industry experience, the
performance of our transit buses, and compelling total cost of
ownership has helped make us a leader in the U.S. electric transit
bus market. With over 950 electric transit buses on the road, our
electric transit buses have delivered more than 30 million
cumulative service miles spanning a wide spectrum of
climates, conditions, altitudes and terrains. From this experience,
we have been able to continue to iterate and improve our
technology.
Our decade of experience supplying battery electric heavy duty
transit buses provided us the opportunity to validate our products’
performance, fuel efficiency and maintenance costs with a demanding
customer base and helped broaden our appeal as a supplier to OEMs
in other commercial vehicle segments and geographies. Proterra
Powered has partnered with more than a dozen OEMs spanning Class 3
to Class 8 trucks, several types of buses, and multiple off-highway
categories. Through September 30, 2022, Proterra Powered has
delivered battery systems and electrification solutions for more
than 1,300 vehicles to our OEM partner customers.
In addition, Proterra Energy has established us as a leading
commercial vehicle charging solution provider by helping fleet
operators fulfill the high-power charging needs of commercial
electric vehicles and optimize their energy usage, while meeting
our customers’ space constraints and continuous service
requirements. As of September 30, 2022, we had delivered
approximately 90 MW of charging infrastructure across North
America.
Through September 30, 2022, we have generated the majority of
our revenue from Proterra Transit’s sales of electric transit
buses, complemented by additional revenue from Proterra Powered’s
sales of battery systems and Proterra Energy’s sales and
installation of charging systems, as well as from the sale of spare
parts and other services provided to customers. As fleet
electrification continues to expand beyond buses to trucks and
other commercial vehicles, we expect Proterra Powered & Energy
to grow into a significantly larger portion of our overall business
and generate a greater portion of revenue. Through
September 30, 2022, our chief operating decision maker, the
Chief Executive Officer, reviewed financial information presented
at the entity level for ongoing operations and for internal
planning and forecasting purposes, and we had a single reportable
segment.
Proterra Powered’s strategy is to leverage Proterra Transit’s
success in the electric transit bus market to showcase the
performance of our technology and demonstrate a strong track record
of range and reliability in order to provide our battery systems
and electrification solutions to other commercial vehicle segments.
We believe our success in the transit bus market using our battery
systems and electrification solutions to power heavy-duty vehicles
with faster acceleration than a diesel-powered bus up steep hills,
all while maintaining a rigorous regular schedule of operation with
little tolerance for error, helps demonstrate the broad
applicability of our technology to other commercial vehicle
segments with similar requirements. We sell our electric
powertrains using a business development team as well as a channel
sales team for certain end markets. These teams work closely with
our engineering team to develop optimal electrification solutions
for our customers, depending on their vehicle
requirements.
Enhanced by Proterra Powered’s high performance battery systems and
electrification solutions and our purpose-built transit bus vehicle
designed to optimize power, weight, and efficiency, Proterra
Transit has been a leader in the North American electric transit
market since 2012. Our sales efforts are focused on the 400 largest
public transit agencies, which range in size from approximately 50
buses to thousands of buses in their fleets. These agencies operate
more than 85% of the more than 70,000 transit buses on the road in
North America, according to the FTA’s National Transit Database. We
also focus our sales efforts on airports, universities, and
corporate shuttle operators. As of September 30, 2022, there
are, in aggregate, more than 25,000 buses in operation at fleets
that are mandated to convert to 100% zero-emission by 2040 in North
America, including fleets in the state of California and the cities
of New York City, Chicago, and Seattle, among others. The
fleet size of our primary public transit agency customer targets
ranges between approximately 100 to more than 4,000 buses, and
their electrification plans typically involve a phased approach.
Our strategy is to maintain our leadership in market share of the
North American electric transit bus market as electric penetration
continues to rise by both acquiring new customers and expanding our
share of existing customers as transit agencies’ average order
rates increase to meet their zero emission targets. We believe we
have a competitive advantage in winning new bus sales due to our
extensive track record, with more than 950 vehicles on the road
which have accumulated more than 30 million real-world service
miles spanning a wide spectrum of climates, conditions, altitudes
and terrains. We believe that repeat orders of increasing scale
represent a considerable growth opportunity for our electric
transit buses. After initial purchase, our customers often expand
their electric vehicle programs and place additional orders for
electric buses and charging systems. Repeat orders lower our
customer acquisition costs and increase visibility into our sales
pipeline. Many of our existing customers have announced long-term
goals to transition to fleets completely comprised of electric
vehicles.
We have a long sales and production cycle given our customers’
structured procurement processes and vehicle customization
requirements, and believe that our proven ability to deliver
commercial-quality battery systems, electrification and charging
solutions, and electric transit buses gives us a distinct first
mover advantage in end markets that are electrifying rapidly. For
Proterra Powered, new vehicle development programs for commercial
vehicle OEMs typically last between one and three years. As a
result, volume production and revenue generation tend to trail
initial contract signatures by a few years. For Proterra Transit,
public transit agencies typically conduct a request for proposal
process before awards are made and purchase orders are issued.
Proposals are evaluated on various criteria, including but not
limited to technical requirements, reliability, reputation of the
manufacturer, and price. This initial sales process from first
engagement to award typically ranges from 6 to 18 months. Once a
proposal has been awarded, a pre-production process is completed
where customer specific options are mutually agreed upon. A final
purchase order follows the pre-production process. Procurement of
parts and production typically follow the purchase order. Once a
bus is fully manufactured, the customer performs a final inspection
before accepting delivery, allowing us to recognize revenue. The
length of time between a customer award and vehicle acceptance
typically varies between 12 and 24 months, depending on product
availability and production capacity.
We established significant manufacturing capacity already at scale
with approximately 360,000 square feet of manufacturing space
across three facilities in two states . In City of Industry,
California, we operate a battery production facility as well as a
bus manufacturing facility. We also operate a battery production
facility in Burlingame, California. Our largest bus manufacturing
facility is located in Greenville, South Carolina. Battery
manufacturing capacity at our City of Industry facility, if fully
staffed on a three shift structure, is 675 MWh, sufficient to
supply batteries for both our total bus manufacturing capacity of
680 transit buses across our two bus assembly facilities in
Greenville, South Carolina and City of Industry, California, as
well as more than 350 MWh of Proterra Powered batteries for
third-party customers, equivalent to 1,500 school buses and/or
delivery vehicles per year. In November 2021, we entered into a
lease arrangement for a new plant (the “Powered 1 factory”) with
approximately 327,000 square feet at Greer, South Carolina to
expand our battery system manufacturing capacity to multiple
gigawatt-hours per year. We have specifically developed our battery
modules using a design for manufacturability (DFM) approach that
enables high-volume automated production of the module using a
modular manufacturing line that can be rapidly built with low
capital expenditures. Enabled by the simplicity of design and
integrated architecture of our battery modules, we manufacture our
battery packs in two widths and three heights, various lengths
ranging from 3-feet to 9-feet, and four different voltages. In the
nine months ended September 30, 2021 our battery production was 145
MWh and in the nine months ended September 30, 2022 our battery
production was 255 MWh, a 76% increase year over year. As we
increase our production volumes and complete construction of the
Powered 1 factory, and improve manufacturing efficiency across our
production assets as we scale , we believe that we will be able to
leverage our historical investments in capacity to reduce our labor
and overhead costs as a percentage of total revenue. With the
addition of our Powered 1 factory, we believe we will have
sufficient capacity to fulfill our current backlog and anticipated
near-term growth but further investment in capacity will be
required as demand for electric vehicles continues to grow
globally.
For the nine months ended September 30, 2022 and 2021, our total
revenue was $229.4 million and $174.4 million, respectively. We
generated a gross loss of $3.7 million and a gross profit of $4.8
million for the nine months ended September 30, 2022 and 2021,
representing a gross margin of (1.6)% and 3%, respectively. We have
also invested significant resources in research and development,
operations, and sales and marketing to grow our business and, as a
result, generated losses from operations of $147.2 million and
$86.8 million for the nine months ended September 30, 2022 and
2021, respectively.
We intend to continue to make investments in developing new
products and enhancing existing products. This quarter, we made a
strategic equity investment in a privately held entity that we
expect to produce lithium iron phosphate (LFP) battery cells in the
United States in the coming years to provide us with development
opportunities for battery packs with another cell chemistry to
address additional segments of the commercial vehicle market. We
are also increasing and/or optimizing our production capacity, and
also expect to make investments in our sales and marketing
organizations as well as those expenses associated with operating
as a public company. As a result, we expect that the cost of goods
sold and operating expenses will increase with total revenue in
absolute dollars in future periods but decline as a percentage of
total revenue over time.
Key metrics and select financial data
Deliveries
We delivered 162 (152 new and 10 pre-owned) and 154 vehicles in the
nine months ended September 30, 2022 and 2021, respectively. We
delivered battery systems for 927 and 134 vehicles in the nine
months ended September 30, 2022 and 2021,
respectively.
Deliveries is an indicator of our ability to convert awarded orders
into revenue and demonstrates the scaling of our operations. We
expect volume of deliveries to vary every quarter and not be linear
as product configurations vary in complexity and timing for
completion is not standard. Vehicles delivered represents the
number of buses that have met revenue recognition criteria during a
period. Battery systems delivered represents the battery systems
sold to OEMs that have met revenue recognition criteria during a
period and is measured based on the number of underlying vehicles
in which they are to be used. In addition to batteries, battery
systems could include drivetrains and high voltage systems and
controls, depending upon the customer contract.
Growth rates between deliveries and total revenue are not perfectly
correlated because our total revenue is affected by other
variables, such as the mix of products sold during the period or
other services provided in addition to the hardware
delivered.
Net Income (Loss) to Adjusted EBITDA Reconciliation
Adjusted EBITDA is a supplemental non-GAAP financial measure of
operating performance we use to evaluate our ongoing operations.
Adjusted EBITDA is not defined under GAAP and may not be comparable
to similarly titled measures used by other companies and should not
be considered a substitute for other results reported in accordance
with GAAP. We define Adjusted EBITDA as net income (loss), adjusted
for the effects of financing, non-recurring items, depreciation on
capital expenditures, and other non-cash items such as stock-based
compensation, (gain) loss on valuation of derivative and warrant
liabilities, gain on debt extinguishment, and other items like
start-up costs for new facilities. We believe this measure is a
useful financial metric for business planning purposes and to
assess the operating performance from period to period by excluding
certain items we believe are not representative of our core
business. A reconciliation of net income (loss) to adjusted EBITDA
is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
(in thousands) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Adjusted EBITDA Reconciliation:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$ |
(65,061) |
|
|
$ |
36,321 |
|
|
$ |
(156,960) |
|
|
$ |
(204,868) |
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
Interest expense, net
|
7,361 |
|
|
6,362 |
|
|
21,191 |
|
|
44,288 |
|
|
Provision for income taxes
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Depreciation and amortization expense
|
2,911 |
|
|
3,938 |
|
|
9,583 |
|
|
11,675 |
|
|
Stock-based compensation expense
|
5,356 |
|
|
3,178 |
|
|
16,313 |
|
|
11,265 |
|
|
(Gain) loss on valuation of derivative and warrant
liabilities
|
— |
|
|
(73,197) |
|
|
— |
|
|
72,913 |
|
|
Gain on debt extinguishment
|
— |
|
|
— |
|
|
(10,007) |
|
|
— |
|
|
Other items
(1)
|
3,837 |
|
|
— |
|
|
6,668 |
|
|
— |
|
|
Adjusted EBITDA
|
$ |
(45,596) |
|
|
$ |
(23,398) |
|
|
$ |
(113,212) |
|
|
$ |
(64,727) |
|
__________________
(1)Represents
the start-up costs for the Powered 1 factory in Greer, South
Carolina, which is still under construction.
Business Combination
On June 14, 2021, we consummated the transactions contemplated by
the Merger Agreement, by and among ArcLight, Phoenix Merger Sub,
and Legacy Proterra. As contemplated by the Merger Agreement, on
June 11,
2021, ArcLight consummated the Domestication. Further, on June 14,
2021, as contemplated by the Merger Agreement, we consummated the
Merger.
In addition, pursuant to the Subscription Agreements, the PIPE
Investors purchased an aggregate of 41,500,000 shares of Proterra
common stock concurrently with the Closing for an aggregate
purchase price of $415,000,000.
We received $649.3 million in net cash proceeds upon Closing to
fund our growth initiatives, including research and development and
our next-generation battery program.
In October 2021, the majority of the public warrants and all of the
private placement warrants were exercised, and we redeemed the
remaining outstanding public warrants at a redemption price of
$0.10 per public warrant.
Key factors affecting our performance
COVID-19 Pandemic and Global Economic Impacts
The outbreak of the novel coronavirus COVID-19, which was declared
a pandemic by the World Health Organization on March 11, 2020, has
led to adverse impacts on the U.S. and global economies and created
uncertainty regarding potential impacts to our supply chain,
operations, and customer demand. Further recent inflation, and
increased energy costs and continued disruption in global markets
(in part stemming from the war in Ukraine) have further impacted
supply chain stability and material costs. We have made adjustments
to our business operations and have continued to operate with
limited interruptions since March 2020 with no material
adverse impact to our operations, financial position, or liquidity
through September 30, 2022. Our vehicle and charging system
deliveries were impacted, especially during the three months ended
March 31, 2022, by ongoing constraints and inefficiencies in
production driven by shortages in component parts, particularly
resin for connectors, resulting from global supply chain
disruptions stemming from the pandemic. Although we achieved
revenue growth during the nine months ended September 30, 2022
compared to the nine months ended September 30, 2021, these
disruptions decreased our production which negatively impacted our
revenue and increased our overhead, led to increased costs to
secure components critical to our production needs and negatively
impacted our margins. We expect our results for the remaining
quarter of 2022 to continue to be impacted by supply chain issues,
including availability of wiring harnesses for transit and
drivetrain products which we currently largely source from one
supplier.
More generally, the COVID-19 pandemic, raw material and component
price inflation, and increased freight and logistics costs are
currently expected to continue to have an impact on our results of
operations, financial position, and liquidity. If these disruptions
and related shutdowns, shipment delays, part shortages, production
inefficiencies or extended customer order and acceptance processes,
are prolonged or worsen, including as a result of variant strains
of the COVID-19 virus, it could lead to more significant delays in
production, the signing of new customer contracts and customer
acceptances of near-term deliveries.
Ability to sell additional powertrains, vehicles, chargers and
other products to new and existing customers
Our results will be impacted by our ability to sell our battery
systems, electrification solutions including charging and energy
management software, and electric transit buses, to new and
existing customers. We have had initial success with Proterra
Powered establishing strategic partnerships and with Proterra
Transit selling electric transit buses and chargers to more than
130 customers. Our growth opportunity is dependent on commercial
vehicle manufacturers electrifying their product offerings and
increasing production as well as transit agencies electrifying more
of their fleets (both of which we believe will increase with
continued improvement in battery performance and costs over time),
as well as our ability to increase manufacturing capacity and
secure supply of key components, including battery cells, to meet
expected demand. Our ability to sell additional products to
existing customers is a key part of our success,
as follow-on purchases indicate customer satisfaction and
decrease the likelihood of competitive substitution. In order to
sell additional products to new and existing customers, we will
need to continue to invest significant resources in our products
and services, and our manufacturing capacity and supply chain. If
we fail to make the right investment decisions in our technology
and electrification solutions, including our battery systems and
electrification and charging solutions, and our manufacturing
facilities and supply chain initiatives, if customers do not adopt
our technology or our products and
services or we cannot timely deliver products to customers due to
supply chain disruptions or otherwise, or if our competitors are
able to develop and deliver technology or products and services
that are superior to ours, our business, prospects, financial
condition, and operating results could be adversely
affected.
Ability to improve profit margins and scale our
business
We intend to continue investing in initiatives to improve our
operating leverage and significantly ramp production. We believe
continued reduction in costs and an increase in production volumes
will enable commercial vehicle manufacturers to electrify faster.
Purchased materials represent the largest component of cost of
goods sold in all products and we continue to explore ways to
reduce these costs through improved design for cost, strategic
sourcing, long-term contracts, and in some cases vertical
integration. We launched two new manufacturing facilities in 2017
and a new battery manufacturing facility in 2020. We are currently
under construction of our third battery production facility. We
believe that an increase in volume and additional experience will
allow us to leverage those investments and reduce our labor and
overhead costs, as well as our freight costs, as a percentage of
total revenue. We expect our product cost of goods sold to increase
in absolute dollars in future periods as the volume of products we
sell increases. As we grow into our current capacity, execute on
cost-reduction initiatives, and improve production efficiency, we
expect our product cost of goods sold as a percentage of revenue to
decrease in the longer term. We anticipate that by increasing
facility utilization rates and improving overall economies of
scale, we can positively impact gross margins of our products,
bring value to our customers and help accelerate commercial
electric vehicle adoption. Our ability to achieve cost-saving and
production-efficiency objectives can be negatively impacted by a
variety of factors including, among other things, labor cost
inflation, lower-than-expected facility utilization rates, rising
real estate costs, manufacturing and production cost overruns,
increased purchased material costs, and unexpected supply-chain
quality issues or interruptions, and delays in our ability to hire,
train, and retain employees needed to scale production to meet
demand.
Continued emissions regulation and environmental
stewardship
Our business benefits from international, federal, state, and local
government interest in regulating air pollution and greenhouse gas
emissions that contribute to global climate change. In
July 2020, 15 states, including California and New York,
pledged to work jointly towards a unified goal of zero emissions
for 100% of new sales of medium- and heavy-duty commercial vehicles
by 2050. In August 2019, the European Union passed
Regulation 2019/1242, mandating a reduction in emissions from
new trucks by 2025 and 2030. In addition, a growing number of
cities and transit agencies have pledged to convert their entire
transit bus fleets to zero-emission vehicles by a specific target
date, and many have already begun to purchase electric vehicles in
order to meet this goal. For example, on December 14, 2018, the
California Air Resources Board adopted a state-wide mandate, the
Innovative Clean Transit Rule, mandating transit agencies to commit
to purchasing zero-emission
buses starting in 2029.
The move away from diesel- and natural gas-powered commercial
vehicles is a significant step forward to accelerate the use of
advanced technologies in medium- and heavy-duty vehicles to meet
air quality and public health goals, thereby boosting near-term
deployment of battery-electric commercial vehicles. As legacy
internal combustion engine technology becomes more heavily
regulated and costly across the globe, commercial vehicle
manufacturers are investing in electrification. While this
investment may increase competition, we believe that it will also
increase customer demand, and help build the necessary supply chain
and adjacent industry investments to support powertrain
electrification. However, the uncertainty related to the passage of
new legislation, appropriation of government funding, and
implementation of regulations could impact the timing and number of
vehicle orders, and any reduction in governmental interest in
emissions regulation could negatively impact our business prospects
or operating results.
Government programs accelerating adoption of zero-emission
vehicles
Federal and state funding has accelerated the adoption of electric
vehicles in our target markets. For instance, our U.S. transit
customers have partially funded electric bus purchases through
competitive grant programs, including the Low or No Emission
Vehicle Program authorized by the federal Fixing America’s Surface
Transportation Act in 2015, and other state-specific
funding.
The Infrastructure Investment and Jobs Act enacted on November 15,
2021 authorizes additional funding for electric vehicles and
electric vehicle charging infrastructure through the creation of
new programs and grants and the expansion of existing programs,
including over $4.0 billion to replace existing buses with zero
emission buses and at least $2.5 billion to replace
existing
school buses with zero emission school buses.
In August 2022, the Inflation Reduction Act added additional
funding and tax credit programs for both passenger car and
commercial vehicles, many of which will become available to
recipients in 2023. In the United States, states are also
allocating portions of settlement funds from the approximately $15
billion Volkswagen Emissions Settlement Program to investments in
zero-emission transit buses and school buses. We expect that the
availability of this now unprecedented level of government funding
for our customers, suppliers, and competitors to help fund
purchases of commercial electric vehicles and battery systems will
remain an important factor in our company’s growth
prospects.
Components of results of operations
Revenue
We derive revenue primarily from the sale of vehicles, the sale of
battery and powertrain systems, the sale and installation of
charging systems, as well as the sale of spare parts and other
services provided to customers.
Product revenue. Product
revenue consists of revenue earned from the sale of vehicles, sale
of battery and powertrain systems as well as sales and installation
of charging systems. A vehicle is considered delivered once met
revenue recognition criteria. Revenue from sales of vehicles is
typically recognized upon delivery when the Company can objectively
demonstrate that the criteria specified in the contractual
acceptance provisions are achieved prior to delivery. In cases,
where the Company cannot objectively demonstrate that the criteria
specified in the contractual acceptance provisions have been
achieved prior to delivery, revenue is recognized upon acceptance
by the customer. Revenue from sales of charging systems is
recognized at a point in time, generally upon acceptance by the
customer or commissioning. Under certain contract arrangements,
revenue related to the charging systems is recognized over the
installation period using an input measure based on costs incurred
to date relative to total estimated costs to completion.
Revenue from the sale of battery and powertrain systems is
typically recognized upon shipping. Product revenue also includes
revenue from leasing vehicles and charging systems under operating
leases. Revenue from operating lease arrangements is recognized
ratably over the lease term. The amount of product revenue we
recognize in a given period depends on the number of vehicles
delivered and the type of financing used by the
customer.
Parts and other service revenue. Parts
and other service revenue includes sales of spare parts, revenue
earned from the development of electric vehicle powertrain
components, the design and development of battery and drive systems
for other vehicle manufacturers, and sales of extended warranties.
The amount of parts and service revenue tends to grow with the
number of vehicles delivered. However, variability can exist as
customers have different methodologies for sourcing spare parts for
their fleets. Revenue related to the design, development and
integration of battery and drive systems is typically recognized
upon shipping or delivery of services and prototypes, depending on
the terms in customer contracts.
Cost of goods sold
Product cost of goods sold. Product
cost of goods sold consists primarily of direct material and labor
costs, manufacturing overhead, other personnel-related expenses,
which include salaries, bonuses, benefits, and stock-based
compensation expense, reserves for estimated warranty costs,
freight expense, and depreciation expense. Product cost of goods
sold also includes charges to write-down the carrying value of
inventory when it exceeds its estimated net realizable value,
including on-hand inventory that is either obsolete or in excess of
forecasted demand. We expect our product cost of goods sold to
increase in absolute dollars in future periods as the volume of
products we sell increases. As we grow into our current capacity,
execute on cost-reduction initiatives, and improve production
efficiency, we expect our product cost of goods sold as a
percentage of revenue to decrease in the longer term.
Parts and other service cost of goods sold. Parts
and other service cost of goods sold consists primarily of material
costs and the cost of services provided, including field service
costs and costs related to our development team. We record costs of
development services incurred in periods prior to the finalization
of an agreement as research and development expense. Once a
development agreement is finalized, we record these costs in parts
and other service cost of goods sold. We expect our parts and other
service cost of goods sold to increase in absolute dollars in
future periods as more customers put additional vehicles into
service and sign new development agreements.
Gross profit (loss) and margin
Gross profit (loss) is total revenue less total cost of goods sold.
Gross margin is gross profit (loss) expressed as a percentage
of total revenue. Our gross profit (loss) and margin has and may in
the future fluctuate from period-to-period. Such fluctuations have
been and will continue to be affected by a variety of factors,
including the timing of vehicle delivery, mix of products sold,
manufacturing costs, financing options, and warranty costs. We
expect our gross margin to improve over time as we continue to
scale our operations and execute on cost reduction initiatives in
the longer term.
Operating expenses
Research and development. Research
and development expense consists primarily of personnel-related
expenses, consulting and contractor expenses, validation and
testing expense, prototype parts and materials, depreciation
expense, and allocated overhead costs. Software development costs
related to our fleet and energy management platform are expensed as
incurred if the capitalization criteria are not met. We intend to
continue to make significant investments in developing new products
and enhancing existing products. Research and development expense
will be variable relative to the number of products that are in
development, validation or testing. However, we expect it to
decline as a percentage of total revenue over time.
Selling, general and administrative. Selling,
general and administrative expenses consist primarily of
personnel-related expenses for our sales, marketing, supply chain,
finance, legal, human resources, and administrative personnel, as
well as the costs of customer service, information technology,
professional services, insurance, travel, allocated overhead, and
other marketing, communications and administrative expenses. We
will continue to actively promote our products. We also expect to
invest in our corporate organization and incur additional expenses
associated with operating as a public company, including increased
legal and accounting costs, investor relations costs, higher
insurance premiums, and compliance costs. As a result, we expect
that selling, general and administrative expenses will increase in
absolute dollars in future periods but decline as a percentage of
total revenue over time.
Interest expense, net
Interest expense, net consists primarily of interest expense
associated with our debt facilities and amortization of debt
discount and issuance costs. Interest income consists primarily of
interest income earned on our cash and cash equivalents and
short-term investments balances.
Gain on debt extinguishment
Gain on debt extinguishment relates to the forgiveness of the PPP
loan.
(Gain) loss on valuation of derivative and warrant
liabilities
(Gain) loss on valuation of derivative and warrant liabilities
relates to the changes in the fair value of derivative and warrant
liabilities, which were subject to remeasurement at each balance
sheet date.
Other expense (income), net
Other expense (income), net primarily relates to sublease income
and currency fluctuations that generate foreign exchange gains or
losses on invoices denominated in currencies other than the U.S.
dollar, sublease income, amortization of short-term investment
premium/discount and other non-operational financial gains or
losses.
Results of operations
The following tables set forth our results of operations for the
periods presented and as a percentage of our total revenue for
those periods. Percentages presented in the following tables may
not sum due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
(in thousands) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
Product revenue
|
|
$ |
89,769 |
|
|
$ |
59,907 |
|
|
$ |
214,196 |
|
|
$ |
167,401 |
|
|
Parts and other service revenue
|
|
6,454 |
|
|
2,034 |
|
|
15,172 |
|
|
7,048 |
|
|
Total revenue
|
|
96,223 |
|
|
61,941 |
|
|
229,368 |
|
|
174,449 |
|
|
Product cost of goods sold
|
|
91,408 |
|
|
57,034 |
|
|
217,743 |
|
|
162,513 |
|
|
Parts and other service cost of goods sold
|
|
6,091 |
|
|
2,244 |
|
|
15,349 |
|
|
7,089 |
|
|
Total cost of goods sold
(1)
|
|
97,499 |
|
|
59,278 |
|
|
233,092 |
|
|
169,602 |
|
|
Gross profit (loss)
|
|
(1,276) |
|
|
2,663 |
|
|
(3,724) |
|
|
4,847 |
|
|
Research and development
(1)
|
|
18,165 |
|
|
11,296 |
|
|
44,871 |
|
|
31,311 |
|
|
Selling, general and administrative
(1)
|
|
38,554 |
|
|
21,123 |
|
|
98,646 |
|
|
60,327 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
56,719 |
|
|
32,419 |
|
|
143,517 |
|
|
91,638 |
|
|
Loss from operations
|
|
(57,995) |
|
|
(29,756) |
|
|
(147,241) |
|
|
(86,791) |
|
|
Interest expense, net
|
|
7,361 |
|
|
6,362 |
|
|
21,191 |
|
|
44,288 |
|
|
Gain on debt extinguishment |
|
— |
|
|
— |
|
|
(10,201) |
|
|
— |
|
|
(Gain) loss on valuation of derivative and warrant
liabilities
|
|
— |
|
|
(73,197) |
|
|
— |
|
|
72,913 |
|
|
Other expense (income), net
|
|
(295) |
|
|
758 |
|
|
(1,271) |
|
|
876 |
|
|
Income (loss) before income taxes
|
|
(65,061) |
|
|
36,321 |
|
|
(156,960) |
|
|
(204,868) |
|
|
Provision for income taxes
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net income (loss)
|
|
$ |
(65,061) |
|
|
$ |
36,321 |
|
|
$ |
(156,960) |
|
|
$ |
(204,868) |
|
__________________
(1)Includes
stock-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
(in thousands) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
$ |
456 |
|
|
$ |
319 |
|
|
$ |
1,350 |
|
|
$ |
865 |
|
|
Research and development
|
|
1,409 |
|
|
567 |
|
|
3,690 |
|
|
1,625 |
|
|
Selling, general and administrative
|
|
3,491 |
|
|
2,292 |
|
|
11,273 |
|
|
8,775 |
|
|
Total stock-based compensation expense
|
|
$ |
5,356 |
|
|
$ |
3,178 |
|
|
$ |
16,313 |
|
|
$ |
11,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
Product revenue
|
|
93 |
% |
|
97 |
% |
|
93 |
% |
|
96 |
% |
|
Parts and other service revenue
|
|
7 |
|
|
3 |
|
|
7 |
|
|
4 |
|
|
Total revenue
|
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
|
Product cost of goods sold
|
|
95 |
|
|
92 |
|
|
95 |
|
|
93 |
|
|
Parts and other service cost of goods sold
|
|
6 |
|
|
4 |
|
|
7 |
|
|
4 |
|
|
Total cost of goods sold
(1)
|
|
101 |
|
|
96 |
|
|
102 |
|
|
97 |
|
|
Gross profit (loss)
|
|
(1) |
|
|
4 |
|
|
(2) |
|
|
3 |
|
|
Research and development
(1)
|
|
19 |
|
|
18 |
|
|
19 |
|
|
18 |
|
|
Selling, general and administrative
(1)
|
|
40 |
|
|
34 |
|
|
43 |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
59 |
|
|
52 |
|
|
62 |
|
|
53 |
|
|
Loss from operations
|
|
(60) |
|
|
(48) |
|
|
(64) |
|
|
(50) |
|
|
Interest expense, net
|
|
8 |
|
|
10 |
|
|
9 |
|
|
25 |
|
|
Gain on debt extinguishment |
|
— |
|
|
— |
|
|
(4) |
|
|
— |
|
|
(Gain) loss on valuation of derivative and warrant
liabilities
|
|
— |
|
|
(118) |
|
|
— |
|
|
42 |
|
|
Other expense (income), net
|
|
— |
|
|
1 |
|
|
(1) |
|
|
1 |
|
|
Income (loss) before income taxes
|
|
(68) |
|
|
59 |
|
|
(68) |
|
|
(118) |
|
|
Provision for income taxes
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net Income (loss)
|
|
(68) |
% |
|
59 |
% |
|
(68) |
% |
|
(118) |
% |
__________________
(1)Includes
stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
1 |
% |
|
1 |
% |
|
— |
% |
|
— |
% |
|
Research and development
|
|
1 |
|
|
1 |
|
|
2 |
|
|
1 |
|
|
Selling, general and administrative
|
|
4 |
|
|
4 |
|
|
5 |
|
|
5 |
|
|
Total stock-based compensation expense
|
|
6 |
% |
|
5 |
% |
|
7 |
% |
|
6 |
% |
Comparison of the Three and Nine Months Ended September 30, 2022
and 2021
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
$ |
|
% |
|
Nine Months Ended September 30, |
|
$ |
|
% |
|
(dollars in thousands) |
|
2022 |
|
2021 |
|
Change |
|
Change |
|
2022 |
|
2021 |
|