The strategic premium is considered akin to payment for research and development efforts as the strategic
premium will be used to pay for incremental cost associated with the Companys battery cell development. The Company has an accounting policy to record research and development effort payments as contra research and development. Therefore, the
Company records the benefits (amortization of the strategic premium) over the estimated period of the development agreements with the investors which was originally estimated to be three years at March 2016 and two years at March 2017.
Subsequent to the Series D issuance, in 2018, 2019 and in the nine months ended September 30, 2020, the Company
re-assessed the estimated period of the development agreements as part of its annual forecast process and determined that the period should be extended. The updated period of the estimated period of the
development agreements was utilized to amortize the remaining strategic premium during those periods. For the nine months ended September 30, 2020 and September 30, 2019, the Company recorded amortization of $0.5 million and
$0.7 million, respectively, as a reduction to research and development expenses.
In May and July 2020, the Board of Directors and stockholders
approved the sale of up to 14,684,843 shares of Series F convertible preferred stock at the price of $26.4218 per share for gross proceeds of approximately $388.0 million to VGA and other new and existing investors. The proceeds are expected to
be received in November 2020, December 2020 and Q1 2021.
Dividends
The holders of shares of Series A, Series B, Series B-1, Series C, Series D, Series E and Series F convertible
preferred stock are entitled to receive non-cumulative dividends, out of any assets legally available for such purpose, prior and in preference to any declaration or payment of any dividend on the common
stock, when, as, and if, declared by the Board of Directors in the amount equal to at least $0.1761408, $0.402, $0.4965296, $0.8325736, $1.6090, $1.787 and $2.1137 per share, respectively on each outstanding share of preferred stock. No
distributions shall be made with respect to the common stock unless declared dividends on the preferred stock have been paid or set aside.
Conversion
Each share of Series A, Series B, and Series B-1 convertible preferred stock is convertible, at the option of
the holder thereof, at any time after the date of issuance of such share, into such number of fully paid and non-assessable shares of Class B common stock as is determined by dividing the applicable
original issue price by the conversion price applicable to such share in effect on the date of conversion (Series A at $2.20131 as of September 30, 2020 and December 31, 2019; Series B at $5.01900 as of September 30, 2020 and
December 31, 2019; and Series B-1 at $6.20662 as of September 30, 2020 and December 31, 2019).
Each share of Series C, Series D, Series E, and Series F convertible preferred stock is convertible, at the option of the holder thereof, at any time after
the date of issuance of such share, into such number of fully paid and non-assessable shares of Class A common stock as is determined by dividing the applicable original issue price by the conversion
price applicable to such share in effect on the date of conversion (Series C at $10.40717 as of September 30, 2020 and December 31, 2019 , Series D at $20.1127 as of September 30, 2020 and December 31, 2019, and Series E at
$22.3437 as of September 30, 2020 and December 31, 2019).
The conversion price of each series of preferred stock may be subject to adjustment
from time to time under certain circumstances. The preferred stock issued to date was sold at a price of $2.20131, $5.01900, $6.20662, $10.40717, $20.1127 and $22.3437 per share for Series A, Series B, Series
B-1, Series C, Series D and Series E convertible preferred stock, respectively, which exceeded the fair value of the common stock. Accordingly, there was no intrinsic value associated with the issuance of the
preferred stock through September 30, 2020, and there were no other separate instruments issued with the preferred stock that required further evaluation of a beneficial
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