Fisker Inc./DE - Quarter Report: 2023 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 2023
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: 001-39160
______________________
FISKER INC.
(Exact name of registrant as specified in its charter)
______________________
| Delaware | 82-3100340 | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
1888 Rosecrans Avenue, Manhattan Beach, CA 90266
(Address of principal executive offices)
(833) 434-7537
(Registrant’s telephone number, including area code)
(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 | ||||||||||||
| Class A Common Stock, par value of $0.00001 per share | FSR | New York Stock Exchange | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
______________________
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 4, 2023, the registrant had 197,898,275 shares of Class A Common Stock and 132,354,128 shares of Class B Common Stock, par value $0.00001 per share, outstanding.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are forward-looking and as such are not historical facts. These forward-looking statements include, without limitation, statements regarding future financial performance, business strategies, expansion plans, future results of operations, estimated revenues, losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on our management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this report, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:
•our ability to grow and manage growth profitably;
•our ability to continue to enter into binding contracts with OEMs or tier-one suppliers in order to execute on our business plan;
•our ability to execute our business model, including market acceptance of our planned products and services;
•our expansion plans and opportunities;
•our expectations regarding future expenditures;
•our ability to raise capital in the future;
•our ability to attract and retain qualified employees and key personnel;
•the possibility that we may be adversely affected by other economic, business or competitive factors;
•changes in applicable laws or regulations;
•the outcome of any known and unknown litigation and regulatory proceedings;
•our ability to maintain the listing of our Class A common stock, par value $0.00001 per share ("Class A Common Stock") on the New York Stock Exchange ("NYSE");
•the possibility that COVID-19, the Russian-Ukraine war or rising inflation may adversely affect the results of our operations, financial position and cash flows; and
•other factors described in this report, including those described in the section entitled “Risk Factors” under Part I, Item 1A of our most recent Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 1, 2023, as supplemented by reports subsequently filed with the SEC.
The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors” under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the effect of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
The forward-looking statements made by us in this report speak only as of the date of this report. Except to the extent required under the federal securities laws and rules and regulations of the SEC, we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or
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results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.
WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (www.fiskerinc.com) and various social media channels as a means of disclosing information about the company and its products to its customers, investors and the public (e.g., @fiskerinc, @fiskerofficial, #fiskerinc, #henrikfisker and #fisker on Twitter, Facebook, Instagram, YouTube, TikTok and LinkedIn). The information posted on social media channels is not incorporated by reference in this report or in any other report or document we file with the SEC. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about the Company when you enroll your e-mail address by visiting the “Investor Email Alerts” section of our website at www.investors.fiskerinc.com. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about the Company when you enroll your e-mail address by visiting the “Investor Email Alerts” section of our website at www.investors.fiskerinc.com.
ADDITIONAL INFORMATION
Unless the context indicates otherwise, references in this report to the “Company,” “Fisker,” “we,” “us,” “our” and similar terms refer to Fisker Inc. (f/k/a Spartan Energy Acquisition Corp.) and its consolidated subsidiaries (including Fisker Group Inc. or Legacy Fisker). References to “Spartan” refer to Spartan Energy Acquisition Corp., our predecessor company prior to the consummation of the Business Combination (as defined below).
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Fisker Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
As of March 31, 2023 | As of December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 652,534 | $ | 736,549 | |||||||
| Restricted cash | 4,624 | — | |||||||||
| Prepaid expenses and other current assets | 126,305 | 91,765 | |||||||||
| Equity investment | 2,410 | 3,140 | |||||||||
| Total current assets | 785,873 | 831,454 | |||||||||
| Non-current assets: | |||||||||||
| Property and equipment, net | 420,607 | 387,137 | |||||||||
| Intangible assets | 241,322 | 246,922 | |||||||||
| Right-of-use assets, net | 38,680 | 33,424 | |||||||||
| Other non-current assets | 18,064 | 16,489 | |||||||||
| Total non-current assets | 718,673 | 683,972 | |||||||||
| TOTAL ASSETS | $ | 1,504,546 | $ | 1,515,426 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 68,317 | $ | 58,871 | |||||||
| Accrued expenses | 310,710 | 264,925 | |||||||||
| Lease liabilities | 7,323 | 7,085 | |||||||||
| Total current liabilities | 386,350 | 330,881 | |||||||||
| Non-current liabilities: | |||||||||||
| Customer deposits | 15,669 | 15,334 | |||||||||
| Lease liabilities | 33,587 | 27,884 | |||||||||
| Convertible senior notes | 661,250 | 660,822 | |||||||||
| Total non-current liabilities | 710,506 | 704,040 | |||||||||
| Total liabilities | 1,096,856 | 1,034,921 | |||||||||
| COMMITMENTS AND CONTINGENCIES (Note 14) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $0.00001 par value; 15,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022 | — | — | |||||||||
Class A Common stock, $0.00001 par value; 750,000,000 shares authorized; 197,843,646 and 187,599,812 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 2 | 2 | |||||||||
Class B Common stock, $0.00001 par value; 150,000,000 shares authorized; 132,354,128 shares issued and outstanding as of March 31, 2023 and December 31, 2022 | 1 | 1 | |||||||||
| Additional paid-in capital | 1,704,622 | 1,650,196 | |||||||||
| Accumulated deficit | (1,287,296) | (1,166,741) | |||||||||
| Receivable for stock issuance | (9,639) | (2,953) | |||||||||
| Total stockholders’ equity | 407,690 | 480,505 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,504,546 | $ | 1,515,426 | |||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
Fisker Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three Months ended March 31, 2023 and 2022
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenue | $ | 198 | $ | 12 | |||||||
| Cost of goods sold | 164 | 11 | |||||||||
| Gross margin | 34 | 1 | |||||||||
| Operating costs and expenses: | |||||||||||
| Selling, general and administrative | 44,648 | 21,992 | |||||||||
| Research and development | 76,999 | 101,460 | |||||||||
| Total operating costs and expenses | 121,647 | 123,452 | |||||||||
| Loss from operations | (121,613) | (123,451) | |||||||||
| Other income (expense): | |||||||||||
| Other income (expense), net | (45) | (371) | |||||||||
| Interest income | 6,894 | 265 | |||||||||
| Interest expense | (4,601) | (4,383) | |||||||||
| Foreign currency gain (loss) | (401) | 746 | |||||||||
| Unrealized gain (loss) recognized on equity securities | (730) | 5,120 | |||||||||
| Total other income (expense) | 1,117 | 1,377 | |||||||||
| Loss before income taxes | (120,496) | (122,074) | |||||||||
| Provision for income taxes | (59) | — | |||||||||
| Net loss | $ | (120,555) | $ | (122,074) | |||||||
| Net loss per common share | |||||||||||
| Net loss per share attributable to Class A and Class B Common shareholders- Basic and Diluted | $ | (0.38) | $ | (0.41) | |||||||
| Weighted average shares outstanding | |||||||||||
| Weighted average Class A and Class B Common shares outstanding- Basic and Diluted | 320,983,589 | 296,508,619 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Fisker Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
| Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Receivable for stock issuance | Accumulated Deficit | Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2023 | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 187,599,812 | $ | 2 | 132,354,128 | $ | 1 | $ | 1,650,196 | $ | (2,953) | $ | (1,166,741) | $ | 480,505 | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | (1,642) | — | $ | — | $ | (1,642) | |||||||||||||||||||||||||||||||||||||
| Exercise of stock options and issuance of restricted stock unit awards, net of statutory tax withholdings | 1,359,754 | — | — | — | 20 | — | $ | — | $ | 20 | |||||||||||||||||||||||||||||||||||||
| Recognition of Magna warrants | — | — | — | — | 2,230 | — | $ | — | $ | 2,230 | |||||||||||||||||||||||||||||||||||||
| Shares issued under "At-the-market" offering, net of stock issuance costs | 8,884,080 | — | — | — | 53,818 | (6,686) | $ | — | $ | 47,132 | |||||||||||||||||||||||||||||||||||||
| Net Loss | — | — | — | — | — | — | $ | (120,555) | $ | (120,555) | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | 197,843,646 | $ | 2 | 132,354,128 | $ | 1 | $ | 1,704,622 | $ | (9,639) | $ | (1,287,296) | $ | 407,690 | |||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Stockholders’ Deficit | |||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2022 | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 164,377,306 | $ | 2 | 132,354,128 | $ | 1 | $ | 1,419,284 | $ | (619,245) | $ | 800,042 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 5,065 | — | 5,065 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options and issuance of restricted stock unit awards, net of statutory tax withholdings | 459,630 | — | — | — | 298 | — | 298 | ||||||||||||||||||||||||||||||||||
| Recognition of Magna warrants | — | — | — | — | 6,695 | — | 6,695 | ||||||||||||||||||||||||||||||||||
| Net Loss | — | — | — | — | — | (122,074) | (122,074) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | 164,836,936 | $ | 2 | 132,354,128 | $ | 1 | $ | 1,431,342 | $ | (741,319) | $ | 690,026 | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Fisker Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands, except share data)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net loss | $ | (120,555) | $ | (122,074) | |||||||
| Reconciliation of net loss to net cash used in operating activities: | |||||||||||
| Stock-based compensation (benefit)/expense | (1,642) | 5,065 | |||||||||
| Depreciation and amortization | 9,150 | 379 | |||||||||
| Amortization of right-of-use asset | 1,504 | 900 | |||||||||
| Accretion of debt issuance costs | 428 | 204 | |||||||||
| Unrealized (gain)/loss recognized on equity securities | 730 | (5,120) | |||||||||
| Unrealized foreign currency (gain)/loss | 1,435 | (744) | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Prepaid expenses and other assets | (36,115) | (1,524) | |||||||||
| Accounts payable and accrued expenses | 61,807 | 13,024 | |||||||||
| Customer deposits | 335 | 4,755 | |||||||||
| Change in operating lease liability | (819) | (853) | |||||||||
| Net cash used in operating activities | (83,742) | (105,988) | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Acquisition of equity investment | — | (10,000) | |||||||||
| Purchases of property and equipment and intangible asset | (45,748) | (45,750) | |||||||||
| Net cash used in investing activities | (45,748) | (55,750) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Proceeds from the exercise of stock options | 2,788 | 1,861 | |||||||||
| Proceeds from stock issuance under "At-the-market" offering | 47,986 | — | |||||||||
| Payments for "At-the-market" issuance costs | (675) | — | |||||||||
| Net cash provided by financing activities | 50,099 | 1,861 | |||||||||
| Net increase (decrease) in cash and cash equivalents | (79,391) | (159,877) | |||||||||
| Cash and cash equivalents, beginning of the period | 736,549 | 1,202,439 | |||||||||
| Cash, cash equivalents and restricted cash, end of the period | $ | 657,158 | $ | 1,042,562 | |||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash paid for interest | 8,344 | $ | 9,642 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Fisker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In thousands, except share data)
(Unaudited)
1. Overview of the Company
Fisker was originally incorporated in the State of Delaware on October 13, 2017 as a special purpose acquisition company under the name Spartan Energy Acquisition Corp. for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. Spartan completed its initial public offering in August 2018. On October 29, 2020, Spartan’s wholly-owned subsidiary merged with and into Fisker Holdings Inc. (f/k/a Fisker Inc.), a Delaware corporation (“Legacy Fisker”), with Fisker Holdings Inc. surviving the merger as a wholly-owned subsidiary of Spartan (the “Business Combination”). In connection with the Business Combination, Spartan changed its name to Fisker Inc.
Legacy Fisker was incorporated in the State of Delaware on September 21, 2016. In connection with its formation, the Company entered into stock purchase agreements with the Company’s founders, whereby the founders contributed certain intellectual property (primarily trademarks) and interests in Platinum IPR LLC. Platinum IPR LLC was an entity solely owned by the Company’s founders, which held Fisker trademarks registered in a variety of jurisdictions around the world. The founders’ transfer of its interest in Platinum IPR LLC and the transfer of trademarks was accounted for as a transfer of assets between entities under common control. The carrying amount of the transferred assets is recorded based on the prior carrying value, which was de minimis.
The Company’s common stock is listed on the NYSE under the symbol “FSR”. The Company’s warrants previously traded on the NYSE under the symbol “FSR WS” and on April 19, 2021, the NYSE filed a Form 25-NSE with respect to the warrants; the formal delisting of the warrants became effective ten days thereafter.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the SEC.
Unaudited Interim Financial Statements
The condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations and the condensed consolidated statements of changes in stockholders’ equity for the three-months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three-months ended March 31, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date. The interim condensed consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
Comprehensive loss is not separately presented as the amounts are equal to net loss for the three-months ended March 31, 2023 and 2022.
The interim condensed consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The condensed consolidated financial statements for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods.
Going Concern, Liquidity and Capital Resources
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The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern over the next twelve months from the date of filing this report. As of March 31, 2023, the Company had approximately $653 million in unrestricted cash and cash equivalents. The Company believes that substantial doubt about its ability to continue as a going concern does not exist as its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of the filing of this Form 10-Q.
Since inception, the Company has yet to generate any significant revenue from its core business operations and has incurred significant accumulated losses of approximately $1.3 billion. The Company expects to continue to incur significant operating losses for the foreseeable future. The Company expects its capital expenditures and working capital requirements to increase substantially in 2023 and beyond, as it progresses toward serial production of the Fisker Ocean EV model, develop its customer support and marketing infrastructure and expand its research and development efforts. The Company may, however, need additional cash resources, including proceeds of up to $101.7 million from the sale of Class A common stock under its at-the-market equity program, to fund its operations until it commences serial production levels of the Fisker Ocean and achieves a level of production and sales that provide for operating profitability. To the extent that Fisker’s current resources are insufficient to satisfy its cash requirements, the Company may need to seek additional equity or debt financing and there can be no assurance that the Company will be successful in its efforts. If the financing is not available, or if the terms of financing are less desirable than the Company expects, the Company may be forced to decrease its planned level of investment in product development or scale back its operations,including production of the Fisker Ocean, which could have an adverse impact on its business and financial prospects.
Supplier Risk
Suppliers will begin production of components for serial production of vehicles, which are scheduled to be assembled in Austria, during the second quarter of 2023. As of March 31, 2023, these supplier contracts do not represent unconditional purchase obligations with take-or-pay or specified minimum quantities provisions. The Company has secured battery capacity with a supplier located in China for the Fisker Ocean SUV. Under the terms of the agreement, from 2023 through 2025, the battery supplier will deliver two different battery solutions for the Fisker Ocean SUV, with an initial battery capacity of over 5 gigawatt-hours annually.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP required management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the condensed consolidated financial statements and accompanying notes. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.
Restricted Cash
Cash and cash equivalents that is restricted is primarily related to letters of credit issued to suppliers. The Company's restricted cash balance was $4.6 million as of March 31, 2023. Cash and cash equivalents are unrestricted as of December 31, 2022. Subsequent to March 31, 2023, the Company's restricted cash balance related to letters of credit issued to suppliers increased to $29.7 million.
Fair Value Measurements
The Company follows the accounting guidance in ASC 820 Fair Value Measurement ("ASC 820"), for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets or liabilities.
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Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets as follows:
| Useful Life (in years) | |||||
| Tooling | 3-8 | ||||
| Machinery and equipment | 5-15 | ||||
| Furniture and fixtures | 5-10 | ||||
| IT hardware and software | 3-10 | ||||
| Leasehold improvements | Shorter of their estimated life or remaining lease term | ||||
Construction in progress is comprised primarily of costs incurred to construct serial production tooling located at affiliates of Magna and our suppliers.
Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the related lease. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repair expenditures are expensed as incurred, while major improvements that increase functionality of the asset are capitalized and depreciated ratably to expense over the identified useful life.
Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset group to its carrying amount. The Company assesses impairment for asset groups, which represent a combination of assets that produce distinguishable cash flows. If the carrying amount of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. The Company has not recorded any impairment charges during the periods presented.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
There are transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. As of March 31, 2023, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2022.
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The Company’s income tax provision consists of an estimate for U.S. federal, foreign and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. The Company maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because the Company believes the recoverability of the tax assets is not more likely than not as of March 31, 2023.
Equity Awards
The grant date for an option or stock award is established when the grantee has a mutual understanding of the key terms and conditions of the option or award, the award is authorized, including all the necessary approvals unless approval is essentially a formality or perfunctory, and the grantee begins to benefit from, or be adversely affected by, underlying changes in the price of the Company’s Class A common shares. An award or option is authorized on the date that all approval requirements are completed (e.g., action by the compensation committee approving the award and the number of options, restricted shares or other equity instruments to be issued to individual employees).
Net Loss per Share of Common Stock
Basic net loss per share of common stock is calculated using the two-class method under which earnings are allocated to both common shares and participating securities. Undistributed net losses are allocated entirely to common shareholders since the participating security has no contractual obligation to share in the losses. Basic net loss per share is calculated by dividing the net loss attributable to common shares by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of stock-based compensation awards and warrants to purchase common stock (using the treasury stock method).
Foreign Currency Remeasurement and Transactions
The functional currency of the Company’s foreign subsidiaries is the U.S. Dollar. For these subsidiaries, monetary assets and liabilities denominated in non-U.S. currencies are re-measured to U.S. Dollars using current exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities denominated in non-U.S. currencies are maintained at historical U.S. Dollar exchange rates. Expenses are re-measured at average U.S. Dollar monthly rates.
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Transaction gains and losses are immaterial for all periods presented.
In April and July 2022, the Company purchased 130.1 million Euros for 140.0 million U.S. dollars, a currency exchange rate of 1 U.S. dollar for 1.076 Euro and 50.0 million Euros for 50.9 million U.S. dollars, a currency exchange rate of 1 U.S. dollar for 1.018 Euro, which are designed to provide an economic hedge against future foreign currency exposures. The Company has used purchased Euros totaling 65.0 million for Euro-denominated capital expenditures and expenses during the three-months ended March 31, 2023 and has 24.6 million Euros available as of March 31, 2023 for future foreign currency exposures.
3. Fair Value Measurements
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
Fair Value Measured as of March 31, 2023: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets included in: | |||||||||||||||||||||||
| Money market funds included in cash and cash equivalents | $ | 577,752 | $ | — | $ | — | $ | 577,752 | |||||||||||||||
| Equity investment | 2,410 | — | — | 2,410 | |||||||||||||||||||
| Total fair value | $ | 580,162 | $ | — | $ | — | $ | 580,162 | |||||||||||||||
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Fair Value Measured as of December 31, 2022: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets included in: | |||||||||||||||||||||||
| Money market funds included in cash and cash equivalents | $ | 601,045 | $ | — | $ | — | $ | 601,045 | |||||||||||||||
| Equity investment | 3,140 | — | — | 3,140 | |||||||||||||||||||
| Total fair value | $ | 604,185 | $ | — | $ | — | $ | 604,185 | |||||||||||||||
The fair value of the Company’s money market funds is determined using quoted market prices in active markets for identical assets. The carrying amounts included in the Condensed Consolidated Balance Sheets under Current assets approximate fair value because of the short maturity of these instruments.
On July 28, 2021, the Company made a commitment for a private investment in public equity (PIPE) supporting the planned merger of European EV charging network, Allego B.V. (“Allego”) with Spartan Acquisition Corp. III (NYSE: SPAQ), a publicly-listed special purpose acquisition company. Fisker Inc. is the exclusive electric vehicle automaker in the PIPE and, in parallel, agreed to terms to deliver a range of charging options for its customers in Europe. On March 16, 2022, the merger closed and the Company delivered cash of $10.0 million in exchange for 1,000,000.00 shares of Allego's Class A common stock (NYSE:ALLG). The Company's ownership percentage is less than 5% and does not result in significant influence and has classified its equity investment in Allego as a current asset. Unrealized loss recognized during the three-months ended March 31, 2023 on equity securities held as of March 31, 2023 totaled $0.7 million as shown separately in the Condensed Consolidated Statement of Operations.
We carry the convertible senior notes at face value less the unamortized debt issuance costs on our consolidated balance sheets and present that fair value for disclosure purposes only. As of March 31, 2023, the fair value of the 2026 Notes was $205.4 million. The estimated fair value of the convertible notes, which are classified as Level 2 financial instruments, was determined based on the estimated or actual bid prices of the convertible notes in an over-the-counter market on the last business day of the period.
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following as of March 31, 2023 and December 31, 2022 (in thousands):
| As of March 31, 2023 | As of December 31, 2022 | ||||||||||
| Prepaid insurance | 2,588 | 2,951 | |||||||||
| Value-added tax receivable | 22,044 | 27,928 | |||||||||
| Inventory | 29,016 | 4,276 | |||||||||
| Prepaid and other current assets | 72,657 | 56,610 | |||||||||
| $ | 126,305 | $ | 91,765 | ||||||||
The Company paid value-added taxes on certain capital expenditures and submitted requests for refunds from tax authorities in foreign countries with a concentration in Europe that are pending repayment as of March 31, 2023 and December 31, 2022. Prepaid and other current assets include payments to certain suppliers in advance of production. Inventory consists of raw materials to be used in production.
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5. Intangible Assets
The Company has the following intangible assets (in thousands):
As of March 31, 2023 | |||||||||||||||||||||||
| Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
| Capitalized cost - manufacturing | 8 years | $ | 254,534 | $ | (13,212) | $ | 241,322 | ||||||||||||||||
| $ | 254,534 | $ | (13,212) | $ | 241,322 | ||||||||||||||||||
As of December 31, 2022 | |||||||||||||||||||||||
| Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
| Capitalized cost - manufacturing | 8 years | $ | 252,304 | $ | (5,382) | $ | 246,922 | ||||||||||||||||
| $ | 252,304 | $ | (5,382) | $ | 246,922 | ||||||||||||||||||
Amortization expense of capitalized costs associated with the manufacturing of the Fisker Ocean and production parts, and for warrants granted to Magna International, Inc. (“Magna”) for the three-months ended March 31, 2023 was $8.0 million and is expected to be approximately $31.8 million for the year ending December 31, 2023 and in each of the succeeding five years. The Company expects to amortize the intangible asset over eight years but will continually assess the reasonableness of the estimated life. Refer to Note 9 for additional information regarding the capitalization of costs upon issuance of warrants to Magna.
6. Property and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
| As of March 31, 2023 | As of December 31, 2022 | ||||||||||
| Tooling | $ | 46,960 | $ | — | |||||||
| Machinery and equipment | 27,513 | 9,298 | |||||||||
| Furniture and fixtures | 563 | 470 | |||||||||
| IT hardware and software | 9,256 | 6,427 | |||||||||
| Leasehold improvements | 634 | 634 | |||||||||
| Construction in progress | 339,706 | 372,789 | |||||||||
| Total property and equipment | 424,632 | 389,618 | |||||||||
| Less: Accumulated depreciation and amortization | (4,025) | (2,481) | |||||||||
| Property and equipment, net | $ | 420,607 | $ | 387,137 | |||||||
Construction in progress is comprised primarily of costs incurred to construct serial production tooling located at affiliates of Magna and our suppliers. Assets of $47.0 million that are ready for their intended use have changed categories from Construction in progress to Tooling during the three-months ended March 31, 2023. As of March 31, 2023, accounts payable and accrued expenses includes acquired property and equipment of $133.9 million compared to $144.8 million as of December 31, 2022, which is excluded from net cash used in investing activities as reported in the condensed consolidated statement of cash flows for the three-months ended March 31, 2023.
The amounts in the table above as of December 31, 2022 have been updated to correct a disclosure classification error between fixed asset categories such that Machinery and equipment was overstated and Construction in progress was understated by $33.0 million. The Company determined the error was not material to its previously issued financial statements as it did not affect the Company's financial position as of December 31, 2022 or its results from operations and cash flows for the year ended December 31, 2022.
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7. Accrued Expenses
A summary of the components of accrued expenses is as follows (in thousands):
| March 31, 2023 | December 31, 2022 | ||||||||||
| Accrued vendor liabilities | $ | 291,067 | $ | 251,291 | |||||||
| Order deposits | 4,917 | 4,860 | |||||||||
| Accrued professional fees | 2,030 | 1,145 | |||||||||
| Accrued payroll | 4,415 | 1,627 | |||||||||
| Accrued interest | 695 | 4,867 | |||||||||
| Accrued other | 7,586 | 1,135 | |||||||||
| Total accrued expenses | $ | 310,710 | $ | 264,925 | |||||||
Accrued expenses include amounts owed to vendors but not yet invoiced in exchange for vendor purchases, research and development services, and order deposits. Certain estimates of accrued vendor expenses are based on costs incurred to date.
Order Deposits
In the third quarter of 2022, the Company began accepting order deposits of $5,000 USD or equivalent currency (Order Deposits) for Fisker Ocean Ones, a limited-edition trim level of the Fisker Ocean. The Company also converted customer deposits for reservation holders who previously made a deposit for an Extreme, Ultra or Sport Ocean prior to August 16, 2022, the enactment date of the Inflation Reduction Act of 2022 (the "Inflation Reduction Act"). Order deposits will be applied to the sales price of the vehicle and recognized as revenue when the vehicle is sold and delivered to the customer. Order Deposits are not included in customer deposits.
On July 1, 2022, the Company entered into a contract for global payment processing agreement with JPMorgan Chase Bank, N.A. (“Chase”). Order Deposits paid directly to the Company via ACH or other direct payment mechanisms are received in the Company’s bank account and available for its use in the subsequent month after the month in which the Order Deposits were placed. For Order Deposits made through credit card transactions, Chase holds cash received from customers until the vehicle is delivered to the customer at which time the cash is deposited into the Company’s bank account and available for its use. Cash received from Order Deposits and the conversion of any customer deposit results in the recognition of a contract liability. As of March 31, 2023 contract liabilities totaled $4.9 million and were classified as current liabilities, included in “Accrued Expenses” on the consolidated balance sheet.
8. Customer Deposits
Customer deposits consists of the following (in thousands):
| March 31, 2023 | December 31, 2022 | ||||||||||
| Customer reservation | $ | 14,915 | $ | 14,580 | |||||||
| Customer SUV option | 754 | 754 | |||||||||
| Total customer deposits | $ | 15,669 | $ | 15,334 | |||||||
Customer deposits consist of reservations, which represent cash received for the future right (e.g., a reservation) to order a Fisker Ocean or PEAR, and customer SUV option. Each reservation requires a deposit of $250 USD or equivalent currency.
9. Convertible Senior Notes
2026 Notes
In August 2021, we issued an aggregate of $667.5 million principal amount of 2.50% convertible senior notes due in September 2026 (the “2026 Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the
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Securities Act of 1933, as amended. The 2026 Notes have been designated as green bonds, whose proceeds will be allocated in accordance with the Company’s green bond framework. The 2026 Notes consisted of a $625.0 million initial placement and an over-allotment option that provided the initial purchasers of the 2026 Notes with the option to purchase an additional $100.0 million aggregate principal amount of the 2026 Notes, of which $42.5 million was exercised. The 2026 Notes were issued pursuant to an indenture dated August 17, 2021. The net proceeds from the issuance of the 2026 Notes were $562.2 million net of debt issuance costs and cash used to purchase the capped call transactions (“2026 Capped Call Transactions”) discussed below. The debt issuance costs are amortized to interest expense.
The 2026 Notes are unsecured obligations which bear regular interest at 2.50% annually and are payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2022. The 2026 Notes will mature on September 15, 2026, unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2026 Notes are convertible into cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election, at an initial conversion rate of 50.7743 shares of Class A common stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $19.70 per share of our Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the indenture governing the 2026 Notes. We may redeem for cash all or any portion of the 2026 Notes, at our option, on or after September 20, 2024 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
Holders of the 2026 Notes may convert all or a portion of their 2026 Notes at their option prior to June 15, 2026, in multiples of $1,000 principal amounts, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on September 30, 2021 (and only during such calendar quarter), if the last reported sale price of the Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•during the -business day period after any consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the applicable conversion rate of the 2026 Notes on such trading day;
•if we call such 2026 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the notes called (or deemed called) for redemption; or
•on the occurrence of specified corporate events.
On or after June 15, 2026, the 2026 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the 2026 Notes who convert the 2026 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2026 Notes, or in connection with a redemption may be entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the 2026 Notes may require us to repurchase all or a portion of the 2026 Notes at a price equal to 100% of the principal amount of 2026 Notes, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
We accounted for the issuance of the 2026 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.
As of March 31, 2023, the 2026 Notes consisted of the following (in thousands):
| Principal | $ | 667,500 | |||
| Unamortized debt issuance costs | (6,250) | ||||
| Net carrying amount | $ | 661,250 | |||
Interest expense related to the amortization of debt issuance costs for the three-months ended March 31, 2023 was $0.4 million. Contractual interest expense for the three-months ended March 31, 2023 was $4.2 million.
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As of March 31, 2023, the if-converted value of the 2026 Notes did not exceed the principal amount. The 2026 Notes were not eligible for conversion as of March 31, 2023.No sinking fund is provided for the 2026 Notes, which means that we are not required to redeem or retire them periodically.
Capped Call Transactions
In connection with the offering of the 2026 Notes, we entered into the 2026 Capped Call Transactions with certain counterparties at a net cost of $96.8 million. The 2026 Capped Call Transactions are purchased capped call options on 33.9 million shares Class A common stock, that, if exercised, can be net share settled, net cash settled, or settled in a combination of cash or shares consistent with the settlement elections made with respect to the 2026 Notes if converted. The cap price is initially $32.57 per share of our Class A common stock and subject to certain adjustments under the terms of the 2026 Capped Call Transactions. The strike price is initially $19.70 per share of Class A common stock, subject to customary anti-dilution adjustments that mirror corresponding adjustments for the 2026 Notes.
The 2026 Capped Call Transactions are intended to reduce potential dilution to holders of our Class A common stock upon conversion of the 2026 Notes and/or offset any cash payments we are required to make in excess of the principal amount, as the case may be, with such reduction or offset subject to a cap. The cost of the Capped Call Transactions was recorded as a reduction of our additional paid-in capital in our consolidated balance sheets. The Capped Call Transactions will not be remeasured as long as they continue to meet the conditions for equity classification.
10. Common Stock and Warrants
Magna Warrants
On October 29, 2020, the Company granted Magna up to 19,474,454 warrants, each with an exercise price of $0.01, to acquire underlying shares of Class A common stock of Fisker, which represented approximately 6.0% ownership in Fisker on a fully diluted basis as of the grant date. The right to exercise vested warrants expires on October 29, 2030. The warrants are accounted for as an award issued to non-employees measured on October 29, 2020 with three interrelated performance conditions that are separately evaluated for achievement.
| Milestone | Percentage of Warrants that Vest Upon Achievement | Number of Warrants that Vest Upon Achievement | ||||||||||||
| (a) (i) Achievement of the “preliminary production specification” gateway as set forth in the Development Agreement; (ii) entering into the Platform Agreement; and (iii) entering into the Initial Manufacturing Agreement | 33.3 | % | 6,484,993 | |||||||||||
| (b) (i) Achievement of the “target agreement” gateway as set forth in the Development Agreement and (ii) entering into the Detailed Manufacturing Agreement, which will contain terms and conditions agreed to in the Initial Manufacturing Agreement | 33.3 | % | 6,484,993 | |||||||||||
| (c) Start of pre-serial production | 33.4 | % | 6,504,468 | |||||||||||
| 19,474,454 | ||||||||||||||
The cost upon achievement of each milestone is recognized when it is probable that a milestone will be met. The cost for awards to nonemployees is recognized in the same period and in the same manner as if the Company had paid cash for the goods or services. At March 31, 2023, Magna satisfied the first and second milestones and the Company capitalized costs as an intangible asset representing the future economic benefit to Fisker Inc. As of March 31, 2023, the Company determined the third milestone is probable of achievement and capitalized a portion of the award's fair value corresponding to the service period beginning at the grant date and ending in the second quarter of 2023, a change in the estimated service period of the third tranche from 29 months to 31 months resulting in a decrease of the carrying value and related accretion of $3.8 million in the three-month period ended March 31, 2023. For the three-months ended March 31, 2023, the recognized cost of $2.2 million (a non-cash transaction) associated with services rendered, resulted in increased capitalized cost - manufacturing to $254.5 million as of March 31, 2023. Throughout its useful life, including the period of time before completion, the Company will assess the intangible asset for impairment. If an indicator of impairment exists, the undiscounted cash flows will be estimated and then if the carrying amount of the intangible asset is not recoverable, determine its fair value and record an impairment loss. At March 31, 2023, no indicators of impairment exists.
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The fair value of each warrant is equal to the intrinsic value (e.g., stock price on grant date less exercise price) as the exercise price is $0.01. The terms of the warrant agreement require net settlement when exercised. Using the measurement date stock price of $8.96 for a share of Class A common stock, the warrant fair values for each tranche is shown below. Capitalized cost also results in an increase to additional paid in capital equal to the fair value of the vested warrants. Awards vest when a milestone if met. Magna has 12,969,986 vested and exercisable warrants to acquire underlying Class A common stock of Fisker as of March 31, 2023, none of which are exercised.
| Fair value | Capitalized at March 31, 2023 | ||||||||||
| Milestone (a) | $ | 58,041 | $ | 58,041 | |||||||
| Milestone (b) | 58,041 | 58,041 | |||||||||
| Milestone (c) | 58,215 | 54,445 | |||||||||
| $ | 174,297 | $ | 170,527 | ||||||||
At-the-market Equity Program
In May, 2022, we entered into an at-the-market distribution agreement, dated May 24, 2022 with J.P. Morgan Securities LLC and Cowen and Company, LLC as the sales agents (the "Distribution Agreement"), pursuant to which the Company established an at-the-market equity program (the “ATM Program”). Pursuant to the ATM Program, Fisker may, at its discretion and from time to time during the term of the Distribution Agreement, sell, through the Agents, shares of its Class A Common Stock as would result in aggregate gross proceeds to the Company of up to $350 million by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made directly on the New York Stock Exchange, on any other existing trading market for the Class A Common Stock or to or through a market maker. In addition, the sales agents may also sell the shares of Class A Common Stock by any other method permitted by law, including, but not limited to, negotiated transactions. The Class A Common Stock sold under the ATM Program is registered with the SEC under the Company's effective shelf registration statement that permits the Company to issue various securities for proceeds of up to $2.0 billion. The Company issued 8,884,080 shares of Class A common stock during the three-months ended March 31, 2023 for gross proceeds of $54.8 million, before $0.8 million of commissions and other direct incremental issuance costs and stock issuance receivable of $9.6 million (non-cash), and, as of March 31, 2023, $101.7 million of Class A Common Stock is available for sale under the ATM Program. As of March 31, 2023, the Company may issue securities in the future for up to $1.65 billion under its shelf-registration statement, subject to customary underwriting and due diligence procedures.
11. Loss Per Share
The Company computes earnings (loss) per share of Class A Common Stock and Class B Common Stock using the two-class method required for participating securities. Basic and diluted earnings per share was the same for each period presented as the inclusion of all potential Class A Common Stock and Class B Common Stock outstanding would have been anti-dilutive. Basic and diluted earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights. The following table sets forth the computation of basic and diluted loss per Class A Common Stock and Class B Common Stock:
| Three-months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Numerator: | |||||||||||
| Net loss | $ | (120,555) | $ | (122,074) | |||||||
| Denominator: | |||||||||||
| Weighted average Class A common shares outstanding | 188,629,461 | 164,154,491 | |||||||||
| Weighted average Class B common shares outstanding | 132,354,128 | 132,354,128 | |||||||||
| Weighted average Class A and Class B common shares outstanding- Basic and Diluted | 320,983,589 | 296,508,619 | |||||||||
| Net loss per share attributable to Class A and Class B Common shareholders- Basic and Diluted | $ | (0.38) | $ | (0.41) | |||||||
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The following table presents the potential common shares outstanding that were excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been antidilutive:
| As of March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Convertible senior notes | 33,891,845 | 33,891,845 | |||||||||
| Stock options and warrants | 37,054,239 | 30,560,564 | |||||||||
| Total | 70,946,084 | 64,452,409 | |||||||||
12. Stock Based Compensation
The 2020 Equity Incentive Plan (the “Plan”) is a stock-based compensation plan which provides for the grants of options and restricted stock to employees and consultants of the Company. Options granted under the Plan may be either incentive options (“ISO”) or nonqualified stock options (“NSO”). Also, the Company established a 2020 Employee Stock Purchase Plan (the “ESPP”) under which Class A Common Stock may be issued. As of March 31, 2023, no shares have been issued under the ESPP.
Stock-based compensation expense is as follows (in thousands):
| Three Months Ended March 31, 2023 | |||||||||||
| 2023 | 2022 | ||||||||||
| Selling, general and administrative expense/(benefit) | $ | (657) | $ | 1,773 | |||||||
| Research and development expense/(benefit) | (985) | 3,292 | |||||||||
| Total | (1,642) | 5,065 | |||||||||
Stock options
Options under the Plan may be granted at prices as determined by the Board of Directors, provided, however, that (i) the exercise price of an ISO and NSO shall not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. The fair value of the shares is determined by the Board of Directors on the date of grants. Stock options generally have a contractual life of 10 years. Upon exercise, the Company issues new shares.
In 2016 and 2017, the Company’s founders were granted an aggregate of 15,882,711 options which are fully vested and are not related to performance. Options granted to other employees and consultants become vested and are exercisable over a range of up to six years from the date of grant.
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The following table summarizes option activity under the Plan:
| Options | Weighted Average Exercise Price | Weighted Average Contractual Term (in Years) | |||||||||||||||
| Balance as of December 31, 2022 | 17,679,596 | 1.51 | 4.7 | ||||||||||||||
| Granted | 7,000 | 7.05 | |||||||||||||||
| Exercised | (34,124) | 0.60 | |||||||||||||||
| Forfeited | (72,687) | 14.42 | |||||||||||||||
| Balance as of March 31, 2023 | 17,579,785 | 1.46 | 4.5 | ||||||||||||||
The fair value of each stock option grant under the Plan was estimated on the date of grant using the Black-Scholes option pricing model, with the following range of assumptions:
| Three Months Ended March 31, 2023 | |||||
| Expected term (in years) | 6.3 | ||||
| Volatility | 74.5% to 75.2% | ||||
| Dividend yield | 0.0% | ||||
| Risk-free interest rate | 3.40% to 4.00% | ||||
| Common stock price | $6.98 to $7.10 | ||||
The Black-Scholes option pricing model requires various highly subjective assumptions that represent management’s best estimates of the fair value of the Company’s common stock, volatility, risk-free interest rates, expected term, and dividend yield. As the Company’s shares have actively traded for a short period of time subsequent to the Business Combination, volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.
The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules. Since the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future; therefore, the Company used an expected dividend yield of zero. The risk-free interest rate is based on U.S. Treasury rates in effect during the expected term of the grant. The expected volatility is based on historical volatility of publicly-traded peer companies.
Restricted stock awards
During the three months ended March 31, 2022, the Company granted employees, who rendered services during the year ended December 31, 2021 and were employees of the Company on the grant date, a restricted stock unit (“RSU”) award based in proportion to the service period beginning from the employee’s hire date to the end of the year. The restricted stock unit awards vested on the grant date which resulted in the release of 339,340 shares of Class A common stock equal to stock-based compensation expense of $1.5 million recognized in the three-months ended March 31, 2022. The Company’s founders declined to receive an award related to performance in 2021 and 2022. In accordance with the Company’s Outside Director Compensation Policy, each outside Board of Directors member will receive an annual RSU equal to $200,000 granted on the date of the Company’s annual shareholders’ meeting which vests in 25% increments at the end of each calendar quarter. Each Outside Director may elect to convert all or a portion of his or her annual Board of Directors retainer, excluding any annual retainer that an Outside Director may receive for serving as Lead Director and any annual retainers for committee service, into RSUs in lieu of the applicable cash retainer payment (“RSU Election”). The RSU awards granted to Outside Directors vested on the grant date which resulted in stock-based compensation expense of $0.4 million recognized in each of the three-months ended March 31, 2023 and March 31, 2022, respectively.
The number of Class A Common Stock granted to Outside Directors annually is based on the 30-day average closing trading price of Class A common stock on the day preceding the grant date (“RSU Value”). When an Outside Director exercises his or her RSU Election, the number of shares of Class A Common Stock equal the amount of cash subject to such RSU Election divided by the applicable RSU Value and are fully vested.
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The following table summarizes RSU activity under the Plan:
| RSU Awards | Weighted Average Grant Date Fair Value | |||||||||||||
| Unvested as of December 31, 2022 | 11,752 | $ | 12.45 | |||||||||||
| Awarded | 625,844 | 6.62 | ||||||||||||
| Vested | (47,165) | 12.88 | ||||||||||||
| Forfeited | (8,992) | 12.47 | ||||||||||||
| Unvested as of March 31, 2023 | 581,439 | $ | 10.78 | |||||||||||
Performance-based restricted stock awards
In the third quarter of 2021, the Company’s compensation committee ratified and approved performance-based restricted stock units (“PRSUs”) to all employees (“Grantee”) the value of which is determined based on the Grantee’s level within the Company (“PRSU Value”). Each PRSU is equal to one underlying share of Class A common stock. The number of shares subject to a Grantee’s PRSU award equals the Grantee’s PRSU Value divided by the closing price per Class A common share on the service inception date, or if the service inception date is not a trading day, the closing price per Share on the closest trading day immediately prior to the service inception date; in each case rounded down to the nearest whole number. Each PRSU award shall vest as to 50% of the PRSU Value upon the Committee’s determination, in its sole discretion, and certification of the occurrence of the Ocean Start of Production and shall vest as to 50% of the PRSUs upon the first anniversary of the Ocean Start of Production, in each case, subject to (i) the Grantee’s continuous service through the applicable vesting date, (ii) the Grantee’s not committing any action or omission that would constitute Cause for termination through the applicable vesting date, as determined in the sole discretion of the Company, and (iii) the Ocean Start of Production occurring on or before December 31, 2022. The compensation committee has discretion to reduce or eliminate the number of PRSUs that shall vest pursuant to each PRSU award upon the certification of the occurrence of the Ocean Start of Production and/or upon the first anniversary of the Ocean Start of Production, after considering, any factors that it deems relevant, which could include but are not limited to (i) Company performance against key performance indicators, and (ii) departmental performance against goals. The service inception date precedes the grant dates for both performance conditions. The grant date for each of the performance conditions is the date Grantees have a mutual understanding of the key terms and conditions of the PRSU, which will occur when each performance condition is achieved, and the compensation committee has determined whether it will exercise its discretion to adjust the PRSU award. Recognition of stock-based compensation occurs when performance conditions are probable of achievement. Measurement of stock-based compensation attributed to the PRSU awards will be based on the fair value of the underlying Class A Common Stock once the grant date is determined (e.g., variable accounting).
As of March 31, 2023, the Company has approved and authorized PRSUs equal to 2,191,975 shares of Class A Common Stock with an aggregate PRSU value of $13.5 million of which 1,278,465 awards vested on March 24, 2023, the grant and vesting date for the first tranche of the PRSU award. As of December 31, 2022, achievement of the first tranche of the PRSU award was deemed probable resulting in the recognition of cumulative expense of $10.1 million. During the three-month period ended March 31, 2023, the Company measured the cumulative expense to be recognized upon vesting based on the closing stock price on the grant and vesting date, which resulted in cumulative expense of $7.3 million, a reduction of $2.8 million from the Company's measurement of compensation expense as of the end of 2022. The cumulative catch-up adjustment of $2.8 million recorded in the three-month period ended March 31, 2023 to remeasure the PRSU award exceeded compensation expense of $1.1 million for stock options and restricted stock awards.
The grant date of the second tranche of the PRSUs has not been determined as department goals have not been set and the compensation committee has not determined whether it will use its negative discretion. Thus, achievement of the second tranche of the PRSUs is not probable as of March 31, 2023 and remains subject to variable accounting treatment.
13. Related Party Transactions
On March 8, 2021, the Company appointed Mitchell Zuklie to its Board of Directors . Mr. Zuklie is the chairman of the law firm of Orrick, Herrington & Sutcliff LLP (‘‘Orrick’’), which provides various legal services to the Company. During the three-months ended March 31, 2023 and 2022, the Company incurred expenses for legal services rendered by Orrick totaling approximately $0.5 million and $1.7 million, respectively.
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14. Commitments and Contingencies
The Company is not a party to any material legal proceedings and is not aware of any pending or threatened material claims. From time to time however, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Fisker is building a technology-enabled, asset-light automotive business that it believes will be among the first of its kind and aligned with the future state of the automotive industry. This involves a focus on vehicle development, customer experience, sales and service intended to change the personal mobility experience through technological innovation, ease of use and flexibility. The Company combines the legendary design and engineering expertise of Henrik Fisker to develop high quality electric vehicles with strong emotional appeal. Central to Fisker’s business model is the Fisker Flexible Platform Agnostic Design (“FF-PAD”), a proprietary process that allows the development and design of a vehicle to be adapted to any given electric vehicle (“EV”) platform in the specific segment size. The process focuses on selecting industry leading vehicle specifications and adapting the design to crucial hard points on a third-party supplied EV platform and outsourced manufacturing to reduce development cost and time to market. The first example of this is Fisker’s work to adapt the Fisker Ocean design to a base vehicle platform developed by Magna Steyr Fahrzeugtechnik AG & Co KG (“Magna Steyr”).
Recent Developments
We achieved several key milestones in Europe in April and May 2023, including (i) the all-electric Fisker Ocean Extreme equipped with standard 20” and optional 22” wheels and tires achieved combined WLTP ranges of up to 707 km/440 miles and 701 km/436 miles, respectively; (ii) we opened our inaugural Center + facilities in Copenhagen, Denmark and Vienna, Austria; (iii) the Fisker Ocean received small series type approval from the regulatory authority to be sold and delivered in Europe; and (iv) we completed an initial delivery of the limited edition Fisker Ocean One to an early customer in Denmark and we registered a Fisker Ocean One in Germany for Henrik Fisker, our CEO.
As outlined earlier this year, our production forecasts are linked to supply chain readiness and receipt of multiple regulatory homologation approvals across our launch markets. The timing of these approvals has shifted, which impacts our initial volume forecasts for 2023. Based on our current expectations for approvals, which includes obtaining US homologation approvals in May 2023, as well as our capacity expectations related to our supply base, we currently forecast we will produce 1,400 to 1,700 vehicles during the second quarter of 2023.
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Our focus during this initial industrialization phase is to ensure process readiness, tooling maturity, and part validation. Our suppliers are subject to external factors that could impact their ability to ramp output of components for our vehicles. For example, one of our Tier 2 suppliers entered receivership, which required a timely solution with our Tier 1 supplier to secure the underlying tooling. Our key supply chain partners are concentrated within an umbrella group of companies, and we are dependent upon their operational performance. A successful launch of the Fisker Ocean is reliant upon our key suppliers’ ability to mature software and components to market release levels. Our ability to reach expected run rates is also contingent upon the ability of our manufacturing partner to successfully ramp production at required quality levels. We continue to work with our suppliers, including our manufacturing partner, to add shifts to increase production capacity and meet our production goals for the second quarter.
Basis of Presentation
Fisker currently conducts its business through one operating segment. As a company with no commercial operations and limited revenues derived from merchandise sales and home charging solutions, which are not core to our ongoing business, Fisker’s activities to date have been limited and its historical results are reported under U.S. GAAP and in U.S. dollars. Upon commencement of retail production of its Ocean SUV, Fisker expects its global operations to focus primarily on the USA and the European Union markets. As a result, Fisker expects that the financial results it reports for periods after it begins retail production will not be comparable to the financial results included in this report or Fisker’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
Results of Operations
Comparison of the Three-Months Ended March 31, 2023 to the Three-Months Ended March 31, 2022
The following table sets forth Fisker’s historical operating results for the periods indicated:
Three-Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
| (dollar amounts in thousands) | |||||||||||||||||||||||
| Revenue | $ | 198 | $ | 12 | $ | 186 | n.m. | ||||||||||||||||
| Cost of goods sold | 164 | 11 | 153 | n.m. | |||||||||||||||||||
| Gross Margin | 34 | 1 | 33 | n.m. | |||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 44,648 | 21,992 | 22,656 | 103 | % | ||||||||||||||||||
| Research and development | 76,999 | 101,460 | (24,461) | (24) | % | ||||||||||||||||||
| Total operating costs and expenses | 121,647 | 123,452 | (1,805) | (1) | % | ||||||||||||||||||
| Loss from operations | (121,613) | (123,451) | 1,838 | (1) | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Other income (expense) | (45) | (371) | 326 | (88) | % | ||||||||||||||||||
| Interest income | 6,894 | 265 | 6,629 | n.m. | |||||||||||||||||||
| Interest expense | (4,601) | (4,383) | (218) | 5 | % | ||||||||||||||||||
| Foreign currency gain/(loss) | (401) | 746 | (1,147) | n.m. | |||||||||||||||||||
| Unrealized gain/(loss) recognized on equity securities | (730) | 5,120 | (5,850) | n.m. | |||||||||||||||||||
| Total other income (expense) | 1,117 | 1,377 | (260) | (19) | % | ||||||||||||||||||
| Loss before income taxes | (120,496) | (122,074) | 1,578 | (1) | % | ||||||||||||||||||
| Provision for income taxes | (59) | — | (59) | n.m. | |||||||||||||||||||
| Net Loss | $ | (120,555) | $ | (122,074) | $ | 1,519 | $ | — | |||||||||||||||
n.m. = not meaningful.
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Revenue and Cost of Goods Sold
In May 2023, we began producing vehicles for deliveries to our customers and, accordingly, we are recognizing vehicle revenues from the sale of initial Fisker Ocean SUVs. Merchandise sales and home charging solutions are not intended to comprise a significant portion of the Company's revenues. Over the course of the second half of 2023, we will ramp production volumes at a measured pace to ensure the supplier base can delivery high-quality components in line with our serial production run-rate.
Sales of branded apparel and goods and home charging solutions totaled $198 thousand with related costs of goods sold of $164 thousand resulting in a gross profit of $34 thousand during the three-month period ended March 31, 2023 compared to branded apparel sales of $12 thousand with related cost of goods sold of $11 thousand resulting in gross profit of $1 thousand during the corresponding three-month period ended March 31, 2022.
Once we commence production and sale of our vehicles, we expect cost of goods sold to include mainly vehicle components and parts, including batteries, direct labor costs, amortized tooling costs and capitalized costs associated with the Magna warrants, and reserves for estimated warranty expenses.
Selling, General and Administrative
Selling, general and administrative expenses consist mainly of personnel-related expenses for Fisker’s executive and other administrative functions, advertising and marketing expenses, and expenses for outside professional services, including legal, accounting and other advisory services.
Selling, general and administrative expenses increased by $22.7 million or 103% from $22.0 million during the three months ended March 31, 2022 to $44.6 million during the three month period ended March 31, 2023, primarily due to increased salaried, targeted marketing and advertising for events, employee headcount, improved benefits in line with our human capital and ESG goals designed to offer potential employees competitive compensation packages and stock-based compensation. With vehicle deliveries beginning in the second quarter of 2023, we will increase our marketing and advertising efforts in alignment with expected customer interest in the Fisker Ocean. Also, Center+, showroom, vehicle processing, and service and pickup locations will open throughout the remainder of 2023 resulting in higher expenses. The timing of openings will correspond with customer order demand and completion of homologation in Europe and the United States. Selling, general and administrative expenses include stock-based compensation benefit of $0.7 million and stock based compensation expense of $1.8 million for three-months ended March 31, 2023 and 2022, respectively. Overall, total headcount for the Company increased to over 900 employees as of March 31, 2023, compared to 760 employees as of December 31, 2022.
The company expects selling, general and administrative expenses, excluding stock-based compensation expenses, in the year ended December 31, 2023 to range between $130.0 million and $160.0 million as compared to $106.4 million in the year ended December 31, 2022.
Research and Development
To date, Fisker’s research and development expenses have consisted primarily of external engineering services in connection with the design of the Fisker Ocean model and development of the pre-production and start of production vehicles.
Research and development expenses decreased by approximately $24.5 million or 24% from $101.5 million during the three months ended March 31, 2022, to $77.0 million during the three months ended March 31, 2023. The decrease primarily relates to higher costs associated with the purchase and expense of $39.2 million for prototype parts and engineering and design services incurred as Fisker met key development gateways during the first quarter of 2022 that did not recur in the first quarter of 2023 as the Fisker Ocean is in the final stages of homologation. Higher costs in the first quarter of 2022 are only partially offset by higher headcount in the first quarter of 2023. Over the remainder of 2023, we expect research and development expenses will continue to trend lower than the corresponding three-month periods in 2022 as conceptual design and development of PEAR and costs associated with the completion of homologation in 2023 are not expected to exceed 2022's costs incurred to complete the engineering and design of the Ocean and transition to production, including accrual of probable achievement of engineering and design milestones at the end of 2022. Research and development expense includes stock-based compensation benefit of $1.0 million and stock-based compensation expense of $3.3 million for the three-months ended March 31, 2023 and 2022, respectively.
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The company expects research and development expenses, excluding stock-based compensation expenses, in the year ended December 31, 2023 to range between $160.0 million and $190.0 million as compared to $423.9 million in the year ended December 31, 2022.
Interest Expense
Interest expense consists of interest expense associated with the convertible senior notes.
Interest expense amounted to $4.6 million and $4.4 million during the three months ended March 31, 2023 and 2022, respectively due to the sale, in August 2021, of $667.5 million principal amount of 2.50% convertible senior notes. Interest expense in the subsequent three-month period throughout calendar year 2023 will approximate $4.5 million, including accretion of debt issuance costs.
Foreign Currency Gain/Loss
The Company recorded foreign currency losses of $0.4 million during the three months ended March 31, 2023, compared to gains of $0.7 million during the three-months ended March 31, 2022, primarily due to remeasurement losses on Euro-denominated monetary assets caused by weakening Euro currency rates. For the remainder of 2023, we expect EUR denominated transactions associated with our foreign operations and services provided by suppliers will increase and will subject Fisker to greater fluctuation in realized gain and losses from foreign currencies.
Unrealized Gain/Loss Recognized on Equity Securities
Unrealized losses recognized on equity securities held as of March 31, 2023 totaled $0.7 million for the three-months ended March 31, 2023 compared to a gain of $5.1 million during the three-months ended March 31, 2022.
Provision for Income Tax
Fisker’s income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Fisker maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because Fisker believes the recoverability of the tax assets is not more likely than not.
Provision for income tax amounted to $59 thousand for the three-months ended March 31, 2023.
Net Loss
Net loss was $120.6 million during the three-months ended March 31, 2023, a decrease of approximately $1.5 million from a net loss of $122.1 million during the three-months ended March 31, 2022, for the reasons discussed above.
Liquidity and Capital Resources
As of the date of this Form 10-Q, Fisker has yet to generate any meaningful revenue from its core business operations. To date, Fisker has funded its capital expenditures and working capital requirements through equity and convertible notes, as further discussed below. Fisker’s ability to successfully commence its primary commercial operations and expand its business may depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.
As of March 31, 2023, Fisker’s cash and cash equivalents totaled $652.5 million.
In May 2022, we entered into the Distribution Agreement, pursuant to which Fisker established an ATM Program. Pursuant to the ATM Program, Fisker may, at its discretion and from time to time during the term of the Distribution Agreement, sell, through the Agents, shares of its Class A Common Stock as would result in aggregate gross proceeds to Fisker of up to $350 million by any method permitted by law deemed to be an “at-the-market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including without limitation sales made directly on the New York Stock Exchange, on any other existing trading market for the Class A Common Stock or to or through a market maker. In addition, the sales agents may also sell the shares of Class A Common Stock by any other method permitted by law, including, but not limited to, negotiated transactions. We issued 8,884,080 shares of Class A Common Stock under the
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ATM Program during the three-months ended March 31, 2023 for gross proceeds of $54.8 million, before $0.8 million of commissions and other direct incremental issuance costs. As of March 31, 2023, $101.7 million of Class A Common Stock is available for sale under the ATM Program.
In August 2021, we entered into a purchase agreement for the sale of an aggregate of $667.5 million principal amount of convertible senior notes due in 2026. The net proceeds from the issuance of the 2026 Notes were $562.2 million, net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 9. The 2026 Notes mature on September 15, 2026, unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The 2026 Notes were not convertible as of March 31, 2023.
Fisker expects its capital expenditures and working capital requirements to stabilize in 2023 and beyond, as it progresses toward production and deliveries of the Fisker Ocean, develops its customer support and marketing infrastructure and expands its research and development efforts on PEAR, Ronin and other future vehicle programs. Fisker believes that its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this Form 10-Q. Fisker may, however, need additional cash resources, including proceeds from the sale of up to $101.7 million of Class A common stock under the ATM Program, to fund its operations until it commences serial production levels of the Fisker Ocean due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, disruptions due to COVID-19, competitive pressures, and regulatory developments, among other developments such as the collaboration on “Project PEAR” with Foxconn announced in February 2021.
To the extent our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. In particular, in addition to issuing equity under our ATM Program, we may seek other forms of financing under our effective shelf registration statement or through private placements. Our existing effective shelf registration statement permits us to issue various securities for proceeds of up to $2.0 billion, which amount is reduced by amounts sold under our ATM Program. If such financing is not available, or if the terms of the financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects.
Cash Flows
The following table provides a summary of Fisker’s cash flow data for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
( in thousands) | |||||||||||
| Net cash used in operating activities | $ | (83,742) | $ | (105,988) | |||||||
| Net cash used in investing activities | (45,748) | (55,750) | |||||||||
| Net cash provided by financing activities | $ | 50,099 | $ | 1,861 | |||||||
Cash Flows used in Operating Activities
Fisker’s net cash flows used in operating activities to date have been primarily comprised of costs related to research and development, payroll and other selling, general and administrative activities. Lease commitments as of March 31, 2023, will result in cash payments of $6.4 million for the remainder of 2023, and $8.8 million for 2024, and $35.8 million for 2025 and thereafter. Structural improvements are required before Fisker can use its Fisker Lounges in the U.S. and Europe for its intended purposes. The timing for completion of the structural improvements is expected during 2023. Compared to 2022, Fisker expects its cash used in operating activities will decrease as development costs of the Fisker Ocean subside and cash collections from vehicle sales in excess of costs to manufacture accumulate throughout the remainder of 2023. In total, excluding stock-based compensation costs, Fisker is projecting to use between $290.0 million and $350.0 million for combined SG&A and R&D activities during 2023.
Net cash used in operating activities decreased by approximately $22.2 million from $106.0 million during the three-months ended March 31, 2022 to $83.7 million during the three-months ended March 31, 2023.
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Cash Flows used in Investing Activities
Fisker’s cash flows used in investing activities, historically, have been comprised mainly of purchases of property and equipment. During the three-months ended March 31, 2023, the Company acquired assets related to production of the Fisker Ocean and its components that totaled $45.7 million compared to $45.8 million during the three-months ended March 31, 2022. Fisker continues to expect 2023 capital expenditures for tooling and manufacturing equipment to range between $245 million and $260 million of which we expect at least 50% is denominated in foreign currencies, as serial production tooling and equipment installations continue at both vehicle assembly and supplier facilities during 2023.
Fisker used cash of $45.7 million for investing activities during the three-months ended March 31, 2023, compared to $55.8 million during the corresponding three-months ended March 31, 2022.
On July 28, 2021, the Company made a $10.0 million commitment for a private investment in public equity (PIPE) supporting the planned merger of leading European EV charging network, Allego with Spartan Acquisition Corp. III (NYSE: SPAQ), a publicly-listed special purpose acquisition company. The merger closed in the first quarter of 2022 which triggered our investment commitment resulting in a $10.0 million cash payment to acquire 1,000,000 class A common shares of Allego (NYSE: ALLG). Fisker was the exclusive electric vehicle automaker in the PIPE and, in parallel, has agreed to terms on a strategic partnership to deliver a range of charging options for its customers in Europe.
Cash Flows from Financing Activities
Through March 31, 2023, Fisker has financed its operations primarily through the sale of equity securities and convertible senior notes.
Net cash from financing activities was $50.1 million during the three-months ended March 31, 2023, which was primarily due to the proceeds from the issuance of the ATM equity program of $48.0 million, net of stock issuance costs of $0.7 million, as well as aggregate proceeds from the exercise of stock options and collection of related statutory withholding taxes of $2.8 million. Net cash from financing activities was $1.9 million during the three-months ended March 31, 2022 which was entirely due to the proceeds from the exercise of stock options and collection of related statutory withholding taxes due to payment and accrued as of March 31, 2022.
Off-Balance Sheet Arrangements
Fisker is not a party to any off-balance sheet arrangements, as defined under SEC rules.
Non-GAAP Financial Measure Reconciliations
The following tables show our Non-GAAP financial measure reconciliations:
Three-Months Ended March 31, | |||||||||||
| Selling, General and Administrative Reconciliation | 2023 | 2022 | |||||||||
| GAAP Selling, general and administrative | 44,648 | 21,992 | |||||||||
| Stock-based compensation benefit/(expense) | 657 | (1,773) | |||||||||
| Non-GAAP Selling, general and administrative | $ | 45,305 | $ | 20,219 | |||||||
Three-Months Ended March 31, | |||||||||||
| Research and Development Reconciliation | 2023 | 2022 | |||||||||
| GAAP Research and development | 76,999 | 101,460 | |||||||||
| Stock-based compensation benefit/(expense) | 985 | (3,292) | |||||||||
| Non-GAAP Research and development | $ | 77,984 | $ | 98,168 | |||||||
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Critical Accounting Policies and Estimates
Fisker’s financial statements have been prepared in accordance with GAAP. In the preparation of these financial statements, Fisker is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Fisker considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the condensed consolidated financial statements.
For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements included elsewhere in this Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and Fisker’s assessment, to the extent it has made one, of their potential impact on Fisker’s financial condition and its results of operations and cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Fisker has not, to date, been exposed to material market risks given its early stage of operations. In the future, Fisker expects to be exposed to foreign currency translation and transaction risks and potentially other market risks, including those related to interest rates or valuation of financial instruments, among others.
Foreign Currency Risk
Fisker’s functional currency is the U.S. dollar, while certain of Fisker’s current and future subsidiaries are expected to have functional currencies in Euro, British Pound Sterling, Indian Rupee, and Chinese Yuan Renminbi reflecting their principal operating markets. Once Fisker commences commercial operations, it expects to be exposed to both currency transaction and translation risk. For example, Fisker expects its contracts with OEMs and/or tier-one automotive suppliers to be transacted in Euro or other foreign currencies. In addition, Fisker expects that certain of its subsidiaries will have functional currencies other than the U.S. dollar, meaning that such subsidiaries’ results of operations will be periodically translated into U.S. dollars in Fisker’s condensed consolidated financial statements, which may result in revenue and earnings volatility from period to period in response to exchange rates fluctuations. The Company assesses whether opportunities exist to purchase foreign currencies with U.S. dollars to take advantage of favorable exchange rates. In April and July 2022, the Company purchased 130.1 million Euros for 140.0 million U.S. dollars, a currency exchange rate of 1 U.S. dollar for 1.076 Euro and 50.0 million Euros for 50.9 million U.S. dollars, a currency exchange rate of 1 U.S. dollar for 1.018 Euro. The Company has used purchased Euros totaling 65.0 million for Euro-denominated capital expenditures and expenses during the three-months ended March 31, 2023 and has 24.6 million Euros available as of March 31, 2023 for future foreign currency exposures.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosures.
Management, including the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation (pursuant to Rule 13a-15(b)under the Exchange Act) of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can
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provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2023, the Company’s disclosure controls and procedures were effective at the reasonable level.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
For a description of our material pending legal proceedings, please see Note 14, Commitments and Contingencies, to the unaudited condensed consolidated financial statements included elsewhere in this report.
From time to time, we may become involved in legal proceedings arising in the ordinary course of business. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.
Item 1A. Risk Factors
Please see Part I, Item 1A. Risk Factors in our Annual Report filed on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023, for a discussion of risks, uncertainties and other factors that could materially affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information.
Not applicable
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Item 6. Exhibits.
| Incorporated by Reference | ||||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit Title | Form | File No. | Exhibit No. | Filing Date | Filed or Furnished Herewith | ||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1 | X | |||||||||||||||||||||||||||||||||||||
| 32.2 | X | |||||||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document. | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X | ||||||||||||||||||||||||||||||||||||
| 104 | Coverpage Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 9, 2023.
| FISKER INC. | ||||||||
| By: | /s/ Dr. Geeta Gupta-Fisker | |||||||
| Name: | Dr. Geeta Gupta-Fisker | |||||||
| Title: | Chief Financial Officer and Chief Operating Officer | |||||||
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