LIGHTNING EMOTORS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

References to "we," "us," "our" or the "Company" are to Lightning eMotors, Inc.,
together with its wholly owned subsidiaries, except where the context requires
otherwise. The following discussion should be read in conjunction with our
audited consolidated financial statements and the related notes included in our
annual report on Form 10-K for the year ended December 31, 2021 filed with the
Securities and Exchange Commission on March 30, 2022.

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act, and Section 21E of the
Exchange Act. Our forward-looking statements include, but are not limited to,
statements regarding our or our management team's expectations, hopes, beliefs,
intentions, or strategies regarding the future. In addition, any statements that
refer to projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "will," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking.

The forward-looking statements contained in this report are based on our current
expectations and beliefs concerning future developments and their potential
effects on us. There can be no assurance that future developments affecting us
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 the risks
described in our annual report on Form 10-K, including, but not limited to: the
impact of the COVID-19 pandemic on the overall economy and our results of
operations; our ability to become profitable; our ability to disrupt the
commercial vehicle medium-duty powertrain market; our ability to control costs
of our operations; our ability to obtain sufficient supplies of chassis, motors,
batteries and other critical components for the manufacture of our vehicles and
powertrains; an increase in the cost of raw materials due to inflation; the
number of orders placed by our commercial fleet customers; our ability to raise
additional funds; the market acceptance of our products; the availability of
government grants, loans or other incentives; the ability of our solutions to
reduce carbon intensity and greenhouse gas emissions and other risks and
uncertainties.

Should one or more of these risks or uncertainties materialize, or should any of
our assumptions prove incorrect, actual results may vary in material respects
from those projected in these forward-looking statements. These forward-looking
statements speak only as of the date hereof. We undertake no obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by law.

Insight

We are a leading electrification solutions provider committed to enabling the
eradication of commercial vehicle emissions, one of the top contributors of
greenhouse gas emissions in the transportation sector according to the U.S.
Environmental Protection Agency. We design and manufacture zero-emission
vehicles, or ZEVs, including battery electric and fuel cell electric vehicles,
and charging infrastructure solutions for commercial fleets, large enterprises,
original equipment manufacturers and governments. Our product offerings range
from Class 3-5 cargo and passenger vehicles and school buses, Class 5 and 6 work
trucks and buses and Class 7 city buses and motorcoaches. Our ongoing focus has
been on providing a broad range of ZEV platforms and charging solutions to help
fleets reduce emissions, lower operating costs and improve energy efficiency.

We started in 2008 as a manufacturer of hybrid systems for commercial vehicles,
and in 2017, customer feedback led us to understand that hybrid systems did not
adequately address the growing issue of urban air pollution from commercial
vehicle fleets. In 2017, we redirected our efforts to focus exclusively on the
attractive market opportunity in ZEVs. We leveraged nearly 10 years of extensive
knowledge and production infrastructure from developing and implementing hybrid
commercial vehicles to successfully adapt to ZEVs. To date, all of our platforms
have been fully certified as ZEVs by the California Air Resource Board, the
clean air agency that defines vehicle emission standards. We currently maintain
nine Executive Orders, which are required to sell ZEVs in California as well as
various other states. As of July 31, 2022, we had approximately 300 vehicles on
the road with over 2 million miles driven.

                                       36
--------------------------------------------------------------------------------
  Table of Contents
We believe we are the only full-range manufacturer of Class 3 to 7 BEV and FCEV
in the United States, and we provide end-to-end electrification solutions,
including advanced analytics software and mobile charging solutions. We combine
an internally developed optimized modular software, which can be used in
multiple platforms and applications, with hardware designs, that we believe,
allows us to address a diverse range of opportunities in the markets in which we
operate in a cost-effective manner with a significant time-to-market advantage.
Our manufacturing facility has the capacity to produce 1,500 ZEVs per year on
one eight-hour shift. The same facility and equipment can produce 3,000 ZEVs
annually by increasing labor to two eight-hour shifts. We believe that with full
utilization of our facilities combined with our ability to lease more space on
our current campus, and with our OEM customers' installation capacities, we will
have the capacity to scale production to 20,000 vehicles and powertrains per
year. Over the long term, we believe that we will be able to leverage our
significant investment in manufacturing capacity to increase production output,
leverage our fixed overhead and improve profitability from the sale of our
products. In addition, we have also built an ecosystem of supply-chain partners
and specialty vehicle partners which are instrumental to our growth.

RECENT DEVELOPMENTS

During the three months ended June 30, 2022, we produced 69 ZEVs, of which 5 are
for our internal use, and 5 powertrains; and we sold 31 ZEVs and 5 powertrains.
During the six months ended June 30, 2022, we produced 144 ZEVs, of which 8 are
for our internal use, and 5 powertrains; and we sold 99 ZEVs and 5 powertrains.
We produced more ZEVs than we sold during the three and six months ended
June 30, 2022 due to customer financing delays. We are continuing to expand our
product offerings and seek applications for our modular software and hardware.
Using our modular customization strategy, we are able to adapt relatively
quickly to new customers' needs, vehicle configurations or uses.

In March 2022, we expanded our partnership with Forest River to offer a
factory-certified all-electric repower program for shuttle buses and passenger
vans. Forest River manufactures shuttle buses, recreational vehicles, cargo
trailers, utility trailers and pontoon boats, and with currently more than
50,000 vehicles, is the dominant manufacturer of shuttle buses across US and
Canada. Many of those buses have been highly customized with wheel-chair lifts,
roof-top air conditioners and other equipment. Repowering these vehicles not
only reduces emissions, it also preserves the prior investment and extends the
life of the vehicle all while reducing costs for the customer.

Repowering gas and diesel-powered commercial vehicles has been common practice
for many years since the chassis and body often outlast the powertrains, while
repowering vehicles with electric powertrains remains a largely untapped
opportunity for many fleet operators.

In May 2022, we announced a partnership with Perrone Robotics to offer Class 3
to 7 commercial fleet customers self-driving, electric fleet vehicles that can
be deployed for a wide range of dedicated uses. The partnership expands our
zero-emissions platform offerings to include Perrone's AV-powered technology,
TONY®, a vehicle-independent retrofit kit designed to enable vehicles to
transport people and goods in geo-fenced and dedicated driving routes. Vehicles
equipped with Perrone's self-driving technology embedded into our vehicles for
both cargo and passenger uses can be ordered immediately.

In June 2022we announced the widespread deployment of Class 3 vans and re-motorized Class 7 coaches across the bay area and from the north
California. All-electric vehicles are either already in service or soon to be in service with many of the biggest technology companies in the world. bay area.

In July 2022, we unveiled our second-generation Lightning Mobile chargers for
commercial and consumer electric vehicles. The first-of-its-kind mobile DC fast
charger offers rapid deployment of reliable charging capabilities in locations
where static charging stations are not possible or that only have Level 2 power
available-all without the constraints associated with installing static charging
stations. Each modular unit offers between 105 to 420 kWh battery capacity and
provides the option of up to 5 DC fast-charging outputs. The new systems are
currently available to order for delivery in late 2022.

In July 2022, we also agreed with our long-term customer Collins Bus to expand
their zero-emission Type A electric school bus offering to include both GM and
Ford chassis as a result of the chassis shortage we experienced.

Closing of the business combination

On December 10, 2020, Lightning Systems, Inc. entered into the business
combination agreement with GigCapital3, Inc. and its wholly owned subsidiary
Project Power Merger Sub, Inc. Pursuant to the business combination agreement,
the
                                       37
--------------------------------------------------------------------------------
  Table of Contents
stockholders of Gig approved the transaction on April 21, 2021, and the
transaction closed on May 6, 2021, or the Business Combination. As a result,
Merger Sub was merged with and into Lightning Systems and the separate corporate
existence of Merger Sub ceased, and Lightning Systems continued as the surviving
corporation of the Business Combination. The Business Combination was accounted
for as a reverse recapitalization. Under this method of accounting, Gig was
treated as the acquired company for financial statement reporting purposes, and
Lightning Systems was deemed the accounting predecessor. The combined entity
became the successor SEC registrant, meaning that Lightning Systems' financial
statements for previous periods are disclosed in the registrant's periodic
reports filed with the SEC after closing. On May 6, 2021, and in connection with
the closing of the Business Combination, Gig changed its name to Lightning
eMotors, Inc. See Note 1 and Note 3 to the Consolidated Financial Statements for
more detail on the Business Combination.

As a result of the Business Combination, Lightning Systems became our wholly
owned subsidiary. We are a NYSE-listed company with our common stock registered
under the Exchange Act.

Results of Operations

Comparison of the three months ended June 30, 2022 and 2021

The following table sets forth our historical operating results for the periods
indicated:

                                               Three Months Ended June 30,
                                                 2022                  2021             $ Change              % Change
                                                                    (dollar amounts in thousands)
Revenues                                   $        3,536          $   5,923          $  (2,387)                     (40) %
Cost of revenues                                    4,889              7,048             (2,159)                     (31) %
Gross loss                                         (1,353)            (1,125)              (228)                     (20) %
Operating expenses
Research and development                            1,810                743              1,067                      144  %
Selling, general and administrative                12,559             16,026             (3,467)                     (22) %
Total operating expenses                           14,369             16,769             (2,400)                     (14) %
Loss from operations                              (15,722)           (17,894)             2,172                       12  %
Other (income) expense, net
Interest expense, net                               3,849              3,940                (91)                      (2) %
(Gain) loss from change in fair value of
warrant liabilities                                (1,126)             7,596             (8,722)                        nm*
(Gain) loss from change in fair value of
derivative liability                              (10,087)             4,267            (14,354)                        nm*
(Gain) loss from change in fair value of
earnout liability                                 (44,131)            12,376            (56,507)                        nm*
Other expense (income), net                            35                (15)                50                         nm*
Total other (income) expense, net                 (51,460)            28,164            (79,624)
Net income (loss)                          $       35,738          $ (46,058)         $  81,796



*Not meaningful

Revenues

Revenue is primarily derived from the sale of our ZEVs. Our total revenue
decreased by $2.4 million, or 40%, from $5.9 million during the three months
ended June 30, 2021 to $3.5 million during the three months ended June 30, 2022.
The decrease in revenues was principally related to the sale of 31 ZEVs,
primarily Class 3, during the three months ended June 30, 2022 as compared to
the sale of 36 ZEVs, primarily Class 4 and Class 5, during the three months
ended June 30, 2021, which had a higher sales price. The decrease in ZEV sales
for the three months ended June 30, 2022 compared to the prior year period was
primarily the result of chassis and other component shortages and customer
financing delays.

                                       38
--------------------------------------------------------------------------------
  Table of Contents
Cost of Revenues

Cost of revenues includes direct costs (parts, material, and labor); indirect
manufacturing costs (manufacturing overhead, depreciation and plant operating
lease expense); shipping, field services, logistics and warranty costs.

Cost of revenues decreased by $2.2 million, or 31%, from $7.0 million during the
three months ended June 30, 2021 to $4.9 million during the three months ended
June 30, 2022. The decrease in the cost of revenues was primarily related to a
decrease in revenue during the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021, offset by an increase in factory overhead
and other fixed costs during the three months ended June 30, 2022 as compared to
the three months ended June 30, 2021.

Research and development

Research and development expenses consist primarily of costs incurred for the
discovery and development of our zero-emission powertrain solutions and the
production thereof, which principally include personnel-related expenses
including salaries, benefits, travel and stock-based compensation, for personnel
performing research and development activities; expenses related to materials,
supplies and testing; and consulting and occupancy expenses.

Research and development expenses increased by $1.1 million or 144%, from $0.7
million in the three months ended June 30, 2021 to $1.8 million in the three
months ended June 30, 2022. The increase was primarily due to an increase
in our engineering headcount year-over-year, as we continue to advance the
development and design of our products, refine and improve our production
processes and enhance our in-house engineering capabilities.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of personnel-related
expenses for our corporate, executive, engineering, finance, sales, marketing,
program management support, and other administrative functions, expenses for
outside professional services, including legal, audit and accounting services,
as well as expenses for information technology, facilities, insurance,
depreciation, amortization, travel, and sales and marketing costs.
Personnel-related expenses consist of salaries, payroll taxes, benefits, and
stock-based compensation. We expect our selling, general and administrative
expenses to increase for the foreseeable future as we increase headcount and
expenses with the growth of our business, drive for productivity improvements,
acquisition of new and retention of existing customers and the additional costs
associated with being a public company, which include, among other things,
increases in headcount for administration and increases in legal and
professional services, accounting and audit fees and liability insurance.

Selling, general and administrative expenses decreased by $3.5 million or 22%,
from $16.0 million during the three months ended June 30, 2021 to $12.6 million
during the three months ended June 30, 2022. The three months ended June 30,
2021 included one-time fees of $9.1 million associated with the closing of the
Business Combination. Excluding the one-time fees, selling, general and
administrative expenses increased by $5.6 million during the three months ended
June 30, 2022, primarily due to an increase in employee headcount in sales and
administration to support the planned growth in sales and production, and the
expenses associated with being a public company.

Interest expense, net

Interest expense consists of interest paid on notes payable, the amortization of
debt issuance costs, the amortization of debt discounts attributable to the
bifurcation of warrants issued, and amortization of an embedded conversion
feature. The notes payable included, over the periods presented, the Convertible
Note, the Facility, a third-party secured promissory note and various
convertible notes payable, as described in more detail in Note 8 to the
Consolidated Financial Statements.

Interest expense decreased to $3.8 million for the three months ended June 30,
2022 from $3.9 million for the three months ended June 30, 2021. Interest
expense for the three months ended June 30, 2022 included $3.9 million of
accrued interest and discount amortization related to the Convertible Note and
$0.1 million of interest expense associated with the Facility, offset by $0.2
million of interest income on our cash equivalents. Interest expense for the
three months ended June 30, 2021 included $2.3 million of accrued interest and
discount amortization related to the Convertible Note which was only outstanding
after the closing of the Business Combination in May 2021, $0.3 million of
discount amortization associated with the short-term convertible notes converted
at the close of the Business Combination, $0.9 million for the early payment of
interest associated with loans paid off in the Business Combination and $0.4
million of interest expense associated with the term note and working capital
facility.
                                       39

————————————————– ——————————

Contents

Change in fair value of warrant liabilities

The gain from change in fair value of warrant liabilities of $1.1 million for
the three months ended June 30, 2022 represents the change in fair value of the
Gig private warrants that were assumed in the Business Combination. The loss
from change in fair value of warrant liabilities of $7.6 million for the three
months ended June 30, 2021 represents a loss of $7.3 million from the change in
fair value of the outstanding common and preferred warrants, which were
converted to common stock as a result of the Business Combination, and a loss of
$0.3 million from the change in fair value of the Gig private warrants assumed
in the Business Combination. These changes in fair value reflect the impact of
the marking-to-market of the warrant liability.

Change in fair value of derivative liability

The change in fair value of the derivative liability reflected a gain of $10.1
million during the three months ended June 30, 2022 and a loss of $4.3 million
during the three months ended June 30, 2021. These changes reflect the impact of
the marking-to-market of the underlying derivative embedded in the Convertible
Note.

Change in fair value of earn-out liability

The change in fair value of the earnout liability reflected a gain of $44.1
million during the three months ended June 30, 2022 and a loss of $12.4 million
during the three months ended June 30, 2021. These changes reflect the impact of
the marking-to-market of the earnout shares.

Operating results

Comparison of the six months ended June 30, 2022 and 2021

The following table sets forth our historical operating results for the periods
indicated:

                                                Six Months Ended June 30,
                                                 2022                 2021             $ Change               % Change
                                                                    (dollar amounts in thousands)
Revenues                                   $       8,948          $  10,514          $   (1,566)                     (15) %
Cost of revenues                                  12,611             12,366                 245                        2  %
Gross loss                                        (3,663)            (1,852)             (1,811)                     (98) %
Operating expenses
Research and development                           3,752              1,391               2,361                      170  %
Selling, general and administrative               24,158             19,946               4,212                       21  %
Total operating expenses                          27,910             21,337               6,573                       31  %
Loss from operations                             (31,573)           (23,189)             (8,384)                     (36) %
Other (income) expense, net
Interest expense, net                              7,710              5,551               2,159                       39  %
(Gain) loss from change in fair value of
warrant liabilities                               (1,314)            28,135             (29,449)                        nm*
(Gain) loss from change in fair value of
derivative liability                             (12,642)             4,267             (16,909)                        nm*
(Gain) loss from change in fair value of
earnout liability                                (50,303)            12,376             (62,679)                        nm*
Other income, net                                     (6)               (24)                 18                         nm*
Total other (income) expense, net                (56,555)            50,305            (106,860)
Net income (loss)                          $      24,982          $ (73,494)         $   98,476



*Not meaningful

                                       40
--------------------------------------------------------------------------------
  Table of Contents
Revenues

Our total revenue decreased by $1.6 million, or 15%, from $10.5 million during
the six months ended June 30, 2021 to $8.9 million during the six months ended
June 30, 2022. The decrease in revenue was principally related to the mix of ZEV
sales during the six months ended June 30, 2022 compared to the six months ended
June 30, 2021. During the six months ended June 30, 2022, we sold 99 ZEVs
primarily in Class 3 compared to the sale of 67 ZEVs in Classes 3, 4 and 5
during the six months ended June 30, 2021 which had a higher sales price. In
addition, revenues decreased as a result of chassis and other component
shortages and customer financing delays during the six months ended June 30,
2022.

Cost of Revenues

Cost of revenues increased by $0.2 million, or 2%, from $12.4 million during the
six months ended June 30, 2021 to $12.6 million during the six months ended
June 30, 2022. The increase in the cost of revenues was primarily related to an
increase in factory overhead and other fixed costs during the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021.

Research and development

Research and development expenses increased by $2.4 million, or 170%, from $1.4
million in the six months ended June 30, 2021 to $3.8 million in the six months
ended June 30, 2022. The increase was primarily due to an increase
in our engineering headcount year-over-year, as we continue to advance the
development and design of our vehicles, refine and improve our production
processes and enhance our in-house engineering capabilities.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $4.2 million, or 21%,
from $19.9 million during the six months ended June 30, 2021 to $24.2 million
during the six months ended June 30, 2022. The six months ended June 30, 2021
included one-time fees of $9.1 million associated with the closing of the
Business Combination. Excluding the one-time fees, selling, general and
administrative expenses increased by $13.3 million during the six months ended
June 30, 2022 primarily due to an increase in employee headcount in sales and
administration to support the planned growth in sales and production. In
addition, we incurred, among other things, increases in legal, professional
services, accounting and audit fees and liability insurance associated with
being a public company.

Interest expense, net

Interest expense increased to $7.7 million for the six months ended June 30,
2022 from $5.6 million for the six months ended June 30, 2021. The increase was
primarily due to an increase of $5.4 million of accrued interest and
amortization of the discount related to the Convertible Note during the six
months ended June 30, 2022 as the Convertible Note was only outstanding after
the closing of the Business Combination in the prior year period. This increase
was offset by prior period interest expense of $1.3 million of amortization of
the discount associated with the short-term convertible notes converted at the
close of the Business Combination and $0.9 million for the early payment of
interest associated with loans paid off in the Business Combination. In
addition, interest expense on the term note and working capital facility
decreased by $0.8 million due to a decrease in the facility principal balance.

Change in fair value of warrant liabilities

The gain from change in fair value of warrant liabilities of $1.3 million for
the six months ended June 30, 2022 represents the change in fair value of the
Gig private warrants that we assumed in the Business Combination. The loss from
change in fair value of warrant liabilities of $28.1 million for the six months
ended June 30, 2021 represents a loss of $27.8 million from the change in fair
value of the outstanding common and preferred warrants, which were converted to
common stock as a result of the Business Combination and a loss of $0.3 million
from the change in fair value of the Gig private warrants assumed in the
Business Combination. These changes in fair value reflect the impact of the
marking-to-market of the warrant liability.

Change in fair value of derivative liability

The change in fair value of the derivative liability reflected a gain of $12.6
million during the six months ended June 30, 2022 and a loss of $4.3 million
during the six months ended June 30, 2021. These changes reflect the impact of
the marking-to-market of the underlying derivative embedded in the Convertible
Note.
                                       41

————————————————– ——————————

Contents

Change in fair value of earn-out liability

The change in the fair value of the earn-out liability reflects a gain of $50.3 million in the six months ended June 30, 2022 and a loss $12.4 million
in the six months ended June 30, 2021. These changes reflect the impact of the mark-to-market valuation of price supplements.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the
following non-GAAP measures, as defined in Item 10(e) of Regulation S-K, are
useful in evaluating our operational performance. We use the following non-GAAP
financial information among other operational metrics to evaluate our ongoing
operations and for internal planning and forecasting purposes. We believe that
non-GAAP financial information, when taken collectively, may be helpful to
investors in assessing our operating performance.

EBITDA, Adjusted EBITDA and Adjusted Net Loss

We define EBITDA as net income (loss) before depreciation and amortization and
interest expense. We define adjusted EBITDA as net income (loss) before
depreciation and amortization, interest expense, stock-based compensation, gains
or losses related to the change in fair value of warrant, derivative and earnout
share liabilities and other non-recurring costs determined by management, such
as Business Combination related expenses. We define adjusted net loss as net
income (loss) adjusted for stock-based compensation expense, gains or losses
related to the change in fair value of warrant, derivative and earnout share
liabilities and certain other non-recurring costs determined by management, such
as Business Combination related expenses. We believe EBITDA, adjusted EBITDA and
adjusted net loss are meaningful metrics intended to supplement measures of our
performance that are neither required by, nor presented in accordance with,
GAAP. We believe that using EBITDA, adjusted EBITDA and adjusted net loss
provide an additional tool for investors to use in evaluating ongoing operating
results and trends while comparing our financial measures with those of
comparable companies, which may present similar non-GAAP financial measures to
investors. However, you should be aware that when evaluating EBITDA, adjusted
EBITDA and adjusted net loss we may incur future expenses similar to those
excluded when calculating these measures. In addition, our presentation of these
measures should not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items. Our computation of EBITDA,
adjusted EBITDA and adjusted net loss may not be comparable to other similarly
titled measures computed by other companies, because all companies may not
calculate EBITDA, adjusted EBITDA and adjusted net loss in the same fashion.

Because of these limitations, EBITDA, adjusted EBITDA and adjusted net loss
should not be considered in isolation or as a substitute for performance
measures calculated in accordance with GAAP. We compensate for these limitations
by relying primarily on our GAAP results and using EBITDA, adjusted EBITDA and
adjusted net loss on a supplemental basis. No undue reliance should be placed on
these non-GAAP measures.

                                       42
--------------------------------------------------------------------------------
  Table of Contents
The following table reconciles net income (loss) to EBITDA and adjusted EBITDA
for the three and six months ended June 30, 2022 and 2021:

                                              Three Months Ended June 30,                 Six Months Ended June 30,
                                                2022                  2021                 2022                  2021
Net income (loss)                         $       35,738          $ (46,058)         $       24,982          $ (73,494)
Adjustments:
Depreciation and amortization                           407                224                     768                350
Interest expense, net                                 3,849              3,940                   7,710              5,551
EBITDA                                    $       39,994          $

(41,894) $33,460 ($67,593)
Stock-based compensation expense

                      1,436                128                   2,408                196
(Gain) loss from change in fair value of
warrant liabilities                               (1,126)             7,596                  (1,314)            28,135
(Gain) loss from change in fair value of
derivative liability                             (10,087)             4,267                 (12,642)             4,267
(Gain) loss from change in earnout
liability                                        (44,131)            12,376                 (50,303)            12,376

Business Combination expense                           -              9,098                       -              9,098
Adjusted EBITDA                           $      (13,914)         $  (8,429)         $      (28,391)         $ (13,521)



The following table reconciles net profit (loss) to adjusted net loss for the quarters and six months ended June 30, 2022 and 2021:

                                              Three Months Ended June 30,                 Six Months Ended June 30,
                                                2022                  2021                 2022                  2021
Net income (loss)                         $       35,738          $

(46,058) $24,982 ($73,494)
Adjustments: Stock-based compensation expense

                   1,436                128                   2,408                196
Business Combination expense                           -              9,098                       -              9,098
(Gain) loss from change in fair value of
warrant liabilities                               (1,126)             7,596                  (1,314)            28,135
(Gain) loss from change in fair value of
derivative liability                             (10,087)             4,267                 (12,642)             4,267
(Gain) loss from change in earnout
liability                                        (44,131)            12,376                 (50,303)            12,376

Adjusted net loss                         $      (18,170)         $ (12,593)         $      (36,869)         $ (19,422)


Cash and capital resources

As of June 30, 2022, we had $125.4 million in cash and cash equivalents compared
to $168.5 million as of December 31, 2021. For the six months ended June 30,
2022, we had net income of $25.0 million. Cash flow used in operating activities
was $39.2 million for the six months ended June 30, 2022. We had positive
working capital of $148.1 million as of June 30, 2022, primarily as a result of
the Business Combination. Our accumulated deficit amounted to $156.6 million as
of June 30, 2022.

Sources of Liquidity

Since our inception, we have funded our operations primarily through debt financing and the sale of common and convertible preferred stock. We completed the business combination on May 6, 2021 under which we have added $216.8 million of cash, net of redemptions, on the balance sheet.

From June 30, 2022our main sources of liquidity were our cash and cash equivalents for an amount of $125.4 million. We believe that our cash and cash equivalents balance will be sufficient to continue executing our business strategy over the next twelve months.

                                       43
--------------------------------------------------------------------------------
  Table of Contents
Liquidity Requirements

In the near and long-term, we will require additional capital to fund the growth
and scaling of our manufacturing facilities and operations; further develop our
products and services, including those for orders in our order backlog; and fund
potential strategic investments and acquisitions. Until we can generate
sufficient cash flow from operations, we expect to finance our operations
through a combination of the merger proceeds we received from the Business
Combination as well as from additional public offerings, debt financings or
other capital markets transactions, collaborations or licensing arrangements.
The amount and timing of our future funding requirements depend on many factors,
including the pace and results of our development efforts and our ability to
scale our operations.

We cannot provide any assurance that additional capital will be available on
commercially acceptable terms, if at all. If we are unable to secure additional
capital, we may be required to take additional measures to reduce costs in order
to conserve our cash in amounts sufficient to sustain operations and meet our
obligations. These measures could cause significant delays in our continued
efforts to commercialize our products, which is critical to the realization of
our business plan and our future operations.
Material Cash Requirements

From time to time in the ordinary course of business, we enter into agreements
with vendors for the purchase of components and raw materials to be used in the
manufacture of our products. To provide flexibility in our development and
production plan and opportunities to renegotiate pricing, we generally do not
have binding and enforceable purchase orders beyond the near term. However, in
order to secure raw materials vital to our products, we have entered into
multi-year minimum purchase commitments with some of our suppliers. If we fail
to meet the minimum purchase commitments, we must pay a penalty. As of June 30,
2022, the minimum purchase commitment for the next twelve months is $34.8
million under these agreements. However, we are currently in negotiations with
certain suppliers to either blend and extend or terminate some of our future
commitments due to supply chain constraints and cost increases for both parties.
See Note 14 to the Consolidated Financial Statements for additional information.

Our capital expenditures are typically difficult to project beyond the short
term given potential supply chain constraints and market conditions. We estimate
our total capital expenditures for the year 2022 to be between $10 and $12
million for development and production activities.

Debt

As of June 30, 2022, we had outstanding $87.9 million of principal indebtedness
associated with our Convertible Notes, which mature on May 15, 2024. We are
obligated to make semi-annual interest payments of $3.3 million in May and
November through maturity based on an annual interest rate of 7.5%. We also had
outstanding $3.0 million of principal indebtedness associated with our Facility,
which matures on October 21, 2024. We are obligated to make quarterly interest
payments of $0.1 million through maturity based on an annual interest rate of
15%. See Note 8 to the Consolidated Financial Statements for additional
information.

Leases

We have one material lease commitment, an operating lease covering our
manufacturing center, distribution center and office space. We also have an
operating lease for IT equipment and finance leases for manufacturing equipment.
As of June 30, 2022, our total minimum lease commitments were $14.9 million,
with $3.0 million due in the next twelve months. See Note 9 to the Consolidated
Financial Statements for additional information.

                                       44
--------------------------------------------------------------------------------
  Table of Contents
Cash Flows

The following table presents a summary of the cash flow data (in thousands):

                                                                       Six Months Ended June 30,
                                                                       2022                  2021
                                                                     (dollar amounts in thousands)
Net cash used in operating activities                            $      (39,178)         $  (33,674)
Net cash used in investing activities                                    (3,930)             (1,436)
Net cash (used in) provided by financing activities                         (20)            236,540
Net (decrease) increase in cash                                  $      

(43,128) $201,430

Cash flows used in operating activities

Net cash used in operating activities for the six months ended June 30, 2022 and
2021 was $39.2 million and $33.7 million, respectively. Cash flows from
operating activities are significantly affected by revenue levels, mix of
products and services, and investments in the business in research and
development and selling, general and administrative costs in order to develop
products and services, improve manufacturing capacity and efficiency, and
support revenue growth. With respect to the six months ended June 30, 2022,
increases in net cash used in operating activities, in comparison to the
corresponding prior period, were principally driven by a decrease in revenues
and increases in cost of revenues and selling, general and administrative
expenses, as described in more detail above.

Cash flows used in investing activities

Net cash used in investing activities for the six months ended June 30, 2022 and
2021 was $3.9 million and $1.4 million, respectively. Cash flows from investing
activities relate to capital expenditures to support revenue growth as we invest
in and expand our business and infrastructure.

Cash flow from financing activities

Net cash used in financing activities for the six months ended June 30, 2022 was
de minimis. Net cash provided by financing activities for the six months ended
June 30, 2021 was $236.5 million and consisted of net proceeds of $142.8 million
from the Business Combination and PIPE Financing, proceeds of $95.0 million from
the issuance of the Convertible Note, proceeds from Facility borrowings of $7.0
million, proceeds from the exercise of warrants of $3.3 million, offset by
payments on our previous outstanding notes payable of $11.5 million and payments
related to lease obligations of $0.1 million.

Back

As of July 31, 2022, we had $169.3 million of order backlog comprised of ZEVs,
zero-emission powertrains and/or charging systems of approximately 1,500 units.
Our order backlog is generally comprised of non-binding agreements and purchase
orders from customers. In addition, some of our order backlog has contingencies,
including completing a successful pilot program, obtaining third-party financing
or obtaining government grants, such as the California Hybrid and Zero-Emission
Truck and Bus Voucher Incentive Project. Although the order backlog, in most
cases, does not constitute a legal obligation and, in some cases, may have
contingencies, we believe the amounts included in our order backlog are firm,
even though the non-binding orders may be cancelled or delayed by customers
without penalty. We may elect to permit cancellation of orders without penalty
where management believes it is in our best interest to do so. On a case-by-case
basis and at our sole discretion, we have held partial deposits for purchase
orders from customers.

The realization and timing of the recognition of our order backlog is dependent,
among other things, on our ability to obtain and secure a steady supply of
components used in our manufacturing process. Accordingly, revenue estimates and
the amount and timing of work expected to be performed at the time the estimate
of order backlog is developed is subject to change. As a result, the order
backlog may not be indicative of future sales and can vary significantly from
period to
period. In addition, it is possible that the methodology for determining the
order backlog may not be comparable to methods used by other companies.

                                       45
--------------------------------------------------------------------------------
  Table of Contents
Material Trends and Uncertainties

The impact of current macroeconomic factors on our business - including
increasing inflation and interest rates which affect the demand of its ZEVs,
supply chain constraints, and geopolitical events - is uncertain. In addition,
although the impact is lessening, the extent to which the COVID-19 pandemic may
impact our business in future periods remains uncertain and unpredictable. Our
outlook for future growth in ZEVs depends upon the various economic and
regulatory conditions, and on our ability to manage through supply chain issues
that have, and will continue to, limit the level to which we can increase output
in the near term. Our long-term outlook remains positive as we believe the
adoption of alternative fuel vehicles and the electric vehicle market will
continue to grow.

Supply-Chain challenges. We have been experiencing significant delivery delays
from our suppliers since April 2020. In addition, we often do not get informed
of delivery delays until or after the expected delivery dates and have, at
times, also experienced deliveries in advance of expected delivery dates without
prior notice (for orders that were previously delayed), which does not allow for
adequate planning. We have also been experiencing shortages of chassis and other
components. We have increased our raw material inventories and added new
suppliers, however, adding new suppliers, especially for chassis, increases cost
and delays production. We expect supply chain challenges will continue for the
foreseeable future.

Inflation and interest rates. We are experiencing cost increases due to
inflation resulting from various supply chain disruptions and other disruptions
caused by COVID-19 and general global economic conditions. The cost of raw
materials, manufacturing equipment, labor and shipping and transportation has
increased considerably. We expect higher than recent years' levels of inflation
to persist for the foreseeable future. If we are unable to fully offset higher
costs through price increases or other measures, we could experience an adverse
impact to our business, prospects, financial condition, results of operations,
and cash flows. Interest rates have also increased considerably. The increase in
inflation and interest rates impacts the demand for our ZEVs, as customers may
delay purchasing ZEVs and/or have difficulty financing their ZEV purchases.

Off-balance sheet arrangements

We have not entered into any off-balance sheet arrangements, as defined in the rules and regulations of the SECOND.

Significant Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with GAAP. These principles require us to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities, as
of the balance sheet date, as well as reported amounts of revenue and expenses
during the reporting period. Our most significant estimates and judgments
involve deferred income taxes, allowance for doubtful accounts, warranty
liability, write downs and write offs of obsolete and damaged inventory,
valuation of share-based compensation, warrants and warrant liabilities, the
value of the convertible note derivative liability and the value of the earnout
share liability. Management bases its estimates on historical experience and on
various other assumptions believed to be reasonable, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities. Actual results could differ from those estimates, and such
differences could be material to the Company's financial statements.

We believe that there have been no significant changes to our critical
accounting policies and estimates during the six months ended June 30, 2022 as
compared to those disclosed in Note 1 to the Consolidated Financial Statements
included in this Quarterly Report on Form 10-Q and in our Annual Report on Form
10-K for the year ended December 31, 2021.

Emerging Growth Company Status

We are an emerging growth company, or EGC, as defined in Section 2(a) of the
Securities Act, as modified by the JOBS Act. As an EGC, we are permitted to take
advantage of an extended transition period to comply with new or revised
accounting standards, delaying the adoption of these accounting standards until
they would apply to private companies. We have elected to use this extended
transition period to enable us to comply with new or revised accounting
standards that have different effective dates for public and private companies
until the earlier of the date we (i) are no longer an emerging growth company or
(ii) affirmatively and irrevocably opt out of the extended transition period. As
a result, our financial statements may not be comparable to companies that
comply with the new or revised accounting standards as of public company
effective dates.
                                       46

————————————————– ——————————

Contents

In addition, we intend to rely on the other exemptions and reduced reporting
requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not
required to, among other things: (i) provide an auditor's attestation report on
our system of internal controls over financial reporting pursuant to Section
404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation
disclosure that may be required of non-emerging growth public companies under
the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with
any requirement that may be adopted by the Public Company Accounting Oversight
Board regarding mandatory audit firm rotation or a supplement to the auditor's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis); and (iv) disclose certain
executive compensation-related items such as the correlation between executive
compensation and performance and comparisons of the Chief Executive Officer's
compensation to median employee compensation.

We will remain an EGC under the JOBS Act until the earliest of (i) December 31,
2025, which is the last day of our first fiscal year following the fifth
anniversary of our initial public offering, (ii) the last date of our fiscal
year in which we have total annual gross revenue of at least $1.07 billion,
(iii) the date on which we are deemed to be a "large accelerated filer" under
the rules of the SEC with at least $700.0 million of our common equity held by
non-affiliates, or (iv) the date on which we have issued more than $1.0 billion
in non-convertible debt securities during the previous three-year period.

© Edgar Online, source Previews

Robert M. Larson