Form 424B3 Lion Electric Co

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-256633

PROSPECTUS

152,276,690 Common Shares

This prospectus relates to the offer and sale from time to time by the selling securityholders or their permitted transferees (collectively, the “selling securityholders”) of up to 152,276,690 common shares in the capital of The Lion Electric Company. This prospectus also covers any additional securities that may become issuable by reason of share splits, share dividends or other similar transactions.

The shares covered by this prospectus include (i) 132,867,990 common shares held, or issuable upon exercise of the Specified Customer Warrant (as defined herein), by certain selling securityholders that were securityholders of The Lion Electric Company, a corporation existing under the Business Corporations Act (Québec) (“Lion”), prior to the closing of the business combination (the “Business Combination”) between Lion, Lion Electric Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Lion, and Northern Genesis Acquisition Corp., a Delaware corporation and (ii) 19,408,700 common shares issued to certain securityholders in connection with the closing of a private placement offering at a price per share of $10.00, for gross proceeds of approximately $200,402,000, which closed concurrently with the Business Combination on May 6, 2021.

Lion is registering the offer and sale of the securities described above to satisfy certain registration rights they have granted. Lion is registering these securities for resale by the selling securityholders named in this prospectus, or their transferees, pledgees, donees or assignees or other successors-in-interest that receive any of the shares as a gift, distribution, or other non-sale related transfer. The selling securityholders may offer all or part of the securities for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. These securities are being registered to permit the selling securityholders to sell securities from time to time, in amounts, at prices and on terms determined at the time of offering. The selling securityholders may sell these securities through ordinary brokerage transactions, directly to market makers of Lion’s shares or through any other means described in the section titled “Plan of Distribution”. In connection with any sales of common shares offered hereunder, the selling securityholders, any underwriters, agents, brokers or dealers participating in such sales may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

All of the common shares offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. Lion will not receive any of the proceeds from such sales.

Lion will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution”.

Lion’s common shares are listed on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”) under the symbol “LEV”. On June 11, 2021, the last reported sale price of Lion’s common shares as reported on the NYSE was $19.76 per share.

Lion may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.

Lion is a “foreign private issuer” under applicable Securities and Exchange Commission rules and an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 and, as such, is subject to reduced public company reporting requirements.

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of material risks of investing in our securities in “Risk Factors“ beginning on page 7 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities or Canadian securities regulator has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated June 14, 2021

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. Neither Lion, nor the selling securityholders, has authorized any other person to provide you with different or additional information. Neither Lion, nor the selling securityholders, takes responsibility for, nor can Lion provide assurance as to the reliability of, any other information that others may provide. The selling securityholders are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and Lion’s business, financial condition, results of operations and/or prospects may have changed since those dates.

Except as otherwise set forth in this prospectus, neither Lion nor the selling securityholders has taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.

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IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES

Lion’s financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).

This prospectus makes reference to certain non-IFRS measures, including Adjusted EBITDA, and other performance metrics, including the Company’s order book. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.

For more information on non-IFRS measures, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Measures and Other Performance Metrics.”

CONVENTIONS THAT APPLY TO THIS PROSPECTUS

In this prospectus, unless otherwise specified, all monetary amounts are in U.S. dollars, all references to “US$,” “$,” “USD” and “dollars” mean U.S. dollars and all references to “C$” mean Canadian dollars.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

This prospectus includes certain trademarks, such as “Lion,” “LionBeat” and “LionEnergy,” which are registered under applicable intellectual property laws and are Lion’s property or for which Lion has pending applications or common law rights. Solely for convenience, the trademarks, and trade names referred to in this prospectus are listed without the ^®, and (TM) symbols, but Lion intends to assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensors to these trademarks, and trade names.

INDUSTRY AND MARKET DATA

Industry and market data presented throughout this prospectus was obtained from third-party sources and industry reports, and from publications, websites and other publicly available information, as well as industry and other data prepared by Lion or on its behalf on the basis of Lion’s knowledge of the markets in which it operates, including information provided by suppliers, partners, customers and other industry participants.

Lion believes that the market and economic data presented throughout this prospectus is accurate and, with respect to data prepared by Lion or on its behalf, that Lion’s estimates and assumptions, as applicable, are currently appropriate and reasonable, but there can be no assurance as to the accuracy or completeness thereof. The accuracy and completeness of the market and economic data presented throughout this prospectus are not guaranteed and Lion does not make any representation or warranty, express or implied, as to the accuracy of such data. Actual outcomes may vary materially from those forecast in such reports or publications, and the prospect for material variation can be expected to increase as the length of the forecast period increases. Although Lion believes it to be reliable, it has not independently verified any of the data from third-party sources referred to in this prospectus, analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying market, economic and other assumptions relied upon by such sources. Market and economic data, including estimates and projections relating to addressable markets, competitive position and market share, is subject to variations and cannot be verified due to limits on the availability and reliability of data inputs, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Lion’s management estimates are based on internal research, their knowledge of the relevant market and industry and extrapolations from third-party sources. While Lion is not aware of any misstatements regarding the industry and market data presented in this prospectus, such data involve risks and uncertainties and are subject to change based on various factors, including those factors discussed under the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Lion has no intention and undertakes no obligation to update or revise any such information or data, whether as a result of new information, future events or otherwise, except as required by law.

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PROSPECTUS SUMMARY

This summary highlights certain information about The Lion Electric Company, this offering and selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in the securities covered by this prospectus. For a more complete understanding of The Lion Electric Company and this offering, we encourage you to read and consider carefully the more detailed information in this prospectus, any related prospectus supplement and any related free writing prospectus, including the information set forth in the section titled “Risk Factors” in this prospectus, any related prospectus supplement and any related free writing prospectus in their entirety before making an investment decision.

Unless otherwise stated or the context otherwise indicates, references to “Lion,” “we”, “our,” “us” or “Company” refers to The Lion Electric Company, a corporation existing under the Business Corporations Act (Québec).

Our Company

Lion is a corporation incorporated in 2008 and existing under the Business Corporations Act (Québec). Lion believes it is a North American leader in the design, development, manufacturing, and distribution of purpose-built all-electric medium and heavy-duty urban electric vehicles (“EV”). Lion gained distinct industry expertise and a first-mover advantage in the medium and heavy-duty urban EV segment through more than 10 years of focused all-electric vehicle R&D, manufacturing and commercialization experience. Lion’s vehicles and technology benefit from over seven million miles driven by over 390 of its purpose-built all-electric vehicles that are on the road today, in real-life operating conditions.

Lion’s growing line-up of purpose-built all-electric vehicles consists of seven mid-range truck and bus models available for purchase today. Lion further has an active product development pipeline and expects to launch eight new mid-range truck and bus models over the next two years. By the end of 2022, management believes Lion will have among the broadest mid-range EV offerings in the medium and heavy-duty urban segment, with an expected total of 15 vehicles comprising Class 5, 6, 7 and 8 electric trucks designed for specific applications, Type A, C and D electric school buses, as well as an electric medium-duty shuttle bus and an electric ambulance.

Lion’s EVs are tailored to satisfy the needs of its customers and are entirely designed, manufactured and assembled in-house in North America, without relying on traditional combustion-engine vehicle retrofitting or third-party integrators. To achieve this, Lion has developed its own purpose-built for electric chassis, truck cabins, and bus bodies, incorporating its proprietary battery technology with modular energy capacity and its proprietary Lion software.

Like others in the EV space, Lion has adopted a direct-to-customer sales model tailored for EVs, avoiding reliance on third-party dealerships in most instances. As part of its go-to-market strategy, Lion assists its customers through the EV transition journey in all critical aspects of vehicle selection, purchase and adoption, including EV education and training, identification and seeking of any applicable governmental grants, energy requirements, charging infrastructure, maintenance and advanced telematics solutions. To enhance customer experience and help drive repeat purchases, Lion leverages its growing network of Experience Centers, which are dedicated spaces where prospective customers, policymakers and other transportation industry stakeholders can interact with EVs, learn about their specifications and advantages, meet a sales representative, discuss grant and subsidy assistance, receive vehicle training, and have existing vehicles serviced. Services available on-site at Lion’s Experience Centers include product demonstrations and sales support, full-service training, charging infrastructure assistance and maintenance support. There are currently nine Experience Centers strategically located in key markets in the United States and Canada, with additional centers expected to be opened within the next two years.

By capitalizing on its significant first-mover advantage, broad EV line-up available today, turnkey customer experience and rapidly growing customer base, Lion’s management believes Lion is strongly positioned to gain significant market share in the medium and heavy-duty mid-range vehicle segment.

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Recent Developments

Closing of Business Combination Agreement with Northern Genesis Acquisition Corp. and Concurrent Equity Private Placement

On May 6, 2021, Lion completed its previously-announced business combination transaction pursuant to a business combination agreement and plan of reorganization dated as of November 30, 2020 (the “Business Combination Agreement”), among Lion, Northern Genesis Acquisition Corp. (“NGA”) and Lion Electric Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Lion (“Merger Sub”), pursuant to which (i) Merger Sub merged with and into NGA through a statutory merger under the laws of the State of Delaware, with NGA surviving the merger as a wholly-owned subsidiary of Lion (the “Business Combination”), and (ii) as consideration for the merger, each outstanding share of NGA’s common stock held by an NGA stockholder was converted into the right to receive one newly issued common share of Lion (each, a “Lion Common Share”), and each outstanding warrant to purchase shares of NGA’s common stock, with each such whole warrant exercisable for one share of NGA’s common stock at an exercise price of $11.50, was converted into a warrant to acquire a number of Lion Common Shares (each, a “Lion Warrant”) equal to the number of shares of NGA’s common stock underlying each such warrant of NGA. At the time of closing (“Closing”) of the Business Combination, NGA held (net of the redemptions exercised by NGA’s stockholders holding 20,449 shares) approximately $320 million in its trust account.

Immediately prior to the completion of the Business Combination, Lion completed a reorganization (the “Pre-Closing Reorganization”) which included a share split pursuant to which each Lion Common Share outstanding immediately prior to such share split was converted into 4.1289 Lion Common Shares. Immediately prior to the completion of the Business Combination, Lion also completed a private placement (the “PIPE Financing”) pursuant to which a number of investors agreed to purchase, and Lion agreed to sell to such investors, an aggregate of 20,040,200 Lion Common Shares, for a purchase price of $10.00 per share and an aggregate purchase price of $200,402,000.

The Business Combination and the PIPE Financing resulted in proceeds of approximately $490 million, net of transaction fees. Approximately $90 million of the net proceeds were used to repay outstanding credit facilities and debt instruments. See section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Update with Respect to Certain Debt Instruments.”

Following the closing of the Business Combination and the PIPE Financing, the Lion Common Shares began trading on the TSX and on the NYSE under the new symbol “LEV”, and the Lion Warrants began trading on the TSX under the new symbol “LEV.WT” and on the NYSE under the new symbol “LEV WS”.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

As defined in Section 102(b)(1) of the JOBS Act (as defined below), Lion is as an emerging growth company (“EGC”). As such, Lion is eligible for and relies on certain exemptions and reduced reporting requirements provided by the JOBS Act, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

Lion will remain an EGC under the JOBS Act until the earliest of (i) the last day of the fiscal year in which the market value of Lion’s Common Shares that are held by non-affiliates exceeds $700 million as of the last business day of the second quarter of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the Closing.

Lion qualifies as a “foreign private issuer” as defined under SEC rules. Even after Lion no longer qualifies as an EGC, as long as Lion continues to qualify as a foreign private issuer under SEC rules, Lion is exempt from certain SEC rules that are applicable to U.S. domestic public companies, including:

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Notwithstanding these exemptions, Lion will file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC or Canadian securities legislation, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm.

Lion may take advantage of these exemptions until such time as Lion is no longer a foreign private issuer. Lion would cease to be a foreign private issuer at such time as more than 50% of its outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of its executive officers or directors are U.S. citizens or residents, (ii) more than 50% of its assets are located in the United States or (iii) its business is administered principally in the United States.

Both foreign private issuers and EGCs also are exempt from certain more stringent executive compensation disclosure rules. Thus, even if Lion no longer qualifies as an EGC, but remains a foreign private issuer, Lion will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an EGC nor a foreign private issuer.

In addition, because Lion qualifies as a foreign private issuer under SEC rules, Lion is permitted to follow the corporate governance practices of Canada (the jurisdiction in which Lion is organized) in lieu of certain NYSE corporate governance requirements that would otherwise be applicable to Lion. For example, under Canadian securities laws, Lion is not required to have a board of directors comprised of a majority of directors meeting the independence standards described in the listing rules of the NYSE (“the NYSE Listing Rules”). In addition, under Canadian securities laws, Lion is not required to have a compensation committee or a nominations committee that is comprised solely of independent directors.

If at any time Lion ceases to be a foreign private issuer, Lion will take all action necessary to comply with the SEC and NYSE Listing Rules, including by having compensation and nominating committees that are comprised solely of independent directors, subject to a permitted “phase-in” period.

Risk Factors

An investment in the Lion Common Shares involves a high degree of risk. Below is a summary of certain key risk factors that you should consider before deciding to invest in the Lion Common Shares. However, this list is not exhaustive. For more information about the risks related to an investment in the Lion Common Shares, see the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Some of the significant risks include:

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Corporate Information

Lion was incorporated by Marc Bedard, Lion’s CEO—Founder, and Camile Chartrand under the Business Corporations Act (Québec) on July 28, 2008 as “Lion Buses Inc.” Over the years, Lion’s articles were amended in order to, among other things, amend the terms and conditions of Lion’s share capital in connection with strategic investments made by investors, including the strategic investment made by Power Energy Corporation (“PEC” or “Power Energy”), a wholly-owned subsidiary of Power Sustainable Capital Inc., in October 2017, which resulted in Lion’s authorized share capital being amended to provide for only one class of common shares. On November 24, 2020, Lion filed articles of amendment to change its name to The Lion Electric Company. On May 6, 2021, Lion filed articles of amendments, which resulted in Lion’s authorized share capital being amended to provide for (i) an unlimited number of Lion Common Shares and (ii) an unlimited number of “blank-cheque” preferred shares issuable in series, and immediately thereafter filed articles of consolidation to consolidate its articles.

Lion’s principal and registered office is located at 921 chemin de la Rivière-du-Nord, Saint-Jérôme, Québec, Canada J7Y 5G2, and its telephone number is (450) 432-5466.

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The following chart reflects Lion’s organization structure (including the jurisdiction of formation or incorporation of Lion and its subsidiaries):

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THE OFFERING

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RISK FACTORS

Investing in Lion Common Shares involves a high degree of risk. In addition to the other information set forth in this prospectus, you should carefully consider the risk factors discussed below when considering an investment in Lion Common Shares and any risk factors that may be set forth in the applicable prospectus supplement, any related free writing prospectus, as well as the other information contained in this prospectus, any applicable prospectus supplement and any related free writing prospectus. If any of the following risks occur, Lion’s business, financial condition, results of operations and prospects could be materially and adversely affected. In that case, the market price of Lion’s common shares could decline and you could lose some or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to Lion’s Business

Lion’s success will depend on its ability to economically develop, manufacture and sell its vehicles at scale and meet its customers’ business needs. Lion’s ability to develop, manufacture and distribute vehicles of sufficient quality and appeal to customers on schedule and at scale is unproven.

Lion’s future business depends in large part on its ability to economically manufacture, market and sell its vehicles at sufficient capacity to meet the transportation demands of its customers. Although it currently develops and manufactures vehicles from its manufacturing facility in Saint-Jérôme, Québec, Lion will need to scale its manufacturing capacity in order to successfully implement its growth strategy, and plans to do so in the future by, among other things, building a large-scale manufacturing facility in the United States and building a battery assembly facility. Although Lion has experience in developing and manufacturing buses and trucks from its existing facility, such operations are currently conducted on a limited scale, and Lion has no experience to date in high volume manufacturing of its vehicles. Lion does not know whether it will be able to develop efficient, automated, low-cost manufacturing capabilities and processes, or whether it will be able to secure reliable sources of component supply, in each case that will enable it to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market its vehicles and meet its business objectives and customer needs. Even if Lion is successful in developing high-volume manufacturing capability and processes and can reliably source component supplies in sufficient volume, it does not know whether it will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond its control such as problems with suppliers, or in time to meet the commercialization schedules of future vehicles or to satisfy the requirements of its customers. Lion’s ability to effectively reduce its cost structure over time is limited by the fixed nature of many of its planned expenses in the near-term, and its ability to reduce long-term expenses is constrained by its need to continue investment in its growth strategy. Any failure to develop and scale such manufacturing processes and capabilities within Lion’s projected costs and timelines could have a material adverse effect on its business, results of operations or financial condition.

Lion may not be able to successfully implement its growth strategy, on a timely basis or at all, and it may be unable to manage future growth effectively.

Lion’s future growth, results of operations and financial condition depend upon its ability to successfully implement its growth strategy, which, in turn, is dependent upon a number of factors, some of which are beyond Lion’s control, including its ability to:

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There can be no assurance that Lion can successfully achieve any or all of the above initiatives in the manner or time period that it expects. Further, achieving these objectives will require investments which may result in both short-term and long-term costs without generating any current revenue and therefore may be dilutive to earnings. Lion cannot provide any assurance that it will realize, in full or in part, the anticipated benefits it expects to generate from its growth strategy. Failure to realize those benefits could have a material adverse effect on Lion’s business, results of operations or financial condition.

Even if it can achieve the above benefits and successfully implement its growth strategy, any failure to manage its growth effectively could materially and adversely affect Lion’s business, results of operations or financial condition. Lion intends to expand its operations significantly, which will require it to hire and train new employees across all divisions; accurately forecast supply and demand, production and revenue; control expenses and investments in anticipation of expanded operations; establish new or expand current design, production, and sales and service facilities; and implement and enhance administrative infrastructure, systems and processes. Failure to efficiently manage any of the above could have a material adverse effect on Lion’s business, results of operations or financial condition.

Failure to drastically increase manufacturing capacity and efficiency could have a material adverse effect on Lion’s business, results of operations or financial condition.

Although Lion’s existing Saint-Jérôme, Québec, manufacturing facility, which has a current capacity of approximately 2,500 vehicles per year and which was used in 2020 to manufacture 84 vehicles comprised primarily of LionC (Type C school bus) and a few Lion 360° (cowled-chassis bus) buses and Lion6 and Lion8 urban class truck prototypes, is able to satisfy Lion’s current manufacturing requirements, the future success of Lion’s business depends in part on its ability to drastically increase manufacturing capacity and efficiency. Lion may be unable to expand its business, satisfy demand from its current and new customers, maintain its competitive position and improve profitability if it is unable to build and operate its planned large-scale manufacturing facility in the U.S. and otherwise allow for increases in manufacturing output and speed. The construction of such a facility will require significant cash investments and management resources and may not meet Lion’s expectations with respect to increasing capacity, efficiency and satisfying additional demand. For example, if there are delays in Lion’s planned large-scale U.S. manufacturing facility becoming fully operational or achieving target yields and output, Lion may not meet its target for adding capacity, which would limit its ability to increase sales and result in lower than expected sales and higher than expected costs and expenses. Failure to drastically increase manufacturing capacity or otherwise satisfy customers’ demands may result in a loss of market share to competitors, damage Lion’s relationships with its key customers, a loss of business opportunities or otherwise materially adversely affect its business, results of operations or financial condition.

Lion is and will be dependent on its manufacturing facilities. If one or more of its current or future manufacturing facilities becomes inoperable, capacity constrained or if operations are disrupted, Lion’s business, results of operations or financial condition could be materially adversely affected.

Lion’s revenue is and will be dependent on the continued operations of its Saint-Jérôme, Québec, manufacturing facility as well as its other planned facilities, including its planned large-scale U.S. manufacturing facility and battery assembly facility. To the extent that Lion experiences any operational risk including, among other things, fire and explosions, severe weather and natural disasters (such as floods and hurricanes), failures in water supply, major power failures, equipment failures (including any failure of its information technology, air conditioning, and cooling and compressor systems), failures to comply with applicable regulations and standards, labor force and work stoppages, or if its current or future manufacturing facilities become capacity constrained, Lion will be required to make capital expenditures even though it may not have available resources at such time. Additionally, there is no guarantee that the proceeds available from Lion’s insurance policies will be sufficient to cover such capital expenditures. As a result, Lion’s insurance coverage and available resources may prove to be inadequate for events that may cause significant disruption to its operations. Any disruption in Lion’s manufacturing processes could result in delivery delays, scheduling problems, increased costs, or production interruption, which, in

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turn, may result in its customers deciding to purchase products from its competitors. Lion is and will be dependent on its current and future manufacturing facilities which will in the future require a high degree of capital expenditures. If one or more of Lion’s current or future manufacturing facilities becomes inoperative, capacity constrained or if operations are disrupted, its business, results of operations or financial condition could be materially adversely affected.

Lion may in the future need to raise additional funds to meet its capital requirements and such funds may not be available to Lion on commercially reasonable terms or at all when it needs them, which could materially adversely affect Lion’s business, results of operations or financial condition.

The development, design, manufacturing, sale and servicing of Lion’s battery electric vehicles is capital-intensive. Although Lion believes that it will have sufficient funds to meet its short to medium term capital requirements, it may in the future need to raise additional funds, including through the issuance of equity, equity related or debt securities or through obtaining credit from government or financial institutions, to meet its capital requirements, and the availability of additional funds to Lion will depend on a variety of factors, some of which are outside of its control. Additional funds may not be available to Lion on commercially reasonable terms or at all when it needs them, which could materially adversely affect its business, results of operations or financial condition. If additional funds are raised by issuing equity securities, shareholders of Lion may incur dilution.

Lion has a history of losses, and negative cash flows from operating activities and expects to incur significant expenses for the foreseeable future, and there is no guarantee it will achieve or sustain profitability.

Lion incurred net losses of approximately $16.1 million for the quarter ended March 31, 2021, approximately $97.4 million for the year ended December 31, 2020, approximately $3.1 million for the year ended December 31, 2019, and approximately $5.4 million for the year ended December 31, 2018. Further, Lion had negative cash flows from operating activities of approximately $10.1 million for the quarter ended March 31, 2021, approximately $27.1 million for the year ended December 31, 2020, approximately $7.4 million for the year ended December 31, 2019, and approximately $2.2 million for the year ended December 31, 2018. These losses and negative cash flows are the result of the substantial investments Lion made to grow its business, and Lion expects to make significant expenditures to expand its business in the future. Lion expects to incur significant expenditures in connection with its growth strategy, both in the United States and Canada, including as a result of the expected increase in costs related to: the construction of its planned battery assembly facility and planned large-scale U.S. manufacturing facility; the design, development and production of its new products; the hire of additional employees across all divisions; the production of an inventory of its vehicles; the buildup of inventories of parts and components for its vehicles; the expansion of its design, development, installation and servicing capabilities, including the planned construction of additional research and development centers and Lion experience centers; and an increase in its administrative functions to support its growth. Lion also expects to continue spending on technical and other operational enhancements to its business and to increase investment in research and development as it continues to introduce new products and solutions with a view to offer full turnkey transition services towards fleet electrification to its customers. While Lion expects to generate positive cash flows over time, the aforementioned anticipated increased expenditures will make it harder for Lion to achieve profitability and positive cash flow and Lion cannot guarantee it will achieve either in the near term or at all. If Lion is unable to generate adequate revenue growth and manage its expenses, it may continue to incur losses and have negative cash flows from operating activities and there is no guarantee it will achieve or sustain profitability or positive cash flows. To the extent Lion has negative cash flows from operating activities in any future periods, all or a portion of the funds raised in connection with the Business Combination and the PIPE financing may be used to fund such negative cash flows. See the section entitled “Risk Factors—Lion may in the future need to raise additional funds to meet its capital requirements and such funds may not be available to Lion on commercially reasonable terms or at all when it needs them, which could materially adversely affect Lion’s business, results of operations or financial condition.” Even if Lion is able to successfully and economically develop, manufacture and distribute its vehicles on schedule and at scale, there can be no assurance that it will be commercially successful.

Lion may make decisions that would reduce its short-term operating results if it believes those decisions will improve the quality of its products or services and if it believes such decisions will improve its operating results over the long-term. These decisions may not be consistent with the expectations of investors and may not produce the long-term benefits that Lion expects, in which case Lion’s business, results of operations or financial condition may be materially and adversely affected.

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Lion may not succeed in establishing, maintaining and strengthening its brand, which would materially and adversely affect customer acceptance of its vehicles, which could materially adversely affect its business, results of operations or financial condition.

Lion’s business and prospects heavily depend on its ability to develop, maintain and strengthen the Lion brand. If it is unable to establish, maintain and strengthen its brand, Lion may lose the opportunity to build and maintain a critical mass of customers. Lion’s ability to develop, maintain and strengthen the Lion brand will depend heavily on the success of its marketing efforts. The battery electric vehicle industry, and the alternative fuel vehicle industry in general, are highly competitive, and Lion may not be successful in building, maintaining and strengthening its brand. Many of Lion’s current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan and the European Union, have greater name recognition, broader customer relationships and substantially greater marketing resources than Lion. Failure to develop and maintain a strong brand would materially and adversely affect customer acceptance of Lion’s vehicles, could result in suppliers and other third parties being less likely to invest time and resources in developing business relationships with Lion, and could materially adversely affect Lion’s business, results of operations or financial condition.

Increases in costs, disruption of supply or shortage of raw materials, particularly lithium-ion battery cells, could materially adversely affect Lion’s business, results of operations or financial condition.

Lion may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. Any such increase in cost or supply interruption or shortage could materially adversely affect Lion’s business, results of operations or financial condition. Components in Lion’s vehicles are made of various raw materials, including aluminum, steel, carbon fiber, non-ferrous metals (such as copper) and other materials and minerals used to manufacture lithium-ion batteries. The prices for these raw materials fluctuate depending on market conditions and global demand and could materially affect Lion’s business, results of operations or financial condition. While Lion manages some of these risks through long-term contractual arrangements with suppliers with respect to the supply of certain key components of its vehicles, including lithium-ion batteries, it does not currently hedge its long-term exposure to price fluctuations of raw materials and supplies. Therefore, Lion is nevertheless exposed to multiple risks relating to price fluctuations for lithium-ion cells. These risks include:

Any disruption in the supply of battery cells or other key vehicle components could temporarily disrupt production of Lion’s vehicles until a different supplier is fully qualified. Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are not sufficiently safe. Furthermore, various fluctuations in market and economic conditions may cause Lion to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for raw materials would increase Lion’s operating costs and could reduce Lion’s margins if the increased costs cannot be recouped through increased vehicle prices. There can be no assurance that Lion will be able to recoup increasing costs of raw materials by increasing vehicle prices.

Lion’s vehicles use lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.

The battery packs within Lion’s vehicles use lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, a field or testing failure of Lion’s vehicles could occur, which could result in bodily injury or death and could subject Lion to lawsuits, product recalls, or redesign efforts, all of which would be time

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consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications, the social and environmental impacts of cobalt mining or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve Lion’s vehicles, could materially adversely affect Lion’s business, results of operations or financial condition.

In addition, manufacturing of Lion’s vehicles requires it to store a significant number of lithium-ion cells at its facility. Any mishandling of battery cells may cause disruption to the operation of Lion’s current or future facilities. While Lion has implemented safety procedures related to the handling of the cells, a safety issue or fire related to the cells could disrupt Lion’s operations. Such damage or injury could lead to adverse publicity and potentially a safety recall. Moreover, any failure of a competitor’s electric vehicle or energy storage product may cause indirect adverse publicity for Lion and its products. Such adverse publicity could negatively affect Lion’s brand or could materially adversely affect Lion’s business, results of operations or financial condition.

Lion may not be able to adequately forecast the supply and demand for its vehicles, its manufacturing capacity or its profitability under long term supply arrangements, including the MPA with the Specified Customer, which could result in a variety of inefficiencies in its business and hinder its ability to generate revenue.

It is difficult to predict Lion’s future sales and appropriately budget for Lion’s expenses, and Lion may have limited insight into trends that may emerge and affect its business. Lion will be required to provide forecasts of its demand to its suppliers several months prior to the scheduled delivery of products to customers. Currently, there is limited historical basis for making judgments on the future demand for Lion’s vehicles or its ability to mass develop, manufacture and deliver vehicles at scale, or Lion’s profitability in the future. If Lion fails to accurately predict its manufacturing requirements, it could incur additional costs or experience delays. If Lion overestimates manufacturing requirements, its suppliers may have excess inventory, which indirectly would increase Lion’s costs. If Lion underestimates manufacturing requirements, its suppliers may have inadequate inventory, which could interrupt manufacturing of Lion’s vehicles and result in delays in shipments and revenues. In addition, lead times for materials and components that Lion’s suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If Lion fails to order sufficient quantities of product components in a timely manner, the delivery of vehicles to its customers could be delayed, which could materially adversely affect its business, results of operations or financial condition.

In addition, the MPA (as defined below) with the Specified Customer (as defined below) requires Lion to reserve necessary manufacturing capacity to deliver up to 500 trucks per year from 2021 to 2025 and the greater of 500 trucks per year or 10% of Lion’s manufacturing capacity from 2026 to 2030, which could hinder Lion’s ability to capitalize on future business opportunities. Moreover, some of Lion’s customers, including the Specified Customer under the MPA, operate on a purchase order basis, which means such customers are not required to purchase any specified minimum quantity of vehicles beyond the quantities in an existing purchase order and may in certain circumstances cancel or reschedule purchase orders on relatively short notice. Cancellations or rescheduling of customer orders could result in the delay or loss of anticipated sales without allowing sufficient time to reduce, or delay the incurrence of, corresponding inventory and operating expenses, which could materially adversely affect Lion’s business, results of operations or financial condition.

Lion’s operating and financial results may vary significantly from period to period due to fluctuations in its operating costs and other factors.

Lion expects its period-to-period operating and financial results to vary based on a multitude of factors, some of which are outside of Lion’s control. Lion expects its period-to-period financial results to vary based on operating costs, which it anticipates will fluctuate with the pace at which it increases its manufacturing capacity and continues to design, develop and produce new products. In addition, Lion’s revenues from period to period may fluctuate as it develops and introduces new vehicles. As a result of these factors, Lion believes that quarter-to-quarter comparisons of its operating or financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, Lion’s financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on quarterly financial results. If any of this occurs, the trading price of Lion’s Common Shares could fall substantially, either suddenly or over time, which could have a material adverse effect on Lion’s business, results of operations or financial condition.

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Lion may experience significant delays in the design, production and launch of its new products.

Lion is still in the development and testing phase with respect to certain of its vehicles, including, among others, the Lion8 Tractor, Lion8 Bucket, Lion8 Boom, Lion7, Lion6 Utility and Lion5 all-electric trucks, the LionD all-electric school bus and an all-electric ambulance. The commercial deliveries of such vehicles are not expected to begin until later this year or 2022 (depending on the product) and may occur later or not at all. Any delay in the financing, design, production and launch of any such new vehicles, including future production of the aforementioned all-electric trucks, school buses and ambulance, could harm Lion’s reputation or materially adversely affect its business, results of operations or financial condition.

Failure to carry adequate insurance coverage may have a material adverse effect on Lion’s business, results of operations or financial condition.

Lion maintains liability insurance, property and business interruption insurance, cargo insurance, cybersecurity insurance, automotive liability insurance and directors and officers insurance, and such insurance coverage reflects deductibles, self-insured retentions, limits of liability and similar provisions. However, there is no guarantee that Lion’s insurance coverage will be sufficient, or that insurance proceeds will be paid to Lion in a timely manner. In addition, there are types of losses Lion may incur but against which it cannot be insured or which it believes are not economically reasonable to insure, such as losses due to acts of war and certain natural disasters. If Lion incurs these losses and they are material, its business, results of operations or financial condition could be materially adversely affected.

Increased freight and shipping costs or disruptions in transportation and shipping infrastructure could materially adversely impact Lion’s business, results of operations or financial condition.

Lion uses external freight shipping and transportation services to transport and deliver its vehicles as well as subcomponents and raw materials incorporated therein. Adverse fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important shipping and delivery points for Lion’s products, as well as for subcomponents incorporated in Lion’s vehicles could materially adversely affect Lion’s business, financial condition and results of operations. For example, delivery delays or increases in transportation costs (including through increased fuel costs, increased carrier rates or driver wages as a result of driver shortages, a decrease in transportation capacity, or work stoppages or slowdowns) could significantly decrease Lion’s ability to make sales and earn profits. Labor shortages or work stoppages in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries or which would necessitate Lion securing alternative shipping suppliers could also increase Lion’s costs or otherwise materially adversely affect its business, results of operations or financial condition.

Lion is highly dependent on the services of Marc Bedard, its CEO—Founder, and the rest of its senior management team. Lion’s inability to retain Mr. Bedard or attract and retain management or other employees who possess specialized market knowledge and technical skills could affect its ability to compete, manage operations effectively or develop new products or otherwise materially adversely affect its business, results of operations or financial condition.

Lion’s success depends, in part, on its ability to retain its key personnel, in particular management and other employees who possess specialized market knowledge and technical skills. Lion is highly dependent on the services of Marc Bedard, its CEO—Founder and second largest shareholder. Mr. Bedard is the source of many of the innovative ideas driving Lion and their execution. If Mr. Bedard were to discontinue his service for Lion due to death, disability or any other reason, Lion would be significantly disadvantaged. The unexpected loss of or failure to retain one or more of Lion’s key employees could adversely affect Lion’s business, results of operations or financial condition. Lion does not currently maintain key man life insurance policies with respect to Mr. Bedard or any other officer, and Lion will continue to evaluate whether to obtain such key man life insurance policies.

Lion’s success also depends, in part, on its continuing ability to identify, hire, attract, train, develop and retain other highly qualified personnel with specialized market knowledge and technical skills. Experienced and highly skilled employees are in high demand and competition for these employees can be intense, and Lion’s ability to hire, attract and retain them depends on Lion’s ability to provide competitive compensation. Lion may not be able to

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attract, assimilate, develop or retain qualified personnel in the future, and Lion’s failure to do so could materially adversely affect its business, results of operations or financial condition. Any failure by Lion’s management team and employees to perform as expected may have a material adverse effect on its business, financial condition and operating results.

Any deterioration in relationships with Lion’s employees as well as any work stoppage or similar difficulties could have a material adverse effect on Lion’s business, results of operations or financial condition.

None of Lion’s employees are currently unionized. The maintenance of a productive and efficient labor environment and, in the event of unionization of employees, the successful negotiation of a collective bargaining agreement, cannot be assured. A deterioration in relationships with employees or in the labor environment could result in work interruptions or other disruptions, or cause management to divert time and resources from other aspects of Lion’s business, any of which could have a material adverse effect on Lion’s business, results of operations or financial condition.

Lion’s employees and independent contractors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could have a material adverse effect on its business, results of operations or financial condition.

Lion is exposed to the risk that its employees, independent contractors or other parties it collaborates with may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other activities that violate laws and regulations, including production standards, federal, state and provincial fraud, abuse, data privacy and security laws, other similar laws or laws that require the true, complete and accurate reporting of financial information or data. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions Lion takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting it from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, Lion is subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against Lion and it is not successful in defending itself or asserting its rights, those actions could have a material adverse effect on its business, results of operations or financial condition, including, without limitation, by way of imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of its operations.

Lion has and may in the future make strategic alliances, partnerships or investments or acquisitions, all of which could divert management’s attention, result in Lion incurring significant costs or operating difficulties and dilution to its shareholders and otherwise disrupt its operations and materially adversely affect its business, results of operations or financial condition.

Pursuing potential strategic alliances, partnerships or investments or acquisitions and/or inorganic growth opportunities is part of Lion’s growth strategy. There are risks associated with any strategic partnership or arrangement, the termination or operation of joint ventures or other strategic alliances and pursuing strategic acquisitions or investment opportunities, including:

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Lion may have limited ability to monitor or control the actions of any third party involved in any such transaction and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, Lion may also suffer negative publicity or harm to its reputation by virtue of its association with any such third party. Participation in strategic alliances, partnerships or investments or acquisitions may also result in dilutive issuances of equity securities, which could adversely affect the price of the Lion Common Shares, or result in issuances of securities with superior rights and preferences to the Lion Common Shares or the incurrence of debt with restrictive covenants that limit Lion’s future uses of capital in pursuit of business opportunities. Lion may also not be able to identify opportunities for strategic partnerships or arrangements, acquisition or investments that meet its strategic objectives, or to the extent such opportunities are identified, may not be able to negotiate terms with respect to such opportunity that are acceptable to it. At this time Lion has made no commitments or agreements with respect to any such material transactions.

The terms of Lion’s indebtedness contain, and the terms of its future indebtedness may contain, certain covenants that restrict its ability to engage in certain transactions and may impair its ability to execute its growth strategy and respond to changing business and economic conditions.

The loan agreement with Finalta (as defined below) contains restrictive covenants that may limit Lion’s discretion with respect to certain business matters as well as covenants that require it to meet certain financial condition tests. Lion may also incur future indebtedness that might subject it to additional covenants and restrictions that could affect its financial and operational flexibility. Such restrictions may prevent it from taking actions that it believes would be in the best interest of its business and may make it difficult for it to execute its business strategy successfully or effectively compete with companies that are not similarly restricted.

Lion’s ability to comply with the covenants and restrictions contained in the instruments governing its indebtedness may be affected by economic, financial and industry conditions beyond its control. A breach of any of these covenants or restrictions could result in a default under the applicable debt instrument that would permit applicable lender(s) to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest, or cause cross-defaults under Lion’s other debt. If Lion is unable to repay its indebtedness, lenders could proceed against the collateral securing the debt. In any such case, Lion may be unable to borrow under the agreements under which such other indebtedness is issued, which could have a material adverse effect on its business, results of operations or financial condition.

Fluctuations in foreign currency exchange rates could result in declines in reported sales and net earnings.

Lion reports its financial results in U.S. dollars and a material portion of its sales and operating costs are realized in currencies other than the U.S. dollar. For the year ended December 31, 2020, approximately 49.5% of Lion’s revenues were realized in Canada. Lion is also exposed to other currencies such as the Euro, and may in the future be exposed to other currencies. If the value of any currencies in which sales are realized, particularly the Canadian dollar, depreciates relative to the U.S. dollar, Lion’s foreign currency revenue will decrease when translated to U.S. dollars for reporting purposes. In addition, any depreciation in foreign currencies could result in higher local prices, which may negatively impact local demand and have a material adverse effect on Lion’s business, results of operations or financial condition. Alternatively, if the value of any of the currencies in which operating costs are realized appreciates relative to the U.S. dollar, Lion’s operating costs will increase when translated to U.S. dollars for reporting purposes. Although these risks may sometimes be naturally hedged by a match in sales and operating costs denominated in the same currency, fluctuations in foreign currency exchange rates, particularly the U.S.-Canadian dollar exchange rate, could create discrepancies between Lion’s sales and

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operating costs in a given currency that could have a material adverse effect on its business, results of operations or financial condition. Fluctuations in foreign currency exchange rates could also have a material adverse effect on the relative competitive position of Lion’s products in markets where it faces competition from manufacturers who are less affected by such fluctuations in exchange rates, especially in the U.S. market.

While Lion actively manages its exposure to foreign-exchange rate fluctuations and may enter into hedging contracts from time to time, such contracts hedge foreign-currency denominated transactions and any change in the fair value of the contracts could be offset by changes in the underlying value of the transactions being hedged. Furthermore, Lion does not have foreign-exchange hedging contracts in place with respect to all currencies in which it does business. As a result, there can be no assurance that Lion’s approach to managing its exposure to foreign-exchange rate fluctuations will be effective in the future or that Lion will be able to enter into foreign-exchange hedging contracts as deemed necessary on satisfactory terms.

Unfavorable economic conditions, such as consequences of the global COVID-19 pandemic, may have a material adverse effect on Lion’s business, results of operations and financial condition.

Lion has been impacted by the COVID-19 pandemic, and Lion cannot predict the future impacts the COVID-19 pandemic may have on its business, results of operations and financial condition. Beginning in March 2020, numerous government regulations and public advisories, as well as shifting social behaviors, temporarily and from time to time limited or closed non-essential transportation, government functions, business activities and person-to-person interactions, and the duration of such trends is difficult to predict. Mandated governmental measures have forced Lion to reduce operations at its Saint-Jérôme, Québec, facility and establish work-from-home policies for certain of its employees, and some of its suppliers have been subject to similar limitations and may also have been required to shut down production. Limitations on travel by Lion’s personnel and personnel of its customers and increased demand for commercial trucks within its customers’ fleets caused some customers to delay electrification of their fleet, and future delays or shutdowns of Lion’s facilities or those of its suppliers’ could impact Lion’s ability to meet customer orders. Lion cannot predict if current restrictions and limitations to its or its customers’ and suppliers’ operations will be maintained, or if new measures will be implemented.

Lion’s operations and timelines may also be affected by global economic markets and levels of consumer comfort and spend, including recessions, slow economic growth, economic and pricing instability, increase of interest rates and credit market volatility, all of which could impact demand in the worldwide transportation industries or otherwise have a material adverse effect on Lion’s business, operating results and financial condition. Because the impact of current conditions on an ongoing basis is yet largely unknown, is rapidly evolving and has been varied across geographic regions, this ongoing assessment will be particularly critical to allow Lion to accurately project supply and demand and infrastructure requirements globally and allocate resources accordingly. If current global market conditions continue or worsen, Lion’s business, results of operations and financial condition could be materially adversely affected.

Natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, boycotts and geo-political events could materially adversely affect Lion’s business, results of operations or financial condition.

The occurrence of one or more natural disasters, such as hurricanes and earthquakes, unusually adverse weather, epidemic or pandemic outbreaks, such as the ongoing COVID-19 pandemic, boycotts and geo-political events, such as civil unrest and acts of terrorism, or similar disruptions could materially adversely affect Lion’s business, results of operations or financial condition. These events could result in physical damage to property, an increase in energy prices, temporary or permanent closure of one or more of Lion’s current or planned facilities, temporary lack of an adequate workforce in a market, temporary or long-term disruption in the supply of raw materials, product parts and components, temporary disruption in transport from overseas, or disruption to Lion’s information systems. Lion may incur expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, operating results and financial condition.

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As a result of the Business Combination, Lion could be treated as a U.S. corporation for U.S. federal income tax purposes.

Under current U.S. federal income tax law, a corporation organized under Canadian law is not treated as a U.S. corporation and, therefore, is treated as a non-U.S. corporation. Section 7874 of the Code and the Treasury Regulations promulgated thereunder, however, contain rules that may cause a non-U.S. corporation that acquires the stock of a U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes under certain circumstances. If, as a result of the Business Combination, Lion were treated as a U.S. corporation for U.S. federal income tax purposes, among other consequences, it would generally be subject to U.S. federal income tax on its worldwide income, and its dividends would be treated as dividends from a U.S. corporation. Regardless of the application of Section 7874 of the Code, Lion is expected to be treated as a Canadian tax resident for Canadian tax purposes. Consequently, if Lion were to be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code, it could be liable for both U.S. and Canadian taxes and dividends paid by Lion to its shareholders could be subject to both U.S. and Canadian withholding taxes.

Lion does not expect to be treated as a U.S. corporation for U.S. federal income tax purposes, and Lion intends to take this position on its tax returns. Lion has not sought and will not seek any rulings from the IRS as to such tax treatment, and the closing of the Business Combination was not conditioned upon achieving, or receiving a ruling from any tax authority or opinion from any tax advisor in regards to, any particular tax treatment. Further, there can be no assurance that your tax advisor, the IRS, or a court will agree with the position that Lion is not treated as a U.S. corporation pursuant to Section 7874 of the Code. Lion is not representing to you that Lion will not be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code. The rules for determining whether a non-U.S. corporation is treated as a U.S. corporation for U.S. federal income tax purposes are complex, unclear, and the subject of ongoing regulatory change. Lion’s intended position is not free from doubt. For more information about the application of Section 7874 of the Code to Lion, see the section entitled “Material U.S. Federal Income Tax Considerations —Tax Residence of Lion for U.S. Federal Income Tax Purposes”.

If, as a result of the Business Combination, Lion were to be treated as an inverted domestic corporation under the Homeland Security Act or other relevant state and local rules, the U.S. federal government and certain state and local governments may cease doing business with Lion, which could substantially decrease the value of Lion’s business and, accordingly, the value of the Lion Common Shares.

The Federal Acquisition Regulation (“FAR”) prohibits U.S. federal government agencies from using appropriated (or otherwise made available) funds for contracts with a foreign incorporated entity, or a subsidiary of such an entity, that is an “inverted domestic corporation,” as defined in the Homeland Security Act at 6 U.S.C. § 395(b). Further, at the state and local level, certain jurisdictions have adopted similar restrictions or may adopt similar restrictions in the future. Accordingly, U.S. federal government agencies and certain state and local government agencies may be prohibited from entering into new contracts with an inverted domestic corporation and may be prohibited from paying for contractor activities on existing contracts after the date of the “inversion.” If the future expansion of Lion’s business in the United States becomes dependent upon its ability to enter into contracts with U.S. federal government agencies or state and local governments agencies in the United States, the treatment of Lion as an inverted domestic corporation could substantially decrease the value of its business following the Business Combination.

Lion intends to take the position that it is not an “inverted domestic corporation.” The application of the “inverted domestic corporation” definition is somewhat unclear due to the lack of detailed regulations or other guidance promulgated with respect to the relevant provisions of the Homeland Security Act (and similar state and local rules). Section 7874 of the Code, discussed above, includes substantially similar provisions regarding the determination of whether a foreign incorporated corporation is treated as a U.S. domestic corporation for U.S. federal income tax purposes. While the regulatory provisions and other guidance issued by the IRS and the U.S. Treasury Department with respect to such provisions provide more detailed guidance providing for expansive application, these regulations do not explicitly apply for the purposes of determining whether a corporation is an inverted domestic corporation under the Homeland Security Act (and similar state and local rules), and it is unclear to what extent they should be viewed as interpretive guidance for such purposes. There can be no assurance that the relevant government agencies, or a court or administrative tribunal, will agree with Lion’s position that it should not be treated as an inverted domestic corporation under the Homeland Security Act (or similar state or local rules), and, in addition, changes in facts or law might cause Lion to be treated as an inverted domestic corporation for such purposes. New statutory or regulatory provisions, or other guidance under the Homeland Security Act or other relevant rules, could be enacted or promulgated that would adversely affect Lion’s status with regard to the FAR prohibition or other relevant prohibitions, all of which could have retroactive application.

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Risks Related to Customers and Suppliers

Lion’s growth will depend on its ability to successfully attract new customers and secure firm orders from them and to retain existing customers and engage them into additional deployments in the future. Failure to increase sales to both new and existing customers could have a material adverse effect on Lion’s business, results of operations or financial condition.

Lion’s success, and its ability to increase revenue and operate profitably, depends in part on its ability to identify new customers and secure firm orders from them, its ability to retain existing customers and engage them into additional deployments in the future, and its ability to meet current and new customers business needs. Failure to achieve any of the foregoing could materially and adversely affect Lion’s business, results of operations or financial condition. Lion may fail to attract new customers or retain existing customers, retain revenue from existing customers or increase sales to both new and existing customers as a result of a number of other factors, including:

meaning that Lion may make strategic decisions that may not maximize its short-term revenue or profitability if it believes that the decisions are consistent with its vision and will improve its financial performance over the long-term.

Lion is dependent on third-party suppliers, some of which are single-source suppliers, and Lion expects to continue to rely on third-party suppliers. The inability of any such supplier to deliver necessary parts or components according to Lion’s schedule and at prices, volumes and quality levels acceptable to it, Lion’s inability to efficiently manage these parts or components, or the termination or interruption of any supply arrangement could materially adversely affect Lion’s business, results of operations or financial condition.

Lion is dependent on third-party suppliers to supply and manufacture parts and components included in its vehicles, and it expects to continue to rely on third parties to supply and manufacture such parts and components in the future. While Lion obtains components from multiple sources whenever possible, some of the components used in its vehicles, including certain key battery system components, are purchased from a single source. While Lion believes that it may be able to establish alternate supply relationships and can obtain or potentially engineer replacement components for some of its single source components, it may be unable to do so in the short term or at all, or at prices, volumes or quality levels that are acceptable to it. In addition, the inability of any of Lion’s suppliers to deliver necessary parts or components according to Lion’s schedule and at prices, volumes or quality levels acceptable to Lion, Lion’s inability to efficiently manage these parts or components, or the termination or interruption of any material supply arrangement could materially adversely affect Lion’s business, results of operations or financial condition. Any disruption in the supply of parts or components, whether or not from a single source supplier, could temporarily disrupt manufacturing of Lion’s vehicles until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond Lion’s control or which it does not presently anticipate, could also affect Lion’s suppliers’ ability to deliver components to Lion on a timely basis and ultimately, Lion’s ability to economically manufacture and distribute its vehicles. Any of the foregoing could materially adversely affect Lion’s business, results of operations or financial condition.

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Also, if any of Lion’s suppliers become economically distressed or go bankrupt, Lion may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase its costs, affect its liquidity or cause production disruptions, all of which could materially adversely affect Lion’s business, results of operations or financial condition.

Lion has limited experience servicing the urban trucks it distributes. Failure to address the servicing requirements of its customers could harm Lion’s reputation or materially adversely affect its business, results of operations or financial condition.

Lion has limited experience in servicing the urban trucks it distributes, including its class 6 and 8 trucks available for purchase today, and it expects to be required to increase its servicing capabilities as it scales its operations and continues to grow, including by building new Lion experience centers in the U.S. and Canada. Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. Although Lion believes the experience it has gained servicing its electric buses and developing and operating prototypes of its urban trucks positions it well to service its urban trucks and future products, Lion has no after-sale experience of maintaining and servicing urban trucks for its customers, and there is no guarantee Lion will be able to do so. Failure to address the servicing requirements of its customers could harm Lion’s reputation or materially adversely affect its business, results of operations or financial condition.

Lion’s customers will also depend on Lion’s customer support team to resolve technical and operational issues relating to the software integrated in its vehicles. Lion’s ability to provide effective customer support is largely dependent on its ability to attract, train and retain qualified personnel with experience in supporting customers on platforms such as Lion’s platform. As it continues to grow, additional pressure may be placed on Lion’s customer support team, and Lion may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. Lion may also be unable to modify the future scope and delivery of its technical support to compete with changes in the technical support provided by its competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect Lion’s results of operation. If Lion is unable to successfully address the servicing requirements of its customers or establish a market perception that it maintains high-quality support, it may be subject to claims from its customers, including for loss of revenue or damages, and its business, results of operations or financial condition may be materially and adversely affected.

Lion’s future growth is dependent upon the trucking and busing industries’ and Lion’s other customers’ willingness to adopt battery electric vehicles and specifically Lion’s vehicles.

Lion’s future growth is highly dependent upon the adoption by the commercial trucking and busing industries and Lion’s other target consumers of, and Lion is subject to an elevated risk of any reduced demand for, alternative fuel vehicles in general and electric vehicles in particular. If the market for electric vehicles does not develop at the rate or in the manner or to the extent that Lion expects, or if critical assumptions Lion has made regarding the efficiency of its vehicles are incorrect or incomplete, Lion’s business, results of operations or financial condition may be adversely materially affected. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. Factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:

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For example, if the market price of oil drops, it is unknown to what extent any corresponding decreases in the cost of diesel fuel may impact the market for electric vehicles. Moreover, travel restrictions and social distancing efforts in response to the COVID-19 pandemic may negatively impact the commercial trucking industry, leading to reduced consumer demand for products carried by the commercial trucking industry, for an unknown, but potentially lengthy, period of time. In addition, temporary school closures in the United States and Canada resulted in reduced school bus usage and reduced demand for ancillary products and services. Even if the trucking and busing industries and Lion’s other target customers adopt battery electric vehicles, Lion may be unable to establish and maintain confidence in its long-term business prospects among consumers, analysts and within the industry, and may be subject to negative publicity. The influence of any of the factors described above may cause current or potential customers not to purchase Lion’s vehicles and may otherwise materially adversely affect Lion’s business, results of operations or financial condition.

Lion’s inability to leverage vehicle and customer data could impact the servicing of its products, its software algorithms and impact research and development operations.

Lion relies on data collected from the use of its fleet of vehicles, including vehicle data and data related to battery usage statistics. Lion uses this data in connection with the servicing and normal course software updates of its products, its software algorithms and the research, development and analysis of its vehicles. Lion’s inability to obtain this data or the necessary rights to use this data or Lion’s inability to properly analyze or use this data could result in Lion’s inability to adequately service its vehicles or delay or otherwise negatively impact its research and development efforts. Any of the foregoing could materially adversely affect Lion’s business, results of operations or financial condition.

Risks Related to Electric Vehicle Industry and Related Regulatory, Legal and Tax Matters

The battery electric vehicle industry and its associated technologies are rapidly evolving and may be subject to unforeseen changes. Developments in alternative or analogous technologies may adversely affect the demand for Lion’s vehicles or otherwise materially adversely affect Lion’s business, results of operations or financial condition.

The battery electric vehicle industry and its technology are rapidly evolving and may be subject to unforeseen changes. Lion may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a

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fuel source and, as a result, its competitiveness may suffer. Developments in alternative or analogous technologies, such as advanced diesel, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may harm Lion’s competitive position and growth prospects or materially and adversely affect Lion’s business, results of operations or financial condition, including in ways which it currently does not anticipate.

The electric vehicle industry is highly competitive and Lion is likely to face competition from a number of sources. Lion may not be successful in competing in this industry, which may materially adversely affect its business, results of operations or financial condition.

The North American medium and heavy-duty urban truck market is highly competitive today and Lion expects it will become even more so in the future. Lion’s principal competition for their trucks comes from manufacturers of trucks with internal combustion engines powered by diesel fuel. This includes Navistar (Volkswagen), Daimler, Volvo, PACCAR, Hino (Toyota), and other automotive manufacturers. Lion cannot assure that customers will choose its vehicles over those of its competitors’ diesel-powered trucks. As of the date hereof, few class 5 to 8 electric trucks or battery electric buses are being sold in the United States or Canada. However, Lion expects that an increasing number of competitors will enter the electric truck market within the next several years and as they do so Lion expects that it will experience significant competition. A number of private and public companies have announced plans to offer battery electric trucks, including companies such as Navistar, Daimler, Volvo, PACCAR, Tesla, Nikola, and others. Based on publicly available information, a number of these competitors have displayed prototype trucks and have announced target availability and production timelines, while others have launched pilot programs in some markets. In addition, Lion is aware that potential competitors, including BYD and Workhorse, are currently manufacturing and selling battery electric trucks.

The North American school bus market is mainly concentrated in the hands of three incumbent automotive original equipment manufacturers (“OEMs”) selling primarily diesel school buses: Blue Bird Corporation, Thomas Built Buses (Daimler), and IC Bus (Navistar/Volkswagen). These manufacturers mainly compete with Lion’s school buses through their traditional diesel offering but are beginning to rollout electric models. In addition to the incumbent diesel school bus OEMs, a few early-stage EV OEMs have entered in competition with Lion such as Green Power Motor, which offers purpose-built electric Type D school buses, and Trans Tech, which offers retrofit electric Type A school buses.

Some of Lion’s current and potential competitors may also have greater financial resources, more extensive development, manufacturing, technical, marketing and service capabilities, greater brand, customer and industry recognition, a larger number of managerial and technical personnel or a lower cost of funds than Lion does or other competitive advantages relative to Lion. Many of Lion’s current and potential competitors may also be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products.

Lion expects competition in its industry to intensify in the future in light of increased demand for electric and other alternative fuel vehicles and continuing globalization. Factors affecting competition include the total cost of ownership (“TCO”), product quality and features, innovation and development time, pricing, availability, reliability, safety, fuel economy, customer service (including breadth of service network) and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in a further downward price pressure and adversely affect Lion’s business, financial condition and results of operation. There can be no assurances that Lion will be able to compete successfully in the markets in which it operates. If Lion’s competitors introduce new vehicles or services that compete with or surpass the quality, price, performance or availability of Lion’s vehicles or services, Lion may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow it to generate attractive rates of return on its investment. Increased competition could result in price reductions and revenue shortfalls, loss of customers and loss of market share, which could materially adversely affect Lion’s business, results of operations or financial condition.

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Lion’s vehicles are subject to numerous mandated safety standards. Lion may be unable to comply with such safety standards, or could incur significant costs in order to do so, which could in each case materially adversely affect its business, results of operations or financial condition.

Lion’s vehicles, and the sale of motor vehicles in general, are subject to numerous international, federal, state and provincial motor vehicle safety and other standards, including the National Traffic and Motor Vehicle Safety Act, the Federal Motor Vehicle Safety Standards, the Motor Vehicle Safety Act (Canada) and similar laws and regulations. Although Lion continuously evaluates requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service its vehicles in the United States and Canada, it may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service its vehicles, especially for future vehicles. For example, in the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Similar regulations exist in other jurisdictions. Failure by Lion to maintain or obtain any necessary approval for, or otherwise satisfy motor vehicle standards with respect to, its existing or future electric vehicles, or the incurrence of material unexpected costs in connection therewith, could have a material adverse effect on Lion’s business, financial condition and operating results.

Lion is subject to substantial laws, regulations and standards, including related to product safety, health and safety and environmental matters, each of which could impose substantial costs, legal prohibitions or unfavorable changes upon its operations or products, and any failure to comply with these laws, regulations or standards, including as they evolve, could harm Lion’s reputation, subject it to significant fines and liability, negatively impact its ability to sell its vehicles or operate its manufacturing facilities and materially adversely affect its business, results of operations and financial condition.

As a manufacturing company, including with respect to its current Saint-Jérôme, Québec, facility and its planned battery assembly facility and planned large-scale U.S. manufacturing facility, Lion is or will be subject to complex environmental, manufacturing, health and safety laws and regulations at numerous jurisdictional levels in the U.S. and Canada, including laws relating to the use, handling, storage, recycling, disposal and human exposure to hazardous materials and with respect to constructing, operating and maintaining its facilities. The costs of compliance, including remediating contamination if any is found on Lion’s current or future properties, or at sites where Lion has sent wastes for disposal, and any changes to Lion’s operations mandated by new or amended laws, may be significant. Lion may also face unexpected delays in obtaining permits and approvals required by such laws in connection with its future facilities, which would hinder operation of these facilities and Lion’s growth. Such costs and delays may materially adversely impact Lion’s business, results of operations or financial condition. Furthermore, any violations of these laws may result in substantial fines and penalties, remediation costs, third party damages, or a suspension or cessation of Lion’s operations. In addition, battery electric vehicles are subject to substantial regulation under international, federal, state, provincial and local laws and implementing regulations. These requirements are subject to change, including as a result of shifting sociopolitical trends. For example, several jurisdictions have adopted, or are considering adopting, laws related to supply chain sustainability, particularly with regards to environmental and/or human rights characteristics. Lion incurs significant costs in complying with applicable laws and regulations and may be required to incur additional costs to comply with any changes to such laws or regulations, and any failures to comply could result in significant expenses, delays or fines, or otherwise materially adversely affect Lion’s business, results of operations or financial condition.

The unavailability, reduction or elimination of government and economic incentives due to policy changes, government regulation or otherwise, could have a material adverse effect on Lion’s business, results of operations or financial condition.

Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle industry or other reasons may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or Lion’s vehicles. While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, Lion’s business, results of operations or financial condition could be materially adversely affected.

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In particular, demand for Lion’s vehicles is influenced by federal, state, provincial and local tax credits, rebates, grants and other government programs and incentives that promote the use of battery electric vehicles. These include various government programs that make grant funds available for the purchase of battery electric vehicles. Additionally, demand for Lion’s vehicles may be influenced by laws, rules, regulations and programs that require reductions in carbon emissions, such as the various measures implemented by lawmakers and regulators in California and Québec, among others, designed to increase the use of electric and other zero-emission vehicles, including the establishment of firm goals in certain instances for the number of these vehicles operating on state roads by specified dates and the enactment of various laws and other programs in support of these goals. These programs and regulations, which have the effect of encouraging the use of battery electric vehicles, could expire or be repealed or amended for a variety of reasons. For example, parties with an interest in gasoline and diesel, hydrogen or other alternative vehicles or vehicle fuels, including lawmakers, regulators, policymakers, environmental or advocacy organizations, OEMs, trade groups, suppliers or other groups, may invest significant time and money in efforts to delay, repeal or otherwise negatively influence regulations and programs that promote the use of battery electric vehicles. Many of these parties have substantially greater resources and influence than Lion has. Further, changes in federal, state, provincial or local political, social or economic conditions, including a lack of legislative focus on these programs and regulations, could result in their modification, delayed adoption or repeal. Any failure to adopt, delay in implementation, expiration, repeal or modification of these programs and regulations, or the adoption of any programs or regulations that encourage the use of other alternative fuels or alternative vehicles over battery electric vehicles, would reduce the market for battery electric vehicles and could materially adversely affect Lion’s business, results of operations or financial condition.

Lion’s inability to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which it may apply could have a material adverse effect on its business, results of operations or financial condition.

Lion has applied, and expects in the future to apply, for federal, state and provincial grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of battery electric vehicles and related technologies. Lion anticipates that in the future there will be new opportunities to apply for grants, loans and other incentives from federal, state, provincial and foreign governments. Lion’s ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of Lion’s applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive and will cause management to divert time and resources from other aspects of its business. Lion cannot assure that it will be successful in obtaining any of these additional grants, loans and other incentives, and Lion’s inability to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which it may apply could have a material adverse effect on its business, results of operations or financial condition.

Unfavorable changes in U.S. or Canadian laws or regulations and trade policy, including the imposition of tariffs or quotas, or changes in any free-trade arrangements such as the CUSMA could adversely affect Lion’s business, results of operations or financial condition.

While Lion plans on manufacturing some of its vehicles in the United States in the future, all of its vehicles are currently manufactured in, and distributed from, its Saint-Jérôme, Québec, facility. For the year ended December 31, 2020 and the year ended December 31, 2019, Lion’s total sales outside Canada represented approximately 50.5% and 62.0%, respectively, of its total sales, and Lion intends to continue to expand its operations in the United States by investing in the construction of a large-scale U.S. manufacturing facility and promoting its brand and vehicles in the United States. The U.S. market has been and is expected to continue generating sales growth. Several factors, including weakened international economic conditions, the introduction of new trade restrictions, increased protectionism or changes in free-trade arrangements such as the Canada-United States-Mexico Agreement (CUSMA), tariffs, negative geo-political events or an outbreak of infectious disease, a pandemic or a similar public health threat, such as the COVID-19 pandemic, could adversely affect such growth. In particular, the U.S. government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements. It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have resulted in increased costs for goods imported into the United States. There is no guarantee that further tariffs or additional trade restrictions will not be implemented on a broader range of products or raw materials. The resulting environment could have a material adverse effect on Lion’s business, results of operations or financial condition.

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Tax matters and changes in tax laws could materially adversely affect Lion’s business, results of operations or financial condition.

Lion conducts operations, directly and through its U.S. subsidiaries, in Canada and the United States and is therefore subject to income taxes in Canada and the United States. Lion may also in the future become subject to income taxes in other foreign jurisdictions. Lion’s effective income tax rate could be adversely affected by a number of factors, including changes in the valuation of deferred tax assets and liabilities, changes in tax laws, changes in accounting and tax standards or practices, changes in the composition of operating income by tax jurisdiction, changes in Lion’s operating results before taxes, and the outcome of income tax audits in Canada, the United States, or other jurisdictions. Lion regularly assesses all of these matters to determine the adequacy of its tax liabilities. If any of Lion’s assessments turn out to be incorrect, Lion’s business, results of operations, or financial condition could be materially adversely affected.

Lion conducts business in the United States through its existing U.S. subsidiary and may in the future conduct business via new subsidiaries in the United States or other jurisdictions. Due to the complexity of multinational tax obligations and filings, Lion may have a heightened risk related to audits or examinations by federal, state, provincial, and local taxing authorities in the jurisdictions in which it operates. Outcomes from these audits or examinations could have a material adverse effect on Lion’s business, results of operations, or financial condition.

The tax laws of Canada and the U.S., as well as potentially any other jurisdiction in which Lion may operate in the future, have detailed transfer pricing rules that require that all transactions with non-resident related parties satisfy arm’s length pricing principles. Although Lion believes that its transfer pricing policies have been reasonably determined in accordance with arm’s length principles, the taxation authorities in the jurisdictions where Lion carries on business could challenge its transfer pricing policies. International transfer pricing is a subjective area of taxation and generally involves a significant degree of judgment. If any of these taxation authorities were to successfully challenge Lion’s transfer pricing policies, Lion could be subject to additional income tax expenses, including interest and penalties. Any such increase in Lion’s income tax expense and related interest and penalties could have a material adverse effect on its business, results of operations, or financial condition.

In addition, Lion is also entitled to claim certain expenses and tax credits, including research and development expenses and Scientific Research and Experimental Development tax credits. Although Lion believes that the claims or deductions have been reasonably determined, there can be no assurance that Canadian or other relevant taxation authorities will agree. If a taxation authority were to successfully challenge the correctness of such expenses or tax credits claimed, or if a taxation authority were to reduce any tax credit either by reducing the rate of the grant or the eligibility of some research and development expenses in the future, Lion’s business, results of operations, or financial condition could be materially adversely affected.

Lion may also be adversely affected by changes in the relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions, and interpretations thereof, in each case, possibly with retroactive effect. For example, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS recently entered into force among the jurisdictions that have ratified it. While Canada has ratified this convention, the United States has not yet done so. These recent changes could adversely affect Lion’s taxation, especially as Lion expands its relationships and operations internationally and could have a material adverse effect on Lion’s business, results of operations, or financial condition.

An adverse determination in any significant product liability claim against Lion could materially adversely affect its business, results of operations or financial condition.

The development, manufacturing, sale and usage of Lion’s vehicles expose Lion to significant risks associated with product liability claims. The automotive industry in particular experiences significant product liability claims, and Lion may face inherent risk of exposure to claims in the event its vehicles do not perform or are claimed to not have performed as expected. If Lion’s products are defective, malfunction or are used incorrectly by its customers, it may result in bodily injury, property damage or other injury, including death, which could give rise to product liability claims against Lion. Changes to Lion’s manufacturing processes, including as a result of its expected

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increase in manufacturing capacity and planned large-scale U.S. manufacturing facility, and the production of new products could result in product quality issues, thereby increasing the risk of litigation and potential liability. Any losses that Lion may suffer from any liability claims and the effect that any product liability litigation may have upon the brand image, reputation and marketability of Lion’s products could have a material adverse impact on Lion’s business, results of operations or financial condition.

Although Lion maintains insurance with respect to future claims in amounts it believes to be appropriate, no assurance can be given that material product liability claims will not be made in the future against Lion, or that claims will not arise in the future in excess or outside the coverage of Lion’s indemnities and insurance. Lion records provisions for known potential liabilities, but there is the possibility that actual losses may exceed these provisions and therefore negatively impact earnings. Also, Lion may not be able in the future to obtain adequate product liability insurance or the cost of doing so may be prohibitive. Adverse determinations of material product liability claims made against Lion could also harm its reputation and cause it to lose customers and could have a material adverse effect on its business, results of operations or financial condition.

Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on Lion’s business, results of operations or financial condition.

Lion generally provides a limited warranty against defects for all of its products. In addition, Lion may in the future be required to make product recalls or could be held liable in the event that some of its products do not meet safety standards or statutory requirements on product safety, even if the defects related to any such recall or liability are not covered by Lion’s limited warranty. Although Lion employs quality control procedures, products manufactured by it will need repair or replacement or may be recalled. Lion’s standard warranties generally require it to repair or replace defective products during such warranty periods at no cost to the consumer. Lion records provisions based on an estimate of product warranty claims, but there is the possibility that actual claims may exceed these provisions and therefore negatively impact Lion’s results of operations of financial condition. Although Lion has not to this date made any major product recall, it could in the future be required to make major product recalls or could be held liable in the event that some of its products do not meet safety standards or statutory requirements on product safety. In addition, the risks associated with product recalls may be aggravated if production volumes increase significantly, supplied goods do not meet Lion’s standards, Lion fails to perform its risk analysis systematically or product-related decisions are not fully documented. The repair and replacement costs that Lion could incur in connection with a recall could have a material adverse effect on its business, results of operations or financial condition. Product recalls could also harm Lion’s reputation and cause it to lose customers, particularly if recalls cause consumers to question the safety or reliability of its products, which could have a material adverse effect on its business, results of operations or financial condition.

In addition, purchase agreements with Lion’s customers may from time to time contain, in addition to Lion’s limited warranty, undertakings related to certain specific levels of performance and availability for the vehicles sold thereunder. Failure by Lion to provide the required levels of performance and availability, even if such failure is the result of factors outside of Lion’s control, could result in Lion being liable under such contractual arrangements or allow customers to terminate their arrangements with Lion. In particular, the MPA with the Specified Customer contains significant obligations from Lion in favor of the Specified Customer with respect to availability of vehicles in the ordinary course, and failure by Lion to satisfy those obligations, including if vehicle downtime and unavailability result from defects in the vehicles or preventative maintenance or maintenance issues, could result in Lion being liable for significant amounts, and any material breach by Lion under the MPA could entitle the Specified Customer to terminate the MPA and fully accelerate the vesting of the Specified Customer Warrant. See “Risk Factors—Lion’s constating documents permit it to issue an unlimited number of Common Shares without additional shareholder approval.” Failure by Lion to meet such obligations under the MPA with the Specified Customer, especially if the volume of purchases made by the Specified Customer thereunder increases significantly, could affect Lion’s profitability or otherwise materially and adversely affect its business, results of operations or financial condition.

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Risks Related to Cyber Security, Intellectual Property and Technology

Lion is subject to information technology and cybersecurity risks to operational systems, security systems, infrastructure, integrated software in its vehicles and solutions and customer data processed by it, third-party vendors or suppliers, and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent Lion from effectively operating its business, harm its reputation or materially adversely affect its business, results of operations or financial condition.

Lion is at risk for interruptions, outages and breaches of: (i) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by it or its third-party vendors or suppliers; (ii) facility security systems, owned by it or its third-party vendors or suppliers; (iii) transmission control modules or other in-product technology, owned by it or its third-party vendors or suppliers; (iv) the integrated software in Lion’s vehicles; or (v) customer or driver data that Lion processes or Lion’s third-party vendors or suppliers process on its behalf. Such cyber incidents could materially disrupt operational systems; result in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, drivers or others; jeopardize the security of Lion’s facilities; or affect the performance of transmission control modules or other in-product technology and the integrated software in Lion’s vehicles. A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time.

Although Lion maintains information technology measures designed to protect it against intellectual property theft, data breaches and other cyber incidents, such measures will require updates and improvements, and there is no guarantee that such measures will be adequate to detect, prevent or mitigate cyber incidents. Any implementation, maintenance, segregation and improvement of Lion’s systems may require significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving, expanding and updating current systems, including the disruption of Lion’s data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect Lion’s ability to manage its data and inventory, procure parts or supplies or produce, sell, deliver and service its vehicles, adequately protect its intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. Lion cannot be sure that these systems upon which it relies, including those of its third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If Lion does not successfully implement, maintain or expand these systems as planned, its operations may be disrupted, Lion’s ability to accurately and timely report its financial results could be impaired, and deficiencies may arise in Lion’s internal control over financial reporting, which may impact Lion’s ability to certify its financial results. Moreover, Lion’s proprietary information or intellectual property could be compromised or misappropriated, and its reputation may be adversely affected. If these systems do not operate as expected, Lion may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

A significant cyber incident could impact Lion’s manufacturing capacity or production capability, harm its reputation, cause Lion to breach its contractual arrangements with other parties or subject Lion to regulatory actions or litigation, any of which could materially affect its business, prospects, results of operations or financial condition. In addition, Lion’s insurance coverage for cyberattacks may not be sufficient to cover all the losses it may experience as a result of a cyber incident.

Lion also collects, uses, discloses, stores, transmits and otherwise processes customer, driver and employee and others’ data as part of its business and operations, which may include personal data or confidential or proprietary information. Lion also works with partners and third-party service providers or vendors that may in the course of their business relationship with Lion collect, store and process such data on Lion’s behalf and in connection with Lion’s products and services. There can be no assurance that any security measures that Lion or its third-party service providers, vendors, or suppliers have implemented will be effective against current or future security threats. While Lion has developed systems and processes designed to protect the availability, integrity, confidentiality and security of Lion’s, Lion’s customers’, drivers’ and employees’ and others’ data, such security measures or those of its third-party service providers, vendors or suppliers could fail and result in unauthorized access to or disclosure, acquisition, encryption, modification, misuse, loss, destruction or other compromise of such data. If a compromise of such data were to occur, Lion may become liable under its contracts with other parties and under applicable law for damages and incur penalties and other costs to respond to, investigate and remedy such an incident. Laws in all 50 states of the United States and Canada require Lion to provide notice to individuals, customers, regulators, credit reporting agencies and others when certain sensitive information has been compromised as a result of a security

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breach or where a security breach creates a real risk of significant harm to an individual. Such laws are inconsistent and compliance in the event of a widespread data breach could be costly. Depending on the facts and circumstances of such an incident, these damages, penalties, fines and costs could be significant. Any such event could harm Lion’s reputation and result in litigation against it, or otherwise materially adversely affect its business, prospects, results of operations or financial condition.

Any unauthorized control or manipulation of the information technology systems in Lion’s vehicles could result in loss of confidence in Lion and its vehicles and harm its reputation, which could materially adversely affect its business, results of operations or financial condition.

Lion’s vehicles contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. Lion has designed, implemented and tested security measures intended to prevent unauthorized access to its information technology networks and its vehicles and related systems. However, hackers may attempt to gain unauthorized access to modify, alter and use such networks, vehicles and systems to gain control of or to change Lion’s solutions’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicles. Future vulnerabilities could be identified and Lion’s efforts to remediate such vulnerabilities may not be successful. Any unauthorized access to or control of Lion’s vehicles, or any loss of customer data, could result in legal claims or proceedings and remediation of such problems could result in significant, unplanned capital expenditures. In addition, regardless of their veracity, reports of unauthorized access to its technology systems or data, as well as other factors that may result in the perception that Lion’s vehicles, technology systems or data are capable of being “hacked,” could materially negatively affect Lion’s brand and harm Lion’s business, prospects, results of operations or financial condition.

Lion’s vehicles, as well as the maintenance and repair services it offers to its customers, rely on software and hardware that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if Lion is unsuccessful in addressing or mitigating technical limitations in its systems, Lion’s business, results of operations or financial condition could be materially adversely affected.

Lion’s vehicles rely on software and hardware, including software and hardware developed or maintained by third parties, that is highly technical and complex and will require modification and updates over the life of the vehicle. In addition, the performance of the software solutions included in Lion’s vehicles depends on the ability of such software and hardware to store, retrieve, process and manage immense amounts of data. Lion’s software and hardware may contain errors, bugs or vulnerabilities, and its systems are subject to certain technical limitations that may compromise Lion’s ability to meet its objectives. Some errors, bugs or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use. Errors, bugs, vulnerabilities, design defects or technical limitations may be found within Lion’s software and hardware. Although Lion attempts to remedy any issues it observes in its vehicles and software as effectively and rapidly as possible, such efforts may not be timely, may hamper production or may not be to the satisfaction of Lion’s customers. Additionally, if Lion is able to deploy updates to the software addressing any issues, but such updates cannot or are not installed by its customers, such customers’ software will be subject to these vulnerabilities until they install such updates. If Lion is unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in its software and hardware, Lion may suffer damage to its reputation, loss of customers, loss of revenue or liability for damages, any of which could materially adversely affect Lion’s business, results of operations or financial condition.

Interruption or failure of Lion information technology and communications systems could impact Lion’s ability to effectively provide Lion’s services.

The availability and effectiveness of Lion’s goods and services depend on the continued operation of information technology and communications systems. Lion’s systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm Lion’s systems. Lion utilizes reputable third-party service providers or vendors for Lion’s data, and these providers could also be vulnerable to harms similar to those that could damage Lion systems, including sabotage and intentional acts of vandalism causing potential disruptions. Some of Lion’s systems may not be redundant, and Lion’s disaster recovery planning cannot account for all eventualities. Any problems with Lion’s third-party cloud hosting providers could result in lengthy interruptions in Lion’s business. In addition, Lion’s products utilize technical and complex technology which may contain errors or vulnerabilities that could result in interruptions in Lion’s business or the failure of Lion’s systems.

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Lion is subject to evolving laws, regulations, standards and contractual obligations related to data privacy and security, and Lion’s actual or perceived failure to comply with such obligations could harm its reputation, subject it to significant fines and liability or adversely affect its business.

Collection, use, disclosure, storage, transmission or other processing of Lion’s customers’, employees’ and others’ information in conducting Lion’s business may subject it to various legislative and regulatory burdens related to data privacy and security that could require notification of data breaches, restrict or impose burdensome conditions on Lion’s use of such information and hinder Lion’s ability to acquire new customers or market to existing customers. The regulatory framework for data privacy and security is rapidly evolving, and Lion may not be able to monitor and react to all developments in a timely manner. For example, California requires connected devices to maintain minimum information security requirements. As legislation continues to develop, Lion will likely be required to expend significant additional resources to continue to modify or enhance Lion’s protective measures and internal processes to comply with such legislation. In addition, non-compliance with these laws or a significant breach of Lion’s third-party service providers’ or vendors’ or Lion’s own network security and systems could have serious negative consequences for its business and future prospects, including possible fines, penalties and damages, reduced customer demand for its vehicles and harm to its reputation and brand. Customers may also object to Lion’s or its third party service providers’ or vendors’ collection or processing of certain information, including personal data, which could materially adversely affect Lion’s business, results of operations or financial condition.

The performance characteristics of Lion’s vehicles, including battery life and range, may vary or decline over time, including due to factors outside of Lion’s control. Any such variation or decline may negatively influence potential or existing customers’ decisions whether to purchase Lion’s vehicles or affect Lion’s reputation, or could materially adversely affect its business, results of operations or financial condition.

The performance characteristics of Lion’s vehicles, including battery life and range, may vary or decline over time, including due to factors outside of Lion’s control. Factors such as driver behavior, usage, speed, terrain, time and stress patterns may also impact the battery’s ability to hold a charge, which would decrease Lion’s vehicles’ range before needing to recharge. Such battery deterioration and the related decrease in range may negatively influence potential customer decisions. In addition, Lion cannot guarantee that battery life and range deterioration will not be greater than what is currently anticipated. Any deterioration above the expected level could affect Lion’s reputation or could materially adversely affect its business, results of operations or financial condition.

Lion relies on unpatented proprietary know-how, trade secrets and contractual restrictions, and not patents, to protect its intellectual and other proprietary rights. Failure to adequately protect, enforce or otherwise manage Lion’s intellectual and other proprietary rights may undermine its competitive position and could materially adversely affect its business, prospects, results of operations or financial condition.

Protection of proprietary technology, processes, methods and other intellectual property related to Lion is critical to its business. Lion relies on unpatented proprietary know-how, trade secrets, trademarks, copyrights and contractual restrictions to protect its intellectual property and other proprietary rights and Lion does not hold any patents related to its business. As a matter of course, Lion employs numerous measures to protect its intellectual property and other confidential information, including technical data. For instance, Lion has implemented procedures designed to make the proprietary technology incorporated in its vehicle systems very difficult to access and/or retrieve and imposes consequences for users that seek to obtain unauthorized access to such technology. In addition, Lion enters into confidentiality agreements with suppliers, vendors, service providers, customers and other third parties with whom it may share information about its business and operations, and Lion also requires all of its employees, consultants and other persons who work for it to enter into confidentiality and assignment of intellectual property agreements. However, failure to adequately protect Lion’s intellectual property rights could result in Lion’s competitors offering similar products, potentially resulting in the loss of some of Lion’s competitive advantage and a decrease in revenue which would adversely affect Lion’s business, prospects, financial condition and operating results.

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As well, there can be no assurance that competitors and other third parties will not independently develop the know-how and trade secrets related to Lion’s proprietary technology, in which case Lion would not be able to prevent such third parties from using such know-how and trade secrets, or develop better products or manufacturing methods or processes than it.

Further, Lion may not be able to deter current and former employees, consultants, suppliers and customers as well as other parties from breaching confidentiality agreements and misappropriating proprietary information and it is possible that third parties may copy or otherwise obtain and use Lion’s information and proprietary technology without authorization or otherwise infringe on Lion’s intellectual property and other proprietary rights. Lion may in the future need to rely on litigation to enforce its intellectual property rights and contractual rights, and, if not successful, may not be able to protect the value of its intellectual property. Any litigation could be protracted and costly and have a material adverse effect on Lion’s business, prospects, results of operations or financial condition regardless of the outcome. As well, in some cases the costs associated with such litigation could make enforcement impracticable. Further, intellectual property and contract laws vary throughout the world. Some foreign countries do not protect intellectual property rights to the same extent as do the laws of Canada. Policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult. Therefore, Lion’s intellectual property rights may not be as strong or as easily enforced outside of Canada. Failure to adequately enforce Lion’s intellectual property rights could result in its competitors offering similar products, potentially resulting in the loss of some of Lion’s competitive advantage and a decrease in its revenue, which would adversely affect its business, prospects, financial condition and operating results.

Lion may need to defend itself against intellectual property infringement or trade secret misappropriation claims, which may be time-consuming, could cause it to incur substantial costs and could prevent Lion from developing or commercializing future products.

Companies, organizations or individuals, including Lion’s competitors, may own or obtain patents, trademarks or other intellectual property or proprietary rights that would prevent or limit Lion’s ability to make, use, develop or sell its vehicles or components, which could make it more difficult for Lion to operate its business. Lion may receive inquiries from owners of intellectual property rights inquiring whether it infringes their proprietary rights. Lion may also be the subject of allegations that it has misappropriated a third party’s trade secrets or other proprietary rights. Companies owning patents or other intellectual property rights relating to the operation of Lion’s business, including in respect of battery packs, electric motors, fuel cells or electronic power management systems may allege infringement or misappropriation of such rights. In response to a determination that Lion has infringed or misappropriated upon a third party’s intellectual property rights, Lion may be required to do one or more of the following:

Any litigation or claims against Lion, whether valid or invalid, could result in substantial costs and diversion of resources or otherwise materially adversely affect its business, prospects, results of operations and financial condition.

Lion also licenses patents and other intellectual property from third parties, including its third-party vendors and suppliers, and Lion may face claims that the use by it of this in-licensed technology infringes the intellectual property rights of others. In such cases, Lion would seek indemnification from its licensors. However, Lion’s rights to indemnification may be unavailable or insufficient to cover Lion’s costs and losses, which could materially adversely affect Lion’s business, prospects, results of operations and financial condition. As well, Lion cannot be certain that such licensed intellectual property will afford protection against competitors with similar technology as the scope of protection of issued patent claims is often difficult to determine. The claims under any licensed patents may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to the patented technology.

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Risks Related to the Ownership of Lion Common Shares

The share price of Lion Common Shares may be volatile, and you may not be able to sell Lion Common Shares at or above the initial listing price.

The market price of Lion Common Shares could be subject to significant fluctuations. Some of the factors that may cause the market price of Lion Common Shares to fluctuate include:

Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. Certain institutional investors may base their investment decisions on consideration of Lion’s environmental, governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to satisfy such criteria may result in limited or no investment in Lion Common Shares by those institutions, which could materially adversely affect the trading price of Lion Common Shares. There can be no assurance that fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue for a protracted period of time, Lion’s business, results of operations or financial condition and the trading price of Lion Common Shares may be materially adversely affected.

In addition, broad market and industry factors may harm the market price of Lion Common Shares. Hence, the price of Lion Common Shares could fluctuate based upon factors that have little or nothing to do with it, and these fluctuations could materially reduce the price of Lion Common Shares regardless of Lion’s operating performance. In the past, following a significant decline in the market price of a company’s securities, there have been instances of securities class action litigation having been instituted against that company. If Lion is involved in any similar litigation, it could incur substantial costs, its management’s attention and resources could be diverted and Lion’s business, results of operations and financial condition could be materially adversely affected.

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Lion will incur significant expenses and devote other significant resources and management time as a result of being a public company, which may negatively impact its financial performance and could cause its results of operations and financial condition to suffer.

Lion will incur significant legal, accounting, insurance and other expenses as a result of being a public company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Act and the rules and regulations promulgated thereunder and the NYSE, impose additional reporting and other obligations on public companies. Lion expects that compliance with these laws, rules and regulations will substantially increase its expenses, including its legal and accounting costs, and make some activities more time-consuming and costly, and these new obligations will require attention from its management team and could divert their attention away from the day-to-day management of Lion’s business.

Lion also expects these laws, rules and regulations to make it more expensive for it to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for Lion to attract and retain qualified persons to serve on its board of directors or as officers. As a result of the foregoing, Lion expects a substantial increase in legal, accounting, insurance and certain other expenses in the future, which will negatively impact its financial performance and could cause Lion’s results of operations and financial condition to suffer. Furthermore, if Lion is unable to satisfy its obligations as a public company, it could be subject to delisting of the Lion Common Shares, fines, sanctions and other regulatory action and potentially civil litigation.

Lion’s senior management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of the business.

The individuals who now constitute Lion’s senior management team have limited experience managing a publicly traded company and limited experience complying with the increasingly complex regulatory environment pertaining to public companies. Lion’s senior management team may not successfully or efficiently manage Lion’s transition to being a public company subject to significant regulatory oversight and reporting obligations under U.S. and Canadian securities laws.

Lion’s failure to timely and effectively implement controls and procedures required by the Sarbanes-Oxley Act and Canadian securities laws could have a material adverse effect on its business, results of operations or financial condition.

As a foreign private issuer listed on the NYSE, Lion will incur legal, accounting and other expenses that it did not previously incur. Lion will be subject to the requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the NYSE Listing Rules, NYSE listing requirements, and other applicable securities rules and regulations, as well as the Foreign Corrupt Practices Act. Compliance with these rules and regulations will increase Lion’s legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on its systems and resources. The Exchange Act requires that, as a public company, Lion file or furnish annual and certain other reports with respect to its business, financial condition and results of operations.

Effective internal control over financial reporting is necessary for Lion to provide reliable financial reports. Effective internal controls, together with adequate disclosure controls and procedures, are designed to prevent or detect material misstatements due to fraud or error and to provide reasonable assurance as to the reliability of financial reporting. Deficiencies in Lion’s internal controls may adversely affect its management’s ability to record, process, summarize, and report financial data on a timely basis. As a public company, Lion is required to comply with applicable Canadian securities laws, including National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. Beginning with its second annual report, Lion will be obligated to include a report of management’s assessment on its internal control over financial reporting and, after Lion ceases to qualify as an emerging growth company, an independent auditor’s attestation report on its internal control over financial reporting in its annual reports on Form 20-F, subject to certain exceptions. Prior to completion of the Business Combination, Lion was never required to test its internal controls within a specified period and, as a result, it may experience difficulty in meeting these reporting requirements in a timely manner.

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Lion anticipates that the process of building its accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. Lion expects that it will need to adapt its current internal system to combine and streamline the management of its financial, accounting, human resources and other functions. However, such a system would likely require Lion to complete many processes and procedures for the effective use of the system or to run its business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect Lion’s controls and materially adversely affect its business, results of operations or financial condition. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. In addition, Lion may discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. Lion’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

Certain of Lion’s shareholders have significant influence over Lion.

PEC, directly or indirectly, owns or controls approximately 38.0% of Lion’s issued and outstanding Lion Common Shares, and 9368-2672, directly or indirectly, owns or controls approximately 16.1% of Lion’s issued and outstanding Lion Common Shares (in each case, on a non-diluted basis). Each of PEC and 9368-2672 therefore has significant influence over Lion’s management and affairs, which could limit a shareholder’s ability to influence the outcome of matters submitted to shareholders for a vote, including election of directors and significant corporate transactions. In addition, as per the terms of the Business Combination Agreement, effective as of Closing, Lion entered into the Nomination Rights Agreement, pursuant to which, subject to the terms and conditions contained therein, each of PEC and 9368-2672 was granted certain rights to nominate members of Lion’s Board (including, in certain cases, members of committees of Lion’s Board) for so long as it holds a requisite percentage of the total voting power of Lion. For more information about the Nomination Rights Agreement, see the section entitled “Description of Share Capital of Lion—Nomination Rights.”

Each of PEC and 9368-2672 is able to influence Lion’s decisions. The market price of Lion Common Shares could be adversely affected due to the significant influence and voting power of PEC and 9368-2672. Moreover, the significant influence and voting interest of PEC and 9368-2672 may discourage transactions involving a change of control, including transactions in which an investor, as a holder of Lion Common Shares, might otherwise receive a premium for Lion Common Shares over the then-current market price, or discourage competing proposals if a going private transaction is proposed.

Additionally, PEC’s interests may not align with the interests of Lion’s other shareholders. PEC (or its affiliates or related entities) is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with Lion. PEC (or its affiliates or related entities) may also pursue acquisition opportunities that may be complementary to Lion’s business, and, as a result, those acquisition opportunities may not be available to Lion.

Lion does not expect to declare any dividends in the foreseeable future.

Lion anticipates reinvesting earnings to finance the growth of its business, and does not anticipate declaring any cash dividends to holders of Lion Common Shares in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

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Lion is an “emerging growth company” within the meaning of the Securities Act, and if it takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, it could make Lion’s securities less attractive to investors and may make it more difficult to compare Lion’s performance to the performance of other public companies.

Lion is as an “emerging growth company” as defined in the Securities Act, as amended by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, Lion is eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. Lion will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of Lion Common Shares that are held by non-affiliates exceeds $700 million as of the last business day of the second quarter of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the Closing. Investors may find Lion Common Shares less attractive because Lion will rely on these exemptions, which may result in a less active trading market for Lion Common Shares and its price may be more volatile.

Lion is a foreign private issuer within the meaning of the SEC rules, and as such is exempt from certain provisions applicable to U.S. domestic public companies.

Because Lion qualifies as a foreign private issuer under the Exchange Act, Lion is exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

Lion is required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, Lion intends to publish its results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information Lion is required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

As a foreign private issuer, Lion is permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NYSE Listing Rules; these practices may afford less protection to shareholders than they would enjoy if Lion complied fully with the NYSE Listing Rules.

As a corporation incorporated under the Business Corporations Act (Québec) listed on the NYSE, Lion is subject to the NYSE Listing Rules. However, the NYSE Listing Rules permit a foreign private issuer like Lion to follow the corporate governance practices of its home country. Certain corporate governance practices in Canada, which is Lion’s home country, may differ significantly from the NYSE Listing Rules. Lion may rely on home country practice with respect to its corporate governance, and Lion is currently doing so with respect to certain corporate governance requirements. As a result, Lion’s shareholders may be afforded less protection than they otherwise would enjoy under the NYSE Listing Rules applicable to U.S. domestic issuers.

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If securities or industry analysts do not publish or cease publishing research or reports about Lion, its business or market, or if they change their recommendations regarding Lion Common Shares adversely, the price and trading volume of Lion Common Shares could decline.

The trading market for Lion Common Shares is influenced by the research and reports that industry or securities analysts publish about Lion, its business, its market or its competitors. If any of the analysts who cover Lion or may cover Lion in the future change their recommendation regarding Lion Common Shares adversely, or provide more favorable relative recommendations about its competitors, the price of Lion Common Shares would likely decline. If any analyst who covers Lion or may cover it in the future were to cease coverage of Lion or fail to regularly publish reports on it, Lion could lose visibility in the financial markets, which in turn could cause the price or trading volume of Lion Common Shares to decline.

A significant portion of Lion’s total outstanding Lion Common Shares are restricted from immediate resale but may be sold into the market in the near future. Future sales of Lion’s securities by existing shareholders or by Lion could cause the market price of Lion Common Shares to drop significantly, even if its business is doing well.

Sales of a substantial number of Lion Common Shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of Lion Common Shares or securities convertible into Lion Common Shares intend to sell Lion Common Shares, could reduce the market price of Lion Common Shares. The Lion Common Shares issued in exchange for the NGA Common Stock issued to the Sponsor prior to NGA’s initial public offering are subject to a 365-day lock-up with Lion, and the Lion Common Shares held by shareholders of Lion prior to the Business Combination are subject to a 180-day lock-up with Lion, in each case subject to certain exceptions thereto.

All of these Lion Common Shares will, however, be able to be resold after the expiration of the applicable lock-up period, as well as pursuant to customary exceptions thereto or upon the waiver of the lock-up agreement by Lion. As restrictions on resale end, the market price of Lion Common Shares could decline if the holders of currently restricted Lion Common Shares sell them or are perceived by the market as intending to sell them.

Lion entered into the Registration Rights Agreement pursuant to which, subject to the terms and conditions contained therein, each of PEC, 9368-2672 and the Warrantholder (as defined below) were granted certain rights with respect to the registration or qualification by prospectus in the United States and/or Canada of the sale of the Lion Common Shares held by them. For more information about the Registration Rights Agreement, see the section entitled “Description of Share Capital of Lion—Registration Rights.” Further, Lion cannot predict the size of future issuances of Lion Common Shares or the effect, if any, that future issuances and sales of Lion Common Shares will have on the market price of Lion Common Shares. Sales of a substantial number of Lion Common Shares, or the perception that such sales could occur, may adversely affect prevailing market prices for Lion Common Shares.

Any issuance of preferred shares could make it difficult for another company to acquire Lion or could otherwise adversely affect holders of Lion Common Shares, which could depress the price of Lion Common Shares.

Lion’s Board has the authority to issue Lion Preferred Shares and to determine the preferences, limitations and relative rights of Lion Preferred Shares and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by its shareholders. Any such Lion Preferred Shares could be issued with liquidation, dividend and other rights superior to the rights of Lion Common Shares. The potential issuance of Lion Preferred Shares may delay or prevent a change in control of Lion, discourage bids for Lion Common Shares at a premium over the market price and adversely affect the market price and other rights of the holders of Lion Common Shares.

Lion’s constating documents permit it to issue an unlimited number of Lion Common Shares without additional shareholder approval.

Lion’s articles permit it to issue an unlimited number of Lion Common Shares. Lion may, from time to time, issue additional Lion Common Shares in the future. Subject to the requirements of the NYSE and the TSX, Lion will not be required to obtain the approval of shareholders for the issuance of additional Lion Common Shares. Any further issuances of Lion Common Shares will result in immediate dilution to existing shareholders and may have an adverse effect on the value of their shareholdings.

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As of March 31, 2021, (i) the vested portion of the Specified Customer Warrant is exercisable for a number of Lion Common Shares that represents approximately 2.7% of all Lion Common Shares issued and outstanding on a partially-diluted basis, and (ii) the Specified Customer Warrant would, if fully vested, represent approximately 15.8% of all Lion Common Shares issued and outstanding on a partially-diluted basis. Any exercise by the Warrantholder of its right to acquire Lion Common Shares will dilute the ownership interests of Lion’s then-existing shareholders and reduce Lion’s earnings per share. In addition, any sales by the Warrantholder in the public market of any Lion Common Shares issuable upon the exercise of the Specified Customer Warrant could adversely affect prevailing market prices of the Lion Common Shares. For more information about the Specified Customer Warrant, see the section entitled “Business—Contractual Arrangements with Affiliates of Amazon.com, Inc.”

Lion’s constating documents and certain Canadian legislation contain provisions that may have the effect of delaying or preventing certain change in control transactions or shareholder proposals.

Certain provisions of Lion’s bylaws and certain Canadian legislation, together or separately, could discourage or delay certain change in control transactions or shareholder proposals. Lion’s bylaws contain provisions that establish certain advance notice procedures for nomination of candidates for election as directors at shareholders’ meetings. The Business Corporations Act (Québec) requires that any shareholder proposal that includes nominations for the election of directors must be signed by one or more holders of shares representing in the aggregate not less than 5% of the shares or 5% of the shares of a class or series of shares of the corporation entitled to vote at the meeting to which the proposal is to be presented.

The Investment Canada Act requires that a non-Canadian must file an application for review with the Minister responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a “Canadian business” within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. Furthermore, limitations on the ability to acquire and hold Lion Common Shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition, or Commissioner, to review any acquisition or establishment, directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in Lion. Otherwise, there will be no limitations either under the laws of Canada or Québec, or in Lion’s articles on the rights of non-Canadians to hold or vote its Lion Common Shares.

Any of these provisions may discourage a potential acquirer from proposing or completing a transaction that may have otherwise presented a premium to Lion’s shareholders.

Lion’s constating documents provide that any derivative actions, actions relating to breach of fiduciary duties and other matters relating to its internal affairs will be required to be litigated in Canada, other than complaints asserting a cause of action arising under the Securities Act or the Exchange Act, and that the U.S. federal district courts will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the Exchange Act, which could limit shareholders’ ability to obtain a favorable judicial forum for disputes with Lion.

Lion’s by-laws include a forum selection provision that provides that, unless Lion consents in writing to the selection of an alternative forum, the Superior Court of Justice of the Province of Québec, Canada and the appellate courts therefrom, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on Lion’s behalf; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of Lion’s directors, officers, or other employees to Lion; (iii) any action or proceeding asserting a claim arising pursuant to any provision of the Business Corporations Act (Québec) or Lion’s by-laws; or (iv) any action or proceeding asserting a claim otherwise related to the relationships among Lion, its affiliates and their respective shareholders, directors and/or officers, but excluding claims related to Lion’s business or such affiliates. The forum selection provision also provides that Lion’s securityholders are deemed to have consented to personal jurisdiction in the Province of Québec and to service of process on their counsel in any foreign action initiated in violation of the foregoing provisions. For more information about the choice of forum, see the section entitled “Description of Share Capital of Lion—Important Provisions and Constating Documents—Choice of Forum.”

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In addition, Lion’s by-laws provide that the U.S. federal district courts will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the Exchange Act. The enforceability of similar exclusive forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provisions in Lion’s by-laws. Additionally, Lion’s securityholders cannot waive compliance with the U.S. federal securities laws and the rules and regulations thereunder.

The forum selection provision may impose additional litigation costs on shareholders in pursuing any such claims. Additionally, the forum selection provision may limit shareholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with Lion or its directors, officers or employees, which may discourage the filing of lawsuits against Lion and its directors, officers and employees, even though an action, if successful, might benefit its shareholders. The courts of the Province of Québec may also reach different judgments or results than would other courts, including courts where a shareholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to Lion than to its shareholders. If a court were to find either choice of forum provision contained in Lion’s by-laws to be inapplicable or unenforceable in an action, Lion may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect Lion’s business, results of operations and financial condition.

Lion may be treated as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. investors.

If Lion is treated as a PFIC for any taxable year in which a U.S. Holder (as defined in the section entitled “Material U.S. Federal Income Tax Considerations —Considerations for U.S. Holders —Passive Foreign Investment Company Rules”) holds Lion Common Shares (regardless of whether Lion remains a PFIC for subsequent taxable years), such U.S. Holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements.

Lion expects to take the position that it is not a PFIC for the current taxable year, but such position will not be free from doubt. Lion’s PFIC status for the current taxable year or any subsequent taxable year will not be determinable until after the end of such taxable year, and Lion cannot assure that it will not be a PFIC in the current taxable year or in any future taxable year. If Lion were later determined to be a PFIC, you may be unable to make certain advantageous elections with respect to your ownership of Lion Common Shares that would mitigate the adverse consequences of Lion’s PFIC status, or making such elections retroactively could have adverse tax consequences to you. Lion is not representing to you that Lion will not be treated as a PFIC for the current taxable year or in any future taxable years. The PFIC rules are complex and unclear. Holders should consult with, and rely solely upon, their tax advisors to determine the application of the PFIC rules to them and any resultant tax consequences. For more information about the tax considerations with respect to PFIC classification to Holders, see the section entitled “Material U.S. Federal Income Tax Considerations —Considerations for U.S. Holders —Passive Foreign Investment Company Rules.”

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, and the documents to which this prospectus refers, contain “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of applicable securities laws. Any statements contained in this prospectus, or any such documents, that are not statements of historical fact, including statements about Lion’s beliefs and expectations, are forward-looking statements and should be evaluated as such. Any references to forward-looking statements in this prospectus include forward-looking information within the meaning of applicable Canadian securities laws.

Forward-looking statements may be identified by the use of words such as “believe,” “may,” “will,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “could,” “plan,” “project,” “potential,” “seem,” “seek,” “future,” “target” or other similar expressions and any other statements that predict or indicate future events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. Such forward-looking statements are based on a number of estimates and assumptions that Lion believes are reasonable when made including, but not limited to, that Lion will be able to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners, that Lion will continue to operate the businesses of Lion in the normal course, that Lion will be able to implement its growth strategy, that Lion will be able to successfully and timely complete the construction of its U.S. manufacturing facility and its Québec battery plant, that Lion will be able to maintain its competitive position, that Lion will continue to improve its operational, financial and other internal controls and systems to manage its growth and size and that its results of operations and financial condition will not be adversely affected, that Lion will be able to maintain the benefits received by Lion from government subsidies and economic incentives and that Lion will be able to secure additional funding through equity or debt financing on terms acceptable to Lion. Such estimates and assumptions are made by Lion in light of the experience of management and their perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Lion believes that these risks and uncertainties include, but are not limited to, the following: any adverse changes in the U.S. and Canadian general economic, business, market, financial, political and legal conditions, including as consequences of the global COVID-19 pandemic; Lion’s inability to successfully and economically manufacture and distribute its vehicles at scale and meet its customers’ business needs; Lion’s inability to execute its growth strategy; Lion’s inability to maintain its competitive position; Lion’s inability to reduce its costs of supply over time; any inability to maintain and enhance Lion’s reputation and brand; any significant product repair and/or replacement due to product warranty claims or product recalls; any failure of information technology systems or any cybersecurity and data privacy breaches or incidents; the reduction, elimination or discriminatory application of government subsidies and economic incentives or the reduced need for such subsidies; natural disasters, epidemic or pandemic outbreaks, boycotts and geo-political events; the outcome of any legal proceedings that may be instituted against Lion from time to time. These and other risks and uncertainties related to the businesses of Lion are described in greater detail in the section entitled “Risk Factors.” Many of these risks are beyond Lion’s management’s ability to control or predict. All forward-looking statements attributable to Lion or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained, and risk factors identified, in this prospectus and other documents filed with the Autorité des marchés financiers and the SEC.

Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under applicable securities laws, Lion undertakes no obligation, and expressly disclaims any duty, to update, revise or review any forward-looking information, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

All of the common shares offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. Lion will not receive any of the proceeds from such sales. Lion will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution”.

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DIVIDEND POLICY

Lion does not expect to declare any dividends in the foreseeable future. Lion anticipates reinvesting earnings to finance the growth of its business, and does not anticipate declaring any cash dividends to holders of Lion Common Shares in the foreseeable future.

Subject to the prior rights of the holders of Lion Preferred Shares as to dividends, the holders of Lion Common Shares will be entitled to receive dividends as and when declared by Lion’s Board out of the funds that are available for the payment of dividends.

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma consolidated financial statements of Lion give effect to the PIPE Financing, the Business Combination and related transactions summarized below. The Business Combination does not constitute a business combination pursuant to IFRS 3 – Business Combinations as NGA is a non-operating entity and does not meet the definition of a business under IFRS 3 – Business Combinations. As a result, the Business Combination is being accounted for as a capital transaction of Lion equivalent to the issuance of shares by Lion in exchange for the net monetary assets of NGA.

The unaudited pro forma consolidated statement of financial position has been prepared to give effect to the PIPE Financing, the Business Combination and related transactions summarized below as if they had been consummated on March 31, 2021. The unaudited pro forma consolidated statement of net loss for the year ended December 31, 2020 and the unaudited pro forma consolidated statement of net loss for the three-month period ended March 31, 2021 give effect to the PIPE Financing, the Business Combination and related transactions summarized below as if they had been consummated on January 1, 2020:

The unaudited pro forma consolidated statement of financial position and consolidated statements of net loss have been prepared to give effect to the PIPE Financing, the Business Combination and related transactions summarized above and the assumptions and adjustments discussed further below. The historical financial statements of Lion have been adjusted to give pro forma effect to events that are (i) directly attributable to the PIPE Financing and the Business Combination and (ii) factually supportable.

The following unaudited pro forma consolidated financial statements have been prepared from the information derived from, and should be read in conjunction with:

together with, in each case, the notes accompanying such financial statements and the notes accompanying the unaudited pro forma consolidated financial statements, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as the other information relating to Lion contained herein, and the description of certain terms thereof set forth herein.

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Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma consolidated financial statements are described in the accompanying notes. The unaudited pro forma consolidated financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the PIPE Financing, the Business Combination and related transactions occurred on the dates indicated. Further, the unaudited pro forma consolidated financial statements do not purport to project the future operating results or financial position of Lion following the completion of the PIPE Financing and the Business Combination. These unaudited pro forma consolidated financial statements do not take into account any synergies or cost savings which may, or are expected to, occur as a result of the Business Combination. The unaudited pro forma adjustments represent Lion’s management’s estimates based on information available as of the date of these unaudited pro forma consolidated financial statements and are subject to change as additional information becomes available and analyses are performed.

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The Lion Electric Company

Unaudited Pro Forma Consolidated Statement of Financial Position

As of March 31, 2021

(In US Dollars)

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The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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The Lion Electric Company

Unaudited Pro Forma Consolidated Statement of Net Loss

For the three-month period ended March 31, 2021

(In US Dollars, Except Per Share Data and Number of Shares)

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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The Lion Electric Company

Unaudited Pro Forma Consolidated Statement of Net Loss

For the year ended December 31, 2020

(In US Dollars, Except Per Share Data and Number of Shares)

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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The Lion Electric Company

Notes to Unaudited Pro Forma Consolidated Financial Statements

As of March 31, 2021

(In US Dollars, Except for Number of Shares)

1 – Basis of Presentation

The unaudited pro forma consolidated statement of financial position has been prepared to give effect to the PIPE Financing and the Business Combination together with the related transactions summarized above as if they had been consummated on March 31, 2021. The unaudited pro forma consolidated statement of net loss for the year ended December 31, 2020 and for the three-month period ended March 31, 2021 give effect to the PIPE Financing and the Business Combination together with the related transactions summarized above as if they had been consummated on January 1, 2020.

The unaudited pro forma consolidated financial statements have been prepared from information derived from the audited consolidated financial statements of Lion as of and for the year ended December 31, 2020 and from the unaudited condensed interim consolidated financial statements of Lion as of March 31, 2021 and for the three-month period ended March 31, 2021.

The pro forma adjustments are based on certain currently available information, estimates and certain assumptions. Management believes that the assumptions used provide a reasonable basis for presenting all of the significant effects of the PIPE Financing, the Business Combination and the related transactions summarized above and that the pro forma adjustments give appropriate effect to those assumptions and are appropriately applied in the unaudited pro forma consolidated financial statements. These financial statements do not take into account any synergies or cost savings which may, or are expected to, occur as a result of the Business Combination.

The unaudited pro forma consolidated financial statements are not intended to be indicative of the results that would actually have occurred, or the results expected in future periods, had the events reflected herein occurred on the dates indicated. Actual amounts recorded upon consummation of the PIPE Financing, the Business Combination and the related transactions summarized above will differ from those recorded in the unaudited pro forma consolidated financial statements.

2 – Adjustments to Unaudited Pro Forma Consolidated Financial Statements

The unaudited pro forma consolidated statement of financial position and consolidated statements of net loss have been prepared to reflect the PIPE Financing, the Business Combination together with the related transactions summarized above and the following assumptions and adjustments. The historical financial statements of Lion have been adjusted to give pro forma effect to events that are (i) directly attributable to the PIPE Financing and the Business Combination and (ii) factually supportable.

The adjustments included in the unaudited pro forma consolidated statement of financial position as of March 31, 2021 are as follows:

(a) Represents pro forma adjustments to the cash balance to reflect the following:

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The Business Combination does not constitute a business combination pursuant to IFRS 3 – Business Combinations, as NGA is a non-operating entity and does not meet the definition of a business under IFRS 3 – Business Combinations. In addition NGA is not considered a “business” for purposes of Rule 3-05 of Regulation S-X. As a result, the Business Combination is being accounted for as a capital transaction of Lion equivalent to the issuance of shares of Lion in exchange for the non-monetary assets of Lion with the following impacts on the unaudited pro forma consolidated statement of financial position:

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The pro forma adjustments included in the unaudited pro forma consolidated statements of net loss for the year ended December 31, 2020 and for the three-month period ended March 31, 2021 are as follows:

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3 – Share Capital and Loss Per Share

A continuity of the weighted average number of shares outstanding after giving effect to the pro forma adjustments described in Note 2 is set out as follows:

The pro forma net loss per share is calculated using the historical weighted average Lion Common Shares outstanding, and the issuance of additional Lion Common Shares in connection with the Business Combination and the related transactions summarized above, assuming the shares were outstanding since January 1, 2020. As the Business Combination together with the related transactions summarized above are being reflected as if they had occurred at the beginning of the periods presented, the calculation of the weighted average Lion Common Shares outstanding for basic and diluted net loss per share assumes that the Lion Common Shares issuable relating to the Business Combination and the related transactions summarized above have been outstanding for the entire periods presented.

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BUSINESS

Lion is a corporation incorporated in 2008 and existing under the Business Corporations Act (Québec). Lion believes it is a North American leader in the design, development, manufacturing, and distribution of purpose-built all-electric medium and heavy-duty urban vehicles. Lion gained distinct industry expertise and a first-mover advantage in the medium and heavy-duty urban EV segment through more than 10 years of focused all-electric vehicle R&D, manufacturing and commercialization experience. Lion’s vehicles and technology benefit from over seven million miles driven by over 390 of its purpose-built all-electric vehicles that are on the road today, in real-life operating conditions.

Lion’s growing line-up of purpose-built all-electric vehicles consists of seven mid-range truck and bus models available for purchase today. Lion further has an active product development pipeline and expects to launch eight new mid-range truck and bus models over the next two years. By the end of 2022, management believes Lion will have among the broadest mid-range EV offerings in the medium and heavy-duty urban segment, with an expected total of 15 vehicles comprising Class 5, 6, 7 and 8 electric trucks designed for specific applications, Type A, C and D electric school buses, as well as an electric medium-duty shuttle bus and an electric ambulance.

Lion’s EVs are tailored to satisfy the needs of its customers and are entirely designed, manufactured and assembled in-house in North America, without relying on traditional combustion-engine vehicle retrofitting or third-party integrators. To achieve this, Lion has developed its own purpose-built for electric chassis, truck cabins, and bus bodies, incorporating its proprietary battery technology with modular energy capacity and its proprietary Lion software.

Like others in the EV space, Lion has adopted a direct-to-customer sales model tailored for EVs, avoiding reliance on third-party dealerships in most instances. As part of its go-to-market strategy, Lion assists its customers through the EV transition journey in all critical aspects of vehicle selection, purchase and adoption, including EV education and training, identification and seeking of any applicable governmental grants, energy requirements, charging infrastructure, maintenance and advanced telematics solutions. To enhance customer experience and help drive repeat purchases, Lion leverages its growing network of Experience Centers, which are dedicated spaces where prospective customers, policymakers and other transportation industry stakeholders can interact with EVs, learn about their specifications and advantages, meet a sales representative, discuss grant and subsidy assistance, receive vehicle training, and have existing vehicles serviced. Services available on-site at Lion’s Experience Centers include product demonstrations and sales support, full-service training, charging infrastructure assistance and maintenance support. There are currently nine Experience Centers strategically located in key markets in the United States and Canada, with additional centers expected to be opened within the next two years.

By capitalizing on its significant first mover advantage, broad EV line-up available today, turnkey customer experience and rapidly growing customer base, Lion’s management believes Lion is strongly positioned to gain significant market share in the medium and heavy-duty mid-range vehicle segment.

Market and Industry Trends

Lion’s medium and heavy-duty EV line-up was specifically designed to address the needs of the sub 250-mile (or 400-km) mid-range urban market. This market segment exhibits favorable characteristics for electrification given vehicles are typically driven over a relatively modest distance and return to base at the end of every workday. Mid-range EV applications thus require less battery capacity, resulting in a lower vehicle cost, allowing for a favorable payload, and avoiding the need for an extensive charging station network alongside vehicle routes, all of which contributes to favorable economics when compared to incumbent diesel solutions.

Lion is currently not targeting the long-haul market and, as such, does not compete with incumbent diesel solutions in that segment, nor with announced future long-haul battery- or fuel cells-powered prototypes destined to that market. However, as battery density improves over time, Lion’s products may also be well-suited for such applications.

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Total Addressable Market

Lion believes its total addressable market in the U.S. and Canada is significant. Lion’s Class 5, 6, 7 and 8 trucks target a wide array of customers including carriers, consumer goods companies, waste management operators, manufacturers, utilities as well as governmental agencies. Lion is focusing its sales efforts towards medium to large fleet owners via its direct-to-customer sales model.

The customer breakdown for school buses varies across jurisdictions in the United States and Canada but consists mainly of school bus operators and school boards. On an aggregated basis, it is estimated the U.S. and Canadian fleet of school buses is approximately 60% owned by public school districts, and approximately 40% owned by private bus-fleet operators.

Lion’s shuttle bus, the LionM, targets customers with transit, adapted and shuttle transportation needs such as various commercial fleet owners and municipal transit agencies, among others.

Industry Focused on Total Cost of Ownership Competitiveness

In the trucking industry, the TCO, along with quality and reliability, are the primary decision factors on which customers base their purchasing decision. TCO represents the aggregate cost of vehicle ownership, including vehicle purchase price, energy costs and maintenance and repair costs over the useful life of the truck, which Lion’s management estimates is generally between 10 to 12 years. While EVs are typically sold at a premium when compared to incumbent diesel solutions, their higher upfront cost can be offset by lower energy costs and significantly lower maintenance costs, with EVs requiring far fewer moving parts and far less fluids. Management estimates that, over the useful life of the vehicle, owners of EVs will benefit from savings representing on average approximately 80% with respect to energy costs and approximately 60% with respect to repair and maintenance costs when compared to their diesel vehicles. While subsidies vary by jurisdiction, a number of them are available and help drive the transition to EV by reducing the upfront purchase price further contributes to improving the overall TCO competitiveness of electric trucks.

In the school bus market, TCO is also a key factor in the purchasing decision, along with quality and reliability. However, the lower annual mileage of individual school bus units typically renders the lower energy and maintenance costs insufficient to account for the currently steeper upfront costs of EVs over incumbent diesel units. As such, subsidies are often required for electric school buses to be competitive over diesel units from a pure TCO point of view. Electric school buses nevertheless carry a number of other advantages including reduced air and noise pollution. As governments and school districts are looking to set an example and act as social leaders in terms of sustainability, school buses in particular are often prioritized for subsidized conversion to all-electric solutions.

In addition to energy and repair and maintenance cost savings, TCO competitiveness of EVs can further be enhanced through Vehicle-to-Grid (“V2G”) technology. V2G technology allows the battery of EVs to generate revenue through energy arbitrage, by returning electricity to the grid during periods of peak energy prices while recharging in periods of lower energy prices, or through other revenue-generating ancillary services for the grid operator, such as frequency regulation and spinning reserves. To further improve all-electric vehicle TCO, some customers in specific jurisdictions are eligible to participate in carbon reduction programs. Customers in California, for example, can participate in a market-based incentive program whereby users of lower carbon-intensity fuels or energy sources (e.g., electricity) can earn and sell credits to importers or refiners of carbon-intensive fuels, such as gasoline and diesel, to offset their fuel standards compliance deficits.

Regulatory and Organizational Shifts to Zero-Emission Vehicles

With increasing environmental awareness globally, commercial vehicles have come under significant scrutiny by consumers, enterprises and governmental and regulatory bodies as they represent a significant portion of the global greenhouse gas (“GHG”) emissions. According to the Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2018 (the national GHG inventory that the U.S. Environmental Protection Agency (EPA) prepares annually), transportation was the number one contributor to GHG emissions in the United States, representing 28% of GHG emissions in 2018. According to the same study, medium- and heavy-duty trucks represented 23% of the U.S. transportation sector GHG emissions for the same period.

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U.S. Regulatory Tailwinds

There is an increased prevalence of financial incentives to offset carbon emissions such as Zero-Emission Vehicle (ZEV) credit trading mechanisms in the United States which have proved to generate a substantial revenue and profit stream for EV companies. Such mechanisms have been adopted in several states.

Additionally, in July 2020, 15 states and Washington D.C. signed the Multi-State Medium and Heavy-Duty Zero Emission Vehicle Memorandum of Understanding, which sets goals for the electrification of medium and heavy-duty vehicles, whether by battery, plug-in hybrid, or hydrogen fuel cell. The goal is to ensure that 100% of all new medium and heavy-duty vehicle sales be zero-emission by 2050 with an interim target of 30% zero-emission vehicle sales by 2030.

More recently, the Biden administration announced a goal of 50-52% reduction in economy-wide GHG emissions below 2005 levels by 2030. The Biden administration has proposed several plans including provisions aimed at achieving this goal, as well as economy-wide net-zero emissions by 2050. The Biden administration’s plan aims to reduce GHG emissions from transportation by restoring attributes of the Clean Air Act loosened by the previous administration. Additionally, the plan introduces new fuel economy standards that accelerate electrification of new vehicle sales and ultimately target 100% electric sales for new light and medium-duty vehicles. To further incentivize electrification, the plan calls for significant annual pollution reduction requirements for heavy duty vehicles. The plan also specifically aims to accelerate transition of the entire 500,000 U.S. school bus fleet to zero-emission and all new school bus sales to be zero-emission by 2030. To facilitate this plan, the U.S. Congress is currently considering the CLEAN Future Act, which, among other things, would provide financial incentives for the nationwide deployment of ZEV school buses in the United States. On January 27, 2021, President Biden also signed an executive order calling for significant action on climate change, calling for, among other things, the increased use of zero-emissions vehicles by the federal government. Finally, the Biden administration has stated that it aims to expand grant programs, loan guarantees and incentives for manufacturers to construct or retool existing U.S. facilities to manufacture zero-emission vehicles and charging infrastructure.

Canadian Regulatory Tailwinds

The Canadian federal government has set targets for zero-emission vehicles reaching 10% of new light-duty vehicle sales per year by 2025, 30% by 2030 and 100% by 2040. This program is expected to support zero-emission infrastructure for on-road medium and heavy-duty vehicle fleets.

In Québec, the provincial government recently announced the C$6.7 billion Green Economy Plan with the objective of cutting GHG emissions and banning sales of gasoline-powered consumer and light-duty vehicles by 2035. The plan includes C$217 million to electrify 55% of city buses and C$350 million to electrify 65% of school buses by 2030. Other provincial governments have also committed to green energy initiatives, in some cases assisted by the federal government’s Investing in Canada Plan which is designed to “provide predictable and sustainable funding for projects that will build modern, resilient, and green communities for Canadians.”

Lion’s management believes electric vehicles, such as the ones it produces, are the most promising alternative to rapidly reduce emissions in the transportation sector and meet the various GHG emissions reduction targets in the markets in which Lion operates.

Industry and Competition

Lion competes in the medium and heavy-duty urban vehicle market, ranging from commercial trucks to buses. In this market, Lion competes against traditional incumbent diesel engine OEMs as well as nascent EV manufacturers looking to disrupt the industry.

Primary Competitive Factors

Lion’s management believes the primary competitive factors in both the truck and bus industries include (i) TCO; (ii) vehicle range and payload capacity; (iii) quality, reliability and safety; (iv) technological innovation; (v) compliance with environmental regulation; and (vi) availability of fueling infrastructure.

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Competitors

Medium and Heavy-duty Urban Trucks

Lion’s main competitors for mid-range Class 5, 6, 7 and 8 urban trucks include incumbent diesel truck OEM manufacturers such as Navistar, Daimler, Volvo, PACCAR, Hino (Toyota), and other automotive manufacturers which mainly compete with Lion’s vehicles through their traditional diesel vehicle offering. Lion’s management believes that incumbent OEMs are distracted from EV development and commercialization with their extensive legacy diesel infrastructure, such as factories tailored for production of combustion engine vehicles, and remain focused on their diesel-based product lines. Additionally, incumbent diesel OEMs’ third-party dealership networks are ill-suited to sell EVs given a significant portion of their revenues comes from maintenance and repair services, a less profitable proposition with EVs due to lower maintenance requirements. While a number of these OEMs have announced their intention to rollout EV solutions, Lion’s management believes that most remain at the development stage in the near term or intend to rely on third-party retrofit solutions to electrify their existing made-for-diesel platforms. Lion’s management believes that such retrofit solutions come with significant design and production cost compromises, often resulting in a higher TCO for the end customers when compared to a purpose-built EV solution.

In addition to the incumbent diesel OEMs, Lion also faces competition from a handful of other disruptive EV manufacturers. Lion management believes that many of these EV competitors remain at the early stages of product development, and in certain cases are focused on creating retrofit solutions on built-for-diesel chassis. Such EV companies include Nikola, Hyliion, XL Fleet and other smaller manufacturers.

School Buses

School bus manufacturing in the United States and Canada is mainly concentrated in the hands of three incumbent OEMs selling primarily diesel school buses: Blue Bird Corporation, Thomas Built Buses (Daimler), and IC Bus (Navistar). These manufacturers mainly compete with Lion’s school buses through their traditional diesel offering but are beginning to rollout electric models. Lion’s management estimates that incumbent school bus OEMs are also distracted from EV development and commercialization with their extensive legacy diesel infrastructure, such as factories tailored for production of combustion engine vehicles and remain focused on their diesel-based product lines.

In addition to the incumbent diesel school bus OEMs, a few early-stage EV OEMs have entered in competition with Lion such as Green Power Motor and Trans Tech.

Shuttle Buses

The shuttle bus market in which the LionM bus competes can be broken down into three main sub-markets: 1) the transit market, 2) the shuttle market, and 3) the adapted transport market. The transit market is mostly serviced by traditional transit bus diesel OEMs such a Nova Bus, New Flyer and Gillig. In addition to the diesel alternatives, the traditional transit bus OEMs are developing and offering hybrid, all-electric and alternative fuel transit bus models to challenge emerging all-electric transit bus competitors such as BYD, Proterra, Arrival and other smaller competitors. The shuttle and adapted transport markets generally consist of smaller companies who uplift medium and heavy-duty vehicles to offer a diesel shuttle or adapted transport bus. Additionally, there are other companies, such as Motiv Power Systems and Lightning eMotors, which offer retrofit electric solutions for the shuttle and adapted transport bus markets.

Benefits of Electrification

Lion’s management believes electric trucks and buses provide several advantages over traditional diesel vehicles:

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For most applications, Lion believes its vehicles compare favorably to diesel vehicle alternatives on the basis of TCO. In addition, TCO is expected to improve further over the coming years as Lion reduces its production costs and vehicles prices.

Products and Services

Lion has been developing medium- and heavy-duty all-electric vehicle systems for over 10 years and began manufacturing its proprietary chassis in 2015. Each Lion vehicle is purpose-built for electric and entirely designed and assembled in-house, with its own chassis, truck cabin or bus body, proprietary battery technology with modular energy capacity and Lion software integration. All Lion vehicles are V2G enabled, equipped with Lion’s LionBeat telematics platform which provides for full remote monitoring of vehicle data, and are charging infrastructure agnostic.

Electric Truck Line-up

With the truck market trending towards electrification and many incumbent OEMs maintaining focus on diesel sales, Lion’s management believes Lion has the opportunity to become a leader in all-electric medium- and heavy-duty urban trucks, as it did in the electric school bus market.

Lion Trucks Currently Available

Lion’s current purpose-built all-electric truck offering consists of four trucks in the Class 6 and Class 8 category, including specialty vehicles. Lion’s trucks are the product of over ten years of EV R&D and extensive experience integrating battery systems and electric propulsion systems into purpose-built vehicles.

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Expected Near-Term Truck Launches

Lion’s truck development pipeline consists of seven new trucks that Lion plans to launch over 2021 and 2022. This includes Class 5 and Class 7 trucks as well as additional specialty Class 6 and Class 8 trucks (Lion8 Tractor, Lion8 Bucket, Lion8 Boom, Lion6 Utility and an Ambulance), all of which are expected to be available by the end of 2022.

Estimated TCO of Lion’s Electric Trucks

Today, Lion estimates that its electric trucks have a favorable TCO when compared to traditional diesel trucks for most applications. Despite a higher initial purchase price, management believes that Lion’s vehicles are cost competitive based on their potential to achieve energy cost savings of approximately 80% and estimated maintenance and repair cost savings of approximately 60% relative to diesel-fueled incumbent vehicle solutions. Lion’s management expects the competitiveness of its truck offering to increase significantly over time as production costs decrease. Production costs are expected to decrease as a result of a reduction in battery costs from increased vertical integration in manufacturing of battery systems, a reduction in the cost of other vehicle components from increased purchasing power, and other productivity gains.

Note: TCO has been calculated based on the vehicle purchase price and the estimated energy costs and maintenance and repair costs over the projected useful life of the vehicle, which has been estimated to 10 years for the LION6 and LION8 Refuse, and 12 years for the LION8. Energy costs are estimated at $0.09/kWh for electric vehicles across all platforms. Diesel exhaust fluid (“DEF”) cost and consumption for diesel are estimated at $3.00/gallon and 3.0% of fuel, respectively, for all diesel platforms. All truck platforms assume a residual value of 10% and all TCOs exclude the impact of any subsidies. The TCOs have also been calculated using the following additional assumptions:

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Electric Bus Line-up

The school bus market is rapidly transitioning towards EVs, in part due to an effort to set an example in the eyes of pupils in terms of sustainability. This transition is being supported by governments and school districts via subsidies. Over the past decade, Lion established itself as a clear leader in the U.S. and Canadian electric school bus markets through its extensive portfolio of proprietary and market-leading technologies. The first Lion all-electric school bus was delivered in 2016.

In addition to its school bus offering, Lion also offers the LionM, an all-electric shuttle bus designed to meet the requirements of operators in the transit, shuttle and adapted transport markets.

Buses Currently Available

Lion’s current bus offering includes the LionA and the LionC school buses, which are currently being sold to customers such as school districts and independent bus operators. Additionally, Lion offers the LionM, a shuttle bus with low floors catering to the transit, shuttle and adapted transport markets.

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Expected Near-Term Bus Launches

The LionD (Type D) school bus is currently under development and is expected to be launched in 2021.

Estimated TCO of Lion’s Electric Buses

Given school buses travel fewer miles than trucks, the savings in maintenance and energy costs in all-electric school buses currently do not outweigh the higher upfront purchase price relative to incumbent diesel solutions. However, school buses often benefit from subsidies that significantly decrease the upfront cost and allow Lion buses to be competitive relative to diesel. Similar to its electric trucks, Lion’s management expects the cost of its electric buses to decrease, eventually allowing for competitive TCO relative to diesel-fueled incumbent vehicle solutions, even in the absence of subsidies.

Note: TCO has been calculated based on the vehicle purchase price and the estimated energy costs and maintenance and repair costs over the projected useful life of the vehicle, which has been estimated to 15 years. Energy costs are estimated at $0.09/kWh for electric vehicles across all platforms. DEF cost and consumption for diesel are estimated at $3.00/gallon and 3.0% of fuel, respectively, for all diesel platforms. Current bus TCO includes the estimated impact of subsidies. All bus platforms assume no residual value. The TCOs have also been calculated using the following additional assumptions:

Spare Parts

In addition to the sale of spare parts for the maintenance of Lion vehicles, Lion sells and distributes replacement parts for third-party vehicles out of certain of its Experience Centers. This enables Lion to build connectivity with prospective customers and begin the EV education process with the intention of ultimately converting the spare parts customer to a Lion EV customer.

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Sales and Marketing

Lion’s sales and marketing efforts are conducted through a highly specialized in-house sales team solely focused on selling all-electric medium and heavy-duty urban vehicles and facilitating the EV transition journey for its customers. To do so, Lion provides a full suite of services to support its customers including EV education & training, identification and execution of grants, evaluation of energy requirements, charging infrastructure, maintenance and advanced telematics solutions.

Direct Sales Approach

Lion has chosen to sell directly to customers where possible for three key reasons: (i) traditional dealerships are generally not trained to sell and demonstrate EVs and do not have the required resources to do so; (ii) traditional dealerships typically generate a sizeable portion of their overall revenues through service and maintenance and, considering that EVs require significantly less service and maintenance than incumbent diesel solutions, traditional dealerships are disincentivized to sell EVs; and (iii) paying third-party dealership margins would make EVs less cost competitive for prospective customers.

Through this direct approach, Lion’s sales team handles all critical aspects of vehicle selection, purchase and adoption, including EV education and training, identification and execution of any applicable governmental grants, energy requirements, charging infrastructure, maintenance and advanced telematics solutions to ensure a smooth EV transition.

Lion has nevertheless entered into a number of distribution agreements with a select group of third-party dealers to abide by local laws and regulations in certain states requiring medium and heavy-duty vehicles to be sold through dealerships.

EV Education and Vehicle Selection

From the onset, Lion aims to understand customers’ requirements and help them identify the suitable EV for their needs. During the vehicle selection process, Lion performs analysis of typical customer routes, payload requirements, and ancillary energy consumption to determine the customer’s specific energy requirements. When the customer’s specific requirements have been matched with a Lion vehicle with the required onboard energy, Lion performs a tailored TCO analysis to demonstrate the economic benefits of its EV solution. Finally, customers can visit the Lion factory or one of Lion’s Experience Centers to test drive the product identified in the vehicle selection process.

Lion Grant Team

Given the importance of grants and subsidies in improving the TCO economics for certain EV applications, school buses in particular, Lion has put in place a dedicated grants assistance team responsible for assisting customers in identifying and applying for grant and subsidy funding opportunities. Lion’s grants assistance team has established lines of communication with key governmental bodies providing grants and subsidies, including the California Energy Commission, CARB and the Ministry of Transport of Québec, to support its customers in making sure that they benefit from all programs available in their respective jurisdictions. Given Lion’s position as a first mover in the all-electric medium and heavy-duty vehicle market, governmental bodies have occasionally consulted Lion prior to establishing new grant and subsidy programs to ensure programs are best designed to meet the desired purpose of encouraging the conversion to electric. In many cases, Lion works directly with customers to combine the grants and subsidies available in order to maximize public funding.

LionEnergy Infrastructure Support

New customers that are unfamiliar with EV technology are often intimidated by the charging infrastructure requirements. LionEnergy helps mitigate this fear by educating customers and by providing complete turnkey charging infrastructure solutions, tailored to each customer’s needs. LionEnergy supports the customers at all steps,

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from equipment selection to installation, and equipment management, including V2G. Through resale agreements with Global Tier 1 charging infrastructure manufacturers such as ABB and ChargePoint, LionEnergy generates revenues by selling charging stations to customers prior to the delivery of its EVs.

LionBeat Aftermarket Support

LionBeat is a dedicated EV telematics software solution embedded in every Lion vehicle, which can boost customers’ productivity and generate operational cost savings. LionBeat can gather data such as GHG emissions savings, real-time GPS tracking, speed, odometer readings, charging status, average energy usage, energy usage history, and other relevant maintenance and tracking statistics. It is offered on a subscription basis at three different levels (Gold, Silver and Bronze) with different data access, diagnostic and reporting privileges at each level.

Experience Centers

Overview

Lion operates a growing network of physical Experience Centers across the United States and Canada. The Experience Centers are dedicated spaces where prospective customers, policymakers and other transportation industry stakeholders can interact with EVs, learn about their specifications and advantages, meet a sales representative, discuss grant and subsidy assistance, receive vehicle training, and have existing vehicles serviced. Lion currently has Experience Centers in the United States in the cities of Albany (NY), Sacramento (CA), Seattle (WA), Los Angeles (CA), Jacksonville (FL), Phoenix (AZ) and Minneapolis (MN) and in Canada in the cities of Saint-Jérôme (Québec) and Terrebonne (Québec), with planned openings in the U.S. states of Colorado, Indiana, Pennsylvania, Tennessee, Texas, Vermont and Virginia and the Canadian province of British Columbia within the next two years. Lion intends to continue deploying additional Experience Centers in proximity to large potential markets, or where there is a significant volume of Lion vehicles on the road to improve the brand visibility and customer experience.

BrightSquad

BrightSquad consists of a team of professional technicians with deep EV knowledge that offer best-in-class, on-site, customer service with the objective of ensuring a smooth transition to electric and maximizing vehicle operation and performance. In addition to providing first line preventive maintenance, diagnostic and troubleshooting services, BrightSquad’s team of professionals offer training programs for end users’ drivers and operational teams.

The Lion Academy

Based on its experience delivering and servicing EVs, Lion has developed a training program, the Lion Academy, which provides selected classes to customers. This program, housed in Lion’s Experience Centers, is offered to a wide range of stakeholders such as drivers, mechanics, technicians, business officials, and transportation professionals. The main goal is to provide an overview of how EVs work at different levels based on the customer’s knowledge. In most cases, EVs are new for customers and training is necessary to help bridge the knowledge gap from diesel to electric. Customers who attend the Lion Academy are typically more receptive to the new technology.

The Lion Academy is not limited to Experience Centers; Lion provides training at customer sites or virtually through videoconferencing. Lion’s curriculum includes interactive classes that cover topics such as safety, troubleshooting, electric chargers, EV components, maintenance, repairs, warranty work, driver tips, accessories, and more. Lion also provides easy hands-on access to electric truck components, charging stations, and other tools to facilitate the transition to EVs.

Order Book

As of May 14, 2021, Lion’s vehicle order book stood at 817 all-electric medium- and heavy-duty vehicles, consisting of 209 trucks and 608 buses, representing a combined total order value of over $225 million. Most vehicles are expected to be delivered within the next twelve months, with some deliveries expected to take place in as much as five years. Additionally, LionEnergy, Lion’s division which assists customers with selecting, purchasing,

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project managing and deploying charging infrastructure ahead of vehicle delivery and which generates revenues through project management and consulting services as well as the resale of charging stations from global charging infrastructure manufacturers, has a current order book of 76 charging stations, representing a combined total order value of over $800,000, as of May 14, 2021. Most charging stations are expected to be delivered within the next twelve months.

Electric Truck Customers

Electric Truck Customers

Lion’s Class 5, 6, 7 and 8 trucks are expected to compete favorably with incumbent diesel solutions for urban applications requiring a sub 250-mile (or 400-km) mid-range, catering to vehicle owners and fleet operators of all sizes. As part of its go-to-market strategy, Lion’s direct sales force places a particular focus on medium to large fleet owners given their higher potential for repeat purchases as they adopt a particular EV product to electrify their fleet. Furthermore, medium to large fleet owners often have in-house maintenance capabilities which are complementary to Lion’s service offering.

The Lion150

The Lion150 is a priority customer target list of over 150 large fleet owners who have been carefully identified by Lion’s sales force for their EV orders potential. The fleet owners have been selected on the basis of fleet size, electrification goals, and applicability of Lion products. In aggregate, the combined fleet size of the Lion150 totals approximately 700,000 trucks, which Lion’s management estimates to represent approximately 70,000 truck purchases per year. While not all Lion150 targets are buying EVs today, Lion believes that there is a meaningful opportunity for significant future sales given the size of the vehicle fleet and the increasing focus towards environmentally friendly methods of transportation among large fleet owners.

Electric Bus Customers

School Bus Customers

Lion mainly targets school districts and school bus operators for its Type A, Type C and Type D electric school buses. Demand for school buses in the U.S. and Canada has demonstrated steady growth over the years, with supply being met by a very small number of manufacturers with a limited focus on electric. Lion aims to leverage an aging school bus fleet in the U.S. and Canada with an increasing number of buses reaching the end of their useful life to significantly increase the number of school buses sold. Additionally, with subsidies available to the school bus market to promote conversion to all-electric, Lion believes the market is poised for meaningful growth. Historically, California and Québec school boards and districts have been significant customers for Lion’s vehicles given their leadership in transportation electrification; however, Lion is rapidly expanding its presence throughout the U.S. and Canada.

In 2018, the California Energy Commission (CEC) began soliciting low- to zero-emissions school bus manufacturers for its $94 million school Bus Replacement Program aimed to help public school districts transition from diesel buses to lower emission vehicles. In July 2019, the agency awarded a total of approximately $90 million to schools in 26 California counties (approximately $75 million for electric school bus purchases and approximately $13 million for EV charging infrastructure). Of the six school bus categories eligible in the program, Lion was awarded buses in five categories, more specifically for Lion’s Type A (without wheelchair lift), Type C (with and without wheelchair lift), and Type D (with and without wheelchair lift) all-electric school buses. Gradual deliveries under the program began in December 2019 and will extend into 2022. This is a major milestone for Lion and establishes its leadership position in the electric school bus market due to the highly competitive nature of the request for proposal (RFP) process and stringent technical and pricing criteria.

Electric Shuttle Bus Customers

The LionM shuttle bus was designed to address the needs of the adapted transports, shuttle and transit markets. The LionM is well-suited for such markets given its useful life of over 10 years, high energy-efficiency, low floor and highly customizable seat configuration. Lion is in active dialogue with various regional public and private operators such as public transit authorities.

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Contractual Arrangements with Affiliates of Amazon.com, Inc.

Lion entered into a master purchase agreement effective June 29, 2020 and a work order effective July 6, 2020 (collectively, the “MPA”) with Amazon Logistics, Inc. (the “Specified Customer”) that provides for the purchase of up to 2,500 Lion6 and Lion8 all-electric trucks, at the discretion of the Specified Customer. Under the MPA, Lion is required to, subject to the terms and conditions set out therein, among other things, reserve the necessary manufacturing capacity to meet forecasted volumes and delivery schedules agreed upon with the Specified Customer in accordance with the terms of the MPA. Pursuant to the MPA, Lion will be required to reserve manufacturing capacity in respect of forecasted volumes representing up to 500 trucks per year from 2021 to 2025 and the greater of 500 trucks per year or 10% of Lion’s manufacturing capacity from 2026 to 2030. In addition, Lion is required to provide ongoing maintenance and training assistance to the Specified Customer under the terms of the MPA. As of May 14, 2021, the Specified Customer had placed orders for the purchase of 10 Lion6 trucks, and all deliveries of such trucks have been completed during the first half of 2021. Other than vehicles that are subject to an existing purchase order, the Specified Customer is not required to purchase any specified minimum quantity of vehicles from Lion under the MPA. The MPA will remain in force until December 31, 2025, unless terminated earlier in accordance with its terms. Thereafter, the MPA will be automatically renewed on a month-to-month basis until either party terminates the MPA in accordance with its terms. The Specified Customer may terminate the MPA at any time without cause by providing at least six months’ prior written notice to Lion or upon the occurrence of certain events, including a material breach by Lion of the MPA, certain insolvency events and upon a change of control of Lion (as defined in the Specified Customer Warrant). Under the MPA, except in specific circumstances, the Specified Customer may not cancel any previously submitted and accepted purchase order within three (3) months of a scheduled delivery date, and any cancellation occurring during the period from the date that is six (6) months and the date that is three (3) months prior to a scheduled delivery date triggers the payment of a cancellation fee. Any submitted and accepted purchase order may be cancelled by the Specified Customer without penalty prior to the date that is six (6) months prior to a scheduled delivery date.

This description of the MPA is a summary of the material features of the MPA. This summary is qualified in its entirety by reference to the MPA, which is filed as Exhibit 10.12 to the registration statement of which this prospectus is a part.

In connection with entering into the MPA, Lion issued on July 1, 2020 the Specified Customer Warrant to Warrantholder which vests, subject to the terms and conditions contained therein, based on the aggregate amount of spending by the Specified Customer and its affiliates on Lion products or services. For more information about the Specified Customer Warrant, see the section entitled “Description of Share Capital of Lion—Common Equity Warrant Issued to Warrantholder.”

Manufacturing and Production

Existing Production Facility

Lion’s primary manufacturing facility is located in Saint-Jérôme, Québec, which is approximately 25 miles (or 40-km) north of Montréal, Québec. The facility is approximately 200,000 sq. ft and currently has an annual production capacity of up to 2,500 vehicles. In addition to manufacturing, the facility includes an in-house R&D and testing center. The facility currently has over 600 employees across all functions, including manufacturing, R&D, sales & marketing, and corporate and administrative. The facility is located in one of the most important manufacturing hubs in Canada, and Lion believes local qualified labor availability is ample to satisfy the production ramp-up requirements.

Supply Chain

Over the past decade, Lion has developed a global supply chain spanning over 400 suppliers for all of the components required to manufacture its vehicles. Lion proactively manages its suppliers as part of its production plan to maintain an adequate supply of components at attractive prices, and it engages with alternatives suppliers where appropriate to support its ramp-up or drive cost reductions. Additionally, Lion is engaging with some of the world’s largest truck parts OEMs to accelerate the development of more advanced electric motors, Advanced Driver Assistance Systems and other components in order to remain at the leading edge of EV technology.

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Battery systems are core to Lion’s EV offering. Lion has focused on developing and applying the right battery technology to the right application using its own proprietary battery management system (“BMS”), battery thermal management system (“BTMS”) and battery packs, when applicable. Today, Lion offers two battery systems based on LG battery modules and BMW battery packs, which can be arranged in various configurations depending on the EV application.

On November 17, 2020, Lion entered into a multi-year supply contract with Romeo Systems, Inc. (“Romeo”), a designer and manufacturer of lithium-ion battery modules and packs for commercial EVs. This five-year agreement, which began in 2021, allows Lion to offer Romeo’s battery modules and packs as an alternative energy storage solution across Lion’s fleet of class 6 to 8 commercial urban trucks and buses. Romeo’s already established battery solutions provide an opportunity for Lion to reduce time to market and benefit from favorable pricing. This description of the supply agreement with Romeo is qualified in its entirety by reference to the full text of the supply agreement, which is filed as Exhibit 10.10 to the registration statement of which this prospectus is a part.

Lion is also advancing the development of an integrated proprietary battery system which is expected to include its proprietary battery modules and packs based on 21700 cylindrical battery cells. Lion intends to assemble these new battery systems in-house in its planned battery manufacturing plant and innovation center in Québec, which Lion aims to have built and become operational by 2023.

Growth Strategy

Capitalize on First Mover Advantage through Innovation and Continuous Improvement

Lion has over 390 EVs on the road today. Lion’s EVs have been driven over seven million miles across various geographies, terrains and climates in the U.S. and Canada. By leveraging the continuous dialogue with customers, along with the significant amount of telematic data accumulated over the years, Lion’s management believes it has a competitive advantage over competing medium and heavy-duty vehicle OEMs.

Lion believes that the current product line-up available for purchase today is broader than the all-electric alternatives offered by incumbent manufacturers and new entrants in the medium and heavy-duty truck and bus industries. Lion will continue to capitalize on the depth of its EV knowledge, and the quality and breadth of Lion’s product offering, to further capture new customers and gain significant market share in the medium and heavy-duty mid-range vehicle segment.

Lion’s management expects the competitiveness of Lion’s vehicle offering to increase significantly over time as the production cost of its electric vehicles is expected to decrease significantly. Such decrease is expected to result from reduction in battery costs through increased vertical integration of battery modules manufacturing, increased purchasing power with suppliers through larger volume commitments, increased manufacturing capacity utilization and other productivity gains.

Continued Development of New Products and Services

To accelerate its product development and control costs, Lion is leveraging existing EV platforms and is securing partnerships with select specialized equipment providers to leverage their respective expertise. Lion is also collaborating actively with governmental bodies to secure government funding to support the development of these next generation all-electric urban vehicles to ensure vehicle compliance with local laws and regulations.

Leveraging Lion’s transport platform, the current product line-up of seven purpose-built all-electric models will be bolstered by Lion’s development pipeline. Lion is in the process of developing eight additional electric trucks and buses as part of its focus on the urban market, including class 5, 6, 7 and 8 trucks for various urban applications. Lion’s current product development pipeline consists of Class 5 and Class 7 trucks, LionD bus, as well as specialty vehicles (Lion8 Tractor, Lion8 Boom, Lion8 Bucket, Lion6 Utility and Ambulance). Lion’s robust development pipeline of complementary all-electric medium and heavy-duty vehicles is expected to lead to a total of 15 purpose-built EV models by the end of 2022.

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Site Selection of U.S. Manufacturing Facility

On May 7, 2021, Lion announced the selection of Joliet, Illinois, for the construction of its U.S. manufacturing facility. The new 900,000 sq-ft production facility will be Lion’s largest footprint in the U.S. Lion expects to take possession of the facility in the second half of 2021, and is expected to begin production in the second half of 2022. The facility represents an expected total investment of approximately $130 million by Lion.

Battery System Development and Battery Assembly Facility Project

Lion has been developing its own battery systems since 2011, including proprietary battery packs, BMS and BTMS. In 2014, Lion began developing its proprietary BMS and, in 2017, commenced manufacturing its own battery packs, incorporating its proprietary BMS with LG battery modules. Today, Lion has two battery systems (based either on LG battery modules or BMW battery packs) offered in various configurations depending on the application. In November 2020, Lion entered into a five-year supply contract with Romeo. Beginning in 2021, Romeo’s battery systems are expected to be offered across Lion’s class 6 to 8 commercial urban trucks and buses.

In parallel Lion continues to make progress on its journey to build a battery system development and assembly facility. In March 2021, Lion announced the planned construction of a battery manufacturing plant and innovation center in Québec, which is expected to serve to develop, manufacture and assemble in a highly-automated facility fully proprietary battery systems based on Lion’s proprietary battery. Through this project, Lion aims to further integrate battery manufacturing operations by leveraging years of experience in developing battery systems. The facility is expected to begin operations in the second half of 2022, with the construction projected to begin over the next several months at a location to be confirmed in the near future. The project is expected to represent a total investment of approximately $150 million (C$185 million). As publicly announced on March 15, 2021, Lion expects to benefit from support by the Canadian federal and Quebec governments of up to approximately C$100 million (amounting to approximately up to C$50 million each) in connection with the planned construction of its battery manufacturing plant and innovation center in Québec, of which up to 30% is expected to be forgiven subject to certain criteria tied to Lion and to the operations of the facility Lion proprietary battery modules would be initially based on the 21700 cylindrical battery cells, with the intended flexibility to rapidly adapt to emerging technology, such as solid-state. The project would allow Lion to substantially reduce supplier dependency, realize significant battery systems vertical integration cost savings, become agnostic to battery cell suppliers, and optimize battery specifications while maintaining full control on battery form and design.

Lion’s innovation center will focus on research and development, with the goal of exploring and achieving new advancements in performance, range, energy capacity and the development of innovative products, and will allow the company the flexibility needed to rapidly adapt to emerging technologies.

Sustainable-Trucking-as-a-Service

Lion is well positioned to deliver incremental value from the combination of its best-in-class all-electric vehicles, evolving data management innovations and creative financing solutions under Lion’s ecosystem proposed concept known as Sustainable-Trucking-as-a-Service (“STaaS”). Under this concept, Lion would deliver a turnkey trucking solution to customers, providing a compelling investment proposition for fleet owners to convert their fleets to electric.

Lion would gain the possibility of generating additional revenue under its STaaS ecosystem by:

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Zero-Emission Credits Monetization

On June 25, 2020, CARB adopted the Advanced Clean Trucks (“ACT”) rule, the first statewide zero-emission commercial truck requirement. The primary purpose of ACT is to accelerate the transition to zero-emission medium and heavy-duty on-road vehicles. The ACT rule sets clear requirements on manufacturers to sell zero-emission trucks and requires large entities to report information that would be used for developing future strategies that would require the use of zero-emission trucks.

The credit trading mechanism under the ACT represents a potentially significant source of revenue for Lion as manufacturers exceeding minimum requirements earn surplus credits they can bank for future use or sell to other manufacturers. Manufacturers are required to offset all deficits with credits by sale of zero-emission medium and heavy-duty trucks or by purchasing and trading credits with other manufacturers. Lion expects to start accumulating such credits in 2021. Over time, it may also be able to benefit from other similar programs adopted in other regions of the U.S. For example, in April 2021, the New Jersey Department of Environmental Protection proposed implementing a similar rule.

Research and Development

Lion’s team of over 200 engineers and other R&D professionals conducts research and development from its two R&D centers in Saint-Jérôme, Québec, and Montréal, Québec. Lion is currently planning to launch an additional R&D center in Los Angeles, California by the end of 2021. Site selection for R&D centers is based on the availability of talent in the region, along with the proximity to significant customer pools in order to facilitate collaboration in the development of customized product applications.

Lion’s research and development is currently focused on developing additional purpose-built electric vehicle platforms and continue developing proprietary battery systems.

Lion expects research and development expense to increase in the foreseeable future as Lion generates more revenues in order to continue expanding on and improving its product offering.

Intellectual Property

Lion relies on trade secret protection, trademarks, copyrights and contractual restrictions to protect its intellectual property and other proprietary rights. As a matter of course, Lion does not employ a strategy that is focused on the active registration (including through patent application) of intellectual property rights. Lion relies on a number of other measures to protect its intellectual property and other confidential information, including technical data. For instance, Lion takes steps designated to ensure that proprietary technology incorporated in its vehicle systems is difficult to access and/or retrieve, and takes additional steps to mitigate the effect of any such unauthorized access. In addition, Lion enters into confidentiality agreements with suppliers, customers and other third parties with whom it may share information about its business and operations, and Lion also requires all of its employees, consultants and other persons who work for it to enter into confidentiality and assignment of intellectual property agreements.

Lion pursues from time to time the registration of domain names, trademarks and service marks in the United States, Canada and in some other locations abroad as it considers necessary. In addition, Lion may in the future file patent applications as it considers appropriate under the circumstances relating to any new technologies that it develops.

Lion cannot be sure that third parties will not independently develop the know-how and trade secrets related to Lion’s proprietary technology, in which case Lion would not be able to prevent such third parties from using such know-how and trade secrets, which may allow competitors to develop similar or better products or manufacturing methods or processes than those offered by Lion. As well, Lion cannot be sure that its own proprietary know-how, trade secrets, copyrights and trademarks do not infringe third party intellectual property rights. For more information about the risks associated with Lion intellectual property strategy and portfolio, see the section entitled “Risk Factors.”

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Headquarters and Facilities

Lion’s existing head office and manufacturing facility is based in Saint-Jérôme, Québec, which is approximately 25 miles north of Montréal, Québec. Lion does not own any real property. Lion currently leases the following facilities and offices.

Employees

As of May 14, 2021, Lion had over 658 employees, of which over 200 were in its R&D department. To date, Lion has not experienced any employee-related work stoppages and considers relationships with employees to be in good standing. None of Lion’s employees are either represented by a labor union or subject to a collective bargaining agreement.

Corporate Information and Structure

Lion was incorporated by Marc Bedard, Lion’s CEO—Founder, and Camile Chartrand under the Business Corporations Act (Québec) on July 28, 2008 as “Lion Buses Inc.” Over the years, Lion’s articles were amended in order to, among other things, amend the terms and conditions of Lion’s share capital in connection with strategic investments made by investors, including the strategic investment made by Power Energy, a wholly-owned subsidiary of Power Sustainable Capital Inc., in October 2017, which resulted in Lion’s authorized share capital being amended to provide for only one class of common shares. On November 24, 2020, Lion filed articles of amendment to change its name to The Lion Electric Company. On May 6, 2021, Lion filed articles of amendments, which resulted in Lion’s authorized share capital being amended to provide for (i) an unlimited number of Lion Common Shares and (ii) an unlimited number of “blank-cheque” preferred shares issuable in series, and immediately thereafter filed articles of consolidation to consolidate its articles.

Lion’s principal and registered office is located at 921 chemin de la Rivière-du-Nord, Saint-Jérôme, Québec, Canada J7Y 5G2, and its telephone number is (450) 432-5466.

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The following chart reflects Lion’s organization structure (including the jurisdiction of formation or incorporation of Lion and its subsidiaries):

Government Regulation and Credits

Vehicle Safety

The vehicles that Lion manufacture and sell are subject to various and complex safety standards across jurisdictions where Lion operates. In the United States, the National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates vehicles and vehicle equipment by prohibiting the sale of any new vehicle or equipment that does not conform to applicable vehicle safety standards established by the National Highway Transportation Safety Administration (“NHTSA”). In Canada, the Motor Vehicle Safety Act (the “MVSA”) regulates vehicles, and Transport Canada develops and enforces Motor Vehicle Safety Standards which are largely harmonized with the standards in the United States. Meeting or exceeding such safety standards is costly and has continued to evolve alongside developments in technology and safety expectations. Although Lion continuously evaluates requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service its vehicles in the United States and Canada, it may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service its vehicles, especially for future vehicles. For example, in the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by Lion to maintain or obtain any necessary approval for, or otherwise satisfy motor vehicle standards with respect to, its existing or future electric vehicles, or the incurrence of material unexpected costs in connection therewith, could have a material adverse effect on Lion’s business, financial condition and operating results.

The Safety Act also requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it determines that vehicles do not comply with a safety standard. Should Lion or NHTSA determine that either a safety defect or noncompliance issue exists with respect to any of Lion’s vehicles, the cost of such recall campaigns could be substantial. In Canada, regulations are currently similar to those in the United States; however, under the MVSA, the Transport Canada has broad powers to order manufacturers to submit a notice of defect or non-compliance when it considers it to be in the interest of safety. Remedying such defects may be costly, and any new or more stringent regulations may cause us to incur further costs for compliance or face substantial penalties for non-compliance.

Environment and Other Regulatory Matters

EPA

Although Lion’s vehicles qualify as ZEVs, they are subject to regulations regarding vehicle emissions. For example, in the United States, every class of heavy-duty engines or vehicles must receive Certificate of Conformity (“COCs”) from the EPA prior to being sold. These COCs must be obtained for each model year of production, and failure to obtain them prior to entering Lion’s vehicles into commerce may result in substantial fines or penalties. For more information about vehicles emissions in Canada, see the section entitled “Environment and Climate Change Canada.”

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Environment and Climate Change Canada

In Canada, the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations adopted under the Canadian Environmental Protection Act, 1999, establish Canadian emission standards and test procedures for Canadian manufacturers, distributors and importers of heavy-duty vehicles. These standards and procedures are aligned with the requirements of the United States Code of Federal Regulations for on-road heavy-duty vehicles and engines published by the EPA, parts of which are incorporated by reference in the Regulations however, testing and other requirements to demonstrate compliance may vary, adding to the regulatory complexity of Lion’s operations. Electric vehicles generally comply with such standards, with emission values of CO2, N2O and CH4 deemed to be 0 grams per mile pursuant to Canadian regulations, and all certifications required by Lion have been obtained or are in the course of being obtained.

Battery Safety

The use, storage, transport, and disposal of Lion’s battery packs is subject to extensive regulation. Lithium-ion cells may be regulated as “hazardous” or “dangerous” goods under several regulatory regimes in both the United States and Canada. For example, Lion’s battery packs are subject to testing requirements before they can be transported, and they must be transported in keeping with various conditions which vary by mode of transportation. Complying with these requirements involves substantial costs, and any failure to do so may result in heavy fines or other restrictions on Lion’s operations. Additionally, in certain jurisdictions, Lion may be responsible for the recycling and proper disposal of expended batteries from Lion’s vehicles. Lion has agreements with third-party companies to manage such recycling and disposal; however, Lion may be found liable for any failures in compliance by these third-parties and subject to fines or remediation liabilities, which costs may be substantial.

Supply Chain

Increasingly, jurisdictions require companies to monitor for and address certain practices from their supply chains. For example, under the Dodd-Frank Act, companies listed in the United States that use conflict minerals are required to report certain information regarding such minerals in their supply chain. Similar requirements have been adopted, or are being considered for adoption, in other jurisdictions. Currently, conflict minerals are defined by the Dodd-Frank Act as tin, tungsten, tantalum and gold. While Lion’s operations do not involve the use of such materials, the minerals covered by such requirements may be expanded in future. In addition, supply chain diligence laws are being considered in a variety of jurisdictions. Compliance with such laws entails substantial costs, and may require modifying Lion’s supply chains if any issues are discovered. Additionally, should Lion fail to sufficiently monitor Lion’s supply chains, Lion may be subject to fines or penalties for non-compliance, which may have an adverse effect on Lion’s operations.

Industrial Environmental Controls

In addition to the proper handling, recycling, and disposal of expended batteries, Lion’s operations are subject to a wide range of laws and regulations related to the protection of the environment, including those regulating air emissions, discharges to water, waste management, worker health and safety, and environmental cleanup. Certain environmental statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Under certain circumstances these laws impose joint and several liability as well as liability for related damages to natural resources.

The costs of compliance, including remediating contamination if any is found on Lion’s current or future properties, or at sites where Lion has sent wastes for disposal, and any changes to Lion’s operations mandated by new or amended laws, may be significant. Similarly, Lion may also face unexpected delays in obtaining permits and approvals required by environmental laws, or be unable to obtain such permits on terms acceptable to the company, which would hinder operation of Lion’s facilities and Lion’s growth.

Greenhouse Gas (GHG) Emissions and Related Credits

In connection with the production, delivery and placement into service of Lion products, which are expected to qualify as ZEVs, Lion expects to start accumulating tradable regulatory credits in 2021. Such credits can be sold to automotive companies and other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. For example, under California’s ZEV regulations and those of states that have adopted California’s standard, vehicle manufacturers are required to earn or purchase credits, referred to as ZEV credits, for compliance with their annual regulatory requirements. In addition to these ZEV credits, Lion may also be able to earn credits in the United States, Canada or abroad related to greenhouse gas emissions, fuel economy, clean

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fuels, or other such topics. However, Lion’s claiming and sale of these credits is dependent on significant recordkeeping, accounting, and related requirements. Failure to comply with such requirements may reduce the value of Lion’s credits or subject us to penalties or other restrictions, which may significantly affect Lion’s operations.

Legal Proceedings

From time to time, Lion may become involved in legal proceedings arising in the ordinary course of business. Although no assurances can be given about the final outcome of pending legal proceedings, at the present time Lion’s management does not believe that Lion is currently a party to any legal proceedings the outcome of which, if determined adversely to Lion, would individually or in the aggregate have a material adverse effect on the business, financial condition, and results of operations of Lion.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which Lion’s management believes is relevant to an assessment and understanding of Lion’s results of operations and financial condition. This discussion and analysis should be read together with the audited and unaudited historical consolidated financial statements and related notes that are included elsewhere in this prospectus. This discussion and analysis should also be read together with Lion’s pro forma consolidated financial information in the section entitled “Unaudited Pro Forma Consolidated Financial Information.” In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. For more information about forward-looking statements, see the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this prospectus.

Lion’s consolidated financial statements have been prepared in accordance with IFRS. All amounts are in U.S. dollars except as otherwise indicated. For more information about the basis of presentation of Lion’s consolidated financial statements, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation” below.

Certain figures, such as interest rates and other percentages included in this section, have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in Lion’s consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Company Overview

Lion is a corporation existing under the Business Corporations Act (Québec). Lion is a leader in the design, development, manufacturing, and distribution of purpose-built all-electric medium and heavy-duty urban vehicles. Lion gained distinct industry expertise and a first-mover advantage in the medium and heavy-duty urban electric vehicles (“EV”) segment through more than 10 years of focused all-electric vehicle R&D, manufacturing and commercialization experience. Lion’s vehicles and technology benefit from over seven million miles driven by over 390 of its purpose-built all-electric vehicles that are on the road today, in real-life operating conditions.

Lion’s growing line-up of purpose-built all-electric vehicles consists of seven urban truck and bus models available for purchase today.

Lion’s EVs are tailored to satisfy the needs of its customers and are entirely designed, manufactured, and assembled in-house in North America, without relying on traditional combustion-engine vehicle retrofitting or third-party integrators. To achieve this, Lion has developed its own purpose-built for electric chassis, truck cabins, and bus bodies, incorporating its proprietary battery technology with modular energy capacity and its proprietary Lion software.

Like others in the EV space, Lion has adopted a direct-to-customer sales model tailored for EVs, avoiding reliance on third-party dealerships in most instances. As part of its go-to-market strategy, Lion assists its customers through the EV transition journey in all critical aspects of vehicle selection, purchase and adoption, including EV education and training, identification and seeking of any applicable governmental grants, energy requirements, charging infrastructure, maintenance and advanced telematics solutions. To enhance customer experience and help drive repeat purchases, Lion leverages its growing network of Experience Centers, which are dedicated spaces where prospective customers, policymakers and other transportation industry stakeholders can interact with EVs, learn about their specifications and advantages, meet a sales representative, discuss grant and subsidy assistance, receive vehicle training, and have existing vehicles serviced. Services available on-site at Lion’s Experience Centers include product demonstrations and sales support, full-service training, charging infrastructure assistance and maintenance support. There are currently nine Experience Centers strategically located in key markets in the United States and Canada.

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As of May 14, 2021, Lion had over 658 employees, of which over 200 were in its R&D department.

Financial Highlights of the Three-Month Period Ended March 31, 2021

For the three-month period ended March 31, 2021, the Company’s financial performance was the following when compared to the three-month period ended March 31, 2020:

Operational Highlights of the Three-Month Period Ended March 31, 2021

Construction of Battery Manufacturing Plant and Innovation Center

On March 15, 2021, Lion announced the planned construction of a battery manufacturing plant and innovation center. The factory is expected to begin operations in the second half of 2022 and produce battery packs and modules made from Lithium-ion cells. Construction is projected to break ground over the next few months at a location to be confirmed in the near future. The project is expected to represent a total investment of approximately $150 million (C$185 million). As publicly announced on March 15, 2021, Lion expects to benefit from support by the Canadian federal and Quebec governments of up to approximately C$100 million (amounting to approximately up to C$50 million each) in connection with the planned construction of its battery manufacturing plant and innovation center in Québec, of which up to 30% is expected to be forgiven subject to certain criteria tied to Lion and to the operations of the facility.

Truck Order from Pride Group Enterprises

On March 25, 2021, Lion received a purchase order from Pride Group Enterprises (“Pride”) for 100 all-electric Lion6 and Lion8 trucks. The order represented Lion’s largest single order of zero-emission trucks to date. The majority of the trucks are expected to be delivered to Pride during 2021, with the remainder of deliveries expected to take place in 2022.

Truck Order from Heritage

On May 14, 2021, Lion announced that it has been selected to participate in the Heritage-Romeo Power Fleet Electrification Program to execute on Heritage’s fleet electrification strategy. Heritage will initially purchase five Lion battery-electric trucks for the 2021 fleet electrification validation program consisting of Class 6 and/or Class 8 vehicles. Subject to the validation program’s success to target specifications with operational excellence experienced, Heritage’s initial purchase could result in significantly more orders over a four-year period.

School Bus Order from Autobus Séguin

On January 19, 2021, Lion received a purchase order for up to 60 all-electric LionC school buses over a five-year period from Autobus Groupe Séguin (Autobus Séguin), a transportation operator headquartered in Laval, Quebec. The first 10 buses are expected to be delivered throughout the 2021 calendar year. Subject to continued satisfaction of certain conditions, up to 50 additional buses are expected to be delivered through 2026.

Senior Personnel Hires

Lion announced the appointment of Isabelle Adjahi as Vice President, Investor Relations and Sustainable Development. Ms. Adjahi is responsible for developing and implementing an investor relations strategy aimed at maintaining relationships with investors and analysts through an ongoing dialogue about Lion’s corporate, business, financial objectives and growth. Lion also announced the appointment of Rocco Mezzatesta as Senior Vice-president, Product development and Vehicle engineering. Mr. Mezzatesta is responsible for product development as well as management of engineering projects.

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Recent Developments

Closing of Business Combination Agreement with Northern Genesis Acquisition Corp. and Concurrent Equity Private Placement

On May 6, 2021, Lion completed its previously-announced Business Combination with NGA pursuant to which Merger Sub merged with and into NGA through a statutory merger under the laws of the State of Delaware, with NGA surviving the merger as a wholly-owned subsidiary of Lion, and (ii) as consideration for the merger, each outstanding share of NGA’s common stock held by an NGA stockholder was converted into the right to receive one Lion Common Share, and each outstanding warrant to purchase shares of NGA’s common stock, with each such whole warrant exercisable for one share of NGA’s common stock at an exercise price of $11.50, was converted into a Lion Warrant to acquire a number of Lion Common Shares equal to the number of shares of NGA’s common stock underlying each such warrant of NGA. At the time of closing of the Business Combination, NGA held (net of the redemptions exercised by NGA’s stockholders holding 20,449 shares) approximately $320 million in its trust account.

Immediately prior to the completion of the Business Combination, Lion completed the Pre-Closing Reorganization which included a share split pursuant to which each Lion Common Share outstanding immediately prior to such share split was converted into 4.1289 Lion Common Shares. Immediately prior to the completion of the Business Combination, Lion also completed the PIPE Financing pursuant to which a number of investors agreed to purchase, and Lion agreed to sell to such investors, an aggregate of 20,040,200 Lion Common Shares, for a purchase price of $10.00 per share and an aggregate purchase price of $200,402,000.

The Business Combination and the PIPE Financing resulted in proceeds of approximately $490 million, net of transaction fees. Approximately $90 million of the net proceeds were used to repay outstanding credit facilities and debt instruments. See section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Update with Respect to Certain Debt Instruments” below.

Following the closing of the Business Combination and the PIPE Financing, the Lion Common Shares began trading on the TSX and on the NYSE under the new symbol “LEV”, and the warrants of Lion began trading on the TSX under the new symbol “LEV.WT” and on the NYSE under the new symbol “LEV WS”.

Update with Respect to Certain Debt Instruments

In connection with the closing of the Business Combination, Lion entered into a new loan agreement (the “Finalta Loan Agreement”) with Finalta Capital Fund, L.P. (“Finalta”) amending and restating in their entirety the two (2) loan agreements that had previously been entered into with Finalta, as lender, to finance certain refundable tax credits and grants under government programs (collectively, the “Former Finalta Loan Agreements”). The Finalta Loan Agreement provides for a combined loan facility of up to a principal amount of approximately C$13,500,000 and bears interest at the rate of 7.50% per annum. The Finalta Loan Agreement has terms and conditions which improved on, or are substantially similar to, the terms and conditions of the Former Finalta Loan Agreements. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Finalta Loan Agreement” of this prospectus.

In connection with the closing of the Business Combination, Lion repaid in full all amounts owed under the Credit Agreement (as defined below) entered into with National Bank of Canada (“NBC”), as lender, and the Credit Agreement and all security related thereto were terminated. The Credit Agreement provided for the following credit facilities (i) a $27,489,000 (C$35 million) operating revolving facility, (ii) a $35,343,000 (C$45 million) term loan facility, and (iii) a $7,854,000 (C$10 million) additional term loan facility. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Credit Agreement with National Bank of Canada” of this prospectus.

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Prior to the completion of the Business Combination, Lion had completed financings through (i) the issuance of an unsecured convertible loan (the “Convertible Loan”) to Investissement Québec in the principal amount of $3,927,000 (C$5,000,000), and (ii) the issuance of an unsecured convertible debenture (the “Convertible Debenture”) to Investissement Québec in the principal amount of $15,708,000 (C$20,000,000). See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Convertible Instruments with Investissement Québec” of this prospectus. In connection with the closing of the Business Combination, the Convertible Debenture and the Convertible Loan were repaid in full.

Site Selection of U.S. Manufacturing Facility

On May 7, 2021, the Company announced the selection of Joliet, Illinois, for the construction of its U.S. manufacturing facility. The new 900,000 sq-ft production facility will be Lion’s largest footprint in the U.S. The Company expects to take possession of the facility in the second half of 2021, and is expected to begin production in the second half of 2022. The facility represents an expected total investment of approximately $130 million by Lion.

Appointment of Vice President, Chief Legal Officer and Corporate Secretary

On April 6, 2021, Lion announced the appointment of François Duquette as Vice President, Chief Legal Officer and Corporate Secretary. Mr. Duquette oversees all aspects of legal and regulatory affairs, as well as provides strategic counsel to the senior management team and board of directors.

Appointment of Chief Commercial Officer

On May 11, 2021, Lion announced the appointment of Brian Piern as Chief Commercial Officer, with a start date of June 7^th, 2021. Mr. Piern will oversee all aspects of Lion’s commercial and sales strategy and lead the related execution.

Appointment of Vice-President, Financial Reporting

Lion appointed Vince Spadafora as Vice President, Financial Reporting, effective May 17, 2021. In this newly created role, Mr. Spadafora will oversee all aspects of financial reporting and related compliance.

Order of 260 School Buses from First Student

On May 14, 2021, Lion secured an order for 260 buses from First Student, a leading school bus operator, with deliveries expected to take place from the second half of 2021 to the first half of 2023. The buses will be used by Transco, First Student’s subsidiary that operates in Quebec.

Order Book

As of May 14, 2021, Lion’s vehicle order book stood at 817 all-electric medium- and heavy-duty vehicles, consisting of 209 trucks and 608 buses, representing a combined total order value of over $225 million. Most vehicles are expected to be delivered within the next twelve months, with some deliveries expected to take place in as much as five years. Additionally, LionEnergy, Lion’s division which assists customers with selecting, purchasing, project managing and deploying charging infrastructure ahead of vehicle delivery and which generates revenues through project management and consulting services as well as the resale of charging stations from global charging infrastructure manufacturers, has a current order book of 76 charging stations, representing a combined total order value of over $800,000, as of May 14, 2021. Most charging stations are expected to be delivered within the next twelve months. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-IFRS Measures, Other Performance Metrics and Reconciliation of Adjusted EBITDA.”

Current Situation with Regards to COVID-19

The decree of a COVID-19 state of pandemic in March 2020 has since then resulted in the enactment of numerous measures by the federal, provincial, state and municipal governments to protect the public had impacts on Lion’s operations. From time to time, these measures have resulted in either in a full shutdown or in a significant reduction in the operations of Lion’s manufacturing facility and have also impacted the Company’s research and development, marketing, sales and after-market activities. Similarly, these measures have significantly impacted customers, suppliers and other business partners, and their respective businesses.

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There continues to be significant uncertainty surrounding the COVID-19 pandemic. The COVID-19 pandemic had a material negative impact on the global economy in 2020 and is expected to continue having a negative impact in 2021 and perhaps beyond. Given the dynamic nature of the pandemic, the extent to which it impacts the Lion’s business and future results will depend on unknown future developments and any further impact on the global economy and the markets in which Lion operates and sells its products, including Canada and the United States. Accordingly, as of the date of this prospectus, management was not able to assess how quickly Lion’s activities will get back to normal or the financial impact of these events at this time but continues to monitor closely the evolving situation.

Key Factors Affecting Lion’s Performance

Lion believes that its performance and future success is dependent on multiple factors that present significant opportunities for Lion, but also pose risks and challenges, including those discussed below and in the section of this prospectus entitled “Risk Factors.”

Customer Demand for Electrification

The electrification of medium and heavy-duty commercial vehicles has recently gained strong momentum as users and governmental authorities are looking for novel solutions to reduce GHG emissions and atmospheric pollution generally while the cost competitiveness of electric vehicles continues to improve. Lion anticipates that an increasing number of fleet owners and operators will seek all-electric alternatives to reduce the carbon footprint of their diesel fleets. Lion intends to leverage its broad offering of electric vehicles available for purchase today, and its strong engagement with large fleet owners and other potential customers, in order to benefit from the growing customer demand for electric vehicles.

In order to meet customer demand and drive adoption of its vehicles and solutions, Lion plans to make comprehensive additions to its production capacity and expand its network of Experience Centers, which is expected to require significant capital and operating expenses.

Reduction in Total Cost of Ownership

The total cost of ownership (“TCO”), along with quality and reliability, are the primary drivers of truck and bus purchasing decisions for fleet owners and operators. Lion’s management believes that Lion’s truck TCO is favorable to comparable diesel vehicles today in most use cases. Going forward, the TCO advantage of electric trucks is expected to further increase as electric vehicle prices reduce, which will in turn further improve the economic benefit and rationale for fleet owners and operators to purchase Lion’s all-electric vehicles. In the school bus market, the lower annual mileage of individual units typically renders the lower energy and maintenance costs insufficient to account for the currently steeper upfront costs of electric vehicles over incumbent diesel units. As such, at the current time, subsidies are often required for electric buses to be competitive over diesel units from a pure TCO point of view in this category. Over time, as the cost of the vehicles decreases as a result, among other things, of reduction in battery costs from increased vertical integration in manufacturing of battery systems, increased purchasing power with suppliers through larger volume commitments, increased manufacturing capacity utilization, and other productivity gains, the TCO for electric buses is expected to become favorable even in the absence of subsidies.

Product Development

Lion’s growth strategy depends in part upon its ability to effectively introduce new products and implement new technology-driven services and solutions, which is expected to require significant capital and operating expenses.

Lion had seven all-electric urban vehicles available for purchase as of March 31, 2021. The product offering consisted of (i) trucks, being Lion6 (Class 6 truck), Lion8 (Class 8 truck), Lion8 Reefer, and Lion8 Refuse trucks, (ii) school buses, being LionC (Type C school bus) and LionA (Type A school bus) and (iii) a shuttle bus, the

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LionM. Lion’s development pipeline consists of eight additional all-electric urban vehicles, including the Lion8 Tractor truck, Lion8 Bucket truck, Lion6 Utility truck, LionD (Type D school bus), Lion5 (Class 5 truck), Lion7 (Class 7 truck), Lion8 Boom truck and the Lion Ambulance. In parallel, Lion intends to continue the development and improvement of its existing vehicle products, services and solutions.

Regulatory Landscape and Government and Economic Incentives

Lion operates within an industry that is subject to environmental regulations across the various jurisdictions in which it sells its products. With heightened focus on the global environment, commercial vehicles have come under significant scrutiny by customers, enterprises, and governmental and regulatory bodies as they represent a significant portion of the global GHG emissions. While regulations have become increasingly stringent over time, various subsidy and financial incentives programs have been introduced by governmental authorities in Canada and the United States to promote the adoption of emissions-free vehicles. Demand for Lion’s vehicles is and is expected to remain influenced by federal, state, provincial and local tax credits, rebates, grants and other government programs and incentives that promote the use of battery electric vehicles. These include various government programs that make grant funds available for the purchase of battery electric vehicles. Additionally, demand for Lion’s vehicles may be influenced by laws, rules, regulations and programs that require reductions in carbon emissions, such as the various measures implemented by lawmakers and regulators in California and Québec, among others, designed to increase the use of electric and other zero-emission vehicles, including the establishment of firm goals in certain instances for the number of these vehicles operating on state roads by specified dates and the enactment of various laws and other programs in support of these goals.

Costs of Raw Materials and Supplies

Components in Lion’s vehicles are made of various raw materials, including aluminum, steel, carbon fiber, non-ferrous metals (such as copper) and other materials and minerals used to manufacture lithium-ion batteries. The prices for these raw materials fluctuate depending on market conditions and global demand. While Lion manages some of these risks through long-term contractual arrangements with suppliers with respect to the supply of certain key components of its vehicles, including lithium-ion batteries, it does not currently hedge its long-term exposure to price fluctuations of raw materials and supplies. Therefore, an increase in prices of raw materials and supplies could negatively impact the Company’s operating results if it is not able to find other manufacturing or supply alternatives or transfer these cost increases to customers.

Foreign Exchange

The Company’s revenues are reported in U.S. dollars but its functional currency is the Canadian dollar and the majority of its transactions are in Canadian dollars. The Company’s current manufacturing facility is also located in Canada. Suppliers of the Company are located in Canada, in the United States and other foreign jurisdictions. The Company’s indebtedness is denominated in Canadian dollars. Going forward, the Company’s growth strategy will require substantial investments in Canada and in the United States. Therefore, the Company’s revenues, gross profit and net income (loss) reported in U.S. dollars is and is expected to continue to be exposed to foreign exchange fluctuations.

Seasonality

The Company’s sales have historically experienced substantial fluctuations from quarter to quarter, particularly considering that they have been mainly comprised of sales of school buses which are mainly driven by the school calendar. Historically, the Company’s peak season has been during its third and fourth fiscal quarters. While the Company expects to continue to experience seasonal variations in its sales in the foreseeable future, management believes that the mix of product sales may vary considerably in the future, especially in connection with the Company’s execution of its growth strategy and as sales of trucks become more prevalent and new products are introduced. As a result, it is difficult to predict if any historical trends will be reproduced in the future.

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Research and Development

Lion’s team of over 200 engineers and other R&D professionals conducts research and development from its two R&D centers in Saint-Jérôme, Québec, and Montréal, Québec.

Lion’s research and development is currently focused on developing additional purpose-built electric vehicle platforms and continuing to develop proprietary battery systems.

Lion expects research and development expense to increase in the foreseeable future in order to continue expanding on and improving its product offering.

Basis of Presentation

Lion’s consolidated financial statements have been prepared in accordance with IFRS. All amounts are in U.S. dollars unless otherwise indicated. The Company’s fiscal year is the twelve-month period ending December 31 of each year.

Lion has one reportable operating segment, the manufacturing and sales of electric vehicles in Canada and in the United States.

Components of Results of Operations

Revenues

To date, Lion has primarily generated revenues from the sale of its all-electric school bus vehicles.

Following the ongoing ramp-up of Lion’s truck manufacturing, Lion anticipates a significant proportion of its revenues to be generated from the sale of all-electric trucks over time.

Cost of Sales

Lion’s cost of sales includes material costs, labor, manufacturing overhead, and other direct costs related to electric vehicle production.

Administrative Expenses

Administrative expenses consist of facility leasing, share-based compensation, management, information technology, human resources, accounting and general administrative functions.

Lion expects its administrative expenses to increase for the foreseeable future as Lion increases headcount to support the growth of its business, and as a result of costs associated with operating as a public company, including compliance with the rules and regulations of the SEC and applicable Canadian securities laws and stock exchanges, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.

Selling Expenses

Selling expenses consist of personnel-related expenses for Lion’s bus and truck sales, share-based compensation, business development, aftermarket sales and marketing and communications, in addition to expenses incurred for publicity and marketing events. Lion expects its selling expenses to increase for the foreseeable future as Lion expands its sales force and increases headcount to support the growth of its business.

Finance Costs

Finance costs primarily consists of interest paid on Lion’s outstanding debt, interest on lease liabilities, as well as non-cash accretion expenses on retractable common shares and on balance of purchase price payable related to the acquisition of dealership rights.

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Lion’s Unanimous Shareholders’ Agreement which provided for retraction rights in respect of certain common shares was terminated in accordance with its terms effective as of closing of the Business Combination and such retraction rights did not become exercisable at or before the closing of the Business Combination. As a result, such retraction rights will not impact results of operations for future periods.

Foreign Exchange Loss (Gain)

Foreign exchange loss and gain represents the losses and gains on instruments such as cash balances, accounts receivable, accounts payable, debt balances and other accounts that are not denominated in Canadian dollars, as a result of changes in foreign currency rates.

Change in Fair Value of Share Warrant Obligation

On July 1, 2020, in connection with the entering into of the MPA (as defined below) with Amazon Logistics, Inc., the Company issued the Specified Customer Warrant to the Warrantholder which vests, subject to the terms and conditions contained therein, based on the aggregate amount of spending by Amazon.com, Inc. and its affiliates on Lion’s products or services. Lion has determined that the Specified Customer Warrant is a derivative instrument and should be classified as a liability in accordance with IAS 32 - Financial Instruments: Presentation and IFRS 9 - Financial Instruments. The vested portion of the Specified Customer Warrant is initially recorded at fair value as a share warrant obligation and then revalued at each reporting date, with a corresponding contract asset recognized at inception. The corresponding contract asset recognized at inception will be amortized as a reduction of revenues on a percentage per dollar of revenue generated with Amazon.com, Inc. and its affiliates. See section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Common Equity Warrant Issued to the Warrantholder”.

Results of Operations

Comparison of the three-month period ended March 31, 2021 and the three-month period ended March 31, 2020

Lion’s results of operations for the three-month period ended March 31, 2021 and 2020 are presented below:

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Revenues

Revenues increased by $5.0 million, from $1.2 million for the three-month period ended March 31, 2020 to $6.2 million for the three-month period ended March 31, 2021. The increase in revenue was primarily due to an increase in vehicle sales volume of 22 units, from 2 units (2 school buses in the U.S.) for the three-month period ended March 31, 2020 to 24 units (18 school buses and 6 trucks; 22 vehicles in Canada and 2 vehicles in the U.S.) for the three-month period ended March 31, 2021.

Cost of Sales

Cost of sales increased by $5.7 million, from $2.3 million for the three-month period ended March 31, 2020 to $8.0 million for the three-month period ended March 31, 2021. The increase was primarily due to the addition of personnel and other resources to accommodate higher anticipated production volumes. Lion completed the manufacturing of 43 vehicles in the three-month period ending March 31, 2021.

Gross Profit

Gross profit decreased by $0.8 million, from ($1.1) million (-86.0% of revenues) for the three-month period ended March 31, 2020 to ($1.8) million (-29.0% of revenues) for the three-month period ended March 31, 2021. The decrease is primarily due to the addition of personnel and other resources to accommodate higher anticipated production volumes.

Administrative Expenses

Administrative expenses increased by $5.5 million, from $0.8 million for the three-month period ended March 31, 2020 to $6.3 million for the three-month period ended March 31, 2021. The increase was primarily due a significant increase in non-cash share-based compensation of $3.1 million for the three-month period ended March 31, 2021 ($0.2 million for the three-month period ended March 31, 2020), to Lion expanding its head office capabilities in preparation of an expected increase in business, and an increase in non-recurring professional fees.

Selling Expenses

Selling expenses increased by $2.8 million, from $1.6 million for the three-month period ended March 31, 2020 to $4.4 million for the three-month period ended March 31, 2021. The increase was primarily due a significant increase in non-cash share-based compensation of $2.1 million for the three-month period ended March 31, 2021 ($0.1 million for the three-month period ended March 31, 2020), to Lion expanding its sales force effective, and an increase in expenses associated with Experience Centers.

Finance Costs

Finance costs increased by $2.0 million, from $1.9 million for the three-month period ended March 31, 2020 to $3.9 million for the three-month period ended March 31, 2021. The increase was driven primarily by higher accretion expense on retractable shares, an increase in borrowing costs due to an increase in the amount of debt outstanding, an increase in interest expense on convertible debt instruments, and an increase in lease liabilities from new Experience Center openings.

Foreign Exchange Loss (Gain)

Foreign exchange loss (gain) increased by $0.5 million, from a loss of $0.4 million for the three-month period ended March 31, 2020 to a gain of $0.2 million for the three-month period ended March 31, 2020, largely as a result of a weakening of the Canadian dollar relative to the U.S. dollar during the three-month period ended March 31, 2020 and a strengthening of the Canadian dollar relative to the U.S. dollar during the three-month period ended March 31, 2021.

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Change in Fair Value of Share Warrant Obligation

Change in fair value of share warrant obligation increased from nil for the three-month period ended March 31, 2020 (as the Lion Warrant had not yet been issued), to a gain of $0.1 million for the three-month period ended March 31, 2021. The gain for the three-month period ended March 31, 2021 was largely related to a reduction in warrant life from the December 31, 2020 valuation, offset by an increase in the interest rate used to perform the valuation.

Net Loss

Net loss increased by $10.4 million, from ($5.7) million for the three-month period ended March 31, 2020 to ($16.1) million for the three-month period ended March 31, 2020, largely due to the factors discussed above.

Comparison of Year Ended December 31, 2020 to Year Ended December 31, 2019

Lion’s results of operations for the years ended December 31, 2020 and 2019 are presented below: