Canoo (GOEV) - 2021 Q2 - Quarterly Report

Part I - Financial Information Financial Statements (Unaudited) The company reported no revenue, a significant increase in operating expenses, and a net loss of $112.6 million for the quarter Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $563,565 | $702,422 | | Total current assets | $576,910 | $708,885 | | Total assets | $711,524 | $753,470 | | Total current liabilities | $116,246 | $27,868 | | Contingent earnout shares liability | $58,101 | $133,503 | | Total liabilities | $188,288 | $188,228 | | Total stockholders' equity | $523,236 | $565,242 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Account | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $0 | $0 | $0 | $0 | | Research and development expenses | $57,638 | $14,642 | $96,956 | $33,935 | | Selling, general and administrative expenses | $44,625 | $3,411 | $100,252 | $7,492 | | Loss from operations | $(104,346) | $(19,809) | $(201,415) | $(44,868) | | Net loss and comprehensive loss | $(112,554) | $(23,241) | $(127,780) | $(54,131) | | Net loss per share, basic and diluted | $(0.50) | $(0.28) | $(0.57) | $(0.65) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(108,818) | $(42,314) | | Net cash used in investing activities | $(28,653) | $(979) | | Net cash (used in) provided by financing activities | $(1,386) | $32,267 | | Net decrease in cash | $(138,857) | $(11,026) | - The company made an immaterial correction to its prior period financial statements to reclassify private placement warrants from equity to a liability, in line with SEC guidance[59][60][62] Management's Discussion and Analysis of Financial Condition and Results of Operations Operating expenses rose sharply amid EV development, with $563.6 million in cash deemed sufficient for the next 12 months - Canoo is a mobility technology company developing a modular EV platform with a near-term vehicle lineup including the Lifestyle Vehicle (expected launch Q4 2022), the MPDV1, and a Pickup truck[114][116] - Recent developments include moving into the Gamma development phase for the Lifestyle Vehicle, selecting VDL Nedcar as a contract manufacturing partner, and choosing Oklahoma for its U.S. mega microfactory[118] Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $57,638 | $14,642 | $42,996 | 293.6% | | Selling, general and administrative | $44,625 | $3,411 | $41,214 | NM | | Expense Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $96,956 | $33,935 | $63,021 | 185.7% | | Selling, general and administrative | $100,252 | $7,492 | $92,760 | NM | - The increase in R&D expenses was driven by Gamma stage engineering design, stock-based compensation, and higher salary expenses, while the SG&A increase was due to stock-based compensation and professional fees[141][147][148] - As of June 30, 2021, the company had a cash balance of $563.6 million, which management believes is sufficient to support planned operations for the next 12 months[163][169] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable for the reporting period - The company states that quantitative and qualitative disclosures about market risk are not applicable[184] Controls and Procedures Management concluded disclosure controls were not effective due to ongoing remediation of material weaknesses - Management evaluated disclosure controls and procedures and concluded they were not effective at a reasonable assurance level as of the end of the quarter[186] - The ineffectiveness is due to material weaknesses that have not yet been fully remediated, despite meaningful progress[186][189] - Remediation efforts include hiring experienced executives and personnel, engaging a Big Four firm for internal audit co-sourcing, and designing additional controls for financial closing and reporting[187] Part II - Other Information Legal Proceedings The company faces class action lawsuits and an SEC investigation but does not expect a material adverse effect - The company is a defendant in putative class action complaints filed in April 2021 and a stockholder derivative complaint filed in June 2021[73] - On April 29, 2021, the SEC's Division of Enforcement opened a fact-finding investigation related to the company's IPO, merger, operations, and recent officer departures[74] - Management does not currently consider these pending legal proceedings to be material to the company's business or financial condition[75] Risk Factors The company anticipates losing its 'emerging growth company' status, leading to increased compliance burdens - The company expects to lose its 'emerging growth company' status beginning with its Annual Report for the year ending December 31, 2021, requiring compliance with auditor attestation requirements[195] - The company will also cease to be a 'smaller reporting company,' eliminating its ability to use scaled disclosure exemptions in future filings[196][198] - The company faces risks from various litigation, regulatory actions, and government investigations, which could be costly and divert management resources[199][200] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities but repurchased unvested common stock from former employees - There were no unregistered sales of equity securities[202] Repurchases of Unvested Common Stock (Q2 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30, 2021 | 36,143 | $0.01 | | May 1 - May 31, 2021 | 61,915 | $0.01 | | June 1 - June 30, 2021 | 60,584 | $0.01 | Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[204] Mine Safety Disclosures The company has indicated that this section is not applicable - Not applicable[206] Other Information This section details an immaterial correction to prior period financials regarding private placement warrant classification - The company corrected its prior period financial statements due to the reclassification of private placement warrants from equity to liability, which was not material to previously issued statements[207][208] Impact of Correction on Consolidated Balance Sheet as of Dec 31, 2020 (in thousands) | Account | As Previously Reported | As Corrected | | :--- | :--- | :--- | | Private placement warrants liability | $0 | $6,613 | | Total liabilities | $181,615 | $188,228 | | Additional paid in capital | $920,324 | $910,579 | | Accumulated deficit | $(348,493) | $(345,361) | | Total stockholders' equity (deficit) | $571,855 | $565,242 | Exhibits This section lists all exhibits filed with the Form 10-Q, including material contracts and officer certifications - A list of exhibits filed with the report is provided, including corporate governance documents, material contracts, and required officer certifications[213]