Canoo Running Low on Cash After Losses Widen in Q1

Canoo Running Low on Cash After Losses Widen in Q1
Canoo CEO Tony Aquila. The company warned investors in its first-quarter earnings report that it's low on cash and there's substantial doubt about its ability to meet its financial obligations. (Photo provided)

Electric vehicle startup Canoo Inc., which is moving its headquarters to Bentonville and opening an advanced manufacturing facility in the city, on Tuesday reported widening losses in the first quarter of 2022 and said there's "substantial doubt about the company's ability to continue as a going concern."

Losses in the first quarter were reported to be $125.4 million, up from $15.2 million in the same quarter of 2021. The company ended the quarter with just $104.9 million in unrestricted cash and cash equivalents. It expects to see $95 million to $115 million in operating expenses and $85 million to $105 million in capital expenditures in the second quarter, raising questions about whether it will be able to meet its financial obligations.

Chairman and CEO Tony Aquila said the company has more than $600 million in accessible capital, and that about half of it could be available in the coming weeks. The company on Tuesday reached an agreement with the private equity fund Yorkville Advisors Global LP that gives Canoo the right, but not the obligation, to sell $250 million in common stock at any time in the next 36 months. 

Also on Tuesday, Canoo entered into a subscription agreement with a special purpose vehicle managed by Aquila Family Ventures LLC for the purchase of $50 million in common stock.

A company earnings report says more operating losses are expected as the company implements its business model. The company is exploring raising additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing. 

Canoo shares (Nasdaq: GOEV) fell more than 15% Tuesday. 

Meanwhile, the company is suing an original and its second-largest shareholder: DD Global Holdings Ltd., a Cayman Islands firm led by Pak Tam Li, Bloomberg reports. Canoo claims the firm wrongfully benefited from recent share sales, and it is seeking $61 million-plus.

"We have been clear about our philosophy of raising capital judiciously and will continue with this disciplined approach," Aquila said in a news release. "... As operators and investors, we have significant experience raising capital in challenging markets – and the best way to raise capital is to achieve your goals. We will continue to raise when needed, bridge to milestones and be in a position to take advantage of improving market conditions. We are focused on long-term value creation for our customers and shareholders."

But as a startup, the report says, Canoo isn't sure how much capital it actually needs. "The fact that we have a limited operating history means we have limited historical data on the demand for our EVs and other products," the report says.

The company did not report first-quarter total revenue per se, but instead said net cash used in operating activities totaled $120.3 million and net cash used in investing activities totaled $2 million. Both decreased from $53.9 million and $12.1 million, respectively, compared to 2021.

In other business, since the end of the quarter, the company said it had doubled gamma builds to 39 vehicles, reached 17,500 pre orders with a projected value of $750 million, and was selected by NASA to make Artemis ground crew transportation vehicles.

During the quarter, Canoo saw 17 Gamma vehicles reach the road, completed its second year of deep winter testing of more than 2,000 miles and produced battery modules for 43 gamma vehicles, a 156% increase from the fourth quarter of 2021.

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