Electric vehicle company Canoo agrees to $1.5 million settlement with SEC

Electric vehicle startup Canoo has agreed to a $1.5 million settlement with the U.S. Securities and Exchange Commission, according to a regulatory filing.

The SEC began investigating Canoo in May 2021, just months after the company merged with special-purpose acquisition firm Hennessy Capital Acquisition Corp. The investigation covered Hennessy’s IPO and merger with Canoo, Canoo’s operations, business model, revenue, revenue strategy, agreements, revenue and more. He also looked into the departures of some executives from the company, including co-founder and CEO Ulrich Kranz.

Canoo shared the news Thursday as part of its fourth quarter and full year 2022 earnings report. The company’s stock price, which closed Thursday at $0.62, fell nearly 10% after hours news.

Canoo was one of several SPAC EVs that had come to the attention of the SEC, including Lordstown Motors, Arrival, Nikola and Faraday Future.

Canoo didn’t share many details about the SEC investigation, but the $1.5 million appeared on the company’s fourth quarter balance sheet.

EV SPAC is a pre-revenue company that has repeatedly warned that it is running out of cash and needs to raise more capital to stay in the game. Canoo has delivered its first light tactical vehicle to the military American in the fourth quarter for a demonstration, but that contract is only worth $67,600 – not exactly a large amount considering the company’s losses. In February, Canoo agreed to sell 50 million shares at a 16% discount, or $1.05 per share. Gross proceeds from the offering were approximately $52.5 million.

This injection of cash seems insufficient to make Canoo a source of income. The company ended 2022 with just $36.6 million in cash and cash equivalents. With a net loss of $80.2 million in the fourth quarter ($487.7 million for the full year), the company will likely need to raise more money to cover expenses in the first quarter alone. Incidentally, on a quarterly basis, this loss is down from $138 million in the fourth quarter of 2021. However, Canoo ended 2021 with a net loss of $346.8 million, which is an increase more than 40% year-on-year.

Canoo said on Thursday’s earnings call that it was exploring diversified funding sources that it would announce over the next two quarters. Canoo CEO Tony Aquila noted that “legacy issues” such as messy executive reshuffles and the now-completed SEC investigation made it difficult to apply for funding from the Department of Health’s loan program. ‘Energy, for example.

“Now our opportunities for access to capital are exponential as we begin to establish the track record for this management team,” Aquila said.

Aquila is clearly trying to send a message to investors that Canoo’s problems are due to problems with former management teams. Aquila took over as CEO in 2021, and since then says Canoo has evolved from a company that offered a single product to one with a “new business strategy” that includes onshore manufacturing. Canoo also recently recruited Ken Magnet as its new chief financial officer and Tony Elias as its new executive vice president of operations.

Hopefully that will be enough to power this electric ship. Canoo reported negative adjusted EBITDA of $60 million for the fourth quarter of 2022 and negative $408.6 million for the full year. Last year, those numbers were negative $120 million and negative $332.6 million for the fourth quarter and full year 2021, respectively.

Canoo outlook for the first quarter of 2023

Canoo said it expects first-quarter operating expenses (excluding stock-based compensation and amortization) to be between $55 million and $70 million, with capital expenses between $30 million and $45 million. millions of dollars.

“As we move forward into 2023, we are focused on bringing our facilities online, scaling production and aligning with our strategic channel partners for our global expansion,” Aquila said in a statement. communicated.

Canoo said it is nearing the start of production in Pryor and Oklahoma City, where Canoo is building an EV battery module plant and vehicle manufacturing plant to market its Lifestyle Delivery Vehicle and Lifestyle Vehicle SUV in 2023. Oklahoma provided Canoo with $400 million in incentives to build there and agreed in March to buy 1,000 Canoo electric vehicles, but the state can still opt out of that deal.

Canoo also signed an exclusive distribution agreement with GCC Olayan for vehicles in Saudi Arabia in January, the company’s first phase of international expansion.

Aquila said on Thursday’s earnings call that Canoo believes it can achieve an exit rate of 20,000 for the year. The company says it has seen 300% growth in orders this year with around $2.8 billion in total orders.