goev-20240930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________________

FORM 10-Q

__________________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 001-38824

___________________________________________________

CANOO INC.

(Exact name of registrant as specified in its charter)

___________________________________________________


Delaware			83-1476189
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

19951 Mariner Avenue, Torrance, California			90503
(Address of Principal Executive Offices)			(Zip code)

(424) 271-2144

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $0.0001 par value per share

GOEV

The Nasdaq Capital Market

Warrants to purchase shares of Common Stock

GOEVW

The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 13, 2024, there were 96,781,230 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.

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		Page

Part I	Financial Information

Item 1.	Financial Statements (Unaudited)	6

	Condensed Consolidated Balance Sheets	6

	Condensed Consolidated Statements of Operations	7

	Condensed Consolidated Statements of Redeemab le Preferred St ock and Stockholders’ Equity	8

	Condensed Consolidated Statements of Cash Flows	10

	Notes to Condensed Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56

Item 4.	Controls and Procedures	56

Part II	Other Information

Item 1.	Legal Proceedings	58

Item 1A.	Risk Factors	58

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 3.	Defaults Upon Senior Securities	60

Item 4.	Mine Safety Disclosures	60

Item 5.	Other Information	60

Item 6.	Exhibits	61

Signatures		63

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

These statements are subject to known and unknown risks, uncertainties and assumptions, many of which are difficult to predict and are beyond our control and could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements. Below is a summary of certain material factors that may make an investment in our common stock speculative or risky.

•We are an early stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future.

•We may be unable to adequately control the costs associated with our operations.

•Our current business plans require a significant amount of capital. If we are unable to obtain sufficient funding or do not have access to capital, we will be unable to execute our business plans and our prospects, financial condition and results of operations could be materially adversely affected.

•We have not achieved positive operating cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain.

•Our financial results may vary significantly from period to period due to fluctuations in our operating costs, product demand and other factors.

•Our limited operating history makes evaluating our business and future prospects difficult and increases the risk of your investment.

•Any changes as a result of our Employee Reorganization Plan could adversely affect and disrupt our business and results of operations.

•We have remediated the material weaknesses previously reported in our internal control over financial reporting, but if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.

•If we fail to manage our growth effectively, we may not be able to design, develop, manufacture, market and launch our electric vehicles ("EVs") successfully.

•We are highly dependent on the services of our key employees and senior management and, if we are unable to attract and retain key employees and hire qualified management, technical and EV engineering personnel, our ability to compete could be harmed.

•Several of our key vendors, including some single-source suppliers, have sent us notices of nonpayment of amount owed by us. The termination of any of these supply relationships would hinder our ability to manufacture our products, and the disputed amounts owed could lead to material litigation or other actions.

•We may offer shares of our common stock in lieu of cash payments to vendors in an effort to preserve cash for our operations. Doing so may result in us issuing a significant amount of shares which could result in dilution to your investment.

•We need to raise additional capital in the near term, and we currently do not have sufficient cash on hand to meet our near term obligations or capital requirements, which could jeopardize our ability to continue business operations or render us insolvent.

•Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our securities.

•We face significant barriers to manufacture and bring our EVs to market, and if we cannot successfully overcome those barriers our business will be negatively impacted.

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•In connection with each of our previous eight Form 10-Qs (beginning with the quarter ended March 31, 2022) and each of our previous two Form 10-Ks, our management has performed an analysis of our ability to continue as a going concern and has identified substantial doubt about our ability to continue as a going concern.

•Outstanding amounts and limited capacity under the Current Yorkville PPAs will make us more vulnerable to downturns in our financial condition.

•If our stockholders approve our proposed reverse stock split, the resulting market price of our Common Stock following such event may not attract new investors, and it is not certain that the proposed reverse stock split will result in a sustained proportionate increase in the market price of our Common Stock.

•Customers who have committed to purchase significant amounts of our vehicles may purchase significantly fewer vehicles than we currently anticipate or none at all. In that case, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.

•Our ability to develop and manufacture EVs of sufficient quality and appeal to customers on schedule and on a large scale is unproven and still evolving.

•We will depend initially on revenue generated from a single EV model and in the foreseeable future will be significantly dependent on a limited number of models.

•There is no guarantee that we will be able to develop our software platform, Canoo Digital Ecosystem, or that if we are able to develop it, that we will obtain the revenue and other benefits we expect from it.

•We may fail to attract new customers in sufficient numbers or at sufficient rates or at all or to retain existing customers, if any, and may face risks if we are dependent on a small number of customers for a significant portion of our revenues.

•If our EVs fail to perform as expected, our ability to develop, market and deploy our EVs could be harmed.

•Our distribution model may expose us to risk and if unsuccessful may impact our business prospects and results of operations.

•We face legal, regulatory and legislative uncertainty in how our go-to-market models will be interpreted under existing and future law, including the potential inability to protect our intellectual property rights, and we may be required to adjust our consumer business model in certain jurisdictions as a result.

•If we fail to successfully build and tool our manufacturing facilities and/or if we are unable to establish or continue a relationship with a contract manufacturer or if our manufacturing facilities become inoperable, we will be unable to produce our vehicles and our business will be harmed.

•We may not be able to realize the non-dilutive financial incentives offered by the State of Oklahoma where we will develop our own manufacturing facilities, including if we do not maintain certain levels of employment at such facilities.

•We and our third-party suppliers will rely on complex machinery for production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

•We have no experience to date in high volume manufacture of our EVs.

•We may experience significant delays in the design, production and launch of our EVs, which could harm our business, prospects, financial condition and operating results.

•Increases in costs, disruption of supply or shortage of raw materials and other components used in our vehicles, in particular lithium-ion battery cells, could harm our business.

•We are dependent on our suppliers, some of which are single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our EVs at prices and volumes, performance and specifications acceptable to us, could have a material adverse effect on our business, prospects, financial condition and operating results.

•We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.

•The automotive market is highly competitive and technological developments by our competitors may adversely affect the demand for our EVs and our competitiveness in this industry.

•If the market for EVs does not develop as we expect or develops more slowly than is expected, our business, prospects, financial condition and operating results will be adversely affected.

•We may not be able 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 we may apply.

•Our EVs are based on the use of complex and novel steer-by-wire technology that is unproven on a wide commercial scale.

•Our EVs rely on software and hardware that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful in addressing or mitigating technical limitations in our systems, our business could be adversely affected.

•We are subject to cybersecurity risks to our operational systems, security systems, infrastructure, integrated software in our EVs and customer data processed by us or third-party vendors.

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•Our stock price has been volatile, and the market price of our Common Stock may drop below the price you pay.

•Future sales and issuances of our equity or convertible securities could result in dilution to our existing stockholders and could cause the price of our Common Stock to decline.

•Substantial blocks of our total outstanding shares may be sold into the market. If there are substantial sales or issuances of shares of our Common Stock, the price of our Common Stock could decline.

•Economic, regulatory, political and other events, including fluctuating interest rates, sustained inflation, slower growth or recession, issues with supply chain, shortage of labor, national and global geopolitical and economic uncertainty, may adversely affect our financial results.

•Our ability to meet the timelines we have established for production and manufacturing milestones of our EVs is uncertain.

•Other factors disclosed in this Quarterly Report on Form 10-Q or our other filings with the Securities and Exchange Commission (the “SEC”).

These statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements, including those described under the section "Summary of Risk Factors" and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024. Given such risks and uncertainties, you should not place undue reliance on forward-looking statements.

Should one or more of these risks or uncertainties described in this Quarterly Report on Form 10-Q materialize, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the forward-looking statements discussed herein can be found in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described in this Quarterly Report on Form 10-Q may not be exhaustive and the above summary is qualified in its entirety by those more complete discussions of such risks and uncertainties.

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. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements


CANOO INC. Condensed Consolidated Balance Sheets (in thousands, except par values) (unaudited)


	September 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	1,533	$	6,394
Restricted cash, current	3,936		3,905
Inventory	9,913		6,153
Prepaids and other current assets	13,597		16,099
Total current assets	28,979		32,551
Property and equipment, net	368,740		377,100
Restricted cash, non-current	10,600		10,600
Operating lease right-of-use assets	30,194		36,241
Deferred warrant asset	50,175		50,175
Deferred battery supplier cost, non-current	28,900		30,000
Other non-current assets	5,701		5,338
Total assets	$	523,289	$	542,005
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable	$	81,015	$	65,306
Accrued expenses and other current liabilities	75,085		63,901
Convertible debt, current	42,640		51,180
Derivative liability, current	—		860
Financing liability, current	3,604		3,200
Total current liabilities	202,344		184,447
Contingent earnout shares liability	—		41
Operating lease liabilities, non-current	33,158		35,722
Derivative liability, non-current	9,888		25,919
Financing liability, non-current	28,620		28,910
Warrant liability, non-current	26,618		17,390
Other liabilities	702		—
Total liabilities	$	301,330	$	292,429
Commitments and contingencies (Note 12)

Redeemable preferred stock, $0.0001 par value; 10,000 authorized, 62 and 45 shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively.	$	8,780	$	5,607

Stockholders’ equity
Common stock, $0.0001 par value; 2,000,000 authorized as of September 30, 2024, and December 31, 2023, respectively; 87,195 and 37,591 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively (1)	9		4
Additional paid-in capital (1)	1,807,403		1,725,809
Accumulated deficit	(1,594,233)		(1,481,844)
Total preferred stock and stockholders’ equity	221,959		249,576
Total liabilities, preferred stock and stockholders’ equity	$	523,289	$	542,005

(1) Periods presented have been adjusted to reflect the 1-for-23 reverse stock split on March 8, 2024. See Note 1- Organization and Basis of Presentation - Reverse Stock Split, for additional information.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CANOO INC. Condensed Consolidated Statements of Operations (in thousands, except per share values) Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023

Revenue	$	891	$	519	$	1,497	$	519
Cost of revenue	170		903		2,015		903
Gross margin	721		(384)		(518)		(384)

Operating Expenses
Research and development expenses, excluding depreciation	17,502		21,965		60,676		107,651
Selling, general and administrative expenses, excluding depreciation	22,604		24,925		77,276		85,195
Depreciation	3,752		1,495		10,505		10,632
Reorganization and related exit costs	16,055		—		16,055		—
Total operating expenses	59,913		48,385		164,512		203,478
Loss from operations	(59,192)		(48,769)		(165,030)		(203,862)

Other (Expense) Income
Interest expense	(2,398)		(4,195)		(9,572)		(6,755)
Gain on fair value change in contingent earnout shares liability	—		279		41		2,843
Gain on fair value change in warrant and derivative liability	61,771		17,126		100,607		40,091
Loss on fair value change in derivative asset	—		(3,761)		—		(3,761)
Gain (Loss) on fair value change in convertible debt and other	4,890		(69,615)		(62,226)		(69,615)
Gain (Loss) on extinguishment of debt and other	(1,812)		(2,573)		22,650		(30,261)
Other income (expense), net	(1)		(466)		1,141		(2,256)
Income (Loss) before income taxes	3,258		(111,974)		(112,389)		(273,576)
Provision for income taxes	—		—		—		—
Net income (loss) and comprehensive income (loss) attributable to Canoo	3,258		$	(111,974)	(112,389)		(273,576)
Less: dividends on redeemable preferred stock	1,235		—		3,174		—
Net income (loss) and comprehensive income (loss) available to common shareholders	$	2,023	$	(111,974)	$	(115,563)	$	(273,576)

Per Share Data (1):
Net income (loss) per share, basic	$	0.03	$	(4.15)	$	(1.73)	$	(12.20)
Net income (loss) per share, diluted	$	(0.31)	$	(4.15)	$	(1.73)	$	(12.20)
Weighted-average shares outstanding, basic	79,395		27,012		66,645		22,430
Weighted-average shares outstanding, diluted	93,004		27,012		66,645		22,430

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CANOO INC.


Condensed Consolidated Statement of Redeemable Preferred Stock and Stockholders’ Equity (in thousands) Three and Nine Months Ended September 30, 2024 (unaudited)


	Redeemable Preferred Stock			Common stock (1)			Additional paid-in capital (1)		Accumulated deficit		Total preferred stock and stockholders’ equity
	Shares	Amount		Shares	Amount
Balance as of December 31, 2023	45	$	5,607	37,591	$	4	$	1,725,809	$	(1,481,844)	$	249,576
Issuance of shares for restricted stock units vested	—	—		1,892	—		—		—		—
Issuance of shares under employee stock purchase plan	—	—		26	—		79		—		79
Issuance of shares under the PPA	—	—		21,935	2		54,938		—		54,940
Issuance of shares under Convertible Debentures	—	—		4,672	—		22,254		—		22,254
Exchange of YA warrants	—	—		—	—		(43,416)		—		(43,416)
Issuance of shares to vendor for services	—	—		290	—		562		—		562
Accretion of preferred shares	—	862		—	—		(862)		—		—
Stock-based compensation	—	—		—	—		10,954		—		10,954
Net loss and comprehensive loss	—	—		—	—		—		(110,687)		(110,687)
Balance as of March 31, 2024	45	$	6,469	66,406	$	6	$	1,770,318	$	(1,592,531)	$	184,262
Repurchase of unvested shares - forfeitures											—
Issuance of shares for restricted stock units vested	—	—		111	—		—		—		—
Issuance of shares under employee stock purchase plan	—	—		20	—		35		—		35
Issuance of shares under the PPA	—	—		6,291	1		15,606				15,607
Issuance of shares under preferred shares agreement	17	—		—	—		—		—		—
Accretion of preferred shares	—	1,077		—	—		(1,077)		—		—
Issuance of shares to vendor for services	—	—		74	—		225		—		225
Stock-based compensation	—	—		—	—		1,128		—		1,128
Net loss and comprehensive loss	—	—		—	—		—		(4,960)		(4,960)
Balance as of June 30, 2024	62	$	7,546	72,902	$	7	$	1,786,235	$	(1,597,491)	$	196,297
Issuance of shares for restricted stock units vested	—	—		666	—		—		—		—
Issuance of shares under employee stock purchase plan	—	—		17	—		14		—		14
Issuance of shares under the PPA	—	—		9,796	2		16,870		—		16,872
Issuance of shares under ATM, net of offering costs	—	—		3,725	—		3,681		—		3,681
Accretion of preferred shares	—	1,234		—	—		(1,234)		—		—
Issuance of shares to vendor for services	—	—		89	—		190		—		190
Stock-based compensation	—	—		—	—		1,647		—		1,647
Net income and comprehensive income	—	—		—	—		—		3,258		3,258
Balance as of September 30, 2024	62	$	8,780	87,195	$	9	$	1,807,403	$	(1,594,233)	$	221,959

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CANOO INC.


Condensed Consolidated Statement of Redeemable Preferred Stock and Stockholders’ Equity (in thousands) Three and Nine Months Ended September 30, 2023 (unaudited)


	Redeemable Preferred Stock			Common stock (1)			Additional paid-in capital (1)		Accumulated deficit		Total preferred stock and stockholders’ equity
	Shares	Amount		Shares	Amount
Balance as of December 31, 2022	—	$	—	15,452	$	2	$	1,416,394	$	(1,179,823)	$	236,573
Repurchase of unvested shares - forfeitures	—	—		(1)	—		—		—		—
Issuance of shares for restricted stock units vested	—	—		120	—		—		—		—
Issuance of shares upon exercise of vested stock options	—	—		—	—		—		—		—
Issuance of shares under employee stock purchase plan	—	—		30	—		389		—		389
Vesting of early exercised stock options and restricted stock awards	—	—		—	—		26		—		26
Issuance of shares under the PPA	—	—		2,903	—		64,389		—		64,389
Reclassification of warrant liability to additional paid-in capital	—	—		—	—		19,510		—		19,510
Issuance of shares under SPA, net of offering costs	—	—		2,174	—		10,161		—		10,161
Issuance of warrants to placement agent under SPA	—	—		—	—		1,600		—		1,600
Stock-based compensation	—	—		—	—		9,836		—		9,836
Net loss and comprehensive loss	—	—		—	—		—		(90,732)		(90,732)
Balance as of March 31, 2023	—	$	—	20,678	$	2	$	1,522,305	$	(1,270,555)	$	251,752
Repurchase of unvested shares - forfeitures	—	—		(1)	—		—		—		—
Issuance of shares for restricted stock units vested	—	—		88	—		—		—		—
Issuance of shares under employee stock purchase plan	—	—		26	—		246		—		246
Vesting of early exercised stock options and restricted stock awards	—	—		—	—		2		—		2
Proceeds from exercise of YA warrants	—	—		1,488	—		21,223		—		21,223
Issuance of shares under PIPE agreement	—	—		710	—		1,753		—		1,753
Issuance of shares under the ATM, net of offering costs	—	—		83	—		1,155		—		1,155
Issuance of shares under YA convertible debenture	—	—		1,552	—		19,021		—		19,021
Issuance of shares under I-40 financing arrangement	—	—		101	—		1,506		—		1,506
Issuance of shares to vendor for services	—	—		9	—		250		—		250
Stock-based compensation	—	—		—	—		6,707		—		6,707
Net loss and comprehensive loss	—	—		—	—		—		(70,870)		(70,870)
Balance as of June 30, 2023	—	$	—	24,735	$	2	$	1,574,168	$	(1,341,425)	$	232,745
Repurchase of unvested shares	—	—		(1)	—		—		—		—
Issuance of shares for restricted stock units vested	—	—		48	—		—		—		—
Issuance of shares upon exercise of vested stock options	—	—		—	—		—		—		—
Issuance of shares under employee stock purchase plan	—	—		24	—		231		—		231
Vesting of early exercised stock options and restricted stock awards	—	—		—	—		2		—		2
Issuance of shares under PIPE agreement	—	—		243	—		19		—		19
Issuance of shares under Convertible Debentures	—	—		2,598	—		30,198		—		30,198
Issuance of shares under the PPA	—	—		654	—		7,523		—		7,523
Stock-based compensation	—	—		—	—		6,908		—		6,908
Net loss and comprehensive loss	—	—		—	—		—		(111,974)		(111,974)
Balance as of September 30, 2023	—	$	—	28,300	$	2	$	1,619,049	$	(1,453,399)	$	165,652

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CANOO INC.


Condensed Consolidated Statements of Cash Flows (in thousands) Nine Months Ended September 30, 2024 and 2023 (unaudited)


	Nine months ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(112,389)	$	(273,576)
Adjustments to reconcile net loss to net cash used in operating activities:			—
Depreciation and amortization	10,597		10,632
Non-cash operating lease expense	2,647		2,504
Reorganization and related exit costs	16,055		—
Inventory write-downs	—		366
Stock-based compensation expense	13,730		23,451
Gain on fair value change of contingent earnout shares liability	(41)		(2,843)
Gain on fair value change in warrants liability	(60,463)		(37,093)
Gain on fair value change in derivative liability	(40,144)		(2,998)
Gain on extinguishment of debt and other	(22,650)		30,261
Loss on fair value change in derivative asset	—		3,761
Loss on in fair value change in convertible debt and other	62,226		69,615
Non-cash debt discount	3,142		5,010
Non-cash interest expense	4,220		2,234
Financing charges incurred upon issuance of PPAs	1,820		—
Other	849		839
Changes in assets and liabilities:
Inventory	(3,759)		(3,096)
Prepaid expenses and other current assets	2,502		(3,445)
Other assets	737		(2,511)
Accounts payable, accrued expenses, and other current liabilities	10,983		(14,546)
Net cash used in operating activities	(109,938)		(191,435)

Cash flows from investing activities:
Purchases of property and equipment	(9,730)		(45,376)
Net cash used in investing activities	(9,730)		(45,376)

Cash flows from financing activities:
Proceeds from sale of employee retention credits	9,013		—
Payment of offering costs	—		(400)
Proceeds from exercise of YA warrants	—		21,223
Proceeds from issuance of shares under PIPEs	—		11,750
Proceeds from employee stock purchase plan	128		866
Proceeds from issuance of shares under RDO, net of issuance cost	—		50,961
Proceeds from convertible debenture	—		107,545
Payment of transaction costs	—		(949)
Proceeds for issuance of shares under ATM	3,681		1,155
Payment made on I-40 lease	(2,314)		—
Proceeds from PPA, net of issuance costs	135,995		16,751
Repayment of PPAs	(48,165)		—
Proceeds from preferred shares transaction	16,500		—
Net cash provided by financing activities	114,838		208,902
Net decrease in cash, cash equivalents, and restricted cash	(4,830)		(27,909)

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	Nine months ended September 30,
	2024		2023
Cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of period	20,899		50,615
Cash, cash equivalents, and restricted cash, end of period	$	16,069	$	22,706

Reconciliation of cash, cash equivalents, and restricted cash to the Condensed Consolidated Balance Sheets
Cash and cash equivalents at end of period	1,533		8,260
Restricted cash, current at end of period	3,936		3,846
Restricted cash, non-current at end of period	10,600		10,600
Total cash, cash equivalents, and restricted cash at end of period shown in the Condensed Consolidated Statements of Cash Flows	$	16,069	$	22,706

Supplemental non-cash investing and financing activities
Acquisition of property and equipment included in current liabilities	$	57,209	$	63,776
Acquisition of property and equipment included in current liabilities during the period	$	1,750	$	23,820
Acquisition of property and equipment included in financing liabilities	$	—	$	34,275
Offering costs included in current liabilities	$	903	$	903
Recognition of convertible debentures	$	—	$	71,438
Issuance of shares for extinguishment of convertible debt under PPA agreement	$	87,418	$	71,911
Issuance of shares for extinguishment of convertible debt under convertible debenture	$	22,254	$	49,219
Recognition of warrant liability	$	26,275	$	112,401
Recognition of derivative liability	$	24,857	$	4,310
Recognition of derivative asset	$	—	$	5,966
Accretion on preferred shares	$	3,174	$	—
Non-cash settlement of accounts payable	$	125	$	—
Recognition of operating lease right-of-use asset	$	—	$	272
Reclassification of warrant liability to additional paid in capital	$	—	$	19,510
Exchange of equity classified warrants	$	43,416	$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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CANOO INC.

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, unless otherwise stated) (unaudited)

1. Organization and Description of the Business

Canoo Inc. (“Canoo” or the “Company”) is a high tech advanced mobility technology company with a proprietary modular electric vehicle platform and connected services initially focused on commercial fleet, government and military customers. The Company has developed a breakthrough EV platform that it believes will enable it to rapidly innovate and bring new products addressing multiple use cases to market faster than its competition and at a lower cost.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company's unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the SEC and accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting. Accordingly, certain notes or other information that are normally required by GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited Consolidated Financial Statements. Accordingly, the unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024 (“Annual Report on Form 10-K”). Results of operations reported for interim periods are not necessarily indicative of results for the entire year. In the opinion of management, the Company has made all adjustments necessary to present fairly its Condensed Consolidated Financial Statements for the periods presented. Such adjustments are of a normal, recurring nature. The Company’s financial statements have been prepared under the assumption that the Company will continue as a going concern, which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future.

The accompanying unaudited Condensed Consolidated Financial Statements include the results of the Company and its subsidiaries. The Company’s comprehensive loss is the same as its net loss.

Except for any updates below, no material changes have occurred with respect to the Company’s significant accounting policies disclosed in Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K.

Reverse Stock Split

On February 29, 2024, the Company held a special meeting of its stockholders to approve an amendment to the Company's Second Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company's Common Stock at a reverse stock split ratio ranging from 1:2 to 1:30, and to authorize the Board to determine the timing of the amendment at its discretion at any time, if at all, but in any case prior to the one-year anniversary of the date on which the reverse stock split is approved by the Company’s stockholders. On March 8, 2024, the Company effected a 1-for-23 reverse stock split (the "Reverse Stock Split") of the Company’s Common Stock. As a result of the Reverse Stock Split, every 23 shares of the Company’s issued and outstanding Common Stock as of 8:00 a.m. (Eastern Time) on March 8, 2024 was automatically combined into one issued and outstanding share of Common Stock, with no change in par value per share. No fractional shares of Common Stock were issued as a result of the Reverse Stock Split. Any fractional shares in connection with the Reverse Stock Split were rounded down to the nearest whole share and cash payments were made to the stockholders. The Reverse Stock Split had no impact on the number of shares of Common Stock or Preferred Stock that the Company is authorized to issue pursuant to its certificate of incorporation. Proportional adjustments were made to the number of shares of Common Stock issuable upon exercise or conversion of the Company's equity awards and warrants, as well as the applicable exercise price. All share and per share information included in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the impact of the Reverse Stock Split.

Liquidity and Capital Resources

The Company’s principal sources of liquidity are its unrestricted cash balance and the Company's principal access to capital is under the July 2024 PPA (as defined in Note 10). The Company has incurred losses and negative cash flows from operating activities since inception and has a working capital deficit. The Company had negative cash flows from operating activities of $109.9 million for the nine months ended September 30, 2024. The Company expects to continue to incur net losses and negative cash flows from operating activities in accordance with its operating plan and expects that

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expenditures will increase significantly in connection with its ongoing activities. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

As an early-stage growth company, the Company’s ability to access capital is critical. Although management continues to explore raising additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing to supplement the Company’s capitalization and liquidity, management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented.

The Company believes substantial doubt exists about the Company’s ability to continue as a going concern for twelve months from the date of issuance of the Company's Condensed Consolidated Financial Statements. The Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

Macroeconomic Conditions

Current adverse macroeconomic conditions, including but not limited to heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, challenges in the supply chain could negatively affect the Company's business.

Ultimately, the Company cannot predict the impact of current or worsening macroeconomic conditions. The Company continues to monitor macroeconomic conditions to remain flexible and to optimize and evolve its business as appropriate. To do this, the Company is working on projecting demand and infrastructure requirements and deploying its workforce and other resources accordingly.

Fair Value of Financial Instruments

The Company applies the provisions of ASC 820, Fair Value Measurements and Disclosures, which provides a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value represents the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses the following hierarchy in measuring the fair value of the Company’s assets and liabilities, focusing on the most observable inputs when available:

•Level 1 Quoted prices in active markets for identical assets or liabilities.

•Level 2 Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company's financial assets and liabilities not measured at fair value on a recurring basis include cash and cash equivalents, restricted cash, accounts payable, and other current liabilities and are reflected in the financial statements at cost. Cost approximates fair value for these items due to their short-term nature.

Contingent Earnout Shares Liability

The Company has a contingent obligation to issue shares of Common Stock to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods (the “Earnout Shares”). The Company determined that the right to Earnout Shares represents a contingent liability that meets the definition of a derivative and recognized it on the balance sheet at its fair value upon the grant date. The right to Earnout Shares is remeasured at fair value each period through earnings. The fair value is determined using Level 3 inputs, since estimating

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the fair value of this contingent liability requires the use of significant and subjective inputs that may and are likely to change over the duration of the liability with related changes in internal and external market factors. The tranches were valued using a Monte Carlo simulation of the stock prices using an expected volatility assumption based on the historical volatility of the price of the Company’s stock and implied volatility derived from the price of exchange traded options on the Company’s stock. Upon the occurrence of a bankruptcy or liquidation, any unissued Earnout Shares would be fully issued regardless of whether the share price target has been met.

Convertible Debt

The Company accounts for convertible debt that does not meet the criteria for equity treatment in accordance with the guidance contained in ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The Company classifies convertible debt based on the repayment terms and conditions. Any discounts or premiums on the convertible debt and costs incurred upon issuance of the convertible debt are amortized to interest expense over the terms of the related convertible debt. Convertible debt is also analyzed for the existence of embedded derivatives, which may require bifurcation from the convertible debt and separate accounting treatment. For derivative financial instruments that are accounted for as assets or liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Condensed Consolidated Statements of Operations. Refer to Note 10 for further information.

The Company has elected the fair value option to account for the YA Convertible Debentures, the Ninth Pre-Paid Advance, the Tenth Pre-Paid Advance, the June Prepaid Advance, the Initial July Prepaid Advance and the First Supplemental Advance (all as defined in Note 10 and collectively "Convertible Debt") and recorded such instruments at fair value upon issuance. The Company records changes in fair value in the Condensed Consolidated Statements of Operations, with the exception of changes in fair value due to instrument-specific credit risk which, if present, will be recorded as a component of other comprehensive income. Interest expense related to the Convertible Debt is included in the changes in fair value. As a result of applying the fair value option, direct costs and fees related to the Convertible Debt were expensed as incurred.

Warrants

The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("ASC 480"), then in accordance with ASC 815-40 ("ASC 815"), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. Refer to Note 16 for information regarding the warrants issued.

Redeemable Preferred Stock

Accounting for convertible or redeemable equity instruments in the Company’s own equity requires an evaluation of the hybrid security to determine if liability classification is required under ASC 480-10. Liability classification is required for freestanding financial instruments that are not debt in legal form and are: (1) subject to an unconditional obligation requiring the issuer to redeem the instrument by transferring assets (i.e., mandatorily redeemable), (2) instruments other than equity shares that embody an obligation of the issuer to repurchase its equity shares, or (3) certain types of instruments that obligate the issuer to issue a variable number of equity shares. Securities that do not meet the scoping criteria to be classified as a liability under ASC 480 are subject to redeemable equity guidance, which prescribes securities that may be subject to redemption upon an event not solely within the control of the issuer to be classified outside permanent equity (i.e., classified in temporary equity). Securities classified in temporary equity are initially measured at the proceeds received, net of issuance costs and excluding the fair value of bifurcated embedded derivatives (if any). Subsequent measurement of the carrying value is not required unless the instrument is probable of becoming redeemable or

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is currently redeemable. When the instruments are currently redeemable or probable of becoming redeemable, the Company will recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the then current maximum redemption value at the end of each reporting period. Refer to Note 14 for information regarding the Redeemable Preferred Stock issued.

Stock-Based Compensation

The Company accounts for stock-based compensation awards granted to employees and directors based on the awards’ estimated grant date fair value. The Company estimates the fair value of its Common Stock options using the Black-Scholes-Merton option-pricing model. For stock-based awards that vest solely based on continued service (“service-only vesting conditions”), the resulting fair value is recognized under the graded vesting method over the requisite service period, which is usually the vesting period and generally four years. The Company recognizes the fair value of stock-based awards which contain performance conditions using the graded vesting method, when it is probable the performance condition will be met. The Company recognizes the fair value of stock-based awards which contain market conditions, such as stock price milestones, by simulating a range of possible future stock prices for the Company over the performance period using a Monte-Carlo simulation model to determine the grant date fair value. The Company accounts for forfeitures as they occur. The Company classifies stock-based compensation expense in its Consolidated Statement of Operations in the same manner in which the award recipient’s payroll costs are classified. For grants to non-employees, an expense is recognized when the good or service is received.

The Company estimates the fair value of RSUs based on the market price of the Company’s Common Stock underlying the awards on the grant date. Fair value for awards with stock price performance metrics is calculated using the Monte Carlo simulation model, which incorporates stock price correlation and other variables over the time horizons matching the performance periods. Refer to Note 15 for awards granted to employees during the period.

Cancellation of an existing equity-classified award along with a concurrent grant of a replacement award is accounted for as a modification under ASC 718. Total compensation cost to be recognized in connection with a modification and concurrent grant of a replacement award is equal to the original grant date fair value plus any incremental fair value, calculated as the excess of the fair value of the replacement award over the fair value of the original awards on the cancellation date. Any incremental compensation cost related to vested awards is recognized immediately on the modification date. Any incremental compensation cost related to unvested awards is recognized prospectively over the remaining service period, in addition to the remaining unrecognized grant date fair value.

Net income (loss) per Share

Basic and diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of the Company's common shares outstanding during the period, after consideration for potential dilutive securities. For periods when the Company is in a net loss position, diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive.

3. Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”), in the form of ASUs, to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s Condensed Consolidated Financial Position, Results of Operations or Cash Flows.

Recently Issued Accounting Pronouncements Adopted

In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements ("ASU 2023-01"), which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. Specifically, it amends the accounting for leasehold improvements. The amendments requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted in any annual or interim period as of the beginning of the

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related fiscal year. The adoption of ASU 2023-01 did not have material impact on the Company’s unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the provisions of this new pronouncement and evaluating any material impact that this guidance may have on our Consolidated Financial Statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the provisions of this new pronouncement and evaluating any material impact that this guidance may have on our Consolidated Financial Statements.

On October 9, 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently assessing the provisions of this new pronouncement and evaluating any material impact that this guidance may have on our Consolidated Financial Statements.

4. Fair Value Measurements

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as required by ASC 820, by level, within the fair value hierarchy as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024
	Fair Value		Level 1		Level 2		Level 3
Liability
Convertible debt, current	$	42,640	$	—	$	—	$	42,640
Derivative liability, non-current	$	9,888	$	—	$	—	$	9,888
Warrant liability, non-current	$	26,618	$	—	$	26,618	$	—


	December 31, 2023
	Fair Value		Level 1		Level 2		Level 3
Liability
Contingent earnout shares liability	$	41	$	—	$	—	$	41
Derivative liability, current	$	860	$	—	$	—	$	860
Convertible debt, current	$	16,052	$	—	$	—	$	16,052
Derivative liability, non-current	$	25,919	$	—	$	—	$	25,919
Warrant liability, non-current	$	17,390	$	—	$	17,390	$	—

The Company’s Contingent Earnout liability, convertible debt, derivative liabilities are considered “Level 3” fair value measurement. Refer to Note 2 for discussion of the Company’s methods for valuation.

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The Company entered into the Ninth Pre-Paid Advance, Tenth Pre-Paid Advance, June Prepaid Advance, Initial July Prepaid Advance and First Supplemental Advance as discussed in Note 10, whereby the Company elected to account for the transactions under the fair value option of accounting upon issuance. The Ninth Pre-Paid Advance and June Prepaid Advance were fully paid off as of the end of the reporting period. The Company estimated the fair value of the Tenth Pre-Paid Advance, Initial July Prepaid Advance, and First Supplemental Advance based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period:


	Tenth Pre-Paid Advance			Initial July Prepaid Advance			First Supplemental Advance

Stock price	$	0.98		$	0.98		$	0.98
Risk free interest rate	4.8		%	4.6		%	4.5		%
Interest rate	5.0		%	5.0		%	5.0		%
Expected volatility	106.2		%	115.7		%	111.6		%
Expected dividend yield	—		%	—		%	—		%
Remaining term (in years)	0.2			0.3			0.4

Following is a summary of the change in fair value of the Convertible Debt for the nine months ended September 30, 2024 and September 30, 2023 (in thousands).


	Nine months ended September 30,
Convertible Debt	2024		2023
Beginning fair value	$	16,052	$	—
Additions during the period	87,046		71,438
Payments in cash and common stock during the period	(97,091)		—
Change in fair value during the period	36,633		1,339
Ending fair value	$	42,640	$	72,777

As the proceeds of the freestanding instruments identified within the Ninth Pre-Paid Advance exceeded the fair value, a gain on issuance on convertible debt was recognized. As the fair value of the freestanding instruments identified within the Tenth Pre-Paid Advance, June Prepaid Advance and Initial July Prepaid Advance exceeded the proceeds received, losses on issuance on convertible debt were recognized. Refer to Note 10 for further information.

The Company has a contingent obligation to issue shares of Common Stock to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods. Issuances are made in three tranches of approximately 0.2 million shares, for a total of 0.7 million shares, each upon reaching share price targets within specified time frames from December 21, 2020 ("Earnout Date"). The first tranche was not issued given the share price did not reach the specified threshold as of December 21, 2022. The second tranche will be issued if the share price reaches $575.00 within four years of the closing of the Earnout Date. The third tranche will be issued if the share price reaches $690.00 within five years of the Earnout Date. The tranches may also be issued upon a change of control transaction that occurs within the respective timeframes and results in per share consideration exceeding the respective share price target. As of September 30, 2024, the Company has a remaining contingent obligation to issue 0.4 million shares of Common Stock, the ending fair value of which is nominal based on changes in the fair value of the Earnout Shares liability, driven primarily by changes in the share price of the Company's Common Stock.

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Following is a summary of the change in fair value of the Earnout Shares liability for the nine months ended September 30, 2024 and September 30, 2023 (in thousands).


	Nine months ended September 30,
Earnout Shares Liability	2024		2023
Beginning fair value	$	41	$	3,013

Change in fair value during the period	(41)		(2,843)
Ending fair value	$	—	$	170

The Company entered into a Lease Agreement ("Lease Agreement") with I-40 OKC Partners LLC ("I-40") which contained a "Market Value Shortfall" provision that meets the definition of a derivative, valued at $0.6 million at inception. The shortfall expired in April 2024, upon which the Company recorded a gain on the derecognition of the liability of $1.6 million. The amount was included within Gain (Loss) on extinguishment of debt and other. The fair value of the Market Value Shortfall derivative measured as of December 31, 2023 and immediately prior to expiration was $0.9 million and $1.6 million, respectively, resulting in a loss of $0.7 million during the nine months ended September 30, 2024 which is included within Gain on fair value change in warrant and derivative liability within the Condensed Consolidated Statement of Operations.

The Company entered into the Series B Preferred Stock Purchase Agreement with the Series B Preferred Stock Purchaser whose conversion feature meets the definition of a derivative liability which requires bifurcation (refer to Note 14). The Company estimated the fair value of the conversion feature derivative embedded in the Series B Preferred Stock Purchase Agreement based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period: the price of the Company’s Common Stock of $0.98; a risk-free interest rate of 3.6%; expected volatility of the Company’s Common Stock of 117.3%; expected dividend yield of 0.0%; and remaining term of 4.03 years. The fair value of the conversion feature derivative measured as of December 31, 2023 and September 30, 2024 was $25.9 million and $2.4 million, respectively, resulting in a gain of $23.6 million during the nine months ended September 30, 2024 included within the Condensed Consolidated Statement of Operations.

The Company entered into the Series C Preferred Stock Purchase Agreement with the Series C Preferred Stock Purchasers (as defined in Note 14) whose conversion feature meets the definition of a derivative liability which requires bifurcation. The Company estimated the fair value of the conversion feature derivative embedded in the Series C Preferred Stock Purchase Agreement based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period: the price of the Company’s Common Stock of $0.98; a risk-free interest rate of 3.6%; expected volatility of the Company’s Common Stock of 117.3%; expected dividend yield of 0.0%; and remaining term of 4.59 years. The fair value of the conversion feature derivative measured as of issuance and September 30, 2024 was $24.9 million and $7.5 million, respectively, resulting in a gain of $17.3 million during the nine months ended September 30, 2024 included within the Condensed Consolidated Statement of Operations.

Following is a summary of the change in fair value of the derivative liability for the nine months ended September 30, 2024 and September 30, 2023 (in thousands).


	Nine months ended September 30,
Derivative liability	2024		2023
Beginning fair value	$	26,779	$	—
Additions during the period	24,857		4,310
Derecognition of liability upon expiration of agreement	(1,604)		(774)
Change in fair value during the period	(40,144)		(2,998)
Ending fair value	$	9,888	$	538

Refer to Note 16 for discussion related to warrants fair value measurements.

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