Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
3 Months Ended
Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
In connection with the commencement of the Company's Bentonville, Arkansas and Michigan leases in 2022, the Company issued standby letters of credit of $9.5 million and $1.1 million, respectively which are included in restricted cash within the accompanying consolidated balance sheet as of March 31, 2023.

Refer to Note 10 for information regarding operating lease commitments.
Legal Proceedings
From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief.

On April 2, 2021 and April 9, 2021, the Company was named as a defendant in putative class action complaints filed in California on behalf of individuals who purchased or acquired shares of the Company’s stock during a specified period. Through the complaint, plaintiffs are seeking, among other things, compensatory damages. The Company has filed a pending motion to dismiss the complaints. On February 28, 2023, the court granted the Company’s motion to dismiss with leave to amend. On March 10, 2023, the lead plaintiff filed a second amended consolidated complaint. On March 23, 2023, the court entered a stipulated order setting a briefing schedule on the Company’s anticipated motion to dismiss the second amended consolidated complaint. The final determinations of liability arising from these litigation matters will only be made following comprehensive investigations and litigation processes.
On April 29, 2021, the SEC’s Division of Enforcement advised that it has opened an investigation related to, among other things, Hennessy Capital Acquisition Corp, IV's ("HCAC") initial public offering, HCAC’s merger with the Company and the concurrent private investment in public equity offering, historical movements in the Company, the Company’s operations, business model, revenues, revenue strategy, customer agreements, earnings, and other related topics, along with the recent departures of certain of the Company’s officers. The Staff of the SEC's Division of Enforcement (the "Staff") informed the Company that it has concluded its investigation and believes that certain former senior executives of the Company misled investors in late 2020 and early 2021 regarding 2021 and 2022 projections of revenue from a pipeline of engineering services projects, violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. In March 2021, when new leadership of the Company decided to discontinue engineering services as a potential revenue stream, these projections were revised to zero. The Staff also believes that a former senior executive received a payment of nearly $1.0 million from the company’s former owners in the Fall of 2020 that was not properly disclosed, violating Sections 13(a) and 14(a) of the Exchange Act and Rules 13a-11 and 14a-9 promulgated thereunder. Finally, the Staff believes that Canoo is liable for the conduct of these former senior executives. While not admitting to the Staff’s findings, the Company has decided to resolve the Staff’s investigation into the Company by agreeing in principle with the Staff to a cease and desist order and payment of a $1.5 million penalty, payable in equal installments of $0.4 million over each of the next four quarters beginning in the second quarter of 2023. This settlement is not, and cannot be, final until it is approved by a majority of the Commissioners of the SEC. The Company understands that the Staff’s investigation into certain former senior executives is ongoing.
In March 2022, the Company received demand letters on behalf of shareholders of the Company identifying purchases and sales of the Company’s securities within a period of less than six months by DD Global Holdings Ltd. (“DDG”) that resulted in profits in violation of Section 16(b) of the Exchange Act. On May 9, 2022, the Company brought an action against DDG in the Southern District of New York seeking the disgorgement of the Section 16(b) profits obtained by DDG from such purchases and sales. In the action, the Company seeks to recover an estimated $61.1 million of Section 16(b) profits. In September 2022, the Company filed an amended complaint and a motion to dismiss by DDG is fully briefed and pending.
The Company was the respondent in a confidential arbitration initiated by a former employee of the Company concerning a dispute over issued shares of Common Stock. The arbitration demand alleged claims for conversion and violations of various California statutory provisions. The Company filed counterclaims against the former employee for breach of contract and declaratory judgment. During the three months ended September 30, 2022, the parties entered into a confidential settlement whereby the Company, without admitting wrongdoing, liability or unlawful conduct, released the shares of Common Stock that were in dispute and issued 2,033,864 additional shares of the Common Stock for full and final settlement of the claim.
At this time, the Company does not consider any such claims, lawsuits or proceedings that are currently pending, individually or in the aggregate, including the matters referenced above, to be material to the Company’s business or likely to result in a material adverse effect on its future operating results, financial condition or cash flows should such proceedings be resolved unfavorably.
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to vendors, lessors, investors, directors, officers, employees and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third-parties. These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The Company provided indemnifications to certain of its officers and employees with respect to claims filed by a former employee.