Annual report pursuant to Section 13 and 15(d)

Business Combination

Business Combination
12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
Business Combination Business Combination
On December 21, 2020, we consummated the Business Combination.
Immediately prior to closing of the Business Combination, each Legacy Canoo preference share that was issued and outstanding was automatically converted into a number of Legacy Canoo ordinary shares on a 1:1 basis (which reflected the then-effective conversion rate as calculated pursuant to the Second Amended and Restated Memorandum and Articles of Association of Legacy Canoo). Upon the consummation of the Business Combination, each Legacy Canoo ordinary share issued and outstanding was canceled and converted into the right to receive (i) 1.239434862 shares (the “Exchange Ratio”) of Common Stock, and (ii) the contingent right to receive Earnout Shares, (which consideration, collectively, shall hereinafter be referred to as the “Per Share Merger Consideration”).
Upon the closing of the Business Combination, HCAC's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 510,000,000 shares, of which 500,000,000 shares were designated Common Stock, $0.0001 par value per share, and of which 10,000,000 shares were designated preferred stock, $0.0001 par value per share.
On August 17, 2020, a number of purchasers (each, a “Subscriber”) purchased from HCAC an aggregate of 32,325,000 shares of our Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $323.3 million, pursuant to separate subscription agreements (the “Subscription Agreements”) entered into effective as of August 17, 2020. Pursuant to the Subscription Agreements, we gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of the PIPE Shares was consummated concurrently with the consummation of the Business Combination.
Legacy Canoo was deemed to be the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in ASC 805. While HCAC was the legal acquirer in the Business Combination, because Legacy Canoo was deemed the accounting acquirer, for accounting purposes, the transaction was treated as a recapitalization of Legacy Canoo (i.e., a capital transaction involving the issuance of stock by HCAC for the stock of Legacy Canoo). Accordingly, the consolidated assets, liabilities and results of operations of Legacy Canoo became the historical financial statements of the combined company, and HCAC's assets, liabilities and results of operations were consolidated with Legacy Canoo beginning on the acquisition date. The net assets of HCAC are recognized at historical cost (which is expected to be consistent with carrying value), with no goodwill or other intangible assets recorded.
The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended December 31, 2020 (in thousands):
Cash - HCAC's trust and cash (net of redemptions) $ 306,354 
Cash - PIPE 323,250 
Less transaction costs and advisory fees paid (22,508)
Net Business Combination and PIPE financing 607,096 
Add: non-cash net assets assumed from HCAC 40 
Net contributions from Business Combination and PIPE financing $ 607,136 
The number of shares of Common Stock issued immediately following the consummation of the Business Combination:
Number of Shares
Common stock, outstanding prior to Business Combination 29,730,204 
Less redemption of HCAC shares (9,571)
Common stock of HCAC 29,720,633 
HCAC Founder Shares 7,503,750 
Shares issued in PIPE 32,325,000 
Business Combination and PIPE financing shares 69,549,383 
Legacy Canoo shares(1)
Total shares of Common Stock immediately after Business Combination 235,705,080 
The number of Legacy Canoo shares was determined from the 134.1 million shares of Legacy Canoo ordinary shares outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio of 1.239434862. All fractional shares were rounded down.
In addition, Legacy Canoo shareholders are entitled to receive additional Common Shares of up to an aggregate of 15.0 million shares if the price of our Common Stock trading on the Nasdaq meets certain thresholds following the Business Combination. Pursuant to GAAP, the Company determined the Earnout Shares right to be a derivative liability. See Note 13 for additional information.