Archer Aviation Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2021. Archer is a pre-revenue aerospace company developing electric vertical takeoff and landing aircraft and planned urban air mobility services. The September 16, 2021 business combination with Atlas Crest was accounted for as a reverse recapitalization; historical results principally reflect Legacy Archer.
Financial performance and position
- Revenue: None reported. Archer had not begun aircraft sales or planned UAM operations.
- Net loss: $176.7 million for Q3 2021, versus $7.3 million in Q3 2020; $304.5 million for the first nine months of 2021, versus $16.1 million in the comparable 2020 period. Basic and diluted loss per share was $2.00 for Q3 and $4.50 year to date.
- Expenses: Q3 research and development was $23.1 million, versus $6.7 million; general and administrative expense was $114.1 million, versus $0.6 million. Q3 included $101.7 million of non-cash founder restricted-stock compensation. Other warrant expense was $39.1 million for Q3 and $117.3 million year to date, related to United warrant vesting.
- Cash flow: Operating cash used was $59.5 million for the first nine months, versus $15.2 million in 2020; investing cash used was $3.0 million. Financing provided $822.1 million, primarily from the $600.0 million PIPE and business-combination proceeds.
- Liquidity: Cash and cash equivalents were $796.2 million at September 30, 2021, versus $36.6 million at December 31, 2020. Current assets were $797.7 million and current liabilities $29.7 million.
- Debt and other liabilities: The $20.0 million SVB term loan was reported at $18.7 million net of issuance costs, including $7.0 million current and $11.7 million long term. Warrant liabilities totaled $40.9 million. No profitability margins are meaningful because the company had no revenue.
Material changes and unusual items
- The September business combination and PIPE generated $857.6 million gross cash proceeds; the filing reports $801.8 million of net cash proceeds. Atlas stockholders redeemed $242.4 million of trust funds, leaving $257.6 million released from the trust account.
- Expense growth reflects increased staffing and development activity, public-company and transaction costs, founder stock-based compensation, and United warrant vesting. These non-cash items materially increased reported losses.
- The $0.9 million PPP loan and accrued interest were forgiven in June 2021 and recorded as a gain.
- Archer reported material weaknesses in internal control over financial reporting and concluded disclosure controls were not effective as of quarter-end. Remediation efforts were underway.
Outlook, risks, and contingencies
- Management expected cash on hand and business-combination proceeds to fund its current operating plan for at least 12 months from the date the interim statements were available to be issued. It expects continued losses and rising R&D spending; significant revenue was not expected until late 2024 or 2025, or later.
- Archer’s agreement with United covers a conditional order for up to 200 aircraft, with an option for 100 more. The order depends on FAA certification and agreement on material terms; no revenue had been recognized from it.
- FAA certification, aircraft development and manufacturing execution, market adoption, supplier capacity, and future financing are major uncertainties. Delays or higher costs could require additional capital or changes to development plans.
- Wisk’s trade-secret and patent lawsuit remained pending, with trial scheduled for January 2023. A related federal investigation was ongoing as of November 12, 2021; Archer and employees had received grand jury subpoenas. The company could not estimate a potential loss range.
- Changes in the fair value of liability-classified warrants may create material quarterly non-cash gains or losses. The company also disclosed dilution risks from equity awards, warrants, and future financing, and its Class B shares carry ten votes per share.
Key facts investors should verify
- Whether cash burn, hiring, aircraft development, manufacturing investment, and FAA certification progress remain consistent with available liquidity and the stated operating plan.
- Whether the United purchase conditions and additional material terms are resolved, and whether the order ultimately produces firm deliveries or revenue.
- Developments in the Wisk litigation and federal investigation, including any effect on operations, intellectual property, costs, or potential liabilities.
- Progress in remediating the disclosed internal-control material weaknesses and whether controls become effective.
- The composition and timing of reported losses, particularly founder compensation, United warrant expense, warrant-liability remeasurement, and potential future dilution.