Business context and reporting period
Archer Aviation Inc. filed this Form 10-K for the fiscal year ended December 31, 2022. The company is developing electric vertical takeoff and landing (eVTOL) aircraft and had not generated revenue from its planned aircraft-sales or urban air mobility (UAM) businesses.
Its Midnight aircraft was unveiled in November 2022. Management described it as designed for four passengers plus a pilot, with a planned FAA certification target in late 2024 and commercial service targeted for 2025. These are plans, not assured outcomes.
Financial results and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $171.5 million | $64.3 million |
| General and administrative expense | $165.1 million | $176.7 million |
| Total operating expenses | $347.4 million | $358.3 million |
| Operating loss | $347.4 million | $358.3 million |
| Net loss | $317.3 million | $347.8 million |
| Net loss per share, basic and diluted | $1.32 | $3.14 |
| Cash used in operating activities | $200.4 million | $108.4 million |
| Cash used in investing activities | $464.3 million | $3.5 million |
Because Archer had no revenue, revenue margins are not meaningful. The net loss narrowed by $30.5 million year over year; operating expenses fell $10.9 million. R&D costs rose substantially as development activity expanded. Lower United warrant expense and a higher non-cash gain from warrant-liability remeasurement contributed to the lower net loss.
At year-end, cash and cash equivalents were $69.4 million and short-term investments were $461.8 million; restricted cash was $2.9 million. Management said available cash and investments would fund its current operating plan for at least 12 months from issuance of the financial statements. Total assets were $573.8 million, total liabilities $80.5 million, and stockholders’ equity $493.3 million. Notes payable had $10.0 million principal outstanding, scheduled for repayment during 2023; the balance-sheet carrying amount was $9.3 million net of discount and issuance costs. Current and long-term lease obligations were also reported.
Operating cash use increased from 2021. Investing cash use in 2022 primarily reflected purchases of short-term investments, rather than operating investment alone. Financing cash use was $9.9 million, mainly repayment of $10.0 million of debt. The filing reports no formal financial guidance.
Material changes, outlook and key risks
- Development and manufacturing: Archer reported progress in FAA certification work, including agreement on the certification basis and agreement on a majority of proposed means of compliance. The company was building a 350,000-square-foot Covington, Georgia facility, targeting construction completion in the second half of 2023 or early 2024 and initial production in the second half of 2024. Planned capacity is up to 650 aircraft annually, with potential expansion; actual timing and output are uncertain.
- Customer and strategic relationships: United’s conditional purchase agreement covers up to $1 billion of aircraft, with an option for another $500 million. It is the company’s only aircraft order, and material terms and FAA certification conditions remain outstanding. United paid a $10 million pre-delivery payment in 2022. In January 2023, Stellantis agreed to collaborate on manufacturing and made available, at Archer’s discretion and subject to milestones, up to $150 million in potential equity funding.
- Funding and losses: Archer expects significant expenses and losses until substantial revenue begins, which management expected no earlier than late 2024 or 2025. Delays, higher costs, or limited access to capital could require reduced or delayed development and manufacturing plans. The company also disclosed that its exposure to Silicon Valley Bank was immaterial as of March 15, 2023, and it had no exposure to Signature Bank or Silvergate at that date.
- Certification and market risk: Commercial operations depend on FAA and other approvals, production capability, infrastructure, pilot availability, and public adoption of eVTOL services. Certification, demand, supplier execution, safety, competition, and macroeconomic conditions could materially affect plans.
- Litigation: Wisk sued Archer alleging trade-secret misappropriation and patent infringement; Archer denies the claims and is pursuing counterclaims. The filing says potential loss was not probable or reasonably estimable and no related reserve was recorded. A trial was scheduled for August 2023 at the filing date.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 due to material weaknesses, including deficiencies in staffing, risk assessment, accounting processes, and IT controls. Remediation was ongoing. The independent auditor gave an opinion on the financial statements but was not engaged to audit internal control effectiveness.
- Other unusual items: 2022 net loss included $102.8 million of stock-based compensation and $10.8 million of United warrant expense; fair-value changes in warrant liabilities also affected reported results. These items make reported earnings more variable and do not directly represent operating cash flow.
Important facts for investors to verify
- Progress against FAA certification milestones and the late-2024 certification and 2025 service targets.
- Whether United’s conditional purchase agreement’s remaining terms and conditions are satisfied, and whether the order converts into deliveries and revenue.
- Funding needs, cash burn, and the conditions and availability of Stellantis’s potential equity investment.
- Covington facility construction, production readiness, costs, and achievable production capacity.
- Developments and potential financial or operational consequences of the Wisk litigation.
- Whether identified material weaknesses are remediated and controls operate effectively over time.
- Potential dilution from equity awards, warrants, and registered shares available for resale.