Following the recent Q1 2022 report from EV startup Canoo, we find the feature image rather fitting. After admitting a net loss over $125 million for the first three months of this year, Canoo is very much stuck out in the woods. With a lack of current cash on hand to realistically get through Q2, Canoo admitted “there is substantial doubt” about the company’s ability to get out of those financial woods either.

Canoo is certainly making its presence known on our homepage today. Earlier, we reported a lawsuit filed Monday in which the EV startup was working to recoup $61 million in “short swing” profits allegedly made by DD Global Holdings – Canoo’s second largest shareholder behind CEO Tony Aquila.

Just hours ago, we were concerned about the fact that Canoo was in a national security agreement with DD holdings due to its ties to China, and how the latter’s alleged violation of said agreement could affect Canoo’s recent contract with NASA.

However, after hearing Canoo executives speak during the company’s Q1 call with investors, its apparent that the startup needs that $61 million and then some just to make it into Q3.

Canoo Q1 report: $104M cash on hand, more on the way?

Canoo shared the damning but honest report with the public alongside its quarterly call with investors Tuesday afternoon. While admitting the significant net losses mentioned above, majority shareholder, chairman, and CEO Tony Aquila tried to tell a different story:

We have been clear about our philosophy of raising capital judiciously and will continue with this disciplined approach. We have more than $600 million in accessible capital to support Start of Production (SOP). As operators and investors, we have significant experience raising capital in challenging markets – and the best way to raise capital is to achieve your goals. We will continue to raise when needed, bridge to milestones and be in a position to take advantage of improving market conditions. We are focused on long term value creation for our customers and shareholders.

That $600 million Aquila is talking about can be accessible, but not without some serious legwork. Canoo’s new capital “bake sale” includes a potential $50 million in funding from a commitment of private investment in public equity (PIPE). Business Insider points out that this move consists of CEO Tony Aquila’s firm Aquila Family Ventures buying Canoo shares below current market value. Shares dropped 11% after the market’s bell today.

Canoo is also working on a $250 million equity purchase agreement with financing partner Yorkville Advisors. If that name sounds familiar, they financed a similar agreement with a little startup called Lordstown Motors. Last but not least, Canoo is filing a $300 million universal shelf registration, allowing it to issue securities like common stock in the future. This sort of feels like Canoo digging through all its couches for loose millions.

From a production standpoint, Canoo was already struggling to reach its target to manufacture between 3,000-6,000 EVs this year. According to its latest report, it has built 39 gamma vehicles, 17 of which are operating on roads.

Based upon its current projections for Q2, Canoo expects its operating expenses to be between $95-$115 million and capital expenditures somewhere between $85-$105 million. At minimum that’s $180 million needed for Q2 2022, and Canoo’s $104.9 million in cash on hand won’t cut it. Hence the following statement:

Due to the timing of our announced funding, and the 2014 FASB accounting rule, as of the date of this announcement, we are reporting that there is substantial doubt about the Company’s ability to continue as a going concern.

Could this truly spell the end for Canoo before we even get to drive the MPDV or Pickup?… or anything really? Or can Tony Aquila add “savior” to his six other company titles? All eyes will be on the Q2 report.

Electrek’s Take

NASA has to be paying attention now. I’m personally a fan of Canoo’s vehicles, so this is sad news for me, but it’s not the most surprising thing I’ve heard recently. Following the max exodus of personnel and broad but optimistic company statements, it wasn’t hard to sniff out that something was amiss behind closed doors… I just didn’t think it was this bad.

It’s not like Canoo is throwing in the towel and shuttering up tomorrow. I mean, its new HQ isn’t even complete yet, so how can you close it, right? Canoo still has plenty of potential to bounce back with the necessary capital. It just might come at a cost that could stifle its profits for years to come. That’s future Canoo’s problem though, right? Just throw more money at it.

In all seriousness, I’d love to see the MPDV and Pickup on roads someday, so I’m rooting for Canoo. However, if the company’s outlook for Q2 is gloomy, there’s no reason we shouldn’t be as well.

Lastly, I wanted to point out I didn’t make a single joke about any Canoos (or canoes) sinking.

That’s low-hanging fruit.

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