CANOO INC. The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition. This discussion and analysis should be read in conjunction with our condensed consolidated interim financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q. The statements in this discussion regarding expected and other production timelines, development of our own manufacturing facilities, industry trends, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSEC onMarch 1, 2022 (the "Annual Report on Form 10-K"), Part II, Item IA. "Risk Factors" in this Quarterly Report on Form 10-Q and "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from those contained in or implied by any forward-looking statements. Certain figures included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Overview
Canoo is a mobility technology company with a mission to bring electric vehicles ("EVs") to everyone and provide connected services that improve the vehicle ownership experience. We are developing a technology platform that we believe will enable us to rapidly innovate and bring new products, addressing multiple use cases, to market faster than our competition and at lower cost. Our vehicle architecture and design philosophy are aimed at driving productivity and returning capital to our customers, and we believe the software and technology capabilities we are developing, packaged around a modular, customizable product, have the potential to fundamentally alter the value proposition across a vehicle's lifecycle. We remain committed to the environment and to delivering sustainable mobility that is accessible to everyone. We proudly intend to manufacture our fully electric vehicles inArkansas andOklahoma , bringing advanced manufacturing and technology jobs to communities in America's heartland. We are committed to building a diverse workforce that will draw heavily upon the local communities ofNative Americans and veterans. We believe we are one of the first automotive manufacturers focused on capturing value across the entirety of the vehicle lifecycle, across multiple owners. Our platform and data architecture is purpose-built to be durable and serve as the foundation for the vehicles we intend to offer, unlocking a highly differentiated, multi-layer business model. The foundational layer is our Multi-Purpose Platform ("MPP" or "platform") architecture, which serves as the base of our vehicles, including the Lifestyle Vehicle and its Delivery, Base, Premium, and Adventure trims; the Multi-Purpose Delivery Vehicle ("MPDV") and the Pickup. The next layer is cybersecurity which is embedded in our vehicle to ensure the privacy and protection of vehicle data. Our top hats, or cabins, are modular and purpose-built to provide tailored solutions for our customers. This intentional design enables us to efficiently use resources to produce only what is necessary, underscoring our focus on sustainability and returning capital to customers. The remaining layers, connected accessories and digital customer ecosystem, present high-margin opportunities that extend beyond the initial vehicle sale, across multiple owners. Owners will further be able to customize their vehicles by adding connected accessories such as Bluetooth devices or infotainment systems. In addition, there are opportunities for software sales throughout the vehicle life, including predictive maintenance and service software or advanced driver assistance systems upgrades. Our platform architecture is a self-contained, fully functional rolling chassis that directly houses the most critical components for operation of an EV, including our in-house designed proprietary electric drivetrain, battery systems, advanced vehicle control electronics and software and other critical components, which all have been optimized for functional integration. Both our true steer-by-wire system, believed to be the first such system applied to a production-intent vehicle, and our flat composite leaf-spring suspension system are core components of our platform's differentiated functionality, enabling the development of a broad range of vehicle types and use cases due to the chassis' flat profile and fully variable steering positions. All of our announced vehicles, including the Lifestyle Vehicle and the Lifestyle Delivery Vehicle, the MPDV and the Pickup, will share a common platform architecture paired with different top hats to create a range of uniquely customized and use case optimized purpose-built mobility solutions targeting multiple segments of the rapidly expanding EV marketplace. 23 -------------------------------------------------------------------------------- Tab le of Contents In addition to our vehicle technology, we are developing a software platform that aggregates car data from bothCanoo and non-Canoo vehicles and delivers valuable insights to our customers. Collected over-the-air for connected vehicles or via an on-board diagnostics device for non-connected vehicles, we believe car data is critical to powering the customer journey and maximizing utility and value from the vehicle ownership experience. Leveraging our data aggregation platform, we aim to create the Canoo Digital Ecosystem, an application store that centralizes all vehicle information for customers and provides key tools across Security & Safety, Household Management, Fleet Management, Lifecycle Management and Vehicle Asset Management. Through our software offering, we believe we can provide differentiated value to both commercial customers and consumers by staying connected throughout the vehicle lifecycle, across multiple owners. Core to our ethos is delivering high quality products while empowering local communities, which drove our decision to build in America and source a majority of our parts from America and allied nations. We believe vertical integration across our manufacturing and assembly process will enable us to achieve start of production with less supply chain risk and provide us better oversight of our vehicle manufacturing. We are building production facilities in states and communities that are investing in high-tech manufacturing alongside us, creating American jobs and driving innovation. We intend to have an advanced industrialization facility inBentonville, Arkansas and a mega microfactory inPryor, Oklahoma . We also plan to move our corporate headquarters toBentonville . TheBentonville manufacturing facility will be a low-volume facility, which we intend to use in the near-term for the initial production of our vehicles, allowing us to test and validate our manufacturing equipment and processes before large-scale production begins in our mega microfactory. In the long term, we expect to use theBentonville facility for rapidly innovating on product concepts. We have made strategic investments in our technology and products that position us to capture three large and growing markets - commercial and passenger vehicles, upfitting and accessories, and car data. With the rise of on-demand delivery and eCommerce, it is increasingly important to bring electrification to commercial vehicles, which Mordor Intelligence estimated represented a market opportunity of over$715 billion as of 2020. We also have chosen to pursue the most profitable segments of the passenger vehicle market, the SUV and Pickup segments, which IHS estimated to have generated over$115 billion in profits in 2020. In addition to this opportunity in commercial and passenger vehicle markets, due to the modularity and customization of all our vehicles, we believe there is a significant opportunity in upfitting and accessories across the vehicle lifecycle, which theSpecialty Equipment Market Association estimated were valued at$24 billion in 2020. Lastly, according to research conducted by McKinsey, the value from car data monetization is expected to generate an over$250 billion market by 2030. Altogether, we estimate our highly strategic total market opportunity could grow to be over$1 trillion . We continue to innovate and develop every aspect of our business, from our non-traditional business model to our built in America, highly utilitarian vehicles optimized to return capital to our customers. We believe being forward-thinking across these areas has set the foundation for us to develop into a scalable business that is differentiated from our peers across the automotive original equipment manufacturer landscape.
Recent Developments
Electric Vehicle Fleet Purchase Agreement and Warrant
OnJuly 11, 2022 ,Canoo Sales, LLC , a wholly-owned subsidiary of the Company, entered into an Electric Vehicle Fleet Purchase Agreement (the "EV Fleet Purchase Agreement") with Walmart Inc. ("Walmart"). Pursuant to the EV Fleet Purchase Agreement, subject to certain acceptance and performance criteria, Walmart agreed to purchase at least 4,500 EVs, with an option to purchase up to an additional 5,500 EVs, for an agreed upon capped price per unit determined based on the EV model. The EV Fleet Purchase Agreement (excluding any work order or purchase order as a part thereof) has a five-year term, unless earlier terminated. In connection with the EV Fleet Purchase Agreement, the Company entered into a Warrant Issuance Agreement with Walmart pursuant to which the Company issued to Walmart a warrant (the "Warrant") to purchase an aggregate of 61.2 million shares of Common Stock, at an exercise price of$2.15 per share. The Warrant has a term of ten years and is vested immediately with respect to 15.3 million shares of Common Stock. Thereafter, subject to stockholder approval, if applicable, the Warrant will vest quarterly in amounts proportionate with the net revenue realized by the Company from transactions with Walmart or its affiliates until such net revenue equals$300.0 million , at which time the Warrant will have vested fully. In the event that stockholder approval is not obtained, in lieu of any shares which would have been issued to Walmart on account of the Warrant, the Company is required to pay to Walmart an amount in cash calculated pursuant to the Warrant.
Yorkville Facility II
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OnJuly 20, 2022 , the Company entered into a Pre-Paid Advance Agreement with Yorkville. In accordance with the terms of the PPA, the Company may request advances of up to$50.0 million in cash from Yorkville (or such greater amount that the parties may mutually agree) (each, a "Pre-Paid Advance"), with an aggregate limit of$300.0 million . Such Pre-Paid Advances can be offset by the issuance of shares of Common Stock to Yorkville at a price per share calculated pursuant to the PPA, which in no event will be less than$1.00 per share. The issuance of the shares under the PPA is subject to certain limitations. In addition, subject to certain conditions and limitations, the Company has the right to issue shares of Common Stock and cause Yorkville to offset certain outstanding amounts under the PPA. Interest accrues on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 5%, subject to an increase to 15% upon events of default described in the PPA. Each Pre-Paid Advance has a maturity date of 15 months. OnJuly 22, 2022 , the Company received an aggregate of$49.5 million on account of the first Pre-Paid Advance in accordance with the PPA. Additional Pre-Paid Advances under the PPA are subject to conditions precedent, including that there are no more than$10 million outstanding under prior Pre-Paid Advances.
ATM Program
OnAugust 8, 2022 , the Company entered into an At-the-Market Offering Agreement (the "ATM Agreement") withEvercore Group L.L.C. andH.C. Wainwright & Co., LLC (collectively, the "agents"), to sell shares of Common Stock having an aggregate sales price of up to$200.0 million , from time to time, through an "at-the-market offering" program under which the agents will act as sales agent. The sales, if any, will be made by any method permitted by law deemed to be an "at-the-market offering" as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company will pay the agents a commission rate of up to 3.0% of the gross sales price per share sold, withH.C. Wainwright & Co. LLC being entitled to an additional 1.5% of the gross sales price per share sold, and has agreed to provide the agents with customary indemnification, contribution and reimbursement rights. The ATM Agreement contains customary representations and warranties and conditions to the sales pursuant thereto. The Company is not obligated to sell any shares of Common Stock under the ATM Agreement and may at any time suspend solicitation and offers thereunder. The offering of shares of Common Stock pursuant to the ATM Agreement will terminate upon the sale of all the shares subject to the ATM Agreement or upon the termination of the ATM Agreement by either the Company or the agents, as permitted therein.
For more information, see Note 1 and Note 15 of the notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below.
Availability of Financing Sources and Commercialization of Our EVs
We expect to derive future revenue from our first vehicle offerings. In order to reach commercialization, we must purchase and integrate related property and equipment, as well as achieve several research and development milestones.
Our capital and operating expenditures have increased significantly in connection with our ongoing activities and we expect they will continue to increase, as we:
•continue to invest in our technology, research and development efforts;
•compensate existing personnel;
•invest in manufacturing capacity, via our owned facilities;
•increase our investment in marketing, advertising, sales and distribution infrastructure for our EVs and services;
•obtain, maintain and improve our operational, financial and management information systems;
•hire additional personnel;
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•commercialize our EVs;
•obtain, maintain, expand and protect our intellectual property portfolio; and
•continue to operate as a public company.
We require substantial additional capital to develop our EVs and services and fund our operations for the foreseeable future. We will also require capital to identify and commit resources to investigate new areas of demand. Until we can generate sufficient revenue from vehicle sales, we are financing our operations through access to private and public equity offerings and debt financings. Management believes substantial doubt exists about the Company's ability to continue as a going concern for twelve months from the date of issuance of the financial statements included in this Quarterly Report on Form 10-Q.
Macroeconomic Conditions and COVID-19 Impact
Current adverse macroeconomic conditions, including but not limited to heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, challenges in the supply chain and theUkraine war, could negatively affect our business. In addition, COVID-19 virus variants, infection rates and regulations continue to fluctuate in various regions of the world, and there are ongoing global impacts resulting from the pandemic. Increased demand for semiconductor chips in 2020, due in part to the COVID-19 pandemic and increased demand for consumer electronics that use these chips, has resulted in a global shortage of chips in 2021 that has continued in the first half of 2022. As a result, our ability to source semiconductor chips used in our vehicles may be adversely affected. This shortage may result in increased chip delivery lead times, delays in the production of our vehicles, and increased costs to source available semiconductor chips. Although we have made our best estimates based upon current information, actual results could materially differ from the estimates and assumptions developed by management. Accordingly, it is reasonably possible that the estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, and if so, we may be subject to future impairment losses related to long-lived assets as well as changes to valuations.
Key Components of Statements of Operations
Basis of Presentation
Currently, we conduct business through one operating segment. We are an early stage-growth company with no commercial operations, and our activities to date have been limited and are primarily conducted inthe United States . For more information about our basis of presentation, refer to Note 2 of the notes to our accompanying financial statements for the three and six months endedJune 30, 2022 .
Research and Development Expenses, excluding Depreciation
Research and development expenses, excluding depreciation consist of salaries, employee benefits and expenses for design and engineering and certain manufacturing personnel, stock-based compensation, as well as materials and supplies used in research and development activities. In addition, research and development expenses include fees for consulting and engineering services from third party vendors.
Selling, General and Administrative Expenses, excluding Depreciation
The principal components of our selling, general and administrative expenses are
salaries, wages, benefits and bonuses paid to our employees; stock-based
compensation; travel and other business expenses; and professional services fees
including legal, audit and tax services.
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Depreciation Expense
Depreciation is provided on property and equipment over the estimated useful lives on a straight-line basis. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in the loss from operations. No depreciation expense is allocated to research and development, cost of revenue and selling, general and administrative expenses.
Results of Operations
Comparison of the Three and Six Months Ended
The following table sets forth our historical operating results for the periods
indicated:
Three Months Ended June 30, $ % Six Months Ended June 30, $ %
(in thousands) 2022 2021 Change Change 2022 2021 Change Change
Revenue $ - $ - $ - NM $ - $ - $ - NM
Costs and Operating Expenses
Cost of revenue, excluding
depreciation - - - NM - - - NM
Research and development expenses,
excluding depreciation 115,460 57,638 57,822 100 % 197,946 96,956 100,990 104 %
Selling, general and administrative
expenses, excluding depreciation 55,152 44,625 10,527 24 % 110,773 100,252 10,521 10 %
Depreciation 2,892 2,083 809 39 % 5,570 4,207 1,363 32 %
Total costs and operating expenses 173,504 104,346 69,158 66 % 314,289 201,415 112,874 56 %
Loss from operations (173,504) (104,346) (69,158) 66 % (314,289) (201,415) (112,874) 56 %
Interest income (expense) 19 34 (15) (44) % (9) 46 (55) (120) %
Gain (loss) on fair value change in
contingent earnout shares liability 9,471 (8,157) 17,628 (216) % 24,936 75,402 (50,466) (67) %
Loss on fair value change in
private placement warrants
liability - - - NM - (1,639) 1,639 (100) %
Other (expense), net (378) (85) (293) 345 % (395) (174) (221) 127 %
Loss before income taxes (164,392) (112,554) (51,838) 46 % (289,757) (127,780) (161,977) 127 %
Provision for income taxes - - - NM - - - NM
Net loss and comprehensive loss $ (164,392) $ (112,554) $ (51,838) 46 % $ (289,757) $ (127,780) $ (161,977) 127 %
"NM" means not meaningful
Revenue and Cost of Revenue, excluding Depreciation
During the three and six months ended
Research and Development Expenses, excluding Depreciation
Research and development expenses increased by$57.8 million , or 100%, to$115.5 million in the three months endedJune 30, 2022 , compared to$57.6 million in the three months endedJune 30, 2021 . The increase was primarily due to increases in research and development costs such as engineering and design, testing, prototype tooling, and gamma parts of$33.0 million , salary and related benefits expense of$17.6 million , and professional fees of$3.7 million . The increase in research and development costs primarily related to expenditures for the gamma stage engineering design and development costs incurred during the three months endedJune 30, 2022 . Research and development expenses increased by$101.0 million , or 104%, to$197.9 million in the six months endedJune 30, 2022 , compared to$97.0 million the six months endedJune 30, 2021 . The increase was primarily due to increases in research and development costs such as engineering and design, testing, prototype tooling, and gamma parts of$55.8 million , salary and related benefits expense of$32.9 million , and professional fees of$5.1 million . The increase in research and development costs primarily related to expenditures for the gamma stage engineering design and development costs incurred during the six months endedJune 30, 2022 . 27
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Salary and related benefits expenses increased$17.6 million during the three months endedJune 30, 2022 to$36.9 million from$19.3 million during the three months endedJune 30, 2021 and increased$32.9 million during the six months endedJune 30, 2022 to$67.2 million from$34.3 million during the six months endedJune 30, 2021 . These increases are primarily due to continued investment in personnel and contract employees to drive and reach our research and development goals. Professional fees increased$3.7 million to$5.5 million during the three months endedJune 30, 2022 from$1.8 million during the three months endedJune 30, 2021 . Professional fees increased$5.1 million to$7.5 million during the six months endedJune 30, 2022 from$2.4 million during the six months endedJune 30, 2021 due to activities related to business development, legal fees, and consulting fees. We expect to continue to see an overall increase in research and development expenses to support our growth and initiatives related to the Lifestyle Vehicle, MPDVs, and Pickup which are expected to launch as early as 2022 and 2023.
Selling, General and Administrative Expenses, excluding Depreciation
Selling, general and administrative expenses increased by$10.5 million , to$55.2 million for the three months endedJune 30, 2022 , compared to$44.6 million for the three months endedJune 30, 2021 . The increase was primarily due to an increase of$9.0 million in salary and related benefits. Other factors affecting selling, general and administrative expenses were individually immaterial. Selling, general and administrative expenses increased by$10.5 million , to$110.8 million for the six months endedJune 30, 2022 , compared to$100.3 million for the six months endedJune 30, 2021 . Refer to below and Note 10 for information regarding stock-based compensation expense. The increase was primarily due to increases of$18.1 million in salary and related benefits,$8.7 million in professional fees,$7.9 million in IT expenses, and$2.8 million in occupancy costs partially offset by a decrease of$28.7 million in stock-based compensation expenses.
Professional fees increased by
Salary and related benefits expenses increased by$9.0 million to$14.4 million in the three months endedJune 30, 2022 , compared to$5.4 million in the three months endedJune 30, 2021 . Salary and related benefits expenses increased by$18.1 million to$27.5 million in the six months endedJune 30, 2022 , compared to$9.4 million in the six months endedJune 30, 2021 . These increases were due primarily to investment in personnel to support our growth and achieve start of production in late 2022. IT expenses increased by$7.9 million to$10.3 million during the six months endedJune 30, 2022 from$2.4 million during the three months endedJune 30, 2021 . Occupancy fees increased by$2.8 million to$9.0 million during the six months endedJune 30, 2022 from$6.2 million during the three months endedJune 30, 2021 . The decrease in stock-based compensation expenses of$28.7 million for the six months endedJune 30, 2022 was primarily driven by the granting of certain restricted stock awards in the prior period resulting in the recognition of stock-based compensation expense in the amount of$27.9 million , some of which immediately vested during the quarter endedJune 30, 2021 . See further discussion on stock-based compensation in Note 10 of the notes to our accompanying financial statements.
We expect to see an overall increase in selling, general and administrative expenses to support our growth and initiatives related to the Lifestyle Vehicle, MPDVs, and Pickup which are expected to launch as early as 2022 and 2023.
Gain on Fair Value Change in Contingent Earnout Shares Liability
We recognized a non-cash gain on fair value change of contingent earnout shares liability of$9.5 million and$24.9 million in the three and six months endedJune 30, 2022 , respectively, which was a result of the periodic remeasurement of the fair value of our contingent earnout shares liability. A non-cash loss on fair value change of contingent earnout shares liability of$8.2 million and non-cash gain of$75.4 million was recognized in the three and six months endedJune 30, 2021 , respectively. 28
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Loss on Fair Value Change of Private Placement Warrants Liability
We recognized a non-cash loss on fair value change of private placement warrants liability of$1.6 million in the six months endedJune 30, 2021 , which was a result of the periodic remeasurement of the fair value of our private placement warrants liability. All of the private placement warrants were converted to public warrants onMarch 2, 2021 .
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use the following non-GAAP measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance.
EBITDA and Adjusted EBITDA
"EBITDA" is defined as net loss before interest expense, income tax expense or benefit, and depreciation and amortization. "Adjusted EBITDA" is defined as EBITDA adjusted for stock-based compensation, changes to the fair value of contingent earnout shares liability, changes to the fair value of warrants liability, and any other one-time non-recurring transaction amounts impacting the statement of operations during the year. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe EBITDA and Adjusted EBITDA, when combined with net loss are beneficial to an investor's complete understanding of our operating performance. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate EBITDA and Adjusted EBITDA in the same fashion. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We manage our business utilizing EBITDA and Adjusted EBITDA as supplemental performance measures.
The following table reconciles net loss to EBITDA and Adjusted EBITDA for the
three and six months ended
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Net loss $ (164,392) $ (112,554) $ (289,757) $ (127,780) Interest (income) expense (19) (34) $ 9$ (46) Provision for income taxes - - $ - $ - Depreciation 2,892 2,083$ 5,570 $ 4,207 EBITDA (161,519) (110,505)$ (284,178) $ (123,619)
Adjustments:
(Gain) loss on fair value change in contingent earnout shares liability (9,471) 8,157$ (24,936) $ (75,402) Loss on fair value change in private placement warrants liability - - $ -$ 1,639 Other expense, net 378 85 $ 395$ 174 Stock-based compensation 20,773 25,514$ 41,453 $ 70,660 Adjusted EBITDA$ (149,839) $ (76,749) $ (267,266) $ (126,548) 29
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Liquidity and Capital Resources As ofJune 30, 2022 , we had unrestricted cash and cash equivalents in the amount of$33.8 million , which was primarily invested in money market funds that consist of liquid debt securities issued by theU.S. government. In assessing our liquidity requirements and cash needs, we also consider contractual obligations to which we are a party. Additionally, see discussion related to the operating lease maturity schedule and any new leases entered into in Note 8 of the notes to our accompanying financial statements. We have incurred and expect to incur, net losses which have resulted in an accumulated deficit of$981.9 million as ofJune 30, 2022 . Management continues to explore raising additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing to supplement the Company's capitalization and liquidity. If we raise additional funds by issuing debt securities or preferred stock, or by incurring loans, these forms of financing would have rights, preferences, and privileges senior to those of holders of our Common Stock. The availability and the terms under which we may be able to raise additional capital could be disadvantageous, and the terms of debt financing or other non-dilutive financing may involve restrictive covenants and dilutive financing instruments, which could place significant restrictions on our operations. Macroeconomic conditions and credit markets could also impact the availability and cost of potential future debt financing. If we raise capital through the issuance of additional equity, such sales and issuance would dilute the ownership interests of the existing holders of Common Stock. There can be no assurances that any additional debt, other non-dilutive and/or equity financing would be available to us on favorable terms or at all. We expect to continue to incur net losses, comprehensive losses, and negative cash flows from operating activities in accordance with our operating plan as we continue to expand our research and development activities to complete the development of our MPP and EVs, establish our go-to-market model and scale our operations to meet anticipated demand. We expect that both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we:
•continue to invest in our technology, research and development efforts;
•compensate existing personnel;
•invest in manufacturing capacity, via our owned facilities;
•increase our investment in marketing, advertising, sales and distribution infrastructure for our EVs and services;
•obtain, maintain and improve our operational, financial and management information systems;
•hire additional personnel; •commercialize our EVs;
•obtain, maintain, expand and protect our intellectual property portfolio; and
•operate as a public company.
As of the date of this report, we believe that our existing cash resources and additional sources of liquidity are not sufficient to support planned operations, which comprise bringing our lifestyle vehicle to the point of production, for the next 12 months. The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Cash Flows Summary
Presented below is a summary of our operating, investing and financing cash flows (in thousands):
For the six months ended June 30,
Consolidated Cash Flow Statements Data 2022 2021
Net cash used in operating activities $ (237,565) $ (108,818)
Net cash used in investing activities (34,980) (28,653)
Net cash provided by (used in) financing activities 92,630 (1,386)
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Cash Flows from Operating Activities
Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development as well as selling, general, and administrative activities. Our operating cash flow is also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities was$237.6 million for the six months endedJune 30, 2022 . Our cash outflow from operating activities primarily consist of payments related to our research and development and selling, general and administration expenses. Total expenditure as it relates to research and development excluding depreciation was$197.9 million during the six months endedJune 30, 2022 , of which$15.2 million related to stock-compensation expenses. We also incurred selling, general and administration expenses of$110.8 million for the six months endedJune 30, 2022 , of which$26.3 million related to stock-compensation expenses. The expenses include salaries and benefits paid to employees as primarily all salaries and benefits were paid in cash during the six months endedJune 30, 2022 . Net cash used in operating activities was$108.8 million for the six months endedJune 30, 2021 . Our cash outflow from operating activities primarily consist of payments related to our research and development and selling, general and administration expenses. The total expenditure as it relates to research and development excluding depreciation was$97.0 million during the six months endedJune 30, 2021 of which$15.6 million related to stock-compensation expenses during the year. We also incurred selling, general and administration expenses of$100.3 million for the six months endedJune 30, 2021 , of which$55.0 million related to stock-compensation expenses during the six months endedJune 30, 2021 . The expenses include salaries and benefits paid to employees as primarily all salaries and benefits were paid in cash during the six months endedJune 30, 2021 .
Cash Flows from Investing Activities
We generally expect to experience negative cash flows from investing activities as we expand our business and continue to build our infrastructure. Cash flows from investing activities primarily relate to capital expenditures to support our growth. Net cash used in investing activities was approximately$35.0 million for the six months endedJune 30, 2022 , which primarily consisted of purchases of production tooling and machinery and equipment to support future manufacturing activities offset by a repayment received inFebruary 2022 totaling$30.4 million from VDL Nedcar.
Net cash used in investing activities was approximately
Cash Flows from Financing Activities
Net cash provided by financing activities was$92.6 million for the six months endedJune 30, 2022 , which was primarily due to proceeds of$50.0 million from purchase of Common Stock under the PIPE agreement, proceeds of$32.5 million from issuance of shares under SEPA agreement, and$8.4 million received from VDL Nedcar inFebruary 2022 for the purchase of the shares of Common Stock. Net cash used in financing activities was$1.4 million for the six months endedJune 30, 2021 , which was primarily due to proceeds of$6.9 million resulting from the exercise of public warrants, offset by the payment of the Company's PPP loan. Critical Accounting Estimates Our condensed consolidated financial statements (unaudited) have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. 31
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Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. There have been no material changes to our critical accounting estimates described in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . For a discussion of our critical accounting estimates, see the section titled "Critical Accounting Policies and Estimates" included in "Management's Discussion and Analysis of Financial Condition and Results of Operations', each included in our Annual Report on Form 10-K.
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