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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-15 · 422 added, 278 removed, 776 unchanged (47% of the section changed)

10 unchanged sentences

To the Board of Directors and Stockholders of Archer Aviation Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Archer Aviation Inc.

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for the Wisk Settlement and Valuation of the Second Tranche Warrant

As described in Notes 3 and 8 to the consolidated financial statements, on August 10, 2023, the Company, the Boeing Company (“Boeing”) and Wisk Aero LLC (“Wisk”) (a wholly-owned subsidiary of Boeing) entered into a series of agreements that provide for, among other things, certain investments by Boeing into the Company and an autonomous flight technology collaboration between Wisk and the Company, the issuance of certain warrants to Wisk and resolution of the federal and state court litigation between the parties (the “Technology and Dispute Resolution Agreements” or “Wisk Settlement”).

Under the Wisk Settlement, management agreed to issue Wisk a warrant to purchase up to 13,176,895 shares of the Company’s Common Stock with an exercise price of $0.01 per share (the “Wisk Warrant”).

The Wisk Warrant shall vest and be exercisable as follows:

(i) immediately as to 4,512,636 shares, underlying the Warrant (the “Initial Vested Share Tranche”) and (ii) for up to 8,664,259 shares (the “Second Tranche”) underlying the Wisk Warrant as determined six months from the effective date of the Warrant (the “Specified Date”).

The extent to which the Second Tranche vests is based on the value of the First Boeing Investment and the shares underlying the Initial Vested Share Tranche as of the Specified Date.

Management recorded the Initial Vested Share Tranche within equity at its fair value.

Management recorded the Second Tranche as liabilities at their fair value and adjusts the warrants to fair value at each reporting period.

Management utilizes a Monte Carlo simulation model for the accrued technology and dispute resolution agreements liability at each reporting period, with changes in fair value recognized in the consolidated statements of operations.

As of December 31, 2023, management recorded a $70.3 million non-cash charge in general and administrative expenses consisting of a $26.3 million non-cash charge associated with the Initial Vested Share Tranche and a $44.0 million non-cash charge for the unvested portion of the Wisk Warrant.

At December 31, 2023, the associated liability was $44.0 million.

The principal considerations for our determination that performing procedures relating to the accounting for the Wisk Settlement and valuation of the Second Tranche Warrant liability is a critical audit matter are (i) a high degree of auditor effort in performing procedures and evaluating audit evidence related to the accounting for the Wisk Settlement and valuation of the Second Tranche Warrant liability and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to significant unusual transactions, including controls over management’s accounting for the Wisk Settlement and valuation of the Second Tranche Warrant.

These procedures also included, among others, (i) reading the agreements related to the Wisk Settlement and evaluating the accounting implications of such agreements, (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate for the Second Tranche Warranty liability, (iii) comparing the independent estimate to management's estimate to evaluate the reasonableness of management's estimate of the Second Tranche Warrant liability, and (iv) testing the completeness and accuracy of underlying data used by management in the Monte Carlo simulation model.

Professionals with specialized skill and knowledge were also used to assist in evaluating the appropriateness of the Monte Carlo simulation model used by management to develop the fair value estimate of the Second Tranche Warrant liability.

/s/ PricewaterhouseCoopers LLP

Irvine, California

March 15, 2023

February 29, 2024

We have served as the Company’s auditor since 2020.

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Year Ended December 31,

2023 2022 2021

Operating expenses

5 unchanged sentences

Gain on forgiveness of PPP loan — — 0.9

Other income, net 27.8 10.6

Other (expense) income, net

( 26.9 ) 27.8 10.6

Interest income (expense), net 16.4 2.3 ( 1.0 )

Loss before income taxes ( 457.4 ) ( 317.3 ) ( 347.8 )

Income tax expense ( 0.5 ) — —

Net loss $ ( 457.9 ) $ ( 317.3 ) $ ( 347.8 )

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Year Ended December 31,

2023 2022 2021

Net loss $ ( 457.9 ) $ ( 317.3 ) $ ( 347.8 )

Other comprehensive loss:

Unrealized loss on available-for-sale securities, net of tax ( 0.8 ) —

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale securities, net of tax

0.8 ( 0.8 ) —

Comprehensive loss $ ( 457.1 ) $ ( 318.1 ) $ ( 347.8 )

12 unchanged sentences

Issuance of warrants and warrant expense — — — — 124.3 — — 124.3

Exercise of warrants 8,845,058 — — — 0.1 — — 0.1

Stock-based compensation — — — — 5.5 — — 5.5

Issuance of Class A common stock pursuant to the Business Combination Agreement 36,385,693 — — — 162.3 — — 162.3

PIPE financing 61,512,500 — — — 600.0 — — 600.0

Net loss — — — — — ( 347.8 ) — ( 347.8 )

Balance as of December 31, 2021 162,789,591 — 74,937,945 — 1,072.5 ( 373.6 ) — 698.9

Conversion of Class B common stock to Class A common stock 8,406,170 — ( 8,406,170 ) — — — — —

Issuance of restricted stock and restricted stock expense 5,269,553 — — — 71.3 — — 71.3

Exercise of stock options 1,435,424 — 2,208,728 — 0.4 — — 0.4

Issuance of warrants and warrant expense — — — — 14.1 — — 14.1

Cancellation of Class B common stock (Note 10) — — ( 5,002,306 ) — — — — —

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Balance as of December 31, 2022

Common Stock Additional

Comprehensive

Class A Class B

Shares Amount Shares Amount

Balance as of December 31, 2020 49,828,517 $ — 66,714,287 $ — $ 61.7 $ ( 25.8 ) $ — $ 35.9

177,900,738 — 63,738,197 — 1,185.0 ( 690.9 ) ( 0.8 ) 493.3

Conversion of Class B common stock to Class A common stock 26,449,869 — ( 26,449,869 ) — — — — —

Issuance of Class A common stock 1,985,559 — — — 11.6 — — 11.6

Issuance of restricted stock and restricted stock expense 7,405,542 — — — ( 6.6 ) — — ( 6.6 )

2 unchanged sentences

Exercise of warrants 2,942,778 — — — — — — —

Stock-based compensation — — — — 5.5 — — 5.5

Issuance of Class A common stock pursuant to the Business Combination Agreement 36,385,693 — — — 162.3 — — 162.3

Common Stock Additional

Comprehensive

Class A Class B

Shares Amount Shares Amount

Common stock withheld related to net share settlement of equity awards ( 1,378,367 ) — — — ( 3.5 ) — — ( 3.5 )

Common stock issued under employee stock purchase plan 1,228,632 — — — 2.9 — — 2.9

Common stock issued under stock purchase agreement 18,650,273 — — — 89.6 — — 89.6

Common stock issued under at-the-market offering 3,109,097 — — — 19.5 — — 19.5

PIPE financing 26,173,286 — — — 139.0 — — 139.0

Stock-based compensation — — — — 32.2 — — 32.2

Net loss — — — — — ( 457.9 ) — ( 457.9 )

Other comprehensive income — — — — — — 0.8 0.8

Balance as of December 31, 2023

265,617,341 $ — 38,165,615 $ — $ 1,515.9 $ ( 1,148.8 ) $ — $ 367.1

See accompanying notes to consolidated financial statements.

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Year Ended December 31,

2023 2022 2021

Cash flows from operating activities

5 unchanged sentences

Change in fair value of warrant liabilities and other warrant costs 32.9 ( 22.9 ) ( 10.4 )

Gain on issuance of common stock

Non-cash lease expense 3.8 4.6 1.7

1 unchanged sentence

Other warrant expense 2.1 10.8 117.3

Technology and dispute resolution agreements expense

Interest income on short-term investments — ( 0.5 ) —

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Purchase of property and equipment ( 44.3 ) ( 6.9 ) ( 3.5 )

Net cash used in investing activities ( 464.3 ) ( 3.5 )

Net cash provided by (used in) investing activities

420.7 ( 464.3 ) ( 3.5 )

Cash flows from financing activities

Proceeds from issuance of debt 7.5 — 20.0

Repayment of debt ( 10.0 ) —

Repayment of long-term debt

( 10.0 ) ( 10.0 ) —

Payment of debt issuance costs ( 0.3 ) — ( 0.2 )

Payments for taxes related to net share settlement of equity awards

Proceeds from PIPE financing 145.0 — 600.0

Payment of offering costs in connection with PIPE financing

Proceeds from shares issued under at-the-market offering

Payment of offering costs in connection with at-the-market offering

Recapitalization transaction — — 257.6

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Proceeds from exercise of stock warrants — — 0.1

Payment of debt issuance costs — ( 0.2 )

Net cash (used in) provided by financing activities ( 9.9 ) 822.2

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 674.6 ) 710.3

Proceeds from shares issued under employee stock purchase plan

Proceeds from issuance of common stock

Net cash provided by (used in) financing activities

250.1 ( 9.9 ) 822.2

Net increase (decrease) in cash, cash equivalents, and restricted cash

399.2 ( 674.6 ) 710.3

Cash, cash equivalents, and restricted cash, beginning of period 72.3 746.9 36.6

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Archer Aviation Inc.

(the “Company” “we,” “us” or “our”), a Delaware corporation, with its headquarters located in San Jose, California, is an aerospace company.

(the “Company”), a Delaware corporation, with its headquarters located in San Jose, California, is an aerospace company.

The Company is designing and developing electric vertical takeoff and landing (“eVTOL”) aircraft for use in urban air mobility (“UAM”) networks.

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The Company’s core focus is direct-to-consumer offerings (“Archer UAM”) with its secondary focus being business-to-business offerings (“Archer Direct”).

The Company plans to operate its own UAM ecosystem initially in select major U.S.

The Company plans to operate its own UAM ecosystem initially in select major cities.

The Company’s UAM ecosystem will operate using its eVTOL aircraft which is currently in development.

Archer Direct

The Company also plans to selectively sell a certain amount of its eVTOL aircraft to third parties.

The Company also plans to selectively sell a certain amount of its eVTOL aircraft along with ancillary products and services to third parties.

Business Combination

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Since the Company’s formation, the Company has devoted substantial effort and capital resources to the design and development of its planned eVTOL aircraft and UAM network.

Funding of these activities has primarily been through the net proceeds received from the issuance of related and third-party debt (Note 7), and the sale of preferred and common stock to related and third parties (Note 9).

Through December 31, 2022, the Company has incurred cumulative losses from operations and negative cash flows from operating activities and has an accumulated deficit of $ 690.9 million.

Funding of these activities has primarily been through the net proceeds received from the issuance of related and third-party debt (Note 7 - Notes Payable), and the sale of preferred and common stock to related and third parties (Note 9 - Preferred and Common Stock).

Through December 31, 2023, the Company has incurred cumulative losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $ 1,148.8 million.

Following the closing of the Business Combination on the Closing Date, the Company received net cash proceeds of $ 801.8 million.

As of December 31, 2022, the Company had cash and cash equivalents of $ 69.4 million and short-term investments in marketable securities of $ 461.8 million, which management believes will be sufficient to fund the Company’s current operating plan for at least the next 12 months from the date these consolidated financial statements were issued.

As of December 31, 2023, the Company had cash and cash equivalents of $ 464.6 million, which management believes will be sufficient to fund the Company’s current operating plan for at least the next 12 months from the date these consolidated financial statements were issued.

There can be no assurance that the Company will be successful in achieving its business plans, that the Company’s current capital will be sufficient to support its ongoing business plans, or that any additional financing will be available in a timely manner or on acceptable terms, if at all.

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Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances.

Given the global economic climate and unpredictable nature and unknown duration of the ongoing COVID-19 pandemic, estimates are subject to additional volatility.

Retroactive Application of Reverse Recapitalization

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Notes to Consolidated Financial Statements

Cash and Cash Equivalents

Cash, Cash Equivalents, and Restricted Cash

Cash consists of cash on deposit with financial institutions.

Cash equivalents consist of short-term, highly liquid financial instruments that are readily convertible to cash and have maturities of three months or less from the date of purchase.

Cash and cash equivalent balances were $ 69.4 million and $ 746.6 million as of December 31, 2022 and 2021, respectively, of which money market funds were $ 4.4 million and $ 0.3 million as of December 31, 2022 and 2021, respectively.

Restricted cash consists of cash held as security for the Company’s standby letters of credit to support three of the Company’s leased properties.

As of December 31, 2023 and 2022, the Company’s cash and cash equivalents included money market funds of $ 339.6 million and $ 6.1 million, respectively.

Restricted cash consists primarily of cash held as security for the Company’s standby letters of credit.

Refer to Note 8 - Commitments and Contingencies for further details.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets that sum to amounts reported on the consolidated statements of cash flows (in millions):

2022 December 31,

As of December 31,

Cash and cash equivalents $ 464.6 $ 69.4

2 unchanged sentences

Short-Term Investments

The Company has short-term investments in marketable securities with original maturities of less than one year, including U.S.

The Company had short-term investments in marketable securities with original maturities of less than one year, including U.S.

Treasury securities, corporate debt securities and commercial paper.

The Company classifies its marketable securities as available-for-sale at the time of purchase and reevaluates such classification at each balance sheet date.

These marketable securities are carried at fair value, and unrealized gains and losses are recorded in other comprehensive loss in the consolidated condensed statements of comprehensive loss, which is reflected as a component of stockholders’ equity.

These marketable securities are carried at fair value, and unrealized gains and losses are recorded in other comprehensive loss in the consolidated statements of comprehensive loss, which is reflected as a component of stockholders’ equity.

These marketable securities are assessed as to whether those with unrealized loss positions are other than temporarily impaired.

The Company considers impairments to be other than temporary if they are related to deterioration in credit risk or if it is likely the securities will be sold before the recovery of their cost basis.

Realized gains and losses from the sale of marketable securities and from declines in value deemed to be other than temporary are determined based on the specific identification method and recognized in other income, net in the consolidated condensed statements of operations.

If the impairment is deemed other than temporary, the security is written down to its fair value and a loss is recognized in other (expense) income, net.

Realized gains and losses from the sale of marketable securities and from declines in value deemed to be other than temporary are determined based on the specific identification method and recognized in other (expense) income, net in the consolidated statements of operations.

Fair Value Measurements

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Level 3 Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The carrying amounts of the Company’s cash, accounts payable, accrued compensation, and accrued liabilities approximate fair value due to the short-term nature of these instruments.

The carrying amounts of the Company’s cash, accounts payable, accrued compensation, and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

Archer Aviation Inc.

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Money market funds $ 339.6 $ — $ — $ 339.6

Short-Term Investments:

Treasury securities $ 316.6 $ — $ — $ 316.6

Corporate debt securities $ — $ 20.1 $ — $ 20.1

Commercial paper $ — $ 125.1 $ — $ 125.1

Warrant liability – public warrants

$ 25.4 $ — $ — $ 25.4

Warrant liability – private placement warrants

$ — $ — $ 14.5 $ 14.5

Accrued technology and dispute resolutions agreements liability

$ — $ — $ 44.0 $ 44.0

As of December 31, 2022

Description Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 6.1 $ — $ — $ 6.1

Short-term investments:

Treasury securities $ 316.6 $ — $ — $ 316.6

Corporate debt securities $ — $ 20.1 $ — $ 20.1

Commercial paper $ — $ 125.1 $ — $ 125.1

Warrant liability – public warrants

$ 4.5 $ — $ — $ 4.5

Warrant liability – private placement warrants

$ — $ — $ 2.5 $ 2.5

Cash Equivalents

2 unchanged sentences

Short-Term Investments

The Company’s short-term investments consist of high quality, investment grade marketable securities and are classified as available-for-sale.

The Company’s short-term investments consisted of high quality, investment grade marketable securities and were classified as available-for-sale.

The Company classifies its investments in U.S.

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The Company classifies its investments in corporate debt securities and commercial paper as Level 2, because they are valued using inputs other than quoted prices which are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.

The following tables present a summary of the Company’s cash equivalents and short-term investments as of December 31, 2023 and 2022 (in millions):

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The following table presents a summary of the Company’s cash equivalents and short-term investments as of December 31, 2022 (in millions) :

As of December 31, 2023

2 unchanged sentences

Money market funds $ 339.6 $ — $ — $ 339.6

Total $ 339.6 $ — $ — $ 339.6

As of December 31, 2022

Description Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Cash equivalents:

Money market funds $ 6.1 $ — $ — $ 6.1

Short-term investments:

4 unchanged sentences

The unrealized losses related to the Company’s short-term investments were primarily due to changes in interest rates and not due to increased credit risk or other valuation concerns.

T he Company had no other-than-temporary impairments for the year ended December 31, 2022 .

T he Company had no other-than-temporary impairments for the years ended December 31, 2023, 2022 and 2021 .

Public Warrants

The measurement of the public warrants as of December 31, 2023 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker “ACHR WS”.

The quoted price of the public warrants was $ 0.26 per warrant as of December 31, 2022.

The quoted price of the public warrants was $ 1.46 and $ 0.26 per warrant as of December 31, 2023 and 2022, respectively.

Private Placement Warrants

1 unchanged sentence

The estimated fair value of the private placement warrant liability is determined using Level 3 inputs.

Inherent in a binomial options pricing model and Monte Carlo simulation model are assumptions related to expected share-price volatility, expected life, risk-free interest rate, and dividend yield.

Inherent in a Monte Carlo simulation model are assumptions related to expected share-price volatility, expected life, risk-free interest rate, and dividend yield.

The key inputs into the Monte Carlo simulation model for the private placement warrants are as follows:

7 unchanged sentences

Risk-free rate 4.03 % 4.14 %

The following table presents the change in fair value of the Company’s Level 3 private placement warrants during the years ended December 31, 2022 and 2021:

Accrued Technology and Dispute Resolution Agreements Liability

Under the Technology and Dispute Resolution Agreements, the Company recognized an accrued technology and dispute resolution agreements liability related to the unvested warrants for the Second Tranche (capitalized terms defined below).

See Note 8 - Commitments and Contingencies for further details.

The Company utilizes a Monte Carlo simulation model for the accrued technology and dispute resolution agreements liability at each reporting period, with changes in fair value recognized in the consolidated statements of operations.

The estimated fair value of the accrued technology and dispute resolution agreements

Archer Aviation Inc.

Notes to Consolidated Financial Statements

liability is determined using Level 3 inputs.

Inherent in a Monte Carlo simulation model are assumptions related to expected share-price volatility, expected life, risk-free interest rate, and dividend yield.

The key inputs into the Monte Carlo simulation model for the accrued technology and dispute resolution agreements liability are as follows:

Input December 31,

Stock price $ 6.14

Strike price $ 0.01

Dividend yield 0.00 %

Term (in years) 0.11

Volatility 60.00 %

Risk-free rate 5.40 %

The following table presents the change in fair value of the Company’s Level 3 private placement warrants and accrued technology and dispute resolution agreements liability during the years ended December 31, 2023 and 2022 (in millions):

Balance as of December 31, 2021 $ 10.1

Addition of private placement warrants 13.0

Change in fair value ( 7.6 )

Balance as of December 31, 2022 2.5

accrued technology and dispute resolution agreements liability

Change in fair value 8.0

Balance as of December 31, 2023 (1)

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The Company recognized a gain in connection with changes in the fair value of warrant liabilities of $ 23.3 million and $ 10.4 million within other income, net in the consolidated statements of operations during the years ended December 31, 2022 and 2021, respectively.

Refer to Note 13 for additional information about the public and private placement warrants.

(1) As of December 31, 2023, $ 14.5 million and $ 44.0 million were recorded within warrant liabilities and accrued expenses and other current liabilities, respectively, in the consolidated balance sheets.

In connection with changes in the fair value of the Company’s public and private placement warrants, the Company recognized a loss of $ 32.9 million during the year ended December 31, 2023 and a gain of $ 23.3 million and $ 10.4 million during the years ended December 31, 2022 and 2021, respectively, within other (expense) income, net in the consolidated statements of operations.

Refer to Note 12 - Liability Classified Warrants for additional information about the public and private placement warrants.

In connection with the change in fair value of the accrued technology and dispute resolution agreements liability, the Company recognized a gain of $ 4.0 million within general and administrative expenses in the consolidated statements of operations during the year ended December 31, 2023.

Refer to Note 8 - Commitments and Contingencies for additional information about the accrued technology and dispute resolution agreements liability.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Certain financial instruments, including debt, are not measured at fair value on a recurring basis in the balance sheets.

Certain financial instruments, including debt, are not measured at fair value on a recurring basis in the consolidated balance sheets.

The fair value of debt as of December 31, 2023 approximates its carrying value (Level 2).

Refer to Note 7 for additional information.

Refer to Note 7 - Notes Payable for additional information.

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

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Amortization of domain names is provided over a 15 -year estimated useful life on a straight-line basis or based on the pattern in which economic benefits are consumed, if reliably determinable.

The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company has analyzed a variety of factors in light of the known impact to date of the ongoing COVID-19 pandemic on the Company’s business to determine if any circumstance could trigger an impairment loss, and, at this time and based on the information presently known, does not believe that it is more likely than not that an impairment loss has been incurred.

As of December 31, 2022 and 2021, the net carrying amounts for domain names were $ 0.4 million and $ 0.5 million recorded in the Company’s consolidated balance sheets, respectively.

The Company reviews

Archer Aviation Inc.

Notes to Consolidated Financial Statements

intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company has analyzed a variety of factors to determine if any circumstance could trigger an impairment loss, and, at this time and based on the information presently known, no event has occurred and indicated that it is more likely than not that an impairment loss has been incurred.

Therefore, the Company did no t record any impairment charges for its intangible assets for the years ended December 31, 2023, 2022 and 2021.

As of December 31, 2023 and 2022, the net carrying amounts for domain names were $ 0.4 million and $ 0.4 million, respectively, and were recorded in the Company’s consolidated balance sheets.

Property and Equipment, Net

Property and equipment are stated at historical cost less accumulated depreciation.

Expenditures for major renewals and betterments are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred.

Expenditures for major renewals and betterment are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred.

Upon sale or disposition, the cost and related accumulated depreciation is removed from the accounts, and any difference between the selling price and net carrying amount is recorded as a gain or loss in the consolidated statements of operations.

8 unchanged sentences

Such triggering events or changes in circumstances may include:

Archer Aviation Inc.

Notes to Consolidated Financial Statements

in legal factors or in the business climate, the impact of competition or other factors that could affect the value of a long-lived asset, a significant adverse deterioration in the amount of revenue or cash flows expected to be generated from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

a significant decrease in the market price of a long-lived asset, a significant adverse change in the extent or manner in which a long-lived asset is being or intended to be used, a significant adverse change in legal factors or in the business climate, the impact of competition or other factors that could affect the value of a long-lived asset, a significant adverse deterioration in the amount of revenue or cash flows expected to be generated from an asset group, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development of a long-lived asset, current or future operating or cash flow losses that demonstrate continuing losses associated with the use of a long-lived asset, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

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The Company capitalizes certain implementation costs incurred in the application development stage of projects related to its cloud computing arrangements that are service contracts.

Capitalized implementation costs are recognized in other long-term assets in the consolidated balance sheets and amortized on a straight-line basis over the fixed, noncancellable term of the associated hosting arrangement plus any reasonably certain renewal periods.

Capitalized implementation costs are recognized in other long-term assets in the consolidated balance sheets and amortized on a straight-line basis over the fixed, noncancellable term of the

Archer Aviation Inc.

Notes to Consolidated Financial Statements

associated hosting arrangement plus any reasonably certain renewal periods.

Costs related to preliminary project activities and post-implementation activities are expensed as incurred.

As of December 31, 2022, the Company recognized $ 3.7 million of capitalized cloud computing implementation costs.

As of December 31, 2023 and 2022, the net carrying amounts of the Company’s capitalized cloud computing implementation costs were $ 6.4 million and $ 3.7 million, respectively.

Contract Liabilities

The Company records contract liabilities related to differences between the timing of cash receipts from the customer and the recognition of revenue.

As of December 31, 2023 and 2022, the Company’s contract liability balances were $ 10.8 million and $ 10.0 million, respectively, and recorded in other long-term liabilities in the Company’s consolidated balance sheets.

As of December 31, 2023, the Company’s contract liabilities consisted of a $ 10.0 million pre-delivery payment received from United Airlines, Inc.

(“United”) under the terms of the Amended United Purchase Agreement (defined below) (see Note 10 - Stock-Based Compensation), and a $ 0.8 million installment payment received under a contract order with the United States Air Force for the design, development, and ground test of the Company’s production aircraft, Midnight.

As of December 31, 2022, the Company’s contract liabilities consisted of the $ 10.0 million pre-delivery payment received from United, as discussed above.

No revenues were recognized during the years ended December 31, 2023, 2022 and 2021.

Operating Expenses

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General and administrative expenses are primarily comprised of personnel-related costs including salaries, bonuses, benefits, and stock-based compensation for employees associated with the Company’s administrative services such as finance, legal, human resources, and information technology, other related costs, depreciation, and an allocation of general overhead.

General and administrative expenses include $ 64.9 million and $ 118.1 million of expense related to the restricted stock units granted to the Company’s founders pursuant to the terms and conditions of the Business Combination Agreement immediately prior to closing (the “Founder Grants”), for the years ended December 31, 2022 and 2021.

Refer to Note 10 - Stock-Based Compensation for additional information.

General and administrative expenses include non-cash charges relating to the Technology and Dispute Resolution Agreements (defined below) for the year ended December 31, 2023 and stock-based compensation expense related to restricted stock units (“RSUs”) granted to the Company’s founders pursuant to the terms and conditions of the Business Combination Agreement immediately prior to closing (the “Founder Grants”) for the years ended December 31, 2023, 2022 and 2021.

Refer to Note 8 - Commitments and Contingencies and Note 10 - Stock-Based Compensation for additional information.

Other Warrant Expense

Other warrant expense consists entirely of non-cash expense related to the warrants issued in conjunction with the execution of the purchase agreement (“United Purchase Agreement”), collaboration agreement (“United Collaboration Agreement”), and warrant agreement (“United Warrant Agreement”) with United Airlines Inc.

Refer to Note 10 - Stock-Based Compensation for additional information.

Stock-Based Compensation

The Company’s stock-based compensation awards consist of options granted to employees and non-employees and restricted stock units granted to employees, directors, and non-employees that convert into shares of the Company’s Class A common stock upon vesting.

The Company’s stock-based compensation awards consist of options granted to employees and non-employees and RSUs granted to employees, directors, and non-employees that convert into shares of the Company’s Class A common stock upon vesting.

The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718, Compensation - Stock Compensation .

ASC 718 requires the measurement and recognition of compensation expense for all stock-based compensation awards made to employees, directors, and non-employees to be based on the grant date fair values of the awards.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The Company estimates the fair value of stock options using the Black-Scholes option-pricing model.

The value of the award is recognized as expense over the requisite service period on a straight-line basis.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Determining the grant date fair value of the awards using the Black-Scholes option-pricing model requires management to make assumptions and judgments, including but not limited to the following:

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Since there was no active market for the Company’s common stock, the Company also applied a discount for lack of marketability for both OPM and PWERM scenarios.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

In conducting the valuations, the Company considered all objective and subjective factors that the Company believed to be relevant in the valuation conducted, including management’s best estimate of the Company’s business condition, and prospects and operating performance at the valuation dates.

There are significant judgments and estimates inherent in these valuations.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Since the closing of the Business Combination, the fair value of the Company’s common stock is based on the closing price of the Company’s Class A common stock, as quoted on the NYSE, on the date of grant.

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For all periods presented, the calculation of basic net loss per share excludes shares issued upon the early exercise of stock options where the vesting conditions have not been satisfied.

Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest.

The Company also excludes unvested shares subject to repurchase in the number of shares outstanding in the consolidated balance sheets and statements of stockholders’ equity.

Because the Company reported net losses for all periods presented, diluted loss per share is the same as basic loss per share.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Because the Company reported net losses for all periods presented, diluted loss per share is the same as basic loss per share.

Contingently issuable shares, including equity awards with performance conditions, are considered outstanding common shares and included in basic net loss per share as of the date that all necessary conditions to earn the awards have been satisfied.

Contingently issuable shares, including equity awards with performance conditions, are considered outstanding common shares and included in the computation of basic net loss per share as of the date that all necessary conditions to earn the awards have been satisfied.

Prior to the end of the contingency period, the number of contingently issuable shares included in diluted net loss per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period.

Because the Company reported net losses for all periods presented, all potentially dilutive common stock equivalents are antidilutive and have been excluded from the calculation of net loss per share.

The diluted net loss per common share were the same for Class A and Class B common shares because they are entitled to the same liquidation and dividend rights.

The diluted net loss per common share was the same for Class A and Class B common shares because they are entitled to the same liquidation and dividend rights.

The following table presents the number of antidilutive shares excluded from the calculation of diluted net loss per share:

Year Ended December 31,

2023 2022 2021

Options to purchase common stock 3,174,114 5,335,974 9,444,221

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Shares issuable under the employee stock purchase plan (Note 10)

931,412 712,838 —

Total 89,514,569 81,629,009 80,087,974

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The Company’s CODM is its Chief Executive Officer.

The Company has determined that it operates as a single operating segment and one reportable segment, as the CODM reviews financial information presented on a combined basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

The Company has determined that it operates as a single operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

Given the Company’s pre-revenue operating stage, it currently has no concentration exposure to products, services, or customers.

Comprehensive Loss

Comprehensive loss includes all changes in equity during a period from nonowner sources.

Comprehensive loss includes all changes in equity during the period from non-owner sources.

The Company’s comprehensive loss consists of its net loss and its unrealized gains or losses on available-for-sale securities.

Recently issued accounting pronouncements not yet adopted

In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options , for convertible instruments.

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The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities.

The ASU is effective for public business entities, excluding smaller reporting companies, for interim and annual periods beginning after December 15, 2021, with early adoption permitted.

For all other entities, the amendments are effective for interim and annual periods beginning after December 15, 2023.

Adoption of the ASU can either be on a modified retrospective or full retrospective basis.

The Company is currently evaluating the impact the adoption of this

The Company adopted ASU 2020-06 effective January 1, 2023.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

standard will have on its financial statements and related disclosures.

No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which expands reportable segment disclosure requirements through enhanced disclosures about significant segment expenses, interim segment profit or loss and assets, and how the CODM uses reported segment profit or loss information in assessing segment performance and allocating resources.

The update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of ASU 2023-07 on its disclosures within its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires disclosure of incremental income tax information related to the income tax rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis, and retrospective application is permitted.

The Company is currently evaluating the impact of ASU 2023-09 on its disclosures within its consolidated financial statements.

Note 4 - Reverse Recapitalization and Related Transactions

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The vesting condition states that these earn-out shares of New Archer Class A common stock will vest if the New Archer’s Class A common stock volume weighted-average price, as defined in the Amended and Restated Sponsor Letter Agreement, by and among Atlas Sponsor, Atlas, Legacy Archer, and the individuals named therein, is greater than or equal to $ 12.00 per share for any period of ten ( 10 ) trading days out of twenty ( 20 ) consecutive trading days.

The earn-out shares were recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity (with no net impact to APIC) since the earn-out shares were determined to be indexed to the Company’s own equity and meet the requirements for equity classification.

Pursuant to the terms of the Business Combination Agreement, all of the issued and outstanding series seed redeemable convertible preferred stock and series A redeemable convertible preferred stock converted into 64,884,120 shares of Legacy Archer common stock immediately prior to the Business Combination.

Then, as of the closing of the Business Combination, all outstanding shares of Legacy Archer common stock converted into 124,735,762 shares of New Archer Class A and B common stock.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio, with the aggregate number of shares of New Archer Class A and B common stock issuable upon exercise of such options, RSUs, and warrants to be 60,260,483 .

The earn-out shares were recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity (with no net impact to additional paid-in-capital) since the earn-out shares were determined to be indexed to the Company’s own equity and meet the requirements for equity classification.

Then, as of the closing of the Business Combination, all outstanding shares of Legacy Archer common stock converted into 124,735,762 shares of New Archer Class A and B common stock.

Additionally, each of Legacy Archer options, RSUs, and warrants that were outstanding immediately prior to the closing of the Business Combination remained outstanding and converted into options, RSUs, and warrants for New Archer Class A and Class B common stock equal to the number of the Company’s common stock, subject to such options, RSUs, or warrants, multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio, with the aggregate number of shares of New Archer Class A and B common stock issuable upon exercise of such options, RSUs, and warrants to be 60,260,483 .

Additionally, 10,004,612 of outstanding RSUs vested at the closing of the Business Combination into New Archer Class B common stock.

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Total shares of common stock as of closing of the Business Combination and related transactions as of September 16, 2021 232,638,568

* The corresponding adjustment to APIC related to the reverse recapitalization was comprised of (i) $ 162.3 million which represents the fair value of the consideration transferred in the Business Combination, less the excess of the fair value of the shares issued over the value of the net monetary assets of Atlas, net of transaction costs and (ii) $ 61.5 million which represents the conversion of the convertible preferred stock into New Archer Class A and Class B common stock.

* The corresponding adjustment to additional paid-in-capital related to the reverse recapitalization was comprised of (i) $ 162.3 million which represents the fair value of the consideration transferred in the Business Combination, less the excess of the fair value of the shares issued over the value of the net monetary assets of Atlas, net of transaction costs and (ii) $ 61.5 million which represents the conversion of the convertible preferred stock into New Archer Class A and Class B common stock.

At the Closing Date, Legacy Archer had 56,390,023 outstanding options and RSUs under the 2019 Plan (as defined below) in addition to 13,112,602 outstanding warrants, which remained outstanding and converted into 70,265,095 options, RSUs, and warrants in New Archer Class A or B common stock, as derived by multiplying the number of Legacy Archer common stock subject to such option or warrant by the Exchange Ratio.

In addition, of the RSUs outstanding immediately prior to the closing of the Business Combination, 10,004,612 vested at closing into New Archer Class B common stock.

The options and warrants shall be exercised at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio.

Following the Business Combination, Atlas’ warrants to purchase 24,666,667 shares of New Archer Class A common stock, consisting of (i) 16,666,667 public warrants listed on the NYSE and (ii) 8,000,000 private warrants, each with an exercise price of $ 11.50 per share, remained outstanding.

As part of the closing, total direct and incremental transaction costs aggregated $ 81.8 million, of which $ 10.9 million was expensed as part of the Business Combination, $ 55.8 million was recorded to APIC as equity issuance costs, and the remaining $ 15.1 million was settled through the issuance of shares of New Archer Class A common stock.

The options and warrants

Archer Aviation Inc.

Notes to Consolidated Financial Statements

shall be exercised at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio.

As part of the closing, total direct and incremental transaction costs aggregated $ 81.8 million, of which $ 10.9 million was expensed as part of the Business Combination, $ 55.8 million was recorded to additional paid-in-capital as equity issuance costs, and the remaining $ 15.1 million was settled through the issuance of shares of New Archer Class A common stock.

Note 5 - Property and Equipment, Net

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Total property and equipment, net $ 57.6 $ 11.5

Construction in progress includes costs incurred for leasehold improvements and other assets that have not yet been placed in service.

Construction in progress includes costs incurred for the Company’s manufacturing facilities to be constructed in Covington, Georgia and other assets that have not yet been placed in service.

The following table presents depreciation expense included in each respective expense category in the consolidated statements of operations (in millions):

Year Ended December 31,

2023 2022 2021

Research and development $ 5.3 $ 2.3 $ 0.9

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Total depreciation expense $ 5.8 $ 3.1 $ 1.3

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Note 6 - Accrued Expenses and Other Current Liabilities

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Accrued marketing fees — 0.2

Accrued technology and dispute resolution agreements liability (Note 8 )

Other current liabilities 3.7 1.1

Total $ 96.9 $ 36.7

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Note 7 - Notes Payable

Long-term notes payable consisted of the following (in millions):

The Company’s notes payable consisted of the following (in millions):

As of December 31,

Synovus Bank Loan

Loan unamortized discount and loan issuance costs

Silicon Valley Bank (“SVB”) Term Loans — 10.0

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Total long-term notes payable, net of discount and loan issuance costs $ 7.2 $ —

On July 9, 2021, the Company, as the borrower, entered into a Loan and Security Agreement with SVB and SVB Innovation Credit Fund VIII, L.P.

Synovus Bank Loan

On October 5, 2023, the Company entered into a credit agreement (the “Credit Agreement”) with Synovus Bank, as administrative agent and lender, and the additional lenders (the “Lenders”) from time to time.

The Company may request the Lenders to provide multiple term loan advances (together, the “Loan”) in an aggregate principal amount of up to $ 65.0 million for the construction and development of the Company’s manufacturing facility in Covington, Georgia.

The Company is required to make 120 monthly interest payments from November 14, 2023 until maturity, and 84 equal monthly principal installments from November 14, 2026 until maturity.

The Credit Agreement matures on the earlier of October 5, 2033 or the date on which the outstanding Loan has been declared or automatically becomes due and payable pursuant to the terms of the Credit Agreement.

The interest rate on the Loan is a floating rate per annum equal to secured overnight financing rate (“SOFR”) Rate (as defined in the Credit Agreement) plus the applicable margin of 2.00 %, which increases by 5 % per annum upon the occurrence of an event of default.

The Company’s obligations under the Credit Agreement are secured by funds in a collateral account.

Two of its direct subsidiaries are required to guarantee the Credit Agreement.

The Company may prepay with certain premium that links to the passage of time, and in certain circumstances would be required to prepay the Loan under the Credit Agreement without payment of a premium.

The Credit Agreement contains customary representations and warranties, customary affirmative and

Archer Aviation Inc.

Notes to Consolidated Financial Statements

negative covenants, and customary events of default.

As of December 31, 2023, the Company was in compliance with all the covenants of the Credit Agreement.

The Company has drawn down $ 7.5 million of the Loan as of December 31, 2023.

The effective interest rate for the draw downs ranged from 7.66 % to 8.17 % as of December 31, 2023.

The Company incurred issuance costs of $ 0.3 million related to the loan outstanding as of December 31, 2023.

The loan issuance costs will be amortized to interest expense over the contractual term of the Loan.

During the year ended December 31, 2023, the Company recognized interest expense of $ 0.1 million, including an immaterial amount related to the amortization of issuance costs within interest income (expense), net in the consolidated statements of operations.

The carrying value of the Loan, net of unamortized issuance costs of $ 0.3 million was $ 7.2 million as of December 31, 2023.

The future scheduled principal maturities of the Loan as of December 31, 2023 are as follows (in millions):

2029 and thereafter

On July 9, 2021, the Company, as the borrower, entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with SVB and SVB Innovation Credit Fund VIII, L.P.

(“SVB Innovation”) as the lenders, and SVB as the collateral agent.

1 unchanged sentence

The Term Loans include events of default and covenant provisions, whereby accelerated repayment may result if the Company were to default.

The Term Loans are subject to a final payment fee which was determined to be zero as a result of the completion of the Business Combination prior to October 10, 2021 (the “Outside Date”).

On January 1, 2022, the Company began repaying the Term Loans, which are payable in 24 equal monthly installments, including principal and interest.

The interest rate on the loans is a floating rate per annum equal to the greater of (1) 8.5 % and (2) the Prime Rate plus the Prime Rate Margin (each as defined in the Loan and Security Agreement), which increases by 2 % per annum upon the occurrence of an event of default.

For the years ended December 31, 2022 and 2021, the Company recognized interest expense of $ 1.5 million and $ 0.9 million, respectively.

The interest rate on the loans is a floating rate per annum equal to the greater of (i) 8.5 % and (ii) the Prime Rate plus the Prime Rate Margin (each as defined in the Loan and Security Agreement), which increases by 2 % per annum upon the occurrence of an event of default.

The effective interest rate as of December 31, 2023, 2022 and 2021 were 10.20 %, 9.40 % and 9.02 %, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized interest expense of $ 0.6 million, $ 1.5 million and $ 0.9 million, respectively.

Additionally, in conjunction with the issuance of the Term Loans, the Company issued 366,140 warrants to SVB and 366,140 warrants to SVB Innovation, totaling 732,280 warrants.

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Each warrant provides SVB and SVB Innovation with the right to purchase one share of the Company’s Class A common stock.

The Company recorded the warrants as a liability at their fair value, which is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized as a gain or loss in the Company’s consolidated statements of operations.

See Note 13 - Liability Classified Warrants for further details.

The Company recorded the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period.

This liability is subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized as a gain or loss in the Company’s consolidated statements of operations.

The initial offsetting entry to the warrant liability was a debt discount recorded to reflect the loan issuance fee.

The Company estimated the fair value of the warrants at the issuance date to be $ 1.2 million using the probability-weighted fair value of the warrants under two scenarios, the Business Combination occurring prior to, or after, the Outside Date, with the first scenario of the Business Combination occurring prior to the Outside Date weighted at 95 % and the second scenario of the Business Combination occurring after the Outside Date weighted at 5 %.

For the second scenario, the Company determined the fair value of the warrants using a Monte Carlo simulation approach.

Determining the fair value of these warrants under this model requires subjective assumptions.

See Note 12 - Liability Classified Warrants for further details.

Effective March 27, 2023, the Term Loans and warrants were assigned to and assumed by First-Citizens Bank & Trust Company on the original terms and conditions of the financial instruments.

Upon the closing of the Business Combination, the SVB warrants became public warrants.

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The quoted price of the public warrants was $ 1.46 as of December 31, 2023.

The Company also incurred issuance costs of $ 0.2 million.

The discount and loan issuance costs will be amortized to interest expense over the commitment period of 30 months.

During the years ended December 31, 2022 and 2021, the Company recognized interest expense of $ 0.5 million and $ 0.2 million related to the amortization of the discount and loan issuance costs, respectively.

The unamortized balance of the discount and loan issuance costs was $ 0.7 million as of December 31, 2022.

The future scheduled principal maturities of notes payable as of December 31, 2022 are as follows (in millions):

During the years ended December 31, 2023, 2022 and 2021, the Company recognized interest expense of $ 0.7 million, $ 0.5 million and $ 0.2 million related to the amortization of the discount and loan issuance costs, respectively.

As of December 31, 2023, the Term Loans were fully repaid and the discount and loan issuance costs were fully amortized.

Archer Aviation Inc.

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The Company leases office, lab, hangar, and storage facilities under various operating lease agreements with lease periods expiring between 2024 and 2030 and generally containing periodic rent increases and various renewal and termination options.

On January 14, 2022, the Company entered into a sublease agreement with Forescout Technologies, Inc.

The sublease is for approximately 96,000 rentable square feet of building space in the building located at 190 West Tasman Drive, San Jose, California, which serves as the Company’s corporate headquarters.

The term of the sublease commenced on February 26, 2022 and will expire on October 31, 2026, with no right to extend.

The Company is also responsible for certain other costs under the sublease, such as certain build-out expenses, operating expenses, taxes, assessments, insurance, and utilities.

On March 9, 2022, the Company entered into a lease agreement with SIR Properties Trust.

The lease is for approximately 68,000 rentable square feet of building space in the building located at 77 Rio Robles, San Jose, California.

The Company intends that the premises will be used for lab space and a low rate initial production facility.

The term of the lease commences 210 days after the landlord delivers possession of the premises to the Company, subject to certain demolition work being completed, and will expire 90 months thereafter, with an option for the Company to extend the term for one additional five-year period.

The Company is also responsible for certain other costs under the lease, such as certain build-out expenses, operating expenses, taxes, assessments, insurance, and utilities.

However, the Company is expected to receive a $ 6.0 million leasehold improvement allowance from the landlord that will be applied against certain of the Company’s build-out expenses.

The Company took possession of the premises on October 8, 2022, and therefore the lease commenced in accordance with ASC 842.

The Company’s lease costs were as follows (in millions):

Year Ended December 31,

2023 2022 2021

Operating lease cost $ 5.7 $ 5.8 $ 2.1

4 unchanged sentences

Weighted-average discount rate 14.74 % 13.78 %

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The minimum aggregate future obligations under the Company’s non-cancelable operating leases as of December 31, 2023 were as follows (in millions):

5 unchanged sentences

Present value of future lease payments $ 16.0

Supplemental cash information and non-cash activities related to right-of-use assets and lease liabilities were as follows (in millions):

Supplemental cash flow information and non-cash activities related to right-of-use assets and lease liabilities were as follows (in millions):

Year Ended December 31,

2023 2022 2021

Operating cash outflows from operating leases $ 5.0 $ 4.3 $ 1.9

Operating lease liabilities from obtaining right-of-use assets 0.6 11.7 3.6

Letter of Credit

On September 15, 2020, in conjunction with the operating lease for the Company’s old headquarters, the Company entered into a standby letter of credit in the amount of $ 0.3 million in favor of the Company’s lessor, in lieu of paying cash to the lessor to satisfy the security deposit requirements of the leased property.

The standby letter of credit expired on September 30, 2021.

On June 24, 2021, the Company entered into a standby letter of credit for the same amount, which automatically renews annually through September 1, 2023.

On February 23, 2022, in conjunction with the sublease the Company entered into for its new corporate headquarters, the Company entered into a standby letter of credit in the amount of $ 1.5 million in favor of the lessor, to satisfy the security deposit or other obligations of the leased property.

The standby letter of credit will be automatically reduced and renewed annually through February 1, 2026.

On March 31, 2022, in conjunction with the lease the Company entered into for its new lab space and low rate initial production facility, the Company entered into a standby letter of credit in the amount of $ 1.2 million in favor of the lessor, to satisfy the security deposit of the leased property.

The standby letter of credit automatically renews annually through September 28, 2030.

Finance Lease

In February 2023, the Company entered into a lease arrangement with the Newton County Industrial Development Authority (the “Authority”) for the Company’s manufacturing facilities to be constructed in Covington, Georgia.

In connection with the lease arrangement, the Authority issued a taxable revenue bond (the “Bond”), which was acquired by the Company.

The arrangement is structured so that the Company’s lease payments to the Authority equal and offset the Authority’s bond

Archer Aviation Inc.

Notes to Consolidated Financial Statements

payments to the Company.

Accordingly, the Company offsets the finance lease obligation and the Bond on its consolidated balance sheets.

Letters of Credit

On February 28, 2023, in conjunction with a project agreement that the Company entered into with the City of Covington and the Authority for the Company’s manufacturing facilities to be constructed in Covington, Georgia, the Company entered into a standby letter of credit in the amount of $ 3.5 million in favor of the City of Covington, to guarantee certain performance obligations.

The standby letter of credit expires on March 31, 2035.

As of December 31, 2023, the Company had standby letters of credit in the aggregate outstanding amount of $ 5.9 million, secured with restricted cash.

During the ordinary course of the business, the Company may be subject to legal proceedings, various claims, and litigation.

Such proceedings can be costly, time consuming, and unpredictable, and therefore, no assurance can be given that the final outcome of such proceedings will not materially impact our financial condition or results of operations.

Wisk Litigation

Wisk Litigation and Settlement

On April 6, 2021, Wisk Aero LLC (“Wisk”) brought a lawsuit against the Company in the United States District Court for the Northern District of California (the “District Court”) alleging misappropriation of trade secrets and patent infringement.

The Company has filed certain counterclaims for defamation, tortious interference and unfair competition.

On August 10, 2023, the Company, the Boeing Company (“Boeing”) and Wisk entered into the Technology and Dispute Resolution Agreements (as defined below), which provided for, among other things, the resolution of the federal and state court litigation between the parties.

On August 10, 2023, the Company, Boeing and Wisk entered into a series of agreements that provide for, among other things, for certain investments by Boeing into the Company and an autonomous flight technology collaboration between Wisk and the Company, the issuance of certain warrants to Wisk and resolution of the federal and state court litigation between the parties (the “Technology and Dispute Resolution Agreements”).

Pursuant to a private placement transaction entered into by the Company on August 10, 2023, Boeing subscribed to purchase shares of the Company’s Class A common stock, par value $ 0.0001 per share (the “Common Stock”) (the “First Boeing Investment”), and received registration rights with respect to such shares of Common Stock and the shares of Common Stock underlying the Warrant (as defined below) pursuant to a registration rights agreement.

Pursuant to the Technology and Dispute Resolution Agreements, the Company issued Wisk a warrant to purchase up to 13,176,895 shares of Common Stock with an exercise price of $ 0.01 per share (the “Wisk Warrant”).

The Wisk Warrant shall vest and be exercisable as follows:

(i) immediately as to 4,512,636 shares, underlying the Wisk Warrant (the “Initial Vested Share Tranche”) and (ii) for up to 8,664,259 shares (the “Second Tranche”) underlying the Wisk Warrant as determined six months from the effective date of the Warrant (the “Specified Date”).

The extent to which the Second Tranche vests is based on the value of the First Boeing Investment and the shares underlying the Initial Vested Share Tranche as of the Specified Date.

The companies are in discussions regarding certain terms under the Technology and Dispute Resolution Agreements, including any vesting under the Second Tranche and what, if any, additional value may be provided to Wisk.

The Company recorded the Initial Vested Share Tranche within equity at its fair value.

The Company recognized technology and dispute resolution agreements expense for the Initial Vested Share Tranche upon issuance.

The Company recorded the Second Tranche as liabilities at their fair value and adjusts the warrants to fair value at each reporting period.

The initial offsetting entry to the warrant liability was technology and dispute resolution agreements expense.

During the year ended December 31, 2023, the Company recorded a $ 70.3 million non-cash charge in general and administrative expenses consisting of a $ 26.3 million non-cash charge associated

Archer Aviation Inc.

Notes to Consolidated Financial Statements

On May 19, 2021, Wisk filed a motion for preliminary injunction and expedited discovery.

On June 23, 2021, the Company filed an opposition to the motion for preliminary injunction.

On July 22, 2021, the District Court denied Wisk’s motion for preliminary injunction.

On August 20, 2021, Wisk filed a notice of appeal of the District Court’s denial of the motion for preliminary injunction.

On September 30, 2021, Wisk withdrew its notice of appeal of the District Court’s denial of the motion for preliminary injunction.

On January 19, 2022, the Company filed a motion for judgment on the pleadings to dismiss two of Wisk’s asserted patents as invalid, which the District Court granted on April 19, 2022.

The District Court separately ordered Wisk to narrow its trade secret case to 10 of the 52 alleged trade secrets and its patent case to eight claims across all patents that remain in the case.

Wisk has now narrowed its claims as ordered.

The deadline for filing motions for summary judgment and motions to exclude expert evidence is March 19, 2023.

The District Court is scheduled to hear oral argument on those motions on May 12, 2023.

A trial on Wisk’s claims and the Company’s counterclaims is currently scheduled to begin on August 14, 2023.

On April 6, 2022, the Company brought a lawsuit against The Boeing Company (“Boeing”) in the Superior Court of California, County of Santa Clara (the “Superior Court”), asserting substantially the same claims set forth in the Company’s counterclaims against Wisk.

On April 11, 2022, the Superior Court issued an order staying discovery and the responsive pleading deadline until after the case management conference set for August 2022.

On September 6, 2022, the Superior Court entered an order approving the parties’ joint stipulation to stay the Company’s lawsuit against Boeing pending the resolution of the lawsuit between Wisk and the Company in the District Court.

The Company continues to strongly believe Wisk’s lawsuit is without merit.

The Company will continue to vigorously defend itself against Wisk’s claims and pursue the Company’s counterclaims against Wisk and its claims against Boeing.

Because the Company cannot yet predict the outcome of these proceedings or their potential impact on the Company and its business, the Company has concluded that a potential loss amount or a potential range of loss is not probable or reasonably estimable under ASC 450, Contingencies, and therefore has not accrued any amounts related to the award of damages or settlement of this matter with Wisk.

Therefore, a negative result in these proceedings could have a material adverse effect on the Company’s financial position, liquidity, operations, and cash flows.

with the Initial Vested Share Tranche and a $ 44.0 million non-cash charge for the unvested portion of the Wisk Warrant that is subject to the vesting criteria described above and may never be realized.

Note 9 - Preferred and Common Stock

Amended and Restated Certificate of Incorporation

Upon the effectiveness of the Company’s amended and restated certificate of incorporatio n on September 16, 2021, the Company is authorized to issue up to 700,000,000 shares of Class A common stock, par value $ 0.0001 per share, 300,000,000 shares of Class B common stock, par value $ 0.0001 per share, and 10,000,000 shares of preferred stock, par value $ 0.0001 per share.

There were 177,900,738 and 162,789,591 shares of Class A common stock issued and outstanding as of December 31, 2022 and 2021, respectively.

There were 63,738,197 and 74,937,945 shares of Class B common stock issued and outstanding as of December 31, 2022 and 2021, respectively.

Preferred Stock

As of December 31, 2023, no shares of preferred stock were outstanding, and the Company has no present plans to issue any shares of preferred stock.

Pursuant to the terms of the Company’s amended and restated certificate of incorporation, shares of preferred stock may be issued from time to time in one or more series.

The board of directors is authorized to fix the voting rights, if any, designations, powers and preferences, the relative, participating, optional or other special rights, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series of preferred stock.

The board of directors is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects.

The ability of the board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control or the removal of existing management.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Class A and Class B Common Stock

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In addition, Class B common stock is subject to “sunset” provisions, under which all shares of Class B common stock will automatically convert into an equal number of shares of Class A common stock upon the earliest to occur of (i) the ten-year anniversary of the closing of the Business Combination, (ii) the date specified by the holders of two-thirds of the then outstanding Class B common stock, voting as a separate class, and (iii) when the number of Class B common stock represents less than 10 % of the aggregate number of Class A common stock and Class B common stock then outstanding.

In addition, each share of Class B common stock will automatically convert into an equal number of Class A common stock upon the earliest to occur of (a) in the case of a founder of the Company, the date that is nine months following the death or incapacity of such founder, and, in the case of any other holder, the date of the death or incapacity of such holder, (b) in the case of a founder of the company, the date that is 12 months following the date that such founder ceases to provide services to the Company and its subsidiaries as an executive officer, employee or director of the Company, and, in the case of any other holder, immediately at the occurrence of any such event, and (c) in the case of a founder of the Company or any other holder, at least 80 % (subject to customary capitalization adjustments) of the Class B common stock held by such founder (on a fully as converted/as exercised basis) as of immediately following the closing of the Business Combination having been transferred (subject to exceptions for certain permitted transfers).

In addition, each share of Class B common stock will automatically convert into an equal number of Class A common stock upon the earliest to occur of (a) in the case of a founder of the Company, the date that is nine months following the death or incapacity of such founder, and, in the case of any other holder, the date of the death or incapacity of such holder, (b) in the case of a founder of the Company, the date that is 12 months following the date that such founder ceases to provide services to the Company and its subsidiaries as an executive officer, employee or director of the Company, and, in the case of any other holder, immediately at the occurrence of any such event, and (c) in the case of a founder of the Company or any other holder, at least 80 % (subject to customary capitalization adjustments) of the Class B common stock held by such founder or holder (on a fully as converted/as exercised basis) as of immediately following the closing of the Business Combination having been transferred (subject to exceptions for certain permitted transfers).

During the years ended December 31, 2023, 2022 and 2021, 26,449,869 , 8,406,170 and 5,337,446 shares of Class B common stock were converted into Class A common stock, respectively.

In the event of the Company’s voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of the Company’s common stock will be entitled to receive an equal amount per share of all of the Company’s assets of whatever kind available for distribution to stockholders, after the rights of the holders of any preferred stock have been satisfied.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

PIPE Financing

On August 10, 2023, the Company entered into subscription agreements with certain investors providing for the private placement of 26,173,286 shares of the Company’s Class A common stock for net proceeds of approximately $ 139.0 million, after deducting offering costs.

At-The-Market Offerings

In November 2023, the Company entered into an Open Market Sales Agreement SM (the “Sales Agreement”) with Cantor Fitzgerald & Co., as the sales agent, pursuant to which the Company may offer and sell shares of the Company’s Class A common stock having an aggregate offering amount of up to $ 70.0 million.

The Company will pay Cantor Fitzgerald & Co.

a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of Class A common stock pursuant to the Sales Agreement.

During the year ended December 31, 2023, the Company sold 3,109,097 shares of Class A common stock for net proceeds of $ 19.5 million.

As of December 31, 2023, the Company had $ 49.3 million remaining under the Sales Agreement.

Note 10 - Stock-Based Compensation

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The aggregate number of shares of Class A common stock that may be issued under the plan increased to 34,175,708 .

In addition, the number of shares of Class A common stock reserved for issuance under the Amended and Restated 2021 Plan will automatically increase on January 1st of each year, starting on January 1, 2023 and ending on (and including) January 1, 2031, in an amount equal to the lesser of (1) 5.0 % of the total number of shares of Class A common stock outstanding on December 31 of the preceding year, or (2) a lesser number of Class A common stock determined by the board of directors prior to the date of the increase.

In addition, the number of shares of Class A common stock reserved for issuance under the Amended and Restated 2021 Plan will automatically increase on January 1st of each year following this amendment, starting on January 1, 2023 and ending on (and including) January 1, 2031, in an amount equal to the lesser of (i) 5.0 % of the total number of shares of Class A and Class B common stock outstanding on December 31 of the preceding year, or (ii) a lesser number of shares of Class A common stock determined by the Board of Directors prior to the date of the increase (the “EIP Evergreen Provision”).

The EIP Evergreen Provision is calculated using the number of legally outstanding shares of common stock and includes shares, such as unvested shares pursuant to early exercised stock options, that are not considered outstanding for accounting purposes.

In accordance therewith, the number of shares of Class A common stock reserved for issuance under the Amended and Restated 2021 Plan increased by 12,292,155 shares on January 1, 2023.

The Amended and Restated 2021 Plan provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and other awards to employees, directors, and non-employees.

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The ESPP permits eligible employees to purchase shares of Class A common stock at a price equal to 85 % of the lower of the fair market value of Class A common stock on the first day of an offering or on the date of purchase.

The maximum number of shares of Class A common stock that may be issued under the ESPP will not exceed 4,969,059 shares.

Additionally, the number of shares of Class A common stock reserved for issuance under the ESPP will automatically increase on January 1st of each year, beginning on January 1, 2022 and continuing through and including January 1, 2031, by the lesser of (i) 1.0 % of the total number of shares of Class A common stock outstanding on December 31st of the preceding calendar year;

Archer Aviation Inc.

Notes to Consolidated Financial Statements

December 31 of the preceding year;

(ii) 9,938,118 shares of Class A common stock;

or (iii) such lesser number of shares of the Company as determined by the board of directors.

or (iii) a lesser number of shares of Class A common stock determined by the Board of Directors prior to the date of increase (the “ESPP Evergreen Provision”).

The ESPP Evergreen Provision is calculated using the number of legally outstanding shares of common stock and includes shares, such as unvested shares pursuant to early exercised stock options, that are not considered outstanding for accounting purposes.

In accordance therewith, the number of shares of Class A common stock reserved for issuance under the ESPP increased by 1,809,383 on January 1, 2023.

As of December 31, 2023, the maximum number of shares authorized for issuance under the ESPP was 8,406,337 , of which 7,177,705 shares remained available under the ESPP.

The Company currently offers six-month offering periods, and at the end of each offering period, which occurs every six months on May 31 and November 30, employees can elect to purchase shares of the Company’s Class A common stock with contributions of up to 15 % of their base pay, accumulated via payroll deductions, subject to certain limitations.

During the year ended December 31, 2023, for the six-month ESPP offering periods that ended on May 31, 2023 and November 30, 2023, employees purchased 601,105 shares at a price of $ 2.19 per share and 627,527 shares at a price of $ 2.54 per share, respectively.

The Company uses the Black-Scholes option pricing model to calculate the grant date fair value of each award granted under the ESPP.

The following table sets forth the key assumptions and fair value results for each award granted in the Company’s first offering period under the ESPP, which started on December 1, 2022:

December 1, 2022

The following table sets forth the key assumptions and fair value results for each award granted in the Company’s six-month offering period that started on December 1, 2023:

Input December 1, 2023

Stock price $ 6.30

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Grant date fair value per share $ 2.62

During the year ended December 31, 2022, the Company recognized stock-based compensation expense of $ 0.1 million for the awards granted under the ESPP.

During the years ended December 31, 2023 and 2022, the Company recognized stock-based compensation expense of $ 1.2 million and $ 0.1 million for the ESPP, respectively.

There were no ESPP offerings for the year ended December 31, 2021.

As of December 31, 2023, the total remaining stock-based compensation expense was $ 1.2 million for the ESPP, which is expected to be recognized over the current six-month offering period until May 31, 2024.

Annual Equity Awards

Subject to the achievement of certain performance goals established by the Company from time to time, the Company’s employees are eligible to receive an annual incentive bonus that will entitle them to an annual grant of a number of RSUs determined by dividing the annual bonus target amount by the closing price of the Company’s Class A common stock on the date of grant.

The RSUs will be fully vested on the date of grant.

Furthermore, all the annual equity awards are contingent and issued only upon approval by the Company’s Board of Directors or the Compensation Committee.

During the years ended December 31, 2023 and 2022, the Company recognized stock-based compensation expense of $ 11.5 million and $ 9.5 million, respectively, related to these annual equity awards.

There were no annual equity awards granted during the year ended December 31, 2021.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022, the total remaining stock-based compensation expense was $ 0.5 million for the awards granted under the ESPP, which is expected to be recognized over the current six-month offering period until May 31, 2023.

Quarterly Equity Awards

Subject to the achievement of certain performance goals established by the Company from time to time, the Company’s employees are eligible to receive an annual incentive bonus that will entitle them to a quarterly grant of a number of restricted stock units (“RSUs”) determined by dividing 25 % of the annual bonus target amount by the closing price of the Company’s Class A common stock on the date of grant.

The RSUs will be fully vested on the date of grant.

Furthermore, all the quarterly equity awards are contingent and issued only upon approval by the Company’s board of directors.

During the year ended December 31, 2022, the Company recognized stock-based compensation expense of $ 9.5 million related to these quarterly equity awards.

There were no quarterly equity awards granted for the year ended December 31, 2021.

Stock Options

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Outstanding as of January 1, 2023

5,335,974 $ 0.12 7.66 $ 9.4

Exercised ( 2,027,221 ) 0.12 7.8

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3,174,114 0.12 6.66 19.1

There were no options granted for the year ended December 31, 2022.

There were no options granted for the years ended December 31, 2023 and 2022.

During the year ended December 31, 2021, the Company granted 1,277,622 incentive and non-statutory stock options under the 2019 Plan.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Determination of Fair Value

The assumptions used in the Black-Scholes option pricing model to estimate the fair value of the stock options granted during the year of December 31, 2021 are provided in the following table:

The assumptions used in the Black-Scholes option pricing model to estimate the fair value of the stock options granted during the year ended December 31, 2021 are provided in the following table:

December 31, 2021

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Non-employee stock options $ 13.68

The Company recognized stock-based compensation expense of $ 3.8 million and $ 3.9 million for stock options for the years ended December 31, 2022 and 2021, respectively.

The Company recognized stock-based compensation expense of $ 2.8 million, $ 3.8 million and $ 3.9 million for stock options for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023, the total remaining stock-based compensation expense for unvested stock options was $ 4.9 million, which is expected to be recognized over a weighted-average period of 0.8 years.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Restricted Stock Units

A summary of the Company’s restricted stock activity is as follows:

A summary of the Company’s RSU activity is as follows:

Outstanding as of January 1, 2023

43,146,632 $ 5.72

Granted 11,864,674 3.36

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31,522,483 4.99

During the year ended December 31, 2022, the Company granted 9,692,806 RSUs under the 2021 Plan and the Amended and Restated 2021 Plan.

The RSUs generally vest over a three - or four-year period with a straight-line vesting and a 33 % or 25 % one-year cliff and remain subject to forfeiture if vesting conditions are not met.

Upon vesting, RSUs are settled in Class A

Archer Aviation Inc.

Notes to Consolidated Financial Statements

common stock on a one -for-one basis.

The shares of Class A common stock underlying RSU grants are not issued and outstanding until the applicable vesting date.

During the year ended December 31, 2022, the Company granted 1,865,582 RSUs under the Amended and Restated 2021 Plan, representing the quarterly equity awards for the Company’s first three fiscal quarters of 2022.

During the year ended December 31, 2023, the Company granted 998,364 RSUs under the Amended and Restated 2021 Plan, representing the quarterly equity awards for the Company’s fourth fiscal quarter of 2022.

The RSUs were fully vested on the date of grant and settled in Class A common stock on a one -for-one basis.

In addition, in July 2022, the Company granted 2,151,639 RSUs under the Amended and Restated 2021 Plan.

The RSUs vest over three and a half years with a straight-line vesting and remain subject to forfeiture if vesting conditions are not met.

In addition, the Company granted 10,866,310 RSUs under the Amended and Restated 2021 Plan, which generally vest over a three - or four-year period with a one-year cliff and remain subject to forfeiture if vesting conditions are not met.

Upon vesting, RSUs are settled in Class A common stock on a one -for-one basis.

The shares of Class A common stock underlying RSU grants are not issued and outstanding until the applicable vesting date.

During the year ended December 31, 2021, the Company granted 6,265,293 RSUs under the 2021 Plan.

The RSUs generally vest over a three or four-year period with a straight-line vesting and a 33 % or 25 % one-year cliff and remain subject to forfeiture if vesting conditions are not met.

Upon vesting, RSUs are settled in Class A common stock on a one -for-one basis.

The shares of Class A common stock underlying this grant are not issued and outstanding until the applicable vesting date.

Immediately prior to closing of the Business Combination, each of the Company’s founders was granted 20,009,224 RSUs under the 2019 Plan pursuant to the terms and conditions of the Business Combination Agreement.

Considering each of the founder’s existing equity ownership and assuming the Founder Grants fully vest, it would result in each of the founders owning approximately 18 % of all outstanding shares of the Total Outstanding Capitalization of the Company (as defined in the Business Combination Agreement).

One-quarter of each Founder Grant vests upon the achievement of the earlier to occur of (i) a price-based milestone or (ii) a performance-based milestone, with a different set of such price and performance-based milestones applying to each quarter of each Founder Grant and so long as the achievement occurs within seven years following the closing of the Business Combination.

One-quarter of each of the Founder Grants vests upon the achievement of the earlier to occur of (i) a price-based milestone or (ii) a performance-based milestone, with a different set of such price and performance-based milestones applying to each quarter of each of the Founder Grants and so long as the achievement occurs within seven years following the closing of the Business Combination.

The Company accounts for the Founder Grants as four separate tranches, with each tranche consisting of two award grants, a performance award grant and market award grant.

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If the applicable performance condition is not probable of being achieved, compensation cost for the value of the award incorporating the market condition is recognized, so long as the requisite service is provided.

If the performance milestone becomes probable of being achieved, the full fair value of the award will be recognized, and any remaining expense for the market award will be cancelled.

If the performance milestone becomes probable of being achieved, the full fair value of the award will be recognized, and any remaining expense for the market award will be canceled.

The following assumptions were used to estimate the fair value, using the Monte Carlo simulation, of the market award grant:

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Dividend yield 0.00 %

One-quarter of each Founder Grant, totaling 5,002,306 shares each of Class B common stock, vested immediately prior to the Closing Date pursuant to the terms and conditions of the Business Combination Agreement.

On April 14, 2022, the vested 5,002,306 shares of Class B common stock of Brett Adcock, the Company’s co-founder and former co-CEO, were cancelled.

Following the separation of Mr.

Adcock from the Company on April 13, 2022 (the “Separation Date”), Mr.

Adcock’s unvested 15,006,918 shares of Class B common stock for the remaining three tranches remain

One-quarter of each of the Founder Grants, totaling 5,002,306 shares each of Class B common stock, vested immediately prior to the Closing Date pursuant to the terms and conditions of the Business Combination Agreement.

On April 14, 2022, the

Archer Aviation Inc.

Notes to Consolidated Financial Statements

outstanding and eligible for vesting upon the achievement of the milestones as described above for 15 months from the Separation Date pursuant to the original terms of the Founder Grants.

For the year ended December 31, 2022, the Company recorded $ 64.9 million of stock-based compensation expense for the amortized portion of the market award for the remaining three tranches in general and administrative expenses in the consolidated statements of operations.

For the year ended December 31, 2021, the Company recorded $ 118.1 million of stock-based compensation expense for the vesting of the first tranche and the amortized portion of the market award for the remaining three tranches in general and administrative expenses in the consolidated statements of operations.

For the years ended December 31, 2022 and 2021, the Company recorded $ 22.8 million and $ 1.6 million of stock-based compensation expense, respectively, related to RSUs (excluding the Founder Grants).

As of December 31, 2022, the total remaining stock-based compensation expense for unvested RSUs (including the Founder Grants) was $ 263.2 million, which is expected to be recognized over a weighted-average period of 1.6 years.

vested 5,002,306 shares of Class B common stock of the Company’s co-founder and former co-CEO, were cancelled.

Following the separation of the officer from the Company on April 13, 2022 (the “Separation Date”), the officer’s unvested 15,006,918 shares of Class B common stock for the remaining three tranches remain outstanding and eligible for vesting upon the achievement of the milestones as described above for 15 months from the Separation Date pursuant to the original terms of the Founder Grants.

On July 13, 2023, 15 months following the separation of the officer from the Company, the officer’s unvested 15,006,918 shares of Class B common stock for the remaining three tranches of the Founder Grants were forfeited.

The Company reversed the previously recognized stock-compensation expense associated with these shares for $ 59.1 million.

As of December 31, 2023, there were 15,006,918 shares of Class B common stock outstanding for the remaining Founder Grants.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 49.7 million, $ 64.9 million and $ 118.1 million, respectively, of stock-based compensation expense for the amortized portion of the market award for the remaining three tranches of the outstanding Founder Grants in general and administrative expenses in the consolidated statements of operations.

Of the amounts recorded during the years ended December 31, 2023, 2022 and 2021, approximately $ 17.3 million, $ 32.4 million and $ 9.4 million, respectively, of stock-based compensation expense associated with the forfeiture were reversed in July 2023 and recorded during the year ended December 31, 2023.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 27.0 million, $ 22.8 million and $ 1.6 million of stock-based compensation expense, respectively, related to RSUs (excluding the Founder Grants).

As of December 31, 2023, the total remaining stock-based compensation expense for unvested RSUs (including the remaining Founder Grants) was $ 128.5 million, which is expected to be recognized over a weighted-average period of 1.0 year.

Restricted Stock

In August 2023, the Company issued 1,985,559 shares of Class A common stock to an outside vendor to satisfy $ 11.0 million of the Company’s outstanding payable to that vendor.

Accordingly, the Company reclassified $ 11.6 million, representing the grant date fair value of the award, of legal expense to stock-based compensation expense within general and administrative expenses in the consolidated statements of operations during the year ended December 31, 2023.

The Company records stock-based compensation expense for stock-based compensation awards based on the fair value on the date of grant.

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If an employee forfeits an award because they fail to complete the requisite service period, the Company will reverse stock-based compensation expense previously recognized in the period the award is forfeited.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The following table presents stock-based compensation expense included in each respective expense category in the consolidated statements of operations (in millions):

Year Ended December 31,

2023 2022 2021

Research and development $ 28.9 $ 26.1 $ 3.7

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Outstanding as of January 1, 2023

8,736,599 $ 0.01 7.84 $ 16.3

Issued 15,000,000 0.01

Exercised ( 2,948,352 ) 0.01 17.0

Outstanding as of December 31, 2023

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Those purchases are conditioned upon the Company meeting certain conditions that include, but are not limited to, the certification of the Company’s aircraft by the FAA and further negotiation and reaching of mutual agreement on certain material terms related to the purchases.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Company issued 14,741,764 warrants to United to purchase shares of the Company’s Class A common stock.

The Company issued 14,741,764 warrants to United to purchase shares of the Company’s Class A common stock.

Each warrant provides United with the right to purchase one share of the Company’s Class A common stock at an exercise price of $ 0.01 per share.

The warrants were initially expected to vest in four installments in accordance with the following milestones:

the execution of the United Purchase Agreement and the United Collaboration Agreements, the completion of the Business Combination, the certification of the aircraft by the FAA, and the sale of aircraft to United.

the execution of the United Purchase Agreement and the United Collaboration Agreement, the completion of the Business Combination, the certification of the aircraft by the FAA, and the sale of aircraft to United.

On August 9, 2022, the Company entered into Amendment No.

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1 to the United Warrant Agreement (the “Amended United Warrant Agreement”).

In association with the Amended United Purchase Agreement, the Company received a $ 10.0 million pre-delivery payment from United for 100 of the Company’s aircraft (the “Pre-Delivery Payment”), which was recognized as a contract liability in other long-term liabilities in the Company’s consolidated condensed balance sheets.

Pursuant to the Amended United Warrant Agreement, the vesting condition of the fourth milestone of the United Warrant Agreement was modified, and the warrants now vest in four installments in accordance with the following sub-milestones:

(i) 737,088 warrants vested upon receipt by the Company of the Pre-Delivery Payment on August 9, 2022;

(ii) 2,211,264 warrants shall vest on February 9, 2023 upon the six-month anniversary of the amendment date;

(ii) 2,211,264 warrants vested on February 9, 2023 upon the six-month anniversary of the amendment date;

(iii) 3,685.45 warrants shall vest upon the acceptance and delivery of each of the Company’s 160 aircraft;

and (iv) 22,112.65 warrants shall vest upon the acceptance and delivery of each of the Company’s 40 aircraft.

The Company determined that as a result of the relationship established by signing the United Purchase Agreement, United is a customer with the intention of obtaining the output of the Company’s ordinary activities (design and production of aircraft).

United has not contracted to share in the risks and benefits of development of the aircraft, and United is not otherwise involved in the development of the aircraft.

As a result, the Company accounts for the United Purchase Agreement (including the subsequent amendment) and the United Collaboration Agreements under ASC 606, Revenue from Contracts with Customers .

The Company accounts for the Amended United Purchase Agreement and the United Collaboration Agreement under ASC 606, Revenue from Contracts with Customers .

The Company identified the sale of each aircraft ordered by United as a separate performance obligation in the contract.

As the performance obligations have not been satisfied, the Company has not recognized any revenue as of December 31, 2023.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

With respect to the warrant vesting milestones outlined above, the Company accounts for them as consideration payable to a customer under ASC 606 related to the future purchase of aircraft by United.

The Company determined that the warrants are classified as equity awards based on the criteria of ASC 480, Distinguishing Liabilities from Equity and ASC 718.

The Company determined that the warrants are classified as equity awards based on the criteria of ASC 480, Distinguishing Liabilities from Equity and ASC 718, Compensation — Stock Compensation .

Pursuant to ASC 718, the Company measured the grant date fair value of the warrants to be recognized upon the achievement of each of the original four milestones and the vesting of the related warrants.

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Given the $ 0.01 exercise price, each warrant also had a fair value of $ 13.35 at the grant date.

Pursuant to ASC 606, consideration payable to the customer is generally accounted for as a reduction to revenue and recorded at the later of when (i) the entity recognizes revenue for the transfer of related goods, or (ii) the entity pays the consideration.

Due to the nature of the warrant vesting milestones, and the Company’s unique circumstances upon the actual or anticipated vesting dates as described below, the recognition pattern and cost presentation of each will differ.

For the first milestone, issuance of the warrant in conjunction with the execution of the United Purchase Agreement and the United Collaboration Agreements, the Company recorded the grant date fair value of the respective warrant tranche at the vesting date upon satisfaction of the milestone, and the related costs were recorded in other warrant expense in the consolidated statements of operations due to the absence of historical or probable future revenue.

For the second milestone, the completion of the Business Combination, the related costs were also recorded in other warrant expense in the consolidated statements of operations due to the absence of historical or probable future revenue.

For the first milestone, issuance of warrants in conjunction with the execution of the United Purchase Agreement and the United Collaboration Agreement, the Company recorded the grant date fair value of the respective warrant tranche at the vesting date upon satisfaction of the milestone, and the related costs were recorded in other warrant expense due to the absence of historical or probable future revenue.

For the second milestone, the completion of the Business Combination transaction, the related costs were also recorded in other warrant expense due to the absence of historical or probable future revenue.

For the third milestone, the certification of the aircraft by the FAA, the Company will assess whether it is probable that the award will vest at the end of every reporting period.

If and when the award is deemed probable of vesting, the Company will begin capitalizing the grant date fair value of the associated warrants as an asset through the vesting date and subsequently amortize the asset as a reduction to revenue as it sells the aircraft to United.

For the original fourth milestone, the sale of aircraft to United, the Company was initially expected to record the cost associated with the vesting of each portion of warrants within this milestone as a reduction of the transaction price as revenue is

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Notes to Consolidated Financial Statements

recognized for each sale of the aircraft.

In connection with the Amended United Warrant Agreement, the Company evaluated the accounting implications associated with the amendment to the fourth milestone in accordance with ASC 606 and ASC 718.

For the first sub-milestone, the receipt of the Pre-Delivery Payment, the Company accounted for it as a modification under ASC 718 and recorded the modification date fair value of the associated warrants in other warrant expense upon satisfaction of the sub-milestone on August 9, 2022.

For the second sub-milestone, the vesting of warrants on February 9, 2023, the Company accounted for it as a modification under ASC 718 and will record the modification date fair value of the associated warrants in other warrant expense on a straight-line basis over six months following the amendment date.

The modification date fair value of each warrant associated with the first and second sub-milestones was determined to be $ 4.37 , which was the closing price of the Company’s Class A common stock on August 9, 2022.

For the second sub-milestone, the vesting of warrants on February 9, 2023, the Company accounted for it as a modification under ASC 718 and recorded the modification date fair value of the associated warrants in other warrant expense on a straight-line basis over six months following the amendment date.

For the third and fourth sub-milestones, the sale of 160 aircraft and 40 aircraft, respectively, the Company determined that the amendment does not represent a modification under ASC 718.

The Company will record the cost associated with the vesting of each portion of the associated warrants as a reduction of the transaction price based on the original grant date fair value as revenue is recognized for each sale of the aircraft.

For the year ended December 31, 2023, the Company recorded $ 2.1 million in other warrant expense in the consolidated statements of operations related to the second sub-milestone under the fourth milestone, and a total of 2,211,264 warrants vested from achievement of this milestone.

For the year ended December 31, 2022, the Company recorded $ 10.8 million in other warrant expense in the consolidated statements of operations related to the first two sub-milestones under the fourth milestone, and a total of 737,088 warrants vested from achievement of the first sub-milestone under the fourth milestone.

In August 2023, the Company issued 2,942,778 shares of Class A common stock to United, who cashless net exercised 2,948,352 warrants related to the achievement of the first two sub-milestones under the fourth milestone.

For the year ended December 31, 2021, the Company recorded $ 117.3 million in other warrant expense in the consolidated statements of operations related to the achievement of the first two milestones.

A total of 8,845,058 warrants vested from achievement of the first two milestones and were exercised during the year ended December 31, 2021.

Stellantis N.V.

On January 3, 2023, the Company entered into a manufacturing and collaboration agreement with Stellantis N.V.

(“Stellantis”), pursuant to which the Company and Stellantis will collaborate on the development and implementation of the

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Notes to Consolidated Financial Statements

Company’s manufacturing operations for the production of its eVTOL aircraft products (the “Stellantis Collaboration Agreement”).

In connection with the Stellantis Collaboration Agreement, the Company entered into a forward purchase agreement (as amended, the “Stellantis Forward Purchase Agreement”) and a warrant agreement (the “Stellantis Warrant Agreement”) with Stellantis on January 3, 2023.

Under the terms of the Stellantis Forward Purchase Agreement, the Company may elect, in the Company’s sole discretion, to issue and sell to Stellantis up to $ 150.0 million of shares of the Company’s Class A common stock, following the satisfaction of certain Milestones (as defined in the Stellantis Forward Purchase Agreement) and pursuant to the terms and conditions of the Stellantis Forward Purchase Agreement.

As any issuance of Class A common stock by the Company to Stellantis pursuant to the Stellantis Forward Purchase Agreement is at the election of the Company, the Company will recognize any share issuance at the time it elects to issue and sell shares to Stellantis.

Under the terms of the Stellantis Warrant Agreement, Stellantis is entitled to purchase up to 15.0 million shares of the Company’s Class A common stock, at an exercise price of $ 0.01 per share (the “Stellantis Warrant”).

The Stellantis Warrant will vest and become exercisable in three equal tranches upon 12 , 24 and 36 months of the grant date, provided that (i) Stellantis has performed certain undertakings set forth in the Stellantis Collaboration Agreement and/or (ii) the VWAP (as defined in the Stellantis Warrant Agreement) for the Class A common stock exceeding certain specified amounts.

Pursuant to the terms and conditions of the Stellantis Collaboration Agreement, Stellantis is deemed to have performed the undertakings if the Stellantis Collaboration Agreement has not been terminated by the Company as of the specified vesting date for each tranche.

As the Company is currently in pre-revenue stage and is not generating any revenue from the Stellantis Collaboration Agreement, all costs incurred with third parties are recorded based on the nature of the costs incurred.

The Company accounts for the warrant in accordance with the provisions of ASC 718.

The grant date fair value of each warrant was determined to be $ 1.93 , which was the closing price of the Company’s Class A common stock on January 3, 2023.

For each tranche of the warrant, the Company will recognize compensation costs as the related services are received from Stellantis on a straight-line basis over the associated service period.

During the year ended December 31, 2023, the Company recorded $ 17.5 million of R&D expense in the consolidated statements of operations in connection with the Stellantis Collaboration Agreement.

On June 23, 2023, the Company issued 6,337,039 shares of Class A common stock to Stellantis at a price of $ 3.94506 per share in connection with the first milestone under the Stellantis Forward Purchase Agreement and received approximately $ 25.0 million in gross proceeds.

The Company recognized the issued shares at a fair value of $ 3.38 per share, which was the closing price of the Company’s Class A common stock on June 23, 2023, and recognized a gain of $ 3.6 million within other (expense) income, net in the consolidated statements of operations during the year ended December 31, 2023, to account for the difference between the amount of cash proceeds and the fair value of the issued shares.

On August 10, 2023, Stellantis waived certain conditions provided for in the Stellantis Forward Purchase Agreement relating to the Company’s actual achievement pursuant to Milestone 2 (as defined in the Stellantis Forward Purchase Agreement).

In connection with this waiver, the Company submitted an election notice to draw down upon the $ 70.0 million applicable to Milestone 2, which equals 12,313,234 shares of the Company’s Class A common stock.

This drawdown was completed on October 16, 2023.

On November 6, 2020, the Company entered into a collaboration agreement with FCA US LLC (“FCA”) (the “FCA Collaboration Agreement”), in which both parties agreed to work together to complete a series of fixed duration collaboration projects related to the Company’s ongoing efforts to design, develop, and bring up production capabilities for its aircraft.

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The Company assessed whether it was probable that the award vested for each of the seven milestones at the end of every reporting period.

If and when the award was deemed probable of vesting, the Company recognized compensation expense for the portion of the grant determined probable of vesting on a straight-line basis over the duration of each milestone.

If and when the award was deemed probable of vesting, the Company

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Notes to Consolidated Financial Statements

recognized compensation expense for the portion of the grant determined probable of vesting on a straight-line basis over the duration of each milestone.

If services had been provided by FCA prior to management determining the milestone was probable of being achieved, a cumulative catch-up adjustment was recorded for services performed in prior periods.

During the years ended December 31, 2022 and 2021, the Company recorded $ 0.1 million and $ 0.2 million of R&D expense, respectively, in the consolidated statements of operations related to the completion of certain milestones.

As of December 31, 2022, all of the seven milestones have been completed, amounting to 1,671,202 shares that have vested.

As of December 31, 2022, all seven milestones have been completed, amounting to 1,671,202 shares that have vested.

FCA Italy S.p.A.

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The Company recognized compensation cost for half of the shares that were fully vested upon execution of the Manufacturing Consulting Agreement.

The Company recognized

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Notes to Consolidated Financial Statements

compensation cost for the remaining half of the warrant as the related services were received from FCA Italy on a straight-line basis over the service period of 12 months.

The Company recognized compensation cost for the remaining half of the warrant as the related services were received from FCA Italy on a straight-line basis over the service period of 12 months.

During the year ended December 31, 2022, the Company recorded $ 2.8 million of R&D expense in the consolidated statements of operations related to services received for the second milestone.

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Note 11 - Income Taxes

The Company’s loss before income taxes was approximately $ 317.3 million and $ 347.8 million for the years ended December 31, 2022 and 2021, respectively.

The Company’s loss was generated entirely in the United States.

Current income tax for the years ended December 31, 2022 and 2021 was zero .

The Company's loss before income taxes consisted of the following (in millions):

Year Ended December 31,

2023 2022 2021

United States

$ ( 458.7 ) $ ( 317.3 ) $ ( 347.8 )

International

$ ( 457.4 ) $ ( 317.3 ) $ ( 347.8 )

The Company recognized foreign current income tax provision of $ 0.5 million during the year ended December 31, 2023.

The Company did no t recognize any current income tax provision during the years ended December 31, 2022 and 2021.

The Company did no t record any deferred income tax provision for the years ended December 31, 2023, 2022 and 2021.

The related increase in the deferred tax asset was offset by the increase in valuation allowance.

The following table presents the principal reasons for the difference between the effective tax rate and the federal statutory income tax rate of 21%:

The related increase in the deferred tax assets was offset by the increase in valuation allowance.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

A reconciliation of the Company’s effective income tax rate to the expected income tax rate, computed by applying the federal statutory income tax rate of 21% to the Company’s loss before income taxes, is as follows:

Year Ended December 31,

Federal income tax (benefit) 21.0 % 21.0 %

2023 2022 2021

Federal income tax (benefit) at statutory tax rate

21.0 % 21.0 % 21.0 %

State and local income taxes (net of federal benefit) ( 2.7 ) % 2.5 % 2.6 %

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Effective tax rate ( 0.1 ) % 0.0 % 0.0 %

Differences between state statutory rate and state effective tax rate for the year ended December 31, 2022 primarily relate to the limitations imposed on certain share-based compensation under Section 162(m), R&D tax credits and an increase in the valuation allowance.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Differences between the state statutory rate and state effective tax rate for the year ended December 31, 2023 primarily relate to the limitations imposed on certain share-based compensation under Section 162(m), R&D tax credits and an increase in the valuation allowance.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are provided below (in millions):

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible.

Based upon the analysis of federal and state deferred tax balances and future tax projections and the Company’s lack of taxable income in the carryback period, the Company recorded a valuation allowance of $ 129.7 million against the federal and state deferred tax assets.

The valuation allowance increased by $ 82.6 million during the year ended December 31, 2022, and by $ 39.9 million during the year ended December 31, 2021.

Based upon the analysis of federal and state deferred tax balances and future tax projections and the Company’s lack of taxable income in the carryback period, the Company recorded a valuation allowance of $ 226.3 million against the federal and state deferred tax

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The valuation allowance increased by $ 96.6 million, $ 82.6 million and $ 39.9 million during the years ended December 31, 2023, 2022 and 2021, respectively.

On August 16, 2022, the U.S.

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The state R&D tax credit carryforward is $ 15.7 million and $ 9.3 million for December 31, 2023 and 2022, respectively, which can be carried forward indefinitely.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The following table summarizes the activity related to the Company’s unrecognized tax benefits during the years ended December 31, 2023, 2022 and 2021 (in millions):

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Balance as of December 31, 2022 1.5

Increases related to current year tax positions 0.5

Balance as of December 31, 2023

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2023 and 2022 is zero due to the valuation allowance that would otherwise be recorded on the deferred tax asset associated with the recognized position.

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The Company is not under audit by any tax jurisdictions at this time.

Note 12 - 401(k) Savings Plan

The Company maintains a 401(k) savings plan for the benefit of its employees.

The Company makes matching contributions equal to 50 % of each employee contribution, subject to the maximum amount established by the Internal Revenue Service.

All current employees are eligible to participate in the 401(k) savings plan.

The Company’s matching contributions were $ 2.1 million and $ 0.8 million for the years ended December 31, 2022 and 2021, respectively.

Note 12 - Liability Classified Warrants

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No fractional shares are issued upon exercise of the public warrants.

The public warrants became exercisable on October 30, 2021, 12 months after the closing of the initial public offering of Atlas.

The public warrants became

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Notes to Consolidated Financial Statements

exercisable on October 30, 2021, 12 months after the closing of the initial public offering of Atlas.

The public warrants will expire five years from the consummation of the Business Combination or earlier upon redemption or liquidation.

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• upon not less than 30 days’ prior written notice of redemption to each warrant holder;

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Notes to Consolidated Financial Statements

period commencing after the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.

• if, and only if, the closing price of the Class A common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -trading day period commencing after the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

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As of December 31, 2023, there were 8,000,000 private placement warrants outstanding.

The private placement warrants are identical to the public warrants underlying the shares sold in the initial public offering of Atlas, except that the private placement warrants and the shares of Class A common stock issuable upon the exercise of the private placement warrants became transferable, assignable, and salable as of October 16, 2021, 30 days after the completion of the Business Combination, subject to certain limited exceptions.

The private placement warrants are identical to the public warrants underlying the shares sold in the initial public offering of Atlas, except that the private placement warrants and the shares of Class A common stock issuable upon the exercise of the private placement warrants became transferable, assignable, and salable on October 16, 2021, 30 days after the completion of the Business Combination, subject to certain limited exceptions.

Additionally, the private placement warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees.

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The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date of the issuance of these consolidated financial statements.

Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

On January 3, 2023, the Company entered into a manufacturing collaboration agreement with Stellantis N.V.

(“Stellantis”), pursuant to which the Company and Stellantis will collaborate on the development and implementation of the Company’s manufacturing operations for the production of its eVTOL aircraft products (the “Stellantis Collaboration Agreement”).

In connection with the Stellantis Collaboration Agreement, the Company entered into a forward purchase agreement (the “Stellantis Forward Purchase Agreement”) and a warrant agreement (the “Stellantis Warrant Agreement”) with Stellantis on January 3, 2023.

Under the terms of the Stellantis Warrant Agreement, Stellantis is entitled to purchase up to 15.0 million of shares of the Company’s Class A common stock, at an exercise price of $ 0.01 per share (the “Stellantis Warrant”).

The Stellantis Warrant Agreement provides that the warrant will become vested and exercisable in three separate tranches upon either (i) the performance by Stellantis of certain undertakings set forth in the Stellantis Collaboration Agreement or (ii) the VWAP (as defined in the Stellantis Warrant Agreement) for the Class A common stock exceeding certain specified amounts.

In addition, a member of the Company’s board of directors is also an executive at Stellantis.

The Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data