What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-28 compared with 2024-02-29 · 306 added, 403 removed, 795 unchanged (47% of the section changed)

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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.

Research and Development Costs

As described in Note 3 to the consolidated financial statements, research and development (“R&D”) costs are expensed as incurred and are primarily comprised of personnel-related costs including salaries, bonuses, benefits, and stock-based compensation for employees focused on R&D activities, costs associated with building prototype aircraft, other related costs, depreciation, and an allocation of general overhead.

R&D efforts focus on the design and development of the Company’s eVTOL aircraft, including certain of the systems that are used in it.

The Company’s research and development expense for the year ended December 31, 2024 was $357.7 million.

The principal consideration for our determination that performing procedures relating to research and development costs is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s research and development costs.

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.

These procedures included testing the effectiveness of controls relating to research and development costs.

These procedures also included, among others, testing, on a sample basis, the completeness and accuracy of research and development costs by obtaining and inspecting source documents, such as underlying contracts, purchase orders, invoices received, and information received from certain third-party service providers, where applicable.

/s/ PricewaterhouseCoopers LLP

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Restricted cash 6.8 6.9

Short-term investments — 461.8

Prepaid expenses 12.5 7.9

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Current portion of lease liabilities 3.7 2.8

Current portion of notes payable — 9.3

Accrued expenses and other current liabilities 52.8 96.9

Total current liabilities 71.1 114.0

Notes payable, net of current portion 7.2 —

Notes payable

Lease liabilities, net of current portion 11.3 13.2

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Class A common stock, $ 0.0001 par value;

700,000,000 shares authorized;

1,400,000,000 and 700,000,000 shares authorized as of December 31, 2024 and 2023, respectively;

503,777,464 and 265,617,341 shares issued and outstanding as of December 31, 2024 and 2023, respectively

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Loss from operations ( 509.7 ) ( 446.9 ) ( 347.4 )

Gain on forgiveness of PPP loan — — 0.9

Other (expense) income, net

( 26.9 ) 27.8 10.6

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

Other income (expense), net ( 48.8 ) ( 26.9 ) 27.8

Interest income, net 21.9 16.4 2.3

Loss before income taxes ( 536.6 ) ( 457.4 ) ( 317.3 )

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— 0.8 ( 0.8 )

Foreign currency translation loss ( 0.3 ) — —

Total other comprehensive income (loss) ( 0.3 ) 0.8 ( 0.8 )

Comprehensive loss $ ( 537.1 ) $ ( 457.1 ) $ ( 318.1 )

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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 20,833 — 10,004,612 — 118.1 — — 118.1

Exercise of stock options 859,544 — 3,556,492 — 0.5 — — 0.5

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

Issuance of restricted stock units 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

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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 )

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

Exercise of stock options 1,149,934 — 877,287 — 0.2 — — 0.2

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

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 program 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

Common Stock Additional

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Shares Amount Shares Amount

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

Conversion of Class B common stock to Class A common stock 43,434,962 — ( 43,434,962 ) — — — — —

Issuance of Class A common stock 1,685,994 — — — 5.9 — — 5.9

Issuance of restricted stock units and restricted stock expense 13,774,204 — 5,002,306 — 46.5 — — 46.5

Exercise of stock options 732,072 — 267,041 — — — — —

Issuance of warrants and warrant expense — — — — 55.2 — — 55.2

Exercise of warrants 13,242,767 — — — — — — —

Common stock issued under employee stock purchase plan 1,723,996 — — — 4.8 — — 4.8

Common stock issued under stock purchase agreement 17,401,153 — — — 53.5 — — 53.5

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

Common stock issued under at-the-market program 32,971,617 — — — 137.8 — — 137.8

PIPE financing 113,193,358 0.1 — — 565.7 — — 565.8

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Net loss — — — — — ( 536.8 ) — ( 536.8 )

Other comprehensive income — — — — — — 0.8 0.8

Other comprehensive loss — — — — — — ( 0.3 ) ( 0.3 )

Balance as of December 31, 2024 503,777,464 $ 0.1 — $ — $ 2,438.4 $ ( 1,685.6 ) $ ( 0.3 ) $ 752.6

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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Gain on issuance of common stock

( 1.5 ) ( 3.6 ) —

Non-cash lease expense 3.0 3.8 4.6

Research and development warrant expense 8.1 17.5 2.9

General and administrative warrant expense 0.2 — —

Other warrant expense — 2.1 10.8

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Accretion and amortization income of short-term investments — ( 2.3 ) ( 4.9 )

Gain on forgiveness of PPP loan — — ( 0.9 )

Changes in operating assets and liabilities:

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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

Recapitalization transaction costs — — ( 55.8 )

( 24.3 ) ( 6.0 ) —

Proceeds from shares issued under at-the-market program 138.3 20.7 —

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

( 0.3 ) ( 1.2 ) —

Proceeds from exercise of stock options — — 0.1

Proceeds from exercise of stock warrants — — 0.1

Proceeds from shares issued under employee stock purchase plan

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Purchases of property and equipment included in accounts payable and accrued expenses 7.8 10.8 3.1

Allocation of debt proceeds to stock warrants — — 1.2

Conversion of convertible preferred stock to common stock in connection with the reverse recapitalization — — 61.5

PIPE financing issuance costs settled with the issuance of Class A common stock — — 7.0

Recapitalization transaction costs settled with the issuance of Class A common stock — — 8.1

See accompanying notes to consolidated financial statements.

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(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.

The Company’s mission is to unlock the skies, freeing everyone to reimagine how they move and spend time.

The Company is developing technologies and aircraft that will power the future of advanced aviation.

The Company’s primary product is an electric vertical take-off and landing (“eVTOL”) aircraft.

The Company’s Planned Lines of Business

Upon receipt of all necessary Federal Aviation Administration (“FAA”) certifications and any other government approvals necessary for the Company to manufacture and operate its aircraft, the Company intends to operate two complementary lines of business.

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 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 along with ancillary products and services to third parties.

The Company intends to operate the following lines of business:

This is planned to consist of the sale of the Company’s commercial aircraft and related technologies and services (“Archer Direct”) and direct-to-consumer aerial ride share services in select metropolitan areas around the world (“Archer UAM”).

This is planned to consist of the sale of aircraft and related technologies for defense applications.

Business Combination

On September 16, 2021 (the “Closing Date”), Archer Aviation, Inc., a Delaware corporation (prior to the closing of the Business Combination (as defined below), “Legacy Archer”), Atlas Crest Investment Corp., a Delaware corporation (“Atlas”), and Artemis Acquisition Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Atlas (“Merger Sub”), consummated the closing of the transactions contemplated by the Business Combination Agreement, dated February 10, 2021, as amended and restated on July 29, 2021, by and among Atlas, Legacy Archer and Merger Sub (the “Business Combination Agreement”), following approval at a special meeting of the stockholders of Atlas held on September 14, 2021 (the “Special Meeting”).

Unless otherwise specified or unless the context otherwise requires, references in these notes to Legacy Archer refer to Archer prior to the Business Combination and references in these notes to “New Archer” refer to Archer following the Business Combination.

Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Archer and Atlas was effected by the merger of Merger Sub with and into Legacy Archer, with Legacy Archer surviving the merger (the “Surviving Entity”) as a wholly-owned subsidiary of Atlas (the “Merger,” and, collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”).

Following the consummation of the Merger on the Closing Date, the Surviving Entity changed its name from Archer Aviation, Inc.

to Archer Aviation Operating Corp., and Atlas changed its name from Atlas Crest Investment Corp.

to Archer Aviation Inc.

and it became the successor registrant with the U.S.

Securities and Exchange Commission (the “SEC”).

Prior to the closing of the Business Combination, the Class A common stock and public warrants of Atlas were listed on the New York Stock Exchange (“NYSE”) under the symbols “ACIC” and “ACIC WS,” respectively.

New Archer Class A common stock and public warrants are currently listed on the NYSE under the symbols “ACHR” and “ACHR WS,” respectively.

The Company went public through a de-SPAC transaction in September 2021 as a result of the merger agreement that was entered into in February 2021 (the “Business Combination Agreement”) by Archer Aviation Inc., a Delaware corporation (that existed prior to the closing of the Business Combination (as defined below), “Legacy Archer”), Atlas Crest Investment Corp., a Delaware Corporation (“Atlas”) and Artemis Acquisition Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Atlas (“Merger Sub”).

Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Archer and Atlas was effected by the merger of Merger Sub with and into Legacy Archer, with Legacy Archer surviving the merger as a wholly-owned subsidiary of Atlas (collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”).

Following the consummation of the Business Combination on September 16, 2021, Legacy Archer changed its name to Archer Aviation Operating Corp., and Atlas changed its name to Archer Aviation Inc.

and it became the successor registrant with the Securities and Exchange Commission (“SEC”).

The Company’s Class A common stock and public warrants are listed on the NYSE under the symbols “ACHR” and “ACHR WS,” respectively.

The financial statements included in this report reflect (i) the historical operating results of Legacy Archer prior to the Business Combination;

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and (iv) the Company’s equity structure for all periods presented.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Note 2 - Liquidity and Going Concern

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.

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

Funding of these activities has primarily been through the net proceeds received from the issuance of related and third-party debt (Note 6 - Notes Payable), and the sale of preferred and common stock to related and third parties (Note 8 - Preferred and Common Stock).

Through December 31, 2024, the Company has incurred cumulative losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $ 1,685.6 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, 2024, the Company had cash and cash equivalents of $ 834.5 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.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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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Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.

GAAP”) and include the accounts of the Company.

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

Retroactive Application of Reverse Recapitalization

As discussed in Note 4 - Reverse Recapitalization and Related Transactions, the Business Combination was accounted for as a reverse recapitalization of equity structure.

Pursuant to U.S.

GAAP, the Company retrospectively recast its weighted-average outstanding shares within the Company’s consolidated statement of operations for the year ended December 31, 2021.

As part of the closing, all of Legacy Archer’s issued Series Seed redeemable convertible preferred stock and Series A redeemable convertible preferred stock were converted into Legacy Archer common stock, which were converted again, along with all other issued and outstanding common stock of Legacy Archer, into New Archer Class A common stock and New Archer Class B common stock.

The basic and diluted weighted-average Legacy Archer common stock were retroactively converted to New Archer Class A common stock and New Archer Class B common stock to conform to the recast in the consolidated statements of stockholders’ equity.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Cash, Cash Equivalents, and Restricted Cash

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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.

Refer to Note 7 - Commitments and Contingencies for additional information.

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):

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Total cash, cash equivalents, and restricted cash $ 841.3 $ 471.5

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Short-Term Investments

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 had short-term investments in marketable securities with original maturities of less than one year, including United States 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.

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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.

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.

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

As of December 31, 2024 and 2023, the Company had no short-term investments.

Fair Value Measurements

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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.

Notes to Consolidated Financial Statements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2024 and 2023 and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in millions):

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$ — $ — $ 33.4 $ 33.4

Accrued technology and dispute resolutions agreements liability

$ — $ — $ 44.0 $ 44.0

Archer Aviation Inc.

Notes to Consolidated Financial Statements

As of December 31, 2023

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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

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$ — $ — $ 14.5 $ 14.5

Accrued technology and dispute resolutions agreements liability

$ — $ — $ 44.0 $ 44.0

Cash Equivalents

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The Company classifies its money market funds as Level 1, because they are valued based on quoted market prices in active markets.

Short-Term Investments

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.

Treasury securities as Level 1, because they are valued using quoted market prices in active markets.

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 tables present a summary of the Company’s cash equivalents as of December 31, 2024 and 2023 (in millions):

As of December 31, 2024

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Money market funds $ 339.6 $ — $ — $ 339.6

Short-term investments:

Treasury securities 317.4 — ( 0.8 ) 316.6

Corporate debt securities 20.1 — — 20.1

Commercial paper 125.1 — — 125.1

Total $ 339.6 $ — $ — $ 339.6

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 years ended December 31, 2023, 2022 and 2021 .

Public Warrants

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

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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

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Strike price $ 11.50 $ 11.50

Dividend yield 0.00 % 0.00 %

Term (in years) 1.7 2.7

Volatility 70.15 % 75.00 %

Risk-free rate 4.2 % 4.0 %

Volatility 92.1 % 70.2 %

Dividend yield 0.0 % 0.0 %

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.

Under the Technology and Dispute Resolution Agreements, the Company recognized an accrued technology and dispute resolution agreements liability related to the Wisk Warrant (as defined below).

See Note 7 - Commitments and Contingencies for additional information.

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.

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

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Strike price $ 0.01

Dividend yield 0.00 %

Term (in years) 0.1

Volatility 60.00 %

Risk-free rate 5.4 %

Volatility 60.0 %

Dividend yield 0.0 %

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, 2024 and 2023 (in millions):

Balance as of December 31, 2022

accrued technology and dispute resolution agreements liability

Change in fair value 8.0

Balance as of December 31, 2023 (1)

accrued technology and dispute resolution agreements liability

settlement of accrued technology and dispute resolution agreements liability ( 54.3 )

Change in fair value 29.2

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(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.

In connection with the change in fair value of the Company’s private placement warrants, the Company recognized a loss of $ 18.9 million and $ 12.0 million during the years ended December 31, 2024 and 2023, respectively, and a gain of $ 7.6 million during the year ended December 31, 2022, within other income (expense), net in the consolidated statements of operations.

Refer to Note 11 - Liability Classified Warrants for additional information about the private placement warrants.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

In connection with the change in fair value of the accrued technology and dispute resolution agreements liability, the Company recognized a loss of $ 10.3 million and a gain of $ 4.0 million within general and administrative expenses in the consolidated statements of operations during the years ended December 31, 2024 and 2023, respectively.

Refer to Note 7 - Commitments and Contingencies for additional information about the accrued technology and dispute resolution agreements liability.

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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

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 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 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.

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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.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets as follows:

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Website design 2

Leasehold improvements Shorter of lease term or the asset standard life

Building and leasehold improvements Shorter of building useful life / lease term or the asset standard life

Impairment of Long-Lived Assets

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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

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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 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, 2024 and 2023, the net carrying amounts of the Company’s capitalized cloud computing implementation costs were $ 5.9 million and $ 6.4 million, respectively.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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.

Contract liabilities consisted of the following (in millions):

Year Ended December 31,

Current portion of contract liabilities

Contract liabilities, net of current portion

Total $ 12.7 $ 10.8

Current portion of contract liabilities is recorded in accrued expenses and other current liabilities and contract liabilities, net of current portion is recorded in other long-term liabilities in the Company’s consolidated balance sheets.

As of December 31, 2024 and 2023, the Company’s contract liabilities included 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 9 - Stock-Based Compensation), and installment payments 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, of $ 1.8 million and $ 0.8 million, respectively.

No revenues were recognized during the years ended December 31, 2024, 2023 and 2022.

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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 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.

General and administrative expenses include charges relating to the Technology and Dispute Resolution Agreements (defined below) for the years ended December 31, 2024 and 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 (each, a “Founder Grant” and collectively, the “Founder Grants”) for the years ended December 31, 2024, 2023 and 2022.

Refer to Note 7 - Commitments and Contingencies and Note 9 - Stock-Based Compensation for additional information.

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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.

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:

Expected term — The estimate of the expected term of employee awards is determined in accordance with the simplified method, which estimates the term based on an averaging of the vesting period and contractual term of the option grant.

The Company uses the contractual term for non-employee awards.

Expected volatility — Since the Company does not have sufficient historical data on the volatility of its common stock, the expected volatility used is based on the volatility of similar entities (referred to as “guideline companies”) for a period consistent with the expected term of the award.

Risk-free interest rate — The risk-free interest rate used to value awards is based on the United States Treasury yield in effect at the time of grant for a period consistent with the expected term of the award.

Dividend yield — The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future.

Forfeiture rate — The Company has elected to account for forfeitures as they occur and will record stock-based compensation expense assuming all option holders will complete the requisite service period.

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.

The Company has not issued any stock options since the closing of the Business Combination.

Fair Value of Common Stock

The Company’s Board of Directors grants stock options with exercise prices equal to the fair value of the Company’s common stock on the date of grant.

Prior to the closing of the Business Combination, the Company determined the fair value of its common stock at the time of the grant of stock options in accordance with the American Institute of Certified Public Accountants (“AICPA”) Accounting and Valuation Guide:

Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “AICPA Practice Aid”).

The Company determined the fair value of its common stock based on a variety of factors including, but not limited to (i) the results of contemporaneous independent third-party valuations of the Company’s common stock and the prices, rights, preferences and privileges of the Company’s redeemable convertible preferred stock relative to those of the Company’s common stock;

(ii) the lack of marketability of the Company’s common stock;

(iii) actual operating and financial results;

(iv) current business conditions and projections;

(v) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions;

and (vi) precedent transactions involving the Company’s shares.

As provided in the AICPA Practice Aid, there are several approaches for setting the value of an enterprise and various methodologies for allocating the value of an enterprise to its outstanding equity.

The Company determined the fair value of equity awards using a combination of the market and income approach.

Within the market approach, the guideline public company method was used, which employs the use of ratios developed from the market price of traded shares from publicly traded companies considered reasonably similar to the Company.

Under the income approach, the enterprise value was estimated using the discounted cash flow method, which involves estimating the future cash flows of a business for a discrete period and discounting them to their present value.

In allocating enterprise value to the Company’s outstanding equity, the Company applied a hybrid approach, which consisted of the option pricing method (“OPM”) and probability-weighted expected return method (“PWERM”).

The OPM treats securities, including debt, common and preferred stock, as call options on the enterprise’s value, with exercise prices based on the securities’ respective liquidation preferences and conversion values.

The PWERM estimates the fair market value of the common stock based on an analysis of future values for the enterprise assuming various exit scenarios, such as IPO, merger or sale, staying private, and liquidation.

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.

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.

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.

The Company accounts for leases in accordance with ASC 842, Leases , and determines if an arrangement is a lease at its inception.

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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 the computation of basic net loss per share as of the date that all necessary conditions to earn the awards have been satisfied.

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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 consolidated 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.

The CODM uses net loss 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.

Segment asset information is not used by the CODM to allocate resources.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The following table presents significant expenses provided to the CODM (in millions):

Year Ended December 31,

2024 2023 2022

Operating expenses

Depreciation and amortization expense

$ 11.7 $ 6.5 $ 3.1

Research and development warrant expense

Stock-based compensation

108.8 45.2 102.8

Technology and dispute resolution agreements

General and administrative warrant expense

Other research and development expense

290.9 224.6 140.1

Other general and administrative expense

78.0 80.7 87.7

Other warrant expense — 2.1 10.8

Total operating expenses 509.7 446.9 347.4

Loss from operations ( 509.7 ) ( 446.9 ) ( 347.4 )

Other income (expense), net ( 48.8 ) ( 26.9 ) 27.8

Interest income, net 21.9 16.4 2.3

Loss before income taxes ( 536.6 ) ( 457.4 ) ( 317.3 )

Income tax expense ( 0.2 ) ( 0.5 ) —

Net loss $ ( 536.8 ) $ ( 457.9 ) $ ( 317.3 )

Comprehensive Loss

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.

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

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.

The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging , or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract.

The convertible debt instruments will be accounted for as a single liability measured at amortized cost.

Further, the ASU made amendments to the Earnings Per Share (“EPS”) guidance in Topic 260, Earnings Per Share for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method.

The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting.

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

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 Company adopted ASU 2023-07 effective January 1, 2024.

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

Refer to Note 3 - Summary of Significant Accounting Policies for additional information.

Recently Issued Accounting Pronouncements Not Yet Adopted

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

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 update 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

Upon the consummation of the Business Combination on September 16, 2021, in accordance with the terms and conditions of the Business Combination Agreement, all issued and outstanding Legacy Archer common stock was converted into shares of common stock of New Archer at an exchange ratio of 1.00656519 (the “Exchange Ratio”).

Additionally, upon closing the Business Combination, Legacy Archer received $ 257.6 million in cash proceeds released from Atlas’ trust account, after redemptions of $ 242.4 million.

At the closing of the Business Combination, each non-redeemed outstanding share of Atlas Class A common stock was converted into one share of Class A common stock of New Archer.

Upon consummation of the Business Combination, the shares of Legacy Archer held by Legacy Archer stockholders converted into 124,735,762 shares of common stock of New Archer, including 54,987,838 shares of Class A common stock and 69,747,924 shares of Class B common stock.

While the legal acquirer in the Business Combination was Atlas, for accounting and financial reporting purposes under U.S.

GAAP, Legacy Archer is the accounting acquirer and the Business Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Legacy Archer in many respects.

Under this method of accounting, Atlas was treated as the “acquired” company.

Accordingly, the consolidated assets, liabilities, and results of operations of Legacy Archer became the historical financial statements of New Archer, and Atlas’ assets and liabilities were consolidated with Legacy Archer’s on the Closing Date.

Operations prior to the Business Combination are presented as those of New Archer in reports subsequent to the Closing Date.

The net assets of Atlas were recognized at their carrying value immediately prior to the closing of the Business Combination with no goodwill or other intangible assets recorded and were as follows, net of transaction costs (in millions):

Warrant liability ( 39.5 )

Net assets acquired $ 162.3

The Company accounted for the Business Combination as a tax-free reorganization.

Additionally, as part of the recapitalization, 1,875,000 shares of Atlas Class A common stock held by Atlas Crest Investment LLC (the “Atlas Sponsor”) were exchanged with 1,875,000 shares of New Archer Class A common stock that will be subject to forfeiture if the vesting condition is not met over the three-year term following the Closing Date.

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.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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.

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.

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.

Substantially concurrently with the execution of the Business Combination Agreement, Atlas entered into Subscription Agreements (the “Subscription Agreements”) with certain investors in the PIPE Financing (the “Subscription Investors”).

Pursuant to the Subscription Agreements, the Subscription Investors agreed to purchase, and Atlas agreed to sell to the Subscription Investors, an aggregate of 60,000,000 shares of New Archer Class A common stock for a purchase price of $ 10 .00 per share, or an aggregate of $ 600.0 million in gross cash proceeds.

Pursuant to the Subscription Agreements, Atlas granted certain registration rights to the Subscription Investors with respect to the shares issued and sold in the PIPE Financing.

The closing of the PIPE Financing occurred immediately prior to the closing of the Business Combination.

In conjunction with the PIPE Financing, 1,512,500 shares of New Archer Class A common stock were issued to satisfy certain fees related to the Business Combination and PIPE Financing.

The number of shares of common stock issued immediately following the consummation of the Business Combination were as follows:

Number of shares

Class A and B common stock outstanding on July 1, 2021 52,572,374

Common stock issued through option exercises between July 1, 2021 and September 16, 2021 4,738,344

Vesting of unvested shares between July 1, 2021 and September 16, 2021 2,540,925

Common stock outstanding prior to the Business Combination 59,851,643

Conversion of preferred stock 64,884,120

Common stock attributable to Atlas 36,385,693

Adjustment related to reverse recapitalization* 101,269,813

Restricted stock units vested at closing 10,004,612

Common stock attributable to PIPE Financing 61,512,500

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 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

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which requires disclosure of additional information about specific expense categories in the notes to the financial statements.

The update is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted.

The update can be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any of all prior periods presented in the financial statements.

The Company is currently evaluating the impact of ASU 2024-03 on its disclosures within its consolidated financial statements.

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.

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 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 4 - Property and Equipment, Net

1 unchanged sentence

As of December 31,

Building $ 64.4 $ —

Furniture, fixtures, and equipment 24.7 7.9

2 unchanged sentences

Website design 0.8 0.8

Leasehold improvements 33.0 2.9

Building and leasehold improvements 34.2 33.0

Construction in progress 13.3 18.4

2 unchanged sentences

Total property and equipment, net $ 126.8 $ 57.6

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):

4 unchanged sentences

Total depreciation expense $ 10.3 $ 5.8 $ 3.1

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Note 5 - Accrued Expenses and Other Current Liabilities

7 unchanged sentences

Accrued cloud computing implementation costs 0.1 0.3

Accrued marketing fees — 0.2

Accrued technology and dispute resolution agreements liability (Note 7 )

Current portion of contract liabilities

Other current liabilities 3.9 3.7

Total $ 52.8 $ 96.9

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Note 6 - Notes Payable

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

Notes payable consisted of the following (in millions):

As of December 31,

1 unchanged sentence

Loan unamortized discount and loan issuance costs

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

Term Loans unamortized discount and loan issuance costs — ( 0.7 )

( 1.0 ) ( 0.3 )

Total debt, net of discount and loan issuance costs 64.0 7.2

6 unchanged sentences

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 interest rate on the Loan is a floating rate per annum equal to secured overnight financing rate (as defined in the Credit Agreement) plus the applicable margin of 2.0 %, which increases by 5.0 % 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 and the Credit Agreement is guaranteed by the Company’s domestic subsidiaries.

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.

The Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, and customary events of default.

As of December 31, 2024, the Company was in compliance with all the covenants of the Credit Agreement.

The Company has drawn down $ 65.0 million of the Loan as of December 31, 2024.

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

The effective interest rate for the draw downs ranged from 6.7 % to 7.2 % and 7.7 % to 8.2 % as of December 31, 2024 and 2023, respectively.

The Company incurred issuance costs of $ 1.0 million related to the loan outstanding as of December 31, 2024.

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.

During the years ended December 31, 2024 and 2023, the Company recognized interest expense of $ 0.1 million and $ 0.1 million, respectively, including an immaterial amount related to the amortization of issuance costs within interest income, net in the consolidated statements of operations.

The carrying value of the Loan, net of unamortized issuance costs of $ 1.0 million was $ 64.0 million as of December 31, 2024.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The future scheduled principal maturities of the Loan as of December 31, 2024 are as follows (in millions):

2029 and thereafter

Thereafter 56.8

Silicon Valley Bank (“SVB”) Loan

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.

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The effective interest rate as of December 31, 2023 and 2022 were 10.2 % and 9.4 %, 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.

For the years ended December 31, 2023 and 2022, the Company recognized interest expense of $ 0.6 million and $ 1.5 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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Upon the closing of the Business Combination, the SVB warrants became public warrants.

The subsequent measurement of the SVB 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 subsequent measurement of the SVB warrants 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 $ 3.22 as of December 31, 2024.

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.

During the years ended December 31, 2023 and 2022, the Company recognized interest expense of $ 0.7 million and $ 0.5 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.

Notes to Consolidated Financial Statements

Note 7 - Commitments and Contingencies

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The Company leases office, lab, hangar, and storage facilities under various operating lease agreements with lease periods expiring between 2025 and 2030 and generally containing periodic rent increases and various renewal and termination options.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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

22 unchanged sentences

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.

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

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

2 unchanged sentences

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

Archer Aviation Inc.

Notes to Consolidated Financial Statements

As of December 31, 2024, the Company had standby letters of credit in the aggregate outstanding amount of $ 5.8 million, secured with restricted cash.

1 unchanged sentence

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 the Company’s financial condition or results of operations.

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.

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.

Wisk Litigation and Technology and Dispute Resolution Agreements

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 alleging misappropriation of trade secrets and patent infringement.

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

On August 10, 2023, the Company, the Boeing Company (“Boeing”) and Wisk 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”).

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

The Company recorded the initial vested tranche of shares underlying the warrant within equity at its fair value and recognized technology and dispute resolution agreements expense for the initial vested tranche of shares upon the issuance of the Wisk Warrant.

The Company recorded the unvested portion of shares underlying the Wisk Warrant (the “Second Tranche”) as liabilities at their fair value and adjusted the Wisk Warrant to fair value at each reporting period.

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

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

Upon the issuance of shares underlying the the Second Tranche, the warrant liability was reclassed to equity at fair value.

During the years ended December 31, 2024 and 2023, the Company recorded $ 10.3 million and $ 70.3 million, respectively, in general and administrative expenses.

On June 7, 2024, Wisk filed a motion in the United States District Court for the Northern District of California to enforce the Technology and Dispute Resolution Agreements in regards to a dispute between the parties with respect to the Second Tranche.

The Company filed its opposition on July 10, 2024 and a hearing on Wisk’s motion occurred on August 14, 2024.

On September 6, 2024, the Court entered an order determining that the shares underlying the Second Tranche were exercisable and that the Company was required to pay Wisk prejudgment interest for the period from March 21, 2024 through the date of the Court’s hearing on the issue, which has been paid by the Company.

On November 5, 2024, the Court issued an order denying Wisk’s motion for partial reconsideration of certain aspects of the Court’s August order.

The Wisk Warrant was fully vested and exercised in the year ended December 31, 2024.

Delaware Class Action Litigation

On May 17, 2024, two putative stockholders of the Company (and formerly, Atlas) filed class action lawsuits, on behalf of themselves and other similarly-situated stockholders, in the Delaware Court of Chancery against the directors and officers of Atlas, the Company, the Company’s co-founders, Moelis & Company Group LP and Moelis & Company LLC.

The complaint asserts claims against the defendants for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, and unjust enrichment, in connection with the merger between Atlas and the Company.

The plaintiffs request damages in an amount to be determined at trial, as well as attorneys’ and experts’ fees.

Relatedly, on June 19, 2024, another putative stockholder of the Company filed a class action lawsuit, on behalf of himself and other similarly-situated stockholders, in the Delaware Court of Chancery asserting similar claims as the aforementioned May 17, 2024 complaint against the same defendants named in that May complaint.

The Delaware Court of Chancery subsequently consolidated the related class actions and appointed a lead plaintiff.

The Company along with the other defendants filed a motion to dismiss on October 3, 2024.

The plaintiffs filed an answer on January 13, 2025.

The hearing on the motion to dismiss is scheduled for April 17, 2025.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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.

On June 28, 2024, a stockholder of the Company filed a class action complaint in the Delaware Court of Chancery regarding the vote at the annual meeting of stockholders held on June 21, 2024 to approve the amendment to the Company’s Amended and Restated Certificate of Incorporation filed on September 16, 2021 (the “Amended and Restated Certificate of Incorporation”) to include a provision exculpating officers of the Company from certain types of duty of care claims.

On July 5, 2024, the Company filed a Certificate of Correction to clarify that its Amended and Restated Certificate of Incorporation remains unchanged and the Delaware Court of Chancery subsequently dismissed the class action.

On October 28, 2024, the parties entered into a settlement that releases all claims by the plaintiff and on November 7, 2024, the Company paid an immaterial amount as required under the settlement agreement.

Note 8 - Preferred and Common Stock

On December 26, 2024, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the total number of authorized shares of capital stock from 1,010,000,000 to 1,710,000,000 , consisting of 1,400,000,000 shares of Class A common stock, 300,000,000 shares of Class B common stock and 10,000,000 shares of preferred stock.

Effective December 31, 2024 (the “Final Conversion Date”), pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation providing for the automatic conversion of the Company’s Class B common stock on the last trading day of the year during which the number of outstanding shares of Class B common stock represents less than 10.0 % of the total number of outstanding shares of the Company’s Class A common stock and Class B common stock, each outstanding share of Class B common stock automatically converted into the same number of shares of Class A common stock (the “Conversion”).

No additional shares of Class B common stock have been or will be issued following the Final Conversion Date.

Preferred Stock

As of December 31, 2024, no shares of preferred stock were outstanding, and the Company has no present plans to issue any shares of preferred stock.

Class A and Class B Common Stock

Except for voting rights and conversion rights, or as otherwise required by applicable law, the shares of the Company’s Class A common stock and Class B common stock have the same powers, preferences, and rights and rank equally, share ratable and are identical in all respects as to all matters.

The rights, privileges, and preferences are as follows:

Holders of the Company’s Class A common stock are entitled to one vote per share on all matters to be voted upon by the stockholders, and holders of Class B common stock are entitled to ten votes per share on all matters to be voted upon by the stockholders.

The holders of Class A common stock and Class B common stock will generally vote together as a single class on all matters submitted to a vote of the stockholders, unless otherwise required by Delaware law or the Company’s amended and restated certificate of incorporation.

Holders of Class A common stock and Class B common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s Board of Directors in its discretion out of funds legally available therefor.

Holders of the Company’s Class A common stock are entitled to one vote per share on all matters to be voted upon by the stockholders and prior to the Conversion, holders of Class B common stock were entitled to ten votes per share on all matters to be voted upon by the stockholders.

As a result of the Conversion during the year, all former holders of Class B common stock received an equal number of shares of Class A common stock.

In addition, the provisions of the Certificate of Incorporation and DGCL that entitled the holders of shares of Class A common stock and Class B common stock, in certain circumstances, to separate class voting rights, are no longer applicable as a result of the Conversion.

Holders of Class A common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s Board of Directors in its discretion out of funds legally available therefor.

No dividends on common stock have been declared by the Company’s Board of Directors through December 31, 2024, and the Company does not expect to pay dividends in the foreseeable future.

Preemptive Rights

Stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to Class A common stock and Class B common stock.

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock.

In addition, each share of Class B common stock will automatically convert into one share of Class A common stock upon transfer to a non-authorized holder.

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 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.

Stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to Class A common stock.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The Company’s Class B common stock was subject to “sunset” provisions of the Company’s Amended and Restated Certificate of Incorporation, pursuant to which all shares of Class B common stock would 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.

During the year ended December 31, 2024, shares of the Company’s Class B common stock represented less than 10 % of all outstanding shares of the Company’s common stock, and as such pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, each outstanding share of Class B common stock automatically converted into an equal number of Class A common stock on December 31, 2024.

Following the Final Conversion Date, the Company may no longer issue any additional shares of Class B common stock.

During the years ended December 31, 2024, 2023 and 2022, 43,434,962 , 26,449,869 and 8,406,170 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.

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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.

On August 8, 2024, the Company entered into subscription agreements with certain investors providing for the private placement of the Company’s Class A common stock at a purchase price of $ 3.35 per share (the “First 2024 PIPE Financing”), pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

A portion of the First 2024 PIPE Financing closed on August 12, 2024 for 49,283,582 shares of the Company’s Class A common stock for net proceeds of approximately $ 158.0 million, after deducting offering costs.

The remaining portion of the First 2024 PIPE Financing covering an aggregate of 2,982,089 shares of the Company’s Class A common stock to be issued and sold to Stellantis N.V.

(“Stellantis”) for gross proceeds of approximately $ 10.0 million closed on January 6, 2025.

On December 11, 2024, the Company entered into subscription agreements with certain investors providing for the private placement of the Company’s Class A common stock at a purchase price of $ 6.65 per share (the “Second 2024 PIPE Financing”), pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

A portion of the Second 2024 PIPE Financing closed on December 13, 2024 for 63,909,776 shares of the Company’s Class A common stock for net proceeds of approximately $ 407.7 million, after deducting offering costs.

The remaining portion of the Second 2024 PIPE Financing covering an aggregate of 751,879 shares of the Company’s Class A common stock to be issued and sold to Stellantis for anticipated gross proceeds of approximately $ 5.0 million is subject to the satisfaction of certain closing conditions, including approval by the Company’s stockholders.

At-The-Market Program

In November 2023, the Company filed a shelf registration statement on Form S-3 with the SEC and a related prospectus supplement pursuant to which it may, from time to time, sell shares of its Class A common stock, having an aggregate value of up to $ 70.0 million, pursuant to a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) with a placement agent (the “First ATM Program”).

The First ATM Program was fully utilized in May 2024.

During the years ended December 31, 2024 and 2023, the Company sold 10,275,033 and 3,109,097 shares of Class A common stock, respectively, under the First ATM Program, for net proceeds of $ 48.1 million and $ 19.5 million, respectively.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

In May 2024, the Company filed a shelf registration statement on Form S-3 with the SEC that permits the offering of an aggregate of up to $ 95.0 million of shares of the Company’s Class A common stock or preferred stock, debt securities, warrants, and units (the “2024 Shelf Registration Statement”), including a prospectus for the sale under the Sales Agreement of shares of its Class A common stock, having an aggregate value of up to $ 70.0 million (the “Second ATM Program”).

The Second ATM Program was fully utilized in November 2024.

During the year ended December 31, 2024, the Company sold 20,644,100 shares of Class A common stock under the Second ATM Program for net proceeds of $ 68.0 million.

In November 2024, the Company filed a shelf registration statement on Form S-3ASR with the SEC and a related prospectus for the sale under the Sales Agreement of shares of its Class A common stock, having an aggregate value of up to $ 70.0 million (the “Third ATM Program”).

During the year ended December 31, 2024, the Company sold 2,052,484 shares of Class A common stock under the Third ATM Program for net proceeds of $ 21.7 million.

As of December 31, 2024, the Company had $ 47.5 million remaining eligible for sales under the Third ATM Program.

The Company pays the placement agent a commission rate of up to 3.0 % of the gross proceeds from any shares of Class A common stock sold through the Sales Agreement.

Note 9 - Stock-Based Compensation

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Such stock options will continue to be governed by the terms of the 2019 Plan and the stock option agreements thereunder, until such outstanding options are exercised or until they terminate or expire.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Employee Stock Purchase Plan

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The ESPP permits eligible employees to purchase shares of Class A common stock at a price equal to 85.0 % 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.

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

Archer Aviation Inc.

Notes to Consolidated Financial Statements

December 31 of the preceding year;

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

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Stock price $ 9.57

Risk-free interest rate 5.26 %

Term (in years) 0.5

Risk-free interest rate 4.4 %

Volatility 85.0 %

1 unchanged sentence

Grant date fair value per share $ 3.67

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.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized stock-based compensation expense of $ 2.6 million, $ 1.2 million and $ 0.1 million for the ESPP, respectively.

As of December 31, 2024, the total remaining stock-based compensation expense was $ 1.6 million for the ESPP, which is expected to be recognized over the current six-month offering period until May 31, 2025.

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.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized stock-based compensation expense of $ 17.8 million, $ 11.5 million and $ 9.5 million, respectively, related to these annual equity awards.

Archer Aviation Inc.

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There were no options granted for the years ended December 31, 2024, 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.

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 ended December 31, 2021 are provided in the following table:

December 31, 2021

Risk-free interest rate:

Employee stock options 0.62 %

Non-employee stock options 1.08 %

Expected term (in years):

Employee stock options 6.32

Non-employee stock options 10.00

Expected volatility:

Employee stock options 87.94 %

Non-employee stock options 88.03 %

Dividend yield:

Employee stock options 0.00 %

Non-employee stock options 0.00 %

Grant date fair value per share:

Employee stock options $ 13.65

Non-employee stock options $ 13.68

The Company recognized stock-based compensation expense of $ 2.5 million, $ 2.8 million and $ 3.8 million for stock options for the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024, the total remaining stock-based compensation expense for unvested stock options was $ 2.2 million, which is expected to be recognized over a weighted-average period of 0.4 years.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Restricted Stock Units

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

Grant Fair Value

Outstanding as of January 1, 2024

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28,658,246 5.02

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.

During the year ended December 31, 2024, the Company granted 2,735,840 RSUs under the Amended and Restated 2021 Plan, representing the annual equity awards for 2023.

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

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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, 2024, the Company granted 1,322,520 RSUs under the Amended and Restated 2021 Plan to certain executives, which vest over a three-year period with a payout based on the Company’s relative performance of total shareholder return (“TSR”) compared with the annualized TSR of certain peer companies for the service period (the “PSUs”).

The award payout can range from 0.0 % to 200.0 % of the initial grant, and is measured on each anniversary of the grant date.

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

If an executive’s employment ends due to disability, death, termination without cause or resignation for good reason, the executive (or beneficiary) remains eligible under the award and, if the award is earned, will receive a proration of the PSUs based on active employment during the annual service periods.

In all other cases, the award will not vest and all rights to the PSUs will terminate.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The Company also granted 295,858 RSUs under the Amended and Restated 2021 Plan to an employee that pays out based on attainment of predefined performance goals so long as the employee remains employed by the Company over the ten-year performance period.

The award payout can range from 0.0 % to 100.0 % of the initial grant.

The Company determined the fair value of the PSUs using a Monte Carlo simulation model on the grant date.

The Company will recognize compensation expense for the PSUs on a straight-line basis over the three-year performance period.

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

December 18, 2024 March 26, 2024

Stock price $ 8.95 $ 4.79

Term (in years) 3.0 3.0

Risk-free interest rate 4.3 % 4.3 %

Volatility 87.3 % 87.1 %

Dividend yield 0.0 % 0.0 %

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 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.

One-quarter of each of the Founder Grants was intended to vest 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 conditions, a performance award condition and market award condition.

Each tranche vests when either the market condition or performance condition is satisfied (only one condition is satisfied).

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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:

September 16, 2021

Stock price $ 9.92

Term (in years) 7

Volatility 55.00 %

Risk-free interest rate 1.13 %

Dividend yield 0.00 %

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

One-quarter of each of the Founder Grants, totaling 10,004,612 shares 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 the Company’s former co-CEO were cancelled.

On July 13, 2023, following the expiration of 15 months from the separation of the former co-CEO from the Company on April 13, 2022, the former officer’s unvested 15,006,918 shares of Class B common stock for the remaining three tranches were forfeited.

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

During the year ended December 31, 2024, the Company’s Board of Directors determined that the performance milestone for the second tranche of the outstanding Founder Grant, covering 5,002,306 shares of Class B common stock, was achieved.

As of December 31, 2024, there were 10,004,612 RSUs outstanding, representing the remaining two tranches of the outstanding Founder Grant.

For the years ended December 31, 2024, 2023 and 2022, the Company recorded $ 33.1 million, $ 49.7 million and $ 64.9 million of stock-based compensation expense, respectively, for the remaining three tranches of the outstanding Founder Grant in general and administrative expenses in the consolidated statements of operations.

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

For the years ended December 31, 2024, 2023 and 2022, the Company recorded $ 47.4 million, $ 27.0 million and $ 22.8 million of stock-based compensation expense, respectively, related to RSUs (excluding the Founder Grants).

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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.

As of December 31, 2024, the total remaining stock-based compensation expense for unvested RSUs (including the remaining Founder Grant) was $ 114.5 million, which is expected to be recognized over a weighted-average period of 0.9 years.

Restricted Stock

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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.

Issuance of Class A Common Stock

During the year ended December 31, 2024, the Company issued 1,685,994 shares of Class A common stock pursuant to its 2024 Shelf Registration Statement to certain service providers to satisfy $ 5.8 million of the Company’s outstanding amounts payable to those service providers.

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

2 unchanged sentences

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):

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20,753,630 0.01 3.5 202.1

Vested as of December 31, 2023

Vested and exercisable as of December 31, 2024

7,805,276 $ 0.01 2.4 $ 76.0

Archer Aviation Inc.

Notes to Consolidated Financial Statements

United Airlines

1 unchanged sentence

Under the terms of the United Purchase Agreement, United has a conditional purchase order for up to 200 of the Company’s aircraft, with an option to purchase an additional 100 aircraft.

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.

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 Federal Aviation Administration (“FAA”) and further negotiation and reaching of mutual agreement on certain material terms related to the purchases.

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

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As the performance obligations have not been satisfied, the Company has not recognized any revenue as of December 31, 2024.

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, Compensation — Stock Compensation .

On January 29, 2021, a valuation of the Company’s common stock was performed, valuing the Company’s common stock at $ 13.35 per share.

The value of the common stock was determined using a hybrid approach of the OPM and PWERM, with the PWERM weighted at 80 % primarily based on management’s expectation of the planned merger as described in Note 1 and the OPM weighted at 20 % due to uncertainties in the timing of other possible scenarios.

The Company used the OPM to allocate value in a stay private scenario.

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

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.

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, which was determined to be $ 13.35 , based on a valuation of the Company’s Class A common stock on January 29, 2021.

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.

A total of 8,845,058 warrants vested from achievement of the first two milestones and were exercised.

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 new aircraft to United.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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 recognized for each sale of the aircraft.

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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.

There was no other warrant expense recognized for the year ended December 31, 2024.

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.

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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

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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

On January 3, 2023, the Company entered into a manufacturing and collaboration agreement with 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 (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 Forward Purchase Agreement, the Company agreed to issue and sell to Stellantis up to $ 150.0 million of shares of the Company’s Class A common stock pursuant to terms and conditions of the Stellantis Forward Purchase Agreement.

As further described below, the shares pursuant to the Stellantis Forward Purchase Agreement were fully issued in July 2024.

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”).

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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.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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.

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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.

During the years ended December 31, 2024 and 2023, the Company recorded $ 8.1 million and $ 17.5 million of R&D expense, respectively, 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 in connection with the first milestone under the Stellantis Forward Purchase Agreement and received approximately $ 25.0 million in gross proceeds.

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).

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This drawdown was completed on October 16, 2023.

On June 27, 2024, the Company elected to draw down the $ 55.0 million remaining available under the Stellantis Forward Purchase Agreement associated with Milestone 3 (as defined in the Stellantis Forward Purchase Agreement).

In accordance therewith, on July 1, 2024, the Company issued 17,401,153 shares of Class A common stock to Stellantis for gross proceeds of approximately $ 55.0 million.

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

Archer Aviation Inc.

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 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 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.

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

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

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The shares underlying the warrant vest in two equal installments in accordance with two time-based milestones.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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

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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.

During the year ended December 31, 2021, the Company recorded $ 6.8 million of R&D expense in the consolidated statements of operations related to the achievement of the first milestone and services received for the second milestone.

As of December 31, 2022, both of the milestones have been completed, amounting to 1,077,024 shares that have vested.

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$ ( 536.6 ) $ ( 457.4 ) $ ( 317.3 )

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 recognized foreign current income tax provision of $ 0.2 million and $ 0.5 million during the years ended December 31, 2024 and 2023, respectively.

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

The Company did no t record any deferred income tax provision for the years ended December 31, 2024, 2023 and 2022.

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 21.0% to the Company’s loss before income taxes, is as follows:

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Effective tax rate 0.0 % ( 0.1 ) % 0.0 %

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):

Differences between the state statutory rate and state effective tax rate for the years ended December 31, 2024 and 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.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The Company’s significant components of its deferred tax assets and liabilities are as follows (in millions):

As of December 31,

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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 $ 226.3 million against the federal and state deferred tax

Archer Aviation Inc.

Notes to Consolidated Financial Statements

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 did not believe it is more-likely-than-not that the net deferred tax assets will be realizable.

Accordingly, the Company had provided a full valuation allowance against the entire domestic and the majority of the foreign net deferred tax assets as of December 31, 2024 and 2023.

The valuation allowance increased by $ 127.0 million, $ 96.6 million and $ 82.6 million during the years ended December 31, 2024, 2023 and 2022, respectively.

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As of December 31, 2024 and 2023, the Company has state NOL carryforwards of $ 58.2 million and $ 40.5 million, respectively, which will both begin to expire in 2038.

In the ordinary course of its business, the Company incurs costs that, for tax purposes, are determined to be qualified R&D expenditures within the meaning of IRC §41 and are, therefore, eligible for the Increasing Research Activities credit under IRC §41.

In the ordinary course of its business, the Company incurs costs that, for tax purposes, are determined to be qualified R&D expenditures within the meaning of Section 41 of the Internal Revenue Code of 1986, as amended (the “Code”) and are, therefore, eligible for the Increasing Research Activities credit under Section 41 of the Code.

federal R&D tax credit carryforward is $ 53.2 million and $ 31.4 million for December 31, 2024 and 2023, respectively.

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The state R&D tax credit carryforward is $ 27.9 million and $ 15.7 million for December 31, 2024 and 2023, respectively, which can be carried forward indefinitely.

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):

Archer Aviation Inc.

Notes to Consolidated Financial Statements

The following table shows the changes in the gross amount of unrecognized tax benefits (in millions):

Balance as of December 31, 2021 $ 0.3

Increases related to current year tax positions 0.3

Decreases based on tax positions related to prior years ( 2.0 )

Increases related to prior year tax positions

Balance as of December 31, 2022 1.5

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It is not expected that there will be a significant change in uncertain tax positions in the next 12 months.

In accordance with Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” (generally defined as a cumulative change of more than 50% in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs and R&D tax credits to offset post-change taxable income and post-change tax liabilities, respectively.

In accordance with Section 382 and Section 383 of the Code, a corporation that undergoes an “ownership change” (generally defined as a cumulative change of more than 50.0% in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs and R&D tax credits to offset post-change taxable income and post-change tax liabilities, respectively.

The Company’s existing NOLs and R&D credits may be subject to limitations arising from previous ownership changes, and the ability to utilize NOLs could be further limited by Section 382 and Section 383 of the Code.

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The Company is subject to taxation and files income tax returns with the U.S.

federal government and the states of California and Florida.

The tax years ended December 31, 2018 through December 31, 2023 remain open to examination for federal purposes, and the tax years ended December 31, 2018 through December 31, 2023 remain open to examination for state purposes.

federal government and various state jurisdictions.

The tax years ended December 31, 2018 through December 31, 2024 remain open to examination for federal and state purposes.

In addition, the utilization of NOL and R&D credit carryforwards is subject to federal and state review for the periods in which those net losses were incurred.

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Note 11 - Liability Classified Warrants

As of December 31, 2023, there were 17,398,947 public w arrants outstanding.

As of December 31, 2024, there were 17,398,947 public warrants outstanding.

Public warrants may only be exercised for a whole number of shares.

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

The public warrants became

Archer Aviation Inc.

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 became 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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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.

Archer Aviation Inc.

Notes to Consolidated Financial Statements

Each public warrant entitles the registered holder to purchase one share of Class A common stock at a price of $ 11.50 per share.

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Note 12 - Subsequent Events

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.

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

On February 12, 2025, the Company closed a registered direct offering in which pursuant to the securities purchase agreement dated February 11, 2025, by and between the Company and certain institutional investors, the Company issued and sold 35,500,000 shares of the Company’s Class A common stock for aggregate gross proceeds of $ 301.8 million before deducting placement agent fees and other offering expenses.

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