Archer Aviation Inc.

Current report

Risks Related to the Proposed Acquisition of the Target Companies

Current report

The Acquisition may not be completed on the anticipated timeline, or at all, and the Purchase Agreement may be terminated in accordance with its terms.

Current report

Completion of the Acquisition is subject to the satisfaction or waiver of certain agreed-upon closing conditions, a number of which are not within our control, including receipt of required regulatory approvals and the satisfaction of other conditions specified in the Purchase Agreement. There can be no assurance that all required conditions will be satisfied (or waived) on a timely basis or at all, or that the Acquisition will be completed on the currently anticipated timeline. Delays in obtaining regulatory approvals, including foreign regulatory and export approvals, litigation relating to the transaction, the imposition of conditions, limitations, divestiture requirements or other remedies by governmental authorities, or the failure to satisfy other closing conditions could delay or prevent completion of the Acquisition. In addition, the Purchase Agreement may be terminated in accordance with its terms.

Current report

The Purchase Agreement also places certain restrictions around equity capital financings prior to the completion of the Acquisition, including by limiting our ability to issue Class A Common Stock below a specified price prior to a specified date, subject to customary exceptions, and by conditioning whether shares issued in an equity financing will be excluded from the calculation of Consideration Shares. These restrictions could limit our financing flexibility prior to the completion of the Acquisition.

Current report

If the Acquisition is delayed or not completed, we may not realize the anticipated strategic, operational and financial benefits of the transaction, and our business, financial condition, results of operations and stock price could be adversely affected.

Current report

Consummation of the Acquisition will cause immediate dilution to our existing stockholders. We will also face further dilution if we exercise our right to require Boeing to participate in a future equity offering.

Current report

On the Acquisition Closing Date, we will issue Boeing a number of shares of Class A Common Stock equal to 19.75% of our shares outstanding immediately prior to Closing, subject to a downward adjustment tied to the Target Companies' estimated cash, indebtedness, and unpaid transaction expenses on the Acquisition Closing Date. If such estimated cash, net of indebtedness and unpaid transaction expenses, is below an agreed target amount, the number of shares issued will be reduced by a number of shares equal in value to such shortfall, based on the volume-weighted average price ("VWAP") of our Class A Common Stock for the five trading days ending on the trading day immediately prior to the Acquisition Closing Date. If such amount instead exceeds the target cash amount, the excess will be provided to Boeing. We will also issue two warrants, each covering $100.0 million of our Class A Common Stock. The number of shares covered by the warrants is determined based on the 5-day VWAP on the trading day immediately prior to the Acquisition Closing Date, with exercise prices of $13.00 and $17.88 per share, respectively. The issuance of the warrants may depress our stock price in anticipation of exercise and will cause further dilution if and when exercised. If we do not obtain stockholder approval of the issuance of the shares underlying the warrants before the warrants are exercisable, we may be required to settle the warrants, in cash rather than shares of our Class A Common Stock, based on the value of our Class A Common Stock at the time of settlement, which could require a significant cash outlay and adversely affect our liquidity and financial condition.

Current report

In addition, the Company and Boeing have entered into a Forward Equity Purchase Agreement, pursuant to which the Company may require Boeing to participate in an equity offering for up to $55.0 million, at the lowest price per share as other purchasers in such offering. Any issuances under the Forward Equity Purchase Agreement would result in further dilution to our stockholders.

Current report

Upon consummation of the Acquisition, Boeing will continue to have influence over the Company causing potential conflicts of interest.

Current report

Following the Acquisition Closing Date, Boeing is expected to hold approximately 16.5% of our outstanding Class A Common Stock (without giving effect to the exercise of any warrants held by Boeing), and will have the right to designate one individual for nomination to our board of directors for so long as it holds at least the number of shares equal to 10% of our outstanding shares immediately prior to the Acquisition Closing Date. Boeing’s interests, including in matters that come before our board, may differ from those of our other stockholders, which could result in stockholder litigation, heightened regulatory or proxy advisor scrutiny, or the need for additional governance safeguards.

Current report

We have and will incur significant costs in connection with the Acquisition and integration of the Target Companies, which may be in excess of those anticipated by us.

Current report

We have incurred and expect to continue to incur costs associated with negotiating and completing the Acquisition and integrating the operations of the Target Companies. These costs have been, and will continue to be, substantial. The majority of costs will consist of transaction costs related to the Acquisition and include, among others, fees paid to financial, legal and accounting advisors, filing fees, employee retention costs and other employment-related costs. Many of these costs will be borne by us even if the Acquisition is not completed.

Current report

If the Acquisition is completed, we will also incur transaction costs, some of which may be unanticipated, related to integrating the Target Companies, including facilities, systems and service contract consolidation costs and employment‑related costs. Additionally, securities or derivative litigation is common following the announcement of transactions like this one and, even if without merit, could result in substantial defense costs or other unanticipated liabilities. The costs described above, as well as other unanticipated costs and expenses, could adversely affect our results of operations and financial condition.

Current report

We may not successfully integrate the Target Companies or realize the anticipated benefits of the Acquisition on the anticipated timeline or at all.

Current report

Even if the Acquisition is completed, we may not successfully integrate the Target Companies or realize the expected benefits of the Acquisition on the anticipated timeline or at all. For example, the Target Companies’ technologies and businesses and our existing business operate under different regulatory and customer regimes, and integrating them successfully, including retaining key and security-cleared personnel, may take longer or cost more than expected, or may not succeed at all. In particular, our management team has limited experience operating a business of the type conducted by Insitu, particularly its defense contracting and unmanned systems operations, and may encounter unanticipated operational, regulatory, or customer-relationship challenges in managing that business following Closing. Additionally, we will be newly subject to U.S. and foreign government-contracting and export-control regimes applicable to the combined business, which will require additional compliance investment. The integration may be complex and time-consuming. For these and other reasons, it is possible that the integration process could result in the diversion of management’s attention, the disruption of our ongoing business or inconsistencies in operations, controls, policies and procedures, any of which could adversely affect our business, financial condition and results of operations.