INDEX TO FINANCIAL STATEMENTS
Fast Radius, Inc. (formerly known as ECP Environmental Growth Opportunities Corp.)
Financial Statements (Unaudited)
Fast Radius Operations, Inc. (formerly known as Fast Radius, Inc.)
Audited Financial Statements
F-1
Financial Statements (Unaudited)
F-2
Fast Radius, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share information)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
57,360 |
|
|
$ |
8,702 |
|
Accounts receivable, net of allowances for doubtful accounts of $850 and $930,
respectively |
|
|
7,249 |
|
|
|
7,015 |
|
Inventories |
|
|
766 |
|
|
|
449 |
|
Prepaid production costs |
|
|
695 |
|
|
|
987 |
|
Prepaid expenses and other current assets |
|
|
10,506 |
|
|
|
4,422 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
76,576 |
|
|
|
21,575 |
|
Non-current assets: |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
10,526 |
|
|
|
9,528 |
|
Other non-current assets |
|
|
3,555 |
|
|
|
535 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
90,657 |
|
|
$ |
31,638 |
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity (deficit) |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,764 |
|
|
$ |
3,987 |
|
Accrued compensation |
|
|
3,500 |
|
|
|
3,097 |
|
Accrued and other liabilities |
|
|
16,495 |
|
|
|
11,610 |
|
Advances from customers |
|
|
95 |
|
|
|
258 |
|
Accrued liabilities - related parties |
|
|
2,888 |
|
|
|
2,513 |
|
Warrant liability |
|
|
|
|
|
|
2,968 |
|
Current portion of term loans |
|
|
18,463 |
|
|
|
13,266 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
45,205 |
|
|
|
37,699 |
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
48 |
|
|
|
396 |
|
Warrant liability |
|
|
2,500 |
|
|
|
|
|
Term loans - net of current portion and debt issuance costs |
|
|
10,458 |
|
|
|
16,776 |
|
Related party convertible notes and derivative liability |
|
|
|
|
|
|
16,857 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
58,211 |
|
|
|
71,728 |
|
|
|
|
|
|
|
|
|
|
Commitment and contingencies (Note 6) |
|
|
|
|
|
|
|
|
Stockholders equity (deficit) |
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, authorized 350,000,000 shares; issued 73,041,156 and 39,656,951
shares as of March 31, 2022 and December 31, 2021, respectively |
|
|
7 |
|
|
|
4 |
|
Additional paid-in capital |
|
|
225,373 |
|
|
|
83,399 |
|
Accumulated Deficit |
|
|
(192,934 |
) |
|
|
(123,493 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
32,446 |
|
|
|
(40,090 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit) |
|
$ |
90,657 |
|
|
$ |
31,638 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
Fast Radius, Inc.
Condensed Consolidated Statements of Net Loss and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Revenues |
|
$ |
6,262 |
|
|
$ |
3,796 |
|
Cost of revenues |
|
|
5,629 |
|
|
|
2,966 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
633 |
|
|
|
830 |
|
Operating expenses |
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
6,336 |
|
|
|
3,469 |
|
General and administrative |
|
|
38,225 |
|
|
|
7,712 |
|
Research and development |
|
|
3,332 |
|
|
|
1,146 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
47,893 |
|
|
|
12,327 |
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
(47,260 |
) |
|
|
(11,497 |
) |
Change in fair value of warrants |
|
|
5,295 |
|
|
|
(1,253 |
) |
Change in fair value of derivatives |
|
|
30 |
|
|
|
|
|
Interest income and other income (expense), net |
|
|
(1 |
) |
|
|
9 |
|
Interest expense, including amortization of debt issuance costs |
|
|
(2,664 |
) |
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(44,600 |
) |
|
|
(12,786 |
) |
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(44,600 |
) |
|
$ |
(12,786 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
$ |
(0.73 |
) |
|
$ |
(0.33 |
) |
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
60,851,683 |
|
|
|
39,063,996 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
Fast Radius, Inc.
Condensed Consolidated Statements of Stockholders Equity (Deficit) (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Equity |
|
|
Amount |
|
|
Common Stock |
|
|
Amount |
|
|
Treasury Stock |
|
|
Amount |
|
|
APIC |
|
|
Accumulated Deficit |
|
|
Total |
|
Balance at January 1, 2021 |
|
|
16,023 |
|
|
$ |
74,290 |
|
|
|
3,428 |
|
|
$ |
|
|
|
|
(650 |
) |
|
$ |
(221) |
|
|
$ |
3,724 |
|
|
$ |
(55,388) |
|
|
$ |
(51,885 |
) |
Retroactive application of recapitalization |
|
|
(16,023 |
) |
|
|
(74,290 |
) |
|
|
35,227 |
|
|
|
4 |
|
|
|
650 |
|
|
|
221 |
|
|
|
74,286 |
|
|
|
(221 |
) |
|
|
74,290 |
|
Adjusted balance at January 1, 2021 |
|
|
|
|
|
|
|
|
|
|
38,655 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
78,010 |
|
|
|
(55,609) |
|
|
|
22,405 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,786) |
|
|
|
(12,786 |
) |
Exercise of stock options and release of notes recourse provision |
|
|
|
|
|
|
|
|
|
|
1,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254 |
|
|
|
|
|
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
39,657 |
|
|
$ |
4 |
|
|
|
|
|
|
$ |
|
|
|
$ |
78,273 |
|
|
$ |
(68,395) |
|
|
$ |
9,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2022 |
|
|
16,023 |
|
|
$ |
74,290 |
|
|
|
4,040 |
|
|
$ |
|
|
|
|
(650 |
) |
|
$ |
(221) |
|
|
$ |
9,113 |
|
|
$ |
(123,272) |
|
|
$ |
(114,380 |
) |
Retroactive application of recapitalization |
|
|
(16,023 |
) |
|
|
(74,290 |
) |
|
|
35,873 |
|
|
|
4 |
|
|
|
650 |
|
|
|
221 |
|
|
|
74,286 |
|
|
|
(221 |
) |
|
|
74,290 |
|
Adjusted balance at January 1, 2022 |
|
|
|
|
|
|
|
|
|
|
39,913 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
83,399 |
|
|
|
(123,493) |
|
|
|
(40,090 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,600) |
|
|
|
(44,600 |
) |
Effect of Business Combination and recapitalization, net of redemptions and issuance costs |
|
|
|
|
|
|
|
|
|
|
11,737 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
3,029 |
|
|
|
|
|
|
|
3,030 |
|
Issuance of common stock pursuant to PIPE investment |
|
|
|
|
|
|
|
|
|
|
7,500 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
74,999 |
|
|
|
|
|
|
|
75,000 |
|
Issuance of common stock upon conversion of convertible notes |
|
|
|
|
|
|
|
|
|
|
2,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,655 |
|
|
|
|
|
|
|
17,655 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
63 |
|
Issuance of common stock for settlement of share-based awards |
|
|
|
|
|
|
|
|
|
|
9,176 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
Exercise of Legacy Fast Radius warrants |
|
|
|
|
|
|
|
|
|
|
2,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,020 |
|
|
|
|
|
|
|
1,020 |
|
Company vesting shares granted to Fast Radius shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,841 |
|
|
|
(24,841) |
|
|
|
|
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,368 |
|
|
|
|
|
|
|
20,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2022 |
|
|
|
|
|
$ |
|
|
|
|
73,041 |
|
|
$ |
7 |
|
|
|
|
|
|
$ |
|
|
|
$ |
225,373 |
|
|
$ |
(192,934) |
|
|
$ |
32,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
Fast Radius, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Cash flows lost in from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(44,600 |
) |
|
$ |
(12,786 |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
654 |
|
|
|
231 |
|
Amortization of deferred financing and convertible debt discount |
|
|
2,051 |
|
|
|
26 |
|
Provision for doubtful accounts |
|
|
(80 |
) |
|
|
130 |
|
Loss on disposal of assets |
|
|
|
|
|
|
228 |
|
Stock-based compensation |
|
|
20,368 |
|
|
|
254 |
|
Change in fair value of warrants |
|
|
(5,295 |
) |
|
|
1,253 |
|
Change in fair value of derivative liability |
|
|
(30 |
) |
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts Receivable |
|
|
(154 |
) |
|
|
(399 |
) |
Inventories |
|
|
(317 |
) |
|
|
(157 |
) |
Prepaid production costs |
|
|
292 |
|
|
|
(379 |
) |
Prepaid expense and other current assets |
|
|
(9,701 |
) |
|
|
(720 |
) |
Accounts payable |
|
|
(265 |
) |
|
|
919 |
|
Accrued compensation and other liabilities |
|
|
(2,873 |
) |
|
|
2,268 |
|
Advances from customers |
|
|
(163 |
) |
|
|
|
|
Other non-current assets |
|
|
(3,020 |
) |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(43,133 |
) |
|
|
(9,093 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(1,610 |
) |
|
|
(1,372 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(1,610 |
) |
|
|
(1,372 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
63 |
|
|
|
9 |
|
Proceeds from term loan |
|
|
|
|
|
|
703 |
|
Effect of merger, net of transaction costs paid |
|
|
22,632 |
|
|
|
|
|
Issuance of PIPE shares |
|
|
75,000 |
|
|
|
|
|
Repayment of term loans |
|
|
(2,912 |
) |
|
|
(128 |
) |
Payment of deferred underwriting fees |
|
|
(1,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated from financing activities |
|
|
93,401 |
|
|
|
584 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
48,658 |
|
|
|
(9,881 |
) |
Cash, beginning of period |
|
|
8,702 |
|
|
|
18,494 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ |
57,360 |
|
|
$ |
8,613 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Capital expenditures not yet paid |
|
$ |
282 |
|
|
$ |
327 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-6
Fast Radius, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Nature of Operations and Basis of Presentation
Fast Radius, Inc. (Fast Radius or the Company), f/k/a ECP Environmental Growth Opportunities Corp. (ENNV), was formed as a
Delaware corporation on October 29, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses
(Business Combination). Fast Radius is a cloud manufacturing and digital supply chain company. The Fast Radius solution combines a proprietary software platform with physical infrastructure to enable accelerated product development and
digital tools for product engineers.
Fast Radius is headquartered in Chicago, Illinois, with additional operating locations in Atlanta, Georgia;
Louisville, Kentucky; and Singapore. Fast Radius operations in Louisville, Kentucky are located within the Worldport facility of United Parcel Service, Inc. (UPS), enabling parts to be produced and shipped late into the evening for
overnight distribution around the world. Fast Radius has an operating subsidiary located in Singapore.
Fast Radius is organized as a single operating
segment. Substantially all of the assets and operations of Fast Radius are located in the United States (U.S.).
Basis of Presentation
On July 18, 2021, the Company entered into an Agreement and Plan of Merger (as amended, the Merger Agreement) by and among the
Company, ENNV Merger Sub, Inc., a wholly owned subsidiary of ENNV (Merger Sub), and Fast Radius Operations, Inc. (f/k/a Fast Radius, Inc.) (Legacy Fast Radius), pursuant to which Merger Sub agreed to merge with and into
Legacy Fast Radius, with Legacy Fast Radius surviving such merger as a wholly owned subsidiary of the Company (the Merger and, together with the other transactions contemplated by the Merger Agreement, the Business
Combination). At the closing of the Merger (the Closing), the Company was renamed Fast Radius, Inc. The Business Combination was completed on February 4, 2022 (the Closing Date).
The Merger was accounted for as a reverse recapitalization (the Reverse Recapitalization) in accordance with U.S. generally accepted accounting
principles (U.S. GAAP). Under this method of accounting, ENNV is treated as the acquired company and Legacy Fast Radius is treated as the acquirer for financial reporting purposes. The Reverse Recapitalization was treated as
the equivalent of Legacy Fast Radius issuing stock for the net assets of ENNV, accompanied by a recapitalization. The net assets of ENNV are stated at historical cost, with no goodwill or other intangible assets recorded.
Legacy Fast Radius was determined to be the accounting acquirer based on the following predominant factors:
|
|
Legacy Fast Radius stockholders have the largest portion of voting rights in the Company; |
|
|
Legacy Fast Radius stockholders have the ability to elect the majority of the directors to the Companys
board of directors (the Board); |
|
|
Legacy Fast Radius management comprise the management of the Company; |
|
|
Legacy Fast Radius operations comprise the ongoing operations of the Company; |
|
|
Legacy Fast Radius is the larger entity based on historical revenues and business operations; and
|
|
|
The Company assumed Legacy Fast Radius name. |
F-7
The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are
those of Legacy Fast Radius. The shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the exchange ratio established in the Business
Combination. Activity within the Condensed Statements of Stockholders Equity for the issuance and repurchases of Legacy Fast Radius redeemable convertible preferred stock were also retroactively converted to Legacy Fast Radius common stock.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial reporting
and Securities and Exchange Commission (the SEC) regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Results of
operations for the interim periods are not necessarily indicative of the results to be expected for the full year ended December 31, 2022. A description of the Companys significant accounting policies is included in the Companys
audited consolidated financial statements as of and for the year ended December 31, 2021 included as Exhibit 99.1 to the Companys Form 8-K/A filed with the SEC on March 30, 2022. These
unaudited condensed consolidated financial statements should be read in conjunction with the Legacy Fast Radius December 31, 2021 audited consolidated financial statements and the accompanying notes.
The unaudited condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Going Concern Consideration
The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
The Company has generated recurring losses which have resulted in an
accumulated deficit of $192.9 million and $123.5 million as of March 31, 2022 and December 31, 2021, respectively, and expects to incur additional losses in the future. The Company is still in the growth stage of its business and
expects to continue to make substantial investments in its business, including in the expansion of its product portfolio and research and development, sales and marketing teams, in addition to incurring additional costs as a result of being a public
company. The Company believes the cash it obtained from the Business Combination and the private placement that occurred substantially concurrently with the consummation of the Business Combination (the PIPE Investment), as well as
potential proceeds available under the purchase agreement with Lincoln Park Capital Fund, LLC as discussed in Note 14, are not sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from
the date of the issuance of these financial statements. As a result of the Companys history of losses and negative cash flows from operations, and because its plans to obtain additional capital have not been completed at the time of the
issuance of these consolidated financial statements, substantial doubt exists about the Companys ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Company intends
to seek additional capital to fund its operations and future growth; however, there can be no assurance that the Company will be able to obtain other debt or equity financing on terms acceptable to the Company, if at all. Failure to secure
additional funding may require the Company to modify, delay, or abandon some of its planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on the
Companys business, operating results, financial condition, and ability to achieve its intended business objectives. The Company has concluded that managements plans do not alleviate substantial doubt about the Companys ability to
continue as a going concern.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
F-8
COVID-19 Impact
In March 2020, the World Health Organization declared the outbreak of the new strain of the coronavirus
(COVID-19) to be a pandemic. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial
markets, and business practices. Federal and state governments have implemented measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply
chain logistical changes, and closure of non-essential businesses. To protect the health and well-being of its employees, suppliers, and customers, the Company previously made substantial modifications to
employee travel policies, implemented office closures as employees were advised to work from home, and cancelled or shifted its conferences and other events to virtual-only. The COVID-19 pandemic has impacted
and may continue to impact the Companys business operations, including its employees, customers, partners, and communities, and there is substantial uncertainty in the nature and degree of the pandemics continued effects over time. In
particular, the COVID-19 virus continues to surge in various parts of the world, including China, and such surges have impacts on the Companys suppliers and may cause supply chain issues, parts shortages
and delayed shipping times. COVID-19 and other similar outbreaks, epidemics or pandemics could have a material adverse effect on the Companys business, financial condition, results of operations, cash
flows and prospects as a result of any of the risks described above and other risks that the Company is not able to predict.
Note 2. Summary of
Significant Accounting Policies
Use of Estimates in Condensed Consolidated Financial Statements
The preparation of the consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions
that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses for the periods presented. The
Companys most significant estimates and judgements involve valuation of the Companys debt and equity securities, including assumptions made in the fair value of warrants, derivatives, and stock-based compensation; the useful lives of
fixed assets; and allowances for doubtful accounts. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The
Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from managements estimates if these results differ from historical
experience or other assumptions prove not to be substantially accurate, even if such assumptions are reasonable when made.
Other than the below, there
have been no material changes to the Companys significant accounting policies from its audited consolidated financial statements included as Exhibit 99.1 to the Companys Form 8-K/A filed with the
SEC on March 30, 2022.
Redeemable Convertible Preferred Stock
Prior to the Business Combination, Legacy Fast Radius Series Seed, Seed-1,
A-1, A-2, A-3, and B Convertible Preferred Stock (collectively the Preferred Stock) were classified in temporary
equity as they contained terms that could force Legacy Fast Radius to redeem the shares for cash or other assets upon the occurrence of an event not solely within Legacy Fast Radius control. Legacy Fast Radius adjusted the carrying values of
the Preferred Stock each reporting period to the redemption value inclusive of any declared and unpaid dividends.
All Preferred Stock previously
classified as temporary equity was retroactively adjusted and reclassified to permanent equity as a result of the Business Combination. As a result of the Business Combination, each share of Preferred Stock that was then issued and outstanding was
automatically converted into Legacy Fast Radius common stock, such that each converted share of Preferred Stock was no longer outstanding and ceased to exist. Each share of Legacy Fast Radius common stock, including the Legacy Fast Radius common
stock issued upon
F-9
conversion of Legacy Fast Radius Preferred Stock, was converted into and exchanged for 2.056 (the Exchange Ratio) shares of the Companys common stock. The Exchange Ratio was
established pursuant to the terms of the Merger Agreement.
Warrants
At March 31, 2022, there were 15,516,639 warrants to purchase shares of common stock of the Company (Common Stock), consisting of 8,624,972
public warrants (the Public Warrants) and 6,891,667 private warrants held by the ENNV initial stockholders (the Private Placement Warrants and collectively with the Public Warrants, the Warrants). Each Warrant
entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share. The Warrants expire on February 4, 2027, or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to the Public Warrants underlying the units sold in the Companys initial public offering, except that the
Private Placement Warrants and the shares of Common Stock issuable upon exercise of the Private Placement Warrants were not transferable, assignable, or salable until 30 days after the completion of a Business Combination, subject to certain limited
exceptions. Additionally, the Private Placement Warrants are non-redeemable and can be exercised on a cashless basis so long as they are held by the initial purchasers or such purchasers permitted
transferees. If the Private Placement Warrants are held by someone other than the initial stockholders of ENNV or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the
same basis as the Public Warrants.
The Company may redeem the Public Warrants when the price per share of Common Stock equals or exceeds $18.00:
|
|
In whole and not in part; |
|
|
At a price of $0.01 per Warrant; |
|
|
Upon not less than 30 days prior written notice of redemption; |
|
|
If, and only if, the reported last sale price of the shares of Common Stock equals or exceeds $18.00 per share
(as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to
the notice of redemption to warrant holders; and |
|
|
if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock
underlying the warrants. |
The Company may redeem the Public Warrants when the price per share of Common Stock equals or exceeds $10.00:
|
|
In whole and not in part; |
|
|
Upon not less than 30 days prior written notice of redemption provided that holders will be able to
exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Common Stock to be determined by reference to an agreed table based on the redemption date and the fair market value of shares of Common
Stock; |
|
|
If, and only if, the reported last sale price of the shares of Common Stock equals or exceeds $10.00 per share
(as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) on the trading day prior to the date on which of redemption is sent to the warrant holders; and |
|
|
if, and only if, the Private Placement Warrants are also concurrently called for redemption on the same terms as
the outstanding Public Warrants, as described above. |
F-10
The Company accounts for the Public Warrants and Private Placement Warrants in accordance with the guidance
contained in ASC 815-40. Such guidance provides that because the Warrants do not meet the criteria for equity treatment thereunder, each Warrant must be recorded as a liability.
Note 3. Business Combination
As discussed in Note 1, on
February 4, 2022, the Company completed the Business Combination with Legacy Fast Radius through the Merger, with Legacy Fast Radius surviving the Merger as a wholly-owned subsidiary of the Company. Upon the consummation of the Business
Combination, each share of Legacy Fast Radius common stock issued and outstanding was canceled and converted into the right to receive 2.056 shares of Common Stock.
Upon the closing of the Business Combination, the Companys certificate of incorporation was amended and restated to, among other things, increase the
total number of authorized shares of all classes of capital stock to 351,000,000 shares, of which 350,000,000 shares were designated Common Stock, $0.0001 par value per share, and 1,000,000 shares designated preferred stock, $0.0001 par value per
share.
Each option to purchase Legacy Fast Radius common stock that was outstanding immediately prior to the Business Combination, whether vested or
unvested, was converted into an option to purchase a number of shares of Common Stock equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Legacy Fast Radius common stock subject to such Legacy Fast
Radius option and (ii) approximately 2.3, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Legacy Fast Radius option, divided by (B) approximately 2.3.
Each unvested restricted stock unit awarded by Legacy Fast Radius that was outstanding immediately prior to the Business Combination was converted into an
award of restricted stock units to acquire a number shares of Common Stock equal to the product (rounded down to the nearest whole number) of (1) the number of shares of Legacy Fast Radius common stock subject to the Legacy Fast Radius
restricted stock unit award and (2) approximately 2.3.
The aggregate merger consideration also included an amount equal to 10,000,000 shares of
common stock (the Merger Earn Out Shares) which are subject to the satisfaction of certain price targets set forth in the Merger Agreement during the earn out period, which price targets are based upon (i) the daily volume-weighted
average sale price of shares of Common Stock quoted on NASDAQ, or the exchange on which the shares of Common Stock are then traded, for any 20 trading days within any 30 consecutive trading day period within the earn out period or (ii) the per
share consideration received in connection with the occurrence of certain change of control events of the Company specified in the Merger Agreement (any such event, an Acquiror Sale). The Merger Earn Out Shares will be issuable in two
equal tranches of 5,000,000 shares of Common Stock at the time that the Common Stock reaches a value, as calculated above, of $15.00 and $20.00, respectively.
Furthermore, the Merger Agreement provides that 10% of the shares of Common Stock held by ENNV Holdings, LLC (the Sponsor and such shares, the
Sponsor Earn Out Shares) are subject to vesting upon the satisfaction of certain price targets set forth in the Sponsor Support Agreement during the earn out period, which price targets will be based upon (i) the daily
volume-weighted average sale price of shares of Common Stock quoted on NASDAQ, or the exchange on which the shares of Common Stock are then traded, for any 20 trading days within any 30 consecutive trading day period within the earn out period or
(ii) the per share consideration received in connection with an Acquiror Sale. The Sponsor Earn Out Shares will vest in two equal tranches of 407,000 shares of Common Stock at the time that the Common Stock reaches a value, as calculated above,
of $15.00 and $20.00, respectively.
If, during the earn out period, there is an Acquiror Sale that will result in the holders of Common Stock receiving a
per share price (based on the value of the cash, securities or in-kind consideration being delivered in respect of
F-11
such Common Stock, as determined in good faith by the Board) equal to or in excess of the applicable stock price level set forth above, then immediately prior to the consummation of such Acquiror
Sale, the Legacy Fast Radius equity holders entitled to Merger Earn Out Shares and the Sponsor Earnout Shares shall be eligible to participate in such Acquiror Sale. If, during the earn out period, there is an Acquiror Sale that will result in the
holders of Common Stock receiving a per share price (based on the value of the cash, securities or in-kind consideration being delivered in respect of such common stock, as determined in good faith by the
Board) that is less than the applicable stock price level set forth above, then no Merger Earn Out Shares shall be issuable and no Sponsor Earn Out Shares shall become vested in connection with or following completion of such Acquiror Sale. In the
event of an Acquiror Sale, including where the consideration payable is other than a specified price per share, for purposes of determining whether the applicable stock price levels set forth above have been achieved, the price paid per share of
Common Stock will be calculated on a basis that takes into account the number of Sponsor Earn Out Shares that will vest and the number of Merger Earn Out Shares that will vest (i.e., the ultimate price per share payable to all holders of Common
Stock will be the same price per share used to calculate the number of Sponsor Earn Out Shares and Merger Earn Out Shares that vest). The Sponsor will have all of the rights of a holder of Common Stock with respect to the unvested Sponsor Earn Out
Shares, except that the Sponsor will not be entitled to consideration in connection with any sale or other transaction and the Sponsor Earn Out Shares cannot be sold, redeemed, assigned, pledged, hypothecated, encumbered or otherwise disposed of
prior to vesting.
As the Merger Earn Out Shares and Sponsor Earn Out Shares are not puttable by the holders thereof, the underlying shares are not
redeemable outside of the Companys control, and the Merger Earn Out Shares and Sponsor Earn Out Shares are settled through the issuance (in the case of the Merger Earn Out Shares) or through the vesting (in the case of the Sponsor Earn Out
Shares) a fixed number of shares, the Merger Earn Out Shares and Sponsor Earn Out Shares are not a liability within the scope of ASC 480, Distinguishing Liabilities from Equity. Further, although the Merger Earn Out Shares and Sponsor Earn Out
Shares meet the definition of a derivative, they qualify for the equity-scope exception to derivative accounting because they meet the criteria for equity indexation and equity classification under ASC 815-40,
Contracts in Entitys Own Equity. Note that if an Acquiror Sale occurs as a result of a cash offer, the calculation of the share price used to determine if the applicable stock price level set forth above has been achieved would include the
Merger Earn Out Shares and Sponsor Earn Out Shares. Lastly, the Merger Earn Out Shares and Sponsor Earn Out Shares are indexed to the Companys own stock, as there are no other events that would accelerate the vesting of such shares other than
the share price being in excess of the applicable stock price levels set forth above or an Acquiror Sale.
The Merger Earn Out Shares are reflected in the
condensed consolidated financial statements similar to a dividend since this arrangement was entered into with all the common shareholders of Legacy Fast Radius, which is considered the acquirer for accounting purposes.
In connection with the execution of the Merger Agreement, the Company entered into separate subscription agreements (the Subscription Agreements)
with certain investors (each a Subscriber), pursuant to which the Subscribers agreed to purchase, and the Company agreed to sell to the Subscribers, an aggregate of 7,500,000 shares of Common Stock (the PIPE Shares), for a
purchase price of $10.00 per share and an aggregate purchase price of $75 million in the PIPE investment. The PIPE investment closed concurrently with the closing of the Business Combination.
Upon the closing of the Business Combination, ENNV had outstanding 8,624,972 Public Warrants and 6,891,667 Private Warrants which were listed on the Nasdaq
Capital Market under the symbol ENNVW. Upon the closing of the Business Combination, they became listed on the Nasdaq Global Select Market under the symbol FSRDW. The Warrants remain subject to the same terms and conditions
as prior to the Business Combination.
Also immediately prior to the closing of the Business Combination, the Legacy Fast Radius convertible notes (the
Convertible Notes) and Legacy Fast Radius warrants (the Legacy Fast Radius Warrants) were converted into common shares of Legacy Fast Radius in accordance with their contractual terms. Upon completion of the
F-12
Business Combination, the outstanding principal and unpaid accrued interest due on the Legacy Fast Radius Convertible Notes were converted into an aggregate of 2.0 million shares of Common
Stock, and the converted notes were no longer outstanding, and ceased to exist. Upon completion of the Business Combination, the Legacy Fast Radius Warrants were converted into 2.2 million shares of Common Stock.
Upon consummation of the Business Combination and the closing of the PIPE, the most significant change in Legacy Fast Radius financial position and
results of operations was a total net increase in cash and cash equivalents of approximately $73 million, which reflected the gross proceeds received less repayments of certain indebtedness, transaction costs and other related fees and expenses
such as directors & officers insurance and certain assumed liabilities from ENNV.
The Business Combination is accounted for as a reverse
recapitalization in accordance with U.S. GAAP. Under this method of accounting, ENNV was treated as the acquired company for financial reporting purposes. See Note 1 for further details. Accordingly, for accounting purposes, the Business
Combination was treated as the equivalent of Legacy Fast Radius issuing stock for the net assets of ENNV, accompanied by a recapitalization. The net assets of ENNV are stated at historical cost, with no goodwill or other intangible assets recorded.
The following table reconciles the elements of the Business Combination to the unaudited condensed consolidated statements of stockholders equity
(deficit) and cash flows for the three months ended March 31, 2022:
|
|
|
|
|
(in thousands) |
|
|
|
Cash - ENNV trust and cash, net of redemptions |
|
$ |
30,844 |
|
Cash - PIPE financing |
|
|
75,000 |
|
Non-cash Convertible Note conversion |
|
|
17,655 |
|
Non-cash Legacy Fast Radius warrant conversion |
|
|
1,020 |
|
Liabilities paid on behalf of or assumed from ENNV |
|
|
(10,361 |
) |
Fair value of assumed common stock warrants |
|
|
(5,847 |
) |
Transaction costs recorded in equity |
|
|
(11,606 |
) |
|
|
|
|
|
Net impact on total stockholders equity |
|
|
96,705 |
|
Transaction costs not yet paid or paid in the prior year |
|
|
6,565 |
|
Non-cash Convertible Note conversion |
|
|
(17,655 |
) |
Non-cash Legacy Fast Radius warrant conversion |
|
|
(1,020 |
) |
Liabilities paid on behalf of ENNV and classified as operating cash flows or assumed from ENNV and
not yet paid |
|
|
5,808 |
|
Non-cash fair value of assumed common stock
warrants |
|
|
5,847 |
|
|
|
|
|
|
Net impact on net cash provided by financing activities |
|
$ |
96,250 |
|
Note 4. Supplemental Financial Information
Allowance for Doubtful Accounts
The following table
summarizes activity in the allowance for doubtful accounts for the three months ended:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2022 |
|
|
March 31, 2021 |
|
Balance at beginning of period |
|
$ |
(930 |
) |
|
$ |
(405 |
) |
Uncollectible accounts (charged) credited to expense |
|
|
80 |
|
|
|
(130 |
) |
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
(850 |
) |
|
$ |
(535 |
) |
|
|
|
|
|
|
|
|
|
F-13
Inventories
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Raw materials |
|
$ |
592 |
|
|
$ |
433 |
|
Work-in-process |
|
|
174 |
|
|
|
16 |
|
Finished Goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Inventories |
|
$ |
766 |
|
|
$ |
449 |
|
|
|
|
|
|
|
|
|
|
Property and Equipment, Net
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Advanced manufacturing machinery & quality equipment |
|
$ |
5,740 |
|
|
$ |
5,705 |
|
Software |
|
|
3,709 |
|
|
|
2,912 |
|
Computer & office hardware |
|
|
1,226 |
|
|
|
1,149 |
|
Furniture and fixtures |
|
|
136 |
|
|
|
39 |
|
Leasehold improvements |
|
|
3,400 |
|
|
|
3,048 |
|
Construction in-progress |
|
|
293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
|
14,504 |
|
|
|
12,853 |
|
Accumulated depreciation and amortization |
|
|
(3,978 |
) |
|
|
(3,325 |
) |
|
|
|
|
|
|
|
|
|
Property, plant and equipment (net) |
|
$ |
10,526 |
|
|
$ |
9,528 |
|
|
|
|
|
|
|
|
|
|
Accrued and Other Liabilities
Accrued and other liabilities as of March 31, 2022 and December 31, 2021 included costs associated with the Business Combination of approximately
$13.5 million and $6.3 million, respectively.
Significant Customers and Concentration of Credit Risks
The Company is subject to credit risk primarily through its accounts receivable. Credit is generally extended to customers based on a credit review. The credit
review considers each customers financial condition, including the customers established credit rating or the Companys assessment of the customers creditworthiness based on their financial statements absent a credit rating,
local industry practices, and business strategy. A credit limit and terms are established for each customer based on the outcome of this review. The Company performs on-going credit evaluations of its
customers and maintains allowances for potential credit losses which, when realized, have been within the range of managements expectations. The Company generally does not require collateral. The Company regularly evaluates the credit risk of
its customers.
Significant customers are those that represent more than 10% of the Companys total revenue or accounts receivable. For the three
months ended March 31, 2022 and 2021, no single customer accounted for more than 10% of the Companys revenue. As of March 31, 2022 and December 31, 2021, no single customer accounted for more than 10% of the Companys
accounts receivable.
F-14
Note 5. Debt
The following is a summary of short- and long-term debt:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
2020 MFS Loan |
|
$ |
296 |
|
|
$ |
314 |
|
Manufacturers Capital Promissory Notes |
|
|
907 |
|
|
|
968 |
|
Related Party - Energize Convertible Debt |
|
|
|
|
|
|
7,600 |
|
2020 SVB Loan |
|
|
9,392 |
|
|
|
10,225 |
|
2021 SVB Loan |
|
|
20,868 |
|
|
|
20,800 |
|
Related Party - Drive Capital Convertible Debt |
|
|
|
|
|
|
3,000 |
|
Related Party - ECP Holdings Convertible Debt |
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
Total Outstanding Principal |
|
|
31,463 |
|
|
|
49,907 |
|
Less: Discounts and deferred financing fees |
|
|
(2,542 |
) |
|
|
(7,403 |
) |
Total Outstanding Debt |
|
|
28,921 |
|
|
|
42,504 |
|
Fair Value of Derivatives |
|
|
|
|
|
|
4,395 |
|
|
|
|
|
|
|
|
|
|
Total Debt and Derivative Liabilities |
|
$ |
28,921 |
|
|
$ |
46,899 |
|
|
|
|
|
|
|
|
|
|
The following is the summary of future principal repayments of debt:
|
|
|
|
|
(in thousands) |
|
March 31, 2022 |
|
Remainder of 2022 |
|
$ |
12,147 |
|
2023 |
|
|
15,160 |
|
2024 |
|
|
3,949 |
|
2025 |
|
|
207 |
|
|
|
|
|
|
Total |
|
$ |
31,463 |
|
|
|
|
|
|
2021 SVB Loan
On
February 4, 2022, the 2021 Silicon Valley Bank (SVB) Loan was amended to extend the maturity date from the Closing Date to April 3, 2023 and required payment of $2.0 million of the $20.0 million outstanding principal
balance upon consummation of the Business Combination. This amendment also added the original $0.8 million fee due at the Closing Date to the amended loans outstanding principal balance, deferring its repayment until maturity. In exchange
for the extension of the loan, Fast Radius will pay an additional fee of $2.1 million due at maturity. The Company will make six interest-only payments beginning March 1, 2022 and will begin paying $2.4 million in principal beginning
September 1, 2022. The interest rate on the term loan is the prime rate + 6.0%.
Related Party Convertible Notes Energize Ventures Fund
On March 12, 2021, Legacy Fast Radius entered into a note purchase agreement with Energize Ventures Fund LP, Energize Growth Fund I LP, EV FR
SPV and Ironspring Venture Fund I-FR, LP, all of which were existing stockholders or affiliates of existing shareholders of Legacy Fast Radius, for convertible promissory notes (collectively the Related
Party Convertible Notes I). Legacy Fast Radius received the principal of $7.6 million on April 13, 2021 at closing. The Related Party Convertible Notes had a stated interest rate of 6%, with all accrued interest and principal due at
maturity, which was scheduled to be April 13, 2023. Further, warrants to purchase a maximum of 140,000 shares with an exercise price of $0.01 were issued in conjunction with the closing of the Related Party Convertible Notes I. The warrants
were determined to be equity classified and were recorded as a discount to the Related Party Convertible Notes I. The Related Party Convertible Notes I contained
F-15
a share settlement redemption feature that qualified as a derivative liability and required bifurcation. The derivative had a fair value of $2.5 million as of December 31, 2021 and was
recorded in Related party convertible notes and derivative liability on the condensed consolidated balance sheet. For the three months ended March 31, 2022, the Company recognized a mark to market gain associated with the derivative of
$47 thousand.
The following provides a summary of the interest expense of the Companys Related Party Convertible Notes I and Related Party
Derivative Liability with Energize Ventures:
|
|
|
|
|
(in thousands) |
|
Three Months Ended March 31, 2022 |
|
Contractual interest expense |
|
|
44 |
|
Amortization of deferred financing costs and convertible debt discount |
|
|
184 |
|
|
|
|
|
|
Total Interest Expense |
|
|
228 |
|
Effective interest rate |
|
|
58.3 |
% |
The following provides a summary of the convertible notes and derivatives:
|
|
|
|
|
(in thousands) |
|
As of December 31, 2021 |
|
Unamortized deferred issuance costs, derivative, and warrants |
|
$ |
3,534 |
|
Net carrying amount of convertible note |
|
|
4,066 |
|
|
|
|
|
|
Principal value of convertible note |
|
$ |
7,600 |
|
Fair value of convertible note and derivative liability |
|
$ |
9,936 |
|
Fair value of convertible note excluding derivative liability |
|
$ |
7,446 |
|
Fair value Level |
|
|
Level 3 |
|
For further information on fair value measurements, refer to Note 12.
Related Party Convertible Notes Drive Capital Fund
On August 23, 2021, Legacy Fast Radius entered into a Note Purchase Agreement with Drive Capital Fund II LP and Drive Capital Ignition Fund II LP
(existing stockholders of Legacy Fast Radius) for convertible promissory notes (collectively the Related Party Convertible Notes II). Legacy Fast Radius received funding of $3.0 million on August 24, 2021 at closing. The Notes
had a stated interest rate of 6%, with all accrued interest and principal due at maturity, which was scheduled to be August 23, 2023. These Related Party Convertible Notes II contained a share settlement redemption feature that qualified as a
derivative liability and required bifurcation. The derivative had a fair value of $0.6 million as of December 31, 2021 and was recorded in Related party convertible notes and derivative liability on the consolidated balance sheet. For the
three months ended March 31, 2022, the Company recognized a mark to market loss associated with the derivative of $5 thousand.
F-16
The following provides a summary of interest expense on the Companys Related Party Convertible Notes
II and Related Party Derivative Liability with Drive Capital:
|
|
|
|
|
(in thousands) |
|
Three Months Ended March 31, 2022 |
|
Contractual interest expense |
|
|
17 |
|
Amortization of deferred financing costs and convertible debt discount |
|
|
24 |
|
|
|
|
|
|
Total Interest Expense |
|
|
41 |
|
Effective interest rate |
|
|
17.1 |
% |
The following provides a summary of the convertible notes and derivatives:
|
|
|
|
|
(in thousands) |
|
As of December 31, 2021 |
|
Unamortized deferred issuance costs, derivative, and warrants |
|
$ |
474 |
|
Net carrying amount of convertible note |
|
|
2,526 |
|
|
|
|
|
|
Principal value of convertible note |
|
$ |
3,000 |
|
Fair value of convertible note and derivative liability |
|
$ |
3,390 |
|
Fair value of convertible note excluding derivative liability |
|
$ |
2,830 |
|
Fair value Level |
|
|
Level 3 |
|
Related Party Convertible Notes Energy Capital Partners Holdings
On October 26, 2021, Legacy Fast Radius entered into a Note Purchase Agreement with Energy Capital Partners Holdings, LP for convertible promissory notes
(collectively the Related Party Convertible Notes III). Legacy Fast Radius received funding of $7.0 million on October 26, 2021 at closing. The Notes had a stated interest rate of 6%, with all accrued interest and principal due
at maturity, which was scheduled to be October 26, 2023. These Related Party Convertible Notes III contained a share settlement redemption feature that qualified as a derivative liability and required bifurcation. The derivative had a value of
$1.3 million as of December 31, 2021 and was recorded in Related party convertible notes and derivative liability on the consolidated balance sheet. For the three months ended March 31, 2022, the Company recognized a mark to market
loss associated with the derivative of $12 thousand.
The following provides a summary of the interest expense of the Companys Related Party
Convertible Notes III and Related Party Derivative Liability with Energy Capital Partners Holdings:
|
|
|
|
|
(in thousands) |
|
Three Months Ended March 31, 2022 |
|
Contractual interest expense |
|
|
40 |
|
Amortization of deferred financing costs and convertible debt discount |
|
|
52 |
|
|
|
|
|
|
Total Interest Expense |
|
|
92 |
|
Effective interest rate |
|
|
16.3 |
% |
F-17
The following provides a summary of the convertible notes and derivatives:
|
|
|
|
|
(in thousands) |
|
As of December 31, 2021 |
|
Unamortized deferred issuance costs, derivative, and warrants |
|
$ |
1,130 |
|
Net carrying amount of convertible note |
|
|
5,870 |
|
|
|
|
|
|
Principal value of convertible note |
|
$ |
7,000 |
|
Fair value of convertible note and derivative liability |
|
$ |
7,829 |
|
Fair value of convertible note excluding derivative liability |
|
$ |
6,484 |
|
Fair value Level |
|
|
Level 3 |
|
Immediately prior to the completion of the Business Combination, the Related Party Convertible Notes I, II and III, along with
unpaid and accrued interest, were converted into 990 thousand shares of common stock of Legacy Fast Radius (2.0 million shares of Common Stock post Business Combination).
Note 6. Commitments and Contingencies
The Company
accounts for loss contingencies in accordance with ASC 450-20, Loss Contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources
are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Commitments
In May 2021, Legacy Fast Radius entered into a master subscription agreement with Palantir Technologies Inc. (Palantir) in which
Legacy Fast Radius would commit to utilize software and services from Palantir over the next six years for a total of $45.0 million. The software and services are related to the Companys future plan to provide automated intelligence
solutions as a service following commercialization of the Companys Cloud Manufacturing Platform. Upon close of the Merger in February 2022, the Company made a payment to Palantir of $9.4 million and the remaining non-cancellable future minimum payments due on this firm purchase agreement are $10.1 million.
Contingencies
In October 2021, based on an internal review, Legacy Fast Radius became aware of certain additional duties likely owed to the United States
Customs and Border Protection (CBP). Legacy Fast Radius initiated a voluntary disclosure to CBP in late 2021 of certain possible errors in the declaration of imported products relating to value, classification, and other matters. As part
of the disclosure, the Company conducted a comprehensive review of its import practices and in March 2022 made a further submission to CBP providing details regarding the possible errors. The Companys comprehensive review of import practices
and communication with CBP is ongoing. As a result, related to additional duties primarily from 2021, Legacy Fast Radius recognized a $1.0 million charge within Cost of revenues in the consolidated statement of net loss and comprehensive loss
for the year ended December 31, 2021. The information submitted by the Company will be reviewed by CBP and the Company may be liable to CBP for additional unpaid duties and interest. The resolution of this prior disclosure could be material to
the Companys cash flows in a future period and to its results of operations for any period.
F-18
Note 7. Equity
The condensed consolidated statements of changes in stockholders equity (deficit) reflects the Business Combination as defined in Note 1 as of
February 4, 2022. As Legacy Fast Radius was deemed the accounting acquirer in the Business Combination with ENNV, all periods prior to the consummation date reflect the balances and activity of Legacy Fast Radius. The balances as of
January 1, 2022 and 2021 are from the consolidated financial statements of Legacy Fast Radius as of that date, share activity (convertible preferred stock, common stock, treasury stock, additional paid in capital and accumulated deficit) and
per share amounts were retroactively adjusted, where applicable, using the recapitalization conversion ratio of 2.056.
Common Stock
Upon closing of the Business Combination, pursuant to the terms of the Companys Second Amended and Restated Certificate of Incorporation, the Company
authorized 350,000,000 shares of Common Stock with a par value $0.0001. The holders of Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval and are entitled to receive dividends, as
and if declared by the Board out of legally available funds.
The Company had 73.0 million issued and outstanding shares of Common Stock as of
March 31, 2022. Not reflected in the shares issued and outstanding as of March 31, 2022 is approximately 1.8 million shares related to RSUs that vested in 2022 but have not yet been settled and issued.
Preferred Stock
Upon closing of the Business
Combination, pursuant to the terms of the Companys Second Amended and Restated Certificate of Incorporation, the Company authorized 1,000,000 shares of Preferred Stock with a par value $0.0001.
There was no Preferred Stock outstanding as of March 31, 2022.
Legacy Fast Radius Warrants
Immediately prior to
the completion of the Business Combination, all outstanding Legacy Fast Radius Warrants were exercised into an aggregate of 1.1 million shares of Legacy Fast Radius common stock (2.2 million shares of Common Stock post Business
Combination).
Legacy Fast Radius Convertible Preferred Stock
Immediately prior to the completion of the Business Combination, all outstanding shares of Legacy Fast Radius preferred stock converted into an aggregate of
16.0 million shares of Legacy Fast Radius common stock (32.9 million shares of Common Stock post Business Combination).
Legacy Fast
Radius Treasury Stock
Immediately prior to the completion of the Business Combination, all treasury shares of Legacy Fast Radius were retired.
Warrants
Prior to the Business Combination,
there were 15,516,667 warrants to purchase Common Stock outstanding, consisting of 8,625,000 Public Warrants and 6,891,667 Private Placement Warrants held by the ENNV initial stockholders. Following the Business Combination, there were 15,516,639
warrants to purchase Common Stock
F-19
outstanding, consisting of 8,624,972 Public Warrants and 6,891,667 Private Placement Warrants held by the ENNV initial stockholders, with the reduction in Public Warrants resulting from rounding
for fractional interests. Each warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share. The warrants expire on February 4, 2027, or earlier upon redemption or liquidation. Refer to Note 2 for
additional information.
Note 8. Revenues
The
Company charges certain customers shipping and handling fees. These fees are recorded within revenue when incurred after transfer of control of the products to customers. Revenues related to shipping and handling fees were $389 thousand and
$57 thousand for the three months ended March 31, 2022 and 2021, respectively. When shipping and handling services are performed before transfer of control to customers, they are accounted for as a fulfillment cost and are included in cost
of revenues when incurred.
The Company will contract with third parties to produce certain components of a customer order. Costs paid in advance of
production are recorded in current assets as prepaid production costs until control of the product is transferred to the customer. Under such outsourced manufacturing arrangements, the Company is the primary obligor to its customer.
Contract assets are recorded when the Company has a right to consideration in exchange for goods or services that it has transferred to a customer but for
which payment is conditional on more than just the passage of time. Contract liabilities consist of fees paid by the Companys customers for which the associated performance obligations have not been satisfied and revenue has not been
recognized based on the Companys revenue recognition criteria. The Company did not have any contract assets or liabilities as of March 31, 2022 or December 31, 2021, respectively. During the three months ended March 31, 2021,
the amount of revenue recognized that was included in deferred revenue as of December 31, 2020 was not significant.
Disaggregation of Revenues
The Companys primary sources of revenue are from one revenue stream, product sales of manufactured parts. The Company is also presenting a
disaggregation of revenue by geographical region (based on the external customers location) for the three months ended March 31, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Revenues |
|
|
|
|
|
|
|
|
Americas |
|
$ |
6,039 |
|
|
$ |
3,501 |
|
Europe |
|
|
170 |
|
|
|
71 |
|
Asia Pacific |
|
|
53 |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,262 |
|
|
$ |
3,796 |
|
|
|
|
|
|
|
|
|
|
Note 9. Stock-Based Compensation
Equity Incentive Plan
On February 2, 2022,
the Company stockholders approved the Fast Radius, Inc. 2022 Equity Incentive Plan (the Equity Incentive Plan), which became effective immediately upon the Closing, replacing the Legacy Fast Radius 2017 Equity Incentive Plan, as
amended (the 2017 Equity Incentive Plan). Each outstanding vested or unvested stock award under the 2017 Plan was converted to the 2022 Plan, multiplied by the applicable exchange ratio as described in Note 3, with the same key terms and
vesting requirements. All stock option activity prior to the closing of the Business Combination on February 4, 2022 has been retroactively restated to reflect the
F-20
Exchange Ratio. Pursuant to the Equity Incentive Plan, the Board may grant stock awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock units and
other stock-based awards, to officers, key employees, and directors. The Equity Incentive Plan allows for non-employee director grants, which are accounted for in the same manner as employee awards. There are
11.0 million registered shares of Common Stock reserved for issuance under the Equity Incentive Plan. During the three months ended March 31, 2022, 7.2 million RSUs were considered granted under the Equity Incentive Plan for
accounting purposes.
Standard employee RSUs contain both service and performance conditions wherein vesting is generally subject to a requisite four year
service period, whereby the award vests 25% on the one-year anniversary of the vesting commencement date then ratably over 36 monthly installments, subject to continuous service by the individual and
achievement of the performance target, as stipulated in the notice of grant (Liquidity Event as defined in the underlying agreements). Founder RSUs included a portion that vested upon the closing of the Business Combination, and a
portion that will vest on the first day following the lapse of the Lock-Up Period, the first 180 days from the consummation of the Business Combination, on which the Company Valuation equals or exceeds
$1.5 billion. Due to the nature of the performance condition, recognition of compensation cost was deferred until the occurrence of the Liquidity Event. The fair values associated with the RSUs granted after the Closing Date are based on the
closing price of the Companys Common Stock on the date of grant. The fair values associated with the RSUs granted in 2022 prior to the Closing Date under the 2017 Equity Incentive Plan were estimated on the date of grant by multiplying the
SPAC share market value by the Exchange Ratio and adding the value of the $15 and $20 earn out shares which is evaluated using a Monte-Carlo analysis. The remaining private scenario is evaluated using the Black-Scholes option-pricing model. The key
assumptions used in this valuation are as follows.
|
|
|
|
|
SPAC probability |
|
|
95 |
% |
Remain private probability |
|
|
5 |
% |
SPAC Market Value |
|
$ |
736 million |
|
Conversion Ratio |
|
|
2.056 |
|
Expected annual dividend yield |
|
|
0.00 |
% |
Expected volatility |
|
|
84 |
% |
Risk-free rate of return |
|
|
0.71 |
% |
Expected option term (years) |
|
|
1.4 years |
|
Vesting of the RSUs issued under the 2017 Equity Incentive Plan was dependent on a liquidity event, of which the Business
Combination qualified under the 2017 Equity Incentive Plan as a liquidity event, which occurred on February 4, 2022. Accordingly, the Company recognized stock-based compensation expense of $18.7 million as of that date to recognize the
vested portion of the awards.
CEO Award
Pursuant to
the terms of his amended and restated employment agreement, Mr. Rassey, the Companys Chief Executive Officer, was granted a RSU award of 6 million shares under the Equity Incentive Plan for accounting purposes concurrent with the
closing of the Business Combination. The award is eligible to vest in installments contingent upon Mr. Rasseys continued employment as Chief Executive Officer through the date of attainment of ten common stock share price performance
goals (Price Hurdles), 10% of the total number of shares subject to the award are eligible to vest upon attainment of each separate identified Price Hurdle. Once any portion of the award vests based on achievement of a specific Price
Hurdle, no additional portion of the award may vest based on any subsequent attainment of the same Price Hurdle on any later date during the term of the award. The fair
F-21
value is determined by using the Monte Carlo Simulation valuation model and the assumptions below. The valuation model incorporated the following key assumptions on the date of grant:
|
|
|
|
|
Stock price |
|
$ |
7.63 |
|
Expected volatility |
|
|
30.1 |
% |
Expected term (years) |
|
|
10.0 |
|
Risk-free rate |
|
|
1.92 |
% |
Discount for lack of marketability |
|
|
6.9 |
% |
The aggregate grant date fair value of the award is $11.6 million. The derived service period under the Monte Carlo
Simulation model for the equity-classified award was determined based on the median vesting time for the simulations that achieved the vesting hurdle. Stock-based compensation expense associated with each tranche under the award is recognized over
the longer of the (i) derived service period of the tranche and (ii) expected service period, using the accelerated expense recognition method. It is estimated that the stock-based compensation expense for the award will be recognized over
8 years.
Stock-based compensation expense for the three months ended March 31, 2022 and 2021 was $20.4 million and $0.3 million
respectively. No income tax benefit was recognized in the condensed consolidated statements of net loss and comprehensive loss and an immaterial amount of compensation was capitalized. Stock-based compensation expense was recorded in the following
financial statement lines within the condensed consolidated statements of net loss and comprehensive loss:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Cost of Revenues |
|
$ |
115 |
|
|
$ |
4 |
|
General and Administrative |
|
$ |
17,545 |
|
|
$ |
219 |
|
Selling & Marketing |
|
$ |
1,183 |
|
|
$ |
|
|
Research & Development |
|
$ |
1,525 |
|
|
$ |
31 |
|
As of March 31, 2022, the Company had 10.1 million granted but unvested RSUs with unrecognized stock-based
compensation expense of $29.7 million remaining to be recognized over a weighted-average period of 2.1 years.
Employee Stock Purchase Plan
On February 2, 2022, the Companys stockholders approved the 2022 Employee Stock Purchase Plan, (the ESPP). The ESPP
provides eligible employees with a means of acquiring equity in the Company at a discounted price using their own accumulated payroll deductions. Under the terms of the ESPP, employees can elect to have amounts of their annual compensation withheld,
up to a maximum set by the Board, to purchase shares of Common Stock for a purchase price equal to 85% of the lower of the fair market value per share (at closing) of Common Stock on (i) the first trading day of the offering period or
(ii) the last trading day of the offering period. There are 2,150,000 shares of Common Stock reserved for issuance under the ESPP. During the three months ended March 31, 2022, there were no shares purchased under the ESPP.
Note 10. Taxes
The Companys provision for interim
periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items arising in that period. The Companys effective tax rate differs from the U.S. statutory tax rate primarily due to valuation allowances on its
deferred tax assets as it is more likely than not that some, or all, of the Companys deferred tax assets will not be realized. There was no income tax benefit for the three months ended March 31, 2022 and 2021, respectively.
Deferred tax assets and liabilities are determined based upon the differences between the unaudited condensed consolidated financial statements carrying
amounts and the tax bases of existing assets and liabilities and for loss
F-22
and credit carryforwards, using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. The Company has provided a full valuation allowance
against the net deferred tax assets as the Company has determined that it was more likely than not that the Company would not realize the benefits of federal and state net deferred tax assets.
Note 11. Net Loss Per Share
The Company computes basic
loss per share using net loss attributable to stockholders and the weighted-average number of Common Stock shares outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options and
stock-based awards where the conversion of such instruments would be dilutive. The Companys potentially dilutive securities, which include stock options, unvested restricted stock awards/units, earnout awards, convertible notes, redeemable
convertible preferred stock and warrants to purchase shares of stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common
shares outstanding used to calculate both basic and diluted net loss per share attributable to the Companys stockholders is the same.
The
reconciliation of the numerator and denominator for the basic and diluted earnings calculations for the three months ended March 31, 2022 and 2021 is as follows:
|
|
|
|
|
|
|
|
|
(in thousands, except share and per share data) |
|
March 31, 2022 |
|
|
March 31, 2021 |
|
Income (loss) available to common stockholders per share: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(44,600 |
) |
|
$ |
(12,786 |
) |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
60,851,683 |
|
|
|
39,063,996 |
|
Net loss per share - Basic and Diluted |
|
$ |
(0.73 |
) |
|
$ |
(0.33 |
) |
The computation of diluted net loss per share excluded approximately 43 million and 45 million securities in 2022
and 2021, respectively, because their inclusion would have had an anti-dilutive effect on net loss per share
Note 12. Fair Value Measurements
The Companys financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021
by level within the fair value hierarchy are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
(in thousands) |
|
Quoted prices in active markets |
|
|
Significant other observable inputs |
|
|
Significant unobservable inputs |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Cash sweep accounts |
|
$ |
57,360 |
|
|
$ |
|
|
|
$ |
|
|
Public warrants |
|
$ |
1,390 |
|
|
$ |
|
|
|
$ |
|
|
Private placement warrants |
|
$ |
|
|
|
$ |
1,110 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
(in thousands) |
|
Quoted prices in active markets |
|
|
Significant other observable inputs |
|
|
Significant unobservable inputs |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Cash sweep and money market accounts |
|
$ |
8,702 |
|
|
$ |
|
|
|
$ |
|
|
Related party derivative liability |
|
$ |
|
|
|
$ |
|
|
|
$ |
4,395 |
|
Legacy Fast Radius warrant liability |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,968 |
|
F-23
There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2022.
Fair Value of warrants issued to purchase Legacy Fast Radius Common Stock
The following table includes a summary of the changes in fair value of the liability classified warrants issued to purchase Legacy Fast Radius common stock
measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2022 and 2021:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Beginning balance |
|
$ |
2,014 |
|
|
$ |
87 |
|
Additions |
|
|
|
|
|
|
507 |
|
Change in fair value |
|
|
(1,475 |
) |
|
|
559 |
|
Converted to common stock |
|
|
(539 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
1,153 |
|
|
|
|
|
|
|
|
|
|
A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the Companys
warrant liability for common share warrants categorized within Level 3 of the fair value hierarchy as of February 4, 2022 (the conversion date) and December 31, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
February 4, 2022 |
|
|
December 31, 2021 |
|
Legacy Fast Radius stock price |
|
$ |
15.69 |
|
|
$ |
28.28 |
|
Term (Years) |
|
|
N/A |
|
|
|
10.71 |
|
Volatility |
|
|
N/A |
|
|
|
84.40 |
% |
Risk-free rate of return |
|
|
N/A |
|
|
|
1.52 |
% |
Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
Fair Value of warrants issued to purchase Legacy Fast Radius series A-3
preferred stock
The following table includes a summary of changes in fair value of the liability classified warrants issued to purchase Legacy
Fast Radius series A-3 preferred stock measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2022 and 2021:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Beginning balance |
|
$ |
954 |
|
|
$ |
112 |
|
Change in fair value |
|
|
(473 |
) |
|
|
694 |
|
Converted to common stock |
|
|
(481 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
$ |
806 |
|
|
|
|
|
|
|
|
|
|
A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the Companys
warrant liability for preferred share warrants is categorized within Level 3 of the fair value hierarchy as of February 4, 2022 (the conversion date) and December 31, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
February 4, 2022 |
|
|
December 31, 2021 |
|
Legacy Fast Radius stock price |
|
|
15.69 |
|
|
$ |
30.19 |
|
Term (Years) |
|
|
N/A |
|
|
|
11.26 |
|
Volatility |
|
|
N/A |
|
|
|
83.10 |
% |
Risk-free rate of return |
|
|
N/A |
|
|
|
1.54 |
% |
Dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
F-24
Related Party Derivative Liability
The following table includes a summary of changes in fair value of the Companys Related party derivative liabilities related to the convertible notes
measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2022:
|
|
|
|
|
(in thousands) |
|
2022 |
|
Beginning balance |
|
$ |
4,395 |
|
Change in fair value |
|
|
(30 |
) |
Converted to common stock |
|
|
(4,365 |
) |
|
|
|
|
|
Ending balance |
|
$ |
|
|
|
|
|
|
|
A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the Companys
derivative liability categorized within Level 3 of the fair value hierarchy as of February 4, 2022 (the conversion date) and December 31, 2021 is as follows:
|
|
|
|
|
|
|
|
|
Energize |
|
February 4, 2022 |
|
|
December 31, 2021 |
|
Cost of debt |
|
|
11.0 |
% |
|
|
11.0 |
% |
Term (Years) |
|
|
0.0 |
|
|
|
0.08 - 0.25 |
|
Present value factor |
|
|
1 |
|
|
|
0.98 - 0.99 |
|
|
|
|
Drive Capital |
|
February 4, 2022 |
|
|
December 31, 2021 |
|
Cost of debt |
|
|
11.0 |
% |
|
|
11.0 |
% |
Term (Years) |
|
|
0.0 |
|
|
|
0.08 - 0.25 |
|
Present value factor |
|
|
1 |
|
|
|
0.98 - 0.99 |
|
|
|
|
ECP Holdings |
|
February 4, 2022 |
|
|
December 31, 2021 |
|
Cost of debt |
|
|
11.0 |
% |
|
|
11.0 |
% |
Term (Years) |
|
|
0.0 |
|
|
|
0.08 - 0.25 |
|
Present value factor |
|
|
1 |
|
|
|
0.98 - 0.99 |
|
Other
The
carrying amounts reported in the condensed consolidated balance sheets for accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short-term maturities. With the exception of the Companys Related
Party Convertible Notes, the fair value of the Companys debt approximates their carrying values based on the variable nature of interest rates and current market rates available. The Company considered its debt at December 31, 2021 to be
a Level 3 measurement in the fair value hierarchy as significant judgment was involved to determine the fair value of embedded conversion features. Refer to Note 5 for further information regarding the fair value of the Companys Related
Party Convertible Notes.
Note 13. Related Party Transactions
United Parcel Service
Since Legacy Fast
Radius inception, UPS has contributed significant amounts of capital in the form of equity and debt to Legacy Fast Radius. UPS currently has investments in Common Stock. The Company has multiple agreements with UPS, which are summarized below.
Legacy Fast Radius entered into a Discount Agreement in 2016 with UPS, which was amended in March 2017 and March 2019. Under the agreement, UPS performs
advertising and brand marketing services for the Company. In exchange for the services, the Company has agreed to compensate UPS in the form of equity
F-25
royalties which are determined based on 6% of the Companys gross revenues. The Company determined this arrangement qualifies as a nonmonetary transaction within ASC 718. As of
March 31, 2022 and December 31, 2021, the Company recognized $2.9 million and $2.5 million as a related party accrued liability on the condensed consolidated balance sheets. During the three months ended March 31, 2022 and
2021, the Company recognized $375 thousand and $227 thousand, respectively, in sales and marketing expense on its condensed consolidated statements of net loss and comprehensive loss.
Legacy Fast Radius entered into a warehouse rental agreement with UPS in January 2015. The Company leases space in a warehouse in Louisville, KY that is used
for printing equipment, supplies, packages and shipping space. The Company paid $17 thousand in lease payments to UPS for the three months ended March 31, 2022 and 2021, respectively.
Legacy Fast Radius entered into a shipping service agreement with UPS in 2016 (as amended in both 2017 and 2019) for which the Company receives pickup and
delivery services. The Company paid $451 thousand and $148 thousand in fees to UPS for shipping services for the three months ended March 31, 2022 and 2021, respectively.
Legacy Fast Radius entered into a sub-lease agreement with UPS in August 2018. The Company sub-leases office space from UPS in Singapore. The Company paid $3 thousand and $2 thousand in lease payments to UPS for the three months ended March 31, 2022 and 2021, respectively.
Energize Venture Fund & Ironspring Venture Fund
Energize Venture Fund LP (Energize) and Ironspring Venture Fund I, LP (Ironspring) have investments in the Companys Common Stock.
On March 12, 2021, Legacy Fast Radius signed a convertible note agreement with Energize and Ironspring, which was funded on April 13, 2021. The Company received $7.6 million in proceeds related to these notes. The notes had a stated
interest rate of 6% and an effective interest rate of 58%, with all principal and interest due at maturity. Interest expense recorded on the note during the three months ended March 31, 2022 was $228 thousand. The note, including accrued
and unpaid interest, was converted into Common Stock upon close of the Business Combination. Legacy Fast Radius also issued warrants to purchase 140,000 shares of Legacy Fast Radius common stock to holders of Energize that were converted into Common
Stock upon the close of the Business Combination.
Drive Capital
Drive Capital has an investment in the Companys Common Stock. On August 24, 2021, Legacy Fast Radius signed a convertible note agreement with Drive
Capital, which was funded on August 24, 2021. Legacy Fast Radius received $3.0 million in proceeds related to these notes. The notes had a stated interest rate of 6% and an effective interest rate of 17%, with all principal and interest
due at maturity. Interest expense recorded on the note during the three months ended March 31, 2022 was $41 thousand. The note, including accrued and unpaid interest, was converted into Common Stock upon close of the Business Combination.
ECP Holdings
On October 26, 2021,
Legacy Fast Radius signed a convertible note agreement with Energy Capital Partners Holdings LP (ECP Holdings), an affiliate of ENNV, which was funded on October 26, 2021. Legacy Fast Radius received $7.0 million in proceeds
related to these notes. The notes have a stated interest rate of 6% and an effective interest rate of 16%, with all principal and interest due at maturity. Interest expense recorded on the note during the three months ended March 31, 2022 was
$92 thousand. The note, including accrued and unpaid interest, was converted into Common Stock upon close of the Business Combination.
F-26
Palantir
Concurrently with the execution of the Merger Agreement in 2021, ENNV entered into subscription agreements with the PIPE Investors, including Palantir,
pursuant to which the PIPE Investors agreed to subscribe for and purchase, and ENNV agreed to issue and sell, to the PIPE Investors the PIPE Shares for a purchase price of $10.00 per share, or an aggregate purchase price of $75.0 million, in
the PIPE Investment. The PIPE Investment closed concurrently with the Business Combination on February 4, 2022. In May 2021, Legacy Fast Radius entered into a master subscription agreement with Palantir in which Legacy Fast Radius committed to
utilize software and services from Palantir over the next six years for a total of $45.0 million. The software and services are related to the Companys future plan to provide automated intelligence solutions as a service following
commercialization of the Companys Cloud Manufacturing Platform. Upon close of the Merger in February 2022, the Company made a payment to Palantir of $9.4 million and the remaining non-cancellable
future minimum payments due on this firm purchase agreement are $10.1 million.
Note 14. Subsequent Events
On May 11, 2022, the Company entered into a purchase agreement (the Purchase Agreement) with Lincoln Park Capital Fund, LLC, an Illinois
limited liability company (Lincoln Park), pursuant to which Lincoln Park has committed to purchase up to $30.0 million worth of Common Stock. Concurrently with entering into the Purchase Agreement, the Company also entered into a
registration rights agreement (the Registration Rights Agreement) with Lincoln Park, pursuant to which it agreed to register the offer and sale of shares of Common Stock available for issuance under the Purchase Agreement under the
Securities Act of 1933, as amended (the Securities Act).
Beginning on the Commencement Date (as defined below) and thereafter, the Company
has the right, but not the obligation, to deliver to Lincoln Park a purchase notice (a Regular Purchase Notice), directing Lincoln Park to purchase up to 100,000 shares of Common Stock (the Regular Purchase Amount) provided
that the closing sale price of Common Stock on the purchase date is not below a threshold price set forth in the Purchase Agreement (a Regular Purchase). The Regular Purchase Amount may be increased to various limits, up to 400,000
shares, if the closing sale price of Common Stock on the applicable purchase date equals or exceeds certain higher threshold prices set forth in the Purchase Agreement, provided that Lincoln Parks maximum committed purchase obligation under
any single Regular Purchase may not exceed $2.0 million. The above-referenced share amount limitations and closing sale price thresholds are subject to adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction as provided in the Purchase Agreement. The purchase price per share for each Regular Purchase will be the lower of: (i) the lowest sale price of
Common Stock during the purchase date, or (ii) the average of the three lowest closing sale prices of Common Stock in the ten business days prior to the purchase date. There are no upper limits on the price per share that Lincoln Park must pay
for shares of Common Stock under the Purchase Agreement. Lincoln Park may not assign or transfer its rights and obligations under the Purchase Agreement.
If the Company directs Lincoln Park to purchase the maximum number of shares of Common Stock that the Company may sell in a Regular Purchase, then in addition
to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park to purchase additional shares of Common Stock in accelerated purchases (each, an Accelerated
Purchase) up to the lower of: (i) three times the number of shares of Common Stock purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the trading volume on the date of each such accelerated purchase or such shorter
period as provided under the Purchase Agreement. The purchase price for the additional shares is 97% of the lesser of:
|
|
|
the closing sale price for the Common Stock on the date of sale; or |
|
|
|
the accelerated purchase dates volume weighted average price of the Common Stock on the date of sale.
|
F-27
The aggregate number of shares of Common Stock that the Company can sell to Lincoln Park under the Purchase
Agreement may in no case exceed 14,643,920 shares (subject to adjustment as described above) of Common Stock (which is equal to approximately 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase
Agreement) (the Exchange Cap), unless (i) Company stockholder approval is obtained to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all
applicable sales of Common Stock to Lincoln Park under the Purchase Agreement equals or exceeds $0.62 per share of Common Stock (which represents the lower of (A) the Nasdaq official closing price of the Common Stock on the trading day
immediately preceding the date of the Purchase Agreement or (B) the average Nasdaq official closing price of the Common Stock for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase
Agreement, adjusted such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules).
In all cases, the Purchase Agreement also prohibits the Company from directing Lincoln Park to purchase any shares of Common Stock if those shares, when
aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 13d-3 thereunder), would result in Lincoln Park beneficially owning more than 9.99%.
As consideration for Lincoln
Parks commitment to purchase shares of Common Stock under the Purchase Agreement, the Company issued 728,385 shares of Common Stock to Lincoln Park as a commitment fee. Upon the date of the first Regular Purchase, the Company will be required
to issue 182,096 shares as an additional commitment fee.
The Purchase Agreement contains customary representations, warranties, covenants, closing
conditions and indemnification provisions. Sales under the Purchase Agreement may commence only after certain conditions have been satisfied (the date on which all requisite conditions have been satisfied, the Commencement Date), which
conditions include the effectiveness of a registration statement covering the resale of the shares of Common Stock issued or sold by the Company to Lincoln Park under the Purchase Agreement, the filing with The Nasdaq Stock Market of a Listing of
Additional Shares notification with respect to the shares of Common Stock issued or sold by the Company to Lincoln Park under the Purchase Agreement and Nasdaq having raised no objection to the consummation of transactions contemplated under the
Purchase Agreement, and the receipt by Lincoln Park of a customary opinion of counsel and other certificates and closing documents.
The Purchase
Agreement may be terminated by the Company at any time for any reason or for no reason, without any cost or penalty, by giving one business day notice to Lincoln Park. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any
direct or indirect short selling or hedging of the Common Stock. Although the Company has agreed to reimburse Lincoln Park for a limited portion of the fees it incurred in connection with the Purchase Agreement, the Company has not and will not pay
any additional amounts to reimburse or otherwise compensate Lincoln Park in connection with the transaction, other than the issuance of the shares of Common Stock being issued as a commitment fee.
There are no limitations on use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the Companys
ability to enter into variable rate transactions described in the Purchase Agreement), rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Company may deliver Purchase Notices under the
Purchase Agreement, subject to market conditions, and in light of its capital needs from time to time and under the limitations contained in the Purchase Agreement. Any proceeds that the Company receives under the Purchase Agreement are expected to
be used to advance its growth strategy and for general corporate purposes.
F-28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Fast Radius Operations, Inc.
Opinion on the Financial Statements
We have audited the
accompanying consolidated balance sheets of Fast Radius Operations, Inc. and subsidiary (the Company) as of December 31, 2021 and 2020, the related consolidated statements of net loss and comprehensive loss, stockholders
equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity
with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, since inception, the Company has experienced recurring losses from operations and generated negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern.
Managements plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As
part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 30, 2022 (June 3, 2022, as to the effects of the reverse recapitalization described in Note 1)
We have served as the Companys auditor since 2021.
F-30
Fast Radius Operations, Inc.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
2021 |
|
|
December 31, 2020 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
8,701,895 |
|
|
$ |
18,494,248 |
|
Accounts receivable, net of allowances for doubtful accounts of $929,800 and $404,755,
respectively |
|
|
7,015,278 |
|
|
|
5,046,497 |
|
Inventories |
|
|
448,771 |
|
|
|
274,311 |
|
Prepaid production costs |
|
|
986,498 |
|
|
|
283,553 |
|
Prepaid expenses and other current assets |
|
|
4,422,307 |
|
|
|
623,292 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
$ |
21,574,749 |
|
|
$ |
24,721,901 |
|
Non-current assets |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
9,528,427 |
|
|
|
2,664,366 |
|
Other non-current assets |
|
|
534,915 |
|
|
|
336,923 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
31,638,091 |
|
|
$ |
27,723,190 |
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity (deficit) |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,987,129 |
|
|
$ |
1,528,790 |
|
Accrued compensation |
|
|
3,096,556 |
|
|
|
1,350,539 |
|
Accrued and other liabilities |
|
|
11,610,233 |
|
|
|
167,384 |
|
Advances from customers |
|
|
258,089 |
|
|
|
25,012 |
|
Accrued liabilities related parties |
|
|
2,513,347 |
|
|
|
1,313,062 |
|
Deferred revenue |
|
|
|
|
|
|
5,350 |
|
Warrant liability |
|
|
2,968,435 |
|
|
|
199,408 |
|
Current portion of long-term debt |
|
|
13,265,588 |
|
|
|
413,930 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
$ |
37,699,377 |
|
|
$ |
5,003,475 |
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
396,258 |
|
|
|
|
|
Term loans - net of current portion and debt issuance costs |
|
|
16,775,836 |
|
|
|
314,389 |
|
Related party convertible notes and derivative liabilities |
|
|
16,856,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
71,728,029 |
|
|
$ |
5,317,864 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
Stockholders equity (deficit) |
|
|
|
|
|
|
|
|
Common Stock, $0.0001 par value, 350,000,000 authorized; 39,913,100 and 38,654,855 shares issued
and outstanding as of December 31, 2021 and December 31, 2020, respectively |
|
|
3,991 |
|
|
|
3,865 |
|
Additional paid-in capital |
|
|
83,399,444 |
|
|
|
78,010,936 |
|
Accumulated deficit |
|
|
(123,493,373 |
) |
|
|
(55,609,475 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(40,089,938 |
) |
|
|
22,405,326 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit) |
|
$ |
31,638,091 |
|
|
$ |
27,723,190 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
F-31
Fast Radius Operations, Inc.
CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
For the years ended |
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Revenues |
|
$ |
20,012,064 |
|
|
$ |
13,966,251 |
|
Cost of revenues |
|
|
20,299,677 |
|
|
|
12,038,769 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
(287,613 |
) |
|
|
1,927,482 |
|
Operating expenses |
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
22,721,423 |
|
|
|
8,327,910 |
|
General and administrative |
|
|
32,974,231 |
|
|
|
12,043,879 |
|
Research and development |
|
|
5,035,963 |
|
|
|
2,959,330 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
60,731,617 |
|
|
|
23,331,119 |
|
Loss from operations |
|
|
(61,019,230 |
) |
|
|
(21,403,637 |
) |
Change in fair value of warrants |
|
|
(1,781,280 |
) |
|
|
(80,040 |
) |
Change in fair value of derivative liability |
|
|
(208,000 |
) |
|
|
|
|
Interest income and other income |
|
|
1,318 |
|
|
|
120,549 |
|
Interest expense, including amortization of debt issuance costs |
|
|
(4,876,706 |
) |
|
|
(308,266 |
) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(67,883,898 |
) |
|
|
(21,671,394 |
) |
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
|
$ |
(67,883,898 |
) |
|
$ |
(21,671,394 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(1.64 |
) |
|
$ |
(0.56 |
) |
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
41,454,582 |
|
|
|
38,900,813 |
|
See accompanying notes to the consolidated financial statements.
F-32
Fast Radius Operations, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Equity |
|
|
Amount |
|
|
Common Stock |
|
|
Amount |
|
|
Treasury Stock |
|
|
Amount |
|
|
APIC |
|
|
Accumulated Deficit |
|
|
Total |
|
Balance at January 1, 2020 |
|
|
15,430,205 |
|
|
$ |
66,290,289 |
|
|
|
1,194,163 |
|
|
$ |
119 |
|
|
|
(650,000 |
) |
|
$ |
(221,000 |
) |
|
$ |
2,525,228 |
|
|
$ |
(33,717,081 |
) |
|
$ |
(31,412,734 |
) |
Retroactive application of recapitalization |
|
|
(15,430,205 |
) |
|
|
(66,290,289 |
) |
|
|
31,649,506 |
|
|
|
3,165 |
|
|
|
650,000 |
|
|
|
221,000 |
|
|
|
66,287,124 |
|
|
|
(221,000 |
) |
|
|
66,290,289 |
|
Adjusted balance at January 1, 2020 |
|
|
|
|
|
|
|
|
|
|
32,843,669 |
|
|
|
3,284 |
|
|
|
|
|
|
|
|
|
|
|
68,812,352 |
|
|
|
(33,938,081 |
) |
|
|
34,877,555 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,671,394 |
) |
|
|
(21,671,394 |
) |
Issuance of equity warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,373 |
|
|
|
|
|
|
|
200,373 |
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
1,219,281 |
|
|
|
122 |
|
|
|
|
|
|
|
|
|
|
|
7,999,839 |
|
|
|
|
|
|
|
7,999,961 |
|
Exercise of stock options and release of notes recourse provision |
|
|
|
|
|
|
|
|
|
|
4,591,905 |
|
|
|
459 |
|
|
|
|
|
|
|
|
|
|
|
6,292 |
|
|
|
|
|
|
|
6,751 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
992,080 |
|
|
|
|
|
|
|
992,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
38,654,855 |
|
|
$ |
3,865 |
|
|
|
|
|
|
$ |
|
|
|
$ |
78,010,936 |
|
|
$ |
(55,609,475 |
) |
|
$ |
22,405,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2021 |
|
|
16,023,234 |
|
|
$ |
74,290,250 |
|
|
|
3,427,555 |
|
|
$ |
343 |
|
|
|
(650,000 |
) |
|
$ |
(221,000 |
) |
|
$ |
3,724,208 |
|
|
$ |
(55,388,475 |
) |
|
$ |
(51,884,924 |
) |
Retroactive application of recapitalization |
|
|
(16,023,234 |
) |
|
|
(74,290,250 |
) |
|
|
35,227,300 |
|
|
|
3,522 |
|
|
|
650,000 |
|
|
|
221,000 |
|
|
|
74,286,728 |
|
|
|
(221,000 |
) |
|
|
74,290,250 |
|
Adjusted balance at January 1, 2021 |
|
|
|
|
|
|
|
|
|
|
38,654,855 |
|
|
|
3,865 |
|
|
|
|
|
|
|
|
|
|
|
78,010,936 |
|
|
|
(55,609,475 |
) |
|
|
22,405,326 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67,883,898 |
) |
|
|
(67,883,898 |
) |
Issuance of equity warrants to related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,200,658 |
|
|
|
|
|
|
|
2,200,658 |
|
Issuance of equity warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,245,000 |
|
|
|
|
|
|
|
2,245,000 |
|
Exercise of stock options and release of notes recourse provision |
|
|
|
|
|
|
|
|
|
|
1,258,245 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
87,454 |
|
|
|
|
|
|
|
87,580 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
855,396 |
|
|
|
|
|
|
|
855,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
39,913,100 |
|
|
$ |
3,991 |
|
|
|
|
|
|
$ |
|
|
|
$ |
83,399,444 |
|
|
$ |
(123,493,373 |
) |
|
$ |
(40,089,938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements
F-33
Fast Radius Operations, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
For the years ended |
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(67,883,898 |
) |
|
$ |
(21,671,394 |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,653,318 |
|
|
|
841,736 |
|
Amortization of deferred financing fees and convertible debt discount |
|
|
3,484,753 |
|
|
|
116,857 |
|
Stock-based compensation |
|
|
855,396 |
|
|
|
992,082 |
|
Compensation expense related to equity classified warrants |
|
|
|
|
|
|
200,373 |
|
Change in fair value of warrants |
|
|
1,781,280 |
|
|
|
80,040 |
|
Change in fair value of derivative liability |
|
|
208,000 |
|
|
|
|
|
Provision for doubtful accounts |
|
|
641,357 |
|
|
|
710,882 |
|
Loss on disposal of assets |
|
|
227,800 |
|
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,610,138 |
) |
|
|
(1,840,412 |
) |
Inventories |
|
|
(174,460 |
) |
|
|
(12,676 |
) |
Prepaid production costs |
|
|
(702,945 |
) |
|
|
96,734 |
|
Prepaid expenses and other current assets |
|
|
(3,311,925 |
) |
|
|
(635,941 |
) |
Accounts payable |
|
|
2,335,077 |
|
|
|
(138,229 |
) |
Accrued compensation and other liabilities |
|
|
14,785,409 |
|
|
|
550,733 |
|
Advances from customers |
|
|
233,077 |
|
|
|
(85,466 |
) |
Deferred revenue |
|
|
(5,350 |
) |
|
|
(102,845 |
) |
Other |
|
|
(287,872 |
) |
|
|
(6,250 |
) |
|
|
|
|
|
|
|
|
|
Cash used in operating activities |
|
$ |
(48,771,121 |
) |
|
$ |
(20,903,776 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(8,621,917 |
) |
|
|
(711,727 |
) |
|
|
|
|
|
|
|
|
|
Cash used in investing activities |
|
$ |
(8,621,917 |
) |
|
$ |
(711,727 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from term loans |
|
$ |
31,486,824 |
|
|
|
427,615 |
|
Repayment of term loans |
|
|
(948,928 |
) |
|
|
(3,140,783 |
) |
Proceeds from convertible notes and warrants with related parties |
|
|
17,600,000 |
|
|
|
|
|
Proceeds from equity contributions |
|
|
|
|
|
|
7,999,961 |
|
Convertible notes issuance costs |
|
|
(124,791 |
) |
|
|
|
|
Proceeds from exercise of stock options |
|
|
87,580 |
|
|
|
6,750 |
|
|
|
|
Payment of deferred financing costs |
|
|
(500,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities |
|
$ |
47,600,685 |
|
|
$ |
5,293,543 |
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
(9,792,353 |
) |
|
|
(16,321,960) |
|
Cash and cash equivalents, beginning of period |
|
|
18,494,248 |
|
|
|
34,816,208 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
8,701,895 |
|
|
$ |
18,494,248 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Issuance of liability classified warrants in connection with debt |
|
$ |
987,747 |
|
|
$ |
86,963 |
|
Issuance of equity classified warrants in connection with debt |
|
$ |
4,445,658 |
|
|
$ |
|
|
Capital expenditures not yet paid |
|
$ |
239,261 |
|
|
$ |
116,000 |
|
Interest paid |
|
$ |
854,078 |
|
|
$ |
110,420 |
|
See accompanying notes to the consolidated financial statements.
F-34
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Nature of Operations and Basis of Presentation
Fast Radius Operations, Inc., which was incorporated in the United States in 2017 (Fast Radius or the Company), is a cloud
manufacturing and digital supply chain company. The Fast Radius solution combines a proprietary software platform with physical infrastructure to enable accelerated product development and digital tools for product engineers.
The Company is headquartered in Chicago, Illinois, with additional operating locations in Atlanta, Georgia; Louisville, Kentucky; and Singapore. The
Companys operations in Louisville, Kentucky are located within the Worldport facility of United Parcel Service, Inc. (UPS), enabling parts to be produced and shipped late into the evening for overnight distribution around the
world. The Company has an operating subsidiary located in Singapore.
On July 18, 2021, ECP Environmental Growth Opportunities Corp., a Delaware
corporation (ENNV), and ENNV Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of ENNV (Merger Sub), entered into an Agreement and Plan of Merger (as it was amended, supplemented or otherwise modified from
time to time in accordance with its terms, the Merger Agreement) with Fast Radius, pursuant to which Merger Sub will merge with and into Fast Radius, with Fast Radius surviving the merger as a wholly owned subsidiary of ENNV (the
Merger and, together with the other transactions contemplated by the Merger Agreement, the Business Combination).
On
February 4, 2022, pursuant to the Merger Agreement, Fast Radius consummated the Business Combination. Subject to the terms of the Merger Agreement, all of the issued and outstanding shares of Fast Radius were converted into an aggregate of (i)
65,000,000 shares of Common Stock, par value $0.0001 per share, of ENNV at a deemed value of $10.00 per share (including 11,196,271 shares of Common Stock underlying exchanged options, vested RSUs and exchanged RSUs) and (ii) the contingent
right to receive during the earnout period certain additional shares of the Companys common stock as specified in the Merger Agreement (the Merger Earnout Shares), in two equal tranches of 5,000,000 shares of the Companys
Common Stock, upon the satisfaction of certain price targets set forth in the Merger Agreement. The transaction provided all holders of the Companys Common Stock with shares of Common Stock of the continuing public company. Upon close of the
Business Combination, ENNV changed its name to Fast Radius, Inc. and the Company changed its name to Fast Radius Operations, Inc. As of December 31, 2021, the Company capitalized $3.6 million in direct and incremental equity
issuance-related transaction costs within prepaid expenses and other current assets on the consolidated balance sheet, of which $3.1 million was not yet paid as of December 31, 2021 and was presented within accrued and other liabilities on
the consolidated balance sheet.
The Merger will be accounted for as a reverse recapitalization (the Reverse Recapitalization) in accordance
with U.S. generally accepted accounting principles (U.S. GAAP). Under this method of accounting, ENNV is treated as the acquired company and Fast Radius is treated as the acquirer for financial reporting purposes. The Reverse
Recapitalization was treated as the equivalent of Fast Radius issuing stock for the net assets of ENNV, accompanied by a recapitalization. The net assets of ENNV are stated at historical cost, with no goodwill or other intangible assets recorded.
Fast Radius was determined to be the accounting acquirer based on the following predominant factors:
|
|
|
Fast Radius stockholders have the largest portion of voting rights in the post Business Combination Company;
|
|
|
|
Fast Radius stockholders have the ability to elect the majority of the directors to the post Business Combination
Companys board of directors (the Board); |
F-35
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Fast Radius management comprise the management of the post Business Combination Company;
|
|
|
|
Fast Radius operations comprise the ongoing operations of the post Business Combination Company;
|
|
|
|
Fast Radius is the larger entity based on historical revenues and business operations; and |
|
|
|
The post Business Combination Company assumed Fast Radius name. |
The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Fast Radius. The shares and corresponding
capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the exchange ratio established in the Business Combination, unless otherwise noted. Activity within the Statements
of Stockholders Equity (Deficit) for the issuance and repurchases of Fast Radius redeemable convertible preferred stock were also retroactively converted to Fast Radius common stock.
Basis of Presentation
The accompanying
consolidated financial statements have been prepared in accordance with U.S. GAAP. No transactions have been recorded to accumulated other comprehensive income or loss through December 31, 2021.
Principles of Consolidation
The Companys
consolidated financial statements reflect its financial statements and those of its wholly owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation.
Risks and Uncertainties
The Company is subject to
a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, new customer acquisition, the need for additional funding, competition from
substitute products and services from larger companies, protection of proprietary technology, dependence on key individuals, and risks associated with changes in information technology. The Company has financed its operations through issuances of
debt and preferred stock since inception. The Companys long-term success is dependent upon its ability to successfully market its products and services; grow revenue; control operating costs and expenses; meet its obligations; obtain
additional capital when needed; and, ultimately, achieve profitable operations.
COVID-19 Impact
In March 2020, the World Health Organization declared the outbreak of the new strain of the coronavirus
(COVID-19) to be a pandemic. The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial
markets, and business practices. Federal and state governments have implemented measures in an effort to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply
chain logistical changes, and closure of non-essential businesses. To protect the health and well-being of its employees, suppliers, and customers, the Company has made substantial modifications to employee
travel policies, implemented office closures as employees are advised to work from home, and cancelled or shifted its conferences and other events to virtual-only through the date of these consolidated financial statements. The COVID-19 pandemic has impacted and may continue to impact the Companys business operations, including its employees, customers, partners, and communities, and there is substantial uncertainty in the nature and
degree of the pandemics continued effects over time. COVID-19 and other similar outbreaks, epidemics or pandemics could have a
F-36
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
material adverse effect on the Companys business, financial condition, results of operations, cash flows and prospects as a result of any of the risks described above and other risks that
the Company is not able to predict.
Going Concern Consideration
The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Since inception, the Company has
generated recurring losses which have resulted in an accumulated deficit of $123.5 million and $55.6 million as of December 31, 2021 and December 31, 2020, respectively, and expects to incur additional losses in the future. The
Company is still in the growth stage of its business and expects to continue to make substantial investments in its business, including in the expansion of its product portfolio and research and development, sales and marketing teams, in addition to
incurring additional costs as a result of being a public company. The Company believes the cash it obtained from the Business Combination and the private placement that occurred substantially concurrently with the consummation of the Business
Combination (the PIPE Investment), are not sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of the issuance of these financial statements. As a result of the
Companys history of losses and negative cash flows from operations, and because its plans to obtain additional capital have not been completed at the time of the issuance of these consolidated financial statements, substantial doubt exists
about the Companys ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. The Company expects to generate additional cash to fund its growth through future debt or equity
transactions; however, there can be no assurance that the Company will be able to obtain other debt or equity financing on terms acceptable to the Company, if at all. Failure to secure additional funding may require the Company to modify, delay, or
abandon some of its planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on the Companys business, operating results, financial condition,
and ability to achieve its intended business objectives. The Company has concluded that managements plans do not alleviate substantial doubt about the Companys ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might result from the outcome of this uncertainty.
Note 2 Summary of Significant Accounting
Policies
Emerging Growth Company
As an
emerging growth company (EGC), the Jumpstart Our Business Startups Act (JOBS Act) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are
applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.
Use of Estimates
The preparation of the
consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and
liabilities at the date of the financial statements, and the
F-37
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
reported amounts of revenues and expenses for the periods presented. The Companys most significant estimates and judgements involve valuation of the Companys debt and equity
securities, including assumptions made in the fair value of warrants, derivatives, and stock-based compensation; the useful lives of fixed assets; and allowances for doubtful accounts. Although the Company regularly assesses these estimates, actual
results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be
reasonable under the circumstances. Actual results may differ from managements estimates if these results differ from historical experience or other assumptions prove not to be substantially accurate, even if such assumptions are reasonable
when made.
Segment Information
The Company
operates and manages its business as one operating and reportable segment. The Companys chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of evaluating
financial performance and allocating resources. The Companys long-lived assets and customers are all substantially located in the United States.
Cash and Cash Equivalents
The Company considers
all highly liquid investments with an original maturity of 90 days or less, or with the ability to redeem amounts on demand, to be cash and cash equivalents. The carrying amount of cash equivalents are reported at cost, which approximates their fair
value.
Accounts Receivable
In evaluating the
collectability of accounts receivable, the Company assesses a number of factors, including specific customers abilities to meet their financial obligations, the length of time a receivable is past due, and historical collection experience. If
circumstances related to specific customers change, or economic conditions deteriorate such that the Companys past collection experience is no longer relevant, its estimate of the recoverability of accounts receivable could be further reduced
from the levels provided for in the consolidated financial statements. All accounts or portions thereof considered uncollectible are written off to the allowance for doubtful accounts in the period this information becomes known. Recoveries of trade
receivables previously written off are recorded when received.
The components of
accounts receivable are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Trade receivables |
|
$ |
7,945,078 |
|
|
$ |
5,451,252 |
|
Allowance for doubtful accounts |
|
|
(929,800 |
) |
|
|
(404,755 |
) |
|
|
|
|
|
|
|
|
|
Total accounts receivable |
|
$ |
7,015,278 |
|
|
$ |
5,046,497 |
|
The following table summarizes activity in the allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Balance at beginning of period |
|
$ |
(404,755 |
) |
|
$ |
(190,205 |
) |
Provision for uncollectible accounts |
|
|
(641,357 |
) |
|
|
(710,882 |
) |
Uncollectible accounts written off |
|
|
116,312 |
|
|
|
496,332 |
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
(929,800 |
) |
|
$ |
(404,755 |
) |
F-38
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Significant Customers and Concentration of Credit Risks
The Company is subject to credit risk primarily through its accounts receivable. Credit is extended to customers based on a credit review. The credit review
considers each customers financial condition, including the customers established credit rating or the Companys assessment of the customers creditworthiness based on their financial statements absent a credit rating, local
industry practices, and business strategy. A credit limit and terms are established for each customer based on the outcome of this review. The Company performs on- going credit evaluations of its customers and
maintains allowances for potential credit losses which, when realized, have been within the range of managements expectations. The Company generally does not require collateral. The Company regularly evaluates the credit risk of its customers.
Significant customers are those that represent more than 10% of the Companys total revenue or accounts receivable. For the customers identified,
revenue as a percentage of total revenue and accounts receivable as a percentage of net accounts receivable are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Revenue for the years ended |
|
|
|
|
|
|
|
|
Customer A |
|
|
<10 |
% |
|
|
21.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Accounts receivable |
|
|
|
|
|
|
|
|
Customer A |
|
|
<10 |
% |
|
|
24.2 |
% |
Customer B |
|
|
<10 |
% |
|
|
13.3 |
% |
Inventories
The
Companys inventories consist of raw materials, work-in-process, and finished goods, and costs incurred directly or indirectly in production, which includes labor
and overhead. Certain items in inventory require limited assembly procedures to be performed before shipping the items to customers. Inventories are stated at the lower of cost and net realizable value. As virtually all inventory is made to
customers specific orders, finished goods inventory is typically shipped to the customer upon completion.
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31,
2020 |
|
Raw materials |
|
$ |
432,461 |
|
|
$ |
162,397 |
|
Work-in-process |
|
|
16,310 |
|
|
|
107,770 |
|
Finished goods |
|
|
|
|
|
|
4,144 |
|
|
|
|
|
|
|
|
|
|
Total Inventories |
|
$ |
448,771 |
|
|
$ |
274,311 |
|
Cost is determined using the weighted-average method. The Company performs on-going
evaluations and records adjustments for slow-moving and obsolete items, based upon factors surrounding the inventory age, amount of inventory on hand and projected sales. Inventory provisions based on obsolescence and inventory in excess of
forecasted demand are recorded through cost of revenues in the consolidated statements of net loss and comprehensive loss.
Property and Equipment,
net
The Companys property and equipment primarily consists of advanced manufacturing machinery, quality measurement equipment, other
manufacturing infrastructure, office equipment and furniture, computer hardware,
F-39
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
internally developed software, and networking equipment. Depreciation is computed using the straight-line method over the estimated useful life by asset category, or in the case of leasehold
improvements, the shorter of the lease term including any renewal periods reasonably assured to be exercised at inception, or the estimated useful life of the asset category. Repairs and maintenance are expensed as incurred, while betterments and
improvements that the Company determines extend the useful life or add functionality of property and equipment are capitalized. Property and equipment are depreciated over the estimated useful life of the asset categories as follows:
|
|
|
|
|
Advanced Manufacturing Machinery & Quality Equipment |
|
|
5 10 Years |
|
Computer & Office Hardware |
|
|
5 Years |
|
Furniture & Fixtures |
|
|
7 Years |
|
Internally Developed Software |
|
|
3 5 years |
|
Leasehold Improvements |
|
|
Lesser of lease term or estimated useful life |
|
The Company periodically reviews each asset categorys estimated useful life based upon actual experience and expected
future utilization. A change in useful life is treated as a change in accounting estimate and is applied prospectively.
The Company reviews the carrying
amounts of property and equipment for potential impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating recoverability, the Company groups assets and liabilities at the
lowest level such that the identifiable cash flows relating to the group are largely independent of the cash flows of other assets and liabilities, which are each determined to be an asset group. The Company then compares the carrying amount of each
asset group to the estimated undiscounted future cash flows attributable to the asset group. If the estimated undiscounted future cash flows for the asset group are not at least equal to the carrying amount, the Company estimates the fair value
of the asset group and an impairment charge is recorded at the amount by which the carrying amount of the asset or asset group exceeds the fair value, if
applicable. In addition, the remaining depreciation period for the impaired asset or asset group would be reassessed and, if necessary, revised. For the years ended December 31, 2021 and December 31, 2020, the Company did not recognize any
impairment of its property and equipment. Refer to Note 4 for further information regarding property and equipment.
Software applications developed
for internal use are capitalized as internally developed software. Costs are capitalized when: (i) the preliminary project stage is completed (i.e., the application development stage) and (ii) it is probable that
the software will be completed and used for its intended function. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.
Costs incurred for maintenance, minor upgrades and enhancements are expensed as incurred within general and administrative expense in the consolidated statements of net loss and comprehensive loss.
Debt and Deferred Financing Fees
Debt discounts
are presented on the balance sheet as a direct deduction from the carrying amount of that related debt. Refer to Note 5 for further information regarding debt.
Costs incurred in connection with the Companys debt instruments consist principally of debt issuance costs and have been deferred and are being
amortized over the terms of the related debt agreements using the effective interest method. Deferred financing fees are presented on the consolidated balance sheets as direct reductions to debt balances.
F-40
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Research and Development Costs
Management invests resources to advance the development of its products and services for its customers, including the development of the cloud manufacturing
software platform. Research and development costs represent costs incurred to support the advancement of new product platforms, consumables, and activities to enhance manufacturing capabilities. Research and development costs are comprised of
prototype parts, design expense, employee-related personnel expense, and an allocated portion of overhead costs. Research and development costs are expensed as incurred.
Net Loss Per Share
Basic net loss per share
attributable to stockholders is computed by dividing net loss attributable to the Companys stockholders by the weighted-average number of common shares outstanding during the period without consideration of potentially dilutive Common Stock.
Diluted net loss per share attributable to the Companys stockholders reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the
issuance of Common Stock that then shared in the earnings of the Company unless inclusion of such shares would be anti-dilutive. For periods in which the Company reports net losses, diluted net loss per common share attributable to the
Companys stockholders is the same as basic net loss per common share attributable to the Companys stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Refer to
Note 14 for further information regarding net loss per share.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses consist primarily of media advertising costs, trade and customer marketing expenses, sales and
marketing related personnel, and public relations expenses which aim to strengthen the leadership of the Companys brand in key vertical markets. Advertising costs were approximately $7.9 million and $1.2 million for the years ended
December 31, 2021 and 2020, respectively. All advertising expenses are recorded in Sales and marketing expense in the consolidated statements of net loss and comprehensive loss.
Income Taxes
Income taxes are accounted for under
the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases, and net operating loss and tax credit carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of net loss and comprehensive loss in the period that includes the enactment date.
Deferred income tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred income tax assets will not be realized. The Company does not have any uncertain tax positions.
A valuation allowance is provided unless it is more likely than not that the deferred tax asset will be realized. Assessing whether deferred tax assets are
realizable requires significant judgement. In the determination of the appropriate valuation allowance, the Company considers future reversals of existing taxable temporary differences, the most recent projections of future business results, prior
earnings history, carry back and carry forward periods, and prudent tax strategies. Assessments for the realization of deferred tax assets made at a given balance sheet date are subject to change in the future. Refer to Note 6 for further
information regarding income taxes.
F-41
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based CompensationOptions, RSUs and Warrants
The Company accounts for stock-based compensation awards in accordance with Financial Accounting Standards Board (FASB) ASC 718,
CompensationStock Compensation (ASC 718). ASC 718 requires all stock-based payments to employees and nonemployees, including grants of stock options, restricted stock, restricted stock units (RSUs), and
modifications to existing stock awards, to be recognized in the statements of net loss and comprehensive loss based on their fair values. The Companys stock-based awards are comprised of stock options and RSUs. The Company estimated the fair
value of its Common Stock options when granted using the Black Scholes option-pricing model and RSUs when granted using the estimated Common Stock value.
The Companys stock-based awards are subject to service and/or performance-based vesting conditions. The Company recognizes compensation expenses for
awards with only a service condition over the explicit service period using the straight-line method. For awards subject to a service and performance condition, compensation cost is recognized over the longer of the explicit, implicit, or derived
period using the accelerated attribution method for cost allocation, as long as the performance condition is probable of achievement. At each reporting period, the Company evaluates the probability that its performance-based stock options will be
earned and adjusts its previously recognized compensation expense as necessary. If the achievement of the respective performance metrics is not probable or the respective performance goals are not met, the Company reverses its previously recognized
compensation expense. In accordance with ASC 718, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating activities. All excess tax benefits and tax deficiencies (including tax benefits of
dividends on share-based payment awards) are recognized as income tax expense or benefit in the consolidated statements of net loss and comprehensive loss.
The Company accounts for stock-based compensation awards issued to nonemployees for services, as prescribed by ASC 718, at either the fair value of the
services rendered or the instruments issued in exchange for such services, whichever is more readily determinable using the measurement date guidelines enumerated in Accounting Standards Update (ASU)
2018-07, Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07).
The Company has elected to account for forfeitures as they occur for both employee and nonemployee awards. Refer to Note 9 for further information regarding
stock-based compensation.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be
used when available.
The Company has determined the estimated fair value of its financial instruments including stock-based awards, derivatives, and
certain warrants, which are accounted for as liabilities, based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. Accordingly, these estimated fair values are not necessarily indicative of
the amounts the Company could realize in a current market exchange. The estimated fair values can be materially affected by using different assumptions or methodologies.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents represent cost, which approximates fair value. The carrying
amounts reported in the consolidated balance sheets for accounts
F-42
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
receivable, accounts payable, and accrued liabilities approximate fair value due to their short-term maturities. With the exception of the Companys Related Party Convertible Notes, the fair
value of the Companys debt approximates their carrying values based on the variable nature of interest rates and current market rates available. The Company considers its debt to be a Level 3 measurement in the fair value hierarchy as
significant judgment is involved to determine the fair value of embedded conversion features. Refer to Note 10 for further information regarding fair value.
Redeemable Convertible Preferred Stock
Prior to
the Business Combination, Fast Radius Series Seed, Seed-1, A-1, A-2, A-3, and B Convertible Preferred Stock (collectively the Preferred Stock) were classified in temporary equity as they contained terms that could force Fast Radius
to redeem the shares for cash or other assets upon the occurrence of an event not solely within Fast Radius control. Fast Radius adjusted the carrying values of the Preferred Stock each reporting period to the redemption value inclusive of any
declared and unpaid dividends.
All Preferred Stock previously classified as temporary equity was retroactively adjusted and reclassified to permanent
equity as a result of the Business Combination. As a result of the Business Combination, each share of Preferred Stock that was then issued and outstanding was automatically converted into Fast Radius common stock, such that each converted share of
Preferred Stock was no longer outstanding and ceased to exist. Each share of Fast Radius common stock, including the Fast Radius common stock issued upon conversion of Fast Radius Preferred Stock, was converted into and exchanged for 2.056 (the
Exchange Ratio) shares of the post Business Combination Companys common stock. The Exchange Ratio was established pursuant to the terms of the Merger Agreement.
Warrants
The Company accounts for its warrants
issued with other debt and equity instruments in accordance with ASC 480, Distinguishing Liabilities from Equity (ASC 480), and ASC 718. In the event the terms of the warrants qualify for classification as a liability rather than
equity, the Company accounts for the instrument as a liability recorded at fair value each reporting period with the change in fair value recognized through earnings. Refer to Note 8 for further information regarding warrants.
Treasury stock
Fast Radius historically
repurchased a portion of its previously issued common stock that was classified on the Consolidated Balance Sheet as Treasury Stock. Immediately prior to the completion of the Business Combination, all treasury shares of Fast Radius were retired.
Revenue Recognition
The Company determines
revenue recognition through the following steps:
|
|
|
Identification of the contract, or contracts, with a customer; |
|
|
|
Identification of the performance obligations in the contract; |
|
|
|
Determination of the transaction price; |
|
|
|
Allocation of the transaction price to the performance obligations in the contracts; and |
|
|
|
Recognition of revenue when, or as, the Company satisfies a performance obligation |
F-43
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Companys primary source of revenue is from product sales of manufactured parts. Fast Radius has
contracts with customers where the transfer of control of the specified good varies from contract to contract, but predominantly occurs upon shipment. The Company does not act as an agent in any of its revenue arrangements. Fast Radius seldom offers
assurance-type warranties in the ordinary course of business; however, when such warranties are included, they generally have a service life of four years beginning from the date of product purchase. In the event of a failure of products covered
under the warranties, the Company may repair or replace the products at the customers discretion. As of December 31, 2021 and 2020, the Company has not incurred any warranty related costs related to products covered by this warranty.
The Company also derives revenue from consulting agreements, in which the Company produces digital assets (CAD files) and physical assets (prototypes). For
consulting contracts, the deliverables are combined to be one performance obligation within the context of the contract, and revenue is recognized over time or at a
point-in- time based on contract terms. Revenue is recognized over time when the customer legally controls the work-in- process associated with the Companys performance. Revenue is measured by the costs incurred to date relative to the estimated total direct costs to fulfill each contract (cost-to-cost method). Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs
include hourly labor, materials, and overhead. Otherwise revenues are recognized at a point-in-time when control has transferred to the customer.
Payments are generally due within a range of 30 to 90 days after the performance obligation has been satisfied. Revenue from consulting agreements is not
material.
The Company charges certain customers shipping and handling fees. These fees are recorded within revenue after transfer of control of the
products to customers. Revenues related to shipping and handling were $0.8 million and $0.4 million in 2021 and 2020, respectively. When shipping and handling services are performed before transfer of control to customers, they are
accounted for as a fulfillment cost and are included in cost of revenues as incurred.
The Company will contract with third parties to produce certain
components of a customer order. Costs paid in advance of production are recorded in current assets as prepaid production costs until control of the product is transferred to the customer. Under such outsourced manufacturing arrangements, the Company
is the primary obligor to its customer.
Contract liabilities consist of fees paid by the Companys customers for which the associated performance
obligations have not been satisfied and revenue has not been recognized based on the Companys revenue recognition criteria described above.
Contract assets are recorded when the Company has a right to consideration in exchange for goods or services that it has transferred to a customer but for
which payment is conditional on more than just the passage of time. Given the nature of the Companys contracts, the Company did not have any contract assets as of December 31, 2021 or 2020, respectively. Refer to Note 3 for further
information regarding revenue.
Leases
The
Company leases certain equipment, office space and its corporate headquarters under non-cancelable lease agreements which are accounted for as operating leases. The Company recognizes operating lease
minimum rentals on a straight-line basis over the lease term. Executory costs such as real estate taxes and maintenance, and contingent rentals based on the volume of actual utilization are recognized as incurred. The difference between cash rent
payments and the recognition of straight-line rent expense is recorded as deferred rent. The Company
F-44
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
records deferred rent in other non-current liabilities on the consolidated balance sheets. The lease term, which includes all renewal periods that are
considered to be reasonably assured of being exercised, begins on the date the Company has access to the leased asset. Refer to Note 11 for further information regarding leases.
Recently issued accounting pronouncements
Recently Adopted Accounting Pronouncements
In August
2018, the FASB issued ASU No. 2018-15, Intangibles Goodwill and Other Internal-Use Software (Subtopic
350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs
incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that
include an internal-use software license). The standard was effective for annual reporting periods beginning after December 15, 2020 and interim periods within annual periods beginning after
December 15, 2021. The adoption of this guidance did not have a material impact on the Companys consolidated financial statements.
In August
2020, the FASB issued ASU 2020-06, DebtDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and HedgingContracts in Entitys Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entitys Own Equity, which simplifies accounting for convertible instruments. More convertible debt instruments will be reported as a
single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to
qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. The ASU also simplifies the diluted EPS calculation in certain circumstances. The ASU is effective for smaller reporting companies for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2020. The ASU allows entities to use either a
modified retrospective or full retrospective transition method. The Company early adopted this standard effective January 1, 2021 noting no material effects on its consolidated financial statements.
Recently Issued Accounting Pronouncements not yet adopted as of December 31, 2021
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)Simplifying the Accounting for Income
Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes. It also clarifies certain aspects of the existing guidance to promote more consistent application.
This standard is effective for calendar-year private companies with fiscal years beginning after December 15, 2022 and interim periods within that year, and early adoption is permitted. The Company is currently in the process of evaluating the
impact the new standard will have on its consolidated financial statements.
In February 2016, the FASB issued ASU
2016-02, Leases (ASC 842), which requires lessees to recognize a right-of-use asset and lease liability for
all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification of the lease as a finance or operating lease. On April 8, 2020, the FASB, pursuant to ASU 2020-05, voted to defer the effective date for ASC 842 for one year. For private companies, the leasing standard will be effective for fiscal years beginning after December 15, 2021, and interim periods within
fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is in the process of evaluating the effects of adopting this ASU on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses: Measurement of Credit Losses
on Financial Instruments, and subsequent related amendments, which requires the use of a new current
F-45
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
expected credit loss (CECL) model in estimating allowances for doubtful accounts with respect to accounts receivable and notes receivable. Receivables from revenue transactions, or
trade receivables, are recognized when the corresponding revenue is recognized under ASC 606. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances which are
deducted from the balance of the receivables, which represent the estimated net amounts expected to be collected. Given the generally short-term nature of trade receivables, the Company does not expect to apply a discounted cash flow methodology.
However, the Company will consider whether historical loss rates are consistent with expectations of forward-looking estimates for its trade receivables. This ASU is effective for fiscal years beginning after December 15, 2023, and interim
periods within those fiscal years. The Company is in the process of evaluating the effects of adopting this ASU on its consolidated financial statements.
NOTE 3 - REVENUES
The Company charges certain customers
shipping and handling fees. These fees are recorded within revenue when incurred after transfer of control of the products to customers. Revenues related to shipping and handling fees were $0.8 million and $0.4 million for the years ended
December 31, 2021 and 2020, respectively. When shipping and handling services are performed before transfer of control to customers, they are accounted for as a fulfillment cost and are included in cost of revenues when incurred.
The Company will contract with third parties to produce certain components of a customer order. Costs paid in advance of production are recorded in current
assets as prepaid production costs until control of the product is transferred to the customer. Under such outsourced manufacturing arrangements, the Company is the primary obligor to its customer.
Contract assets are recorded when the Company has a right to consideration in exchange for goods or services that it has transferred to a customer but for
which payment is conditional on more than just the passage of time. Contract liabilities consist of fees paid by the Companys customers for which the associated performance obligations have not been satisfied and revenue has not been
recognized based on the Companys revenue recognition criteria. The Company did not have any contract assets as of December 31, 2021 or 2020, respectively. Deferred revenue (contract liabilities) is recognized when a customer pays
consideration before the Company transfers goods or provide services and was $5 thousand as of December 31, 2020. There were no contract liabilities as of December 31, 2021. During the year ended December 31, 2021, the amount of
revenue recognized that was included in deferred revenue as of December 31, 2020 was not significant.
Disaggregation of Revenues
The Companys primary sources of revenue are from one revenue stream, product sales of manufactured parts. The Company is also presenting a disaggregation
of revenue by geographical region (based on the external customers location) for the years ended December 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Revenues |
|
|
|
|
|
|
|
|
Americas |
|
$ |
18,947,044 |
|
|
$ |
12,946,158 |
|
Europe |
|
|
499,294 |
|
|
|
476,087 |
|
Asia Pacific |
|
|
565,726 |
|
|
|
544,006 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
20,012,064 |
|
|
$ |
13,966,251 |
|
F-46
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Advanced manufacturing machinery & quality equipment |
|
$ |
5,705,034 |
|
|
$ |
3,016,377 |
|
Software |
|
|
2,912,107 |
|
|
|
|
|
Computer & office hardware |
|
|
1,148,944 |
|
|
|
657,972 |
|
Furniture and fixtures |
|
|
38,473 |
|
|
|
34,753 |
|
Leasehold improvements |
|
|
3,048,419 |
|
|
|
699,278 |
|
|
|
|
|
|
|
|
|
|
Total property and equipment |
|
$ |
12,852,977 |
|
|
$ |
4,408,380 |
|
Less: accumulated depreciation and amortization |
|
|
(3,324,550 |
) |
|
|
(1,744,014 |
) |
|
|
|
|
|
|
|
|
|
Property and equipment (Net) |
|
$ |
9,528,427 |
|
|
$ |
2,664,366 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the years ended December 31, 2021 and 2020, was $1.7 million and
$0.8 million, respectively.
NOTE 5 DEBT
The following is a summary of short- and long-term debt:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
2018 ATEL Loan |
|
$ |
|
|
|
$ |
359,594 |
|
2020 MFS Loan |
|
|
314,637 |
|
|
|
384,604 |
|
Manufacturers Capital Promissory Notes |
|
|
967,710 |
|
|
|
|
|
Related Party - Energize Convertible Debt |
|
|
7,600,000 |
|
|
|
|
|
2020 SVB Loan |
|
|
10,225,000 |
|
|
|
|
|
2021 SVB Loan |
|
|
20,800,000 |
|
|
|
|
|
Related Party - Drive Capital Convertible Debt |
|
|
3,000,000 |
|
|
|
|
|
Related Party - ECP Holdings Convertible Debt |
|
|
7,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Outstanding Principal |
|
$ |
49,907,347 |
|
|
$ |
744,198 |
|
Less: Discounts |
|
|
(6,816,026 |
) |
|
|
|
|
Less: Deferred financing fees |
|
|
(588,339 |
) |
|
|
(15,879 |
) |
|
|
|
|
|
|
|
|
|
Total Outstanding debt |
|
$ |
42,502,982 |
|
|
$ |
728,319 |
|
Fair value of derivatives |
|
|
4,395,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt and derivative liabilities |
|
$ |
46,897,982 |
|
|
$ |
728,319 |
|
|
|
|
|
|
|
|
|
|
F-47
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following is the summary of future principal repayments of debt:
|
|
|
|
|
|
|
Amounts |
|
2022 |
|
$ |
15,059,584 |
|
2023 |
|
|
30,690,676 |
|
2024 |
|
|
3,949,970 |
|
2025 |
|
|
207,117 |
|
|
|
|
|
|
Total |
|
$ |
49,907,347 |
|
|
|
|
|
|
2018 ATEL Loan
On
October 4, 2018, the Company entered into a credit agreement with ATEL Ventures (ATEL) with a principal amount up to $3.0 million to finance equipment purchases (hereafter referred to as the ATEL Loan). All advances
under the agreement are collateralized by the specific equipment financed in accordance with the agreement terms. On December 31, 2018, the Company financed the acquisition of advanced manufacturing equipment and machinery in the amount of
$1.1 million. The loan required 36 monthly payments of principal and interest, with a maturity date of November 1, 2021. The loan did not have a stated interest rate; therefore, the Company calculated the imputed interest rate using the Yield-to-Maturity (YTM) method. The imputed interest rate for the periods ended December 31, 2021 and 2020, was approximately 5.8% and 5.6%, respectively. In conjunction
with the agreement, the Company issued a warrant to ATEL to purchase up to 91,755 shares of the Companys Series A-3 Preferred Stock. As the Company only borrowed
one-third of the total available financing, only one- third of the total 91,755 warrants were granted. These warrants are accounted for pursuant to ASC 480. As of
December 31, 2021, the Company has issued 32,405 warrants to ATEL in conjunction with the debt agreement. The agreement includes provisions allowing for an optional prepayment, default interest, and acceleration upon events of default that are
outlined within the agreement. On November 1, 2021, the ATEL loan was paid in full, including the outstanding interest and principal balance.
2018 SVB Loan
On October 12, 2018, the
Company entered into a term loan agreement with Silicon Valley Bank (SVB) for $3.0 million (hereafter referred to as the 2018 SVB loan). The term loan required monthly payments of principal and interest, with all
remaining principal and interest due on September 1, 2022. The term loan had an interest rate of prime rate + 1.25%. The loan was substantially collateralized by personal property and equity, as guaranteed by the Company. The term loan
agreement did not contain financial covenants. In conjunction with the term loan, the Company issued warrants for the purchase of up to 46,636 shares of Common Stock at an exercise price of $0.45 per share. The warrants were recorded as a discount
to the term note. Refer to Note 8 for information regarding redeemable warrants.
On February 19, 2020, the Company extinguished the 2018 SVB loan by
repaying the outstanding interest and principal balance. The Company also expensed the remainder of the deferred financing fees associated with the loan.
2020 MFS Loan
On November 4, 2020, the
Company entered into a secured loan agreement with Manufacturers Financing Services (MFS) for $0.4 million to finance the purchase of printing equipment. The loan required a 10% down payment at the time of origination, with 60
monthly payments of $7 thousand inclusive of principal and interest to be paid through December 1, 2025. The imputed interest rate for the periods ended December 31, 2021 and
F-48
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2020 was approximately 3.4% and 4.1%, respectively. The loan agreement does not contain any financial covenants. The loan is substantially secured by the equipment serving as collateral. The
outstanding balance of the loan was $315 thousand as of December 31, 2021.
2020 SVB Loan
On December 29, 2020, the Company entered into a term loan credit agreement with SVB with a maximum credit extension of $6.5 million (2020 SVB
loan). On March 12, 2021, the agreement was amended to increase the maximum credit extension to $10.0 million. The credit agreement defines two tranches of availability for advances. The first tranche must be drawn by
May 31, 2021 and the second tranche must be drawn by September 30, 2021. The agreement requires monthly interest payments of 4.9% on the outstanding principal and monthly principal payments of $277.8 thousand beginning January 1,
2022. The term of the loan is the earlier to occur of the 36th month after the last tranche of funding and no later than December 1, 2024. The interest rate on the term loan is the greater of (a) the prime rate + 1.0%, or (b) 2.25%.
In connection with acquiring the financing from the 2020 SVB loan, the Company issued warrants for the purchase of 26,115 shares of Common Stock at an
exercise price of $1.81 per share. On March 12, 2021, the Company issued 26,115 additional warrants for the purchase of common shares at an exercise price of $13.49 per share. On May 25, 2021, the Company issued 26,115 additional warrants
for the purchase of common shares at an exercise price of $13.49 per share. The warrants were determined to be liability classified and were recorded at their issuance date fair value as a discount to the loan. See Note 8 for further discussion on
redeemable warrants.
On May 25, 2021, the Company drew the full availability of the loan. The outstanding balance of the loan as of
December 31, 2021 was $10.0 million.
2021 SVB Loan
On September 10, 2021, the Company entered into a term loan credit agreement with SVB with a maximum credit extension of $20.0 million. The first
$10.0 million of the loan can be drawn upon immediately, and the remaining $10.0 million can only be drawn upon to the amount of other additional financing that the Company receives. The company will make interest-only payments until the
term loans maturity date, which is the earlier of a merger with a special purpose acquisition company (SPAC) or March 10, 2022. The interest rate on the term loan is the prime rate + 6.0%.
On September 10, 2021, the Company drew the initial $10.0 million and an additional $3.0 million when the Drive Capital convertible debt was
issued. The Company subsequently drew the remaining $7.0 million on October 26, 2021 when the ECP convertible debt was issued. As of November 8, 2021, the full $20 million has been drawn on the loan. On February 4, 2022, the
2021 SVB Loan was amended to extend the maturity date from March 10, 2022 to April 3, 2023. Refer to Note 15 for further information regarding the extension.
Manufacturers Capital Promissory Notes
On
January 15, 2021, the Company entered into a note agreement with Manufacturers Capital to finance the purchase of machinery and equipment. The Company received proceeds of $299 thousand which required down payment of 10% at the time of
origination. The agreement calls for 48 monthly payments of $5 thousand, inclusive of principal and interest to be paid through January 15, 2025. The imputed interest rate for the year ended December 31, 2021 was 2.8%. The loan
agreement does not contain any financial covenants and is
F-49
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
substantially secured by the equipment serving as collateral. The outstanding balance of the loan was $168 thousand as of December 31, 2021.
On March 24, 2021, the Company entered into a note agreement with Manufacturers Capital to finance the purchase of equipment. The Company received
proceeds of $680 thousand which required down payment of 10% at the time of origination. The agreement calls for 48 monthly payments of $11.7 thousand, inclusive of principal and interest to be paid through March 24, 2025. The imputed
interest rate for the year ended December 31, 2021 was 3.0%. The loan agreement does not contain any financial covenants and is substantially secured by the equipment serving as collateral. The outstanding balance of the loan was
$389 thousand as of December 31, 2021.
On July 13, 2021, the Company entered into a note agreement with Manufacturers Capital to finance
the purchase of equipment. The Company received proceeds of $253 thousand which required down payment of 10% at the time of origination. The agreement calls for 48 monthly payments of $5.7 thousand, inclusive of principal and interest to
be paid through July 13, 2025. The imputed interest rate for the year ended December 31, 2021 was 2.4%. The loan agreement does not contain any financial covenants and is substantially secured by the equipment serving as collateral. The
outstanding balance of the loan was $203 thousand as of December 31, 2021.
On August 16, 2021, the Company entered into a note agreement
with Manufacturers Capital to finance the purchase of equipment. The Company received proceeds of $253 thousand which required down payment of 10% at the time of origination. The agreement calls for 48 monthly payments of $5.7 thousand,
inclusive of principal and interest to be paid through August 16, 2025. The imputed interest rate for the year ended December 31, 2021 was 2.0%. The loan agreement does not contain any financial covenants and is substantially secured by
the equipment serving as collateral. The outstanding balance of the loan was $207 thousand as of December 31, 2021.
Related Party
Convertible Notes Energize Ventures Fund
On March 12, 2021, the Company entered into a note purchase agreement with Energize Ventures
Fund LP, Energize Growth Fund I LP, EV FR SPV and Ironspring Venture Fund I-FR, LP, all of which are existing shareholders or affiliates of existing shareholders, for convertible promissory notes (collectively
the Related Party Convertible Notes I). The Company received the principal of $7.6 million on April 13, 2021 at closing. The Related Party Convertible Notes have a stated interest rate of 6%, with all accrued interest and
principal due at maturity, which is April 13, 2023. The Related Party Convertible Notes I are recorded at carrying value. Further, warrants to purchase a maximum of 140,000 shares with an exercise price of $0.01 were issued in conjunction with
the closing of the Related Party Convertible Notes I. The warrants were determined to be equity classified and are recorded as a discount to the Related Party Convertible Notes I. For further details, please refer to Note 8. The Related Party
Convertible Notes I contain a share settlement redemption feature that qualifies as a derivative liability and requires bifurcation. The derivative had a fair value of $2.5 million as of December 31, 2021 and was recorded in Related party
convertible notes and derivative liability on the consolidated balance sheet. For the year ended December 31, 2021, the Company recognized a mark to market loss associated with the derivative of $75 thousand.
F-50
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following provides a summary of the interest expense of the Companys Related Party Convertible
Notes I and Related Party Derivative Liability with Energize Ventures:
|
|
|
|
|
|
|
Year ended December 31, |
|
(in thousands) |
|
2021 |
|
Contractual interest expense |
|
$ |
327 |
|
|
|
Amortization of deferred financing costs and convertible debt discount |
|
|
1,102 |
|
|
|
|
|
|
Total Interest Expense |
|
$ |
1,429 |
|
Effective interest rate |
|
|
58.3 |
% |
The following provides a summary of the convertible notes and derivatives:
|
|
|
|
|
|
|
As of |
|
(in thousands) |
|
December 31, 2021 |
|
Unamortized deferred issuance costs, derivative, and warrants |
|
$ |
3,534 |
|
Net carrying amount of convertible note |
|
|
4,066 |
|
|
|
|
|
|
Principal value of convertible note |
|
$ |
7,600 |
|
Fair value of convertible note and derivative liability |
|
|
9,936 |
|
Fair value of convertible note excluding the derivative liability |
|
$ |
7,446 |
|
Fair value level |
|
|
Level 3 |
|
For further information on fair value measurements, refer to Note 10.
Related Party Convertible Notes Drive Capital Fund
On August 23, 2021, the Company entered into a Note Purchase Agreement with Drive Capital Fund II LP and Drive Capital Ignition Fund II LP (existing
stockholders) for convertible promissory notes (collectively the Related Party Convertible Notes II). The Company received funding of $3.0 million on August 24, 2021 at closing. The Notes have a stated interest rate of 6%, with
all accrued interest and principal due at maturity, which is August 23, 2023. These Related Party Convertible Notes II contain a share settlement redemption feature that qualifies as a derivative liability and requires bifurcation. The
derivative had a fair value of $0.6 million as of December 31, 2021 and was recorded in Related party convertible notes and derivative liability on the consolidated balance sheet. For the year ended December 31, 2021, the Company
recognized a mark to market loss associated with the derivative of $11 thousand.
The following provides a summary of interest expense on the
Companys Related Party Convertible Notes II and Related Party Derivative Liability with Drive Capital:
|
|
|
|
|
|
|
Year ended December 31, |
|
(in thousands) |
|
2021 |
|
Contractual interest expense |
|
$ |
63 |
|
|
|
Amortization of deferred financing costs and convertible debt discount |
|
|
86 |
|
|
|
|
|
|
Total Interest Expense |
|
$ |
149 |
|
Effective interest rate |
|
|
17.1 |
% |
F-51
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following provides a summary of the convertible notes and derivatives:
|
|
|
|
|
|
|
As of |
|
(in thousands) |
|
December 31, 2021 |
|
Unamortized deferred issuance costs, derivative, and warrants |
|
$ |
474 |
|
Net carrying amount of convertible note |
|
|
2,526 |
|
|
|
|
|
|
Principal value of convertible note |
|
$ |
3,000 |
|
Fair value of convertible note and derivative liability |
|
|
3,390 |
|
Fair value of convertible note excluding the derivative liability |
|
$ |
2,830 |
|
Fair value level |
|
|
Level 3 |
|
Related Party Convertible Notes Energy Capital Partners Holdings
On October 26, 2021, the Company entered into a Note Purchase Agreement with Energy Capital Partners Holdings, LP for convertible promissory notes
(collectively the Related Party Convertible Notes III). The Company received funding of $7.0 million on October 26, 2021 at closing. The Notes have a stated interest rate of 6%, with all accrued interest and principal due at
maturity, which is October 26, 2023. These Related Party Convertible Notes III contain a share settlement redemption feature that qualifies as a derivative liability and requires bifurcation. The derivative had a value of $1.3 million as
of December 31, 2021 and was recorded in Related party convertible notes and derivative liability on the consolidated balance sheet. For the year ended December 31, 2021, the Company recognized a mark to market loss associated with the
derivative of $122 thousand.
The following provides a summary of the interest expense of the Companys Related Party Convertible Notes III and
Related Party Derivative Liability with Energy Capital Partners Holdings:
|
|
|
|
|
|
|
Year ended December 31, |
|
(in thousands) |
|
2021 |
|
Contractual interest expense |
|
$ |
76 |
|
|
|
Amortization of deferred financing costs and convertible debt discount |
|
|
95 |
|
|
|
|
|
|
Total Interest Expense |
|
$ |
171 |
|
Effective interest rate |
|
|
16.3 |
% |
The following provides a summary of the convertible notes and derivatives:
|
|
|
|
|
(in thousands) |
|
As of
December 31, 2021 |
|
Unamortized deferred issuance costs, derivative, and warrants |
|
$ |
1,130 |
|
Net carrying amount of convertible note |
|
|
5,870 |
|
|
|
|
|
|
Principal value of convertible note |
|
$ |
7,000 |
|
Fair value of convertible note and derivative liability |
|
|
7,829 |
|
Fair value of convertible note excluding the derivative liability |
|
$ |
6,484 |
|
Fair value level |
|
|
Level 3 |
|
F-52
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Related Party Convertible Notes I, II, and III are convertible into common shares at the option of the
holder within 90 days of maturity or are automatically converted upon closing of a SPAC Transaction. Upon a Qualified Financing event, the Related Party Convertible Notes I, II, and III are convertible into preferred equity (as such terms are
defined in the Note Purchase Agreement). As of December 31, 2021, the conversion price of the notes was equal to 80% of the lowest price per share paid by the other purchasers of equity sold in any of those certain triggering events. The
Related Party Convertible Notes I, II, and III were converted into common shares as part of the Business Combination. Refer to Note 15 for further information.
NOTE 6 INCOME TAXES
The components of the
Companys loss before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
United States |
|
$ |
(67,883,898 |
) |
|
$ |
(21,671,394 |
) |
Foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(67,883,898 |
) |
|
$ |
(21,671,394 |
) |
|
|
|
|
|
|
|
|
|
The Company did not record any current or deferred federal, state or foreign income taxes for the years ended
December 31, 2021 and 2020, respectively.
The reconciliation of the Federal statutory income tax provision to the Companys effective income
tax provision is as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Federal statutory income tax rate |
|
|
21 |
% |
|
|
21 |
% |
Federal income tax at statutory rates |
|
$ |
(14,255,619 |
) |
|
$ |
(4,550,993 |
) |
Valuation Allowance |
|
|
13,982,549 |
|
|
|
4,435,667 |
|
Other, permanent difference |
|
|
273,070 |
|
|
|
115,326 |
|
|
|
|
|
|
|
|
|
|
Total income tax provision |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate |
|
|
0 |
% |
|
|
0 |
% |
Deferred income taxes reflect the net tax effects of loss and credit carry forwards and temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Companys deferred income tax assets and liabilities at December 31, 2021 and 2020 were comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
273,692 |
|
|
$ |
110,381 |
|
Accruals and reserves |
|
|
4,448,488 |
|
|
|
733,051 |
|
Disallowed interest carryforwards |
|
|
1,332,346 |
|
|
|
|
|
Net operating loss and other carryforwards |
|
|
24,171,779 |
|
|
|
12,418,254 |
|
Stock based compensation |
|
|
505,580 |
|
|
|
377,514 |
|
Other, net |
|
|
40,507 |
|
|
|
16,364 |
|
F-53
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Deferred tax assets before valuation allowance |
|
$ |
30,772,392 |
|
|
$ |
13,655,564 |
|
Valuation Allowance |
|
|
(30,739,829 |
) |
|
|
(13,591,637 |
) |
Total Deferred Tax Assets, net of valuation allowance |
|
|
32,563 |
|
|
|
63,927 |
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
32,563 |
|
|
|
63,927 |
|
Total Deferred Tax Liabilities |
|
|
32,563 |
|
|
$ |
63,927 |
|
Net Deferred Tax Assets (Liabilities) |
|
$ |
|
|
|
$ |
|
|
A valuation allowance is required to be established when it is more likely than not that all or a portion of a deferred tax
asset will not be realized. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. A full review of all positive and negative evidence needs to be considered, including the Companys
current and past performance, the market environments in which the Company operates, the utilization of past tax credits, length of carry back and carry forward periods, as well as tax planning strategies that might be implemented. Management
believes that, based on a number of factors, it is more likely than not, that all of the deferred tax assets may not be realized; and accordingly, as of December 31, 2021 and 2020, the Company has provided a full valuation allowance against its
net deferred tax assets.
On a gross basis, the Company has Federal net operating loss carry forwards of $89.8 million and $43.9 million as of
December 31, 2021 and December 31, 2020, respectively, of which $1.0 million will expire in 2027 and the remainder of which may be carried forward indefinitely. The Company also has State gross net operating loss carry forwards of
$79.3 million and $50.1 million as of December 31, 2021 and December 31, 2020, respectively, in various state jurisdictions which begin to expire in 2030. A full valuation allowance has been established for these net operating
loss carry forwards as of December 31, 2021 and December 31, 2020. The increase in the valuation allowance in 2021 was due to an increase in the Federal valuation allowance of $14.0 million and an increase to State valuation
allowances of $3.2 million. The following is a rollforward of the Companys valuation allowances for the years ended December 31, 2021 and 2020, respectively:
|
|
|
|
|
Valuation allowance as of January 1, 2020 |
|
$ |
7,831,390 |
|
Adjustments to the valuation allowance |
|
|
5,760,247 |
|
Valuation allowances as of December 31, 2020 |
|
|
13,591,637 |
|
Adjustments to the valuation allowance |
|
|
17,148,192 |
|
Valuation allowance as of December 31, 2021 |
|
$ |
30,739,829 |
|
The Company has no unrecognized tax benefits as of December 31, 2021 and December 31, 2020. The Company is subject
to U.S. Federal income tax and various state income taxes. The Company is subject to examination in these jurisdictions for the 2017 year and beyond.
NOTE 7 STOCKHOLDERS EQUITY (DEFICIT)
The
consolidated statements of changes in stockholders equity (deficit) reflects the Business Combination as defined in Note 1. As Fast Radius was deemed the accounting acquirer in the Business Combination with ENNV, all periods prior to the
consummation date reflect the balances and activity of Fast Radius. The balances as of January 1, 2021 and 2020 are from the consolidated financial statements of Fast Radius as of that date, share activity (convertible preferred stock, common stock,
treasury stock, additional paid in capital and accumulated deficit) and per share amounts were retroactively adjusted, where applicable, using the recapitalization conversion ratio of 2.056.
F-54
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Common Equity
Upon closing of the Business Combination, pursuant to the terms of the Companys Second Amended and Restated Certificate of Incorporation, the Company
authorized 350,000,000 shares of Common Stock with a par value $0.0001. The holders of Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval and are entitled to receive dividends, as
and if declared by the Board out of legally available funds.
The Company has issued and outstanding 39,913,100 and 38,654,855 shares of Common Stock as
of December 31, 2021 and 2020, respectively, based on the Exchange Ratio.
Preferred Equity
Upon closing of the Business Combination, pursuant to the terms of the Companys Second Amended and Restated Certificate of Incorporation, the Company
authorized 1,000,000 shares of Preferred Stock with a par value $0.0001. No shares of Preferred Stock are outstanding subsequent to the Business Combination.
Immediately prior to the completion of the Business Combination, all outstanding shares of Fast Radius Preferred Stock converted into an aggregate of 16.0
million shares of Fast Radius common stock (32.9 million shares of Common Stock post Business Combination).
NOTE 8 WARRANTS
Warrants issued to purchase Common Stock
On
December 29, 2020, in connection with the 2020 SVB Loan, the Company issued warrants for the purchase of 53,693 shares of Common Stock at an exercise price of $0.88 per share. On March 12, 2021, the Company amended the December 29,
2020 warrant agreement such that there would be issuances of warrants upon execution of the amendment and on the draw date of the debt. On the date of the amendment, the Company issued 53,693 warrants at an exercise price of $6.56 per share with an
expiration date of March 12, 2033. When the draw occurred on May 25, 2021, the Company issued warrants for the purchase of an additional 53,693 shares of Common Stock to SVB at an exercise price of $6.56 per share with an expiration date
of March 12, 2033. As of December 31, 2021, the full amount of the debt has been drawn and 161,079 warrants were issued and outstanding associated with the amended agreement, comprised of 53,693 and 107,386 warrants issued in 2020 and
2021, respectively. The SVB warrants are classified as a derivative liability pursuant to ASC 815-40, Derivatives and Hedging (ASC 815-40) and adjusted to
their fair value with changes in fair value recognized in earnings. Refer to Note 5 for further information regarding this loan.
On February 2,
2020, for UPSs role in assisting to lead and secure the Series B Preferred Stock financing round, the Company issued UPS warrants to purchase up to 209,564 shares of the Companys Common Stock. The exercise price for the warrants issued
to UPS is $0.00005 per share. The warrants are classified as equity and were recorded at fair value upon issuance.
On April 13, 2021, the Company
issued warrants for the purchase of 287,843 shares of Common Stock to holders of the Related Party Convertible Notes I, as further discussed in Note 5. The warrants have an exercise price of $0.005 per share with an expiration date of April 13,
2031. The warrants are classified as equity and were recorded at fair value upon issuance with a corresponding discount to the Related Party Convertible Notes I.
On September 10, 2021, the Company issued warrants for the purchase of 218,494 shares of Common Stock to SVB at an exercise price of $10.17 per share
with an expiration date of September 10, 2033. These warrants were
F-55
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
granted in conjunction with a term loan of up to $20.0 million. As of December 31, 2021, $20.0 million of the debt has been drawn. The SVB warrants are classified as equity and
were recorded at fair value upon issuance with a corresponding discount to the notes. Refer to Note 5 for further information regarding this loan.
A
summary of the Common Stock warrant activity for the years ended December 31, 2021 and 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of warrants |
|
|
Weighted average exercise price |
|
|
Weighted average grant date fair value |
|
|
Weighted average remaining contractual term (years) |
|
Outstanding at January 1, 2020 |
|
|
1,663,325 |
|
|
$ |
0.41 |
|
|
$ |
0.82 |
|
|
|
|
|
Granted |
|
|
263,257 |
|
|
|
0.18 |
|
|
|
1.09 |
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020 |
|
|
1,926,582 |
|
|
$ |
0.38 |
|
|
$ |
0.85 |
|
|
|
4.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable |
|
|
1,926,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
warrants |
|
|
Weighted
average exercise
price |
|
|
Weighted
average grant date
fair value |
|
|
Weighted
average remaining
contractual term (years) |
|
Outstanding at January 1, 2021 |
|
|
1,926,582 |
|
|
$ |
0.38 |
|
|
$ |
0.85 |
|
|
|
|
|
Granted |
|
|
613,723 |
|
|
|
4.77 |
|
|
|
8.85 |
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2021 |
|
|
2,540,305 |
|
|
$ |
1.44 |
|
|
$ |
2.79 |
|
|
|
4.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable |
|
|
2,540,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 and 2020, there are warrants allowing for the purchase of up to 2,540,305 and 1,926,582 shares of
Common Stock, respectively. Warrants are exercisable at any time, at the option of the holder, into Common Stock at a rate of 1 to 1 initially, subject to adjustments for dilution.
Other than warrants accounted for under ASC 718, the Company evaluated the warrants for liability or equity classification in accordance with the provisions
of ASC 480 and ASC 815-40. Based on the provisions governing the warrants in the applicable agreements, the Company determined that the warrants associated with the 2018 SVB loans, 2021 SVB loans, and Related
Party Convertible Notes I meet the criteria required to be classified as an equity award. Accordingly, the warrants were recorded at their grant date fair value with no subsequent remeasurement. The 2020 SVB loan warrants associated with the
financing agreement have been determined to be liability classified. Accordingly, the warrants were recorded at their initial fair value and are remeasured at fair value at each subsequent reporting date. Additionally, all warrants issued are
immediately exercisable and expire on an expiration date specified in each agreement. Warrants issued to XMS Capital Partners, LLC (XMS) and UPS are accounted for pursuant to ASC 718, CompensationStock Compensation (ASC
718). Refer to Note 9 for further information regarding stock-based compensation.
F-56
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Warrants issued to purchase Series A-3 Preferred Stock
On October 4, 2018, in connection with obtaining a $3.0 million loan from ATEL to finance equipment purchases, the Company issued a
warrant to purchase up to 188,650 Series A-3 Preferred shares at a price of $0.79 per share. 66,625 warrants were issued in conjunction with the term loan and have an expiration date that is the earlier of
October 4, 2033 or the 5th anniversary of an initial public offering (IPO) closing. This warrant to purchase 66,625 shares represents all A-3 warrants outstanding as of December 31, 2021
and 2020, respectively.
The Company evaluated the Series A-3 warrants issued to ATEL for liability or equity
classification in accordance with the provisions of ASC 480 and ASC 815-40. Based on the provisions governing the warrants in the applicable agreement, the ATEL Series
A-3 warrants have been determined to be liability classified. Accordingly, the warrants were recorded at their initial fair value and are remeasured at fair value at each subsequent reporting date. All Series A-3 warrants issued are immediately exercisable and expire on the expiration date specified in the warrant agreement.
The Company recognized expense of $2.2 million and $83 thousand related to liability classified warrants during the years ended December 31,
2021 and 2020, respectively, which included changes in fair value and interest expense associated with the amortization of discounts allocated to the related debt liabilities. The Company recognized $1.8 million and $0.3 million of expense
related to equity classified warrants (under ASC 718) during the years ended December 31, 2021 and 2020, respectively, which included the costs recognized upon issuance and interest expense associated with the amortization of discounts
allocated to the related debt liabilities.
The number and kind of securities purchasable upon the exercise of these warrants and their exercise price
shall be subject to adjustment from time to time upon the occurrence of certain events which may impact the exercise price and number of shares issued, including (a) stock dividends or splits, etc. (b) reclassification, exchange,
combinations or substitution or (c) adjustments to conversion price.
NOTE 9 STOCK BASED COMPENSATION
Stock Options
On December 4, 2017, the
Companys Board of Directors adopted its 2017 Incentive Plan which subsequently was amended and restated on July 29, 2020 (the Plan). The Plan was entered into with the objective of attracting and retaining key personnel,
providing for additional performance incentives, and promoting the success of the Company by increasing the efforts of participants. The Plan seeks to achieve this purpose by providing for awards in the form of stock options (options)
and RSUs to officers, employees, consultants, and directors of the Company. Pursuant to the Plan, the Company has issued the following stock-based payment awards to employees and nonemployees in exchange for services provided to the Company,
(i) options to the Companys founders, including options early exercised through a promissory note, (ii) stock options and RSUs to various employees and former employees, and (iii) options and warrants issued to various
nonemployee consultants (collectively, the Awards). The underlying Awards pursuant to the Plan are administered by the Compensation and Management Development Committee of the Board of Directors.
28 million shares are reserved and available for grant and issuance pursuant to the Plan as of the date of adoption of the amended Plan.
Stock-based compensation expense during the years ended December 31, 2021 and 2020, was $0.9 million and $1.0 million respectively. No income
tax benefit was recognized in the consolidated statements of net loss and comprehensive loss and an immaterial amount of compensation was capitalized during 2021. Stock-based
F-57
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
compensation expense was recorded in the following financial statement lines within the consolidated statements of net loss and comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2021 |
|
|
December 31,
2020 |
|
Cost of Revenues |
|
$ |
13,402 |
|
|
$ |
14,383 |
|
General and Administrative |
|
$ |
680,609 |
|
|
$ |
825,664 |
|
Selling and Marketing |
|
$ |
79,695 |
|
|
$ |
104,985 |
|
Research & Development |
|
$ |
81,690 |
|
|
$ |
47,048 |
|
In 2018, founders early exercised approximately 16 million stock options through execution of partial-recourse promissory
notes. The options had an exercise price of $0.14 per share. The options contain various service and performance-based vesting conditions. Specifically, a portion of the options vest solely based on a graded four- year service condition, a portion
vests based on both achievement of a performance condition as well as completion of a graded four-year service condition, and the remaining vest on achieving certain pre-money valuation in a financing event as
well as completion of a graded five-year service condition. During the years ended December 31, 2021 and 2020, 1,039,320 and 4,561,065 of the shares associated with these early exercised options became outstanding for accounting purposes as
they were released from the notes recourse provision. The release of the notes recourse provision was the result of the donation or sale of these early exercised options by the founders, resulting in an increase in Common Stock
outstanding.
During fiscal year 2020, the Company issued approximately 2 million stock options to its employees and consultants collectively at exercise
prices ranging between $0.70 and $0.88. Stock options granted to employees were subject to graded service-based vesting over the period of four years (primarily), subject, in each case, to the individuals continued service through the
applicable vesting date.
In 2019, the Company issued 136,152 stock options to nonemployees in connection with their respective advisory services to the
Company at exercise prices of $0.70. There were no stock options issued to nonemployees during the years ended December 31, 2021 and 2020. Stock options granted to one of the nonemployees are subject to both performance and service-based
conditions wherein vesting is contingent upon meeting certain business development goals per year and subject to continued services as senior advisor to the Company. Whereas stock options granted to another nonemployee is subject to a standard
four-year time-based vesting schedule with 1/16 of the shares to vest each quarter subject to acceleration upon an initial public offering or a change of control event. With the exception of 786,512 options which had an expiration date of
January 11, 2020, all options expire 10 years after the date of grant.
The following table summarizes activity in relation to the Companys
stock options issued to employees, founders and consultants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares/Units |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant
Date Fair
Value |
|
|
Weighted
Average Remaining
Contractual
Life |
|
|
Aggregate
Intrinsic
Value |
|
|
|
|
|
|
|
|
|
|
|
|
(years) |
|
|
|
|
Balance at January 1, 2021 |
|
|
7,354,441 |
|
|
$ |
0.60 |
|
|
$ |
0.33 |
|
|
|
8.59 |
|
|
$ |
8,636,744 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
218,925 |
|
|
|
0.47 |
|
|
|
0.26 |
|
|
|
|
|
|
|
2,882,631 |
|
Forfeited |
|
|
524,578 |
|
|
|
0.62 |
|
|
|
0.33 |
|
|
|
|
|
|
|
5,965,765 |
|
Expired |
|
|
59,953 |
|
|
|
0.72 |
|
|
|
0.39 |
|
|
|
|
|
|
|
675,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares/Units |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant
Date Fair
Value |
|
|
Weighted
Average Remaining
Contractual
Life |
|
|
Aggregate
Intrinsic
Value |
|
|
|
|
|
|
|
|
|
|
|
|
(years) |
|
|
|
|
Balance at December 31, 2021 |
|
|
6,550,985 |
|
|
$ |
0.61 |
|
|
$ |
0.33 |
|
|
|
7.60 |
|
|
$ |
75,296,955 |
|
Exercisable at December 31, 2021 |
|
|
3,197,157 |
|
|
|
0.50 |
|
|
|
0.27 |
|
|
|
7.31 |
|
|
|
37,456,625 |
|
Expected to vest at December 31, 2021 |
|
|
3,353,828 |
|
|
|
0.71 |
|
|
|
0.36 |
|
|
|
7.87 |
|
|
|
37,840,330 |
|
As of December 31, 2021, there was approximately $0.9 million of unrecognized compensation cost related to options
under the Plan which is expected to be recognized over a weighted average period of 1.1 years.
The Company recognizes compensation expense for the
options equal to the fair value of the equity-based compensation awards over the vesting period of such awards. The fair values associated with the options are estimated on the date of grant using the Black-Scholes option-pricing model using the
following assumptions:
|
|
|
|
|
|
|
2020 |
|
Expected annual dividend yield |
|
|
0.00 |
% |
Expected volatility |
|
|
51.78 |
% |
Risk-free rate of return |
|
|
0.75 |
% |
Expected option term (years) |
|
|
5.98 |
|
The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (a) the expected
stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Due to the lack of company-specific historical and implied volatility data for trading the
Companys stock in the public market, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of
time commensurate with the expected term assumption. The computation of expected volatility is based on the historical volatility of a representative group of companies with similar characteristics to the Company, including stage of product
development and digital manufacturing industry focus. The Company is a technology and services platform positioned as a supply chain solution and the representative group of companies has certain similar characteristics to the Company. The Company
believes the group selected has sufficient similar economic and industry characteristics and includes companies that are most representative of the Company. The expected term is applied to the stock option grant group as a whole, as the Company does
not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to nonemployees, the Company utilizes the contractual term of the arrangement as the basis for the expected term
assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current
plans to pay any dividends on its Common Stock, which is similar to the Companys peer group.
Restricted Stock Units
As of December 31, 2021 and 2020, the Company has issued 4,936,522 and 530,548, respectively, of RSUs with a weighted average grant date fair value of
$7.56 and $0.87 per RSU, respectively. Of the 4,936,522 RSUs issued as of December 31, 2021, 2,799,795 are standard RSUs and 2,136,726 are founder RSUs.
Standard employee RSUs contain both service and performance conditions wherein vesting is generally subject to a requisite four year service period, whereby
the award vests 25% on the one-year anniversary of the Vesting
F-59
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Commencement Date (as defined in the Companys Stock Purchase Agreement) then ratably over 36 monthly installments, subject to continuous service by the individual and achievement of the
performance target, as stipulated in the notice of grant (Liquidity Event as defined in the underlying agreements). Due to the nature of the performance condition, recognition of compensation cost has been deferred until the occurrence
of a Liquidity Event.
As of December 31, 2021, unrecognized compensation costs associated with outstanding RSUs was approximately
$35.8 million.
Founder RSUs include a portion that vests upon the closing of a SPAC transaction or the first IPO to occur following February 1,
2021, and a portion that will vest on the first day following the lapse of the Lock-up Period, the first 180 days from the consummation of a SPAC transaction or IPO, on which the Company Valuation equals or
exceeds $1.5 billion. 1,228,330 of the founders RSUs will vest upon completion of the initial SPAC transaction or IPO and the remaining 908,397 will vest upon the achievement of a $1.5 billion valuation following a SPAC transaction or IPO.
Due to the nature of the vesting conditions, recognition of compensation cost has been deferred until the applicable vesting conditions have been met.
See below for a summary of RSU activity for the year ended December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
Number of units |
|
|
Weighted average grant date fair value |
|
Non-vested at January 1, 2021 |
|
|
493,358 |
|
|
$ |
0.87 |
|
Granted |
|
|
4,405,974 |
|
|
|
8.37 |
|
Vested |
|
|
|
|
|
|
|
|
Forfeited |
|
|
(257,372 |
) |
|
|
5.83 |
|
Non-vested at December 31, 2021 |
|
|
4,641,960 |
|
|
$ |
7.72 |
|
The stock-based compensation expense associated with RSUs will not be recognized until the completion of a Liquidity Event, at
which time RSUs whose service conditions have been met will vest and the associated compensation costs will be recognized as stock-based compensation expense.
As of December 31, 2021, the service conditions for 342,945 of the outstanding 2,505,234 standard employee RSUs have been achieved. The remaining
outstanding employee RSUs are expected to achieve their service conditions over a weighted average period of approximately 1.4 years.
Note 10
Fair Value Measurements
The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. Each level of input has different levels of subjectivity and difficulty involved in determining fair value.
|
Level 1 - |
Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the
identical assets or liabilities as of the reporting date. Therefore, determining fair value for Level 1 investments generally does not require significant judgment, and the estimation is not difficult. |
|
Level 2 - |
Pricing is provided by third-party sources of market information obtained through investment advisors. The
Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors. |
F-60
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
Level 3 - |
Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity
and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize managements estimates of market participant assumptions. The determination of fair value for
Level 3 instruments involves the most management judgment and subjectivity. |
The Companys financial assets and liabilities
that are measured at fair value on a recurring basis as of December 31, 2021 and 2020 by level within the fair value hierarchy are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
Quoted prices in active markets |
|
|
Significant other observable inputs |
|
|
Significant unobservable inputs |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Cash sweep and money market accounts |
|
$ |
8,701,895 |
|
|
$ |
|
|
|
$ |
|
|
Related party derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
4,395,000 |
|
Warrant liability |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,968,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|
|
|
Quoted prices in active markets |
|
|
Significant other observable inputs |
|
|
Significant unobservable inputs |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Cash sweep and money market accounts |
|
$ |
17,562,823 |
|
|
$ |
|
|
|
$ |
|
|
Warrant liability |
|
$ |
|
|
|
$ |
|
|
|
$ |
199,408 |
|
There were no transfers between Level 1, 2 or 3 during the periods ended December 31, 2021 and December 31,
2020.
Fair Value of warrants issued to purchase Common Stock
The following table includes a summary of the changes in fair value of the Companys liability classified warrants issued to purchase Common Stock
measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Beginning balance |
|
$ |
86,963 |
|
|
$ |
|
|
Additions |
|
|
987,747 |
|
|
|
86,963 |
|
Change in fair value recorded in earnings |
|
|
939,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
2,014,164 |
|
|
$ |
86,963 |
|
|
|
|
|
|
|
|
|
|
F-61
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the
Companys warrant liability for common share warrants, including the estimated common stock price of Fast Radius Operations, Inc. prior to the recapitalization, categorized within Level 3 of the fair value hierarchy as of December 31,
2021 and 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Stock Price |
|
$ |
28.28 |
|
|
$ |
4.11 |
|
Term (Years) |
|
|
10.71 |
|
|
|
12.00 |
|
Volatility |
|
|
84.40 |
% |
|
|
120.13 |
% |
Risk-free rate of return |
|
|
1.52 |
% |
|
|
0.13 |
% |
Dividend Yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
Fair Value of warrants issued to purchase series A-3 preferred stock
The following table includes a summary of changes in fair value of the Companys liability classified warrants issued to purchase series A-3 preferred stock measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Beginning balance |
|
$ |
112,445 |
|
|
$ |
32,405 |
|
Additions |
|
|
|
|
|
|
|
|
Change in fair value recorded in earnings |
|
|
841,826 |
|
|
|
80,040 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
954,271 |
|
|
$ |
112,445 |
|
|
|
|
|
|
|
|
|
|
A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the Companys
warrant liability for A-3 preferred share warrants, including the estimated A-3 preferred stock price of Fast Radius Operations, Inc. prior to the recapitalization, categorized within Level 3 of the fair
value hierarchy as of December 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Stock Price |
|
$ |
30.19 |
|
|
$ |
4.23 |
|
Term (Years) |
|
|
11.26 |
|
|
|
12.50 |
|
Volatility |
|
|
83.10 |
% |
|
|
118.63 |
% |
Risk-free rate of return |
|
|
1.54 |
% |
|
|
0.13 |
% |
Dividend Yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
Related Party Derivative Liability
The following table includes a summary of changes in fair value of the Companys Related party derivative liabilities related to the convertible notes
measured at fair value using significant unobservable inputs (Level 3) for the year ended December 31, 2021:
|
|
|
|
|
|
|
December 31, 2021 |
|
Beginning balance |
|
$ |
|
|
Additions |
|
|
4,187,000 |
|
Change in fair value recorded in earnings |
|
|
208,000 |
|
|
|
|
|
|
Ending balance |
|
$ |
4,395,000 |
|
|
|
|
|
|
F-62
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the
Companys derivative liability categorized within Level 3 of the fair value hierarchy as of December 31, 2021 and their inception dates are as follows:
|
|
|
|
|
|
|
|
|
Energize Ventures |
|
December 31, 2021 |
|
|
April 13, 2021 (Inception) |
|
Cost of debt |
|
|
11.0 |
% |
|
|
11.0 |
% |
Term (Years) |
|
|
0.08 0.25 |
|
|
|
0.25 0.50 |
|
Present value factor |
|
|
0.98 0.99 |
|
|
|
0.95 0.97 |
|
|
|
|
Drive Capital |
|
December 31, 2021 |
|
|
August 24, 2021 (Inception) |
|
Cost of debt |
|
|
11.0 |
% |
|
|
11.0 |
% |
Term (Years) |
|
|
0.08 0.25 |
|
|
|
0.31 0.60 |
|
Present value factor |
|
|
0.98 0.99 |
|
|
|
0.94 0.97 |
|
|
|
|
ECP Holdings |
|
December 31, 2021 |
|
|
October 26, 2021 (Inception) |
|
Cost of debt |
|
|
11.0 |
% |
|
|
10.0 |
% |
Term (Years) |
|
|
0.08 0.25 |
|
|
|
0.27 0.43 |
|
Present value factor |
|
|
0.98 0.99 |
|
|
|
0.96 0.98 |
|
NOTE 11 COMMITMENTS AND CONTINGENCIES
The Company accounts for loss contingencies in accordance with ASC 450-20, Loss Contingencies. Liabilities for
loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Commitments
In May 2021, the Company entered into
a master subscription agreement with Palantir Technologies Inc. (Palantir) in which the Company would commit to utilize software and services from Palantir over the next six years for a total of $45.0 million. The software and
services are an integral part of the Companys plan to provide automated intelligence solutions as a service upon commercialization of the Companys Cloud Manufacturing Platform. The agreement is structured such that the Company committed
to spend $50.0 thousand per month through the earlier of the closing of the Merger or December 31, 2021. Should the Merger not have been consummated, the Company had the option of terminating the agreement and no further commitments would
have been required. Upon close of the Merger in February 2022, the Company made a payment to Palantir of $9.4 million and the remaining non-cancellable future minimum payments due on this firm purchase
agreement are $10.1 million.
Contingencies
In October 2021, based on an internal review, the Company became aware of certain additional duties likely owed to the United States Customs and Border
Protection (CBP). The Company initiated a voluntary prior disclosure to CBP in late 2021 of certain possible errors in the declaration of imported products relating to value, classification, and other matters. The Companys
comprehensive review of import practices and communication with CBP is ongoing to accurately complete the analysis and quantify the liability. As a result, related to
F-63
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
additional duties primarily from 2021, the Company recognized a $1.0 million charge within Cost of revenues in the consolidated statement of net loss and comprehensive loss for the year
ended December 31, 2021. The Company made a further submission to CBP in March 2022 providing details regarding the possible errors and is working diligently to resolve the matter. The resolution of this prior disclosure could be material to
the Companys cash flows in a future period and to its results of operations for any period.
Operating Leases
The Company leases certain equipment (3D printers), office space and its corporate headquarters under non-cancelable
lease agreements with remaining terms that do not extend past 2026 which are accounted for as operating leases. Rent expense is recorded on a straight-line basis over the lease term. Certain of the operating lease agreements contain rent escalation
provisions. The difference between cash rent payments and the recognition of straight-line rent expense is recorded as deferred rent. Rent expense for the years ended December 31, 2021 and 2020 was $3.1 million and $1.7 million,
respectively.
Future minimum non-cancelable lease payments under the Companys operating leases as of
December 31, 2021 were as follows:
|
|
|
|
|
|
|
Amounts |
|
2022 |
|
|
2,895,231 |
|
2023 |
|
|
2,191,339 |
|
2024 |
|
|
779,456 |
|
2025 |
|
|
803,073 |
|
2026 |
|
|
67,087 |
|
|
|
|
|
|
Total |
|
$ |
6,736,187 |
|
|
|
|
|
|
NOTE 12 EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution plan for its employees in the United States. This plan is qualified under Section 401(k) of the U.S. tax code.
Currently, the Company does not match any employee contributions and no expense was recorded in the consolidated statements of net loss and comprehensive loss for the years ended December 31, 2021 and 2020, respectively.
NOTE 13 RELATED PARTY TRANSACTIONS
United
Parcel Service
Since the Companys inception, UPS has contributed significant amounts of capital in the form of equity and debt to the
Company. UPS currently has investments in Common Stock with a balances of $38.4 million as of December 31, 2021 and 2020, respectively. The Company has multiple agreements with UPS, which are summarized below.
The Company entered into a Discount Agreement in 2016 with UPS, which was amended in March 2017 and March 2019. Under the agreement, UPS performs advertising
and brand marketing services for the Company. In exchange for the services, the Company has agreed to compensate UPS in the form of equity royalties which are determined based on 6% of the Companys gross revenues. The Company determined this
arrangement qualifies as a nonmonetary transaction within ASC 718. In 2019, the Company issued 30,684 shares of Common Stock for these services. As of December 31, 2021 and 2020, the Company recognized $2.5 million and $1.3 million as
a
F-64
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
related party accrued liability on the consolidated balance sheets. During the years ended December 31, 2021 and 2020, the Company recognized $1.2 million and $0.8 million,
respectively, in sales and marketing expense on its consolidated statements of net loss and comprehensive loss.
The Company entered into a warehouse
rental agreement with UPS in January 2015. The Company leases space in a warehouse in Louisville, KY that is used for printing equipment, supplies, packages and shipping space. The Company paid $66.7 thousand and $65.7 thousand in lease
payments to UPS for the years ended December 31, 2021 and 2020, respectively.
The Company entered into a shipping service agreement with UPS in 2016
(as amended in both 2017 and 2019) for which the Company receives pickup and delivery services. The Company paid $1.0 and $0.5 million in fees to UPS for shipping services for the years ended December 31, 2021 and 2020, respectively.
The Company entered into a sub-lease agreement with UPS in August 2018. The Company
sub-leases office space from UPS in Singapore. The Company paid $7.3 thousand and $6.7 thousand in lease payments to UPS for the years ended December 31, 2021 and 2020, respectively.
Energize Venture Fund & Ironspring Venture Fund
On February 3, 2020, Energize Venture Fund LP (Energize) purchased 3,734,151 shares of common stock with a balance of $10.8 million as of
December 31, 2021 and 2020, respectively.
On February 3, 2020, Ironspring Venture Fund I, LP (Ironspring) purchased 304,818 shares
of common stock with a balance of $2 million as of December 31, 2021 and 2020, respectively.
On March 12, 2021, the Company signed a
convertible note agreement with Energize and Ironspring, which was funded on April 13, 2021. The Company received $7.6 million in proceeds related to these notes. The notes have a stated interest rate of 6% and an effective interest rate
of 58%, with all principal and interest due at maturity. As of December 31, 2021, the Company recognized $1.4 million in interest expense related to these notes and has recorded a derivative liability with a fair market value of
$2.5 million as of December 31, 2021. Please refer to Note 5 for further details.
The Company also issued warrants to purchase 287,843 shares
of Common Stock to holders of Energize, as further discussed in Note 8.
Drive Capital
On November 13, 2017, Drive Capital purchased 8,212,671 shares of common stock for $4.0 million. Drive Capital made additional purchases of 3,773,006
shares of common stock on June 12, 2018 and of 1,524,107 shares of common stock on March 21, 2019 for $3.0 million and $10.0 million, respectively. All shares purchased by Drive Capital remain outstanding as of December 31,
2021 and 2020, respectively.
On August 24, 2021, the Company signed a convertible note agreement with Drive Capital, which was funded on
August 24, 2021. The Company received $3.0 million in proceeds related to these notes. The notes have a stated interest rate of 6% and an effective interest rate of 17%, with all principal and interest due at maturity. As of
December 31, 2021, the Company recognized $0.1 million in interest expense related to these notes and has recorded a derivative liability with a fair market value of $0.6 million as of December 31, 2021. Please refer to Note 5
for further details.
F-65
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ECP Holdings
On October 26, 2021, the Company signed a convertible note agreement with Energy Capital Partners Holdings LP (ECP Holdings), an affiliate of
ENNV, which was funded on October 26, 2021. The Company received $7.0 million in proceeds related to these notes. The notes have a stated interest rate of 6% and an effective interest rate of 16%, with all principal and interest due at
maturity. As of December 31, 2021, the Company recognized $0.2 million in interest expense related to these notes and has recorded a derivative liability with a fair market value of $1.3 million as of December 31, 2021. Please
refer to Note 5 for further details.
Palantir
Concurrently with the execution of the Merger Agreement, ENNV entered into subscription agreements with certain third-party investors, including, among others,
UPS, Palantir and ENNV (the PIPE Investors), pursuant to which the PIPE Investors agreed to subscribe for and purchase, and ENNV agreed to issue and sell, to the PIPE Investors an aggregate of 7,500,000 shares of Common Stock (the
PIPE Shares) for a purchase price of $10.00 per share, or an aggregate purchase price of $75.0 million, in a private placement (the PIPE Investment). The Pipe Investment closed concurrently with the Business Combination
on February 4, 2022. In May 2021, the Company entered into a master subscription agreement with Palantir in which the Company would commit to utilize software and services from Palantir over the next six years for a total of $45.0 million.
The software and services are an integral part of the Companys plan to provide automated intelligence solutions as a service upon commercialization of the Companys Cloud Manufacturing Platform. The agreement is structured such that the
Company committed to spend $50 thousand per month through the earlier of the closing of the Merger or December 31, 2021. Should the Merger not have been consummated, the Company had the option of terminating the agreement and no further
commitments would have been required. Upon close of the Merger in February 2022, the Company made a payment to Palantir of $9.4 million and the remaining non-cancellable future minimum payments due on
this firm purchase agreement are $10.1 million.
NOTE 14 NET LOSS PER SHARE
The Company computes basic loss per share using net loss attributable to Common Stockholders and the weighted-average number of Common Stock shares outstanding
during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options and stock-based awards where the conversion of such instruments would be dilutive. The Companys potentially dilutive securities,
which include stock options, unvested restricted stock awards/units, convertible notes, redeemable convertible preferred stock and warrants to purchase shares of redeemable convertible preferred stock, have been excluded from the computation of
diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to the Companys
stockholders is the same.
Presented in the table below is a reconciliation of the numerator and denominator for the basic and diluted earnings
calculations for the years ended December 31, 2021 and 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
Income (loss) available to Common Stockholders per share: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(67,883,898 |
) |
|
$ |
(21,671,394 |
) |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
41,454,582 |
|
|
|
38,900,813 |
|
Net loss per share Basic and Diluted |
|
$ |
(1.64 |
) |
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
F-66
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The computation of diluted net loss per share excluded approximately 16 million and 8 million
shares in 2021 and 2020, respectively, because their inclusion would have had an anti-dilutive effect on net loss per share
NOTE 15 SUBSEQUENT
EVENTS
In connection with the preparation of the consolidated annual financial statements for the year ended December 31, 2021, management has
evaluated events through March 30, 2022 which is the date the financial statements were issued, to determine whether any events required recognition or disclosure in the consolidated financial statements. The following subsequent events were
identified through the date of these consolidated financial statements:
On February 4, 2022, Fast Radius consummated the Business Combination. The
aggregate merger consideration issued by ENNV (such company, following the Business Combination, the Combined Company) was $750.0 million. In connection with the Closing:
|
|
|
Each issued and outstanding share of Fast Radius capital stock was converted into and exchanged for 65,000,000
shares of the Combined Companys Common Stock. |
|
|
|
Outstanding principal on the mandatorily redeemable Fast Radius convertible notes were converted into 989,539
shares of Fast Radius Common Stock (2,034,513 shares of the Combined Companys Common Stock). |
|
|
|
1,267,948 warrants were exercised and converted into 1,089,378 shares of the Combined Companys Common
Stock. |
|
|
|
803,227 RSUs and 25,306 options vested upon the closing of the Business Combination. Compensation expense
associated with these awards will be recognized in the first quarter of 2022. |
|
|
|
$3.6 million in transaction bonuses to certain founders and employees of the Company upon consummation of
the Business Combination became due. |
Upon the completion of the Business Combination, Lou Rassey, Chief Executive Officer, was granted
a restricted stock unit award (Closing RSU Award) under the Plan. The Closing RSU Award will be in respect to the number of shares of Combined Company Common Stock equal to 5% of the sum of: (i) the total number of shares of
Combined Company Common Stock as determined on a fully diluted basis as of the Closing, plus (ii) total number of Earn Out Shares. The Closing RSU Award is eligible to vest in installments contingent upon Mr. Rasseys continued
employment as Chief Executive Officer through the date of attainment of each of the Combined Company common stock share price performance goals. The aggregate estimated grant date fair value of the closing RSU award will be determined using a Monte
Carlo Simulation model during the first quarter of 2022.
On February 4, 2022, the 2021 SVB Loan was amended to extend the maturity date from the
Closing to April 3, 2023 and required payment of $2.0 million of the $20.0 million outstanding principal balance upon consummation of the Business Combination. This amendment also added the original $0.8 million fee due at the
SPAC closing to the amended loans outstanding principal balance, deferring its repayment until maturity. In exchange for the extension of the loan, Fast Radius will pay an additional fee of $2.1 million due at maturity. The Company will
make six interest-only payments beginning March 1, 2022 and will begin paying $2.4 million in principal beginning September 1, 2022. The interest rate on the term loan is the prime rate + 6.0%.
F-67
Fast Radius Operations, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In conjunction with the close of the Business Combination, the Company paid approximately $9.4 million
to Palantir related to services provided under the agreement as of the Closing. Please refer to Note 11 for further details.
The Company is not aware of
any additional subsequent events, other than those described above, that would require recognition or disclosure in the consolidated financial statements.
F-68