10-Q 1 aeva-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-39204

 

AEVA TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

84-3080757

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

555 Ellis Street

Mountain View, CA

94043

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 481-7070

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.0001 par value per share

 

AEVA

 

New York Stock Exchange

Warrants to purchase one share of common stock

 

AEVA.WS

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of May 2, 2022, the registrant had 216,703,019 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Balance Sheets

4

 

Condensed Statements of Operations

5

 

Condensed Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

6

 

Condensed Statements of Cash Flows

8

 

Notes to the Condensed Financial Statements (Unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

Signatures

34

 

 

 

 


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding future events and our future results that are subject to the safe harbors created under the Securities Act and the Exchange Act. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operations and financial position, the expected impact of the COVID-19 pandemic on our operations, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “goal,” “plan,” “intend,” “expect,” “seek”, and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this report or to conform these statements to actual results or revised expectations.

 

As used in this report, the terms “Aeva,” “we,” “us,” “our,” and “the Company” mean Aeva Technologies, Inc. and its subsidiaries unless the context indicates otherwise.

 

3


Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AEVA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PAR VALUE)

(UNAUDITED)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,499

 

 

$

66,810

 

Marketable securities

 

 

351,988

 

 

 

378,200

 

Accounts receivable

 

 

211

 

 

 

2,341

 

Inventories

 

 

1,926

 

 

 

2,063

 

Other current assets

 

 

8,667

 

 

 

9,070

 

Total current assets

 

 

425,291

 

 

 

458,484

 

Operating lease right-of-use assets

 

 

9,577

 

 

 

10,284

 

Property, plant and equipment, net

 

 

7,279

 

 

 

5,136

 

Intangible assets, net

 

 

4,200

 

 

 

4,425

 

Other noncurrent assets

 

 

860

 

 

 

859

 

Total assets

 

$

447,207

 

 

$

479,188

 

Liabilities, convertible preferred stock and stockholders' equity

 

 

 

 

 

 

Accounts payable

 

$

6,645

 

 

$

4,386

 

Accrued liabilities

 

 

2,671

 

 

 

4,110

 

Accrued employee costs

 

 

1,109

 

 

 

2,196

 

Lease liability, current portion

 

 

2,929

 

 

 

2,872

 

Other current liabilities

 

 

234

 

 

 

733

 

Total current liabilities

 

 

13,588

 

 

 

14,297

 

Lease liability, noncurrent portion

 

 

6,702

 

 

 

7,455

 

Warrant liability

 

 

426

 

 

 

1,060

 

Total liabilities

 

 

20,716

 

 

 

22,812

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Convertible preferred stock $0.0001 par value; 10,000 shares authorized; no shares issued and
outstanding

 

 

 

 

 

 

Common stock $0.0001 par value; 422,000 shares authorized; 216,644 and 214,997 shares issued
   and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

22

 

 

 

21

 

Additional paid-in capital

 

 

625,567

 

 

 

619,841

 

Accumulated other comprehensive loss

 

 

(2,979

)

 

 

(524

)

Accumulated deficit

 

 

(196,119

)

 

 

(162,962

)

Total stockholders' equity

 

 

426,491

 

 

 

456,376

 

Total liabilities, convertible preferred stock and stockholders' equity

 

$

447,207

 

 

$

479,188

 

 

4


Table of Contents

AEVA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

Product

 

$

211

 

 

$

293

 

Professional service

 

 

926

 

 

 

15

 

Total revenues

 

 

1,137

 

 

 

308

 

Cost of revenues:

 

 

 

 

 

 

Product

 

 

920

 

 

 

180

 

Professional service

 

 

455

 

 

 

 

Total cost of revenues

 

 

1,375

 

 

 

180

 

Gross profit

 

 

(238

)

 

 

128

 

Operating expenses:

 

 

 

 

 

 

Research and development expenses

 

 

25,315

 

 

 

11,379

 

General and administrative expenses

 

 

6,872

 

 

 

8,217

 

Selling and marketing expenses

 

 

1,648

 

 

 

659

 

Total operating expenses

 

 

33,835

 

 

 

20,255

 

Operating loss

 

 

(34,073

)

 

 

(20,127

)

Interest income

 

 

283

 

 

 

3

 

Other income, net

 

 

633

 

 

 

666

 

Loss before income taxes

 

 

(33,157

)

 

$

(19,458

)

Income taxes

 

 

 

 

 

 

Net loss

 

$

(33,157

)

 

$

(19,458

)

Unrealized loss on available-for-sale securities

 

 

(2,455

)

 

 

(29

)

Total comprehensive loss

 

 

(35,612

)

 

 

(19,487

)

Net loss per share, basis and diluted

 

 

(0.15

)

 

 

(0.12

)

Weighted-average shares used in computing net loss per share, basic and diluted

 

 

216,017,186

 

 

 

163,955,593

 

 

5


Table of Contents

AEVA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE DATA)

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Convertible preferred stock

 

 

Common stock

 

 

Additional
paid-in

 

 

Other
Comprehensive

 

 

Accumulated

 

 

Total stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

equity

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

214,997,014

 

 

$

21

 

 

$

619,841

 

 

$

(524

)

 

$

(162,962

)

 

$

456,376

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,784

 

 

 

 

 

 

 

 

 

5,784

 

Issuance of common stock upon exercise of stock
   options

 

 

 

 

 

 

 

 

1,029,266

 

 

 

1

 

 

 

185

 

 

 

 

 

 

 

 

 

186

 

Issuance of common stock upon release of restricted
   stock units

 

 

 

 

 

 

 

 

671,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for the withholding tax on vesting of restricted
   stock units

 

 

 

 

 

 

 

 

(53,553

)

 

 

 

 

 

(244

)

 

 

 

 

 

 

 

 

(244

)

Issuance of common stock upon exercise of warrants

 

 

 

 

 

 

 

 

120

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,455

)

 

 

 

 

 

(2,455

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,157

)

 

 

(33,157

)

Balance as of March 31, 2022

 

 

 

 

$

 

 

 

216,644,468

 

 

$

22

 

 

$

625,567

 

 

$

(2,979

)

`

$

(196,119

)

 

$

426,491

 

 

 

6


Table of Contents

AEVA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE DATA)

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Convertible preferred stock

 

 

Common stock

 

 

Additional
paid-in

 

 

Other
Comprehensive

 

 

Accumulated

 

 

Total stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

equity

 

Balance at December 31, 2020 (as previously
   reported)

 

 

8,606,780

 

 

$

79,204

 

 

 

8,069,693

 

 

$

9

 

 

$

8,784

 

 

$

 

 

$

(61,084

)

 

$

(52,291

)

Retroactive application of recapitalization (Note 2)

 

 

(8,606,780

)

 

 

(79,204

)

 

 

143,295,816

 

 

 

6

 

 

 

79,198

 

 

 

 

 

 

 

 

$

79,204

 

Balance at December 31, 2020, as adjusted (Note 2)

 

 

 

 

 

 

 

 

151,365,509

 

 

 

15

 

 

 

87,982

 

 

 

 

 

 

(61,084

)

 

 

26,913

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,513

 

 

 

 

 

 

 

 

 

4,513

 

Issuance of common stock upon exercise of stock
   options

 

 

 

 

 

 

 

 

701,139

 

 

 

 

 

 

198

 

 

 

 

 

 

 

 

 

198

 

Business combination and PIPE financing, net of
   acquired private placement warrant of $
3,014

 

 

 

 

 

 

 

 

59,343,104

 

 

 

6

 

 

 

557,757

 

 

 

 

 

 

 

 

 

557,763

 

Offering cost in connection with Business
   combination and PIPE financing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,983

)

 

 

 

 

 

 

 

 

(47,983

)

Issuance of common stock upon release of restricted
   stock units

 

 

 

 

 

 

 

 

41,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29

)

 

 

 

 

 

(29

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,458

)

 

 

(19,458

)

Balance as of March 31, 2021

 

 

 

 

$

 

 

 

211,451,160

 

 

$

21

 

 

$

602,467

 

 

$

(29

)

 

$

(80,542

)

 

$

521,917

 

 

7


Table of Contents

AEVA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATE
MENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(33,157

)

 

$

(19,458

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

630

 

 

 

215

 

Change in fair value of warrant liability

 

 

(634

)

 

 

(668

)

Stock-based compensation

 

 

5,784

 

 

 

4,513

 

Impairment of inventories

 

 

767

 

 

 

 

Amortization of right-of-use assets

 

 

707

 

 

 

223

 

Amortization of premium on available-for-sale securities

 

 

435

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

2,130

 

 

 

(104

)

Inventories

 

 

(312

)

 

 

(310

)

Other current assets

 

 

403

 

 

 

(258

)

Other noncurrent assets

 

 

(1

)

 

 

(296

)

Accounts payable

 

 

1,890

 

 

 

964

 

Accrued liabilities

 

 

(2,653

)

 

 

872

 

Accrued employee costs

 

 

(1,332

)

 

 

(358

)

Lease liability

 

 

(696

)

 

 

(141

)

Other current liabilities

 

 

(499

)

 

 

9

 

Net cash used in operating activities

 

 

(26,538

)

 

 

(14,797

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(1,283

)

 

 

(669

)

Purchase of available-for-sale securities

 

 

(82,284

)

 

 

(53,501

)

Proceeds from maturities of available-for-sale securities

 

 

105,607

 

 

 

 

Net cash provided by (used in) investing activities

 

 

22,040

 

 

 

(54,170

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from business combination and private offering

 

 

 

 

 

560,777

 

Transaction costs related to business combination and private offering

 

 

 

 

 

(47,228

)

Proceeds from exercise of warrants

 

 

1

 

 

 

 

Proceeds from exercise of stock options

 

 

186

 

 

 

198

 

Net cash provided by financing activities

 

 

187

 

 

 

513,747

 

Net increase (decrease) in cash and cash equivalents

 

 

(4,311

)

 

 

444,781

 

Beginning cash and cash equivalents

 

 

66,810

 

 

 

24,624

 

Ending cash and cash equivalents

 

$

62,499

 

 

$

469,405

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

 

Cash paid for income taxes

 

$

 

 

$

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

Changes in purchases of property and equipment recorded in accounts payable and accrued
   liabilities

 

$

1,265

 

 

$

215

 

Taxes withheld on net settled vesting of restricted stock units

 

$

244

 

 

$

 

Offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

534

 

Private placement of warrants acquired as part of merger

 

$

 

 

$

3,014

 

Right-of-use asset obtained in exchange for lease liability

 

$

 

 

$

4,692

 

Non-cash lease adoption

 

$

 

 

$

1,665

 

 

8


Table of Contents

AEVA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Aeva Technologies, Inc. (the “Company”), through its Frequency Modulated Continuous Wave (“FMCW”) sensing technology, designs a 4D LiDAR-on-chip that, along with its proprietary software applications, has the potential to enable the adoption of LiDAR across broad applications from automated driving to consumer electronics, consumer health, industrial automation and security application.

 

On March 12, 2021 (the “Closing Date”), Aeva, Inc. consummated a business combination (the “Business Combination”) with InterPrivate Acquisition Corp. (the Company’s predecessor, which was originally incorporated in Delaware as a special purpose acquisition company (“IPV”)) pursuant to the Business Combination Agreement dated as of November 2, 2020 (the “BCA”), by and among IPV, WLLY Merger Sub Corp., a wholly owned subsidiary of IPV, and Aeva, Inc. Immediately upon the consummation of the Business Combination, WLLY Merger Sub Corp. merged with and into Aeva, Inc., with Aeva, Inc. surviving the merger as a wholly owned subsidiary of IPV. IPV changed its name to Aeva Technologies, Inc. and the pre-combination Aeva retained its name of Aeva, Inc. Unless the context otherwise requires, “we,” “us,” “our,” “Aeva,” and the “Company” refers to Aeva Technologies Inc., the combined company and its subsidiaries following the Business Combination.

The Company’s common stock and warrants are now listed on the New York Stock Exchange stock market under the symbols “AEVA” and "AEVA.WS".

Basis of Presentation

The Business Combination is accounted for as a reverse recapitalization as the pre-combination Aeva was determined to be the accounting acquirer under Financial Accounting Standards Board (“FASB”)’s Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). The determination is primarily based on the evaluation of the following facts and circumstances:

the equity holders of the pre-combination Aeva hold the majority of voting rights in the Company;
the board of directors of the pre-combination Aeva represent a majority of the members of the board of directors of the Company;
the senior management of the pre-combination Aeva became the senior management of the Company; and
the operations of the pre-combination Aeva comprise the ongoing operations of the Company.

 

In connection with the Business Combination, outstanding capital stock of the pre-combination Aeva was converted into common stock of the Company, par value $0.0001 per share, representing a recapitalization, and the net assets of the Company were acquired at historical cost, with no goodwill or intangible assets recorded. The pre-combination Aeva was deemed to be the predecessor of the Company, and the consolidated assets and liabilities and results of operations prior to the Closing Date are those of the pre-combination Aeva. The shares and corresponding capital amounts and net loss per share available to common stockholders, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the BCA. The number of shares of preferred stock was also retroactively converted into commons shares based on the exchange ratio.

 

Unaudited Interim Financial Statements

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

 

The accompanying condensed consolidated financial statements are unaudited and have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations, comprehensive loss and cash flows for the periods presented, but are not necessarily indicative of the results of operations to be anticipated for any future annual or interim period.

Principal of Consolidation and Liquidity

The condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The consolidated condensed financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

The Company has funded its operations primarily through the Business Combination and issuances of stock. As of March 31, 2022, the Company’s existing sources of liquidity included cash and cash equivalents and marketable securities of $414.5 million. The Company has a limited history of operations and has incurred negative cash flows from operating activities and losses from operations in the past as reflected in the accumulated deficit of $196.1 million as of March 31, 2022. The Company expects to continue to incur operating losses due to the investments it intends to make in its business, including product development. Management believes that existing cash and cash equivalents and marketable

9


Table of Contents

 

securities will be sufficient to fund operating and capital expenditure requirements through at least 12 months from the date of issuance of these financial statements.

Significant Risks and Uncertainties

The Company is subject to those risks common in the technology industry and also those risks common to early-stage companies including, but not limited to, the possibility of not being able to successfully develop or market its products, technological obsolescence, competition, dependence on key personnel and key external alliances, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

The COVID-19 pandemic has disrupted everyday life and markets worldwide, leading to significant business and supply-chain disruption, as well as broad-based changes in supply and demand. While the quarantine, social distancing and other regulatory measures instituted or recommended in response to COVID-19 are expected to be temporary, the duration of the business disruptions, and related financial impact, cannot be estimated at this time. Nevertheless, COVID-19 presents material uncertainty and risk with respect to the Company, its performance, and its financial results and could adversely affect the Company’s financial information.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities, and trade receivables. Risks associated with cash and cash equivalents are mitigated by banking with creditworthy institutions and the Company’s marketable securities having investment-grade ratings when purchased.

The Company’s accounts receivable are derived from customers located in the United States, Asia, and Europe. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions and requires customer advance payments in certain circumstances. The Company generally does not require collateral.

As of March 31, 2022, four customers accounted for 83% of the accounts receivable. As of December 31, 2021, one customer accounted for 90% of accounts receivable. As of March 31, 2022, two vendors accounted for 33% of accounts payable. As of December 31, 2021, two vendors accounted for 37% of accounts payable.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include professional services revenue, valuation allowance for deferred tax assets, stock-based compensation, useful lives of property and equipment, useful lives of intangible assets, accrued liabilities, incremental borrowing rate for leases, and the valuation of the private warrants. The Company bases its estimates on historical experience and also on assumptions that it believes are reasonable. Actual results could differ from those estimates, and such differences could be material to the Company’s financial condition and results of operations.

 

Fair Value of Financial Instruments

The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities.

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

 

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

 

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Leases

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) using the modified retrospective approach with a cumulative-effect adjustment as of January 1, 2021. Upon adoption of Topic 842, the Company recorded operating right-of-use assets of $1.7 million and operating lease liabilities of $1.7 million and derecognized the deferred rent liability of $