Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

Basis of Presentation and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2022
Accounting Policies [Abstract]  
Basis of Presentation These unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“GAAP”) for interim reporting. Accordingly, certain notes or other information that are normally required by GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes as of and for the year ended December 31, 2021, included in the Company's Annual Report on Form 10-K (“Annual Report on Form 10-K”). Results of operations reported for interim periods are not necessarily indicative of results for the entire year. In the opinion of management, the Company has made all adjustments necessary to present fairly its condensed consolidated financial statements for the periods presented. Such adjustments are of a normal, recurring nature. The Company’s financial statements have been prepared under the assumption that the Company will continue as a going concern, which contemplates the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future.
Consolidation The accompanying unaudited condensed consolidated financial statements include the results of the Company and its subsidiaries. The Company’s comprehensive loss is the same as its net loss.
Material changes o material changes have occurred with respect to the Company’s significant accounting policies disclosed in Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K.
Macroeconomic Conditions and COVID-19
Current adverse macroeconomic conditions, including but not limited to heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, challenges in the supply chain and the Ukraine war, could negatively affect our business. In addition, COVID-19 virus variants, infection rates and regulations continue to fluctuate in various regions of the world and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, and intermittent supplier delays.
Ultimately, the Company cannot predict the impact of current or worsening macroeconomic conditions or the ongoing impacts of the COVID-19 pandemic. The Company continues to monitor macroeconomic conditions to remain flexible and to optimize and evolve its business as appropriate. To do this, the Company is working on projecting demand and infrastructure requirements globally and deploying its workforce and other resources accordingly.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
The Company applies the provisions of ASC 820, Fair Value Measurements and Disclosures, which provides a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value represents the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses the following hierarchy in measuring the fair value of the Company’s assets and liabilities, focusing on the most observable inputs when available:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as required by ASC 820, by level, within the fair value hierarchy as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022
Fair Value Level 1 Level 2 Level 3
Money Market Funds $ 47,577 $ 47,577 $ $
Contingent earnout shares liability $ 4,121 $ $ $ 4,121
December 31, 2021
Fair Value Level 1 Level 2 Level 3
Money Market Funds $ 227,492  $ 227,492  $ —  $ — 
Contingent earnout shares liability $ 29,057  $ —  $ —  $ 29,057 
The Company has a contingent obligation to issue 15.0 million shares of Common Stock to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods (the “Earnout Shares”). Upon the occurrence of a bankruptcy or liquidation, any unissued Earnout Shares would be fully issued regardless of whether the share price target has been met.
The Earnout Shares are accounted for as a contingent liability and its fair value is determined using Level 3 inputs, since estimating the fair value of this contingent liability requires the use of significant and subjective inputs that may and are likely to change over the duration of the liability with related changes in internal and external market factors. The tranches were valued using the Monte Carlo simulation of the stock prices based on historical and implied market volatility of the Company.
Following is a summary of the change in fair value of contingent earnout shares liability for the six months ended June 30, 2022 (in thousands).
Earnout Shares Liability
Beginning fair value at December 31, 2021
$ 29,057 
Change in fair value during the period (24,936)
Ending fair value at June 30, 2022
$ 4,121 
Recently Issued Accounting Pronouncements Not Yet Adopted Recently Issued Accounting Pronouncements AdoptedIn November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which amends the guidance on accounting for government assistance and requires business entities to disclose information about certain government assistance they receive. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The amendments are effective for fiscal years beginning after December 15, 2021, and only impacts annual financial statement footnote disclosures. The Company adopted the new standard during the three months ended March 31, 2022, and the impact of any government assistance transactions within the scope of this standard will be included within our annual financial statement footnote disclosures for year ended December 31, 2022.