You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report.
Unless otherwise indicated, references in this section to the terms "ENNV," the
"Company," "we," "our" and "us" refer to
The financial information included in this Management's Discussion and Analysis of Financial Condition and Results of Operations is that of ENNV prior to the Business Combination because the Business Combination was consummated after the period covered by the consolidated financial statements included in this Annual Report on Form 10-K. Accordingly, the historical financial information included in this Annual Report on Form 10-K, unless otherwise indicated or as the context otherwise requires, is that of the Company prior to the Business Combination.
Overview
Until
Recent Developments
On
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of
Pursuant to the terms of the Merger Agreement, a business combination of Legacy Fast Radius and the Company was effected by the merger of Merger Sub with and into Legacy Fast Radius, with Legacy Fast Radius surviving the Merger as a wholly owned subsidiary of the Company (the "Merger"). At the effective time of the Merger (the "Effective Time"), all of the issued and outstanding securities of Legacy Fast Radius were converted into an aggregate of (i) 65,000,000 shares of the Company's common stock (including 11,196,271 shares of the Company's 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 Company's common stock as specified in the Merger Agreement (the "Merger Earnout Shares"), in two equal tranches of 5,000,000 shares of the Company's common stock, upon the satisfaction of certain price targets set forth in the Merger Agreement, which price targets will be based upon the volume-weighted average closing sale price of one share of the Company's common stock quoted on NASDAQ, for any twenty (20) trading days within any thirty (30) consecutive trading day period within the earnout period.
In connection with the Closing, the Company changed its name from
Results of Operations
We neither engaged in any operations (other than searching for a Business Combination after the Company's initial public offering (the "ENNV IPO" or the "Initial Public Offering")) nor generated any revenues prior to the Merger. Our only activities fromOctober 29, 2020 (inception) throughDecember 31, 2021 were organizational activities, completion of the ENNV IPO and the evaluation of possible business combinations. We do not expect to generate any operating revenues until after the completion of the Business Combination. We expect to generate non-operating income in the form of interest income on the proceeds derived from the ENNV IPO and placed in our Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the year ended
Liquidity and Capital Resources
As of
On
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additional Units to cover over-allotments, generating gross proceeds of
Following the Initial Public Offering and the sale of the Private Placement
Warrants, a total of
On
Since inception, Legacy Fast Radius has generated recurring losses which have
resulted in an accumulated deficit of
Going Concern
As a result of Legacy Fast Radius' 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 Company's 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 Company's business, operating results, financial condition, and ability to achieve its intended business objectives.
Off-Balance
Sheet Financing Arrangements
We did not have any off-balance sheet arrangements as ofDecember 31, 2021 .
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters of the ENNV IPO were entitled to a deferred fee of
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In connection with the execution of the Merger Agreement, the Company entered into the Subscription Agreements with thePIPE Investors , pursuant to which thePIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to thePIPE Investors , an aggregate of 7,500,000 shares of Class A common stock (1,000,000 shares of which were issued and sold to the Sponsor in its capacity as a PIPE Investor) for a purchase price of$10.00 per share, or an aggregate of$75,000,000 , in thePIPE Investment . The Subscription Agreements provide for purchase of ENNV Class A common stock, however the Class A common stock was originally sold in the ENNV IPO as a component of the ENNV units for$10.00 per unit. The ENNV units consist of one share of Class A common stock and one-quarter of one ENNV warrant. As ofJanuary 5, 2022 , the closing price on NASDAQ of the ENNV units was$10.05 per unit and the closing price of the Class A common stock was$9.89 per share.
In accordance with the terms of the Subscription Agreements, on
OnJanuary 24, 2021 , we entered into the Forward Purchase Agreement withGSAM , as amended by the First Amendment to Forward Purchase Agreement, dated as ofJanuary 31, 2021 , pursuant to whichGSAM committed to purchase an aggregate of up to 5,000,000 Forward Purchase Units in connection with ENNV's initial business combination. Concurrently with the execution of the Merger Agreement, ENNV, the Sponsor andGSAM entered into the Side Letter, pursuant to whichGSAM irrevocably consented to purchase from ENNV, and ENNV agreed to issue and sell toGSAM , 2,500,000 Forward Purchase Units, each consisting of one Forward Purchase Share and one-quarter of one Forward Purchase Warrant, at a price of$10.00 per Forward Purchase Unit, or an aggregate of$25,000,000 , in a private placement to be consummated substantially concurrently with the consummation of the Business Combination. Each whole Forward Purchase Warrant is exercisable to purchase one share of common stock at an exercise price of$11.50 per share. The Forward Purchase Agreement included an obligation thatGSAM would forfeit certain shares of ENNV Class B common stock it acquired from the Sponsor in connection with the ENNV IPO if, at the timeGSAM provided or withheld its consent to ENNV's initial business combination, it owned a number of shares of ENNV Class A common stock less than the number of Public Shares it purchased at closing of the ENNV IPO. Pursuant to the Side Letter, ENNV and the Sponsor waivedGSAM's potential obligation to forfeit such shares of ENNV Class B common stock in connection with the Business Combination. OnJanuary 20, 2022 , ENNV, the Sponsor andGSAM entered into the Side Letter pursuant to which, ifGSAM acquired any shares of common stock (i) on or afterJanuary 20, 2022 but prior to the Cutoff Time and did not exercise any right to redeem such shares in connection with the Redemption or (ii) on or after the Cutoff Time but prior toFebruary 1, 2022 and delivered evidence reasonably satisfactory to ENNV that (a) the stockholder from whom such shares were acquired had, prior to such acquisition, validly elected to redeem such shares in connection with the Redemption and (b) such stockholder orGSAM , as applicable, had, prior to Closing, validly revoked such election to redeem such shares in connection with the Redemption, and, in each case, did not transfer such Eligible Shares prior to the Closing Date, then such Eligible Shares would be "Non-Redeemed Shares," and the number of Forward Purchase Units GSAM was obligated to purchase under the Forward Purchase Agreement would be reduced by the number of Non-Redeemed Shares. Notwithstanding any such reduction in the number of Forward Purchase Units thatGSAM was obligated to purchase under the Forward Purchase Agreement, upon the consummation of the sale of such Forward Purchase Units, ENNV issued toGSAM a number of redeemable warrants, each of which is exercisable to purchase one share of ENNV Class A common stock at an exercise price of$11.50 per share, which warrants had the same terms as ENNV's Warrants, such thatGSAM received 625,000 Forward Purchase Warrants and Additional Warrants in the aggregate. OnJanuary 27, 2022 ,GSAM delivered to ENNV a notice that it had acquired 2,375,000 Non-Redeemed Shares. The Company issued 125,000 Forward Purchase Units concurrently with the Closing of the Business Combination on the Closing Date.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in
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assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported. We have identified the following critical accounting policies effecting our consolidated financial statements:
Derivative Warrant Liabilities
We account for the ENNV warrants and the Forward Purchase Agreement as either equity-classified or liability-classified instruments based on an assessment of the specific terms and applicable authoritative guidance inFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the ENNV warrants and the Forward Purchase Agreement are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the ENNV warrants and the Forward Purchase Agreement meet all of the requirements for equity classification under ASC 815, including whether the ENNV warrants and the Forward Purchase Agreement are indexed to shares of ENNV common stock and whether the holders of ENNV warrants and the Forward Purchase Agreement could potentially require "net cash settlement" in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the ENNV warrants and the time of entry into the Forward Purchase Agreement and as of each subsequent quarterly period end date while the ENNV warrants are outstanding and the Forward Purchase Agreement is effective. For issued or modified ENNV warrants that meet, and the Forward Purchase Agreement if it meets, all of the criteria for equity classification, such warrants and the Forward Purchase Agreement are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not, and the Forward Purchase Agreement if it does not, meet all the criteria for equity classification, such warrants and the Forward Purchase Agreement are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the liability-classified warrants or Forward Purchase Agreement are recognized as a non-cash gain or loss on the statements of operations. We account for the ENNV warrants and the Forward Purchase Agreement in accordance with the guidance contained in ASC 815-40, under which the ENNV warrants and the Forward Purchase Agreement do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the ENNV warrants and the Forward Purchase Agreement as liabilities at their fair value and adjust such warrants and the Forward Purchase Agreement to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our consolidated statement of operations.
ENNV Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to
mandatory redemption is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common stock (including common stock that
features redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) is classified as temporary equity. At all other times,
common stock is classified as shareholders' equity. The Company's Class A common
stock features certain redemption rights that are considered to be outside of
the Company's control and subject to occurrence of uncertain future events.
Accordingly, at
As previously reported in the Current Report on Form 8-K filed by the Company with theSEC onFebruary 7, 2022 , the Company held a special meeting of the Company's stockholders onFebruary 2, 2022 . At the special meeting, the Company's stockholders considered and adopted, among other matters, the Merger Agreement. Prior to the special meeting, the holders of 31,512,573 shares of common stock exercised their right to redeem 74
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their shares for cash at a redemption price of approximately
As of the Closing Date and following the completion of the Business Combination, the Company had the following outstanding securities:
• 73,041,156 shares of common stock; • 9,580,413 shares of common stock issuable upon exercise of Exchanged Options and Exchanged RSUs; • 1,615,858 shares of common stock issuable upon settlement of fully vested RSUs; • 8,625,000 Public Warrants; and • 6,891,667 Private Placement Warrants.
Net Income Per Share
Net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of common stock outstanding during the period, plus, to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method.
At
Prior to the Business Combination, the Company had two classes of shares, which are referred to as ENNV Class A common stock and ENNV Class B common stock. Earnings are shared pro rata between the two classes of shares as long as the Business Combination is consummated. Accretion associated with the redeemable shares of ENNV Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Offering Costs
Offering costs consist of legal, accounting, underwriting and other costs
incurred through the consolidated balance sheet date that are directly related
to the ENNV IPO. Upon the completion of the ENNV IPO in
Recent Accounting Standards
InAugust 2020 , the FASB issued Accounting Standards Update ("ASU") 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require only separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning afterDecember 15, 2023 and should 75
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be applied on a full or modified retrospective basis, with early adoption permitted beginning onJanuary 1, 2021 . ENNV is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an "emerging growth company," whichever is earlier.
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