STOCKHOLDERS EQUITY (DEFICIT)

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

STOCKHOLDERS EQUITY (DEFICIT)

STOCKHOLDERS EQUITY (DEFICIT)

Common Stock

As of December 31, 2021, the Company has 751,000,000 authorized shares of capital stock, each with a par value of $0.0001 per share, consisting of (a) 750,000,000 shares of common stock (the “Common Stock”), including (i) 740,000,000 shares of Class A Common Stock (the “Class A Common Stock”), and (ii) 10,000,000 shares of Class B Common Stock (the “Class B Common Stock”), and (b) 1,000,000 shares of preferred stock. As of December 31, 2021 163,114,238 shares of Class A Common Stock are issued and outstanding or reserved for potential issuance related to the exercise of stock options, the vesting of restricted common stock, the potential issuance of earnout shares and the exercise of warrants.

Reverse Recapitalization

The Business Combination was accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Under the guidance in Accounting Standards Codifications (“ASC”) Topic 805, Navitas is treated as the “acquirer” for financial reporting purposes. As such, the Company is deemed the accounting predecessor of the combined business and is the successor registrant for U.S. Securities and Exchange Commission (“SEC”) purposes, meaning that the Company’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. The most significant change in our reported financial position and results of operations was net cash proceeds of $298,054 from the merger transaction, which includes $173,000 in gross proceeds from the PIPE financing that was consummated in conjunction with the Business Combination. The increase in cash was offset by transaction costs incurred by Navitas in connection with the Business Combination of approximately $24,967. Substantially all of the transaction costs were paid as of December 31, 2021.

The table below summarizes the shares of Class A common stock issued immediately after the closing of the Business Combination as well as the impact on the consolidated statement of stockholders’ equity as of October 19, 2021:

	Class A Common Stock
	Shares	Par Amount		Additional Paid in Capital
PIPE and SPAC financing	117,733,507	$	12	$	298,054
Transaction expenses		$	—	$	(24,967)
Conversion of redeemable preferred stock				$	109,506
Earnout liability		$	—	$	(96,069)
Warrants liability		$	—	$	(35,763)
Reverse recapitalization on October 19, 2021	117,733,507	$	12	$	250,761

Series B-2 convertible preferred stock

During 2020, the Company amended its articles of incorporation and authorized the issuance of up to 24,027,913 shares of a new class of stock, Series B-2. The Company entered into Series B-2 purchase agreements with 13 investors for 18,198,891 shares of Series B-2 for an aggregate purchase price of $53,085. The Company incurred $706 of direct costs related to the issuance of Series B-2 shares, which is recorded as a reduction of the Series B-2 convertible preferred stock. All of the Series B-2 shares were converted to common shares at the Closing based on the Exchange Ratio.

Preferred stock conversion rights

Under the terms of the July 5, 2018 amended articles of incorporation, Series A, Series B, Series B-1 and Series B-2 shares (collectively, the “Preferred Stock”) are convertible into common stock at the option of the holders at any time after issuance. Preferred Stock shares are automatically converted upon the firm underwriting commitment for an initial public offering of aggregate proceeds not less than $100,000 or upon receipt by the Company of a conversion request by at least 60% of the outstanding Preferred Stock shares. The number of common units issuable upon conversion is determined based on original issuance price divided by the conversion price. The Series A conversion price is equal to the original issuance price of $1.05 per share, the Series B conversion price is equal to the original issuance price of $1.94 per share, the Series B-1 conversion price is equal to the original issuance price of $2.79 per share and the Series B-2 conversion price is equal to the original issuance price of $2.92 per share. The conversion prices may be adjusted downward if subsequent dilutive events occur such as an issuance of additional equity. The conversion prices cannot drop below $0.01 per share. All of the Company’s outstanding Preferred Stock was converted to common shares at the Closing based on the Exchange Ratio.

Preferred stock distribution, redemption and liquidation preference

Series A, Series B, Series B-1 and Series B-2 shareholders are entitled to an annual, noncumulative, dividend preference of $0.08, $0.15, $0.22 and $0.23 per share, respectively. Preferred shareholders are entitled to receive dividends, when, as and if declared by the Company’s Board of Directors. The Company has not declared or paid dividends since its inception. Dividends may be made to common stockholders after satisfying the Preferred Stock dividend preferences. Payment of dividends is made on a pro-rata basis in proportion to the number of shares held by each shareholder. In addition, the Preferred Stock can be redeemed by the holders upon certain events outside of the Company’s sole control, such as a Liquidation Event (as defined in the Company’s constitution), at the Liquidation Preference amount plus declared but unpaid dividends. As such, Preferred Stock is presented outside of permanent equity on the Company’s consolidated balance sheets. The preferred stock is recorded in the consolidated balance sheets at its original issuance less issuance costs. When and if a Liquidation Event becomes probable, the preferred stock will be adjusted to its redemption amount.

Series A, Series B, Series B-1 and Series B-2 shareholders are entitled to a $1.05, $1.94, $2.79 and $2.92 per share liquidation preference, respectively, subject to adjustment for any declared but unpaid dividends. After satisfying the Preferred Stock liquidation preference, remaining assets will be distributed pro-rata to the holders of common stock in proportion to the number of shares held by each holder of common stock. In the case of a Liquidation Event, to the extent that assets available for liquidation are less than the amount necessary to satisfy the liquidation preference, assets will be liquidated on a pro-rata basis to the Preferred Stock shareholders in proportion to the number of Series A, Series B, Series B-1 and Series B-2 shares held by each holder of Preferred Stock. After satisfying the Preferred Stock liquidation

preference, remaining assets will be distributed pro-rata to the holders of common stock in proportion to the number of shares held by each holder of common stock.

Forward Purchase Agreement

On October 6, 2021, Live Oak entered into a forward purchase agreement with ACM ARRT VII A LLC, an affiliate of Atalaya Capital Management LP (“ACM”), pursuant to which ACM had the right, but not the obligation, to purchase up to 3,000,000 shares of Class A Common Stock from shareholders who had redeemed shares, or indicated an interest in redeeming shares, prior to the closing of the Business Combination. The agreement provided for ACM to sell shares it purchased under the agreement to the Company on the second anniversary of the effective date of the agreement, at the redemption price in effect prior to Closing. ACM purchased 3,000,000 such shares and, immediately following the Closing, pursuant to the agreement, the Company paid to ACM the forward price of approximately $30 million. ACM also had the right to sell such shares to others during the two-year term, terminating the Company’s forward purchase obligations, and repaying to the Company a portion of the forward price, in amounts corresponding to the number of shares sold. ACM’s obligations under the agreement were secured by liens on the proceeds of any such sale or other disposition of such shares, and liens on a deposit account into which such proceeds were required to be deposited. On November 18, 2021, ACM notified the Company that it had sold 3,000,000 shares covered by the agreement. As a result, a total of approximately $30 million was remitted to the Company by ACM.

Warrants

Share and per share amounts below have not been adjusted to reflect the impact of the Exchange Ratio in the reverse recapitalization.

The Company issued warrants in connection with its previously outstanding term loan agreement with a bank (see Note 6). Under the original term loan agreement, the Company issued 96,300 warrants in 2016 to the bank. These warrants are exercisable into Series A shares at a price of $1.05 per share and expire on February 16, 2026. In connection with the modification of the term loan agreement on March 6, 2018, the Company issued an additional 49,223 warrants to the bank. These warrants are exercisable into Series B shares at a price of $1.94 per share and expire on March 6, 2018. The warrants issued to the bank may be exercised through payment of cash or net share settlement. The warrants issued to the bank are automatically net share settled upon expiration, acquisition of the Company or an initial public offering (including the Business Combination). The warrants were exercised through net share settlement in 2021, prior to the Closing.

On September 6, 2018, the Company issued 717,424 warrants to a potential customer. The warrants are exercisable into Series B-1 shares at a price of $2.79 per share and expire on January 31, 2020. The warrants vest based on purchases by the customer from January 1, 2019 through December 31, 2019. The warrants are exercisable through payment of cash. As of the date of grant and December 31, 2019, the Company has determined that it was not probable that the customer will make enough purchases to begin vesting, and, accordingly, no expense has been recognized. The warrants did not vest and were cancelled effective January 31, 2020.

On September 7, 2018, the Company issued 215,227 warrants to an investor entity that is involved in generating sales for the Company. The warrants are exercisable into shares of common stock at a price of $0.22 per share and expire on September 7, 2023. The warrants vest based on sales generated by the investor entity through May 15, 2021. The warrants are exercisable through payment of cash or net share settlement. As of the date of grant and December 31, 2019, the investor entity had met the performance conditions for vesting of 21,522 warrants, and, accordingly, an expense amounting to $1 was recognized. The warrants vest and are automatically net share settled upon acquisition of the Company or an initial public offering (including the Business Combination). The remaining warrants vested in 2021 and were exercised for cash payment of $47 in the fourth quarter of 2021, prior to the Closing.

On April 29, 2020, the Company issued warrants in connection with its loan and security agreement with a new bank. Pursuant to the agreement, the Company issued 30,000 warrants that are exercisable into Series B-2 Preferred Stock at a price of $2.92 per share and expire on April 30, 2030. The warrants issued to the bank may be exercised through payment of cash or net share settlement. The warrants are automatically net share settled upon expiration, acquisition of the Company or an initial public offering (including the Business Combination). The warrants were exercised through net share settlement in the fourth quarter of 2021, prior to the Closing.

On December 16, 2020, the Company issued 548,523 warrants to an investor entity that is also an end-customer of the Company. Vested warrants are exercisable into shares of common stock at a price of $0.29 per share and expire on December 16, 2025. The warrants vest based on purchases (indirectly) by the investor entity through December 31, 2021. The warrants are exercisable through payment of cash or net share settlement. As of December 31, 2020, the Company determined it was probable the investor would achieve the performance threshold for vesting, consequently, the company began recognizing the vesting charge for the fair value of the warrants as a reduction of revenue in proportion to the revenue generated. The Company recognized contra-revenue in the amount of $163 and $331 for the years ended December 31, 2021 and 2020, respectively. The warrants were exercised through net share settlement in 2021, prior to the Closing.

On December 29, 2020, the Company issued 342,827 warrants to an investor entity that is also an end-customer of the Company. Vested warrants are exercisable for shares of common stock at a price of $0.29 per share and expire on December 29, 2025. The warrants vest based on purchases (indirectly) by the investor entity through December 31, 2021. The warrants are exercisable through payment of cash or net share settlement. As of the date of grant and December 31, 2021, the Company determined that it was not probable the investor entity would meet the performance conditions for vesting of the warrants, and, accordingly, no expense was recognized as of December 31, 2021. The warrants did not vest by the end of the vesting period and thus expired effective December 31, 2021.

The Company determined that all warrants issued should be classified as equity at the grant date fair value. The Company determined the grant date fair value using the Black-Scholes option pricing model.

The weighted-average assumptions used in calculating the fair value of the warrants issued during the year ended December 31, 2020 are as follows:

	2020
Expected dividend yield	—
Risk-free interest rate	0.21		%
Expected life in years	2.5
Expected volatility	68		%
Weighted-average fair value of warrants granted	$	0.85