What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-05 compared with 2023-03-08 · 409 added, 451 removed, 799 unchanged (52% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of SmartRent, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’

equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

7 unchanged sentences

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 Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

7 unchanged sentences

We have served as the Company's auditor since 2020.

Item 1 - Financial Statements

SMARTRENT, INC.

29 unchanged sentences

500,000 shares authorized as of December 31, 2023 and December 31, 2022, respectively;

198,525 and 193,864 shares issued and outstanding as of December 31, 2022 and December 31, 2021

203,327 and 198,525 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders' equity

4 unchanged sentences

(in thousands, except per share amounts)

Years Ended December 31,

For the years ended December 31,

Professional services

12 unchanged sentences

Interest income (expense), net

Other income (expense), net

Other (expense) income, net

Loss before income taxes

9 unchanged sentences

SMARTRENT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(in thousands, except share amounts)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

Convertible Preferred Stock

6 unchanged sentences

Balance, December 31, 2020

Retroactive application of exchange ratio

Balance, December 31, 2019 as adjusted

Issuance of Series C Preferred Stock for cash, net of offering costs

Exercise of warrants

Conversion of Convertible Note to Series C-1 Preferred Stock

Issuance of common stock in connection with acquisition

Stock-based compensation

Common stock warrants related to marketing expense

Other comprehensive loss

Balance, December 31, 2020

Issuance of Series C Preferred Stock for cash, net of offering costs

Exercise of warrants

Conversion of Convertible Preferred Stock to Common Stock

18 unchanged sentences

Balance, December 31, 2022

Stock-based compensation

Issuance of common stock upon vesting of equity awards

Tax withholdings related to net share settlement of equity awards

Exercise of options

Net settlement related to exercise of options

ESPP purchases

Common stock warrants issued to customers as consideration

Other comprehensive loss

Balance, December 31, 2023

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except per share amounts)

Years Ended December 31,

(in thousands)

For the years ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

23 unchanged sentences

Lease liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for Zenith acquisition, net of cash acquired

Payments for SightPlan acquisition, net of cash acquired

Payments for iQuue acquisition, net of cash acquired

Payments for investment in non-affiliate

Purchase of property and equipment

Payment for loan receivable

Capitalized software costs

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Payments from revolving line of credit

Payments on revolving line of credit

Payments on term loan

Payment on term loan

Payments of senior revolving facility transaction costs

Payments on note payable related to acquisition

Proceeds from warrant exercise

Proceeds from convertible notes

Proceeds from options exercise

5 unchanged sentences

Payments for business combination and private offering transaction costs

Payment of earnout related to acquisition

Net cash (used in) provided by financing activities

20 unchanged sentences

Acquisition consideration held in escrow

Conversion of convertible debt to preferred stock

Common stock issued as consideration for acquisition

Conversion of convertible preferred stock to common stock

5 unchanged sentences

SmartRent, Inc., and its wholly owned subsidiaries (collectively, the "Company"), is an enterprise real estate technology company that provides comprehensive management software and applications designed for property owners, managers and residents.

Its suite of products and services, which includes both smart building hardware and cloud-based software-as-a-service ("SaaS") solutions, provides seamless visibility and control over real estate assets.

The Company’s platform lowers operating costs, increases revenues, mitigates operational friction and protects assets for owners and operators, while providing a differentiated, elevated living experience for residents.

Its suite of products and services, which includes both smart building hardware and cloud-based SaaS solutions, provides seamless visibility and control over real estate assets.

The Company is headquartered in Scottsdale, Arizona.

The Company, formerly known as Fifth Wall Acquisition Corp.

I (“FWAA”), was originally incorporated in Delaware on November 23, 2020, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses.

On February 9, 2021, the Company consummated its initial public offering (the “IPO”), following which its shares began trading on the Nasdaq National Market (“Nasdaq”).

On April 21, 2021, FWAA entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with SmartRent.com, Inc.

(“Legacy SmartRent”) and Einstein Merger Corp.

I, a wholly owned subsidiary of FWAA (“Merger Sub”).

On August 24, 2021, the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated.

I, was originally incorporated in Delaware on November 23, 2020, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses.

On February 9, 2021, the Company consummated its initial public offering, following which its shares began trading on the Nasdaq National Market.

On April 21, 2021, FWAA entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with SmartRent.com, Inc.

(“Legacy SmartRent”) and Einstein Merger Corp.

I, a wholly owned subsidiary of FWAA.

On August 24, 2021, the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated.

In connection with the closing of the Business Combination, FWAA changed its name to SmartRent, Inc.

and its shares began trading on the New York Stock Exchange (“NYSE”) under the symbol “SMRT.”

As a result of the Business Combination, SmartRent, Inc.

and its shares began trading on the NYSE under the symbol “SMRT.” As a result of the Business Combination, SmartRent, Inc.

became the owner, directly or indirectly, of all of the equity interests of Legacy SmartRent and its subsidiaries.

1 unchanged sentence

The Company entered into the Merger Agreement in April 2021 and consummated the Business Combination in August 2021.

In connection with the consummation of the Business Combination, the Company changed its name from “Fifth Wall Acquisition Corp.

to “SmartRent, Inc.”

and changed its trading symbol and securities exchange from “FWAA”

on Nasdaq to “SMRT”

Upon the closing of the Business Combination, Merger Sub merged with and into Legacy SmartRent, with Legacy SmartRent continuing as the surviving company and changing its name to “SmartRent Technologies, Inc.” In connection with the consummation of the Business Combination, the Company changed its name from “Fifth Wall Acquisition Corp.

I” to “SmartRent, Inc.” and changed its trading symbol and securities exchange from “FWAA” on Nasdaq to “SMRT” on the NYSE.

Upon the closing of the Business Combination, the Company's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 550,000 shares, of which 500,000 shares were designated common stock, $ 0.0001 par value per share, and of which 50,000 shares were designated preferred stock, $ 0.0001 par value per share.

Upon consummation of the Business Combination, each share of Legacy SmartRent convertible preferred stock and common stock issued and outstanding was canceled and converted into the right to receive approximately 4.8846 shares (the “Exchange Ratio”) of the Company’s Class A common stock, par value $ 0.0001 per share (“Common Stock”).

Outstanding stock options and restricted stock units ("RSUs"), whether vested or unvested, to purchase or receive shares of Legacy SmartRent common stock granted under the 2018 Stock Plan (see Note 8) converted into stock options and RSUs to purchase shares of the Company’s Common Stock upon the same terms and conditions that were in effect with respect to such stock options and RSUs immediately prior to the Business Combination, after giving effect to the Exchange Ratio.

Outstanding warrants, whether vested or unvested, to purchase shares of Legacy SmartRent common stock (see Note 7) converted into warrants for shares of the Company’s Common Stock upon the same terms and conditions that were in effect with respect to such warrants immediately prior to the Business Combination, after giving effect to the Exchange Ratio.

Upon consummation of the Business Combination, each share of Legacy SmartRent convertible preferred stock and common stock issued and outstanding was canceled and converted into the right to receive approximately 4.8846 shares (the “Exchange Ratio”) of the Company’s Class A Common Stock, par value $ 0.0001 per share (“Common Stock”).

Outstanding stock options and RSUs, whether vested or unvested, to purchase or receive shares of Legacy SmartRent common stock granted under the 2018 Stock Plan (see Note 8) converted into stock options and RSUs to purchase shares of the Company’s Common Stock upon the same terms and conditions that were in effect with respect to such stock options and RSUs immediately prior to the Business Combination, after giving effect to the Exchange Ratio.

In connection with the Business Combination,

Holders of less than one thousand shares of FWAA’s Class A Common Stock sold in its initial public offering (the “Initial Shares”) properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from FWAA’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination.

Each such share was redeemed for approximately $ 10.00 per share, or $ 2 in the aggregate;

The shares of FWAA Class B Common Stock held by Fifth Wall Acquisition Sponsor, LLC (“Sponsor”) and FWAA’s independent directors automatically converted to 8,625 shares of Common Stock;

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

Pursuant to subscription agreements entered into in connection with the Merger Agreement (collectively, the “Subscription Agreements”), certain investors purchased an aggregate of 15,500 newly-issued shares of Common Stock at a purchase price of $ 10.00 per share for an aggregate purchase price of $ 155,000 (the “PIPE Investment”).

At the closing of the Business Combination, the Company consummated the PIPE Investment.

The Company incurred direct and incremental costs of approximately $ 55,981 in connection with the Business Combination and the related equity issuance, consisting primarily of investment banking, legal, accounting, and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds.

The Company accounted for this transaction as a reverse merger in accordance with U.S.

Under this method of accounting, FWAA was treated as the “acquired”

company for financial reporting purposes.

The Company accounted for this transaction as a reverse merger in accordance with GAAP.

Under this method of accounting, FWAA was treated as the “acquired” company for financial reporting purposes.

See Note 2 "Significant Accounting Policies" for further details.

11 unchanged sentences

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

1 unchanged sentence

All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements herein.

Immaterial Restatement of Prior Period Financial Statements

Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2022, the Company’s management identified an error in the classification of cash paid for capitalized software costs that had previously been included in operating activities but should have been included in investing activities within the statement of cash flows.

As a result, the accompanying consolidated statement of cash flows for the year ended December 31, 2022 has been restated from amounts previously reported.

For the year ended December 31, 2021, no such costs were paid, thus, no restatement was required.

Management determined that the error was not material to previously issued financial statements.

The following table presents the effects of the restatement to the Company’s consolidated statement of cash flows for the year ended December 31, 2022.

As Previously Reported

Cash Flows from Operating Activities:

Change in Prepaid expenses and other Assets

Net cash used in operating activities

Cash Flows from Investing Activities:

Capitalized software costs

Net cash used in investing activities

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Foreign Currency

SmartRent, Inc.'s functional and reporting currency is United States Dollars (“USD”) and its foreign subsidiary has a functional currency other than USD.

Financial position and results of operations of the Company's international subsidiary are measured using local currencies as the functional currency.

SmartRent, Inc.'s functional and reporting currency is United States Dollars (“USD”) and its foreign subsidiaries have a functional currency other than USD.

Financial position and results of operations of the Company's international subsidiaries are measured using local currencies as the functional currency.

Assets and liabilities of these operations are translated at the exchange rates in effect at the end of each reporting period.

The Company's international subsidiaries' statements of operations accounts are translated at the weighted-average rates of exchange prevailing during each reporting period.

Translation adjustments arising from the use of differing currency exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’

Gains and losses on foreign currency exchange transactions, as well as translation gains or losses on transactions denominated in currencies other than an entity’s functional currency, are reflected in the Consolidated Statements of Operations and Comprehensive Loss.

Translation adjustments arising from the use of differing currency exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.

2 unchanged sentences

There can be no assurance that such additional equity or debt financing will be available on terms acceptable to the Company, or at all.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Use of Estimates

The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period.

These estimates made by management include valuing the Company’s inventories on hand, allowance for doubtful accounts, intangible assets, earnout liabilities, warranty liabilities and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, stand-alone selling price of items sold and assumptions used to estimate the fair value of stock-based compensation expense.

The preparation of financial statements in conformity with GAAP requires management to make 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, as well as the reported amounts of revenue and expense during the reporting period.

These estimates made by management include valuing the Company’s inventories on hand, allowance for doubtful accounts, intangible assets, earnout liabilities, warranty liabilities, stand-alone selling price of items sold, and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, and assumptions used to estimate the fair value of stock-based compensation expense.

Actual results could differ materially from those estimates.

Impact of COVID-19

The extensive impact caused by the COVID-19 pandemic has resulted and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

The COVID-19 pandemic continues to evolve, with pockets of resurgence and the emergence of variant strains contributing to continued uncertainty about its scope, duration, severity, trajectory, and lasting impact.

In an effort to mitigate the spread of COVID-19, a number of countries, states, and other jurisdictions have imposed, and may impose in the future, various measures, including travel restrictions and quarantines.

These measures have and could continue to contribute to a general slowdown in the global economy, adversely impact the Company's customers, employees, third-party suppliers, logistics providers and other business partners, and otherwise disrupt its operations.

The timing of customer orders and the Company’s ability to fulfill orders received was impacted by various COVID-19-related government mandates, resulting in a delay in units sold.

The Company has also witnessed certain current and prospective customers delaying purchases based on budget constraints or project delays related to COVID-19.

The broader and long-term implications of the COVID-19 pandemic on the Company’s workforce, operations and supply chain, customer demand, results of operations and overall financial performance remain uncertain.

The impact of COVID-19, and measures to prevent its spread, have been impactful and continue to affect supply chain.

The Company has experienced some production delays as a result of COVID-19, including impacts to the sourcing, manufacturing, and logistics channels.

The Company continues to engage with current and potential customers and continues to experience strong demand for its smart home enterprise software solutions.

The Company believes some customers may continue to delay purchases because their development programs may also be delayed as a result of COVID-19.

The Business Combination

The Business Combination is accounted for as a reverse recapitalization as Legacy SmartRent was determined to be the accounting acquirer.

The determination is primarily based on the evaluation of the following facts and circumstances:

the equity holders of Legacy SmartRent hold the majority of voting rights in the Company;

the board of directors of Legacy SmartRent represent a majority of the members of the board of directors of the Company or were appointed by Legacy SmartRent;

the senior management of Legacy SmartRent became the senior management of the Company;

the operations of Legacy SmartRent comprise the ongoing operations of the Company.

In connection with the Business Combination, outstanding capital stock of Legacy SmartRent 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.

Legacy SmartRent 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 Legacy SmartRent.

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.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In March 2022, the Company purchased all of the outstanding equity interests of SightPlan Holdings, Inc.

("SightPlan") in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 13).

The acquisition was recorded on the date that the Company obtained control over the acquired business.

The consideration paid was determined on the acquisition date and the acquisition-related costs, such as professional fees, were excluded from the consideration transferred and were recorded as expense in the period incurred.

Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed.

In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC (“iQuue”) in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 13).

In March 2022, the Company purchased all of the outstanding equity interests of SightPlan in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 13).

The acquisition was recorded on the date that the Company obtained control over the acquired business.

The consideration paid was determined on the acquisition date.

The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and were recorded as expense in the period incurred.

In February 2020, Legacy SmartRent purchased all of the outstanding equity interests of Zenith Highpoint, Inc.

(“Zenith”) in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used, see Note 13 of these Consolidated Financial Statements.

In December 2021, the Company purchased all of the outstanding equity interests of iQuue in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used.

The acquisition was recorded on the date that the Company obtained control over the acquired business.

The consideration paid was determined on the acquisition date.

The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Net Loss Per Share Attributable to Common Stockholders

3 unchanged sentences

The anti-dilutive effect of potentially dilutive securities is excluded from the computation of net loss per share because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive.

The Company’s participating securities included convertible preferred stock, as the holders were entitled to receive noncumulative dividends on a pari passu basis in the event that a dividend is paid on common stock.

The Company also considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock.

The holders of convertible preferred stock, as well as the holders of unvested common shares subject to repurchase, do not have a contractual obligation to share in losses.

In conjunction with the Business Combination all convertible preferred stock converted to common stock.

The Company considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock.

The holders of unvested common shares subject to repurchase do not have a contractual obligation to share in losses.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase and any shares issuable by the exercise of warrants for nominal consideration.

1 unchanged sentence

For periods in which the Company reports a net loss, the diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Cash and Cash Equivalents

10 unchanged sentences

Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for doubtful accounts on the Consolidated Balance Sheets.

The allowance for doubtful accounts totaled $ 606 and $ 357 as of December 31, 2022, and 2021, respectively.

The allowance for doubtful accounts totaled $ 1,361 and $ 606 as of December 31, 2023, and December 31, 2022, respectively.

The provision for doubtful accounts is recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss;

the provision for doubtful accounts totaled $ 819 , $ 242 , and $ 226 for the years ended December 31, 2023, 2022, and 2021, respectively.

There were no material write-offs of accounts receivable deemed uncollectable for the years ended December 31, 2022 and 2021 .

During the year ended December 31, 2020, there were $ 381 in write-offs of accounts receivable deemed uncollectable.

The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for doubtful accounts based on a combination of factors, which include th e nature of relationship and the prior experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date.

There were no material write-offs of accounts receivable for the years ended December 31, 2023, 2022, and 2021.

The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for doubtful accounts based on a combination of factors, which include th e nature of the relationship and the prior collection experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date.

Accounts receivable determined to be uncollectible are charged against the allowance for doubtful accounts.

Actual collections of accounts receivable could differ from management’s estimates.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Significant Customers

A significant customer represents 10 % or more of the Company’s total revenue or net accounts receivable balance at each respective Consolidated Balance Sheet date.

The significant customers of the Company are also limited partners of an investor in the Company with approxima tely 4 % and 22 % ownership as of December 31, 2022 and 2021, respectively.

The investor does not exert control or influence on these limited partners and, as such these limited partners do not meet the definition of related parties of the Company.

A significant customer represents 10 % or more of the Company’s total revenue or net accounts receivable balance at each respective Consolidated Balance Sheet date.

Revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable for each significant customer follows.

Accounts Receivable

As of December 31,

Years Ended December 31,

For the years ended

December 31, 2023

December 31, 2022

December 31, 2023

December 31, 2022

December 31, 2021

* Total less than 10% for the respective period

1 unchanged sentence

The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In August 2023 the Company entered into the Agreement with ADI, pursuant to which, ADI will serve as the Company's non-exclusive hardware fulfillment partner throughout the United States, Canada, and Puerto Rico.

In connection with the Agreement, the Company has agreed to transfer certain of its inventory to ADI, which ADI will use to fulfill the Company's sales in exchange for cash.

The Company is subject to certain buy back provisions relating to the transferred inventory.

As of December 31, 2023, the Company recorded $ 851 in connection with the buy back provision, which is recorded in other current liabilities on the balance sheet.

The Company retains control of the inventory transferred to ADI and continues to recognize the inventory on the balance sheet.

Revenue is recognized at a point in time when the inventory is shipped to the customer.

No revenue is recognized when inventory is transferred to ADI.

Goodwill represents the excess of cost over net assets of the Company's completed business combinations.

The Company tests for potential impairment of goodwill on an annual basis in November to determine if the carrying value is less than the fair value.

In testing goodwill for impairment, the Company began with a qualitative test, commonly referred to as "Step 0", and determined performing a quantitative test was not necessary.

No goodwill impairment has been recorded as of December 31, 2022.

The Company tests for potential impairment of goodwill on an annual basis as of September 30 to determine if the carrying value is less than the fair value.

The Company will conduct additional tests between annual tests if there are indications of potential g oodwill impairment.

No goodwill impairment has been recorded as of December 31, 2023 and December 31, 2022.

Intangible Assets

The Company recorded intangible assets with finite lives, including customer relationships and developed technology, as a result of the iQuue and SightPlan acquisitions.

The Company recorded intangible assets with finite lives, including customer relationships and developed technology, as a result of acquisitions made in prior years.

Intangible assets are amortized on a straight-line basis based on their estimated useful lives.

The estimated useful life of these intangible assets are as follow s.

The estimated useful life of these intangible assets are as follows.

Estimated useful life (in years)

1 unchanged sentence

Developed technology

Property and Equipment, ne t

Property and Equipment, net

Property and equipment is stated at cost, net of accumulated depreciation and amortization.

2 unchanged sentences

Repairs and maintenance expense for the years ended December 31, 2023, 2022 and 2021 was $ 26 , $ 50 and $ 15 , respectively, and is included in general and administrative expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Depreciation and amortization are included in cost of revenue and general and administrative expenses and are computed using the straight-line basis over estimated useful lives of those assets as follows.

12 unchanged sentences

Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company estimates its incremental borrowing rate to discount future lease payments.

The incremental borrowing rate reflects the interest rate that the Company would expect to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term.

Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs and lease incentives.

Certain leases also include options to renew or terminate the lease at the election of the Company.

The Company evaluates these options at lease inception and on an ongoing basis.

Renewal and termination options that the Company is reasonably certain to exercise are included when classifying leases and measuring lease liabilities.

Renewal and termination options that the Company i s reasonably certain to exercise are included when classifying leases and measuring lease liabilities.

Operating lease expense is recognized on a straight-line basis over the lease term.

8 unchanged sentences

Actual warranty claim costs could differ from these estimates.

For the years ended December 31, 2022, 2021 and 2020 warranty expense included in cost of hardware revenue was $ 852 and $ 8,305 and $ 3,694 , respectively.

As of December 31, 2022, and December 31, 2021, the Company’s warranty allowance was $ 2,277 and $ 6,106 , respectively.

For the years ended December 31, 2023, 2022 and 2021, warranty expense included in cost of hardware revenue was $ 2,142 , $ 852 and $ 8,305 , respectively.

As of December 31, 2023, and December 31, 2022, the Company’s warranty allowance was $ 2,215 and $ 2,277 , respectively.

During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and has included an estimate of the expected cost to remove these batteries, which were acquired from one supplier, in its warranty allowance.

During the year ended December 31, 2021, the Company identified additional deficient batteries, and while the number of deficient batteries is less than one percent of the total number of all batteries deployed, the Company has elected to replace all such batteries from previously deployed hardware devices.

As of December 31, 2022, and 2021, $ 1,687 and $ 4,732 , respectively, is included in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency.

The Company's aggregate warranty liabilities and changes were as follows:

As of December 31,

Warranty reserve beginning balance

Warranty accrual for battery deficiencies

Warranty (reversal) accrual for completed projects

Warranty settlements

Warranty reserve ending balance

Convertible Preferred Stock

The Company assessed the provisions of Legacy SmartRent’s convertible preferred stock including redemption rights, dividends and voting rights to determine the appropriate classification.

The Company determined that Legacy SmartRent’s shares of convertible preferred stock are appropriately classified as mezzanine equity because they were contingently redeemable into cash upon the occurrence of an event not solely within Legacy SmartRent’s control.

When it is probable that a convertible preferred share will become redeemable, adjustments are recorded to adjust the carrying values.

No such adjustments have been recorded during the years ended December 31, 2022 or 2021.

As a result of the Business Combination, each share of Legacy SmartRent convertible preferred stock and common stock was converted into the right to receive approximately 4.8846 shares of the Company’s Common Stock.

Refer to Note 7, Convertible Preferred Stock and Equity .

As of December 31, 2023, and December 31, 2022, $ 864 and $ 1,687 , respectively, is included in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency.

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

During the year ended December 31, 2023, the Company identified a deficiency with the firmware and sensor accuracy of certain hardware sold and has included an estimate of the expected cost to update the related firmware and hardware.

As of December 31, 2023, $ 410 is included in the Company’s warranty allowance related to the remaining cost to perform the firmware and hardware updates.

December 31, 2023

December 31, 2022

Warranty reserve beginning balance

Non-recurring warranty items incurred

Warranty accrual (reversal) for completed projects

Warranty settlements

Warranty reserve ending balance

Fair Value of Financial Instruments

8 unchanged sentences

There were no transfers between levels of the fair value hierarchy during the years ended December 31, 2023 or 2022.

The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Revenue Recognition

3 unchanged sentences

The transaction price for a typical arrangement includes the price for:

smart home hardware devices, professional services, and a subscription for use of the Company's proprietary software (“hosted services”).

Included in these contracts are Hub Devices, which integrate the Company’s proprietary enterprise software with third party smart devices.

Historically, the Company sold Hub Devices which only functioned with a subscription to its proprietary software (“non-distinct Hub Devices").

During the year ended December 31, 2022, the Company began shipping Hub Devices with features that function independently from its proprietary software subscription (“distinct Hub Devices").

Non-distinct Hub Devices are recognized as a single performance obligation with the Company’s proprietary software in hosted services revenue, while distinct Hub Devices are recognized as a separate performance obligation in hardware revenue.

When distinct Hub Devices are included in a contract, the hosted services performance obligation is comprised of only the Company’s proprietary software.

smart home hardware devices, professional services, and a subscription for use of the Company's software (“Hosted Services”).

Included in these contracts are centrally connected devices ("Hub Devices"), which integrate the Company’s enterprise software with third party smart devices.

Historically, the Company only sold non-distinct Hub Devices which only functioned with a subscription to its software.

During the year ended December 31, 2022, the Company began shipping distinct Hub Devices.

Non-distinct Hub Devices are recognized as a single performance obligation with the Company’s software in Hosted Services revenue, while distinct Hub Devices are recognized as a separate performance obligation in hardware revenue.

When distinct Hub Devices are included in a contract, the Hosted Services performance obligation is comprised of only the Company’s software.

The Company considers delivery for each of the hardware, professional services and Hosted Services to be separate performance obligations.

2 unchanged sentences

The Hosted Services performance obligation provides a subscription that allows the customer access to software during the contracted-use term when the promised service is provided to the customer.

Also included in the hosted service performance obligation are non-distinct Hub Devices that only function with a subscription to the Company’s proprietary software.

Payments are received by the Company by credit card, check or automated clearing house (“ACH”) payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days .

Also included in the hosted service performance obligation are non-distinct Hub Devices that only function with a subscription to the Company’s software.

Payments are received by the Company by credit card, check or automated clearing house payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days .

Taxes collected from customers and remitted to governmental authorities are not included in reported revenue.

4 unchanged sentences

Amounts billed for shipping and handling fees are recorded as revenue.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

• Sales tax collected from customers:

3 unchanged sentences

The Company only applies these steps when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to a customer.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

• Significant financing component:

3 unchanged sentences

Hardware revenue results from the direct sale to customers of hardware smart home devices, which devices generally consist of a distinct Hub Device, door-locks, thermostats, sensors, and light switches.

These hardware devices provide features that function independently without subscription to the Company's proprietary software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer.

These hardware devices provide features that function independently without subscription to the Company's software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer.

The Company generally provides a one-year warranty period on hardware devices that are delivered and installed.

3 unchanged sentences

Installations can be performed by the Company's employees, contracted out to a third-party with the Company's employees managing the engagement, or the customer can perform the installation themselves.

The Company’s professional services contracts are generally arranged on a fixed price basis and revenue is recognized over the period in which the installations are completed.

• Hosted Services Revenue

Hosted services revenue primarily consists of monthly subscription revenue generated from fees that provide customers’

access to one or more of the Company’s proprietary software applications including access controls, asset monitoring and related services.

These subscription arrangements have contractual terms ranging from one-month to ten -years and include recurring fixed plan subscription fees.

Arrangements with customers do not provide the customer with the right to take possession of the Company’s software at any time.

Hosted Services revenue primarily consists of monthly subscription revenue generated from fees that provide customers access to one or more of the Company’s software applications including access controls, asset monitoring and related services.

These subscription arrangements have contractual terms ranging from one-month to eight -years and include recurring fixed plan subscription fees.

Arrangements with customers do not provide the customer with the right to take possession of the Company’s software at any time.

Customers are granted continuous access to the services over the contractual period.

11 unchanged sentences

Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement.

Cost of hardware revenue consists primarily of direct costs of proprietary products, such as the distinct Hub Device, hardware devices, supplies purchased from third-party providers, and shipping costs together with, indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support.

Cost of hardware revenue consists primarily of direct costs of products, such as the distinct Hub Device, hardware devices, supplies purchased from third-party providers, and shipping costs, together with indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support.

• Professional Services

5 unchanged sentences

Research and Development

These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings.

The Company accounts for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life.

These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings.

The Company expenses preliminary evaluation costs as they are incurred before the product development stage, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades.

As of December 31, 2022, the Company has capitalized $ 3,145 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $ 3,066 is remaining to be amortized.

During the year ended December 31, 2022, $ 79 of amortization expense related to capitalized software was recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.

As of December 31, 2023, the Company had capitalized $ 7,064 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $ 6,163 remained to be amortized.

As of December 31, 2022, the Company had capitalized $ 3,145 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $ 3,066 remains to be amortized.

During the years ended December 31, 2023 and 2022, $ 822 and $ 79 of amortization expense related to capitalized research and development was recorded in research and development expenses on the Consolidated Statements of Operations and Comprehensive Loss, respectively.

There was no such amortization expense recorded during the year ended December 31, 2021.

Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense.

1 unchanged sentence

The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States.

The Company held $ 8,096 and $ 8,629 of assets outside the United States at December 31, 2022 , and 2021, respectively.

The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States.

The Company held $ 8,280 and $ 8,096 of assets outside the United States at December 31, 2023 , and December 31, 2022, respectively.

SMARTRENT, INC.

3 unchanged sentences

Recent Accounting Guidance Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326)”

which modifies the measurement of expected credit losses of certain financial instruments.

This update is effective for fiscal years beginning after December 15, 2022 and must be applied using a modified-retrospective approach, with early adoption permitted.

The adoption of ASU 2016-13 may have an impact on the Company’s accounting for accounts receivable, bad debt expense, and loans receivable included in the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.

The Company is evaluating the extent of such impact.

Recently Adopted Accounting Guidance

In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU updates the annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

Early adoption is also permitted.

The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740) ”

, which simplifies the accounting for income taxes, primarily by eliminating certain exceptions found in the Accounting Standards Codification, section 740.

This standard is effective for fiscal periods beginning after December 15, 2021.

The Company adopted ASU No.

2019-12 effective January 1, 2022 , which did no t have a material impact on the Company’s consolidated financial statements .

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

Upon the adoption of this update, contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination will be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers as if the acquirer had originated the contracts, which would generally result in an acquirer recognizing and measuring acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.

The Company adopted ASU 2021-08 on October 1, 2021 , prior to the acquisition of iQuue and SightPlan.

Therefore, iQuue's and SightPlan’s historical deferred revenue balances, as of their respective acquisition dates, have been included in the purchase price allocations in accordance with ASU 2021-08.

2023-09 - Income Taxes (Topics 740):

Improvements to Income Tax Disclosures.

This ASU requires the expansion of disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for annual periods after December 15, 2024.

Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures.

Recently Adopted Accounting Guidance

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments.

This update is effective for fiscal years beginning after December 15, 2022 and must be applied using a modified-retrospective approach, with early adoption permitted.

The requirement to disclose credit quality indicators by year or origination is not applicable to trade receivables due in one year or less that result from revenue transactions within the scope of ASC 606.

The Company adopted ASU 2016-13 effective January 1, 2023 using the modified-retrospective approach.

The adoption of this guidance did no t have a material impact on the Company's consolidated financial statements.

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF INSTRUMENTS

18 unchanged sentences

Earnout payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs.

The changes in the fair value of the Company's Level 3 liabilities for the years ended December 31, 2022 and 2021 are as follows.

As of December 31,

The changes in the fair value of the Company's Level 3 liabilities for the year ended December 31, 2023 and the year ended December 31, 2022 are as follows.

December 31, 2023

December 31, 2022

Balance at beginning of period

Fair value of earnout payment recorded in connection with the iQuue acquisition

Payment of earnout in connection with the iQuue acquisition

Change in fair value of earnout

1 unchanged sentence

The fair value of the earnout payment is measured on a recurring basis at each reporting date.

The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the earnout payment as of December 31, 2022 and 2021.

The Company determined there was an increase of $ 310 in the fair value of the earnout due to changes to discount and volatility rates during the year ended December 31, 2022 and therefore, recorded this adjustment in general and administrative expense on the Consolidated Statement of Operations and Comprehensive Loss.

The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the earnout payment as of December 31, 2023 and December 31, 2022.

During the year ended December 31, 2023 the Company determined there was a $ 412 increase in the fair value of the earnout, primarily due to a decreased payment term as the Company is one year closer to the payout date.

During the year ended December 31, 2022, there was a $ 310 increase in the fair value of the earnout, primarily due to a decreased payment term as the Company gets closer to the payout date.

The Company recorded these adjustments in general and administrative expense on the Consolidated Statement of Operations and Comprehensive Loss.

See Note 13 for more information regarding the earnout payment.

As of December 31,

The following table sets forth the weighted-average assumptions used to estimate the fair value of the earnout payment as of December 31, 2023 and December 31, 2022.

December 31, 2023

December 31, 2022

Discount Rate

1 unchanged sentence

Disaggregation of Revenue

In the following tables, revenue is disaggregated by primary geographical market and type of revenue.

Years Ended December 31,

In the following tables, revenue is disaggregated by primary geographical market, type of revenue, and SmartRent Solution.

For the years ended December 31,

Revenue by geography

2 unchanged sentences

Total revenue

Years Ended December 31,

For the years ended December 31,

Revenue by type

5 unchanged sentences

(in thousands, except per share amounts)

For the years ended December 31,

(dollars in thousands)

SmartRent Solutions

Professional Services

Hosted Services

Professional Services

Hosted Services

Professional Services

Hosted Services

Smart Communities Solutions

Smart Apartments

Access Control

Community WiFi

Smart Operations Solutions

Total Revenue

Remaining Performance Obligations

Advance payments received from customers are recorded as deferred revenue and are recognized upon the completion of related performance obligations over the period of service.

Advance payments for non-distinct Hub Devices are recorded as deferred revenue and recognized over its average in-service life.

Advance payments for non-distinct Hub Devices were recorded as deferred revenue and recognized over their average in-service life.

Advance payments received from customers for subscription services are recorded as deferred revenue and recognized over the term of the subscription.

A summary of the change in deferred revenue is as follows.

Years Ended December 31,

For the years ended December 31,

Deferred revenue balance as of January 1

5 unchanged sentences

Deferred revenue balance as of December 31

As of December 31, 2022, the Company expects to recognize 52 % of its total deferred revenue within the next 12 months , 21 % of its total deferred revenue between 13 and 36 months , 24 % between 37 and 60 months .

Any deferred revenue expected to be recognized beyond five years is immaterial.

Contracts may contain termination for convenience provisions that allow the Company, customer, or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a substantive termination penalty.

Included in deferred revenue as of December 31, 2022 are $ 39,932 of prepaid fees related to contracts with termination for convenience provisions which are refundable at the request of the customer.

As of December 31, 2023, the Company expects to recognize 56 % of its total deferred revenue within the next 12 months , 21 % of its total deferred revenue between 13 and 36 months , 20 % between 37 and 60 months , and the remainder is expected to be recognized beyond five years .

Contra cts may contain termination for convenience provisions that allow the Company, customer, or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a substantive termination penalty.

Included in deferred revenue as of December 31, 2023 and 2022 are $ 39,195 and $ 39,932 , respectively, of prepaid fees related to contracts with termination for convenience provisions which are refundable at the request of the customer.

Based on the Company's historical experience, customers do not typically exercise their termination for convenience rights.

Deferred cost of revenue includes all direct costs includ ed in cost of revenue that have been deferred to future periods.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

OTHER BALANCE SHEET INFORMATION

Inventory consisted of the following.

As of December 31,

December 31, 2023

December 31, 2022

Finished Goods

4 unchanged sentences

Prepaid expenses and other current assets consisted of the following.

As of December 31,

December 31, 2023

December 31, 2022

Prepaid expenses

1 unchanged sentence

Total prepaid expenses and other current assets

Prepaid expenses decreased during the year ended December 31, 2022 from the previous year, partially due to $ 2,441 of impairment related to prepaid licenses which the Company determined had no future value.

Asset impairment is recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Property and equipment, net consisted of the following.

As of December 31,

December 31, 2023

December 31, 2022

Computer hardware

7 unchanged sentences

Intangible assets, net consisted of the following.

As of December 31,

December 31, 2023

December 31, 2022

Accumulated Amortization

3 unchanged sentences

Total intangible assets, net

Amortization expense on all intangible assets was $ 3,367 for the year ended December 31, 2022 .

There was no amortization expense for the years ended December 31, 2021 or 2020, as the assets were acquired on December 31, 2021 or thereafter.

Accumulated amortization on all intangible assets was $ 3,367 as of December 31, 2022 .

There was no accumulated amortization as of December 31, 2021 .

Total future amortization for finite-lived assets is estimated as follows.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Amortization expense on all intangible assets was $ 3,874 and $ 3,367 for the years ended December 31, 2023 and 2022, respectively.

There was no amortization expense for the year ended December 31, 2021 as the assets were acquired on December 31, 2021 or thereafter.

Total future amortization for finite-lived intangible assets is estimated as follows.

Amortization Expense

Other long-term assets consisted of the following.

As of December 31,

December 31, 2023

December 31, 2022

Capitalized software costs, net

Operating lease - ROU asset, net

Capitalized software costs

Investment in non-affiliate

Restricted cash, long-term portion

1 unchanged sentence

Total other long-term assets

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Amortization expense on capitalized software costs was $ 79 for the year ended December 31, 2022 and was recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss .

No amortization expense was recorded related to capitalized software costs for the years ended December 31, 2021 or 2020.

Additionally, the Company recorded impairment of $ 2,000 related to a note receivable within other long-term assets on the Consolidated Balance Sheets.

Impairment is recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.

Amortization expense on capitalized research and development costs was $ 822 and $ 79 for the years ended December 31, 2023 and 2022, respectively, which is primarily related to capitalized software costs and was recorded in research and development expenses on the Consolidated Statements of Operations and Comprehensive Loss.

There was no such amortization expense recorded during the year ended December 31, 2021.

In December 2023, the Company invested $ 2,250 in a non-affiliated, privately held entity, under a Simple Agreement for Future Equity ("SAFE") agreement.

The non-affiliated entity provides support and consultation for consumers looking to manage and upgrade the technology within their home.

The Company’s investment in the SAFE is recorded using the cost method of accounting and included under other long-term assets on the Consolidated Balance Sheets, as it is not readily convertible into cash.

If the Company identifies factors that may be indicative of impairment the Company will review the investment for impairment.

For the year ended December 31, 2023, the Company did not identify any factors indicative of impairment.

Accrued expenses and other current liabilities consisted of the following.

As of December 31,

December 31, 2023

December 31, 2022

Accrued compensation costs

2 unchanged sentences

Total accrued expenses and other current liabilities

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Term Loan and Revolving Line of Credit Facility

8 unchanged sentences

These costs totaled $ 688 and will be amortized ratably over the five-year term of the Senior Revolving Facility.

For the years ended December 31, 2022 and 2021, the Company recorded $ 147 and $ 11 , respectively, of amortization expense in connection with these costs, which is a component of interest expense on the Consolidated Statements of Operations and Comprehensive Loss.

No such expenses were recorded during the year ended December 31, 2020.

Interest rates for draws upon the Senior Revolving Facility are determined by whether the Company elects a secured overnight financing rate loan (“SOFR Loan”) or alternate base rate loan (”ABR Loan”).

For the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 136 , $ 147 and $ 11 , respectively, of amortization expense in connection with these costs, as a component of interest expense on the Consolidated Statements of Operations and Comprehensive Loss.

For SOFR Loans, the interest rate is based upon the forward-looking term rate based on SOFR as published by the CME Group Benchmark Administration Limited (CBA) plus 0.10 %, subject to a floor of 0.00 %, plus an applicable margin.

3 unchanged sentences

The facility fee rate is based on the daily unused amount of the Senior Revolving Facility and is one fourth of one percent ( 0.25 %) per annum based on the unused facility amount.

During the year ended December 31, 2022, the facility fee totaled $ 190 .

There were no facility fees recorded during the years ended December 31, 2021 or 2020.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

During the years ended December 31, 2023 and 2022, the facility fee totaled $ 188 and $ 190 , respectively.

There were no facility fees recorded during the year ended December 31, 2021.

The Senior Revolving Facility contains certain customary affirmative and negative covenants and events of default.

Such covenants will, among other things, restrict, subject to certain exceptions, the Company’s ability to (i) engage in certain mergers or consolidations, (ii) sell, lease or transfer all or substantially all of the Company’s assets, (iii) engage in certain transactions with affiliates, (iv) make changes in the nature of the Company’s business and its subsidiaries, and (v) incur additional indebtedness that is secured on a pari passu basis with the Senior Revolving Facility.

The Senior Revolving Facility also requires the Company, on a consolidated basis with its subsidiaries, to maintain a minimum cash balance.

3 unchanged sentences

The Senior Revolving Facility is collateralized by first priority or equivalent security interests in substantially all the property, rights, and assets of the Company.

As of December 31, 2022 and 2021, there was no outstanding principal amount under the Senior Revolving Facility.

As of December 31, 2023 and December 31, 2022, there was no outstanding principal amount under the Senior Revolving Facility.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In August 2019, Legacy SmartRent entered into a loan and security agreement for a Credit Facility.

3 unchanged sentences

Proceeds from the Credit Facility were used for general corporate purposes.

In connection with the Credit Facility, the Company issued warrants (see Note 7) to purchase Legacy SmartRent’s common stock, which were subsequently exercised on September 7, 2021 pursuant to a cashless exercise and resulting in the issuance of 147,911 shares of Common Stock.

At the time of issuance, the fair value of the warrants was recorded as additional paid-in capital with a reduction to the carrying value of the Term Loan Facility.

6 unchanged sentences

The Company is authorized to issue 50,000 shares of $ 0.0001 par value preferred stock.

As of December 31, 2023, there are no preferred stock issued or outstanding.

As discussed in Note 1, the Company has retroactively adjusted the shares issued and outstanding prior to August 24, 2021 to give effect to the Exchange Ratio to determine the number of shares of Common Stock into which they were converted.

1 unchanged sentence

Upon the closing of the Business Combination, the 24,816 outstanding shares of preferred stock were converted into 121,214 shares of Common Stock of the Company based on the Exchange Ratio of approximately 4.8846 .

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The original issuance price per share of Legacy SmartRent’s authorized, issued and outstanding preferred stock follows as of August 24, 2021.

Shares Issued

September 2018

March - May 2020;

During the year ended December 31, 2021 , Legacy SmartRent issued an additional 3,358 shares of Series C preferred stock through two tranches that closed in February and March 2021.

The Series C preferred stock was issued in exchange for $ 35,000 gross cash proceeds.

Expenses in connection with the issuance of the Series C preferred stock were $ 207 , resulting in net cash proceeds of $ 34,793 .

In February 2021, Legacy SmartRent issued 750 warrants to purchase Legacy SmartRent’s common stock as consideration to certain customers.

As part of the Business Combination on August 24, 2021, these warrants converted to warrants to purchase 3,663 shares of Common Stock at $ 0.01 per share pursuant to the Exchange Ratio and remain outstanding.

The warrants are exercisable upon issuance until their expiration in February 2031 or earlier upon redemption.

The number of warrants issued to these customers is dependent on the number of installed units, as defined by the warrant agreements, purchased by the customer.

The fair value of the vested portion of the warrants has been recorded as additional paid in capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss, respectively.

For the years ended December 31, 2022 and 2021 respectively, the Company recorded $ 72 and $ 121 , as contra-revenue in the Consolidated Statement of Operations and Comprehensive Loss related to these warrants.

No contra-revenue was recorded in connection with these warrants during the year ended December 31, 2020.

In April 2020, in connection with the closing of the second tranche of the Series C preferred stock, Legacy SmartRent issued a warrant to purchase common stock to an investor who participated in the second tranche closing.

The warrant represents compensation paid for marketing services to be provided and was accounted for using stock-based compensation guidance.

The warrant vests based on the number of installed units attained over a measurement period, which expires in April 2023 .

The variability in the units earned was determined to be a performance condition and did not require classification of the warrant as a liability.

Upon vesting, the warrant holder is entitled to purchase 384 fully paid and non-assessable shares of Legacy SmartRent’s common stock at $ 0.01 per share, subject to adjustment pursuant to the warrant.

The Company measured the fair value of the warrants using the Black-Scholes-Merton model.

As part of the Business Combination on August 24, 2021, these warrants converted to warrants to purchase 1,874 shares of Common Stock pursuant the Exchange Ratio.

The remaining warrants fully vested during the three months ended March 31, 2022.

The warrants were exercised during the three months ended June 30, 2022.

As of December 31, 2023, warrants issued as consideration to certain customers to purchase 3,663 shares of Common Stock at $ 0.01 per share remain outstanding.

The warrants vest dependent on the number of installed units, as defined by the warrant agreements, purchased by the customer with certain measurement periods which expire in February 2024 .

The fair value of the vested warrants has been recorded as additional paid-in capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss, respectively.

During the years ended December 31, 2022 and 2021, the Company recorded $ 72 and $ 121 , respectively, as contra-revenue in the Consolidated Statement of Operations and Comprehensive Loss related to these warrants.

As of December 31, 202 3, the Company determined, based on the count of installed units, the number of warrants to vest would be zero and removed $ 193 from additional paid-in-capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.

As of December 31, 2023 , warrants issued to a former investor to purchase 1,874 shares of Common Stock were fully vested and exercised.

The warrants represented compensation paid for marketing services provided by the investor and was accounted for using stock-based compensation guidance.

The warrants vested based on the number of installed units attained over a measurement period.

The warrants fully vested during the three months ended March 31, 2022 and the warrants were exercised during the three months ended June 30, 2022.

The Company recorded the associated marketing expense over the service period as the units were installed with an offset to additional paid-in-capital.

During the years ended December 31, 2022 and 2021 respectively, the Company recognized $ 217 and $ 810 of sales and marketing expens e related to these warrants.

No expenses related to these warrants were recognized during the year ended December 31, 2020.

During the years ended December 31, 2022 and 2021, the Company recognized $ 217 and $ 810 of sales and marketing expens e related to these warrants.

No such marketing expense was recorded during the year ended December 31, 2023.

SMARTRENT, INC.

3 unchanged sentences

The warrants were exercisable upon issuance until their expiration in August 2029 or earlier upon redemption.

The holder of the warrants, together with any successor or permitted assignee or transferee, was entitled to purchase 33 fully paid and non-assessable shares of the Legacy SmartRent’s common stock at $ 2.30 per share, subject to adjustment pursuant to the warrant.

The fair value of the warrants has been recorded as additional paid in capital and a reduction to the carrying value of the Term Loan Facility.

6 unchanged sentences

The variability in the units earned was determined to be a performance condition and did not require classification of the warrant as a liability.

Upon vesting, the warrant holder was entitled to purchase up to 503 fully paid and non-assessable shares of Legacy SmartRent’s common stock at $ 0.01 per share, subject to adjustment pursuant to the warrant.

The Company measured the fair value of the warrant using the Black-Scholes-Merton model.

The Company measured the fair value of the warrant using the Black-Scholes model.

The Company recorded the associated marketing expense over the service period as the units were installed with an offset to additional paid-in-capital.

These warrants were exercised by the holder in March 2021, which resulted in 503 shares of common stock being issued by Legacy SmartRent.

During the years ended December 31, 2022 and 2021 , no sales and marketing expense related t o these warrants was recorded in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

During the year ended December 31, 2020, the Company recognized $ 342 of sales and marketing expense related to these warrants in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

During the years ended December 31, 2023, 2022 and 2021, no sales and marketing expense related to these warrants was recorded in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

STOCK-BASED COMPENSATION

2018 Stock Plan

Legacy SmartRent’s board of directors adopted, and its stockholders approved, the SmartRent.com, Inc.

2018 Stock Plan (the “2018 Stock Plan”), effective March 2018.

Legacy SmartRent’s board of directors adopted, and its stockholders approved, the SmartRent.com, Inc.

2018 Stock Plan (the “2018 Stock Plan”), effective March 2018.

The purpose of the 2018 Stock Plan was to advance the interests of Legacy SmartRent and its stockholders by providing an incentive to attract, retain and reward persons performing services for Legacy SmartRent and by motivating such persons to contribute to the growth and profitability of Legacy SmartRent.

The 2018 Stock Plan seeks to achieve this purpose by providing for awards in the form of options, restricted stock purchase rights or restricted stock bonuses.

Awards granted under the 2018 Stock Plan generally expire ten years from the date of grant and become vested and exercisable over a four-year period.

The 2018 Stock Plan seeks to achieve this purpose by providing awards in the form of stock options and restricted stock purchase rights.

Awards granted as stock options under the 2018 Stock Plan generally expire no later than ten years from the date of grant and become vested and exercisable over a four-year period.

All options are subject to certain provisions that may impact these vesting schedules.

As part of the Business Combination on August 24, 2021, all awards issued under the 2018 Stock Plan were assumed by the Company and converted to options to purchase Common Stock and RSUs for Common Stock using the Exchange Ratio.

Summaries of the Company’s 2018 Stock Plan activity for the year ended December 31, 2022 is presented below.

Amendment to the 2018 Stock Plan

In April 2021, the board of directors of Legacy SmartRent executed a unanimous written consent to provide an additional incentive to certain employees of Legacy SmartRent by amending the 2018 Stock Plan to allow for the issuance of RSUs and granted a total of 1,533 RSUs to certain employees which vest over four years .

The estimated fair value for each RSU issue d was approximately $ 21.55 per share and the total stock-based compensation expense to be amortized over the vesting period is $ 33,033 .

Effective upon the Business Combination in August 2021, the 2018 Stock Plan was replaced by the 2021 Plan.

The 2018 Stock Plan continues to govern the terms and conditions of the outstanding awards previously granted thereunder.

No new awards will be granted out of the 2018 Stock Plan.

2021 Equity Incentive Plan

In connection with the Business Combination, the Board approved and implemented the SmartRent, Inc.

The purpose of the 2021 Plan is to enhance the Company's ability to attract, retain and motivate persons who make, or are expected to make, important contributions to the Company by providing these individuals with equity ownership opportunities and equity-linked compensation opportunities.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The 2021 Plan authorizes the administrator of the 2021 Plan (generally, the Board or its compensation committee) to provide incentive compensation in the form of stock options, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards.

Under the 2021 Plan, the Company is authorized to issue up to 15,500 shares of common stock.

Non-employee board member RSUs generally will vest either over one year or three years .

The RSUs and options granted to employees are generally subject to a four-year vesting schedule and all vesting generally shall be subject to the recipient’s continued employment with the Company or its subsidiaries through the applicable vesting dates.

The table below summarizes the activity pursuant to the 2021 Plan, for the years ended December 31, 2023, 2022, and the shares available for future issuances as of December 31, 2023, 2022 and 2021.

Shares Available for Future Issuance

Shares available as of December 31, 2021

Stock options issued, net

RSUs issued, net

Shares available as of December 31, 2022

Stock options issued, net

RSUs issued, net

Shares available as of December 31, 2023

The table below summarizes the activity related to stock options, pursuant to the 2018 Plan and 2021 Plan, for the years ended December 31, 2023 and 2022.

Options Outstanding

8 unchanged sentences

(in thousands, except per share amounts)

Amendment to the 2018 Stock Plan

The estimated fair value for each RSU issued was approximately $ 21.55 per share and the total stock-based compensation expense to be amortized over the vesting period is $ 33,033 .

As part of the Business Combination on August 24, 2021 these RSUs were assumed by the Company and converted to 7,489 RSUs at a per share fair value of $ 4.41 pursuant to the Exchange Ratio.

The outstanding RSUs also contain a liquidity event vesting condition which was satisfied upon closing of the Business Combination.

Accordingly, the Company recognized an additional one-time stock-based compensation expense of $ 2,827 in August 2021 as a retroactive catch-up of cumulative stock-based compensation expense for such awards from their original grant dates.

During the years ended December 31, 2023, 2022 and 2021, stock-based compensation expense of $ 1,654 , $ 662 and $ 906 , respectively, was recognized in connection with the outstanding options.

During the year ended December 31, 2020, there was no stock-based compensation expense related to the options.

2021 Equity Incentive Plan

In connection with the Business Combination, the board of directors approved and implemented the SmartRent, Inc.

2021 Equity Incentive Plan.

The 2021 Plan authorizes the compensation committee to provide incentive compensation in the form of stock options, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards.

Under the 2021 Plan, the Company is authorized to issue up to 15,500 shares of common stock.

As part of the Business Combination on August 24, 2021, the RSUs granted in the 2018 Stock Plan were assumed by the Company and converted to 7,489 restricted stock units pursuant to the Exchange Ratio.

Non-employee board member RSUs will vest either over one year or three years .

The RSUs granted to employees are generally subject to a four-year vesting schedule and all vesting shall be subject to the recipient’s continued employment with the Company or its subsidiaries through the applicable vesting dates.

I n November 2021, the Company granted 72 RSUs to certain executives pursuant to the 2021 Equity Incentive Plan.

These RSUs had a fair value of $ 12.10 at the time of the grant and will vest over four years .

The table below summarizes the activity related to the RSUs.

As of December 31, 2023, there is $ 4,457 of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 3.0 years.

The table below summarizes the activity related to RSUs, pursuant to the 2018 Plan and 2021 Plan, for the years ended December 31, 2023 and 2022.

Restricted Stock Units

2 unchanged sentences

December 31, 2021

Granted - pre-merger, retroactive application of exchange ratio

Granted - post-merger

Vested or distributed

December 31, 2022

3 unchanged sentences

Compensation expense associated with the unvested RSUs is recognized on a straight-line basis over the vesting period.

During the years ended December 31, 2022 and 2021 respectively, stock-based compensation expense of $ 11,955 and $ 6,413 wa s recognized in connection with the vesting of all RSUs.

During the year ended December 31, 2020, there was no stock-based compensation expense related to the RSUs.

At December 31, 2022, $ 26,373 of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.2 years.

During the years ended December 31, 2023, 2022 and 2021 respectively, stock-based compensation expense of $ 11,273 , $ 11,955 and $ 6,413 was recognized in connection with the vesting of all RSUs.

As of December 31, 2023, there is $ 16,623 of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.1 years.

Employee Stock Purchase Plan

The Company has the ability to initially issue up to 2,000 shares of Common Stock under the ESPP, subject to annual increases effective as of January 1, 2022, and each subsequent January 1 through and including January 1, 2030, in an amount equal to the smallest of (i) 1 % of the number of shares of the Common Stock outstanding as of the immediately preceding December 31, (ii) 2,000 shares or (iii) such amount, if any, as the Board may determine.

The table below summarizes the activity related to the ESPP for the years ended December 31, 2023 and 2022.

Shares Available

December 31, 2021

Annual additions to the plan

Shares purchased

December 31, 2022

Annual additions to the plan

Shares purchased

December 31, 2023

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

Employee Stock Purchase Plan

The Company has the ability to initially issue up to 2,000 shares of Common Stock under the Employee Stock Purchase Plan ("ESPP"), subject to annual increases effective as of January 1, 2022 and each subsequent January 1 through and including January 1, 2030 in an amount equal to the smallest of (i) 1 % of the number of shares of the Common Stock outstanding as of the immediately preceding December 31, (ii) 2,000 shares or (iii) such amount, if any, as the Board may determine.

During the year ended December 31, 2022, stock-based compensation expense of $ 288 was re cognized in connection with the ESPP.

No expense related to the ESPP was recognized during the years ended December 31, 2021 or 2020.

The ESPP allows employees to purchase shares of the Company's Class A Common Stock at 85 percent of its quoted market price.

During the years ended December 31, 2023 and 2022, stock-based compensation expense of $ 235 and $ 288 , respectively, was recognized in connection with the ESPP.

No expense related to the ESPP was recognized during the year ended December 31, 2021.

Stock-Based Compensation

The fair value of stock option grants is estimated by the Company on the date of grant using the Black Scholes-Merton option pricing model with the following weighted-average assumptions for the year ended December 31, 2022 and 2020.

During the years ended December 31, 2023 and 2022, there were options granted covering 3,299 and 175 shares, respectively.

There were no options granted during the year ended December 31, 2021.

December 31, 2022

December 31, 2020

For the years ended December 31,

Risk free interest

3.55 % - 4.32 %

Dividend yield

2 unchanged sentences

The Company recorded stock-based compensation expense as follows.

Years Ended December 31,

For the years ended December 31,

Cost of revenue

Research and development

1 unchanged sentence

General and administrative

During the years ended December 31, 2022, 2021 and 2020, respectively, stock-based compensation expense of $ 811 , $ 812 and $ 707 was recognized for 844 shares granted in connection with the Company's February 2020 acquisition of a foreign supplier and are recorded as a component of general and administrative expense.

As part of the Business Combination on August 24, 2021, these 844 shares converted into 4,123 shares pursuant to the Exchange Ratio.

The Company's provision for income taxes consisted of the following.

During the years ended December 31, 2023, 2022 and 2021, stock-based compensation expense of $ 109 , $ 811 and $ 812 , respectively, was recognized for 844 shares granted in connection with the Company's February 2020 acquisition of a foreign supplier and are recorded as a component of general and administrative expense.

The Company's components of income tax (benefit) expense consisted of the following.

Years Ended December 31,

4 unchanged sentences

Deferred (benefit) provision

Provision for income taxes

Income tax (benefit) expense

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

The following table presents a reconciliation of the Company’s effective tax rates for the periods indicated.

Years Ended December 31,

29 unchanged sentences

The net valuation allowance increased by $ 9,807 from $ 61,683 to $ 71,490 in 2023.

As of December 31, 2022, the Company has gross NOLs of $ 205.8 million and $ 188.3 million for federal and state income tax return purposes, respectively.

Federal NOLs can be carried forward indefinitely, while State NOLs will expire between 2038 and 2042 .

As of December 31, 2023, the Company had U.S.

federal net operating losses of $ 3.7 million that begin to expire in 2032 and $ 200.9 million which will be carried forward indefinitely.

As of December 31, 2023, the Company had $ 193.4 million of state net operating loss carryforwards that expire on varying dates.

The Company also has $ 0.1 million of R&D credits available that expire in 2039 .

2 unchanged sentences

The Company has not performed a Section 382 analysis.

The Company recorded net deferred tax liabilities during the year ended December 31, 2022, due to the acquisition of SightPlan.

Those net deferred tax liabilities provide a source of taxable income to offset future tax deductions from deferred tax assets, and as a result, management reduced the valuation allowance by $ 5,902 during the year ended December 31, 2022 (Note 13).

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the valuation allowance release due to deferred tax liabilities from the SightPlan acquisition.

The Company recorded net deferred tax liabilities during the year ended December 31, 2022, due to the acquisition of SightPlan.

Those net deferred tax liabilities provided a source of taxable income to offset future tax deductions from deferred tax assets, and as a result, management reduced the valuation allowance by $ 5,902 during the year ended December 31, 2022 (Note 13).

The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the federal, state, and international taxes offset by a change in the valuation allowance.

We have established a full valuation allowance for net deferred U.S.

24 unchanged sentences

Unrecognized tax benefits - December 31

Unrecognized tax benefits - December 31 (tax-effected)

The total balance of unrecognized tax benefits as of December 31, 2023 would not impact the effective tax rate if recognized, as the Company is in a full valuation allowance and the unrecognized tax benefit is a deferred tax asset.

2 unchanged sentences

The Company expects the unrecognized tax benefits to reverse in full within the next 12 months.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

NET LOSS PER SHARE

The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because inclusion of the shares on an as-converted basis would have been anti-dilutive.

Years Ended December 31,

Convertible preferred stock

For the years ended December 31,

Common stock options and restricted stock units

1 unchanged sentence

Shares subject to repurchase

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

RELATED-PARTY TRANSACTIONS

During the years ended December 31, 2022, 2021 and 2020 respectively, the Company incurred marketing expense of $ 217 , $ 810 and $ 481 in connection with the vesting of warrants held by an investor.

The Company incurred consulting expense of $ 20 included in research and development expenses for the year December 31, 2022, related to services provided by companies in which one of the Company's executives have control or significant influence.

During the years ended December 31, 2021 and 2020, the Company incurred consulting expenses from these companies of $ 110 and $ 39 , respectively.

On March 22, 2022, the Company purchased all of the outstanding equity interests of SightPlan (see Note 13) .

One of the Company's directors, through a personal investment vehicle, held an unsecured convertible promissory note in SightPlan (the “SightPlan Convertible Note”).

A member of the Board serves on the board of directors of a SmartRent customer.

For the years ended December 31, 2023, 2022, and 2021, the Company earned revenue from this customer of $ 3,738 , $ 3,598 , and $ 3,831 , respectively.

As of December 31, 2023, and 2022, the Company had receivables due from this customer of $ 1,352 and $ 287 , respectively.

All business dealings with the customer were entered into in the ordinary course of business and the arrangements are on terms no more favorable than terms that would be available to unaffiliated third parties under the same or similar circumstances.

During the years ended December 31, 2022 and 2021, respectively, the Company incurred marketing expenses of $ 217 and $ 810 in connection with the vesting of warrants held by a former investor (see Note 7).

During the years ended December 31, 2022 and 2021, the Company incurred consulting expense of $ 20 and $ 110 related to services provided by companies in which one of the Company's former executives had control or significant influence.

In March 2022, the Company purchased all of the outstanding equity interests of SightPlan (see Note 13) .

One of the Company's directors, through a personal investment vehicle, held an unsecured convertible promissory note in SightPlan (the “SightPlan Convertible Note”).

As consideration for the conversion and cancellation of the SightPlan Convertible Note, the director received $ 458 at the closing of the SightPlan acquisition.

The director did not participate in any negotiations, recused himself from all Board discussions related to the SightPlan acquisition, and did not vote on the matter.

Entities affiliated with RETV Management, LLC ("RET"), which currently hold more than 3 % of the outstanding shares of the Company's Common Stock, held more than 17 % of th e fully diluted shares outstanding of SightPlan (the “RET SightPlan Holdings”).

Entities affiliated with RETV Management, LLC ("RET"), which at the time of the SightPlan acquisition held more than 5 % of the outstanding shares of the Company's Common Stock, held more than 17 % of th e fully diluted shares outstanding of SightPlan (the “RET SightPlan Holdings”).

As consideration for the RET SightPlan Holdings, entities affiliated with RET received $ 22,271 at the closing of the SightPlan acquisition.

None of the Company's executive officers or directors hold any economic interest in RET and RET does not have a designee on the Company's board of directors.

Further, RET did not assist the Company with any negotiations or participate in the Company's board discussions related to the SightPlan acquisition.

COMMITMENTS AND CONTINGENCIES

None of the Company's executive officers or directors hold any economic interest in RET and RET does not have a designee on the Board.

Further, RET did not assist the Company with any negotiations or participate in the Board discussions related to the SightPlan acquisition.

As of December 31, 2023 , RET does no t hold any outstanding shares of the Company's Common Stock.

COMMITMENTS AND CONTINGE NCIES

Lease Commitments

From time to time, the Company enters into lease agreements with third parties for purposes of obtaining office and warehouse space.

These leases are accounted for as operating leases and have remaining lease terms of 1.25 years to 4.33 years .

These leases are accounted for as operating leases and have remaining lease terms of 5 months to 3.33 years .

In addition to monthly rent payments, the Company reimburses the lessors for its share of operating expenses as defined in the leases.

1 unchanged sentence

One of these leases includes a single, five-year extension option .

The Company does not intend to exercise this extension option.

The Company has chosen not to exercise this extension option.

During the years ended December 31, 2022 and 2021, the Company obtained $ 2,776 and $ 3,007 of ROU assets, respectively, in exchange for lease obligations in connection with its operating leases.

No new leases were entered into during the year ended December 31, 2023.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

The Company’s weighted average discount rate was 3.50 % at December 31, 2022.

The Company’s weighted average discount rate was 3.35 % at December 31, 2023.

The weighted-average lease term was 2.4 years, 3.1 years and 2.8 years at December 31, 2023, 2022 and 2021, respectively.

1 unchanged sentence

During the years ended December 31, 2023, 2022 and 2021 the Company incurred rent and other related occupancy expenses of $ 1,374 , $ 1,614 and $ 683 , respectively.

Included in these amounts are $ 133 , $ 77 and $ 35 , respectively, of variable rent expense which is comprised primarily of the Company’s proportionate share of operating expenses, properly classified as lease cost due to the Company’s election to not separate lease and non-lease components.

Rent costs are recorded to cost of revenue and general and administrative expenses on the Company’s Consolidated Statement of Operations.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Included in these amounts are $ 147 , $ 133 and $ 77 , respectively, of variable rent expense which is comprised primarily of the Company’s proportionate share of operating expenses, properly classified as lease cost due to the Company’s election to not separate lease and non-lease components.

Rent costs are recorded to cost of revenue and general and administrative expenses on the Company’s Consolidated Statement of Operations.

Annual base rental commitments associated with these leases, excluding operating expense reimbursements, month-to-month lease payments and other related fees and expenses during the remaining lease terms are as follows.

6 unchanged sentences

Lease liability, noncurrent

The Company had $ 3,968 and $ 2,927 of ROU assets related to its lease liabilities at December 31, 2022 and 2021, respectively, and are included in other long-term assets on the Consolidated Balance Sheets.

The noncurrent portion of the Company’s lease liability is included in other long-term liabilities on the Consolidated Balance Sheets.

The Company had $ 2,550 and $ 3,968 of ROU assets, net of related amortization, related to its lease liabilities at December 31, 2023 and 2022, respectively, and are included in other long-term assets on the Consolidated Balance Sheets.

The noncurrent portion of the Company’s lease liability is included in other long-term liabilities on the Consolidated Balance Sheets.

The current portion of the Company's lease liability is included in other current liabilities on the Consolidated Balance Sheets.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 1,674 , $ 1,272 , and $ 603 for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company determined that it was required to pay sales and use tax in various jurisdictions.

Accordingly, the Company has recorded a liability of $ 2,291 and $ 1,156 as of December 31, 2022 and 2021, respectively.

These liabilities are included in accrued expenses and other current liabilities on the Consolidated Balance Sheets.

There are no penalties and interest included in the balance at December 31, 2022 or 2021.

Legal Matters

4 unchanged sentences

Due to significant failure rates and other defects, the Company ceased ordering product from this supplier as of December 2020.

Despite the Company’s requests, the supplier indicated they are not willing to refund the Company for the malfunctioning products previously purchased, and therefore, the Company filed a complaint against the supplier on March 22, 2022 in the Superior Court for the State of California, County of Santa Clara.

On July 26, 2022, the supplier filed a demurrer seeking to dismiss the complaint filed by the Company as well as a cross-complaint against the Company for breach of contract and other allegations.

The Company denies the allegations in the supplier’s complaint and does not believe it has any further commitment to the supplier.

On October 18, 2022, the supplier’s demurrer was overruled, in part, thus allowing the Company’s claims against the supplier to move forward.

In addition, the Company filed a demurrer to supplier’s cross-complaint on October 31, 2022.

The parties are now engaging in discovery.

On July 26, 2022, the supplier filed a cross-complaint against the Company for breach of contract and other allegations.

The Company denies the allegations in the supplier’s complaint and does not believe it has any further commitment to the supplier.

The parties are now engaging in discovery, and trial has been set for November 2024.

The Company regularly reviews outstanding legal claims, actions and enforcement matters, if any exist, to determine if accruals for expected negative outcomes of such matters are probable and can be reasonably estimated.

The Company evaluates any such outstanding matters based on management’s best judgment after consultation with counsel.

There is no assurance that the Company's accruals for loss contingencies will not need to be adjusted in the future.

The amount of such adjustment could significantly exceed the accruals the Company has recorded.

The Company had no such accruals as of December 31, 2022, 2021 or 2020.

The amount of such adjustment could significantly exceed the accruals the Company has reco rded.

The Company had no such accruals as of December 31, 2023 or December 31, 2022 .

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

BUSINESS ACQUISITIONS

SightPlan Acquisition

On March 22, 2022, the Company purchased all of the outstanding equity interests of SightPlan for approximately $ 135,000 .

In March 2022, the Company purchased all of the outstanding equity interests of SightPlan for approximately $ 135,000 .

SightPlan was founded in 2013 and is headquartered in Orlando, Florida.

6 unchanged sentences

As part of the business combination, the Company agreed to pay up to approximately $ 5,760 to the former employees of SightPlan on the one-year anniversary of the acquisition date, subject to continued employment at the Company.

As this payment is contingent upon the continuous service of the employees, it is accounted for as post-combination expense and will be recognized ratably over the service period of one year .

During the year ended December 31, 2022, the Company recorded $ 4,495 t o general and administrative expenses on the Statements of Operations and Comprehensive Loss and to other current liabilities on the Consolidated Balance Sheets in connection with this contingent consideration.

The Company deposited $ 5,760 cash in escrow on the acquisition date for this obligation.

The escrow deposit is classified as restricted cash, current portion.

The fair value and allocation of the business combination are preliminary, are based upon management’s best estimates and assumptions, and are subject to future revision.

The Company will finalize these amounts no later than one year from the acquisition date once it obtains the information necessary to complete the measurement process.

Any changes resulting from facts and circumstances that existed as of the acquisition date may result in adjustments to the preliminary amounts disclosed above which may impact the reported results in the period those adjustments are identified.

As this payment was contingent upon the continuous service of the employees, it was accounted for as post-combination expense and was recognized ratably over the service period of one year .

During the year ended December 31, 2023, the Company distributed $ 5,976 in connection with this contingent consideration, including $ 216 for payroll taxes and retirement benefits.

The total purchase consideration and the fair values of the acquired assets and liabilities at the acquisition date were as follows.

15 unchanged sentences

Total identifiable assets

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Changes resulting from facts and circumstances that existed as of the acquisition date resulted in measurement period adjustments to the estimated fair values of accounts receivable, net, intangible assets, other assets, deferred tax liability, and goodwill during the year ended December 31, 2022.

2 unchanged sentences

Changes to accounts receivable, net and other assets were immaterial.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Cash paid at acquisition

3 unchanged sentences

Payment of acquisition consideration, net of cash acquired

The Company recognized approximately $ 4,495 of compensation expense related to the SightPlan acquisition during the year ended December 31, 2022.

The Company recognized $ 771 of other non-recurring acquisition related costs that were expensed during the year ended December 31, 2022.

Compensation and other non-recurring acquisition related costs and are included in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

The Company recognized approximately $ 1,480 and $ 4,495 of compensation expense related to contingent consideration in connection with the SightPlan acquisition during the years ended December 31, 2023 and 2022, respectively.

The Company recognized $ 196 and $ 771 of other non-recurring acquisition related costs that were expensed during the years ended December 31, 2023 and 2022, respectively.

Compensation and other non-recurring acquisition related costs are included in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

The fair value of the assets acquired includes accounts receivable of $ 1,255 .

The gross amount due under contracts for accounts receivable is $ 1,284 , substantially all of which is expected to be collected.

The gross amount due under contracts for accounts receivable was $ 1,284 as of March 22, 2022.

The Company did not acquire any other class of receivable as a result of the acquisition of SightPlan.

The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on the fair market value of such assets and liabilities at the date of acquisition.

Intangible assets associated with the acquisition totaled $ 30,900 and primarily related to customer relationships and developed technology.

Intangible assets associated with the acquisition totaled $ 30,900 and were primarily related to customer relationships and developed technology.

The excess purchase price over the fair value of net assets acquired was recognized as goodwill and totaled $ 104,601 .

The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is not deductible for income tax purposes.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is not deductible for income tax purposes.

The Company recorded intangible assets at their fair value, which consisted of the following.

11 unchanged sentences

As such, all aforementioned intangible assets were valued using Level 3 inputs.

During the year ended December 31, 2022, the Company recorded amortization expense of $ 2,806 related to intangible assets.

There was no such amortization expense recorded in the years end ed December 31, 2021 or 2020 as the acquisition occurred on March 22, 2022.

During the years ended December 31, 2023 and 2022, the Company recorded amortization expense of $ 3,622 and $ 2,806 , respectively, related to intangible assets.

There was no such amortization expense recorded in the year ended December 31, 2021 as the acquisition occurred on March 22, 2022.

These intangible assets are deductible over 15 years for income tax purposes.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Pro Forma Operating Results

The Company’s Consolidated Balance Sheet as of December 31, 2022, and other financial statements presented herein for the year ended December 31, 2022 include the results of operations of SightPlan since the acquisition date.

The Company’s Consolidated Balance Sheet as of December 31, 2023 and December 2022, and other financial statements presented herein for the three and years ended December 31, 2023 and 2022 include the results of operations of SightPlan since the acquisition date.

The following unaudited pro forma information presents consolidated financial information as if the SightPlan acquisition had occurred on January 1, 2022.

1 unchanged sentence

Pro forma operating results were prepared for comparative purposes only and are not indicative of what would have occurred had the acquisition been made as of January 1, 2022 or of the results that may occur in the future.

For the years ended

December 31, 2022

December 31, 2021

December 31, 2020

For the years ended December 31,

iQuue Acquisition

On December 31, 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC.

In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC.

iQuue was founded in 2015 and is headquartered in Altamonte Springs, Florida.

2 unchanged sentences

iQuue offerings include access control, door code management, managed WiFi, and professional installation.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company accounted for the iQuue acquisition as a business combination.

1 unchanged sentence

On the acquisition date, the Company paid cash of $ 6,192 , and placed $ 1,021 in escrow accounts.

As of December 31, 2022, the current escrow deposits are classified as “Restricted cash, current portion”

in the Consolidated Balance Sheets.

As of December 31, 2023, the current escrow deposits are classified as “Restricted cash, current portion” in the Consolidated Balance Sheets.

The Company determines current or non-current classification based on the expected duration of the restriction.

4 unchanged sentences

The fair value of the earnout liability falls within Level 3 of the fair value hierarchy as a result of the unobservable inputs used for the measurement.

The Company determined there was an increase of $ 310 in the fair value of the earnout during the year ended December 31, 2022 and therefore, recorded the adjustment in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

During the years ended December 31, 2023 and 2022, the Company determined there was an increase of $ 412 and $ 310 , respectively, in the fair value of the earnout and therefore, recorded the adjustment in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

The fair value of the earnout as of December 31, 2023 and 2022 was $ 4,250 and $ 5,540 , respectively.

As part of the business combination, the Company agreed to pay up to approximately $ 742 to the former shareholders of iQuue over the next three years , subject to the shareholders’

continued employment at the Company.

As part of the business combination, the Company agreed to pay up to approximately $ 742 to the former shareholders of iQuue over the next three years , subject to the shareholders’ continued employment at the Company.

As this payment is contingent upon the continuous service of the key employees, it is accounted for as post-combination compensation expense and is being recognized ratably over the service period of three years .

The Company deposited $ 742 cash in escrow on the acquisition date for this obligation.

The current portion of the escrow deposit is classified as “Restricted cash, current portion”

and the non-current portion is classified as a component of "Other long-term assets" on the Consolidated Balance Sheets.

During the year ended December 31, 2022, the Company recognized $ 247 of compensation expense in connection with this bonus.

The current portion of the escrow deposit is classified as “Restricted cash, current portion” and the non-current portion is classified as a component of "Other long-term assets" on the Consolidated Balance Sheets.

During the year ended December 31, 2023 and 2022, the Company recognized $ 247 and $ 247 , respectively, of compensation expense in connection with this bonus.

No such compensation expense was recorded during the year ended December 31, 2021.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The total purchase consideration and the fair values of the acquired assets and liabilities at the acquisition date were as follows.

15 unchanged sentences

Total identifiable assets

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company recognized approximately $ 547 of compensation expense related to the iQuue acquisition during the year ended December 31, 2022 .

The Company recognized approximately $ 576 and $ 547 of compensation expense related to the iQuue acquisition during the years ended December 31, 2023 and 2022, respectively.

No such compensation expense was recorded during the year ended December 31, 2021.

The Company recognized $ 43 and $ 116 of other non-recurring acquisition related costs that were expensed during the years ended December 31, 2023 and 2022, respectively.

No such non-recurring cost was recorded during the year ended December 31, 2021.

Compensation and other non-recurring acquisition related costs are included in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

5 unchanged sentences

The excess purchase price over the fair value of net assets acquired was recognized as goodwill and totaled $ 8,504 .

The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is deductible over 15 years for income tax purposes.

The Company recorded intangible assets at their fair value, which consisted of the following.

4 unchanged sentences

Total intangible assets

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The valuation of intangible assets was determined using an income approach methodology.

5 unchanged sentences

As such, all aforementioned intangible assets were valued using Level 3 inputs.

During the year ended December 31, 2022, the Company recorded amortization expense of $ 562 related to intangible assets.

During the years ended December 31, 2023 and 2022, the Company recorded amortization expense of $ 253 and $ 562 , respectively, related to intangible assets.

There was no such amortization expense recorded for the year ended December 31, 2021 as the acquisition occurred on December 31, 2021.

These intangible assets are deductible over 15 years for income tax purposes.

The Company’s Consolidated Balance Sheets as of December 31, 2022 and 2021, and other financial statements presented herein for the year ended December 31, 2022 include the results of operations of iQuue since the acquisition date.

Pro forma disclosures have not been provided since the acquisition did not have, and is not expected to have, a material impact on the Company’s results of operations.

Zenith Acquisition

In February 2020, Legacy SmartRent purchased all of the outstanding equity interests of Zenith which had previously been a vendor for Legacy SmartRent.

The Company accounted for the Zenith acquisition as a business combination.

The purchase price consisted of $ 6,909 cash, $ 974 promissory note consideration, $ 813 common stock consideration, and $ 1,158 related to settlement of preexisting relationships for a total purchase price of $ 9,854 .

The preexisting relationship related to prepaid inventory owned by the Company, with a corresponding deferred revenue balance recorded by Zenith.

This preexisting relationship was settled on the acquisition date as an adjustment to the purchase price.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of $ 4,162 .

Additionally, Legacy SmartRent issued 844 shares of common stock that vest annually over three years and $ 3,353 of promissory notes to certain employees, contingent upon continued employment.

These costs are recognized as post-combination compensation expenses as a component of general and administrative expense on the Company’s Consolidated Statement of Operations and Comprehensive Loss.

In connection with the common stock issued with this transaction, the Company recorded $ 811 , $ 812 and $ 707 of stock-based compensation expense during the years ended December 31, 2022, 2021 and 2020, respectively.

As part of the Business Combination of August 24, 2021 these 844 shares converted to 4,123 shares pursuant to the Exchange Ratio.

The total purchase consideration and the fair values and liabilities at the acquisition date were as follows.

Consideration

Cash Consideration

Promissory Note Consideration

Stock Consideration

Settlement of Preexisting Relationships

Fair Value of Total Consideration Transferred

Recognized amounts of identifiable assets acquired and liabilities assumed

Accounts receivable

Prepaid expenses and other current assets

Property and equipment, net

Total identifiable assets acquired

Accounts payable

Accrued expenses and other current liabilities

Total liabilities assumed

Total identifiable net assets

The Company recognized approximately $ 21 of acquisition related costs that were expensed during the year ended December 31, 2020 and are included in general and administrative expenses.

None of these costs were expensed during the years ended December 31, 2022 or 2021.

The excess of the purchase price over the tangible and intangible assets acquired has been recorded as Goodwill.

The Company determined the intangible assets held by Zenith were not material to the acquisition and did not include them in the acquisition.

The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is not deductible for income tax purposes.

The Company’s consolidated balance sheet for the year ended December 31, 2022, and other financial statements presented herein for the years ended December 31, 2022, 2021 and 2020 include the results of operations of Zenith since the acquisition date.

Revenue related to Zenith and included in amounts presented on the Company’s Consolidated Statement of Operations and Comprehensive Loss are $ 2,026 , $ 2,565 and $ 2,259 for the years ended December 31, 2022, 2021 and 2020, respectively.

Net income related to Zenith and included in amounts presented on the Company’s Consolidated Statement of Operations and Comprehensive Loss are $ 218 , $ 819 and $ 420 for the years ended December 31, 2022, 2021 and 2020.

Pro forma disclosures have not been provided since the acquisition did not have, and is not expected to have, a material impact on the Company’s results of operations.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company’s Consolidated Balance Sheets as of December 31, 2023 and 2022, and other financial statements presented herein for the year ended December 31, 2023 and 2022 include the results of operations of iQuue since the acquisition date.

Pro forma disclosures have not been provided since the acquisition did not have, and is not expected to have, a material impact on the Company’s results of operations.

SUBSEQUENT EVENTS

In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after December 31, 2023 and through March 5, 2024, the date these financial statements were issued, for potential recognition or disclosure and has determined that there are no additional items to disclose except as disclosed below.

In January 2023, issuable shares of the Company’s Class A Common Stock under the ESPP increased by 1,985 shares.

In January 2023, the Board of Directors approved 2,157 RSUs and 3,070 Option awards to certain employees under the 2021 Equity Incentive Stock Plan.

In February 2023, employees enrolled in the Company’s ESPP purchased 176 shares of the Company’s Class A Common Stock.

In January 2024, issuable shares of the Company’s Class A Common Stock under the ESPP increased by 2,000 shares.

In January 2024, the Board of Directors approved 1,653 RSUs and 2,527 Option awards to certain employees under the 2021 Incentive Stock Plan.

In January 2024, the Company made an earnout payment of $ 1,530 in connection with the iQuue acquisition.

In January and February 2024, 542 shares of the Company's Class A Common Stock were issued to certain employees related to vested RSUs, exercised options, and ESPP purchases.

In March 2024, the board of directors of the Company authorized the repurchase of up to $ 50,000 of the Company’s Class A common stock.

Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.

The repurchase program does not obligate the Company to acquire any particular amount of its Class A common stock and may be suspended at any time at the Company’s discretion.

The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data