Quarterly report pursuant to Section 13 or 15(d)

Nature of the Business and Basis of Presentation

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Nature of the Business and Basis of Presentation
 6 Months Ended
Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of the Business and Basis of Presentation Nature of the Business and Basis of Presentation
Evolv Technologies Holdings, Inc. (the “Company”), a Delaware corporation, is a leader in AI-based weapons detection for security screening. The Company’s mission is to make the world a safer and more enjoyable place to live, work, learn, and play. The Company is democratizing security by making it seamless for gathering spaces to better address the chronic epidemic of escalating gun violence, mass shootings and terrorist attacks in a cost-effective manner while improving safety and the visitor experience. The Company is headquartered in Waltham, Massachusetts.

As used in this Quarterly Report on Form 10-Q/A, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Evolv” refer to the consolidated operations of Evolv Technologies Holdings, Inc. and its wholly-owned subsidiaries, which include Evolv Technologies, Inc., Evolv Technologies UK Ltd. and Give Evolv LLC.

Basis of presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements as of June 30, 2023, and for the three and six months ended June 30, 2023 and 2022 have been prepared on the same basis as the audited annual consolidated financial statements as of December 31, 2022 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2023 and the results of its operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period.
Merger
On July 16, 2021, we consummated the business combination (the “Merger”), contemplated by the Agreement and Plan of Merger, dated March 5, 2021, with NHIC Sub Inc. (“Merger Sub”), a wholly-owned subsidiary of NewHold Investment Corp. (“NHIC”), a special purpose acquisition company, which is our legal predecessor, and Evolv Technologies, Inc. dba Evolv Technology, Inc. (“Legacy Evolv”), as amended by that certain First Amendment to Agreement and Plan of Merger dated June 5, 2021 by and among NHIC, Merger Sub and Legacy Evolv (the “Amendment” and as amended, the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub was merged with and into Legacy Evolv, with Legacy Evolv surviving the Merger as a wholly-owned subsidiary of NHIC. Upon the closing of the Merger, NHIC changed its name to Evolv Technologies Holdings, Inc. Evolv Technologies Holdings, Inc. became the successor entity to NHIC pursuant to Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Restatement
The Company is restating its previously issued condensed consolidated financial statements and related notes as of and for the three and six months ended June 30, 2023. The Company identified an error related to classification of certain marketable securities on the condensed consolidated balance sheet as of June 30, 2023, which also resulted in an error in the condensed consolidated statement of cash flows for the six months ended June 30, 2023.
During the three months ended June 30, 2023, as part of its overall cash management strategy, the Company purchased zero coupon U.S. treasury bills with staggered maturities of between two months and six months. The Company classified all outstanding treasury bills as cash equivalents on its condensed consolidated balance sheet as of June 30, 2023. However, the treasury bills with maturities exceeding three months did not meet the definition of cash equivalents per Accounting Standards Codification 230 - Statement of Cash Flows, and should have been presented separately within current assets. The purchases of treasury bills with maturities greater than three months should have been presented as a cash outflow from investing activities within the condensed consolidated statement of cash flows for the six months ended June 30, 2023.
A summary of the impact of the error on the condensed consolidated balance sheet as of June 30, 2023 is as follows (amounts in thousands):
As Reported Adjustment As Restated
Current assets:
Cash and cash equivalents $ 155,537  $ (29,647) $ 125,890 
Restricted cash 1,000  —  1,000 
Marketable securities —  29,647  29,647 
Accounts receivable, net 32,393  —  32,393 
Inventory 5,032  —  5,032 
Current portion of contract assets 4,732  —  4,732 
Current portion of commission asset 3,648  —  3,648 
Prepaid expenses and other current assets 13,808  —  13,808 
Total current assets 216,150  —  216,150 
Total assets $ 307,968  $ —  $ 307,968 
Total liabilities $ 163,810  $ —  $ 163,810 
Stockholders’ equity $ 144,158  $ —  $ 144,158 
Total liabilities and stockholders’ equity $ 307,968  $ —  $ 307,968 
A summary of the impact of the error on the condensed consolidated statement of cash flows for the six months ended June 30, 2023 is as follows (amounts in thousands):

As Reported Adjustment As Restated
Cash flows from operating activities:
Net loss $ (95,363) $ —  $ (95,363)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 4,087  —  4,087 
Write-off of inventory and change in inventory reserve 337  —  337 
Loss from impairment of property and equipment 294  —  294 
Stock-based compensation 11,732  —  11,732 
Non-cash interest expense 22  —  22 
Accretion of discount on marketable securities —  (242) (242)
Non-cash lease expense 432  —  432 
Change in allowance for expected credit losses 173  —  173 
Loss on extinguishment of debt 626  —  626 
Change in fair value of earn-out liability 31,431  —  31,431 
Change in fair value of contingently issuable common stock 5,837  —  5,837 
Change in fair value of public warrant liability 13,501  —  13,501 
Changes in operating assets and liabilities —  — 
Accounts receivable (646) —  (646)
Inventory 5,080  —  5,080 
Commission assets (1,258) —  (1,258)
Contract assets (1,184) —  (1,184)
Other assets (43) —  (43)
Prepaid expenses and other current assets 580  —  580 
Accounts payable (7,409) —  (7,409)
Deferred revenue 24,113  —  24,113 
Accrued expenses and other current liabilities (342) —  (342)
Operating lease liability (513) —  (513)
Net cash used in operating activities (8,513) (242) (8,755)
Cash flows from investing activities:
Development of internal-use software (1,599) —  (1,599)
Purchases of property and equipment (33,173) —  (33,173)
Proceeds from sale of property and equipment 60  —  60 
Purchases of marketable securities —  (29,405) (29,405)
Net cash used in investing activities (34,712) (29,405) (64,117)
Net cash provided by (used in) financing activities $ (29,988) $ —  $ (29,988)
Effect of exchange rate changes on cash and cash equivalents $ (33) $ —  $ (33)
Net increase (decrease) in cash, cash equivalents and restricted cash $ (73,246) $ (29,647) $ (102,893)
Cash, cash equivalents and restricted cash at end of period $ 156,812  $ (29,647) $ 127,165 

Additionally, Note 4. Fair Value Measurements (As Restated), has been restated to present the treasury bills separately as a financial asset measured using Level 2 inputs under the fair value hierarchy. The previously issued condensed consolidated financial statements incorrectly included the treasury bills in the caption "Money market funds," which are measured using Level 1 inputs under the fair value hierarchy. The restated financial statements also include certain required disclosures related to these investments in debt securities. These are included in Note 3. Marketable Securities (As Restated).