hyre20220930

hyre20220930_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-38561

HyreCar Inc.

(Exact name of registrant as specified in its charter)

Delaware		47-2480487
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

915 Wilshire Blvd, Suite 1950 Los Angeles, CA		90017
(Address of principal executive offices)		(Zip Code)

(888) 688-6769

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.00001 per share		HYRE		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 14, 2022, the registrant had 30,414,249 shares of common stock, $0.00001 par value per share, issued and outstanding.

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	Table of Contents

		Page No

Cautionary Note Regarding Forward-Looking Statements and Industry Data		ii
PART I - FINANCIAL INFORMATION		1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021.	1
	Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2022 and 2021	2
	Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine months ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2022 and 2021	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.	Controls and Procedures	21

PART II - OTHER INFORMATION		22
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	23
Signatures		24

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

●

the impacts of COVID-19, or other future pandemics on our business, results of operations, financial position and cash flows;

●

our ability to effectively manage our growth and maintain and improve our corporate culture;

●

the potential benefits of and our ability to maintain, our relationships with ridesharing companies, and to establish or maintain future collaborations or strategic relationships, and from time to time to obtain additional funding;

●

our marketing capabilities and strategy;

●

our ability to maintain a cost-effective insurance program;

●

our industry being in the early stages of growth;

●

our history of operating losses, and the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

●

our investments in new and enhanced products and offerings, and the effect of these investments on our results of operations;

●

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

●

our competitive position, and developments and projections relating to our competitors and our industry;

●

our ability to manage risks related to technology systems and security breaches;

●

the outcome of pending, threatened or future litigation;

●

our ability to comply with existing, modified, or new laws and regulations applying to our business;

●

those factors discussed in “Part I, Item IA. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” in our Annual Report on Form 10-K, and elsewhere in this Quarterly Report on Form 10-Q. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in our Annual Report on Form 10-K for the year ended December 31, 2021 or this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the "SEC") could materially and adversely affect our business, prospects, financial condition and results of operations. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

References to HyreCar

Throughout this Quarterly Report on Form 10-Q, the “Company,” “HyreCar,” “we,” “us,” and “our” refers to HyreCar Inc. and “our Board of Directors” refers to the Board of Directors of HyreCar Inc.

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

HYRECAR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	*September 30,*			*December 31,*
	*2022*			*2021*
Assets
Current assets:
Cash and cash equivalents	$	9,109,046		$	11,499,136
Restricted cash		3,018,632			3,248,271
Accounts receivable, net of allowance		172,478			162,586
Insurance and security deposits		46,564			95,000
Other current assets		1,295,652			1,061,520
Total current assets		13,642,372			16,066,513

Property and equipment, net		65,184			5,265
Intangible assets, net		517,406			372,592
Right of use assets		797,939			—
Other long-term assets		2,532,423			—
Total assets	$	17,555,324		$	16,444,370

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	7,724,174		$	5,567,233
Accrued liabilities		2,801,386			2,877,438
Insurance reserve		3,527,923			2,330,190
Right of use liabilities (current)		251,099			—
Deferred revenue		50,653			52,192
Notes payable - related party		500,000			—
Total current liabilities		14,855,235			10,827,053

Right of use liabilities		570,757			—
Total liabilities		15,425,992			10,827,053

Stockholders' equity:
Preferred stock, 13,500,000 shares authorized, par value $0.00001, 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Series A Preferred Stock, 1,500,000 shares authorized, par value $0.00001, 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Common stock, 50,000,000 shares authorized, par value $0.00001, 30,291,747 and 21,609,409 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		301			216
Additional paid-in capital		87,413,821			75,806,853
Accumulated deficit		(85,284,790	)		(70,189,752	)
Total stockholders' equity		2,129,332			5,617,317
Total liabilities and stockholders' equity	$	17,555,324		$	16,444,370

See accompanying notes to the unaudited condensed consolidated financial statements

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HYRECAR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	*Three Months Ended*			*Three Months Ended*			*Nine Months Ended*			*Nine Months Ended*
	*September 30,*			*September 30,*			*September 30,*			*September 30,*
	*2022*			*2021*			*2022*			*2021*

Net Revenue	$	10,271,719		$	9,651,340		$	30,330,491		$	26,157,606

Cost of revenue		6,424,035			6,691,358			19,823,377			19,660,672

Gross profit		3,847,684			2,959,982			10,507,114			6,496,934

Operating Expenses:
General and administrative		5,842,842			4,705,542			15,275,017			16,601,006
Sales and marketing		2,196,588			2,451,645			6,267,795			8,033,920
Research and development		1,207,156			1,953,582			4,078,727			4,553,436
Total operating expenses		9,246,586			9,110,769			25,621,539			29,188,362

Operating loss		(5,398,902	)		(6,150,787	)		(15,114,425	)		(22,691,428	)

Other (income) expense
Interest expense		—			1,755			288			7,554
Other income		(10,354	)		(3,895	)		(20,475	)		(9,440	)
Total other (income) expense		(10,354	)		(2,140	)		(20,187	)		(1,886	)

Loss before provision for income taxes		(5,388,548	)		(6,148,647	)		(15,094,238	)		(22,689,542	)

Provision for income taxes		—			—			800			800

Net loss	$	(5,388,548	)	$	(6,148,647	)	$	(15,095,038	)	$	(22,690,342	)

Weighted average net loss per share - basic and diluted	$	(0.23	)	$	(0.29	)	$	(0.68	)	$	(1.12	)
Weighted average shares outstanding - basic and diluted		23,583,303			21,215,836			22,361,568			20,331,222

See accompanying notes to the unaudited condensed consolidated financial statements

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HYRECAR INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

Three Months Ended September 30, 2022 and September 30, 2021


									*Additional*						*Total*
	*Preferred Stock*				*Common Stock*				*Paid-in*			*Accumulated*			*Stockholders'*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*			*Deficit*			*Equity (Deficit)*
June 30, 2022		—	$	—		21,843,648	$	218	$	77,903,739		$	(79,896,242	)	$	(1,992,285	)
Restricted stock unit compensation		—		—		—		—		1,241,030			—			1,241,030
Stock options exercised		—		—		51,686		1		36,697			—			36,698
Shares issued for vested restricted stock units		—		—		710,369		7		(9	)		—			(2	)
Investment in HyreDrive in exchange of warrants issued		—		—		—		—		1,847,089			—			1,847,089
Shares Issued in exchange of Equity Line of Credit						539,633		5		685,329						685,334
Common stock issued for cash		—		—		7,116,411		71		6,571,161			—			6,571,231
Offering costs		—		—		—		—		(871,215	)		—			(871,215	)
Shares issued for services		—		—		30,000		—		—			—			—
Net loss		—		—		—		—		—			(5,388,548	)		(5,388,548	)
September 30, 2022		—	$	—		30,291,747	$	301	$	87,413,821		$	(85,284,790	)	$	2,129,332

June 30, 2021		—	$	—		20,961,319	$	209	$	73,467,587		$	(60,777,730	)	$	12,690,066
Stock option compensation		—		—		—		—		632			—			632
Restricted stock unit compensation		—		—		—		—		1,027,767			—			1,027,767
Stock options exercised		—		—		17,500		—		44,625			—			44,625
Shares issued for vested restricted stock units		—		—		420,810		5		(5	)		—			—
Warrants exercised - cashless		—		—		48,803		—		60,000			—			60,000
Net loss		—		—		—		—		—			(6,148,647	)		(6,148,647	)
September 30, 2021		—	$	—		21,448,432	$	214	$	74,600,606		$	(66,926,377	)	$	7,674,443

Nine Months Ended September 30, 2022 and September 30, 2021


									Additional						Total
	Preferred Stock				Common Stock				Paid-in			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity (Deficit)
December 31, 2021		—	$	—		21,609,409	$	216	$	75,806,853		$	(70,189,752	)	$	5,617,317
Restricted stock unit compensation		—		—		—		—		3,337,918			—			3,337,918
Stock options exercised		—		—		51,686		1		36,697			—			36,698
Shares issued for vested restricted stock units		—		—		944,608		8		(11	)		—			(3	)
Investment in HyreDrive in exchange of warrants issued		—		—		—		—		1,847,089			—			1,847,089
Shares Issued in exchange of Equity Line of Credit						539,633		5		685,329			—			685,334
Common stock issued for cash		—		—		7,116,411		71		6,571,161			—			6,571,232
Offering costs		—		—		—		—		(871,215	)		—			(871,215	)
Shares issued for services		—		—		30,000		—		—			—			—
Net loss		—		—		—		—		—			(15,095,038	)		(15,095,038	)
September 30, 2022		—	$	—		30,291,747	$	301	$	87,413,821		$	(85,284,790	)	$	2,129,332

December 31, 2020		—	$	—		17,741,713	$	177	$	39,725,445		$	(44,236,035	)	$	(4,510,413	)
Stock option compensation		—		—		—		—		11,402			—			11,402
Restricted stock unit compensation		—		—		—		—		6,728,560			—			6,728,560
Stock options exercised		—		—		137,872		1		159,520			—			159,521
Shares issued for vested restricted stock units		—		—		856,655		9		(9	)		—			—
Warrants exercised for cash		—		—		48,803		1		124,539			—			124,540
Warrants exercised - cashless		—		—		121,111		1		(1	)		—			—
Common stock issued for cash		—		—		2,530,000		25		29,727,475			—			29,727,500
Offering costs		—		—		—		—		(2,126,305	)		—			(2,126,305	)
Shares issued for services		—		—		12,278		—		249,980			—			249,980
Net loss		—		—		—		—		—			(22,690,342	)		(22,690,342	)
September 30, 2021		—	$	—		21,448,432	$	214	$	74,600,606		$	(66,926,377	)	$	7,674,443

See accompanying notes to the unaudited condensed consolidated financial statements

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HYRECAR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	*Nine Months Ended*			*Nine Months Ended*
	*September 30,*			*September 30,*
	*2022*			*2021*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(15,095,038	)	$	(22,690,342	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		92,898			57,808
Stock-based compensation		3,337,918			6,989,942
Provision for losses on accounts receivable		—			50,079
Changes in operating assets and liabilities:
Accounts receivable		(9,892	)		(96,225	)
Insurance and security deposits		48,436			(1,462,171	)
Other current assets		511,005			(477,574	)
Accounts payable		1,411,801			1,420,333
Accrued liabilities		(76,052	)		1,918,592
Insurance reserve		1,197,733			(149,430	)
Deferred revenue		(1,539	)		(33,240	)
Right of use assets and liabilities, net		(252	)		—
Net cash used in operating activities		(8,582,982	)		(14,472,228	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of intangible assets		(273,462	)		—
Net cash used in investing activities		(273,462	)		—

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		6,571,232			29,727,500
Offering costs associated with sale of common stock		(871,215	)		(2,126,305	)
Proceeds from exercise of stock options		36,698			159,521
Proceeds from exercise of warrants		—			124,540
Notes payable - related party		500,000			—
Net cash provided by financing activities		6,236,715			27,885,256

Increase (decrease) in cash, cash equivalents and restricted cash		(2,619,729	)		13,413,028
Cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash - beginning of period		14,747,407			4,923,515
Cash, cash equivalents and restricted cash - end of period	$	12,127,678		$	18,336,543

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents	$	9,109,046		$	16,743,483
Restricted cash		3,018,632			1,593,060
Total cash, and cash equivalents and restricted cash to the condensed consolidated balance sheets	$	12,127,678		$	18,336,543

Supplemental disclosures of cash flow information:
Cash paid for:
Interest expense	$	—		$	—
Income taxes	$	800		$	800
Non-cash investing and financing activities:
Shares Issued in exchange of Equity Line of Credit	$	685,334		$	—
Investment in HyreDrive in exchange of warrants issued	$	1,847,089		$	—
Right of use asset and liability	$	997,109		$	—

See accompanying notes to the unaudited condensed consolidated financial statements

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HYRECAR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Organization and Description of Business

HyreCar Inc. (which may be referred to herein as “HyreCar,” the “Company,” “we,” “us” or “our”) was incorporated on November 24, 2014 (“Inception”) in the State of Delaware. The Company's headquarter is located in Los Angeles, California. The Company operates a web-based marketplace that allows car and fleet owners to rent their cars to Uber, Lyft and other gig economy service drivers safely, securely and reliably. The condensed consolidated financial statements of HyreCar Inc. are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Automobile Liability Insurance Program, Uber Agreement, At-The-Market Offering and Equity Line of Credit

On May 20, 2021, the Company renewed its Automobile Liability Insurance Program with Apollo 1969 of Lloyd’s until 2023 at our current rates, providing stable predictable insurance pricing for the next two years. Further, the Company has completed integration with Sedgwick, a leading insurance claim processing partner for many companies in rideshare transportation and food delivery.

On July 26, 2021, the Company entered into a certain Vehicle Rental Strategic Relationship Agreement with Uber Technologies, Inc. to become an official vehicle solution provider on the Uber platform for both electric vehicles and internal combustion engine vehicles. We are currently piloting the vehicle solutions program with Uber and refining the terms of the program as we gather additional performance data.

On November 9, 2021, the Company entered into an Equity Offering Sales Agreement (the “ATM Agreement”), with D.A. Davidson & Co. and Northland Securities, Inc. (collectively, the “Agents"), pursuant to which each Agent acts as the Company’s sales agents with respect to the offer and sale from time to time of shares of the Company’s common stock, par value $0.00001 (the “Common Stock”), having an aggregate gross sales price of up to $50.0 million in “at-the market-offerings”, as defined in Rule 415(a)(4) under the Securities Act, and pursuant to a registration statement on Form S-3 (the “Form S-3”) that was previously declared effective by the SEC. Under the Form S-3 based upon our public float at the time we filed our Annual Report on Form 10-K, our public float fell below certain minimum levels and as such, we are subject to, among other requirements applicable to our continuing eligibility to offer and sell securities, the “baby shelf” registration requirements which limits the amounts available under Form S-3, including amounts available under the ATM Agreement. On August 15, 2022, the Company amended the ATM Agreement and filed Supplement No. 1 to the Prospectus Supplement dated November 9, 2021, reducing the aggregate shares to be sold under the ATM program from $50,000,000 to $7,900,000. As of November 14, 2022, we have sold 1,346,265 shares pursuant to the ATM Agreement for total net proceeds of $1,734,502.

On August 15, 2022, the Company entered into a Purchase Agreement (the “ELOC Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company has the right to sell up to $15,000,000 in shares of the Company’s Common Stock to Lincoln Park over the thirty-six month term of the ELOC Agreement, subject to certain limitations and conditions as set forth in the ELOC Agreement (such transactions, the “Equity Line of Credit”). In consideration for entering in the ELOC Agreement, the Company issued a one-time commitment fee of 539,633 shares of the Common Stock to Lincoln Park. These amounts will be capitalized as deferred offering costs and will be offset against future proceeds at the end of the term.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with “U.S. GAAP” and include the accounts of the Company. All significant intercompany balances and transactions have been eliminated.

The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position, results of operations, stockholders’ equity, and cash flows for the periods presented, but are not necessarily indicative of the results of operations to be anticipated for any future annual or interim period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2021 and notes thereto that are included in the Company's Annual Report on Form 10-K.

Management's Plans

We have incurred operating losses since inception and historically relied on equity financing for working capital. Throughout the next 12 months, the Company intends to fund its operations through revenue from operations, current cash reserves and through equity/debt financial instruments including the available ATM Agreement and the Equity Line of Credit. The estimated cash flows combined with opportunities to access capital lead us to believe the Company will have sufficient resources to operate its business for the next twelve months.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of condensed consolidated financial statements and accompanying notes in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of revenue and expenses during the reporting period. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term. All significant intercompany accounts and transactions are eliminated upon consolidation.

Joint Venture/Investments

The Company elected the measurement alternative to account for the Joint Venture (defined below) and investments. Under the measurement alternative, the carrying value of the non-marketable equity securities are adjusted based on price changes from observable transactions of identical or similar securities of the same issuer or for impairment. Any changes in carrying value are recorded within other income (expense), net in the Company's condensed consolidated statement of operations.

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HYRECAR INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company’s most significant estimates and judgments involve recognition of revenue and estimates for insurance reserves, and the measurement of the Company’s stock-based compensation.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2022 and December 31, 2021. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and cash equivalents, accounts payable, and accrued liabilities. Fair values for these items were assumed to approximate carrying values because of their short-term nature or they are payable on demand.

SEC Form 10-Q filed by HyreCar Inc.