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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 March 31, 2022

OR

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: 001-39524

 

Joby Aviation, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

98-1548118

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

2155 Delaware Avenue, Suite #225

Santa Cruz, CA

95060

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (831) 426-3733

 

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 $0.0001

 

JOBY

 

New York Stock Exchange

Warrants to purchase common stock

 

JOBY WS

 

New York Stock Exchange

 

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 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 an 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

 

The number of shares of registrant’s Common Stock outstanding as of May 10, 2022 was 606,458,106.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

2

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets (Unaudited)

3

 

Condensed Consolidated Statements of Operations (Unaudited)

4

 

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

5

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)

6

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

28

 

 

 

PART II.

OTHER INFORMATION

29

 

 

 

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

 

Signatures

31

 

 

 

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include, without limitation, statements regarding the future financial position, business strategy and plans and objectives of management of Joby Aviation, Inc. (the “Company,” “Joby,” “we,” “us” or “our”). These statements constitute projections and forecasts and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

These forward-looking statements are based on information available as of the date of this Quarterly Report and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. While we believe these expectations, forecasts, assumptions and judgments are reasonable, our forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. Our business, prospects, financial condition, operating results and the price of our common stock may be affected by a number of factors, whether currently known or unknown, including but not limited to those discussed in this Quarterly Report in Part I., Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the section titled “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 28, 2022. Any one or more of these factors could, directly or indirectly, cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

 

2


 

PART 1. FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share amounts)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

417,116

 

 

$

955,563

 

Short-term investments

 

 

803,712

 

 

 

343,248

 

Total cash, cash equivalents and short-term investments

 

 

1,220,828

 

 

 

1,298,811

 

Other receivables

 

 

2,722

 

 

 

2,315

 

Prepaid expenses and other current assets

 

 

19,055

 

 

 

17,416

 

Total current assets

 

 

1,242,605

 

 

 

1,318,542

 

Property and equipment, net

 

 

57,920

 

 

 

53,155

 

Restricted cash

 

 

1,731

 

 

 

762

 

Equity method investment

 

 

27,006

 

 

 

20,306

 

Intangible assets

 

 

14,529

 

 

 

14,512

 

Goodwill

 

 

10,757

 

 

 

10,757

 

Other non-current assets

 

 

68,747

 

 

 

70,321

 

Total assets

 

$

1,423,295

 

 

$

1,488,355

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

2,665

 

 

$

3,637

 

Accrued and other current liabilities

 

 

15,498

 

 

 

10,211

 

Total current liabilities

 

 

18,163

 

 

 

13,848

 

Stock repurchase liability

 

 

589

 

 

 

711

 

Warrant liability

 

 

47,493

 

 

 

44,902

 

Earnout shares liability

 

 

90,440

 

 

 

109,844

 

Other non-current liabilities

 

 

2,176

 

 

 

2,291

 

Total liabilities

 

 

158,861

 

 

 

171,596

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock: $0.0001 par value - 100,000,000 shares authorized at March 31, 2022 and December 31, 2021. No shares issued and outstanding at March 31, 2022 and December 31, 2021.

 

 

 

 

 

 

Common stock: $0.0001 par value - 1,400,000,000 and 1,400,000,000 shares authorized, 605,836,369 and 604,174,329 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.

 

 

60

 

 

 

60

 

Additional paid-in capital

 

 

1,805,983

 

 

 

1,793,431

 

Accumulated deficit

 

 

(538,929

)

 

 

(476,610

)

Accumulated other comprehensive loss

 

 

(2,680

)

 

 

(122

)

Total stockholders’ equity

 

 

1,264,434

 

 

 

1,316,759

 

Total liabilities and stockholders’ equity

 

$

1,423,295

 

 

$

1,488,355

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended
March 31,

 

 

 

 

2022

 

 

2021

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development (including related party purchases of $644 and $512 for the three months ended March 31, 2022 and 2021, respectively)

 

$

72,071

 

 

$

34,184

 

 

Selling, general and administrative (including related party purchases of $161 and $105 for the three months ended March 31, 2022 and 2021, respectively)

 

 

22,272

 

 

 

11,644

 

 

         Total operating expenses

 

 

94,343

 

 

 

45,828

 

 

Loss from operations

 

 

(94,343

)

 

 

(45,828

)

 

Interest and other income, net

 

 

788

 

 

 

480

 

 

Interest expense

 

 

(31

)

 

 

(863

)

 

Income from equity method investment

 

 

14,458

 

 

 

4,710

 

 

Gain from change in fair value of warrants and earnout shares

 

 

16,814

 

 

 

 

 

    Total other income, net

 

 

32,029

 

 

 

4,327

 

 

Loss before income taxes

 

 

(62,314

)

 

 

(41,501

)

 

Income tax expense

 

 

5

 

 

 

4

 

 

Net loss

 

$

(62,319

)

 

$

(41,505

)

 

Net loss per share, basic and diluted

 

$

(0.11

)

 

$

(0.37

)

 

Weighted-average common stock outstanding, basic and diluted

 

 

579,090,606

 

 

 

111,012,510

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(In thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

 

2022

 

 

2021

 

 

Net loss

 

$

(62,319

)

 

$

(41,505

)

 

Other comprehensive (loss) gain:

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

(2,596

)

 

 

(300

)

 

Foreign currency translation gain (loss)

 

 

38

 

 

 

(1

)

 

Total other comprehensive loss

 

 

(2,558

)

 

 

(301

)

 

Comprehensive loss

 

$

(64,877

)

 

$

(41,806

)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

(In thousands, except share data)

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Comprehensive
Loss

 

 

Stockholders’
Equity (Deficit)

 

 Balance at January 1, 2022

 

 

 

 

$

 

 

 

 

604,174,329

 

 

$

60

 

 

$

1,793,431

 

 

$

(476,610

)

 

$

(122

)

 

$

1,316,759

 

 Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(62,319

)

 

 

 

 

 

(62,319

)

 Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,088

 

 

 

 

 

 

 

 

 

12,088

 

 Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

823,524

 

 

 

 

 

 

428

 

 

 

 

 

 

 

 

 

428

 

 Issuance of common stock upon release of restricted stock units

 

 

 

 

 

 

 

 

 

851,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121

 

 

 

 

 

 

 

 

 

121

 

 Shares withheld related to net share settlement

 

 

 

 

 

 

 

 

 

(13,041

)

 

 

 

 

 

(85

)

 

 

 

 

 

 

 

 

(85

)

 Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,558

)

 

 

(2,558

)

 Balance at March 31, 2022

 

 

 

 

$

 

 

 

 

605,836,369

 

 

$

60

 

 

$

1,805,983

 

 

$

(538,929

)

 

$

(2,680

)

 

$

1,264,434

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

6


 

JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

(unaudited)

(In thousands, except share data)

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Comprehensive
Income (Loss)

 

 

Stockholders’
Equity (Deficit)

 

 Balance at January 1, 2021

 

 

332,764,215

 

 

$

768,312

 

 

 

 

122,058,940

 

 

$

12

 

 

$

12,579

 

 

$

(296,286

)

 

$

527

 

 

$

(283,168

)

 Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41,505

)

 

 

 

 

 

(41,505

)

 Issuance of redeemable convertible preferred stock

 

 

8,924,010

 

 

 

77,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,808

 

 

 

 

 

 

 

 

 

4,808

 

 Other noncash compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,741

 

 

 

 

 

 

 

 

 

1,741

 

 Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

746,830

 

 

 

 

 

 

303

 

 

 

 

 

 

 

 

 

303

 

 Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

 

 

 

 

 

 

 

 

 

75

 

 Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(309

)

 

 

(309

)

 Balance at March 31, 2021

 

 

341,688,225

 

 

$

845,931

 

 

 

 

122,805,770

 

 

$

12

 

 

$

19,506

 

 

$

(337,791

)

 

$

218

 

 

$

(318,055

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

7


 

JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(62,319

)

 

$

(41,505

)

Reconciliation of net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

5,212

 

 

 

3,333

 

Non-cash interest expense and amortization of debt costs

 

 

 

 

 

825

 

Stock-based compensation expense

 

 

19,429

 

 

 

4,808

 

Other non-cash compensation expense

 

 

 

 

 

1,741

 

Gain from change in the fair value of warrants and earnout shares

 

 

(16,814

)

 

 

 

Income from equity method investment

 

 

(14,458

)

 

 

(1,400

)

Net accretion and amortization of investments in marketable debt securities

 

 

774

 

 

 

1,622

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Other receivables and prepaid expenses and other current assets

 

 

418

 

 

 

(1,995

)

Other non-current assets

 

 

9,332

 

 

 

(32

)

Accounts payable and accrued and other liabilities

 

 

(3,000

)

 

 

2,938

 

Net cash used in operating activities

 

 

(61,426

)

 

 

(29,665

)

Cash flows from investing activities

 

 

 

 

 

 

Purchase of marketable securities

 

 

(571,890

)

 

 

(169,676

)

Proceeds from sales of marketable securities

 

 

34,506

 

 

 

26,825

 

Proceeds from maturities of marketable securities

 

 

73,550

 

 

 

142,054

 

Purchases of property and equipment

 

 

(10,833

)

 

 

(5,082

)

Acquisition, net of cash

 

 

(1,465

)

 

 

 

Net cash used in investing activities

 

 

(476,132

)

 

 

(5,879

)

Cash flows from financing activities

 

 

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(85

)

 

 

 

Proceeds from capital lease obligation

 

 

 

 

 

380

 

Proceeds from issuance of convertible notes

 

 

 

 

 

74,972

 

Proceeds from the exercise of stock options and warrants issuance

 

 

427

 

 

 

309

 

Repayments of tenant improvement loan and capital lease obligation

 

 

(262

)

 

 

(160

)

Payments for deferred offering costs

 

 

 

 

 

(512

)

Net cash provided by financing activities

 

 

80

 

 

 

74,989

 

Net change in cash, cash equivalents and restricted cash

 

 

(537,478

)

 

 

39,445

 

Cash, cash equivalents and restricted cash, at the beginning of the period

 

 

956,325

 

 

 

78,030

 

Cash, cash equivalents and restricted cash, at the end of the period

 

$

418,847

 

 

$

117,475

 

Reconciliation of cash, cash equivalents and restricted cash to condensed
   consolidated balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

$

417,116

 

 

$

116,782

 

Restricted cash

 

 

1,731

 

 

 

693

 

Cash, cash equivalents and restricted cash

 

$

418,847

 

 

$

117,475

 

Non-cash investing and financing activities

 

 

 

 

 

 

Unpaid property and equipment purchases

 

$

426

 

 

$

1,996

 

Uber acquisition in exchange for Series C redeemable convertible preferred stock

 

$

 

 

$

77,619

 

Property and equipment purchased through capital leases

 

$

252

 

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8


 

JOBY AVIATION, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Company and Nature of Business

Description of Business

Joby Aviation, Inc. (“Joby Aviation” or the “Company”) is a vertically integrated air mobility company that is building a clean and quiet, fully electric vertical takeoff and landing (“eVTOL”) aircraft to be used by the Company to deliver air transportation as a service. The Company is headquartered in Santa Cruz, California.

Merger with RTP

On August 10, 2021 (the “Closing Date”), Reinvent Technology Partners, a Cayman Islands exempted company and special purpose acquisition company (“RTP”), completed the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 23, 2021, by and among RTP, RTP Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of RTP (“RTP Merger Sub”), and Joby Aero, Inc., a Delaware corporation (“Legacy Joby”). On the Closing Date, RTP was domesticated as a Delaware corporation, Merger Sub merged with and into Legacy Joby and the separate corporate existence of Merger Sub ceased (the “Merger”), and Legacy Joby survived as a wholly owned subsidiary of RTP, which changed its name to Joby Aviation, Inc.

In connection with the execution of the Merger Agreement, RTP entered into separate subscription agreements (each a “Subscription Agreement”) with a number of investors (each a “PIPE Investor”), pursuant to which the PIPE Investors agreed to purchase, and RTP agreed to sell to the PIPE Investors, shares of Common Stock (“PIPE Shares”), in a private placement (“PIPE Financing”). The PIPE Financing closed substantially concurrently with the consummation of the Merger.

The Merger, together with the other transactions described in the Merger Agreement and the PIPE Financing, are referred to herein as the (“Reverse Recapitalization”). The number of Legacy Joby common shares and redeemable convertible preferred shares for all periods prior to the Closing Date have been retrospectively increased using the exchange ratio that was established in accordance with the Merger Agreement. Please refer to Note 3, “Reverse Recapitalization,” in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

 

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2022 and December 31, 2021 and results of operations and cash flows for the three months ended March 31, 2022 and 2021.

The condensed consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

There have been no changes to our significant accounting policies described in Note 2 “Summary of Significant Accounting Policies” to the audited Consolidated Financial Statements in the Company’s annual report on Form 10-K for the year ended December 31, 2021, that have had a material impact on the condensed consolidated financial statements and related notes.

Unaudited Interim Financial Information

Certain information and footnote disclosures normally included in the Company’s annual audited Consolidated Financial Statements and accompanying notes have been condensed or omitted in these accompanying interim consolidated financial statements and footnotes. Accordingly, the accompanying interim Consolidated Financial Statements included herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments and accruals, consisting only of normal,

 

9


 

recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein.
 

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash and cash equivalents. The recorded carrying amount of cash and cash equivalents approximates their fair value. At March 31, 2022, restricted cash primarily related to a letter of credit associated with key equipment purchases of approximately $1.0 million and a lease obligation of approximately $0.8 million. At December 31, 2021, restricted cash primarily related to collateral on a lease obligation of approximately $0.8 million.

Investment in SummerBio, LLC

Following the outbreak of the COVID-19 pandemic, the Company’s management determined that certain previously developed technology that was accessible to the Company could be repurposed and applied in providing high-volume rapid COVID-19 testing through its investment in SummerBio, LLC (“SummerBio”), a related party. The Company has determined that it is not the primary beneficiary of SummerBio. Therefore it accounts for its investment in SummerBio under the equity method of accounting with an ownership interest of approximately 43.4% as of March 31, 2022 and December 31, 2021. The Company recognized $14.5 million and $4.7 million for the three months ended March 31, 2022 and 2021, respectively, within income from equity method investment on the consolidated statement of operations for its investment in SummerBio.

Recently Adopted Accounting Pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 - a consensus of the FASB Emerging Issues Task Force, which makes improvements related to the following two topics: (1) accounting for certain equity securities when the equity method of accounting is applied or discontinued, and (2) scope considerations related to forward contracts and purchased options on certain securities. The Company adopted this pronouncement in the first quarter of 2022 and the impact of the provisions of this standard on its Consolidated Financial Statements was immaterial.

New Accounting Pronouncements Not Yet Adopted

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. As such the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the timeline for adopting new or revised accounting standards for public business entities that are not emerging growth companies, and will follow the transition guidance applicable to private companies.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which provides clarification to ASU No. 2016-02. These ASUs require an entity to recognize a lease liability and a right-of-use asset in the balance sheets for leases with lease terms of more than 12 months. Lessor accounting is largely unchanged, while lessees will no longer be provided with a source of off-balance-sheet financing. This guidance is effective for fiscal years beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities to elect a modified retrospective transition method where entities may continue to apply the existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative effect adjustment in the period of adoptions rather than in the earliest period presented. The Company is currently evaluating, but has not yet completed, the assessment of the quantitative impact that adopting these ASUs will have on its consolidated financial statements and assessing any changes to its processes and controls. The adoption of these ASUs will result in the recognition of right-of-use assets and the corresponding lease liabilities.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The guidance is effective for the Company beginning in the first quarter of 2023. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, that simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intra-period tax allocation and modified the methodology for calculating income taxes in an interim period. It also clarifies and simplifies other aspects of the accounting for income taxes. The guidance is effective for the Company for fiscal years beginning after December 15, 2021, and

 

10


 

interim periods within fiscal years beginning after December 15, 2022 with early adoption permitted. The Company is evaluating the effect of this guidance on its consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The guidance also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. The amendment is effective for all entities through December 31, 2022. The Company does not expect the adoption of this new standard to have a material impact on the Company's consolidated financial statements.

Note 3. Fair Value Measurements

Assets and liabilities recorded at fair value on a recurring basis in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2 - Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3 - Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company’s financial assets consist of Level 1 and 2 assets. The Company classifies its cash equivalents and marketable debt securities within Level 1 or Level 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. The Company’s fixed income available-for-sale securities consist of high quality, investment grade securities from diverse issuers. The valuation techniques used to measure the fair value of the Company’s marketable debt securities were derived from non-binding market consensus prices that are corroborated by observable market data and quoted market prices for similar instruments.

The Company’s financial liabilities measured at fair value on a recurring basis consist of Level 2 and Level 3 liabilities. The Company classifies the Private Placement Warrants (as defined in Note 8) within Level 2, because they were valued using inputs other than quoted prices which are directly observable in the market, including readily available pricing for the Company's Public Warrants (as defined in Note 8). The Company classifies the Earnout Shares Liability (as defined in Note 8) within Level 3. The Earnout Shares Liability is measured at fair value on a recurring basis. Changes in fair value of Level 3 liabilities are recorded in other income, net, in the condensed consolidated statements of operations.

 

 

11


 

The following tables set forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

 

March 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets measured at fair value

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

387,535

 

 

$

 

 

$