joby-20220930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________________

FORM 10-Q

_____________________________________________

(Mark One)


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

For the quarterly period ended September 30, 2022


o			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) 201-6700

_____________________________________________

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 x No o

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 x No o

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	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	x

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. o

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

The number of shares of registrant’s Common Stock outstanding as of November 2, 2022 was 621,731,378

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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION	35

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	Signatures	37

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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.

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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)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	193,844	$	955,563
Short-term investments	880,662		343,248
Total cash, cash equivalents and short-term investments	1,074,506		1,298,811
Restricted cash	3,204		—
Other receivables	6,092		2,315
Prepaid expenses and other current assets	20,234		17,416
Total current assets	1,104,036		1,318,542
Property and equipment, net	62,954		53,155
Restricted cash	762		762
Equity method investment	12,486		20,306
Intangible assets	14,198		14,512
Goodwill	14,011		10,757
Other non-current assets	65,362		70,321
Total assets	$	1,273,809	$	1,488,355
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	4,302	$	3,637
Accrued and other current liabilities	24,500		10,211
Total current liabilities	28,802		13,848
Stock repurchase liability	463		711
Warrant liability	24,175		44,902
Earnout shares liability	58,499		109,844
Other non-current liabilities	1,715		2,291
Total liabilities	113,654		171,596
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock: $0.0001 par value - 100,000,000 shares authorized at September 30, 2022 and December 31, 2021. No shares issued and outstanding at September 30, 2022 and December 31, 2021.	—		—
Common stock: $0.0001 par value - 1,400,000,000 and 1,400,000,000 shares authorized, 609,566,379 and 604,174,329 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.	60		60
Additional paid-in capital	1,837,332		1,793,431
Accumulated deficit	(667,709)		(476,610)
Accumulated other comprehensive loss	(9,528)		(122)
Total stockholders’ equity	1,160,155		1,316,759
Total liabilities and stockholders’ equity	$	1,273,809	$	1,488,355

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

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JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating expenses:
Research and development (including related party purchases of $243 and $547 for the three months ended September 30, 2022 and 2021, respectively, $1,470 and $1,523 for the nine months ended September 30, 2022 and 2021, respectively.)	$	73,870	$	52,092	$	220,146	$	140,310
Selling, general and administrative (including related party purchases of $46 and $154 for the three months ended September 30, 2022 and 2021, respectively, $335 and $390 for the nine months ended September 30, 2022 and 2021, respectively.)	23,251		15,607		70,700		41,587
Total operating expenses	97,121		67,699		290,846		181,897
Loss from operations	(97,121)		(67,699)		(290,846)		(181,897)
Interest and other income, net	5,395		163		8,766		872
Interest expense	(35)		(484)		(95)		(2,388)
Income from equity method investment	—		10,331		19,039		19,222
Transaction expenses related to merger	—		(9,015)		—		(9,015)
Gain (Loss) from change in fair value of warrants and earnout shares	12,560		(11,489)		72,072		(11,489)
Convertible notes extinguishment loss	—		(665)		—		(665)
Total other income (loss), net	17,920		(11,159)		99,782		(3,463)
Loss before income taxes	(79,201)		(78,858)		(191,064)		(185,360)
Income tax expense	5		—		35		9
Net loss	$	(79,206)	$	(78,858)	$	(191,099)	$	(185,369)
Net loss per share, basic and diluted	$	(0.14)	$	(0.20)	$	(0.33)	$	(0.91)
Weighted-average common stock outstanding, basic and diluted	583,970,409		385,560,732		581,458,391		203,536,351

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

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JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss	$	(79,206)	$	(78,858)	$	(191,099)	$	(185,369)
Other comprehensive (loss) gain:
Unrealized loss on available-for-sale securities	(4,427)		(14)		(9,313)		(337)
Foreign currency translation gain (loss)	29		(94)		(93)		(42)
Total other comprehensive loss	(4,398)		(108)		(9,406)		(379)
Comprehensive loss	$	(83,604)	$	(78,966)	$	(200,505)	$	(185,748)

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

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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 Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
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
Net loss	—	—		—	—		—		(49,574)		—		(49,574)
Stock-based compensation	—	—		—	—		15,869		—		—		15,869
Issuance of common stock upon exercise of stock options	—	—		559,552	—		318		—		—		318
Issuance of common stock upon release of restricted stock units	—	—		792,523	—		—		—		—		—
Vesting of early exercised stock options	—	—		—	—		65		—		—		65
Other comprehensive loss	—	—		—	—		—		—		(2,450)		(2,450)
Balance at June 30, 2022	—	—		607,188,444	60		1,822,235		(588,503)		(5,130)		1,228,662
Net loss	—	—		—	—		—		(79,206)		—		(79,206)
Stock-based compensation	—	—		—	—		14,673		—		—		14,673
Issuance of common stock upon exercise of stock options	—	—		486,797	—		364		—		—		364
Issuance of common stock upon release of restricted stock units	—	—		1,891,138	—		—		—		—		—
Vesting of early exercised stock options	—	—		—	—		60		—		—		60
Other comprehensive loss	—	—		—	—		—		—		(4,398)		(4,398)
Balance at September 30, 2022	—	$	—	609,566,379	$	60	$	1,837,332	$	(667,709)	$	(9,528)	$	1,160,155

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

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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 Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
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)
Net loss	—	—		—	—		—		(65,006)		—		(65,006)
Issuance of redeemable convertible preferred stock	2,677,200	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		6,992		—		—		6,992
Other noncash compensation expense	—	—		—	—		2,006		—		—		2,006
Issuance of common stock upon exercise of stock options	—	—		592,948	—		217		—		—		217
Vesting of early exercised stock options				—			112						112
Other comprehensive loss	—	—		—	—		—		—		38		38
Balance at June 30, 2021	344,365,425	845,931		123,398,718	12		28,833		(402,797)		256		(373,696)
Net loss	—	—		—	—		—		(78,858)		—		(78,858)
Stock-based compensation	—	—		—	—		7,618		—		—		7,618
Other noncash compensation expense	—	—		—	—		2,028		—		—		2,028
Issuance of common stock upon exercise of stock options	—	—		699,852	—		347		—		—		347
Issuance of common stock upon exercise of SVB warrants				752,732
Vesting of early exercised stock options	—	—		—	—		50						50
Issuance of redeemable convertible preferred stock upon conversion exercise of In-Q-Tel warrants	68,629	—		—	—		691		—		—		691
Issuance of common stock upon conversion of Uber convertible notes	—	—		7,716,780	1		77,398		—		—		77,399
Conversion of redeemable convertible preferred stock upon reverse recapitalization	(344,434,054)	(845,931)		344,434,054	34		845,897						845,931
Issuance of common stock upon reverse recapitalization, net of issuance costs				127,333,290	13		823,256						823,269
Other comprehensive loss	—	—		—	—		—		—		(108)		(108)
Balance at September 30, 2021	—	$	—	604,335,426	$	60	$	1,786,118	$	(481,655)	$	148	$	1,304,671

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

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JOBY AVIATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(191,099)	$	(185,369)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization expense	17,422		11,467
Non-cash interest expense and amortization of debt costs	—		2,892
Stock-based compensation expense	51,905		19,418
Write-off of in-process research and development project	—		5,030
Other non-cash compensation expense	—		5,775
Loss from transaction costs related to merger	—		9,015
(Gain)/loss from change in the fair value of warrants and earnout shares	(72,072)		11,578
Income from equity method investment	(19,039)		(9,187)
Net accretion and amortization of investments in marketable debt securities	(874)		3,893
Changes in operating assets and liabilities
Other receivables and prepaid expenses and other current assets	(2,924)		(11,227)
Other non-current assets	31,852		(9,856)
Accounts payable and accrued and other liabilities	2,011		(435)
Net cash used in operating activities	(182,818)		(147,006)
Cash flows from investing activities
Purchase of marketable securities	(1,221,114)		(336,914)
Proceeds from sales of marketable securities	60,527		47,139
Proceeds from maturities of marketable securities	614,734		308,141
Purchases of property and equipment	(24,412)		(20,694)
Acquisition, net of cash	(5,707)		(4,981)
Net cash used in investing activities	(575,972)		(7,309)
Cash flows from financing activities
Taxes paid related to net share settlement of equity awards	(85)		—
Proceeds from merger	—		1,067,922
Proceeds from issuance of convertible notes	—		74,972
Proceeds from the exercise of stock options and warrants issuance	1,166		1,179
Repayments of tenant improvement loan and capital lease obligation	(806)		(813)
Payments for offering costs	—		(49,717)
Net cash provided by financing activities	275		1,093,543
Net change in cash, cash equivalents and restricted cash	(758,515)		939,228
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	$	197,810	$	1,017,258
Reconciliation of cash, cash equivalents and restricted cash to balance sheets
Cash and cash equivalents	$	193,844	$	1,016,496
Restricted cash	3,966		762
Cash, cash equivalents and restricted cash	$	197,810	$	1,017,258
Non-cash investing and financing activities
Unpaid property and equipment purchases	$	1,484	$	621
Uber Elevate acquisition in exchange for Series C redeemable convertible preferred stock	$	—	$	77,619
Property and equipment purchased through capital leases	$	252	$	926
Conversion of Uber note payable to Series C preferred stock	$	—	$	77,399
Unpaid offering costs	$	—	$	470
Conversion of preferred stock	$	—	$	846,622
Net non-cash assets acquired in merger	$	—	$	1,119

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

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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, 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 September 30, 2022 and December 31, 2021 and results of operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022.

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 the Company’s 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.

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 condensed consolidated financial statements and footnotes. Accordingly, the accompanying interim Condensed 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 Condensed Consolidated Financial Statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein.

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Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with remaining 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 September 30, 2022, restricted cash primarily related to (i) approximately $2.2 million of cash temporarily retained by the Company to satisfy the Company’s post-closing indemnification claims, if any, against the seller, in connection with the acquisition of aerospace software engineering company in May 2022 (Note 4), (ii) a collateral on a letter of credit associated with key equipment purchases of approximately $1.0 million, and (iii) a security deposit for a lease obligation of approximately $0.8 million. At December 31, 2021, restricted cash primarily related to a security deposit for 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 September 30, 2022 and December 31, 2021.

In June 2022, SummerBio notified the Company of its decision to wind down testing operations and close the business. As a result, the Company recorded an impairment loss on the Company’s investment of $6.8 million which is included within the income from equity method investment line on the condensed consolidated statement of operations and on the condensed consolidated statement of cash flow.

The Company recognized income of nil and $10.3 million for the three months ended September 30, 2022 and 2021, respectively and income of $19.0 million (net of impairment loss) and $19.2 million for the nine months ended September 30, 2022 and 2021, respectively, within income from equity method investment on the condensed 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 Condensed 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 (“ROU”) 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 Company currently estimates an ROU asset and lease liability of approximately $20 million to $30 million.

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These values are preliminary as the Company finalizes its review of lease agreements, incremental borrowing rates, and continues to evaluate material contracts for additional embedded lease agreements.

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 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 June 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 1, Level 2 and Level 3 liabilities. The Company’s Public Warrants (as defined in Note 8) are classified as Level 1 because they are directly observable in the market. 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. The Company classifies the Earnout Shares Liability (as

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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.

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 September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets measured at fair value
Money market funds	$	166,438	$	—	$	—	$	166,438
Cash equivalents	$	166,438	$	—	$	—	$	166,438
Term deposits	$	—	$	40,506	$	—	$	40,506
Asset backed securities	—		31,667		—		31,667
Government debt securities	—		385,827		—		385,827
Corporate debt securities	—		422,662		—		422,662
Available-for-sale investments	—		880,662		—		880,662
Total fair value of assets	$	166,438	$	880,662	$	—	$	1,047,100

Liabilities measured at fair value
Common stock warrant liabilities (Public)	$	14,488	$	—	$	—	$	14,488
Common stock warrant liabilities (Private Placement)	—		9,687		—		9,687
Earnout Shares Liability	—		—		58,499		58,499
Total fair value of liabilities	$	14,488	$	9,687	$	58,499	$	82,674


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets measured at fair value
Money market funds	$	929,842	$	—	$	—	$	929,842
Cash equivalents	$	929,842	$	—	$	—	$	929,842
Term deposits	$	—	$	40,069	$	—	$	40,069
Asset backed securities	—		69,496		—		69,496
Government debt securities	—		47,308		—		47,308
Corporate debt securities	—		186,376		—		186,376
Available-for-sale investments	—		343,249		—		343,249
Total fair value of assets	$	929,842	$	343,249	$	—	$	1,273,091

Liabilities measured at fair value
Common stock warrant liabilities (Public)	$	26,910	$	—	$	—	$	26,910
Common stock warrant liabilities (Private Placement)	—		17,992		—		17,992
Earnout Shares Liability	—		—		109,844		109,844
Total fair value of liabilities	$	26,910	$	17,992	$	109,844	$	154,746

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The following is a summary of the Company’s available-for-sale securities (in thousands):


	September 30, 2022
	Adjusted Basis		Unrealized Gains		Unrealized Losses		Recorded Basis
Assets measured at fair value
Term deposits	$	40,506	$	—	$	—	$	40,506
Asset backed securities	32,052		—		(385)		31,667
Government debt securities	390,761		—		(4,934)		385,827
Corporate debt securities	426,882		—		(4,220)		422,662
Total	$	890,201	$	—	$	(9,539)	$	880,662


	December 31, 2021
	Adjusted Basis		Unrealized Gains		Unrealized Losses		Recorded Basis
Assets measured at fair value
Term deposits	$	40,069	$	—	$	—	$	40,069
Asset backed securities	69,579		—		(83)		69,496
Government debt securities	47,355		—		(47)		47,308
Corporate debt securities	186,471		—		(95)		186,376
Total	$	343,474	$	—	$	(225)	$	343,249

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the nine months ended September 30, 2022 and 2021.

The following table sets forth a summary of the change in the fair value, which is recognized as a component of other income within the condensed consolidated statement of operations, of the Company’s Level 3 financial liabilities (in thousands):


	Earnout Shares Liability
Fair value as of January 1, 2022	$	109,844
Change in fair value	(51,345)
Fair value as of September 30, 2022	$	58,499

The fair value of the Earnout Shares Liability (see Note 8) are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

Note 4. Acquisitions