METROMILE, INC. The following discussion and analysis of the financial condition and results of operations of INSU should be read in conjunction with INSU's audited financial statements and the notes related thereto which are included in "Item 8. Financial Statements and Supplementary Data." Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under "Cautionary Note Regarding Forward-Looking Statements," in this Amended Annual Report and in the Original Filing and "Item 1A. Risk Factors" in this Amended Annual Report and in the Original Filing. Overview Recent Developments
Metromile Business Combination
As ofDecember 31, 2020 , we were a blank check company incorporated as aDelaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. OnFebruary 9, 2021 , we consummated the previously announced Business Combination and, as a result thereof, we now own 100% of the outstanding common stock of Legacy Metromile and each share of Legacy Metromile common stock was converted into and exchanged for either (a) cash and shares of our common stock or (b) shares of our common stock, if no cash was elected, in each case as provided in the Merger Agreement. As a result of the consummation of the Business Combination, we paid an aggregate of$32 million in cash, and issued an aggregate of 83,012,000 shares of our common stock to the Legacy Metromile securityholders. We have also agreed to issue up to 10 million additional shares of our common stock if the closing share price of is greater than$15.00 over any 20 trading days within any 30 trading day period at any time during the 24 months following the closing. As a result of the closing of the Business Combination, we acquired 100% of the stock of Legacy Metromile and its subsidiaries and the Legacy Metromile Stockholders hold a majority of the voting power of our company, LegacyMetromile's senior management comprise substantially all of our senior management, and Legacy Metromile's operations now comprise our ongoing operations. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction in which Legacy Metromile issued stock for the net assets of INSU and Legacy Metromile's financial statements became our financial statements. Additional information regarding the Business Combination and related transactions is set forth in our Current Report on Form 8-K, initially filed with theSEC onFebruary 11, 2021 and amended onFebruary 11, 2020 , andMarch 31, 2021 , or the Business Combination 8-K. The financial information included in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" reflects the historical operations of INSU. LegacyMetromile's audited consolidated financial statements for the year endedDecember 31, 2020 and related Management's Discussion and Analysis of Financial Condition and Results of Operations are included in the Business Combination 8-K, and updated combined pro forma financial information as ofDecember 31, 2020 is included in Amendment No. 3 to the Business Combination 8-K, which is being filed substantially concurrently with this
Amended Annual Report.
32
Restatement and Revision of Previously Issued Financial Statements
This Management's Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement and revision of the financial statements for the year endedDecember 31, 2020 included in the Original Filing. We are restating our historical financial results to reclassify our Warrants as derivative liabilities pursuant to ASC 815-40 rather than as a component of equity as we had previously treated the Warrants. The impact of the Restatement is reflected in the Management's Discussion and Analysis of Financial Condition and Results of Operations below. Other than as disclosed in the Explanatory Note and with respect to the impact of the Restatement, no other information in this Item 7 has been amended. The impact of the Restatement is more fully described in Notes 2 and 13 to the restated financial statements included in "Item 8. Financial Statements and Supplementary Data" and "Item 9A: Controls and Procedures," of this Amended
Annual Report. Results of Operations Upon the consummation of our IPO onSeptember 8, 2020 , we deposited$230,000,000 of the net proceeds of our IPO and concurrent private placement in a trust account. Funds in the trust account were invested only inU.S. government treasury bills with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, or the Investment Company Act, and that invest only in in directU.S. government obligations. Following our IPO and prior to the Business Combination, we generated non-operating income in the form of interest income on cash and marketable securities held in the trust account. For the year endedDecember 31, 2020 , we had a net loss of$15,636,976 , which consisted of operating costs of$578,277 , non-operating costs of$15,058,699 related to change in fair value of warrant liabilities and transaction costs allocable to the warrants offset by interest income on marketable securities held in the trust account of$7,184 .
For the year ended
For the period from
Liquidity and Capital Resources
Until the consummation of our IPO onSeptember 8, 2020 , our only source of liquidity was the sale of 1,000 shares of INSU Class B common stock to our Sponsor and certain of our initial stockholders for an aggregate purchase price of$25,000 inJuly 2020 , and monies loaned to us by an affiliate of our Sponsor to fund organizational costs and expenses in connection with our IPO. OnSeptember 8, 2020 , we consummated the IPO of 23,000,000 units, which included the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 units, at$10.00 per unit, generating gross proceeds of$230,000,000 . Simultaneously with the closing of our IPO, we consummated the sale of 540,000 units to our Sponsor and Cantor, at a price of$10.00 per unit, generating gross proceeds of$5,400,000 . Following our IPO and the sale of the additional units to Cantor and our Sponsor, a total of$230,000,000 was placed in the trust account and we had$963,727 of cash held outside of the trust account, after payment of costs related to our IPO, and available for working capital purposes. We incurred$14,233,916 in transaction costs related to our IPO, including$4,000,000 of cash underwriting fees,$9,800,000 of deferred underwriting fees and$433,916 of other offering costs.
For the year ended
As ofDecember 31, 2020 , we had marketable securities held in the trust account of$230,007,184 (including approximately$7,184 of interest income) consisting ofU.S. Treasury securities with a maturity of 185 days or less. Interest income on the balance in the trust account may be used by us to pay taxes. ThroughDecember 31, 2020 , we did not withdraw any interest earned on the trust account.
For the year ended
AtDecember 31, 2020 , we had cash of$330,837 held outside the trust account. We used substantially all of the funds held in the trust account, including amounts representing interest earned on the trust account (less amounts released to us to pay taxes and deferred underwriting commissions) to consummate the Business Combination. 33 Pursuant to a loan commitment agreement datedSeptember 2, 2020 , our Sponsor or one of its affiliates committed to loan us funds as may have been required up to a maximum of$750,000 , and may have, but was not obligated to, loan us additional funds to fund our additional working capital requirements and transaction costs. The loans would be interest free, repayable upon the consummation of an initial business combination, and convertible into warrants in certain cases. We did not borrow funds under the loan commitment agreement prior to the consummation of the Business Combination and such commitment has now terminated.
Off-balance sheet financing arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Contractual obligations We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. Prior to the consummation of the Business Combination, we had an agreement to pay an affiliate of our Sponsor a monthly fee of$20,000 for office space, administrative and shared personnel support services. We began incurring these fees onSeptember 3, 2020 and continued to incur these fees monthly until completion of the Business Combination.
Critical Accounting Policies (as restated)
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common stock subject to possible redemption
We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification, or ASC Topic 480 "Distinguishing Liabilities from Equity," or ASC 480, common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented as temporary equity, outside of the stockholders' equity section of our balance sheets. Net loss per common share
We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the trust account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net loss per common share, basic and diluted for Class A and Class B non-redeemable common stock is calculated by dividing net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class A and Class B non-redeemable common stock outstanding for the periods presented.
Warrant Liability (as restated)
We classify the Warrants as a liability on our consolidated balance sheet as ofDecember 31, 2020 . The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statement of operations. The fair value of the public warrants issued in connection with the Initial Public Offering and the private placement warrants were initially measured at fair value using a Monte Carlo simulation model. Subsequently, the fair value of the private placement warrants were estimated using a Monte Carlo simulation model or Black-Scholes Merton model. The fair value of public warrants issued in connection with the Initial Public Offering were measured based on the listed market price of such warrants, a Level 1 measurement, sinceDecember 31, 2020 . 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statements
Report of Independent Registered Public Accounting Firm F-2
Balance Sheets as ofDecember 31, 2020 and 2019 (As Restated)
F-3
Statements of Operations For the Years ended
F-4
Statements of Changes In Stockholders' Equity For the Years ended
F-5
Statements of Cash Flows For the Years ended
F-6
Notes to Financial Statements (As Restated) F-7
F-1
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Metromile, Inc. Opinion on the Financial Statements
We have audited the accompanying balance sheets ofMetromile, Inc. (formerlyINSU Acquisition Corp. II ) aDelaware corporation, or the Company, as ofDecember 31, 2020 and 2019, the related statements of operations, changes in stockholders' equity (deficit), and cash flows for each of the two years in the period endedDecember 31, 2020 , and the related notes, collectively referred to as the financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period endedDecember 31, 2020 , in conformity with accounting principles generally accepted inthe United States of America .
Restatement of previously issued financial statements
As discussed in Note 2, the 2020 financial statements have been restated to correct a misstatement.
Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with thePublic Company Accounting Oversight Board (United States ), or PCAOB, and are required to be independent with respect to the Company in accordance with theU.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/GRANT THORNTON LLP
We have served as the Company's auditor since 2020.
F-2
METROMILE, INC. (f/k/a INSU ACQUISITION CORP. II)
BALANCE SHEETS
December 31,
2020
(As Restated) 2019
ASSETS
Current Assets
Cash $ 330,837 $ -
Prepaid expenses 205,921 -
Total Current Assets 536,758 -
Deferred offering costs 10,315
Marketable securities held in Trust Account 230,007,184 -
TOTAL ASSETS $
230,543,942
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses$ 125,075 $ 1,124 Accrued offering costs - 10,315 Total Current Liabilities 125,075 11,439 Warrant liabilities 27,837,928 Deferred underwriting fee payable 9,800,000 - Total Liabilities
37,763,003 11,439
Commitments and Contingencies (Note 7)
Class A common stock subject to possible redemption,
23,000,000 shares at redemption value as of
230,000,000 -
Stockholders' Equity
Preferred stock,
- -
Class A common stock,
54 -
Class B common stock, $0.0001 par value; 15,000,000 shares
authorized; 7,846,667 shares issued and outstanding as of
December 31, 2020 and 2019 785 785
Additional paid-in capital 0 24,215
Stock subscription receivable - (25,000 )
Accumulated deficit (37,219,900 ) (1,124 )
Total Stockholders' Equity (Deficit) (37,219,061 ) (1,124 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 230,543,942 $ 10,315 The accompanying notes are an integral part of these financial statements.
F-3
METROMILE, INC. (f/k/a INSU ACQUISITION CORP. II)
STATEMENTS OF OPERATIONS
Year Ended
December 31,
2020
(As Restated) 2019
Formation and operating costs $ 578,277 $ 976
Loss from operations (578,277 ) (976 )
Other income:
Interest income on marketable securities held in Trust Account
7,184 -
Change in fair value of warrant liabilities (14,245,031 )
Transaction costs allocable to warrant liabilities (820,852 )
Other income (loss) (15,058,699 ) -
Loss before income taxes (15,636,976 ) (976 )
Net loss $
(15,636,976 )
Weighted average number of shares outstanding of Class A common stock
23,540,000 -
Basic and diluted net loss per share, Class A common stock
Weighted average number of shares outstanding of Class B common stock
7,160,875 6,846,667
Basic and diluted net loss per common share, Class B common stock$ (0.51 ) $ (0.00 ) The accompanying notes are an integral part of these financial statements. F-4 METROMILE, INC. (f/k/a INSU ACQUISITION CORP. II) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) Stock Total Additional Subscription Stockholders' Paid-in Receivable Accumulated Equity Class A Class B Capital from Deficit Deficit) Common Stock Common Stock (As Stockholder (As (As (As Shares Amount Shares Amount Restated) Restated) Restated) Restated) Balance - January 1, 2019 - $ - - $ - $ - $
-
Issuance of Class B common stock to Sponsor -
- 7,846,667 785 24,215 (25,000 ) - -
Net loss - - - - - - (976 ) -
Balance - December 31, 2019 - - 7,846,667 785 24,215 (25,000 ) (1,124 ) (1,124 )
Collection of stock subscription receivable from
stockholder - - - - - 25,000 - 25,000
Sale of 23,000,000 Units, net of underwriting
discount and offering expenses 23,000,000 2,300 - - 203,321,339 - - 203,323,639
Sale of 540,000 Placement Units, net of underwriting discount and offering expenses
540,000 54 - - 5,072,346 - - 5,072,400
Common stock subject to possible redemption (23,000,000 ) (2,300 ) - - (208,417,900 ) - (21,579,800 ) (230,000,000 ) Net loss - - - - - - (15,638,976 ) (15,638,976 )
Balance - December 31, 2020 - $
54 7,846,667 $ 785 $ - $ - $ (37,219,900 ) $ (37,219,061 )
The accompanying notes are an integral part of the financial statements.
F-5
METROMILE, INC. (f/k/a INSU ACQUISITION CORP. II)
STATEMENTS OF CASH FLOWS
Year Ended
December 31,
2020
(As Restated) 2019
Cash Flows from Operating Activities:
Net loss $ (15,636,976 ) $ (976 )
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
Interest earned on marketable securities held in Trust
Account (7,184 ) -
Changes in fair value of warrant liabilities 14,245,031
Transaction costs allocable to warrant liabilities
820,852
Changes in operating assets and liabilities: Prepaid expenses (205,921 ) - Accounts payable and accrued expenses 123,951 976 Net cash used in operating activities (660,247 ) - Cash Flows from Investing Activities: Investment of cash in Trust Account (230,000,000 ) - Net used in investing activities (230,000,000 ) -
Cash Flows from Financing Activities: Proceeds from sale of Units, net of underwriting discounts paid
226,000,000 -
Proceeds from sale of Placement Units 5,400,000 -
Proceeds from the collection of stock subscription receivable
25,000 -
Proceeds from promissory notes - related party 75,000 -
Repayment of promissory notes - related party (75,000 ) -
Payment of offering costs (433,916 ) -
Net cash provided by financing activities 230,991,084 -
Net Change in Cash 330,837 -
Cash - Beginning - -
Cash - Ending $ 330,837 $ -
Non-cash investing and financing activities: Initial classification of Class A common stock subject to redemption
$ 230,000,000 $ - Deferred underwriting fee payable$ 9,800,000 $ - Offering costs included in accrued offering costs $ -$ 9,315 Issuance of stock for stock subscription receivable $
-$ 25,000 The accompanying notes are an integral part of these financial statements. F-6METROMILE, INC. f/k/aINSU ACQUISITION CORP. II NOTES TO FINANCIAL STATEMENTS
NOTE 1-DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
The Company was incorporated inDelaware onOctober 11, 2018 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
Business Combination OnFebruary 9, 2021 , the Company consummated the previously announced Business Combination pursuant to the Agreement and Plan of Merger and Reorganization, or the Merger Agreement, datedNovember 24, 2020 and as amended onJanuary 12, 2021 and further amended onFebruary 8, 2021 , by and among the Company,INSU II Merger Sub Corp. , aDelaware corporation and a direct wholly owned subsidiary of the Company, or Merger Sub, andMetroMile, Inc. , aDelaware corporation, or Legacy Metromile, pursuant to which, among other things, Merger Sub merged with and into Legacy Metromile, or the Merger, and together with the other transactions contemplated by the Merger Agreement, the Business Combination, with Legacy Metromile surviving the merger as a wholly owned subsidiary of
the Company.
Business Prior to the Business Combination
All activity through
The registration statement for the Company's Initial Public Offering was declared effective onSeptember 2, 2020 . OnSeptember 8, 2020 the Company consummated the Initial Public Offering of 23,000,000 units, or the Units, and, with respect to the shares of Class A common stock included in the Units sold, the Public Shares, which included the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at$10.00 per Unit, generating gross proceeds of$230,000,000 , which is described in Note 4. Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 540,000 units, or the Placement Units, at a price of$10.00 per Placement Unit in a private placement toInsurance Acquisition Sponsor II, LLC , or INSU Sponsor,Dioptra Advisors II, LLC , together with INSU Sponsor, the Sponsor, and Cantor, generating gross proceeds of$5,400,000 ,
which is described in Note 5. Transaction costs amounted to$14,233,916 , consisting of$4,000,000 in cash underwriting fees,$9,800,000 of deferred underwriting fees and$433,916 of other offering costs. F-7METROMILE, INC. f/k/aINSU ACQUISITION CORP. II NOTES TO FINANCIAL STATEMENTS
Following the closing of the Initial Public Offering onSeptember 8, 2020 , an amount of$230,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Placement Units was placed in a trust account, or the Trust Account, which will be invested inU.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended, or the Investment Company Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by
the Company, until the Closing.
NOTE 2-RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In
OnApril 12, 2021 , the Acting Director of theDivision of Corporation Finance and Acting Chief Accountant of theSEC issued the Statement. Specifically, the Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreements governing the Warrants. Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity, or ASC 815-40. The views expressed in the Statement were not consistent with the Company's historical interpretation of the specific provisions within its warrant agreement and the Company's application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for the Warrants in light of the Statement. Following consideration of the guidance in the Statement, the Company concluded the Warrants do not meet the conditions to be classified in equity and instead, the Warrants meet the definition of a derivative under ASC 815-40, under which the Company should record the Warrants as liabilities on the Company's consolidated balance sheet at fair value as of the date of issuance, with subsequent changes in their respective fair values recognized in the Company's consolidated statement of operations at each reporting date. Further, transaction costs allocable to the Warrants should
be charged to expense. In addition, ASC Topic 480-10-S99-3A, "SEC Staff Announcement: Classification and Measurement of Redeemable Securities," provides that redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified 1,978,314 shares in permanent equity given that the Company's Amended and Restated Certificate of Incorporation, or the Charter, prior to the Business Combination provided that the Company would not redeem shares of common stock included as part of the Units sold in the Initial Public Offering to the extent such redemption would result in the Company's failure to have net tangible assets in excess of$5,000,000 . The Company restated its financial statements to classify all Class A common stock as redeemable, as the threshold in the Charter does not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent
equity.
F-8
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
Impact of the Restatement
The impact of the Restatement on the balance sheets, statements of operations
and statements of cash flows for the quarterly period ended September 8, 2020
and the for the year ended December 31, 2020 is presented below. The Restatement
had no impact on net cash flows from operating, investing or financing
activities.
As
Previously As
Reported Adjustments Restated
Balance sheet as of September 8, 2020
Warrant Liabilities $ - $ 13,592,898 $ 13,592,898
Total Liabilities 9,801,183 13,592,898 23,394,081
Common Stock Subject to Possible Redemption 216,189,340 13,810,660 230,000,000
Class A Common Stock 192 (138 ) 54
Additional Paid-in Capital 5,000,863 (5,000,863 ) 0
Accumulated Deficit (1,740 ) (22,400,652 ) (22,402,392 )
Balance sheet as ofDecember 31, 2020 Warrant Liabilities $ -$ 27,837,928 $ 27,837,928 Total Liabilities 9,925.075 27,837,928 37,763,003 Common Stock Subject to Possible Redemption 215,618,860 14,381,140 230,000,000 Class A Common Stock 198 (144 ) 54 Additional Paid-in Capital 5,571,241 (5,571,241 ) 0 Accumulated Deficit (572,217 )
(36,647,683 ) (37,219,900 )
Year-endedDecember 31, 2020 Change in fair value of warrant liabilities $ -$ 14,245,031 $ 14,245,031 Transaction costs allocable to warrant liabilities - 820,852 820,852 Net loss (571,093 ) (15,065,883 ) (15,636,976 ) Basic and diluted net loss per share, Class A common stock (0.00 ) (0.51 ) (0.51 ) Basic and diluted net loss per share, Class B common stock (0.07 ) (0.44 ) (0.51 ) Cash Flow Statement for the year endedDecember 31, 2020 Net loss$ (571,093 ) $ (15,065,883 ) $ (15,636,976 ) Change in fair value of warrant liabilities - 14,245,031 14,245,031 Transaction costs allocable to warrant liabilities -
820,852 820,852
F-9
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE 3-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements is presented in conformity with
Use of Estimates The preparation of financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as ofDecember 31, 2020 and 2019.
Marketable Securities Held in Trust Account
At
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification, or ASC, Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. The Company's Class A common stock features certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' equity section of the Company's balance sheets. Income Taxes
The Company follows the asset and liability method of accounting for income
taxes under ASC 740, "Income Taxes." Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that included the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
F-10
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as ofDecember 31, 2020 and 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company is subject to income tax examinations by major taxing authorities since inception. The Company's management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Net Loss Per Common Share Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 7,846,666 shares of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The Company's statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income per share. Net income (loss) per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding since original issuance. Net income (loss) per common share, basic and diluted for Class A and Class B non-redeemable common stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the weighted average number of Class A and Class B non-redeemable common stock outstanding for the period. Class A and Class B non-redeemable common stock includes the Founder Shares and the Placement Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of$250,000 . The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company's assets and liabilities, which qualify as financial instruments under ASC 820, "Fair Value Measurement," approximates the carrying amounts represented in the accompanying balance sheets, primarily
due
to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
F-11
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE 4-INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 23,000,000 Units, which included the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at a purchase price of$10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third of one warrant, or a Public Warrant. Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of$11.50 (see Note 7). NOTE 5-PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor and Cantor purchased an aggregate of 540,000 Placement Units, at a price of$10.00 per Placement Unit, or$5,400,000 in the aggregate, of which 452,500 Placement Units were purchased byInsurance Acquisition Sponsor II, LLC and 87,500 Placement Units were purchased by Cantor. Each Placement Unit consists of one share of Class A common stock and one-third of one warrant, or the Placement Warrant. Each whole Placement Warrant is exercisable for one share of Class A common stock at a price of$11.50 per share. The proceeds from the Placement Units were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the private placement warrants.
NOTE 6-RELATED PARTY TRANSACTIONS
Founder Shares
In
OnJuly 28, 2020 , the Company filed an amendment to its Certificate of Incorporation to, among other things, create two classes of common stock, Class A and Class B, and to convert the outstanding Founder Shares into shares of Class B common stock. The Founder Shares will automatically convert into shares of Class A common stock upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments, as described in Note 7. OnJuly 28, 2020 , the Company effectuated a 6,888.333-for-1 forward stock split of its Class B common stock and onSeptember 2, 2020 , the Company effected a stock dividend of 1.1391242 shares of Class B common stock for each share of its Class B common stock, resulting in an aggregate of 7,846,667 shares of Class B common stock being held by the Sponsor, or the Founder Shares. The 7,846,667 Founder Shares included an aggregate of up to 1,000,000 shares of Class B common stock which were subject to forfeiture by the Sponsor to the extent that the underwriters' overallotment option was not exercised in full or in part, so that the Founder Shares would represent 25% of the Company's aggregate Founder Shares, Placement Shares and issued and outstanding Public Shares after the Initial Public Offering. As a result of the underwriters' election to fully exercise their over-allotment option, 1,000,000 Founder Shares are no longer subject to forfeiture.
The Sponsor and the Company's officers and directors, or the Insiders have agreed not to transfer, assign or sell any of their Founder Shares (except to permitted transferees) until (i) with respect to 20% of such shares, upon consummation of the Company's initial Business Combination, (ii) with respect to 20% of such shares, when the closing price of the Class A common stock exceeds$12.00 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination, (iii) with respect to 20% of such shares, when the closing price of the Class A common stock exceeds$13.50 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination, (iv) with respect to 20% of such shares, when the closing price of the Class A common stock exceeds$15.00 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination and (v) with respect to 20% of such shares, when the closing price of the Class A common stock exceeds$17.00 for any 20 trading days within a 30-trading day period following the consummation of a Business Combination or earlier, in any case, if, following a Business Combination, the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the public stockholders having the right to exchange their shares of common stock for cash, securities or other property. F-12METROMILE, INC. f/k/aINSU ACQUISITION CORP. II NOTES TO FINANCIAL STATEMENTS
Administrative Services Agreement
The Company entered into an agreement whereby, commencing onSeptember 3, 2020 through the earlier of the Company's consummation of a Business Combination and its liquidation, the Company will pay the Sponsor or an affiliate of the Sponsor$20,000 per month for office space, administrative and shared personnel support services. For the year endedDecember 31, 2020 , the Company incurred and paid$80,000 in fees for these services. Upon the closing of the Merger Agreement, the Company ceased paying these monthly fees. Related Party Loans In order to finance transaction costs in connection with a Business Combination, the Sponsor or one of its affiliates has committed to loan the Company funds as may be required up to a maximum of$750,000 , or the Working Capital Loans, which will be repaid only upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, the Company may use a portion of any funds held outside the Trust Account to repay the Working Capital Loans; however, no proceeds from the Trust Account may be used for such repayment. If such funds are insufficient to repay the Working Capital Loans, the unpaid amounts would be forgiven. Up to$1,500,000 of the Working Capital Loans may be converted into warrants at a price of$1.00 per warrant at the option of the holder. The warrants would be identical to the Placement Warrants. As ofDecember 31, 2020 , there were no amounts outstanding under the Working Capital Loans. NOTE 7-COMMITMENTS Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company's financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Registration Rights Pursuant to a registration rights agreement entered into onSeptember 2, 2020 , the holders of the Founder Shares, Placement Units (including securities contained therein) and the warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Placement Warrants or the warrants issued upon conversion of the Working Capital Loans) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities for sale under the Securities Act. In addition, the holders will have "piggy-back" registration rights to include such securities in other registration statements filed by the Company and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement will provide that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. Notwithstanding the foregoing, Cantor may not exercise its demand and "piggyback" registration rights after five (5) and seven (7) years after the effective date of the Initial Public Offering and may not exercise its demand rights on more than one occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement The underwriters were paid a cash underwriting discount of 2.0% of the gross proceeds of the Initial Public Offering, or$4,000,000 . In addition, the representative of the underwriters is entitled to a deferred fee of$9,800,000 . The deferred fee was paid upon the closing of the Merger Agreement from the amounts held in the Trust Account. F-13METROMILE, INC. f/k/aINSU ACQUISITION CORP. II NOTES TO FINANCIAL STATEMENTS
NOTE 8 -- WARRANT LIABILITIES
As of
Public warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the public warrants. The public warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The public warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation. The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise for cash of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt from the registration or qualifications requirements of the securities laws of the state of residence of the registered holder of the warrants. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants has not been declared effective by the end of 60 business days following the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with theSEC , and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. The Company will use its best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
? in whole and not in part;
? at a price of
? upon not less than 30 days' prior written notice of redemption to each warrant
holder; and
? if, and only if, the reported last sale price of the Company's Class A common
stock equals or exceeds
30-trading day period ending on the third trading day prior to the date on
which the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption for cash, management
will have the option to require all holders that wish to exercise the Public
Warrants to do so on a "cashless basis," as described in the warrant agreement.
The exercise price and number of shares of Class A common stock issuable upon
exercise of the warrants may be adjusted in certain circumstances including in
the event of a stock dividend, or recapitalization, reorganization, merger or
consolidation. Additionally, in no event will the Company be required to net
cash settle the warrants.
F-14
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
If (x) the Company issues additional shares of Class A common stock or
equity-linked securities for capital raising purposes in connection with the
closing of a Business Combination at an issue price or effective issue price of
less than $9.20 per share of Class A common stock (with such issue price or
effective issue price to be determined in good faith by the Company's board of
directors, and in the case of any such issuance to Insiders or their respective
affiliates, without taking into account any Founder Shares held by them, as
applicable, prior to such issuance), or the newly issued price, (y) the
aggregate gross proceeds from such issuances represent more than 50% of the
total equity proceeds, and interest thereon, available for the funding of a
Business Combination on the date of the completion of a Business Combination
(net of redemptions), and (z) the volume-weighted average trading price of
shares of Class A common stock during the 20 trading day period starting on the
trading day prior to the day on which the Company completes its Business
Combination (such price, the "market value") is below $9.20 per share, the
exercise price of the warrants will be adjusted (to the nearest cent) to be
equal to 115% of the higher of the market value and the newly issued price, and
the $18.00 per share redemption trigger price will be adjusted (to the nearest
cent) to be equal to 180% of the higher of the market value and the newly issued
price.
The private placement warrants are identical to the public warrants underlying
the Units sold in the Initial Public Offering, except that the private placement
warrants and the Class A common stock issuable upon the exercise of the private
warrants will not be transferable, assignable or saleable until 30 days after
the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the private placement will be non-redeemable so long as they are
held by the initial purchaser or their permitted transferees. If the private
placement are held by someone other than the initial purchaser or their
permitted transferees, the private placement will be redeemable by the Company
and exercisable by such holders on the same basis as the public warrants.
NOTE 9-STOCKHOLDERS' EQUITY
Preferred Stock - The Company is authorized to issue 1,000,000 shares of
preferred stock with a par value of $0.0001 per share with such designations,
voting and other rights and preferences as may be determined from time to time
by the Company's board of directors. At December 31, 2020 and 2019, there were
no shares of preferred stock issued or outstanding.
Class A Common Stock - The Company is authorized to issue 60,000,000 shares of
Class A common stock with a par value of $0.0001 per share. Holders of Class A
common stock are entitled to one vote for each share. At December 31, 2020 ,
there were no shares of Class A common stock issued and outstanding, excluding
23,540,000 shares of Class A common stock subject to possible redemption. At
December 31, 2019 , there were no shares of Class A common stock issued or
outstanding.
Class B Common Stock - The Company is authorized to issue 10,000,000 shares of
Class B common stock with a par value of $0.0001 per share. Holders of Class B
common stock are entitled to one vote for each share. At December 31, 2020 and
2019, there were 7,846,667 shares of Class B common stock issued and
outstanding.
Holders of Class B common stock will vote on the election of directors prior to
the consummation of a Business Combination. Holders of Class A common stock and
Class B common stock will vote together as a single class on all other matters
submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically convert into shares of
Class A common stock at the time of a Business Combination on a one-for-one
basis, subject to adjustment. In the case that additional shares of Class A
common stock or equity-linked securities are issued or deemed issued in excess
of the amounts offered in the Initial Public Offering and related to the closing
of a Business Combination, the ratio at which shares of Class B common stock
shall convert into shares of Class A common stock will be adjusted (unless the
holders of a majority of the outstanding shares of Class B common stock agree to
waive such adjustment with respect to any such issuance or deemed issuance) so
that the number of shares of Class A common stock issuable upon conversion of
all shares of Class B common stock will equal, in the aggregate, on an
as-converted basis, 25% of the sum of the total number of all shares of common
stock issued and outstanding upon completion of the Business Combination,
including Placement Shares, plus all shares of Class A common stock and
equity-linked securities issued or deemed issued in connection with a Business
Combination (excluding any shares or equity-linked securities issued, or to be
issued, to any seller in a Business Combination).
F-15
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - INCOME TAX
The Company's net deferred tax assets or liabilities are as follows:
December 31, December 31,
2020 2019
Deferred tax assets
Net operating loss carryforward $ 16,522 $ -
Business Combination Expenses 103,408 -
Total deferred tax assets 119,930 -
Valuation Allowance (119,930 ) -
Deferred tax assets, net of allowance - -
The income tax provision for the year ended December 31, 2020 and 2019 consists
of the following:
December 31, December 31,
2020 2019
Federal
Current $ - $ -
Deferred (119,930 ) -
State and Local
Current - -
Deferred - -
Change in valuation allowance 119,930 -
Income tax provision $ - $ -
As of
In assessing the realization of the deferred tax assets, management considers
whether it is more likely than not that some portion of all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which temporary differences representing net future deductible amounts become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment.
F-16
METROMILE, INC.
f/k/a INSU ACQUISITION CORP. II
NOTES TO FINANCIAL STATEMENTS
A reconciliation of the federal income tax rate to the Company's effective tax
rate at
December 31 ,December 31, 2020 2019
Statutory federal income tax rate 21.0 % 21.0 % State taxes, net of federal tax benefit 0.0 % 0.0
% Valuation allowance (21.0 )% (21.0 )% Income tax provision (0.00 )% (0.00 )% The Company files income tax returns in theU.S. federal jurisdiction and is subject to examination by the various taxing authorities. The Company's tax returns since inception remain open to examination by the taxing authorities. The Company considersNew York to be a significant state tax jurisdiction. OnDecember 27, 2020 ,Congress passed, andPresident Trump signed into law, the Consolidated Appropriations Act, 2021, or the Act, which includes certain business tax provisions. The Company does not expect the Act to have a material impact on the Company's effective tax rate or income tax expense for the year endingDecember 31, 2021 .
NOTE 11-FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company's financial assets and liabilities reflects management's estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An
active market for an asset or liability is a market in which
transactions for the asset or liability occur with sufficient frequency
and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or
liabilities and quoted prices for identical assets orliabilities in
markets that are not active.
Level 3: Unobservable inputs based on the Company's assessment of the
assumptions that market participants would use in pricing the
asset or
liability.
The following table presents information about the Company's assets that are
measured at fair value on a recurring basis at December 31, 2020 , and indicates
the fair value hierarchy of the valuation inputs the Company utilized to
determine such fair value:
December 31,
2020
Description Level (As Restated)
Assets:
Marketable securities held in Trust Account - U.S. Treasury
Securities Money Market Fund 1 $ 230,007,184
Liabilities:
Warrant liabilities - Public warrants 1 $ 26,451,928
Warrant liabilities - Private Placement warrants 2 $ 1,386,000 F-17METROMILE, INC. f/k/aINSU ACQUISITION CORP. II NOTES TO FINANCIAL STATEMENTS The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statement of operations. The fair value of the public warrants issued in connection with the Initial Public Offering and the private placement were initially measured at fair value using a Monte Carlo simulation model. Subsequently, the fair value of the private placement warrants were estimated using a Monte Carlo simulation model or Black -Scholes Merton model at each measurement date. The fair value of public warrants issued in connection with the Initial Public Offering were measured based on the listed market price of such warrants, a Level 1 measurement, sinceDecember 31, 2020 . For the period endedDecember 31, 2020 , the Company recognized a charge to the statement of operations resulting from an increase in the fair value of liabilities of approximately$14.2 million presented as change in fair value of warrant liabilities on the accompanying statement of operations.
The
- The risk-free interest rate is based on the
measurement date for a maturity similar to the expected term of the warrants.
- The expected term was based on the remaining contractual term of the warrants.
- The expected volatility was based on data from a set of comparable
publicly-traded companies .
- The stock price at initial measurement and
unit price less one-third of the warrant price. The stock price as of December
31, 2020 represents the closing price on the measurement date.
The key inputs regarding Level 3 fair value measurements at their initial
measurement and
September 8,
2020
(Initial September 30, December 31,
Input Measurement) 2020 2020
Risk-free interest rate 0.34 % 0.33 % 0.45 %
Expected term (years) 5.6 5.5 5.4
Expected volatility 25.0 % 25.0 % 55.6 %
Exercise price $ 11.50 $ 11.50 $ 11.50
Stock Price $ 9.91 $ 10.019 $ 15.55
The following table presents the changes in the fair value of warrant
liabilities:
Private Warrant
Placement Public Liabilities
Initial measurement on September 8, 2020 $ 327,600 $ 13,265,297 $ 13,592,897
Change in valuation inputs or other assumptions 1,058,400 13,186,631 14,245,031
Fair value as of December 31, 2020 $ 1,386,000 $ 26,451,928 $ 27,837,928
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting
period. There were no transfers between levels for the period from October 11,
2018 (inception) through December 31, 2020 other than the transfer of the public
warrants from Level 3 to Level 1 and private warrants from Level 3 to Level
2.
F-18
NOTE 12-SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the
balance sheet date up to the date that the financial statements were issued.
Based upon this review, other than as described below, the Company did not
identify any subsequent events that would have required adjustment or disclosure
in the financial statements.
As described in Note 1, the Company completed the Business Combination on
NOTE 13-IMPACT OF RESTATEMENT ON QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The impact of the Restatement on the balance sheets, statements of operations and statements of cash flows for the three and nine months endedSeptember 30, 2020 is presented below. The Restatement had no impact on net cash flows from operating, investing or financing activities. As Previously As Reported Adjustments Restated Balance sheet as ofSeptember 30, 2020 Warrant Liabilities $ -$ 14,457,629 $ 14,457,629 Total Liabilities 9,826,454 14,457,629 24,284,083 Common Stock Subject to Possible Redemption 216,106,340 13,893,660 230,000,000 Class A Common Stock 193 (139 ) 54 Additional Paid-in Capital 5,083,766 (5,083,766 ) 0 Accumulated Deficit (84,739 )
(23,267,383 ) (23,352,122 )
Three months endedSeptember 30, 2020 Change in fair value of warrant liabilities $ -$ 866,731 $ 866,731 Transaction costs allocable to warrant liabilities - 820,852 820,852 Net loss (83,615 ) (1,687,583 ) (1,771,198 ) Basic and diluted net loss per share, Class A common stock (0.00 ) (0.06 ) (0.06 ) Basic and diluted net loss per share, Class B common stock (0.01 ) (0.05 ) (0.06 ) Nine months endedSeptember 30, 2020 Change in fair value of warrant liabilities $ -$ 866,731 $ 866,731 Transaction costs allocable to warrant liabilities - 820,852 820,852 Net loss (83,615 ) (1,687,583 ) (1,771,198 ) Basic and diluted net loss per share, Class A common stock (0.00 ) (0.06 ) (0.06 ) Basic and diluted net loss per share, Class B common stock (0.01 ) (0.05 ) (0.06 ) Cash Flow Statement for the nine months endedSeptember 30, 2020 Net loss$ (83,615 ) $ (1,687,583 ) $ (1,771,198 ) Change in fair value of warrant liabilities - 866,731 866,731 Transaction costs allocable to warrant liabilities -
820,852 820,852
F-19
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this report solely due to the material weakness in our internal control over financial reporting due to the insufficient risk assessment of the underlying accounting treatment for certain complex financial instruments, as described below. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As described in "Item 8. Financial Statements and Supplementary Data," in response to the Statement, management analyzed and evaluated the Company's financial statements contained in the Original Filing for the year endedDecember 31, 2020 and concluded that there was a material misstatement related to the accounting for complex financial instruments in the historical financial statements of the Company for the year endedDecember 31, 2020 , which is corrected with this Amended Annual Report. Prior to the issuance of the Statement, management had concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by the Original Filing. However, in response to the guidance in the Statement, management re-evaluated the Company's disclosure controls and procedures as ofDecember 31, 2020 and concluded that the Company's disclosure controls and procedures were not effective at the reasonable assurance level as ofDecember 31, 2020 due to a material weakness in internal control over financial reporting due to the insufficient risk assessment of the underlying accounting treatment for certain complex financial instruments. Notwithstanding this material weakness, management has concluded that our financial statements included in this Amended Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with GAAP. Remediation Plan We are taking steps to remediate the material weakness by, among other things, devoting significant effort and resources to the remediation and improvement of our internal control over financial reporting as it relates to the accounting treatment for complex financial instruments. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our securities and financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. These plans and actions will begin immediately and are subject to ongoing review by senior management and Audit Committee oversight. As we continue to evaluate and work to improve our internal control over financial reporting, management may implement additional measures to address the material weakness or modify the remediation plan described above and will continue to review and make necessary changes to the overall design of our internal controls.
Internal Control over Financial Reporting
This Amended Annual Report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of theSEC for newly public companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during
the quarter ended
35
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