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Government Certification
We also announced that we have agreed to a “G-1” certification basis for our aircraft with the Federal Aviation Administration (“FAA”). This agreement lays out the specific requirements that need to be met by our aircraft for it to be certified for commercial operations. “G-1” outlines the criteria that need to be met in order for an aircraft to be certified for civil commercial operations, and reaching this milestone marks a key step on the way towards certifying any new aircraft in the U.S. Our aircraft will be certified in line with the FAA’s existing Part 23 requirements for Normal Category Airplanes, with special conditions introduced to address requirements specific to our unique aircraft. These special conditions, defined in the “G-1” document, are expected to be published in the U.S. Federal Register in 2021. We will also need to obtain authorizations and certifications related to the production of our aircraft and the deployment of our aerial ridesharing service. While we anticipate being able to meet the requirements of such authorizations and certifications, we may be unable to obtain such authorizations and certifications, or to do so on the timeline we project. Should we fail to obtain any of the required authorizations or certifications, or do so in a timely manner, or any of these authorizations or certifications are modified, suspended or revoked after we obtain them, we may be unable to launch our commercial service or do so on the timelines we project, which would have adverse effects on our business, prospects, financial condition and/or results of operations.
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Agility Prime
In December 2020, we became the first company to receive airworthiness approval for an eVTOL aircraft from the U.S. Air Force, and in the first quarter of 2021, we officially began on-base operations under contract pursuant to the U.S. Air Force’s Agility Prime program. Our multi-year relationship with the U.S. Air Force and other U.S. Government agencies provides us with a compelling opportunity to more thoroughly understand the operational capabilities and maintenance profiles of our aircraft in advance of commercial launch. In addition to the operational learnings, our existing contracts also provide for more than $40 million of payments through 2024 based upon full performance, and we are actively pursuing additional contracts and relationships that would further secure these on-base operations going forward. Our U.S. government contracting party may modify, curtail or terminate its contracts with us without prior notice and either at its convenience or for default based on performance, or may decline to accept performance or exercise subsequent option years. We may also be unable to secure additional contracts or continue to grow our relationship with the U.S. government and/or Department of Defense.
Impact of COVID-19
In December 2019, COVID-19 was first reported to the World Health Organization (“WHO”), and in January 2020, the WHO declared the outbreak to be a public health emergency. In March 2020, the WHO characterized COVID-19 as a pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain for manufacturers and suppliers, and has led to a decrease in the need of transportation services around the world.
As a result of the COVID-19 pandemic, we modified our business practices (including employee travel, recommending that all non-essential personnel work from home and cancellation or reduction of physical participation in meetings, events and conferences) and implemented additional safety protocols for essential workers. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, suppliers, vendors and business partners. While the ultimate duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted, such as the extent and effectiveness of containment actions and vaccine adoption, it has already had an adverse effect on the global economy and the ultimate societal and economic impact of the COVID-19 pandemic remains unknown.
Fully-Integrated Business Model
Our business model to serve as a fully-integrated eVTOL transportation service provider includes multiple uncertainties. Present projections indicate that payback periods on aircraft will result in a viable business model over the long-term as production volumes scale and unit economics improve to support sufficient market adoption. As with any new industry and business model, numerous risks and uncertainties exist. Our financial results are dependent on certifying and delivering aircraft on time and at a cost that supports returns at prices that sufficient numbers of customers are willing to pay based on value arising from time and efficiency savings from utilizing eVTOL services. Our aircraft include numerous parts and manufacturing processes unique to eVTOL aircraft, in general, and our product design, in particular. We have used our best efforts to estimate costs in our planning projections; however, the variable cost associated with assembling our aircraft at scale remains uncertain at this stage of development. The success of our business also is dependent, in part, on the utilization rate of our aircraft and reductions in utilization will adversely impact our financial performance. Our aircraft may not be able to fly safely in poor weather conditions, including snowstorms, thunderstorms, lightning, hail, known icing conditions and/or fog. Our inability to operate safely in these conditions will reduce our aircraft utilization and cause delays and disruptions in our services. We intend to maintain a high daily aircraft utilization rate which is the amount of time our aircraft spend in the air carrying passengers. High daily aircraft utilization is achieved in part by reducing turnaround times at skyports so we can fly more hours on average in a day. Aircraft utilization is reduced by delays and cancellations from various factors, many of which are beyond our control, including adverse weather conditions, security requirements, air traffic congestion and unscheduled maintenance events.
Components of Results of Operations
Research and Development Expenses
Research and development expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation, costs of consulting, equipment and materials, depreciation and amortization and allocations of overhead, including rent, information technology costs and utilities. Research and development expenses are partially offset by payments we received in the form of government grants, including those received under the Agility Prime program.
We expect our research and development expenses to increase as we increase staffing to support aircraft engineering and software development, build aircraft prototypes, and continue to explore and develop next generation aircraft and technologies.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of personnel expenses, including salaries, benefits, and stock-based compensation, related to executive management, finance, legal, human resource functions. Other costs include business development, contractor and professional services fees, audit and compliance expenses, insurance costs and general corporate expenses, including allocated depreciation, rent, information technology costs and utilities.
Near term increases in selling, general and administrative expenses are expected to be related to hiring additional personnel and consultants to support our commercialization efforts and compliance with the applicable provisions of the Sarbanes-Oxley Act (“SOX”) and other U.S. Securities and Exchange Commission (“SEC”) rules and regulations.
Investment in SummerBio, LLC
Following the outbreak of the COVID-19 pandemic, our management determined that certain previously developed technology that was accessible to us could be repurposed and applied to providing high-volume, rapid COVID-19 diagnostic testing. To enable the development and deployment of this technology, in May 2020, SummerBio, LLC (“SummerBio”) was established. SummerBio was 100% beneficially owned by us, and a fully consolidated subsidiary until August 24, 2020.
On August 24, 2020, SummerBio raised additional financing through issuing equity instruments to other investors and changed the structure of its board of directors, as a result of which we concluded that on August 24, 2020 we no longer had a controlling interest in SummerBio. We concluded that our retained interest in SummerBio should be accounted for under the equity method. Accordingly, we deconsolidated SummerBio, recognized our remaining investment in SummerBio as an equity investment at a fair value of $5.2 million, derecognized net liabilities of SummerBio of $1.7 million and recognized a gain on deconsolidation of $6.9 million, which is included in other income on the consolidated statement of operations for the year ended December 31, 2020. We recognized our share of earnings of SummerBio as income from equity method investment on the consolidated statement of operations for the total amount of $10.3 million and $19.2 million for the three and nine months ended September 30, 2021 and $0.3 million for the three and nine months ended September 30, 2020, respectively.
Transaction Expenses Related to Merger
Transaction costs consist of legal, accounting, banking fees and other costs that were directly related to the consummation of the Merger. Transaction costs related to the issuance of common shares were recognized in stockholders’ equity while costs allocated to the issuance of Earnout Shares were expensed in the condensed consolidated statements of operations upon the completion of the Merger on August 10, 2021.
Loss from changes in fair value of derivative liabilities
Derivative liabilities consist of publicly-traded warrants (“Public Warrants”), and private placement warrants issued to RTP (“Private Placement Warrants”) and Earnout Shares which are subject to remeasurement to fair value at each balance sheet date. We expect to incur an incremental income (expense) in the condensed consolidated statements of operations for the fair value adjustments for the outstanding derivative liabilities at the end of each reporting period.
Acquisition of Uber Elevate
On January 11, 2021, we completed the acquisition of a portion of Uber Technologies, Inc.’s (“Uber”) business that was dedicated to development of aerial ridesharing (“Uber Elevate”) in exchange for consideration in the form of 8,924,009 shares of Joby’s Series C redeemable convertible preferred stock. Concurrently with the acquisition of Uber Elevate, we issued to Uber a convertible note for the total principal amount of $75.0 million. Joby determined that the convertible note included a discount of approximately $0.5 million, which was attributable to the consideration transferred by Joby in this acquisition. Upon closing of the Merger, the unpaid principal amount of $75.0 million plus accrued and unpaid interest in the amount of $2.2 million was converted into 7,716,780 shares of common stock of Joby Aviation. Following the acquisition date, the results of operations of Uber Elevate are fully consolidated in our consolidated statement of operations.
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Asset Acquisition
On April 6, 2021, we completed acquisition of an entity (the “acquiree”) engaged in the development of transportation technology with application to aviation, whereby we acquired all the outstanding shares of the acquiree in exchange for a total consideration consisting of (i) $5.0 million in cash, (ii) 774,385 shares of Legacy Joby Series C redeemable convertible preferred stock with the aggregate acquisition date fair value of $23.9 million. Upon closing of the acquisition, the acquiree’s former shareholders became our employees. The Series C Preferred shares issued to the former shareholders as part of the total consideration are subject to a six year quarterly vesting term, which is contingent of the continued employment of the former shareholders with the Company. We concluded that Series C Preferred shares are considered to be a part of the former shareholders’ postcombination compensation expense rather than part of purchase consideration. The Series C redeemable convertible preferred shares were converted into an equivalent number of shares of Legacy Joby common stock on a one-to-one basis immediately prior to the closing of the Merger.
The acquisition was accounted for as an asset acquisition. The purchase consideration of $5.0 million was allocated to the acquired in-process research and development (“IPR&D”) assets, $0.1 million was allocated to the acquired current liabilities and less than $0.1 million was allocated to the acquired current assets. We concluded that acquired IPR&D assets are to be used only in specific programs and have no alternative future use if such programs fail to result in a commercialized product. Therefore, the acquired IPR&D assets were immediately written off and reflected as part of research and development expenses in the condensed consolidated statement of operations.
In-Q-Tel Warrant
On March 19, 2021 we entered into a government grant contract with In-Q-Tel, an independent nonprofit corporation that partners with the U.S. intelligence and national security community, under which we receive payments from In-Q-Tel for reports on our aircraft's development progress and future services offering. Upon submission of certain specified deliverables, we will receive a total of $1.0 million from In-Q-Tel.
In connection with entering into the government grant contract with In-Q-Tel, Legacy Joby issued the In-Q-Tel Warrant for 68,649 shares of Legacy Joby Series C redeemable convertible preferred shares with an issuance date fair value of $0.6 million and recognized a respective deferred cost. The deferred cost will be amortized to research and development expenses as we earn the $1.0 million in government grants from In-Q-Tel. In connection with the closing of the Business Combination, the In-Q-Tel Warrant was exercised, on a cashless basis, for 68,629 shares of Series C redeemable convertible preferred stock issuable upon exercise of the warrant.
Interest and Other Income
Interest income consists primarily of interest earned on our cash and cash equivalents and investments in marketable securities.
Interest Expense
Interest expense consists primarily of the interest on our convertible notes, equipment finance leases and tenant improvement loans. Interest on convertible notes relates to convertible notes that converted into Series C redeemable convertible preferred shares in December 2019 and Series C redeemable convertible preferred notes issued to Uber in January 2021. Upon closing of the Merger, the unpaid principal amount of $75.0 million plus accrued and unpaid interest in the amount of $2.2 million was converted into 7,716,780 shares of common stock of Joby Aviation.
Provision for Income Taxes
Our provision for income taxes consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in tax law. Due to the level of historical losses, we maintain a valuation allowance against U.S. federal and state deferred tax assets as it has been concluded it is more likely than not that these deferred tax assets will not be realized.
34
Results of Operations
Comparison of the Three Months Ended September 30, 2021 to the three Months Ended September 30, 2020
The following table summarizes our historical results of operations for the periods indicated (in thousands, except percentage):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
($)
|
|
|
(%)
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
52,092
|
|
|
$
|
30,713
|
|
|
|
21,379
|
|
|
|
70
|
%
|
Selling, general and administrative
|
|
|
15,607
|
|
|
|
5,515
|
|
|
|
10,092
|
|
|
|
183
|
%
|
Total operating expenses
|
|
|
67,699
|
|
|
|
36,228
|
|
|
|
31,471
|
|
|
|
87
|
%
|
Loss from operations
|
|
|
(67,699
|
)
|
|
|
(36,228
|
)
|
|
|
(31,471
|
)
|
|
|
87
|
%
|
Interest and other income, net
|
|
|
163
|
|
|
|
1,081
|
|
|
|
(918
|
)
|
|
|
(85
|
)%
|
Interest expense
|
|
|
(484
|
)
|
|
|
(65
|
)
|
|
|
(419
|
)
|
|
|
645
|
%
|
Income (loss) from equity method investment
|
|
|
10,331
|
|
|
|
286
|
|
|
|
10,045
|
|
|
n.m.
|
|
Gain on disposal of subsidiary
|
|
|
—
|
|
|
|
6,904
|
|
|
|
(6,904
|
)
|
|
|
(100
|
)%
|
Transaction expenses related to Merger
|
|
|
(9,015
|
)
|
|
|
—
|
|
|
|
(9,015
|
)
|
|
|
(100
|
)%
|
Loss from changes in fair value of derivative liabilities
|
|
|
(11,489
|
)
|
|
|
—
|
|
|
|
(11,489
|
)
|
|
|
(100
|
)%
|
Convertible note extinguishment loss
|
|
|
(665
|
)
|
|
|
—
|
|
|
|
(665
|
)
|
|
|
(100
|
)%
|
Total other income (loss)
|
|
|
(11,159
|
)
|
|
|
8,206
|
|
|
|
(19,365
|
)
|
|
|
236
|
%
|
Loss before income taxes
|
|
|
(78,858
|
)
|
|
|
(28,022
|
)
|
|
|
(50,836
|
)
|
|
|
181
|
%
|
Income tax expenses
|
|
|
—
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
100
|
%
|
Net loss
|
|
$
|
(78,858
|
)
|
|
$
|
(28,028
|
)
|
|
|
(50,830
|
)
|
|
|
181
|
%
|
* n.m. marks changes that are not meaningful.
Research and Development Expenses
Research and development increased by $21.4 million, or 70%, to $52.1 million during the three months ended September 30, 2021 from $30.7 million during the three months ended September 30, 2020. The increase was primarily attributable to increases in personnel to support aircraft engineering, software development, manufacturing process development, and certification, as well as increased materials used in prototype development and testing. These increases were offset partially by government research and development grants earned through increased operations as part of our Department of Defense contracts.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $10.1 million, or 183%, to $15.6 million during the three months ended September 30, 2021 from $5.5 million during the three months ended September 30, 2020. The increase was primarily attributable to increased headcount to support operations growth, including IT, legal, facilities, HR, and finance, as well as an increase in insurance cost and professional services costs related to legal, accounting and recruiting support.
Interest and Other Income
Interest and other income decreased by $0.9 million, or 86%, to $0.1 million during the three months ended September 30, 2021 from $1.0 million during the three months ended September 30, 2020, driven mainly by the decline in interest rates on our short-term investments and bank deposits.
Interest Expense
Interest expenses increased by $0.4 million, or 645%, to $0.5 million during the three months ended September 30, 2021 from $0.1 million during the three months ended September 30, 2020 due to the interest expense on the convertible notes issued in January 2021 to Uber.
35
Income from Equity Method Investment and Gain on Disposal of Subsidiary
Upon deconsolidation of SummerBio in August 2020, we recognized our retained interest in SummerBio as an equity method investment at fair value, which resulted in recognizing a gain of $6.9 million during 2020. In addition, following deconsolidation of SummerBio, income from equity method investment increased $10.0 million to $10.3 million during the three months ended September 30, 2021 from $0.3 million during the three months ended September 30, 2020, reflecting Summerbio's increased COVID testing volume.
Transaction Expenses Related to Merger
During the three months ended September 30, 2021, we recorded Merger transaction expenses of $9.0 million in relation to banking, legal and other professional fees allocated to Earnout Shares issuance.
Loss from Changes in Fair Value of Derivative Liabilities
Loss from the change in the fair value of derivative liabilities was $11.5 million for the three months ended September 30, 2021, compared to nil for the three months ended September 30, 2020, due to re-measurement of the derivative liabilities to their fair value as of September 30, 2021, reflecting the change in fair value of our public and private warrants and fair value of earn-out shares associated with our common stock between the Closing Date and September 30, 2021.
Convertible Notes Extinguishment Loss
Loss on conversion of convertible notes was $0.6 million for the three months ended September 30, 2021, compared to nil for the three months ended September 30, 2020, due to the settlement of the convertible promissory notes upon conversion of the notes into shares of Series C redeemable convertible preferred stock in August 2021 immediately prior to the conversion of Series C redeemable convertible preferred stock into common stock in connection with the completion of the Merger on August 10, 2021.
Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020
The following table summarizes our historical results of operations for the periods indicated (in thousands, except percentage):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
($)
|
|
|
(%)
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
140,310
|
|
|
$
|
76,940
|
|
|
|
63,370
|
|
|
|
82
|
%
|
Selling, general and administrative
|
|
|
41,587
|
|
|
|
15,112
|
|
|
|
26,475
|
|
|
|
175
|
%
|
Total operating expenses
|
|
|
181,897
|
|
|
|
92,052
|
|
|
|
89,845
|
|
|
|
98
|
%
|
Loss from operations
|
|
|
(181,897
|
)
|
|
|
(92,052
|
)
|
|
|
(89,845
|
)
|
|
|
98
|
%
|
Interest and other income
|
|
|
872
|
|
|
|
4,813
|
|
|
|
(3,941
|
)
|
|
|
(82
|
)%
|
Interest expense
|
|
|
(2,388
|
)
|
|
|
(193
|
)
|
|
|
(2,195
|
)
|
|
n.m.
|
|
Income from equity method investment
|
|
|
19,222
|
|
|
|
286
|
|
|
|
18,936
|
|
|
n.m.
|
|
Gain on disposal of subsidiary
|
|
|
—
|
|
|
|
6,904
|
|
|
|
(6,904
|
)
|
|
|
(100
|
)%
|
Transaction expenses related to Merger
|
|
|
(9,015
|
)
|
|
|
—
|
|
|
|
(9,015
|
)
|
|
|
(100
|
)%
|
Loss from changes in fair value of derivative liabilities
|
|
|
(11,489
|
)
|
|
|
—
|
|
|
|
(11,489
|
)
|
|
|
(100
|
)%
|
Convertible note extinguishment loss
|
|
|
(665
|
)
|
|
|
—
|
|
|
|
(665
|
)
|
|
|
(100
|
)%
|
Total other income (loss)
|
|
|
(3,463
|
)
|
|
|
11,810
|
|
|
|
(15,273
|
)
|
|
|
(129
|
)%
|
Loss before income taxes
|
|
|
(185,360
|
)
|
|
|
(80,242
|
)
|
|
|
(105,118
|
)
|
|
|
131
|
%
|
Income tax expenses
|
|
|
9
|
|
|
|
23
|
|
|
|
(14
|
)
|
|
|
(61
|
)%
|
Net loss
|
|
$
|
(185,369
|
)
|
|
$
|
(80,265
|
)
|
|
|
(105,104
|
)
|
|
|
131
|
%
|
* n.m. marks changes that are not meaningful .
Research and Development Expenses
Research and development expenses increased by $63.4 million, or 82%, to 140.3 million during the nine months ended September 30, 2021 from $76.9 million during the nine months ended September 30, 2020. The increase was primarily attributable to increases in personnel to support aircraft engineering, software development, manufacturing process development, and certification as well as increased materials used in prototype development and testing. These increases were partially offset by government research and development grants earned through increased operations as part of our Department of Defense contracts.
36
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $26.5 million, or 175%, to $41.6 million during the nine months ended September 30, 2021 from $15.1 million during the nine months ended September 30, 2020. The increase was primarily attributable to increased headcount to support operations growth, including IT, legal, facilities, HR, and finance, as well as an increase in insurance cost and professional services cost related to legal, accounting and recruiting support.
Interest and Other Income
Interest income decreased by $3.9 million, or 82%, to $0.9 million during the nine months ended September 30, 2021 from $4.8 million during the nine months ended September 30, 2020, driven mainly by the decline in interest rates on our short-term investments and bank deposits.
Interest Expense
Interest expenses increased by $2.2 million, to $2.4 million during the nine months ended September 30, 2021 from $0.2 million during the nine months ended September 30, 2020 due to the interest expense on the convertible notes issued in January 2021 to Uber.
Income from Equity Method Investment and Gain on Disposal of Subsidiary
Upon deconsolidation of SummerBio in August 2020, we recognized our retained interest in SummerBio as an equity method investment at fair value, which resulted in recognizing a gain of $6.9 million during 2020. In addition, following deconsolidation of SummerBio, income from equity method investment increased $18.9 million to $19.2 million during the nine months ended September 30, 2021 from $0.3 million during the nine months ended September 30, 2020, reflecting Summerbio's increased COVID testing.
Transaction Expenses Related to Merger
During the nine months ended September 30, 2021, we recorded Merger transaction expenses of $9.0 million in relation to banking, legal and other professional fees allocated to Earnout Shares issuance.
Loss from Changes in Fair Value of Derivative Liabilities
Loss from the change in the fair value of derivative liabilities was $11.5 million for the nine months ended September 30, 2021, compared to nil for the nine months ended September 30, 2020, due to re-measurement of the derivative liabilities to their fair value as of September 30, 2021, reflecting the change in fair value of our public and private warrants and fair value of earn-out shares associated with our common stock between the Closing Date and September 30, 2021.
Convertible Notes Extinguishment Loss
Loss on conversion of convertible notes was $0.6 million for the nine months ended September 30, 2021, compared to nil for the nine months ended September 30, 2020, due to the settlement of the convertible promissory notes upon conversion of the notes into shares of Series C redeemable convertible preferred stock in August 2021 immediately prior to the conversion of Series C redeemable convertible preferred stock into common stock in connection with the completion of the Merger on August 10, 2021.
Liquidity and Capital Resources
Sources of Liquidity
We have incurred net losses and negative operating cash flows from operations since inception, and we expect to continue to incur losses and negative operating cash flows for the foreseeable future until we successfully commence sustainable commercial operations. To date, we have funded our operations primarily with proceeds from the Merger and issuance of redeemable convertible preferred stock and convertible notes. From inception through September 30, 2021, we raised net proceeds of $1,067.9 million from the Merger and $843.3 million from the issuances of Legacy Joby's redeemable convertible preferred stock and convertible notes. As of September 30, 2021, we had cash, cash equivalents and restricted cash of $1,017.3 million and short-term investment in marketable securities of $346.0 million. Restricted cash, totaling $0.8 million, reflects a security deposit on leased facilities. We believe that our cash on hand will satisfy our working capital and capital requirements for at least the next twelve months from the date on which our consolidated financial statements were available to be issued.
37
Long-Term Liquidity Requirements
We expect our cash and cash equivalents on hand together with the cash we anticipate to generate from future operations will provide sufficient funding to support us through to initial commercialization. Until we generate sufficient operating cash flow to fully cover our operating expenses, working capital needs and planned capital expenditures, or if circumstances evolve differently than anticipated, we expect to utilize a combination of equity and debt financing to fund any future remaining capital needs. If we raise funds by issuing equity securities, dilution to stockholders may result. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of preferred and common stockholders. The terms of debt securities or borrowings could impose significant restrictions on our operations. The capital markets have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing.
Our principal uses of cash in recent periods were to fund our research and development activities and personnel cost. We estimate near-term capital expenditures through 2024, leading to initial commercialization, to total approximately $850-$900 million. This will primarily include spending on manufacturing facilities, ramping up production and supporting production certification, scaled manufacturing operations for commercialization, operations infrastructure and skyport development, pilot training facilities and production of aircrafts. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from our customers, the expansion of sales and marketing activities and the timing and extent of spending to support development efforts. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies, which could require us to seek additional equity or debt financing. In the event that we require additional financing we may not be able to raise such financing on acceptable terms or at all. If we are unable to raise additional capital or generate cash flows necessary to continue our research and development and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. If adequate funds are not available, we may need to reconsider our investments in production operations, the pace of our production ramp-up, infrastructure investments in skyports, expansion plans or limit our research and development activities, which could have a material adverse impact on our business prospects and results of operations.
Cash Flows
The following tables set forth a summary of our cash flows for the periods indicated (in thousands, except percentage):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
($)
|
|
|
(%)
|
|
Net cash (used in) provided by:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(147,006
|
)
|
|
$
|
(75,574
|
)
|
|
|
(71,432
|
)
|
|
|
95
|
%
|
Investing activities
|
|
|
(7,309
|
)
|
|
|
(435,968
|
)
|
|
|
428,659
|
|
|
|
(98
|
)%
|
Financing activities
|
|
|
1,093,543
|
|
|
|
69,095
|
|
|
|
1,024,448
|
|
|
|
1,483
|
%
|
Net increase (decrease) in cash, cash equivalents, and
restricted cash
|
|
$
|
939,228
|
|
|
$
|
(442,447
|
)
|
|
|
1,381,675
|
|
|
|
(312
|
)%
|
Net Cash Used in Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2021 was $147.0 million, consisting primarily of a net loss of $185.4 million, adjusted for non-cash items and statement of operations impact from financing activities which included $19.4 million stock-based compensation expense, a $11.5 million depreciation and amortization expense, $10.2 million loss for fair value of warrants, $9.0 million for allocated merger transaction costs, $5.0 million write-off of acquired in-process research and development assets, $5.8 million other noncash compensation expense, $3.9 million net accretion and amortization of our investments in marketable securities, $2.2 million non-cash interest expense, and $1.4 million loss for fair value of Earnout Shares Liability, partially offset by $9.2 million increase in income from equity method investment, and an increase in our net working capital of $21.5 million, reflecting primarily increased prepaid expenses for D&O insurance.
Net cash used in operating activities for the nine months ended September 30, 2020 was $75.6 million, consisting primarily of a net loss of $81.0 million, adjusted for non-cash items which included a $5.2 million depreciation and amortization expense, $4.6 million stock-based compensation expense, $0.4 million net accretion and amortization of our investments in marketable securities, partially offset by $7.2 million gain related to the Summerbio deconsolidation and equity method investment and a decrease in our net working capital of $1.7 million, primarily related to the deconsolidation of Summerbio.
38
Net Cash Used in Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2021 was primarily due to purchases of marketable securities of $336.9 million, purchases of property and equipment of $20.7 million, and acquisition of assets of $5.0 million, partially offset by proceeds from the sales of marketable securities of $47.1 million and proceeds from maturities of marketable securities of $308.1 million.
Net cash used in investing activities for the nine months ended September 30, 2020 was primarily due to purchases of marketable securities of $583.2 million and purchases of property and equipment of $17.7 million partially offset by proceeds from the sales of marketable securities of $11.1 million and proceeds from maturities of marketable securities of $154.3 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2021 was primarily due to proceeds from the Merger of $1,067.9 million and issuance of a convertible note to Uber for a net amount of $75.0 million, $1.0 million from exercise of stock options and stock purchase rights, and $0.2 million from issuance preferred stock warrants, partially offset by payments for deferred offering costs of $49.7 million, $0.6 million capital lease obligations and repayment of tenant improvement loan of $0.2 million.
Net cash provided by financing activities for the nine months ended September 30, 2020 was primarily due to proceeds from the issuance of Series C redeemable convertible preferred shares for a net amount of $69.9 million, partially offset by payments on a capital lease obligation of $0.5 million and repayment of a tenant improvement loan of $0.3 million.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.
While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe the following accounting policies and estimates to be critical to the preparation of our consolidated financial statements.
Stock-Based Compensation
We measure and record the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of grant. We recognize stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period and use the straight-line method to recognize stock-based compensation, and account for forfeitures as they occur. We selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the method for determining the estimated fair value for stock options. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of share-based awards, including the option’s expected term, expected volatility of the underlying stock, risk-free interest rate and expected dividend yield.
Expected volatility - Prior to the Merger, since we were not a publicly traded Company, the expected volatility for our stock options was determined by using an average of historical volatilities of selected industry peers deemed to be comparable to our business corresponding to the expected term of the awards.
Risk-free interest rate - The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of the awards.
Expected dividend yield - The expected dividend rate is zero as we currently have no history or expectation of declaring dividends on our common stock.
39
Expected term - The expected term represents the period these stock awards are expected to remain outstanding and is based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules, and expectations of future employee behavior.
Fair Value of Common Stock
Prior to the Merger on August 10, 2021, the fair value of our common stock was determined by the board of directors with assistance from management and, in part, on input from an independent third-party valuation firm. We believe that our board of directors has the relevant experience and expertise to determine the fair value of our common stock prior to the Merger.
Given the absence of a public trading market of our common stock prior to the Merger, and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (“Practice Aid”), our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors include:
contemporaneous valuations of our common stock performed by independent third-party specialists;
the prices, rights, preferences, and privileges of our convertible preferred stock relative to those of our common stock;
the prices paid for common or convertible preferred stock sold to third-party investors by us and prices paid in secondary transactions for shares repurchased by us in arm’s-length transactions, including any tender offers, if any;
the lack of marketability inherent in our common stock;
our actual operating and financial performance;
our current business conditions and projections;
the hiring of key personnel and the experience of our management;
the history of the company and the introduction of new products;
our stage of development;
the likelihood of achieving a liquidity event, such as an initial public offering (IPO), a merger, or acquisition of our company given prevailing market conditions;
the operational and financial performance of comparable publicly traded companies; and
the U.S. and global capital market conditions and overall economic conditions.
In valuing Legacy Joby common stock, the fair value of our business was determined using various valuation methods, including combinations of income, market and cost approaches with input from management. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate that is derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or similar business operations as of each valuation date and is adjusted to reflect the risks inherent in our cash flows. The market approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple is determined and then applied to the subject company’s financial forecasts to estimate the value of the subject company.
The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date. Based on our early stage of development and other relevant factors, we determined that the Option Pricing Method (“OPM”) was the most appropriate method for allocating our enterprise value to determine the estimated fair value of Legacy Joby common stock. OPM uses option theory to value the various classes of a company’s securities in light of their respective claims to the enterprise value. Total stockholders’ equity value is allocated to the various share classes based upon their respective claims on a series of call options with strike prices at various value levels depending upon the rights and preferences of each class. A Black-Scholes closed form option pricing model is typically employed in this analysis, with an option term assumption that is consistent with Management’s expected time to a liquidity event and a volatility assumption based on the estimated stock price volatility of a peer group of comparable public companies over a similar term.
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In determining the estimated fair value of Legacy Joby common stock, our board of directors also considered the fact that our stockholders could not freely trade Legacy Joby common stock in the public markets. Accordingly, we applied discounts to reflect the lack of marketability of Legacy Joby common stock based on the weighted-average expected time to liquidity. The estimated fair value of Legacy Joby common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.
Application of these approaches and methodologies involves the use of estimates, judgments and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses and future cash flows, discount rates, market multiples, the selection of comparable public companies and the probability of and timing associated with possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of Legacy Joby common stock. Following the Merger, it will not be necessary to determine the fair value of Joby Aviation common stock as the shares will be traded in a public market.
Changes in the Estimated Fair Value of Legacy Joby Common Stock During the Periods Presented
Below we present a discussion regarding material differences between the valuations used to determine the pre-merger fair value of our common stock relative to the fair value implied by the Merger.
Valuation History - In April 2020 and September 2020, Legacy Joby's common stock fair value was determined to be $2.92 per share and $4.86 per share, respectively.
In 2020, the Legacy Joby common stock price increased mainly due to gradual improvements we made in research and development. In 2020, we entered into a strategic partnership with Toyota, whose partnership brings scaled manufacturing experience and quality to our operations. Further in 2020, to our knowledge, we became the first company that has agreed to a G-1 certification basis for aircraft with the Federal Aviation Administration (“FAA”). In addition, we received the U.S. Air Force’s first military airworthiness approval for an eVTOL passenger aircraft.
Beginning in December 2020, we started to investigate entering into a transaction with a SPAC. From December 2020 through January 2021, there were initial SPAC meetings, and a non-binding LOI was executed on January 22, 2021. The LOI set forth the basic terms of a potential transaction between Legacy Joby and RTP, contemplating a pre-money equity value of $5,000.0 million for Legacy Joby as well as a PIPE Investment of between $310 million and $510 million in the aggregate, subject to finalization of due diligence, negotiation and execution of definitive agreements, and obtention of sufficient commitments from PIPE Investors. On January 11 2021, in connection with the acquisition of Uber Elevate, we performed a 409A valuation of Legacy Joby common stock, which was determined to be $8.23 per share.
On February 23, 2021 we entered into the Merger Agreement with RTP. The fair value of our common stock implied in the Merger Agreement at the close of the transaction was estimated at approximately $9.84 per share. On February 23, 2021, we performed a 409A valuation of Legacy Joby common stock, which was determined to be $8.60 per share. Subsequently, on June 14, 2021 we performed a 409A valuation of Legacy Joby common stock, which was determined to be $8.97 per share.
Below is the summary of 409A valuation reports performed during 2020 and 2021.
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|
|
|
|
409A Valuation Date
|
|
Common Stock Fair Value
|
|
12/23/2019 (1)
|
|
$
|
2.28
|
|
4/20/2020 (2)
|
|
$
|
2.92
|
|
9/30/2020 (2)
|
|
$
|
4.86
|
|
1/11/2021 (3)
|
|
$
|
8.23
|
|
2/23/2021 (4)
|
|
$
|
8.60
|
|
6/14/2021 (5)
|
|
$
|
8.97
|
|
(1) For the December 2019 409A valuation, we applied a market-based valuation approach to determine the common stock fair value. To arrive at the fair value of common stock, Legacy Joby assigned 100% weighting to OPM.
(2) For the April 2020 and September 2020 409A valuations, we applied valuation methods that relied on a continuing operations scenario approach, whereby during the periods discussed above, the time to liquidity was approximately two to two and half years, as adjusted as appropriate depending on the valuation date.
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(3) With the signing of the LOI with a SPAC on January 22, 2021, we adjusted our valuation assumptions in the January 11, 2021 409A valuation report. Specifically, beginning with the January 11, 2021 409A valuation, we utilized a combination approach relying on (1) a continued operations scenario and (2) a transaction scenario, which we described as the hybrid method (the “Hybrid Method”). The Hybrid Method is appropriate for a company expecting a near term liquidity event, but where, due to market or other factors, the likelihood of completing the liquidity event is uncertain. The Hybrid Method is also appropriate when various possible future outcomes are assumed by management. The Hybrid Method considers a company’s going concern nature, stage of development and the company’s ability to forecast near and long-term future liquidity scenarios. The Hybrid Method was deemed the most appropriate due to the execution of the LOI. The outcomes of each scenario are assigned a probability, and a future equity value under each outcome is then estimated.
A discussion of the two scenarios used in the Hybrid Method as of January 11, 2021 is as follows:
Continuing Operations Scenario:
Under the continuing operations scenario (the “Continuing Operations Scenario”), we utilized an income approach to estimate the enterprise value of Legacy Joby and the option pricing model to allocate the resulting enterprise value to the various classes of securities of Legacy Joby, resulting in a per share value of $7.83 per common share, prior to a discount for the lack of marketability (“DLOM”) being applied. The OPM assumptions included a time to liquidity event of two years and a volatility of 71.2%. The term considers the need for additional capital in this scenario. A DLOM of 22.5% was applied based on various put option models assuming a term of two years and a common stock volatility of 78.7% resulting in a per common share value of $6.07 at January 11, 2021 under the Continuing Operations Scenario.
Transaction Scenario:
Under the transaction scenario (the “Transaction Scenario”), we assumed a pre-money equity value of $5,000.0 million, which resulted in a per share value of $9.79 per common share, prior to a discount for the lack of marketability being applied. A DLOM of 8.5% was applied based on various put option models assuming a term of four months and overall company volatility of 66.1% as well as a present value factor of 10.5% based on the same term, resulting in a per common share value of $8.96 at January 2021 under the Transaction Scenario.
The application of the Hybrid Method resulted in a per common share value of $8.23 at January 11, 2021. Such value was derived based on a weighted average value assigned to the Continuing Operations Scenario at $6.07 (25%) and Transaction Scenario at $8.96 (75%). The weightings reflected the uncertainty regarding the potential transaction between us and RTP, taking into account the non-binding nature of the LOI and the preliminary stage of the due diligence and PIPE Investment processes. We entered into the Merger Agreement with RTP on February 23, 2021, at which point we believed the likelihood of the consummation of the Merger increased significantly.
(4) In performing the February 23, 2021 409A valuation, we utilized the same methodology and approach as for the January 11, 2021 409A valuation, with the exception of the following updates to the assumptions and inputs:
Continuing Operations Scenario:
We utilized an income approach to estimate the enterprise value of Legacy Joby and the option pricing model to allocate the resulting enterprise value to the various classes of securities of Legacy Joby, resulting in a per share value of $7.99 per common share, prior to a discount for the lack of marketability (“DLOM”) being applied. The OPM assumptions included a time to liquidity event of 1.85 years and a volatility of 72.6%. The term considers the need for additional capital in this scenario. A DLOM of 22.5% was applied based on various put option models assuming a term of two years and a common stock volatility of 80.1% resulting in a per common share value of $6.17 at February 23, 2021 under the Continuing Operations Scenario.
Transaction Scenario:
We assumed a pre-money equity value of $5,000.0 million, which resulted in a per share value of $9.63 per common share, prior to a discount for the lack of marketability being applied. A DLOM of 8.0% was applied based on various put option models assuming a term of four months and overall company volatility of 58.8% as well as a present value factor of 10.5% based on the same term, resulting in a per common share value of $8.86 at February 23, 2021.
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The application of the Hybrid Method resulted in a per common share value of $8.60 at February 23, 2021. Such value was derived based on a weighted average value assigned to the Continuing Operations Scenario at $6.17 (10%) and Transaction Scenario at $8.86 (90%). The weightings reflected the decreased uncertainty regarding the potential transaction between us and RTP as compared to the January 11, 2021 valuation, taking into account the signing of the Merger Agreement with RTP on February 23, 2021, at which point we believed the likelihood of the consummation of the Merger increased significantly.
(5) In performing the June 14, 2021 409A valuation, we utilized the same methodology and approach as for the February 23, 2021 409A valuations, with the exception of the following updates to the assumptions and inputs:
Continuing Operations Scenario:
We utilized an income approach to estimate the enterprise value of Legacy Joby and the option pricing model to allocate the resulting enterprise value to the various classes of securities of Legacy Joby, resulting in a per share value of $8.40 per common share, prior to a discount for the lack of marketability (“DLOM”) being applied. The OPM assumptions included a time to liquidity event of 1.55 years and a volatility of 76.2%. The term considers the need for additional capital in this scenario. A DLOM of 21.5% was applied based on various put option models assuming a term of 1.55 years and a common stock volatility of 83.5% resulting in a per common share value of $6.60 at June 14, 2021 under the Continuing Operations Scenario.
Transaction Scenario
We assumed a pre-money equity value of $4,860.0 million, which resulted in a per share value of $9.72 per common share, prior to a discount for the lack of marketability being applied. A DLOM of 5.0% was applied based on various put option models assuming a term of 49 days and overall company volatility of 60.2% as well as a present value factor of 10.5% based on the same term, resulting in a per common share value of $9.24 at June 14, 2021.
The application of the Hybrid Method resulted in a per common share value of $8.97 at June 14, 2021. Such value was derived based on a weighted average value assigned to the Continuing Operations Scenario at $6.60 (10%) and Transaction Scenario at $9.24 (90%). The weightings reflected the decreased uncertainty regarding the potential transaction between us and RTP as compared to the January 11, 2021 valuation, taking into account the signing of the Merger Agreement with RTP on February 23, 2021, at which point we believed the likelihood of the consummation of the Merger increased significantly.
Impact on Measurement of Share-based Payment Awards - We granted approximately 14.3 million options during the year ended December 31, 2020. During the nine months ended on September 30, 2021, we granted approximately 10.6 million restricted stock units. The following chart reflects the date of the grant, the number of awards granted, and the fair value of the underlying common stock used to value such awards for accounting purposes. Such awards were measured at fair value on the date of grant.
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|
|
|
|
|
|
|
|
|
|
Date of Option Grant
|
|
Number of Options
Granted
|
|
|
Number of
RSUs granted
|
|
Fair Value of common stock
|
|
2/10/2020
|
|
|
129,644
|
|
|
|
—
|
|
$
|
2.54
|
|
4/20/2020
|
|
|
6,004,285
|
|
|
|
—
|
|
$
|
2.92
|
|
6/23/2020
|
|
|
1,035,430
|
|
|
|
—
|
|
$
|
3.68
|
|
9/3/2020
|
|
|
1,159,716
|
|
|
|
—
|
|
$
|
4.54
|
|
11/10/2020
|
|
|
3,419,772
|
|
|
|
—
|
|
$
|
6.20
|
|
12/18/2020
|
|
|
2,542,263
|
|
|
|
—
|
|
$
|
7.45
|
|
12/26/2020
|
|
|
13,047
|
|
|
|
—
|
|
$
|
7.71
|
|
1/19/2021
|
|
|
—
|
|
|
|
3,885,684
|
|
$
|
8.30
|
|
2/23/2021
|
|
|
—
|
|
|
|
3,330,293
|
|
$
|
8.60
|
|
4/5/2021
|
|
|
—
|
|
|
|
1,219,553
|
|
$
|
8.73
|
|
6/14/2021
|
|
|
—
|
|
|
|
2,167,700
|
|
$
|
8.97
|
|
To evaluate the fair value of the underlying shares for grants taking place on dates between the dates of any two independent valuations, a linear interpolation framework was used to evaluate the fair value of the underlying shares granted between such two valuation dates. We determined that a linear interpolation was appropriate as there were no material changes in our business, research and development activities, cost structure or financial condition in the intervening period. Other than the non-binding LOI, which was not signed between us and RTP until January 22, 2021, there were no material transactions during the intervening period that would impact our valuation.
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Accounting for Long-Lived Assets
In accounting for long-lived assets, we make estimates about the expected useful lives, projected residual values, and the potential for impairment. In estimating useful lives and residual values of our property and equipment, we have relied upon actual industry experience with the same or similar property and equipment types and our anticipated utilization of the property and equipment. Changing market prices of new and used property and equipment, government regulations, and changes in our maintenance program or operations could result in changes to these estimates.
Our long-lived assets are evaluated for impairment when events and circumstances indicate the assets may be impaired. Indicators include operating or cash flow losses, significant decreases in market value, or changes in technology.
To determine if impairment exists for our property and equipment used in operations, we group our property and equipment by type (the lowest level for which there are identifiable cash flows) and then estimate their future cash flows based on projections of capacity, asset age, maintenance requirements, and other relevant conditions. An impairment occurs when the sum of the estimated undiscounted future cash flows are less than the aggregate carrying value of the assets. The impairment loss recognized is the amount by which the assets' carrying value exceeds its estimated fair value. We estimate our property and equipment's fair value using third party valuations which consider the effects of the current market environment, age of the assets, and marketability.
We have not identified any events and circumstances that would indicate that our long-lived assets may be impaired. Accordingly, we have not recorded any impairment charge our existing property and equipment during the nine months ended September 30, 2021.
Recent Accounting Pronouncements
See Note 2 of our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recently issued accounting pronouncements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors, as defined in Item 303(a)(4)(ii) of Regulation S-K.
44
Emerging Growth Company Accounting Election
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act of 1933, as amended (the "Securities Act") or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Reinvent is an “emerging growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the benefits of this extended transition period,
We expect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public business entities and non-public business entities until the earlier of the date we (a) are no longer an emerging growth company and (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other things: (a) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act: (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
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