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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-40326
TuSimple Holdings Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware86-2341575
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9191 Towne Centre Drive, Suite 600
San Diego, CA
92122
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (619) 916-3144
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading
Symbol(s)
 Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share  TSP
 
 
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
 
Non-accelerated filerxSmaller reporting companyo
    
Emerging growth companyx  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2021, the number of shares of the registrant’s Class A common stock outstanding was 189,026,565 and the number of shares of the registrant’s Class B common stock outstanding was 24,000,000.



Table of Contents
  Page
 
 
 
 
 
 
 
 
 
 
i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” or the negative version of these words and similar expressions are intended to identify forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our future performance, including our revenue, cost of revenue, and operating expenses;
the sufficiency of our cash and cash equivalents to meet our operating requirements;
our ability to scale our Autonomous Freight Network, which we refer to as our AFN;
our ability to attract new users to services provided on our AFN;
our ability to increase reservations for our purpose-built L4 autonomous semi-trucks;
our ability to convert reservations for our purpose-built L4 autonomous semi-trucks into purchases;
our ability to fulfill all reservations for our purpose-built L4 autonomous semi-trucks according to each customer’s delivery schedule;
our ability to effectively manage our growth and future expenses;
the estimated timing for when additional routes will be available;
our ability to compete in a market that is rapidly evolving and subject to technological developments;
our estimated total addressable market, the market for autonomous truck and freight transport solutions, and our market position;
our ability to successfully collaborate with business partners;
our ability to obtain, maintain, protect, and enforce our intellectual property;
our ability to comply with modified or new laws and regulations applicable to our business or industry;
our ability to attract and retain employees with the technical skills we require and other key personnel;
our ability to successfully initiate our driver-out pilot programs on the timeline we expect;
our anticipated investments in research and development and sales and marketing, and the effect of these investments on our results of operations;
the increased expenses associated with being a public company; and
the potential impact of the COVID-19 pandemic on our, and our partners’, business and results of operations, and on the global economy generally.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
ii


Except as required by applicable law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by applicable law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
iii


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TuSimple Holdings Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
December 31,
2020
September 30,
2021
ASSETS  
Current assets:  
Cash and cash equivalents$310,815 $1,412,128 
Accounts receivable, net1,144 1,704 
Prepaid expenses and other current assets3,816 15,900 
Amounts due from related parties3,708  
Total current assets319,483 1,429,732 
Property and equipment, net22,116 29,419 
Other assets4,986 5,875 
Total assets$346,585 $1,465,026 
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
 STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable$4,542 $4,416 
Amounts due to related parties4,360  
Amounts due to joint development partners1,355 6,997 
Accrued expenses and other current liabilities22,961 33,106 
Short-term debt4,623 813 
Warrants liability42,452  
Capital lease liabilities, current805 796 
Total current liabilities81,098 46,128 
Capital lease liabilities, noncurrent3,767 3,045 
Other liabilities2,402 5,814 
Total liabilities87,267 54,987 
Commitments and contingencies (Note 4)
Redeemable convertible preferred stock, $0.0001 par value; 138,102,770 and zero shares
 authorized as of December 31, 2020 and September 30, 2021; 102,074,703 and zero
 shares issued and outstanding as of December 31, 2020 and September 30, 2021,
 respectively; aggregate liquidation preference of $598,842 and $0 as of
 December 31, 2020 and September 30, 2021, respectively
664,791  
Stockholders' equity (deficit):
Common stock, $0.0001 par value; 361,897,230 and 4,876,000,000 Class A shares
 authorized as of December 31, 2020 and September 30, 2021; 60,543,337 and
 188,994,830 shares issued and outstanding as of December 31, 2020 and
 September 30, 2021, respectively; zero and 24,000,000 Class B shares authorized as of
 December 31, 2020 and September 30, 2021; zero and 24,000,000 shares issued
 and outstanding as of December 31, 2020 and September 30, 2021, respectively
6 21 
Additional paid-in-capital 2,432,613 
Accumulated other comprehensive loss(301)(238)
Accumulated deficit(405,178)(1,022,357)
Total stockholders’ equity (deficit)(405,473)1,410,039 
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$346,585 $1,465,026 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1


TuSimple Holdings Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 20202021 20202021
Revenue$584 $1,785 $1,106 $4,211 
Costs and expenses:
Cost of revenue1,330 3,487 2,958 8,715 
Research and development60,041 84,506 100,202 204,774 
Sales and marketing459 910 1,139 2,629 
General and administrative15,271 28,831 27,204 83,537 
Total costs and expenses77,101 117,734 131,503 299,655 
Loss from operations(76,517)(115,949)(130,397)(295,444)
Change in fair value of related party convertible loan(11,849) (11,849) 
Change in fair value of warrants liability(970) (970)(326,900)
Gain on loan extinguishment   4,183 
Other income (expense), net(116)459 (81)982 
Loss before provision for income taxes(89,452)(115,490)(143,297)(617,179)
Provision for income taxes    
Net loss(89,452)(115,490)(143,297)(617,179)
Accretion of redeemable convertible preferred stock(11,943) (11,943)(4,135)
Net loss attributable to common stockholders$(101,395)$(115,490)$(155,240)$(621,314)
Net loss per share attributable to common stockholders, basic and diluted
$(1.73)$(0.54)$(2.70)$(4.08)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
58,606,231 212,802,379 57,584,574 152,469,098 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2


TuSimple Holdings Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2020 2021 2020 2021
Net loss$(89,452)$(115,490)$(143,297)$(617,179)
Other comprehensive income (loss):
Foreign currency translation adjustment285 (73)475 $63 
Comprehensive loss$(89,167)$(115,563)$(142,822)$(617,116)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


TuSimple Holdings Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
 
Redeemable Convertible
Preferred Stock
  Common Stock
 SharesAmount  SharesAmount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
Total
TuSimple
Holdings Inc.
Stockholders’
Deficit
 
Noncontrolling
Interests
 
Total
Stockholders’
Deficit
Balance as of December 31, 2019
74,939,388 $293,736 56,516,425 $6 $ $(658)$(218,718)$(219,370)$(44)$(219,414)
Issuance of common stock from exercise of options— — 2,125,000 — — — — — — — 
Stock-based compensation— — — — 1,227 — — 1,227 — 1,227 
Acquisition of noncontrolling interest in subsidiary— — — — — (44)— (44)44 — 
Foreign currency translation adjustment— — — — — 2 — 2 — 2 
Net loss— — — — — — (25,761)(25,761)— (25,761)
Balance as of March 31, 202074,939,388 293,736 58,641,425 6 1,227 (700)(244,479)(243,946) (243,946)
Stock-based compensation— — — — 453 — — 453 — 453 
Foreign currency translation adjustment— — — — — 188 — 188 — 188 
Net loss— — — — — — (28,084)(28,084)— (28,084)
Balance as of June 30, 202074,939,388 293,736 58,641,425 6 1,680 (512)(272,563)(271,389) (271,389)
Issuance of Series D-1 redeemable convertible preferred shares, net of issuance cost1,849,095 3,057 — — — — — — — — 
Issuance of ordinary shares from exercise of options— — 1,616 — — — — — — — 
Issuance of restricted ordinary shares— — 1,899,680 — — — — — — — 
Accretion of redeemable convertible preferred shares to redemption value— 11,943 — — (9,325)— (2,618)(11,943)— (11,943)
Stock-based compensation— — — — 7,645 — — 7,645 — 7,645 
Foreign currency translation adjustment— — — — — 285 — 285 — 285 
Net loss— — — — — — (89,452)(89,452)— (89,452)
Balance as of September 30, 202076,788,483 $308,736 60,542,721 $6 $ $(227)$(364,633)$(364,854)$ $(364,854)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4


TuSimple Holdings Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
 Redeemable Convertible
Preferred Stock
  Common Stock       
 Shares  Amount   SharesAmountAdditional Paid-in Capital  Accumulated Other Comprehensive Income (Loss)  Accumulated Deficit  Total Stockholders’ Equity (Deficit)
Balance as of December 31, 2020
102,074,703 $664,791 60,543,337 $6 $ $(301)$(405,178)$(405,473)
Issuance of Series E redeemable convertible preferred stock, net of issuance costs4,650,999 61,631 — — — — — — 
Issuance of Series E redeemable convertible preferred stock from the exercise of warrants9,477,073 379,084 — — — — — — 
Issuance of Series E-2 redeemable convertible preferred stock from the exercise of warrants4,331,644 173,275 — — — — — — 
Issuance of common stock from exercise of options— — 60,616 — 1 — — 1 
Vesting of early exercised stock options— — — 21 — — 21 
Accretion of redeemable convertible preferred stock to redemption value— 4,135 — (4,135)— — (4,135)
Stock-based compensation— — — 6,289 — — 6,289 
Foreign currency translation adjustment— — — — 911 — 911 
Net loss— — — — — (385,160)(385,160)
Balance as of March 31, 2021120,534,419 1,282,916 60,603,953 6 2,176 610 (790,338)(787,546)
Vesting of early exercised stock options— — — 21 — — 21 
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering(120,534,419)(1,282,916)120,534,419 12 1,282,904 — — 1,282,916 
Issuance of common stock in connection with initial public offering, net of offering costs— — 27,027,027 3 1,027,371 — — 1,027,374 
Issuance of common stock related to private placement— — 874,999 — 35,000 — — 35,000 
Stock-based compensation— — — — 52,509 — — 52,509 
Foreign currency translation adjustment— — — — — (775)— (775)
Net loss— — — — — (116,529)(116,529)
Balance as of June 30, 2021  209,040,398 21 2,399,981 (165)(906,867)1,492,970 
Vesting of early exercised stock options— — — 21 — — 21 
Issuance of common stock related to option exercise— 183,648 — 529 — — 529 
Issuance of common stock related to release of RSUs and SVAs— 3,770,784 — — — — — 
Stock-based compensation— — — — 32,082 — — 32,082 
Foreign currency translation adjustment— — — — — (73)— (73)
Net loss— — — — — (115,490)(115,490)
Balance as of September 30, 2021 $ 212,994,830 $21 $2,432,613 $(238)$(1,022,357)$1,410,039 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


TuSimple Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Nine Months Ended September 30,
 20202021
Cash flows from operating activities:  
Net loss$(143,297)$(617,179)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation9,325 90,880 
Accretion of asset retirement obligations27  
Depreciation and amortization5,611 6,768 
Loss on disposal of property and equipment127  
Non-cash research and development expense32,325  
Change in fair value of warrants liability970 326,900 
Gain on loan extinguishment (4,183)
Change in fair value of related party convertible loan11,849  
Changes in operating assets and liabilities:
Accounts receivable(298)(560)
Prepaid expenses and other current assets1,251 (12,114)
Other assets(339)(659)
Accounts payable1,359 (313)
Amounts due to/from related parties(274) 
Amounts due to joint development partners 5,642 
Accrued expenses and other current liabilities15,317 16,488 
Other liabilities1,263 1,965 
Net cash used in operating activities(64,784)(186,365)
Cash flows from investing activities:
Purchases of property and equipment(2,881)(12,218)
Purchases of intangible assets(207)(302)
Proceeds from disposal of property and equipment178 100 
Net cash used in investing activities(2,910)(12,420)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of offering costs3,057 54,693 
Proceeds from exercise of warrants for redeemable convertible preferred stock 183,007 
Proceeds from issuance of related party convertible loan50,000  
Proceeds from issuance of warrants11,943  
Proceeds from early exercised stock options 782 
Proceeds from issuance of common stock upon initial public offering, net of offering costs 1,030,965 
Proceeds from issuance of common stock related to private placement 35,000 
Proceeds from related party loan5,000  
Proceeds from loans4,134  
Return of guarantee deposit on related party loan 3,715 
Principal payments on related party loan (4,398)
Payment of third-party costs in connection with initial public offering (2,812)
Principal payments on capital lease obligations(528)(586)
Principal payments on other liabilities(38)(353)
Net cash provided by financing activities73,568 1,300,013 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(324)55 
Net increase in cash, cash equivalents, and restricted cash5,550 1,101,283 
Cash, cash equivalents, and restricted cash - beginning of period64,110 312,351 
Cash, cash equivalents, and restricted cash - end of period$69,660 $1,413,634 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


TuSimple Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Nine Months Ended September 30,
 20202021
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents$68,910 $1,412,128 
Restricted cash included in prepaid expenses and other current assets750 1,506 
Total cash and cash equivalents, and restricted cash$69,660 $1,413,634 
Supplemental disclosure of cash flow information:
Cash paid for interest$850 $575 
Supplemental schedule of non-cash investing and financing activities:
Acquisitions of property and equipment included in current liabilities$1,526 $1,987 
Accretion of redeemable convertible preferred stock11,943 4,135 
Vesting of early exercised stock options 63 
Exercise of liability-classified warrants 369,352 
Conversion of redeemable convertible preferred stock to common stock upon initial public offering 1,282,916 
Cashless exercise of stock options for common stock975  
Issuance costs incurred in connection with initial public offering included in current liabilities 779 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


TuSimple Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
TuSimple Holdings Inc. (“TuSimple” or the “Company”) is principally engaged in the operation and development of autonomous trucks and an autonomous freight network (“AFN”). The Company is headquartered in San Diego, California.
TuSimple was originally incorporated as Tusimple (Cayman) Limited, a limited liability company in the Cayman Islands, on October 25, 2016. In February 2021, the Company deregistered as a Cayman Islands exempted company and continued and domesticated as a corporation incorporated under the laws of the State of Delaware (the “Domestication”). The business, assets and liabilities of the Company and its subsidiaries on a consolidated basis, as well as its principal locations and fiscal year, were the same immediately after the Domestication as they were immediately prior to the Domestication. In addition, the directors and executive officers of the Company immediately after the Domestication were the same individuals who were directors and executive officers, respectively, of the Company immediately prior to the Domestication.
Initial Public Offering and Private Placement
On April 19, 2021, the Company closed its initial public offering (“IPO”) and concurrent private placement, in which it issued and sold 27,027,027 shares and 874,999 shares, respectively, of its authorized Class A common stock at $40.00 per share, resulting in net proceeds of $1.0 billion after deducting underwriting discounts and commissions of $50.1 million and offering costs.
Upon closing of the IPO, (i) the Company filed an amended and restated certificate of incorporation, which authorized 4,876,000,000 shares of Class A common stock and reclassified all outstanding common stock into Class A common stock, authorized 24,000,000 shares of Class B common stock, which are not publicly traded, and authorized 100,000,000 shares of undesignated preferred stock, (ii) Xiaodi Hou and Mo Chen (the “Founders”) each exchanged 12,000,000 shares of their newly designated Class A common stock for an equivalent number of shares of Class B common stock, and (iii) all shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into 120,534,419 shares of Class A common stock.
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. The holders of Class A common stock are entitled to one vote per share and the holders of Class B common stock are entitled to 10 votes per share. Additionally, each share of Class B common stock will automatically convert, on a one-for-one basis, into shares of Class A common stock on the earliest of (i) the date specified by a vote of the holders of Class B common stock representing 75% of the outstanding shares of Class B common stock, (ii) the date that is between 90 days and 270 days, as determined by the board of directors, after the death or incapacitation of the last Founder to die or become incapacitated, or (iii) the date that is between 61 days and 180 days, as determined by the board of directors, after the date on which the number of outstanding shares of Class B common stock held by the Founders (or their permitted affiliates) is less than 12,000,000 shares.
Upon the closing of the IPO, the Company recognized $42.6 million of stock-based compensation expense related to stock options, restricted stock units (“RSUs”), and share value awards (“SVAs”), for which the time-based vesting conditions had been satisfied or partially satisfied and the performance-based conditions were satisfied upon the closing of the IPO.
Additionally, the Company recorded $4.3 million within operating expenses to former employees in connection with post-employment agreements for which payment was contingent upon the occurrence of an IPO or Sale Event (as such terms are defined in the post-employment agreements).
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements (“Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 16, 2021 (the “Prospectus”).
8


The condensed consolidated balance sheet as of December 31, 2020, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP. In management’s opinion, the accompanying Financial Statements reflect all normal recurring adjustments necessary for their fair presentation. Other than described below, there have been no changes to the Company’s significant accounting policies described in the Prospectus that have had a material impact on the Company’s Financial Statements.
Stock-Based Compensation
The Company accounts for stock-based compensation expense in accordance with the fair value recognition and measurement provisions of GAAP, which requires compensation cost for the grant-date fair value of stock-based awards to be recognized over the requisite service period. The Company determines the fair value of stock-based awards granted or modified on the grant date (or modification date, if applicable) at fair value, using appropriate valuation techniques.
Time-Based Service Awards
For stock-based awards with time-based vesting conditions only, generally being RSUs and stock options, stock-based compensation is recognized straight-line over the requisite service period, which is generally four years. The fair value of RSUs is measured on the grant date based on the closing fair market value of the Company's Class A common stock. The fair value of stock option awards is estimated on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected stock price volatility over the term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The Company accounts for forfeitures as they occur instead of estimating the number of awards expected to be forfeited.
Performance-Based Awards
The Company has granted RSUs, SVAs, and stock options that vest only upon the satisfaction of both time-based service and performance-based conditions. The time-based service condition for these awards generally is satisfied over four years The performance-based conditions, other than with respect to the CEO Performance Award discussed in Note 6. Stock Based Compensation, are satisfied upon the occurrence of a qualifying event, defined as the earlier of (i) the closing of certain specific liquidation or change in control transactions, or (ii) an IPO. The Company records stock-based compensation expense for performance-based equity awards such as RSUs, SVAs, and stock options on an accelerated attribution method over the requisite service period, which is generally four years, and only if performance-based conditions are considered probable to be satisfied. Upon completion of the IPO, the Company recorded a cumulative one-time stock-based compensation expense determined using the grant-date fair values. Stock-based compensation related to remaining time-based service after the qualifying event is recorded over the remaining requisite service period. For performance-based RSUs and SVAs, the Company determines the grant-date fair value as the fair value of the Company’s common stock on the grant date.
For performance-based awards with a vesting schedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense associated with each tranche is recognized over the longer of (i) the expected achievement period for the operational milestones for such tranche and (ii) the expected achievement period for the related market capitalization milestone determined on the grant date, beginning at the point in time when the relevant operational milestones are considered probable of being met. If such operational milestones become probable any time after the grant date, the Company will recognize a cumulative catch-up expense from the grant date to that point in time. If the related market capitalization milestone is achieved earlier than its expected achievement period and the achievement of the related operational milestones, then the stock-based compensation expense will be recognized over the expected achievement period for the operational milestones, which may accelerate the rate at which such expense is recognized. The fair value of such awards is estimated on the grant date using Monte Carlo simulations. Refer to Note 6. Stock Based Compensation for further information.
Employee Stock Purchase Plan ("ESPP")
The Company recognizes stock-based expense related to shares issued pursuant to the ESPP on a straight-line basis over the offering period. The ESPP provides for six-month offering periods. The ESPP allows eligible employees to purchase shares of Class A common stock at a 15% discount on the lower of our stock price on either (i) the offering period beginning date or (ii) the purchase date. No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of Class A common stock based on the fair market value per share of Class A common stock at the beginning of an offering for each calendar year such purchase right is outstanding or 1,500 shares. The Company estimates the fair value of shares to be issued under the ESPP based on a combination of options valued using the Black-Scholes option-pricing model. Volatility is determined over an expected term of six months based on the Company's historical volatility. The expected term is estimated based on the contractual term.
9


Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and the accompanying notes. Restricted cash has been reclassified to prepaid expenses and other current assets and accrued expenses incurred under joint development agreements have been reclassified to be presented separately from amounts due to related parties.
Recently Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted the guidance as of January 1, 2021 with no material impact to the Financial Statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes, for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to the Financial Statements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases as modified by subsequently issued ASUs 2018-01, 2018-10 and 2018-11. The core principle of the ASU improves transparency and comparability related to the accounting and reporting of leasing arrangements, including balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months, among other changes.
For the Company, the effective date of these ASUs is for fiscal years beginning after December 15, 2021 and early adoption is permitted. The Company has elected not to early adopt these ASUs and plans to elect the modified retrospective application by recording a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, the Company expects to avail itself of the package of practical expedients allowing the Company to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) the initial direct costs for any existing leases. The Company anticipates recognizing material right-of-use assets and related liabilities upon adoption.
Note 2. Fair Value Measurements
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation (in thousands):
 As of December 31, 2020
 TotalLevel 1Level 2Level 3
Assets:    
Cash equivalents:    
Certificates of deposit$279,279 $279,279 $ $ 
Total$279,279 $279,279 $ $ 
Liabilities:
Warrants liability$42,452 $ $ $42,452 
Total$42,452 $ $ $42,452 
 As of September 30, 2021
 TotalLevel 1Level 2Level 3
Assets:    
Cash equivalents:    
Certificates of deposit$ $ $ $ 
Money market funds1,147,989 1,147,989   
Total$1,147,989 $1,147,989 $ $ 
10


Warrants Liability
As of December 31, 2020, the fair value of the warrants liability was estimated using the Black-Scholes option-pricing model. The fair value of the underlying redeemable convertible preferred stock used within the Black-Scholes option-pricing model was estimated using a hybrid between a probability-weighted expected return method (“PWERM”) and option pricing model (“OPM”), estimating the probability-weighted value across multiple scenarios, while using an OPM to estimate the allocation of value within one or more of these scenarios. Discrete future outcomes considered under the PWERM include an IPO of the Company’s common stock, as well as continued operation as a private company. The significant unobservable inputs into the valuation model include the timing and probability of occurrence of these discrete future outcomes and a discount for the lack of marketability of the redeemable convertible preferred stock.
In February and March 2021, Traton SE (“Traton”) and Navistar, Inc. (“Navistar”) exercised warrants to purchase 4,331,644 and 9,477,073 shares of Series E-2 and Series E redeemable convertible preferred stock at an exercise price of $11.31 and $14.14, resulting in proceeds of $49.0 million and $134.0 million, respectively. Immediately prior to their exercise, the fair value of the warrants liability was remeasured using the Black-Scholes model. The warrants exercised by Traton represented only a portion of their total and the unexercised warrants expired as of the exercise date. As of September 30, 2021, there were no warrants outstanding. Refer to Note 5. Redeemable Convertible Preferred Stock, Preferred Stock Warrants, and Stockholders’ Equity for further information.
The Company used the following assumptions in the model:
 As of
 December 31,
2020
February 26,
2021
March 19,
2021
Discount for lack of marketability
9.00% - 30.00%
Fair value of underlying securities$14.14$40.00$40.00
Expected volatility
53.90% - 76.90%
62.95%60.85%
Expected term (in years)
0.33 - 1.91
1.760.79
Risk-free interest rate
0.10% - 0.13%
0.14%0.08%
The following table sets forth a summary of the changes in the estimated fair value of the Company’s warrants liability (in thousands):
Balance as of December 31, 2020$42,452 
Change in fair value of warrants326,900 
Exercises during the period(369,352)
Balance as of September 30, 2021$ 
Note 3. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net as of December 31, 2020 and September 30, 2021, was as follows (in thousands):
 As of
 December 31,
2020
September 30,
2021
Electronic equipment$11,429 $12,396 
Office and other equipment6,152 8,975 
Vehicles12,775 16,369 
Leasehold improvements7,340 10,542 
Construction in progress225 2,985 
Property and equipment, gross37,921 51,267 
Accumulated depreciation and amortization(15,805)(21,848)
Property and equipment, net$22,116 $29,419 
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Depreciation and amortization expense was $1.8 million and $5.6 million for the three and nine months ended September 30, 2020, respectively, and $2.3 million and $6.7 million for the three and nine months ended September 30, 2021, respectively.
As of December 31, 2020 and September 30, 2021, property and equipment financed under capital leases was $4.6 million and $4.2 million, net of accumulated amortization of $1.8 million and $2.3 million, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of December 31, 2020 and September 30, 2021 were as follows (in thousands):
 As of
 December 31,
2020
September 30,
2021
Accrued payroll$11,941 $24,604 
Accrued professional fees7,865 3,254 
Other3,155 5,248 
Accrued expenses and other current liabilities$22,961 $33,106 
Note 4. Commitments and Contingencies
Lease Commitments
The Company has entered into various noncancelable operating leases for its facilities with various expiry dates through 2033.
Future minimum lease payments for non-cancelable operating and capital leases as of September 30, 2021 are as follows (in thousands):
Year Ending December 31,
Operating
Leases
Capital
Leases
Remainder of 2021
$1,746 $341 
20226,950 1,253 
20237,136 978 
20244,870 963 
20253,418 1,761 
Thereafter21,193  
Total minimum lease payments$45,313 5,296 
Amount representing interest(1,455)
Present value of minimum lease payments$3,841 
Rental expenses amounted to $1.5 million and $3.9 million for the three and nine months ended September 30, 2020, respectively, and $1.6 million and $4.3 million for the three and nine months ended September 30, 2021, respectively.
Joint Development Agreement
In April 2020, the Company entered into a Development Agreement (“DA”) with Scania relating to a hub-to-hub pilot program using Scania vehicles and the Company’s autonomous technology in northern Europe. Under the DA, each party will fund its own costs related to the program. There are no reimbursements paid between the parties and there are no spending floors included within the DA. Upon successful completion of the development activities, the parties intend to set up a long-term cooperation agreement covering development, maintenance, operation, and sales of self-driving systems on a global scale. The terms and conditions of such arrangement will be negotiated by the parties and included in a separate agreement.
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In July 2020, the Company entered into a Joint Development Agreement (“JDA”) with Navistar, Inc., under which the parties will work collaboratively to develop purpose-built L4 autonomous semi-trucks for the North American market. Under the JDA, the parties grant each other rights to their background intellectual property to permit them to conduct research and development activities. Pursuant to the JDA, the Company agrees to reimburse Navistar up to $10.0 million for research and development expenses incurred. Payment of reimbursements is deferred to align with the achievement of certain milestones and reimbursements due are recorded within accrued expenses in the Company’s condensed consolidated balance sheets. All reimbursements are expected to be paid within 12 months of the Company incurring the obligation. Upon successful completion of the development activities under the JDA, the parties will enter into good faith negotiations for a production license agreement. Products developed will be jointly commercialized by the parties.
As of September 30, 2021, expenses incurred to-date by Navistar for reimbursement under the JDA are $10.0 million.
Payroll Protection Program (“PPP”) Loan
In April 2020, the Company received loan proceeds in the amount of $4.1 million under the Small Business Administration Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. In October 2020, the Company applied for forgiveness of the PPP Loan and corresponding accrued interest, which was approved by the SBA in June 2021.
Post-Employment Agreements
The Company has entered into post-employment agreements with former employees under which the Company is required to pay additional compensation upon the occurrence of an IPO or Sale Event (as such terms are defined in the post-employment agreements). Since the Company’s IPO, $4.3 million has been paid to said former employees and recorded within operating expenses as of September 30, 2021 pursuant to such post-employment agreements.
Litigation and Legal Proceedings
The Company is not currently a party to any pending material litigation or other legal proceeding or claims.
Note 5. Redeemable Convertible Preferred Stock, Preferred Stock Warrants, and Stockholders’ Equity
Redeemable Convertible Preferred Stock
In January 2021, the Company issued 4,650,999 shares of Series E redeemable convertible preferred stock at $14.14 per share for aggregate proceeds of $61.6 million, net of issuance costs of $4.1 million. The shares of Series E redeemable convertible preferred stock were accreted to redemption value immediately upon issuance and $4.1 million of accretion was recorded within additional paid-in capital within the condensed consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit).
In February 2021, Traton exercised warrants to purchase 4,331,644 shares of Series E-2 redeemable convertible preferred stock at an exercise price of $