Aurora Innovation(AUR) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements The company reported a $5.8 million net loss for the six months ended June 30, 2021, primarily due to warrant liability fair value changes and administrative expenses, with $977.5 million in its Trust Account and a subsequent merger agreement with Aurora Innovation, Inc Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $501,493 | $0 | | Investment held in Trust Account | $977,543,775 | $0 | | Total Assets | $979,369,873 | $62,863 | | Liabilities & Equity | | | | Derivative warrant liabilities | $38,914,670 | $0 | | Deferred underwriting commissions | $34,212,500 | $0 | | Total liabilities | $73,994,236 | $56,483 | | Class A ordinary shares subject to possible redemption | $900,375,630 | $0 | | Total shareholders' equity | $5,000,007 | $6,380 | Unaudited Condensed Consolidated Statements of Operations Statement of Operations Highlights (Unaudited) | Item | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | General and administrative expenses | $799,535 | $1,008,041 | | Loss from operations | $(799,535) | $(1,008,041) | | Change in fair value of derivative warrant liabilities | $(2,841,130) | $(3,753,970) | | Financing costs - derivative warrant liabilities | $0 | $(1,111,480) | | Unrealized gain on investments held in Trust Account | $34,940 | $43,775 | | Net loss | $(3,605,725) | $(5,829,716) | Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity - Total shareholders' equity increased from $6,380 at December 31, 2020, to approximately $5.0 million at June 30, 2021, primarily due to IPO and private warrant sales, offset by offering costs, shares subject to redemption, and net loss[13] Unaudited Condensed Consolidated Statement of Cash Flows Cash Flow Summary for the Six Months Ended June 30, 2021 (Unaudited) | Cash Flow Category | Amount | | :--- | :--- | | Net cash used in operating activities | $(1,747,231) | | Net cash used in investing activities | $(977,500,000) | | Net cash provided by financing activities | $979,748,724 | | Net increase in cash | $501,493 | - Financing activities were driven by gross proceeds of $977.5 million from the IPO and $22.25 million from the private placement, offset by $19.7 million in offering costs paid[16] - Investing activities consisted entirely of depositing $977.5 million into the Trust Account[16] Notes to Unaudited Condensed Consolidated Financial Statements - The company, a blank check company, consummated its Initial Public Offering (IPO) on March 18, 2021, raising gross proceeds of $977.5 million[18][20] - Concurrently with the IPO, the company sold 8,900,000 private placement warrants to its sponsor for approximately $22.3 million in gross proceeds[21] - On July 14, 2021, the company entered into a definitive merger agreement with Aurora Innovation, Inc., a transaction valued at a pre-transaction equity value of $11.0 billion for Aurora[101][102] - The company accounts for its public and private warrants as derivative liabilities, which are remeasured to fair value at each reporting period, with changes recognized in the statement of operations[49][94] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's blank check status, March 2021 IPO, and subsequent merger agreement with Aurora Innovation, attributing the $5.8 million net loss to non-cash warrant liability changes, financing costs, and administrative expenses, with sufficient liquidity for operations - The company, a blank check company, completed its IPO of 97,750,000 units at $10.00 per unit on March 18, 2021, generating $977.5 million in gross proceeds[111][112] - On July 14, 2021, the company entered into a merger agreement with Aurora Innovation, Inc., which includes a $1 billion PIPE investment[117][121] Results of Operations Summary | Period | Net Loss | Key Drivers | | :--- | :--- | :--- | | Three months ended June 30, 2021 | ~$3.6 million | $2.8M change in warrant liability fair value, $0.8M G&A costs | | Six months ended June 30, 2021 | ~$5.8 million | $3.8M change in warrant liability fair value, $1.1M financing costs, $1.0M G&A costs | - As of June 30, 2021, the company had approximately $501,000 in its operating bank account and working capital of approximately $977,000[127] - A critical accounting policy is the classification of public and private warrants as derivative liabilities, which are remeasured to fair value each reporting period, impacting the statement of operations[135] Quantitative and Qualitative Disclosures About Market Risk The company states it is not subject to any material market or interest rate risk, as funds in the Trust Account are invested in short-term U.S. government treasury bills or money market funds - The company's funds held in the Trust Account are invested in U.S. government treasury bills with maturities of 185 days or less or in money market funds investing in U.S. Treasuries[147] - Due to the short-term nature of these investments, management believes there is no material exposure to interest rate risk[147] Controls and Procedures Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to warrant accounting classification, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2021[149] - The ineffectiveness is due to a material weakness related to the classification of public and private warrants as derivative liabilities rather than equity components[149] - Remediation efforts have begun, including implementing new procedures for complex transactions and establishing additional monitoring controls, aiming to remediate the weakness during fiscal 2021[151] PART II. OTHER INFORMATION Legal Proceedings On August 6, 2021, the company's counsel received a demand letter from a purported shareholder alleging that the Registration Statement for the proposed transaction with Aurora Innovation, Inc. omits material information and seeks corrective disclosures - On August 6, 2021, a purported shareholder sent a demand letter alleging that the Registration Statement for the proposed Aurora merger omits material information[153] - The demand letter requests that the company issue corrective disclosures in an amendment or supplement to the Registration Statement[153] Risk Factors The company highlights a key risk related to its warrant accounting, reclassified as derivative liabilities requiring fair value remeasurement, which can cause significant non-cash gains or losses and financial result fluctuations - A significant risk is that the company's warrants are accounted for as liabilities, and changes in their fair value could materially affect financial results[155] - This accounting treatment resulted from an SEC Staff Statement issued on April 12, 2021, which prompted a reevaluation of the warrants' classification[155] - The recurring fair value measurement of these derivative liabilities will likely cause quarterly fluctuations in the statement of operations, potentially impacting the market price of the company's securities[156] Unregistered Sales of Equity Securities and Use of Proceeds The company details unregistered sales of Founder Shares and Private Placement Warrants, confirming $977.5 million from its IPO was placed into the Trust Account as planned - Unregistered sales include 24,437,500 Class B ordinary shares (Founder Shares) issued to the Sponsor and directors, and 8,900,000 Private Placement Warrants sold to the Sponsor for approximately $22.3 million[158][159] - The company generated gross proceeds of $977.5 million from its IPO of 97,750,000 units[160] - After deducting underwriting discounts and offering expenses, $977.5 million of the net proceeds from the IPO and Private Placement was placed in the Trust Account[161] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[162] Mine Safety Disclosures This item is not applicable to the company - Not applicable[162] Other Information The company reported no other information for the period - None[162] Exhibits The report lists key exhibits filed, including the Merger Agreement with Aurora, the Warrant Agreement, and officer certifications - Key exhibits filed with the report include the Merger Agreement with Aurora, the Warrant Agreement, and officer certifications[163]