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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY 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 No. 001-39484
https://cdn.kscope.io/ff20061713e6bcb88544dac291e9f7b0-mile-20210930_g1.jpg
METROMILE, INC.
(Exact name of registrant as specified in its charter)
Delaware
84-4916134
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
425 Market Street #700
San Francisco, California
94105
(Address of principal executive offices)
(Zip Code)
(888242-5204
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
MILE
The Nasdaq Capital Market
Warrants
MILEW
The Nasdaq Capital 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
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. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
The number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding as of November 10, 2021 was 127,741,367.




METROMILE, INC.
TABLE OF CONTENTS
Page

i

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of present or historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:
our ability to recognize the anticipated benefits of the Business Combination (as defined herein), which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;
our financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder;
changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
potential disruptions to our ongoing business operations caused by the announcement, pendency or completion of the Proposed Transaction (as defined herein);
our ability to consummate the Proposed Transaction and realize the anticipated benefits thereof;
the implementation, market acceptance and success of our business model;
our ability to scale in a cost-effective manner;
developments and projections relating to our competitors and industry;
the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;
our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;
expectations regarding the time during which we will be an emerging growth company;
our future capital requirements and sources and uses of cash;
our ability to obtain funding for our future operations;
our business, expansion plans and opportunities; and
the outcome of any known and unknown litigation and regulatory proceedings.
In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of such terms or other similar expressions. Further, 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 forward-looking statements and statements about our beliefs are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include the following:
We have a history of net losses and could continue to incur substantial net losses in the future;
We may lose existing customers or fail to acquire new customers
We may require additional capital to support business growth or to satisfy our regulatory capital and surplus requirements, and this capital might not be available on acceptable terms, if at all;
The COVID-19 pandemic has caused disruption to our operations and may negatively impact our business, key metrics, and results of operations in numerous ways that remain unpredictable;
Severe weather and other catastrophic events, including the effects of climate change, are unpredictable and may have a material adverse effect on our financial results and financial condition;
We rely on telematics, mobile technology and its digital platform to collect data points that we evaluate in pricing and underwriting insurance policies, managing claims and customer support, and improving business processes, and to the extent regulators prohibit or restrict this collection or use of this data, our business could be harmed;
Regulatory changes may limit our ability to develop or implement our telematics-based pricing model and/or may eliminate or restrict the confidentiality of our proprietary technology;
We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make it difficult to predict future performance;
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Denial of claims or our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations, brand and prospects;
Unexpected increases in the frequency or severity of claims may adversely affect our results of operations and financial condition;
Failure to maintain our risk-based capital (“RBC”) at the required levels could adversely affect our ability to maintain regulatory authority to conduct our business;
We are subject to stringent and changing privacy and data security laws, regulations, and standards related to data privacy and security, and our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business;
If we are unable to underwrite risks accurately or charge competitive yet profitable rates to our customers, our business, results of operations and financial condition will be adversely affected;
Litigation and legal proceedings filed by or against us and our subsidiaries could have a material adverse effect on our business, results of operations and financial condition;
The insurance business, including the market for automobile, renters’ and homeowners’ insurance, is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business;
We are subject to extensive regulation and potential further restrictive regulation may increase our operating costs and limit our growth; and
Our actual incurred losses may be greater than our loss and loss adjustment expense (“LAE”) reserves, which could have a material adverse effect on our financial condition and results of operations.
Additional discussion of the risks, uncertainties and other factors described above, as well as other risks and uncertainties material to our business, can be found under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, and we encourage you to refer to that additional discussion. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our plans, objectives, estimates, expectations and intentions only as of the date of this filing. You should read this report completely and with the understanding that our actual future results and the timing of events may be materially different from what we expect, and we cannot otherwise guarantee that any forward-looking statement will be realized. We hereby qualify all of our forward-looking statements by these cautionary statements.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.
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PART I
ITEM 1. FINANCIAL STATEMENTS
METROMILE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts) 
September 30,
2021
December 31,
2020
(unaudited)
Assets
Investments
Marketable securities - restricted
$49,792 $24,651 
Total investments49,792 24,651 
Cash and cash equivalents159,157 19,150 
Restricted cash and cash equivalents50,938 31,038 
Receivable for securities624  
Premiums receivable18,655 16,329 
Reinsurance recoverable on paid loss 8,475 
Reinsurance recoverable on unpaid loss 33,941 
Prepaid reinsurance premium 13,668 
Prepaid expenses and other assets7,973 12,058 
Deferred transaction costs 3,581 
Deferred policy acquisition costs, net1,569 656 
Telematics devices, improvements and equipment, net13,025 12,716 
Website and software development costs, net22,008 18,401 
Digital assets, net803  
Intangible assets
7,500 7,500 
Total assets
$332,044 $202,164 
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Liabilities
Loss and loss adjustment expense reserves$70,798 $57,093 
Ceded reinsurance premium payable 27,000 
Payable to carriers - premiums and LAE, net299 849 
Unearned premium reserve17,393 16,070 
Deferred revenue4,597 5,817 
Accounts payable and accrued expenses8,907 8,222 
Notes payable 51,934 
Warrant liability6,693 83,652 
Other liabilities
6,302 8,554 
Total liabilities
114,989 259,191 
Commitments and contingencies (Note 10)
Convertible preferred stock, $0.0001 par value; 10,000,000 and 89,775,268 shares authorized as of September 30, 2021, and December 31, 2020, respectively; 0 and 68,776,614 shares issued and outstanding as of September 30, 2021, and December 31, 2020, respectively; liquidation preference of $0 and $302,397 as of September 30, 2021, and December 31, 2020, respectively
 304,469 
Stockholders’ equity (deficit)
Common stock, $0.0001 par value; 640,000,000 and 111,702,628 shares authorized as of September 30, 2021, and December 31, 2020, respectively; 127,737,209 and 8,992,039 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
13 1 
Accumulated paid-in capital755,276 5,482 
Note receivable from executive (415)
Accumulated other comprehensive (loss) income(15)11 
Accumulated deficit
(538,219)(366,575)
Total stockholders' equity (deficit)217,055 (361,496)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
$332,044 $202,164 
See notes to consolidated financial statements.
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METROMILE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts) 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Revenue(unaudited)(unaudited)
Premiums earned, net$28,142 $3,139 $47,316 $9,360 
Investment income30 81 85 500 
Other revenue
1,829 4,731 27,974 14,499 
Total revenue
30,001 7,951 75,375 24,359 
Costs and expenses
Losses and loss adjustment expenses27,480 4,443 62,383 12,214 
Policy servicing expense and other5,674 4,119 15,172 12,803 
Sales, marketing and other acquisition costs12,332 28 85,552 3,616 
Research and development5,130 1,832 11,898 6,668 
Amortization of capitalized software2,838 2,815 8,190 8,311 
Other operating expenses
14,207 3,924 39,534 13,138 
Total costs and expenses
67,661 17,161 222,729 56,750 
Loss from operations(37,660)(9,210)(147,354)(32,391)
Other expense
Interest expense 1,513 15,974 3,453 
Impairment on digital assets
117  183  
(Decrease) increase in fair value of stock warrant liability
(11,020)(26)8,133 640 
Total other expense
(10,903)1,487 24,290 4,093 
Loss before taxes(26,757)(10,697)(171,644)(36,484)
Income tax benefit (67) (67)
Net loss
$(26,757)$(10,630)$(171,644)$(36,417)
Net loss per share, basic and diluted
$(0.21)$(1.20)$(1.56)$(4.10)
Weighted-average shares used in computing basic and diluted net loss per share
127,166,524 8,888,099 109,988,189 8,882,040 
See notes to consolidated financial statements.
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METROMILE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands) 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
(unaudited)(unaudited)
Net loss$(26,757)$(10,630)$(171,644)$(36,417)
Unrealized net loss on marketable securities
 (64)(26)(33)
Total comprehensive loss
$(26,757)$(10,694)$(171,670)$(36,450)
See notes to consolidated financial statements.
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METROMILE, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’
(DEFICIT) EQUITY
(dollars in thousands)
Convertible Preferred StockCommon StockAPICNote
Receivable
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
SharesAmountSharesAmount
Balance as of December 31, 201967,728,286 $304,469 8,730,377 $1 $3,816 $(408)$60 $(246,478)$(243,009)
Retroactive application of recapitalization1,048,328 — 135,133 — — — — — — 
As adjusted, beginning of period68,776,614 304,469 8,865,510 1 3,816 (408)60 (246,478)(243,009)
Exercises and vested portion of stock options— — 20,452 — 50 — — — 50 
Stock-based compensation— — — — 555 — — — 555 
Interest on stock purchase promissory note— — — — — (6)— — (6)
Unrealized net gain on marketable securities— — — — — — 31 — 31 
Net loss— — — — — — — (25,787)(25,787)
Balance as of June 30, 202068,776,614 $304,469 8,885,962 $1 $4,421 $(414)$91 $(272,265)(268,166)
Exercises and vested portion of stock options— — 7,630 — 20 — — — 20 
Stock-based compensation— — — — 426 — — — 426 
Interest on stock purchase promissory note— — — — — (2)— — (2)
Unrealized net gain on marketable securities— — — — — — (64)— (64)
Net loss— — — — — — — (10,630)(10,630)
Balance as of September 30, 202068,776,614 $304,469 8,893,592 $1 $4,867 $(416)$27 $(282,895)$(278,416)
Balance as of December 31, 202067,728,286 $304,469 8,854,978 $1 $5,482 $(415)$11 $(366,575)$(361,496)
Retroactive application of recapitalization1,048,328 137,061 — — — 
As adjusted, beginning of period68,776,614 $304,469 $8,992,039 $1 $5,482 $(415)$11 $(366,575)$(361,496)
Stock-based compensation— — — — 12,021 — — — 12,021 
Exercises and vested portion of stock options— — 1,089,670 — 2,175 — — — 2,175 
Conversion of promissory note— — — — (415)415 — —  
RSUs withheld for tax purposes— — — — (422)— — — (422)
Unrealized net loss on marketable securities— — — — — — (26)— (26)
Exercise of convertible preferred stock warrants3,974,655 132,718 — — — — — — 
Conversion of preferred stock to common(72,751,269)(437,187)72,751,269 7 437,187 — — — 437,194 
Business Combination and PIPE financing— — 43,894,156 4 290,953 — — — 290,957 
Net loss— — — — — — — (144,887)(144,887)
Balance as of June 30, 2021 $ 126,727,134 $12 $746,981 $ $(15)$(511,462)$235,516 
401K match with MILE stock— — 37,170 — 321 — — — 321 
Exercises and vested portion of stock options— — 5,968 — 46 — — — 46 
Stock-based compensation— — 966,937 1 7,928 — — — 7,929 
Net loss— — — — — — — (26,757)(26,757)
Balance as of September 30, 2021 $ 127,737,209 $13 $755,276 $ $(15)$(538,219)$217,055 
See notes to consolidated financial statements.
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METROMILE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended September 30,
20212020
(unaudited)
Cash flows from operating activities:
Net loss$(171,644)$(36,417)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization12,523 12,503 
Stock-based compensation19,949 981 
Change in fair value of warrant liability8,133 640 
Telematics devices unreturned1,616 684 
Amortization of debt issuance costs11,695 796 
Noncash interest and other expense4,388 8,344 
Changes in operating assets and liabilities:
Premiums receivable(2,326)(1,171)
Accounts receivable3,526 692 
Reinsurance recoverable on paid loss8,475 4,752 
Reinsurance recoverable on unpaid loss33,941 (4,746)
Prepaid reinsurance premium13,668 (1,899)
Prepaid expenses and other assets456 3,636 
Deferred transaction costs3,581  
Deferred policy acquisition costs, net(1,951)(482)
Digital assets, net(986) 
Accounts payable and accrued expenses476 (2,115)
Ceded reinsurance premium payable(27,000)(8,683)
Loss and loss adjustment expense reserves13,705 1,157 
Payable to carriers - premiums and LAE, net(550)(1,558)
Unearned premium reserve1,323 2,234 
Deferred revenue(1,220)249 
Deferred tax liability (67)
Other liabilities
(2,109)1,134 
Net cash used in operating activities
(70,331)(19,336)
Cash flows from investing activities:
Purchases of telematics devices, improvements, and equipment(5,220)(6,269)
Payments relating to capitalized website and software development costs(12,077)(10,320)
Net change in payable/(receivable) for securities
(624)225 
Purchase of securities(44,828)(18,088)
Sales and maturities of marketable securities
19,484 39,040 
Net cash (used in) provided by investing activities
(43,265)4,588 
Cash flow from financing activities:
Proceeds from notes payable2,015 25,880 
Payment on notes payable(69,351)(222)
Proceeds from merger with INSU II, net of issuance costs336,469  
Proceeds from exercise of common stock options and warrants
4,370 70 
Net cash provided by financing activities
273,503 25,728 
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents159,907 10,980 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
50,188 42,887 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$210,095 $53,867 
Supplemental cash flow data:
Cash paid for interest$3,164 $2,233 
Non-cash investing and financing transactions:
Net liabilities assumed in the Business Combination$45,516 $ 
Net exercise of preferred stock warrants$56,160 $ 
Net exercise of promissory note$415 $ 
Capitalized website and software development costs included in accrued liabilities$280 $125 
Capitalized stock-based compensation$639 $336 
Reclassification of liability to equity for vesting of stock options$169 $ 
Preferred stock warrant issued in conjunction with note payable$ $12,464 
See notes to consolidated financial statements.
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METROMILE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Overview and Basis of Presentation
Metromile, Inc. (together with its consolidated subsidiaries, the “Company”) formerly known as INSU Acquisition Corp. II (“INSU”), was incorporated in Delaware on October 11, 2018. INSU was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. 
The registration statement for INSU’s initial public offering (“IPO”) was declared effective on September 2, 2020. On September 8, 2020 INSU consummated the IPO of 23,000,000 units (“Units”), and, with respect to the shares of Class A common stock, par value $0.0001 (the “Class A Common Stock”) included in the Units sold (the “Public Shares”), which included the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230.0 million. Simultaneously with the closing of the IPO, INSU consummated the sale of 540,000 units (the “Placement Units”), at a price of $10.00 per Placement Unit in a private placement to the sponsor and Cantor Fitzgerald & Co. (“Cantor”), generating gross proceeds of $5.4 million. Transaction costs amounted to $14.2 million, consisting of $4.0 million in cash underwriting fees, $9.8 million of deferred underwriting fees and $0.4 million of other offering costs. Following the closing of the IPO on September 8, 2020, $230.0 million ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Placement Units was placed in a trust account (the “Trust
Account”), which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, as determined by INSU.
Acquisition of Metromile, Inc. by Lemonade, Inc.
On November 8, 2021, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with Lemonade, Inc., a Delaware corporation (“Lemonade”), Citrus Merger Sub A, Inc., a Delaware corporation and a wholly-owned subsidiary of Lemonade (“Acquisition Sub I”) and Citrus Merger Sub B, LLC, a Delaware limited liability company and wholly owned subsidiary of Lemonade (“Acquisition Sub II”). The Agreement provides that, pursuant to and on the terms and conditions set forth therein, (i) Acquisition Sub I will merge with and into the Company (the “First Merger” and the effective time of the First Merger, the “First Effective Time”)), with the Company continuing as the surviving entity (the “Initial Surviving Corporation”), and (ii) the Initial Surviving Corporation will merge with and into Acquisition Sub II (the “Second Merger”), with Acquisition Sub II continuing as the surviving entity as a wholly owned subsidiary of Lemonade (the First Merger, the Second Merger and the other transactions contemplated by the Agreement, collectively, the “Proposed Transaction”). The Proposed Transaction implies a fully diluted equity value of approximately $500 million, or an enterprise value of about $340 million net of unrestricted cash and cash equivalents as of September 30, 2021. Under the terms of the Agreement, stockholders of the Company will receive shares of Lemonade common stock at a ratio of 19:1. The transaction is conditioned on customary closing conditions, including receipt of applicable regulatory approvals and approval of the Proposed Transaction by stockholders of the Company, and is expected to close in the second quarter of 2022. The Boards of Directors of both the Company and Lemonade have each approved the Proposed Transaction.
For additional information related to the Agreement and the Proposed Transaction, see Note 18, Subsequent Events.
Business Combination
On February 9, 2021, the Company consummated a merger pursuant to that certain Agreement and Plan of Merger and Reorganization, dated November 24, 2020, and as amended on January 12, 2021 and February 8, 2021 (the “Merger Agreement”), by and among INSU, INSU II Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of INSU (“Merger Sub”) and MetroMile, Inc., a Delaware corporation (“Legacy Metromile”), pursuant to which, among other things, Merger Sub merged with and into Legacy Metromile, with Legacy Metromile surviving the merger as a wholly owned subsidiary of the Company (the “Merger,” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the closing of the Business Combination (the “Closing”), the Company changed its name to Metromile, Inc., and Legacy Metromile changed its name to Metromile Operating Company. Unless the context indicates otherwise, references to “INSU” refer to the historical operations of INSU prior to the Closing, and references to the “Company,” “Metromile” and “Metromile Operating Company” refer to the historical operations of Legacy Metromile and its consolidated subsidiaries prior to the Closing and the business of the combined company and its subsidiaries following the Closing.
The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (“GAAP”). Under this method of accounting, INSU, who was the legal acquirer, is treated as the “acquired” company for financial reporting purposes and Metromile Operating Company is treated as the accounting acquirer. This determination was primarily based on the fact that Metromile Operating Company’s stockholders prior to the Merger have a majority of the voting power of the Company, Metromile Operating Company’s senior management now comprise substantially all of the senior management of the Company, the relative size of Metromile Operating Company compared to the Company, and that Metromile Operating Company’s operations comprise the ongoing operations of the Company. Accordingly, for accounting purposes, the Merger is treated as the equivalent of a capital transaction in which Metromile Operating Company issued stock for the net assets of INSU, which are stated at historical cost, with no goodwill or other intangible assets recorded, and Metromile Operating Company’s financial statements became those of the Company.
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Pursuant to the Amended and Restated Certificate of Incorporation of the Company, at the closing, each share of INSU’s Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock”), converted into one share of INSU’s Class A Common Stock. After the Closing and following the effectiveness of the Second Amended and Restated Certificate of Incorporation of the Company, each share of Class A Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable share of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), without any further action by the Company or any stockholder thereof.
On February 9, 2021, a number of purchasers (each, a “Subscriber”) purchased from the Company an aggregate of 17,000,000 shares of Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $170.0 million, pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of November 24, 2020. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect to the PIPE Shares. The sale of PIPE Shares was consummated concurrently with the Closing.
Description of Business after the Business Combination
The Company, through Metromile Operating Company and its wholly owned subsidiary, Metromile Insurance Services LLC (the “GA Subsidiary”), sells pay-per-mile auto insurance to consumers in eight states: California, Washington, Oregon, Illinois, Pennsylvania, Virginia, New Jersey, and Arizona. Metromile Operating Company has a wholly owned subsidiary, Metromile Insurance Company (the “Insurance Company”), which focuses on property and casualty insurance. In January 2019, Metromile Operating Company formed Metromile Enterprise Solutions, LLC (“Enterprise”), a wholly owned subsidiary, which focuses on selling its insurance solution technology to third party customers.
The Insurance Company provides auto insurance to customers with premiums based on a flat rate plus an adjustable rate based on actual miles driven. To record miles driven, the GA Subsidiary may provide drivers with a telematics device, the Metromile Pulse, which plugs into a car’s on-board diagnostic system to capture mileage.
The GA Subsidiary acts as a full-service insurance General Agent (“GA”). As a full-service GA, the subsidiary provides all policy pricing, binding, and servicing (payments and customer service) for the policyholders. Until late 2016, the GA Subsidiary underwriting carrier was National General Insurance (“NGI”) and its related carriers. The GA Subsidiary began transitioning NGI-issued policies upon renewal in late 2016 to the Insurance Company and has only a small number of policies with NGI as of September 30, 2021. Policies underwritten by the Insurance Company are binded by the GA as well as through a network of independent agents.
NGI handles claims for the GA Subsidiary’s policies underwritten by NGI and its related carriers, for which it pays NGI a fee for the LAE. NGI bears the risk of loss under these policies. Accordingly, the Company has no exposure to claims that would require an accrual for those NGI-related losses.
The Insurance Company bears risk of loss under all insurance policies it underwrites. The financial statements include reserves for future claims based on actuarial estimates for the Insurance Company. The Loss and LAE reserves as of September 30, 2021 (unaudited) and December 31, 2020 were $70.8 million and $57.1 million, respectively.
Basis of Presentation
The accompanying interim unaudited consolidated financial statements have been prepared in accordance GAAP and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). References to the Accounting Standard Codification (“ASC”) and Accounting Standard Updates (“ASU”) included hereinafter refer to the Accounting Standards Codification and Updates established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP. The consolidated financial statements include the accounts of Metromile, Inc. and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s Post-Effective Amendment No. 1 to Form S-1 filed with the SEC on August 27, 2021. 
Liquidity and Capital Resources
The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has had recurring losses and an accumulated deficit since its inception, related primarily to the development of its website, technology, customer acquisition, insurance losses and other operations. The Company obtained additional funding of $310.0 million in 2021 in connection with the Business Combination to support its ongoing operations and fund future growth of the Company. Management has concluded that substantial doubt regarding the Company’s ability to continue as a going concern for the period November 2021 through December 2022 has been alleviated based upon the recent funding and future operational improvement plans. 
In the first quarter of 2020, the global pandemic caused by COVID-19 breached the U.S. and resulted in Shelter-In-Place orders across the country and insurance department bulletins limiting the actions that insurance carriers may take and reducing the amount of premiums that will be promptly received in the short term. These factors resulted in a significant decline in both revenues and losses of the Insurance Company. In addition, in response to these events, the Company performed a temporary reduction in force of 125 employees to further align costs with revenue during the second quarter of 2020. The Company will continue to monitor the situation closely, but given the uncertainty about the
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duration or magnitude of the pandemic, management cannot estimate the impact on its financial condition, operations, and workforce.
Revision to Previously Issued Financial Statements
The Company has made revisions to the table in Note 15, Segment and Geographic Information, which presents a reconciliation of the Company’s total reportable segments’ contributions to its total loss from operations. To reflect proper classification of certain income and expense amounts, $1.8 million was reclassified from Policy services expenses and other to Other income within the reconciliation presented for the nine months ended September 30, 2020. The revisions had no effect on total liabilities, stockholders’ deficit or net loss after taxes as previously reported.

Reclassifications
Reclassifications have been made to the prior year balances to conform to the current year presentation. In particular, accounts receivable has been combined with prepaid expenses and other assets into a single line on the consolidated balance sheets. The reclassifications had no effect on stockholders’ deficit or net loss after taxes as previously reported.
Unaudited interim financial information
The accompanying interim consolidated balance sheet as of September 30, 2021, the interim consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ (deficit) equity for the three months and nine months ended September 30, 2020 and 2021, and cash flows for the nine months ended September 30, 2020 and 2021 are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2021 and the Company’s consolidated results of operations for the three months and nine months ended September 30, 2020 and 2021, and cash flows for the nine months ended September 30, 2020 and 2021. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other future interim or annual periods.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. On an ongoing basis, the Company’s management evaluates estimates, including those related to contingent assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the reporting period. The Company’s principal estimates include: unpaid losses and LAE reserves; the fair value of investments; the fair value of stock-based awards; the fair value of the warrant liability; premium refunds to policyholders; reinsurance recoverable on unpaid loss; and the valuation allowance for income taxes. Because of uncertainties associated with estimating the amounts, timing and likelihood of possible outcomes, actual results could differ materially from these estimates.
There have been no material changes to our significant accounting policies from our audited consolidated financial statements included in the Company’s Post-Effective Amendment No. 2 to Form S-1 filed with the SEC on August 27, 2021. 
Digital Assets, Net
During the nine months ended September 30, 2021, the Company purchased an aggregate of $1.0 million in digital assets, comprised solely of bitcoin. The Company currently accounts for these digital assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company has ownership of and control over the purchased bitcoin asset and uses third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheets at cost, net of any impairment losses incurred since acquisition.
An impairment analysis is performed at each reporting period to identify whether events or changes in circumstances, in particular decreases in the quoted prices on active exchanges, indicate that it is more likely than not that digital assets held by the Company are impaired. The fair value of digital assets is determined on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the active exchange(s) that the Company has determined is its principal market for bitcoin (Level 1 inputs). If the carrying value of the digital asset exceeds the fair value based on the lowest price quoted in the active exchanges during the period, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.
Impairment losses are recognized within Other expense in the consolidated statements of operations in the period in which the impairment is identified. The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale. There were no digital assets sales during the nine months ended September 30, 2021.
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Recent Issued Accounting Pronouncements
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (the “JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.
In February 2016, FASB issued ASU 2016-2, Leases (Topic 842). Lessees will need to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard. The standard will be effective beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.
In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. This update modified the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities, reinsurance recoverables, and premiums receivables and could result in the creation of an allowance for credit losses as a contra asset account. The ASU requires a cumulative-effect change to retained earnings in the period of adoption and prospective changes on previously recorded impairments, to the extent applicable. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.
In March 2020, FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. The standard is effective upon issuance through December 31, 2022 and may be applied at the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company is currently evaluating this new standard and the impact it will have on its consolidated financial statements.
2. Fair Value of Financial Instruments
Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Cash and Cash Equivalents
The Company’s cash and cash equivalents are demand and money market accounts and other highly liquid investments with an original maturity of three months or less. Demand and money market accounts are at stated values. Fair values for other cash equivalents are classified as Level 1 and are based upon appropriate valuation methodology.
Marketable Securities — Available-for-sale
The Company classifies highly liquid money market funds, U.S. Treasury bonds and certificates of deposit within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets and upon models that take into consideration such market-based factors as recent sales, risk-free yield curves, and prices of similarly rated bonds. Commercial paper, corporate bonds, corporate debt securities, repurchase agreements, and asset backed securities are classified within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which
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may not be actively traded. The Company did not hold any securities classified within Level 3 as of September 30, 2021 (unaudited) and December 31, 2020.
Assets measured on a recurring basis at fair value, primarily related to marketable securities, included in the consolidated balance sheets as of September 30, 2021 (unaudited) and December 31, 2020 are set forth below (in thousands):
Fair Value Measurement at September 30, 2021 (unaudited)
Level 1Level 2Level 3Total
Cash equivalents
Money market accounts
$154,111 $ $ $154,111 
Total cash equivalents
$154,111 $ $ $154,111 
Restricted cash equivalents
Money market accounts
$31,254 $ $ $31,254 
Certificates of deposits
3,331   3,331 
Total restricted cash equivalents
$34,585 $ $ $34,585 
Marketable securities - restricted
Corporate debt securities
$ $3,356 $ $3,356 
U.S. treasury and agency securities
23,273 1,995  25,268 
Commercial paper
 12,088  12,088 
Asset backed securities
 9,080  9,080 
Total marketable securities - restricted
$23,273 $26,519 $ $49,792 
Fair Value Measurement at December 31, 2020
Level 1Level 2Level 3Total
Cash equivalents
Money market accounts
$6,771 $ $ $6,771 
Total cash equivalents
$6,771 $ $ $6,771 
Restricted cash equivalents
Money market accounts
$6,201 $ $ $6,201 
Certificates of deposits
3,331   3,331 
Total restricted cash equivalents
$9,532 $ $ $9,532 
Marketable securities - restricted
Corporate debt securities
$ $5,955 $ $5,955 
U.S. treasury securities6,994   6,994 
Commercial paper 8,791  8,791 
Asset backed securities
 2,911  2,911 
Total marketable securities - restricted
$6,994 $17,657 $ $24,651 
Public and Private Warrants
At the Closing, Metromile Operating Company acquired the net liabilities from INSU, including warrants exercisable for common stock. The Company estimated the fair value of warrants exercisable for common stock measured at fair value on a recurring basis at the respective dates using the public trading price, for the Public warrants, and the Black-Scholes option valuation model, for the Private placement warrants (together with the public warrants, the “Warrants”), respectively. The Black-Scholes option valuation model inputs are based on the estimated fair value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, the risk-free interest rates, the expected dividends, and the expected volatility of the price of the Company’s underlying stock. These estimates, especially the expected volatility, are highly judgmental and could differ materially in the future.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. The Company considers its Public warrants to be Level 1 liabilities as it uses publicly and
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readily available information to measure the fair value of the warrants. For the Company's Private placement warrants, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date and as such are classified as Level 2 liabilities.
The table below sets forth a summary of changes in the fair value of the Company’s Level 1, Level 2, and Level 3 liabilities for the year ended December 31, 2020 and the nine months ended September 30, 2021 (unaudited) (in thousands):
Balance at December 31, 2019$1,738 
Issuance of warrant on Series E convertible preferred stock
12,620 
Increase in fair value of warrant
69,294 
Balance at December 31, 2020$83,652 
Increase in fair value of warrants
47,061 
Exercise of preferred stock warrants prior to Business Combination
(130,714)
Public and Private placement Warrants acquired in Business Combination
45,623 
Decrease in fair value of Public and Private placement Warrants
(38,929)
Balance at September 30, 2021$6,693 
The fair value of the Private placement warrants was determined using the Black-Scholes option valuation model using the following assumptions for values as of September 30, 2021:
Estimated Fair Value of Warrants as of September 30,
2021
Exercise
Price
Dividend
Yield
Volatility
Risk-Free
Interest
Rate
Expected
Term
 (in thousands)(in whole dollars)(in years)
Private placement warrants$176 $11.50 0 %70 %0.84 %4.4
In connection with the Merger, each of the Metromile Operating Company convertible preferred stock warrants outstanding as of December 31, 2020 was exercised for shares of Metromile Operating Company common stock. Therefore, there were no convertible preferred stock warrants outstanding after the Closing.
Through the three months and nine months ended September 30, 2021 and 2020 (unaudited), there were no transfers to or from any Level. The carrying amounts of accounts payable, accrued expenses and notes payable approximate their fair values because of the relatively short periods until they mature or are required to be settled.
3. Marketable Securities
The Company has investments in certain debt securities that have been classified as available-for-sale and recorded at fair value. These investments are included in both assets for securities with a maturity of one-year or less and assets for securities with a maturity of more than one-year. These securities are held in the Insurance Company and shown as restricted given that the transfer of these assets is subject to the approval of the state regulators. As of September 30, 2021 (unaudited) and December 31, 2020, deposits with various states consisted of bonds, cash and cash equivalents with carrying values of $5.1 million and $4.9 million, respectively.
When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s cost basis. As of December 31, 2020 and September 30, 2021 (unaudited), the Company does not consider any of its investments to be other-than-temporarily impaired. Unrealized gains and losses arising from the revaluation of available-for-sale securities are included in the consolidated statements of other comprehensive loss. Realized gains and losses on sales of investments are generally determined using the specific identification method and are included in the consolidated statements of operations.
The cost basis and fair value of available-for-sale securities as of September 30, 2021 (unaudited) and December 31, 2020 are presented below (in thousands):

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As of September 30, 2021 (Unaudited)
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value
Marketable securities - restricted
Corporate debt securities$3,356 $ $ $3,356 
U.S. treasury and agency securities25,274  (6)25,268 
Commercial paper12,088   12,088 
Asset backed securities9,083  (3)