SEC Filing | Metromile

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mile-20220331

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 March 31, 2022

☐ 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

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)

(888) 242-5204

(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 May 6, 2022 was 130,419,773.

METROMILE, INC.

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		Page
PART I
Item 1.	Financial Statements	1

	Consolidated Balance Sheets (unaudited)	1
	Consolidated Statements of Operations (unaudited)	2
	Consolidated Statements of Comprehensive Loss (unaudited)	3
	Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (unaudited)	4
	Consolidated Statements of Cash Flows (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
	Note 1. Overview and Basis of Presentation	6
	Note 2. Fair Value of Financial Instruments	9
	Note 3. Marketable Securities	11
	Note 4. Business Combination	13
	Note 5. Deferred Policy Acquisition Costs, Net	15

	Note 6. Loss and Loss Adjustment Expense Reserves	15
	Note 7. Reinsurance	16

	Note 8. Leases, Commitments, and Contingencies	17
	Note 9. Stockholders’ Equity	17
	Note 10. Public and Private Warrants	17
	Note 11. Stock Option Plans	18
	Note 12. Income Taxes	20
	Note 13. Segment and Geographic Information	20
	Note 14. Net Loss per Share	22
	Note 15. Related-Party Transactions	22
	Note 16. Business Disposition	22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40

SIGNATURE		41

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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 Proposed Transaction with Lemonade, Inc. (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 with Lemonade, Inc. (as defined herein);

•our ability to consummate the Proposed Transaction with Lemonade, Inc (as defined herein). 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:

•The announcement and pendency of the mergers contemplated by the Proposed Transaction (as defined herein) may result in disruptions to our business.

•The mergers in the Proposed Transaction (as defined herein) may not be completed within the intended timeframe, or at all, and the failure to complete the mergers could adversely affect our business, results of operations, financial condition, and the market price of our common stock.

•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;

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•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;

•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 the Company's 2021 Annual Report on Form 10-K and “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.

iii

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PART I

ITEM 1. FINANCIAL STATEMENTS

METROMILE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Investments
Marketable securities - restricted (amortized cost of $67,613 and $62,741)	$	67,149	$	62,625
Total investments	67,149		62,625
Cash and cash equivalents	84,339		120,940
Restricted cash and cash equivalents	31,978		42,881
Receivable for securities	6,551		—
Premiums receivable	18,522		16,839

Reinsurance recoverable on paid loss	2,694		—
Reinsurance recoverable on unpaid loss	4,408		—
Prepaid reinsurance premium	359		—
Prepaid expenses and other assets	27,416		21,677


Deferred policy acquisition costs, net	1,204		1,433
Telematics devices, improvements and equipment, net	12,169		13,654
Website and software development costs, net	21,971		25,866

Intangible assets	7,500		7,500
Assets held for sale	9,253		—
Total assets	$	295,513	$	313,415

Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Liabilities
Loss and loss adjustment expense reserves	$	76,916	$	73,438
Ceded reinsurance premium payable	8,798		—
Payable to carriers - premiums and LAE, net	315		340
Unearned premium reserve	16,924		15,726
Deferred revenue	—		5,601
Accounts payable and accrued expenses	8,421		10,820
Payable for securities	—		422
Warrant liability	1,025		1,156
Other liabilities	19,319		19,524
Liabilities held for sale	6,156		—
Total liabilities	137,874		127,027

Commitments and contingencies (Note 8)


Stockholders’ equity
Common stock, $0.0001 par value; 640,000,000 shares authorized as of March 31, 2022, and December 31, 2021; 130,183,262 and 128,221,885 shares issued and outstanding as of March 31, 2022 and December 31, 2021.	13		13
Accumulated paid-in capital	775,443		769,525

Accumulated other comprehensive loss	(464)		(116)
Accumulated deficit	(617,353)		(583,034)
Total stockholders' equity	157,639		186,388

Total liabilities, convertible preferred stock and stockholders’ equity	$	295,513	$	313,415

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 March 31,
		2022		2021
Revenue	(unaudited)
Premiums earned, net		$	19,165	$	1,125
Investment income		45		36
Other revenue		1,489		16,115
Total revenue		20,699		17,276
Costs and expenses
Losses and loss adjustment expenses		22,060		12,263
Policy servicing expense and other		5,283		4,443
Sales, marketing and other acquisition costs		6,459		47,294
Research and development		4,277		3,650
Amortization of capitalized software		3,368		2,651
Other operating expenses		13,702		8,589
Total costs and expenses		55,149		78,890
Loss from operations		(34,450)		(61,614)
Other expense
Interest expense		—		15,876

(Decrease) increase in fair value of stock warrant liability		(131)		26,137
Total other expense		(131)		42,013
Loss before taxes		(34,319)		(103,627)
Income tax benefit		—		—
Net loss		$	(34,319)	$	(103,627)
Net loss per share, basic and diluted		$	(0.27)	$	(1.37)
Weighted-average shares used in computing basic and diluted net loss per share		128,715,031		75,791,557

See notes to consolidated financial statements.

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METROMILE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)


	Three Months Ended March 31,
		2022		2021
	(unaudited)
Net loss		$	(34,319)	$	(103,627)
Unrealized net loss on marketable securities		(348)		(9)
Total comprehensive loss		$	(34,667)	$	(103,636)

See notes to consolidated financial statements.

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METROMILE, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(dollars in thousands)


	Convertible Preferred Stock			Common Stock			APIC		Note Receivable		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount
Balance as of December 31, 2020	67,728,286	$	304,469	8,854,978	$	1	$	5,482	$	(415)	$	11	$	(366,575)	$	(361,496)
Retroactive application of recapitalization	1,048,328	—		137,061	—		—		—		—		—		—
As adjusted, beginning of period	68,776,614	304,469		8,992,039	1		5,482		(415)		11		(366,575)		(361,496)






Stock-based compensation	—	—		—	—		3,208		—		—		—		3,208
Exercises and vested portion of stock options	—	—		1,089,670	—		2,059		—		—		—		2,059
Conversion of promissory note	—	—		—	—		(415)		415		—		—		—
RSUs withheld for tax purposes	—	—		—	—		(422)		—		—		—		(422)
Unrealized net loss on marketable securities	—	—		—	—		—		—		(9)		—		(9)
Exercise of convertible preferred stock warrants	3,974,655	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	—	—		—	—		—		—		—		(103,627)		(103,627)
Balance as of March 31, 2021	—	$	—	126,727,134	$	12	$	738,052	$	—	$	2	$	(470,202)	$	267,864

Balance as of December 31, 2021	—	—		128,221,885	$	13	$	769,525	$	—	$	(116)	$	(583,034)	$	186,388













401K match with MILE stock	—	—		110,364	—		553		—		—		—		553

Vesting of common stock from early exercises	—	—		—	—		107								107

Stock-based compensation	—	—		1,851,013	—		5,258		—		—		—		5,258
Unrealized net loss on marketable securities	—	—		—	—		—		—		(348)		—		(348)
Net loss	—	—		—	—		—		—		—		(34,319)		(34,319)
Balance as of March 31, 2022	—	$	—	130,183,262	$	13	$	775,443	$	—	$	(464)	$	(617,353)	$	157,639

See notes to consolidated financial statements.

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METROMILE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Months Ended March 31,
	2022		2021
	(unaudited)
Cash flows from operating activities:
Net loss	$	(34,319)	$	(103,627)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	5,255		4,023
Stock-based compensation	5,258		3,208
Change in fair value of warrant liability	(131)		26,137
Telematics devices unreturned	244		265
Amortization of debt issuance costs	—		11,695
Noncash interest and other expense	638		3,752
Changes in operating assets and liabilities:
Premiums receivable	(1,683)		(2,678)

Reinsurance recoverable on paid loss	(2,694)		5,707
Reinsurance recoverable on unpaid loss	(4,408)		25,247
Prepaid reinsurance premium	(359)		7,351
Prepaid expenses and other assets	(7,443)		(2,972)
Deferred transaction costs	—		3,581
Deferred policy acquisition costs, net	(54)		(1,437)

Accounts payable and accrued expenses	(1,939)		1,400
Ceded reinsurance premium payable	8,798		(15,765)
Loss and loss adjustment expense reserves	3,478		4,488
Payable to carriers - premiums and LAE, net	(25)		47
Unearned premium reserve	1,198		2,189
Deferred revenue	305		(649)

Other liabilities	(100)		(1,325)
Net cash used in operating activities	(27,981)		(29,363)
Cash flows from investing activities:
Purchases of telematics devices, improvements, and equipment	(12)		(126)
Payments relating to capitalized website and software development costs	(5,188)		(1,551)
Net change in payable/(receivable) for securities	(6,973)		822
Purchase of securities	(11,970)		(4,211)
Sales and maturities of marketable securities	7,013		5,805
Net cash (used in) provided by investing activities	(17,130)		739
Cash flow from financing activities:
Proceeds from notes payable	—		2,015
Payment on notes payable	—		(69,351)
Proceeds from merger with INSU II, net of issuance costs	—		336,469
Proceeds from exercise of common stock options and warrants	—		4,349
Net cash provided by financing activities	—		273,482
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents including cash classified within assets held for sale	(45,111)		244,858
Less: Net increase in cash classified within assets held for sale	2,393		—
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents	(47,504)		244,858
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	163,821		50,188
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	116,317	$	295,046
Supplemental cash flow data:
Cash paid for interest	$	—	$	3,164
Non-cash investing and financing transactions:
Transaction costs in accrued liabilities at period end	$	—	$	2,598
Warrants assumed from 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	$	231	$	137
Capitalized stock-based compensation	$	758	$	171
Reclassification of liability to equity for vesting of stock options	$	107	$	284

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.

Enterprise Business Solutions Held for Sale

As of March 31, 2022, the Company had committed to a plan to sell its Enterprise Business Solutions segment and as such the assets and liabilities have been classified as held for sale in the Company's consolidated balance sheets beginning with the period ended March 31, 2022. The business does not meet the criteria to be classified as a discontinued operation; therefore, the results are reflected within continuing operations on the consolidated statements of operations. For additional information related to the held for sale business, please see Note 16, Business Disposition.

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”), pursuant to which (i) Acquisition Sub I will merge with and into Metromile (the “First Merger” and the effective time of the First Merger, the “First Effective Time”), with Metromile 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 September 30, 2021. In accordance with the Agreement, at the First Effective Time, each share of our common stock issued and outstanding immediately prior to the First Effective Time will be converted into the right to receive 0.05263(the “Exchange Ratio”) validly issued, fully paid and non-assessable shares of common stock of Lemonade, par value $0.00001 per share (“Lemonade Common Stock”). The Proposed Transaction is conditioned on customary closing conditions, including receipt of applicable regulatory approvals, and is expected to close in the second quarter of 2022. The applicable waiting period for the Proposed Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired and on February 1, 2022, the Proposed Transaction was approved by our stockholders.

For additional information related to the Proposed Transaction, please see Note 4, Business Combinations included in this Quarterly Report on Form 10-Q, the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company's Current Report on Form 8-K filed with the SEC on November 9, 2021 as well as the proxy statement/prospectus filed with the SEC on December 29, 2021.

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.


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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.

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 March 31, 2022. 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 March 31, 2022 (unaudited) and December 31, 2021 were $76.9 million and $73.4 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 consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 ("the Company’s 2021 Annual Report").

Liquidity and Capital Resources

Consistent with 2021, the Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first three months of 2022.


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While these impacts have moderated since the beginning of the pandemic, there remains a risk that previous disruptions could return or new issues emerge as time amidst the pandemic perpetuates. The Company will continue to monitor and proactively adapt to the changing conditions and effects of COVID-19, but given the continued uncertainty about the duration or magnitude of the pandemic, it is not possible to reliably estimate the impact on the Company's financial condition, operations, and workforce.

Reclassifications

Reclassifications have been made to the prior year balances to conform to the current year presentation. In particular, accounts receivable, and digital assets, net have been combined with prepaid expenses and other assets into a single line on the consolidated balance sheets and consolidated statements of cash flows. 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 sheets as of March 31, 2022, the interim consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ (deficit) equity for the three months ended March 31, 2021 and 2022, and cash flows for the three months ended March 31, 2021 and 2022 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 March 31, 2022 and the Company’s consolidated results of operations for the three months ended March 31, 2021 and 2022, and cash flows for the three months ended March 31, 2021 and 2022. 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 2021 Annual Report except as set forth below:

Discontinued Operations and Held for Sale

A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value and certain other criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. When the carrying amount of the business exceeds its estimated fair value less cost to sell, a loss is recognized and updated each reporting period as appropriate. The results of operations of business classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that will have a major effect on the entity’s operations and financial results.

Adoption of Accounting Standards

For information regarding accounting standards that the Company adopted during the periods presented, see Note 1 of notes to the consolidated financial statements in the Company’s 2021 Annual Report.

Recently Issued Accounting Pronouncements

Reference Rate Reform

In March 2020, FASB issued ASU 2020-04, 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.

This standard may be elected and applied prospectively over time from March, 2020 through December 31, 2022 as reference rate reform activities occur. The Company is evaluating the method of adoption and impact of the standard on its consolidated financial statements and related disclosures.


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Government Assistance

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. This standard is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The amendments should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. The Company is currently evaluating the impact of these amendments 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 may not be actively traded. The Company did not hold any securities classified within Level 3 as of March 31, 2022 (unaudited) and December 31, 2021.


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Assets measured on a recurring basis at fair value, primarily related to marketable securities, included in the consolidated balance sheets as of March 31, 2022 (unaudited) and December 31, 2021 are set forth below (in thousands):


	Fair Value Measurement at March 31, 2022 (unaudited)
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	79,039	$	—	$	—	$	79,039
Total cash equivalents	$	79,039	$	—	$	—	$	79,039

Restricted cash equivalents
Money market accounts	$	14,662	$	—	$	—	$	14,662
Certificates of deposits	3,031		—		—		3,031
Total restricted cash equivalents	$	17,693	$	—	$	—	$	17,693

Marketable securities - restricted
Corporate debt securities	$	—	$	2,738	$	—	$	2,738
U.S. treasury and agency securities	37,693		1,956		—		39,649
Commercial paper	—		18,550		—		18,550
Asset backed securities	—		6,212		—		6,212
Total marketable securities - restricted	$	37,693	$	29,456	$	—	$	67,149


	Fair Value Measurement at December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market accounts	$	113,402	$	—	$	—	$	113,402
Total cash equivalents	$	113,402	$	—	$	—	$	113,402

Restricted cash equivalents
Money market accounts	$	19,569	$	—	$	—	$	19,569
Certificates of deposits	3,331		—		—		3,331
Total restricted cash equivalents	$	22,900	$	—	$	—	$	22,900

Marketable securities - restricted
Corporate debt securities	$	—	$	2,545	$	—	$	2,545
U.S. treasury securities	33,295		1,986		—		35,281
Commercial paper	—		16,081		—		16,081
Asset backed securities	—		8,718		—		8,718
Total marketable securities - restricted	$	33,295	$	29,330	$	—	$	62,625

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 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.


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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, 2021 and the three months ended March 31, 2022 (unaudited) (in thousands):





Balance at December 31, 2020	$	83,652
Increase in fair value of warrants	47,062
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	(44,467)
Balance at December 31, 2021	$	1,156
Decrease in fair value of warrants	(131)

Balance at March 31, 2022	$	1,025

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 March 31, 2022:


	Estimated Fair Value of Warrants as of March 31, 2022		Exercise Price		Dividend Yield		Volatility		Risk-Free Interest Rate		Expected Term
	(in thousands)		(in whole dollars)								(in years)
Private placement warrants	$	28.8	$	11.50	0	%	75	%	2.44	%	3.86

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 ended March 31, 2022 and 2021 (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 March 31, 2022 (unaudited) and December 31, 2021, deposits with various states consisted of bonds, cash and cash equivalents with carrying values of $5.2 million in both periods.

Following the adoption of accounting guidance for credit losses on January 1, 2021, when marketable securities are in an unrealized loss position and the Company does not record an intent-to-sell impairment, the Company will record an allowance for credit losses ("ACL") for the portion of the unrealized loss due to a credit loss. Any remaining unrealized loss on a fixed maturity after recording an ACL is the non-credit amount and is recorded in other comprehensive income (loss) ("OCI"). The ACL is the excess of the amortized cost over the greater of the Company's best estimate of the present value of expected future cash flows or the security's fair value. The ACL cannot exceed the unrealized loss and, therefore, it may fluctuate with changes in the fair value of the fixed maturity if the fair value is greater than the Company's best estimate of the present value of expected future cash flows. The initial ACL and any subsequent changes are recorded in net realized capital gains and losses. The ACL is written off against the amortized cost in the period in which all or a portion of the related fixed maturity is determined to be uncollectible. For further information refer to Note 1, Basis of Presentation and Significant Accounting Policies in the Company’s 2021 Annual Report.

As of December 31, 2021 and March 31, 2022 (unaudited), the Company did not recognize credit losses.


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The amortized cost and fair value of investments in fixed maturities classified as available-for-sale as of March 31, 2022 (unaudited) and December 31, 2021 are presented below (in thousands):


	As of March 31, 2022 (Unaudited)
	Amortized Cost		ACL		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Marketable securities - restricted
Corporate debt securities	$	2,741	$	—	$	—	$	(3)	$	2,738
U.S. treasury and agency securities	40,088		—		—		(439)		39,649
Commercial paper	18,550		—		—		—		18,550
Asset backed securities	6,234		—		—		(22)		6,212
Total marketable securities - restricted	$	67,613	$	—	$	—	$	(464)	$	67,149


	As of December 31, 2021
	Amortized Cost		ACL		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Marketable securities - restricted
Corporate debt securities	$	2,547	$	—	$	—	$	(2)	$	2,545
U.S. treasury securities	35,385		—		—		(104)		35,281
Commercial paper	16,081		—		—		—		16,081
Asset backed securities	8,728		—		—		(10)		8,718
Total marketable securities - restricted	$	62,741	$	—	$	—	$	(116)	$	62,625

The amortized cost and estimated fair value of marketable securities as of March 31, 2022 (unaudited) and December 31, 2021 and are shown below by contractual maturity (in thousands):


	As of March 31, 2022 (unaudited)
	Amortized Cost		Estimated Fair Value
Due within one year	$	52,471	$	52,298
Due between one to five years	15,142		14,851
	$	67,613	$	67,149


	As of December 31, 2021
	Amortized Cost		Estimated Fair Value
Due within one year	$	41,603	$	41,596
Due between one to five years	21,138		21,029
	$	62,741	$	62,625

The following table summarizes, for all fixed maturities classified as available-for-sale in an unrealized loss position at March 31, 2022, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in Note 2, Fair Value. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in Note 1, Basis of Presentation and Significant Accounting Policies in the Company’s 2021 Annual Report in determining whether a credit loss impairment exists.


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	As of March 31, 2022 (unaudited)
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Marketable securities - restricted
Corporate debt securities	$	732	$	(3)	$	—	$	—	$	732	$	(3)
U.S. treasury and agency securities	39,649		(439)		—		—		39,649		(439)
Commercial paper	1,006		—		—		—		1,006		—
Asset backed securities	6,212		(22)		—		—		6,212		(22)
Total in an unrealized loss position	$	47,599	$	(464)	$	—	$	—	$	47,599	$	(464)


	As of December 31, 2021
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Marketable securities - restricted
Corporate debt securities	$	737	$	(2)	$	—	$	—	$	737	$	(2)
U.S. treasury and agency securities	31,809		(104)		—		—		31,809		(104)
Commercial paper	1,808		—		—		—		1,808		—
Asset backed securities	8,716		(10)		—		—		8,716		(10)
Total in an unrealized loss position	$	43,070	$	(116)	$	—	$	—	$	43,070	$	(116)

4. Business Combination

INSU

As described in Note 1, Basis of Presentation and Significant Accounting Policies, the Merger with INSU was consummated on February 9, 2021 (the “Closing Date”). For financial accounting and reporting purposes under GAAP, the Business Combination was accounted for as a reverse acquisition and recapitalization, with no goodwill or other intangible asset recorded. As a result, the historical operations of Metromile Operating Company are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Metromile Operating Company prior to the Business Combination; (ii) the combined results of the Company and Metromile Operating Company following the Business Combination; (iii) the assets and liabilities of Metromile Operating Company at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock issued to Metromile Operating Company stockholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Metromile Operating Company redeemable convertible preferred stock and Metromile Operating Company common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement. Activity within the statement of stockholder’s equity for the issuances and repurchases of Metromile Operating Company redeemable preferred stock, were also retroactively converted to Metromile Operating Company common stock.

The following table reconciles the elements of the Business Combination to the consolidated statement of cash flows and the consolidated statement of stockholders’ equity for the three months ended March 31, 2021 (dollars in thousands).


	Recapitalization
Cash – INSU’s trust and cash (net of redemptions)	$	229,925
Cash – PIPE	170,000
Less transaction costs and advisory fees paid	31,456
Less cash payments to Metromile Operating Company stockholders	32,000
Net Business Combination and PIPE financing	336,469
Less non-cash net liabilities assumed from INSU	45,516
Net contributions from Business Combination and PIPE Financing	$	290,953


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			Number of Shares
INSU Class A Common stock, outstanding prior to Business Combination			23,540,000
INSU Class B Common stock, outstanding prior to Business Combination			6,669,667
Less redemption of INSU shares			8,372
Common stock of INSU			30,201,295
Shares issued in PIPE			17,000,000
Business Combination and PIPE financing shares			47,201,295
Metromile Operating Company shares (1)			79,525,839
Total shares of common stock immediately after Business Combination			126,727,134

(1)The number of Metromile Operating Company shares was determined from the 78,313,665 shares of Metromile Operating Company common and preferred stock outstanding immediately prior to the closing of the Business Combination, which are presented net of the common and preferred stock redeemed, converted at the Exchange Ratio of 1.01547844. All fractional shares were rounded down.

Lemonade

As described above in Note 1, Basis of Presentation and Significant Accounting Policies the Company and Lemonade have entered into the Agreement, pursuant to which Lemonade will acquire the Company in an all-stock transaction that implies a fully diluted equity value of approximately $500 million, as of November 5, 2021 which was the last full trading day prior to public announcement of the Proposed Transaction, or an enterprise value of about $340 million net of unrestricted cash and cash equivalents as of September 30, 2021.

In accordance with the Agreement, at the First Effective Time, each share of the Company’s common stock issued and outstanding immediately prior to the First Effective Time will be converted into the right to receive 0.05263 (the “Exchange Ratio”) validly issued, fully paid and non-assessable shares of common stock of Lemonade, par value $0.00001 per share (“Lemonade Common Stock”).

At the First Effective Time, (i) each Metromile stock option that is held by an individual who, as of November 8, 2021, was not employed or providing services to the Company or its subsidiaries shall be cancelled and converted into the right to receive an amount in cash, without interest, equal to the product of (A) the excess, if any, of the product of (1) the average of the volume weighted average trading prices per share of Lemonade common stock on NYSE on each of the 20 consecutive trading days ending on (and including) the trading day that is three trading days prior to the First Effective Time multiplied by the Exchange Ratio (the “Per Metromile Share Price”), over the (2) the per share exercise price of such Metromile stock option, multiplied by (B) the total number of shares subject to such Metromile stock option; (ii) each other Metromile stock option shall be assumed by Lemonade and automatically converted into a stock option to acquire number of shares of Lemonade common stock (rounded down to the nearest whole share) equal to the product of (A) the number of shares subject to the Metromile stock option and (B) the Exchange Ratio, with an exercise price per share of Lemonade common stock (rounded up to the nearest whole cent) equal to (1) the per share exercise price of the Metromile stock option divided by (2) the Exchange Ratio; (iii) each award of Metromile restricted stock units that (A) is held by any non-employee director of Metromile or (B) vests based on the achievement of one or more performance criteria shall be cancelled and converted automatically into the right to receive an amount in cash equal to the Per Metromile Share Price in respect of each share of common stock underlying such Metromile restricted stock units (in the case of performance-based Metromile restricted stock units, based on actual performance); (iv) each other award of Metromile restricted stock units shall be assumed by Lemonade and automatically converted into an award of Lemonade restricted stock units covering a number of shares of Lemonade common stock equal to (A) the number of shares of Metromile common stock underlying such Metromile restricted stock units multiplied by (B) the Exchange Ratio; and (v) each Metromile warrant exercisable for shares of the Company’s common stock shall be assumed by Lemonade and converted into a corresponding warrant denominated in shares of Lemonade Common Stock (with the number of warrants and exercise price being adjusted based on the Exchange Ratio). Except as otherwise set forth above, each Metromile stock option, restricted stock unit award, and warrant assumed by Lemonade shall continue to have the same terms and conditions as applied immediately prior to the First Effective Time.

The consummation of the Proposed Transaction is subject to the satisfaction or waiver of certain closing conditions, some of which have been completed, including among others (i) the effectiveness of the registration statement on Form S-4 registering the shares of Lemonade Common Stock issuable in the Proposed Transaction and absence of any stop order or proceedings by the SEC with respect ther