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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 001-40216
____________________________
Aurora Innovation, Inc.
(Exact name of registrant as specified in its charter)
____________________________
Delaware
98-1562265
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1654 Smallman St., Pittsburgh, Pennsylvania

15222
(Address of Principal Executive Offices)
(Zip Code)
(888) 583-9506
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.00001 per shareAURThe Nasdaq Stock Market LLC
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50AUROWThe Nasdaq Stock Market LLC
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
o
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The registrant had outstanding 740,447,783 shares of Class A common stock and 423,806,298 shares of Class B common stock as of October 24, 2022.


Table of Contents
TABLE OF CONTENTS
Page
Item 1A.
Risk Factors
i

Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Aurora Innovation, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
$486,633 $1,610,135 
Restricted cash
580 280 
Short-term investments750,697  
Contract asset 32,538 
Related party receivables 10,726 
Prepaid expenses and other current assets
13,931 23,765 
Total current assets
1,251,841 1,677,444 
Property and equipment, net
92,907 93,517 
Operating lease right-of-use assets
141,164 151,278 
Restricted cash, long-term
15,801 15,832 
Other assets
20,864 21,050 
Acquisition related intangible assets
617,901 617,200 
Goodwill
113,685 1,113,766 
Total assets
$2,254,163 $3,690,087 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$2,889 $7,901 
Related party payables
3,326 540 
Operating lease liabilities, current
13,321 12,274 
Accrued expenses and other current liabilities
56,125 70,006 
Total current liabilities
75,661 90,721 
Operating lease liabilities, long-term
124,842 134,551 
Deferred tax liabilities
3,905 3,905 
Warrant liabilities
9,925 65,678 
Earnout shares liability5,076 52,380 
Other long-term liabilities
2,401 1,150 
Total liabilities
221,810 348,385 
Commitments and contingencies
Stockholders’ equity:
Common stock - $0.00001 par value, 1,157,841,044 and 1,122,829,814 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
12 11 
Additional paid-in capital
4,556,083 4,432,907 
Accumulated other comprehensive loss(3,347) 
Accumulated deficit
(2,520,395)(1,091,216)
Total stockholders’ equity
2,032,353 3,341,702 
Total liabilities and stockholders’ equity
$2,254,163 $3,690,087 
See accompanying notes to unaudited condensed consolidated financial statements
1

Table of Contents
Aurora Innovation, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Collaboration revenue$2,897 $55,599 $65,628 $55,599 
Operating expenses:
Research and development
170,490 158,135 508,365 477,056 
Selling, general and administrative
32,511 25,898 97,030 80,224 
Goodwill impairment
  1,000,081  
Total operating expenses
203,001 184,033 1,605,476 557,280 
Loss from operations
(200,104)(128,434)(1,539,848)(501,681)
Other income (expense):
Change in fair value of derivative liabilities(2,631) 103,057  
Other income (expense), net
4,542 (4,911)7,615 (4,738)
Loss before income taxes
(198,193)(133,345)(1,429,176)(506,419)
Income tax expense (benefit)
1  3 (2,643)
Net loss
$(198,194)$(133,345)$(1,429,179)$(503,776)
Basic and diluted net loss per share
$(0.17)$(0.25)$(1.26)$(0.96)
Basic and diluted weighted-average shares outstanding
1,152,081,114 543,629,589 1,137,020,014 523,064,108 
See accompanying notes to unaudited condensed consolidated financial statements
2

Table of Contents
Aurora Innovation, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net loss
$(198,194)$(133,345)$(1,429,179)$(503,776)
Other comprehensive loss:
Unrealized loss on investments
514  (3,347) 
Other comprehensive loss
514  (3,347) 
Comprehensive loss
$(197,680)$(133,345)$(1,432,526)$(503,776)
See accompanying notes to unaudited condensed consolidated financial statements
3

Table of Contents
Aurora Innovation, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Redeemable convertible
preferred stock
Common stock
Additional
paid-in capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders’
equity (deficit)
SharesAmountSharesAmount
Balance as of December 31, 2020
290,300,547 $763,283 278,810,627 $3 $59,181 $ $(335,763)$(276,579)
Issuance of Series U-1 redeemable convertible preferred stock at $9.06 per share in relation to acquisition
110,437,359 1,000,000 — — — — — — 
Issuance of Series U-2 redeemable convertible preferred stock at $9.06 per share, net of issuance costs of $2,138
44,174,944 397,862 — — — — — — 
Equity issued in relation to acquisitions— — 257,863,127 2 945,540 — — 945,542 
Equity issued under incentive compensation plans— — 8,766,467 — 4,988 — — 4,988 
Stock-based compensation
— — — — 120,550 — — 120,550 
Comprehensive loss
— — — — — — (503,776)(503,776)
Balance as of September 30, 2021
444,912,850 $2,161,145 545,440,221 $5 $1,130,259 $ $(839,539)$290,725 
Balance as of December 31, 2021
— $— 1,122,829,814 $11 $4,432,907 $ $(1,091,216)$3,341,702 
Equity issued under incentive compensation plans— — 35,011,230 1 10,846 — — 10,847 
Stock-based compensation
— — — — 112,330 — — 112,330 
Comprehensive loss
— — — — — (3,347)(1,429,179)(1,432,526)
Balance as of September 30, 2022
— $— 1,157,841,044 $12 $4,556,083 $(3,347)$(2,520,395)$2,032,353 
See accompanying notes to unaudited condensed consolidated financial statements
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Aurora Innovation, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Redeemable convertible
preferred stock
Common stock
Additional
paid-in capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders’
equity
SharesAmountSharesAmount
Balance as of June 30, 2021
444,912,850 $2,161,145 542,112,054 $5 $1,087,651 $ $(706,194)$381,462 
Equity issued under incentive compensation plans— — 3,328,167 — 2,641 — — 2,641 
Stock-based compensation
— — — — 39,967 — — 39,967 
Comprehensive loss
— — — — — — (133,345)(133,345)
Balance as of September 30, 2021
444,912,850 $2,161,145 545,440,221 $5 $1,130,259 $ $(839,539)$290,725 
Balance as of June 30, 2022
  1,146,572,506 $11 $4,516,005 $(3,861)$(2,322,201)$2,189,954 
Equity issued under incentive compensation plans— — 11,268,538 1 3,273 — — 3,274 
Stock-based compensation— — — — 36,805 — — 36,805 
Comprehensive loss— — — — — 514 (198,194)(197,680)
Balance as of September 30, 2022
— $— 1,157,841,044 $12 $4,556,083 $(3,347)$(2,520,395)$2,032,353 
See accompanying notes to unaudited condensed consolidated financial statements
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Aurora Innovation, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities
Net loss
$(1,429,179)$(503,776)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
16,712 10,836 
Reduction in the carrying amount of right-of-use assets
20,970 19,063 
Stock-based compensation
112,330 118,405 
Goodwill impairment1,000,081  
Change in fair value of derivative liabilities(103,057) 
Non-cash severance
 7,873 
Change in deferred tax asset valuation allowance
 (2,638)
Other909 6,714 
Changes in operating assets and liabilities:
Contract asset32,538 (5,599)
Prepaid expenses and other current assets
20,325 (3,979)
Other assets
(2,131)(1,071)
Accounts payable
(9,115)(4,657)
Operating lease liabilities
(19,085)(16,785)
Accrued expenses and other current and non-current liabilities
(9,131)(45,240)
Net cash used in operating activities
(367,833)(420,854)
Cash flows from investing activities
Purchases of property and equipment
(11,841)(32,128)
Net cash acquired in acquisitions
 294,439 
Purchase of short-term investments
(1,219,841) 
Maturities of short-term investments466,000  
Other(110) 
Net cash (used in) provided by investing activities
(765,792)262,311 
Cash flows from financing activities
Proceeds from issuance of common stock
12,117 4,709 
Proceeds from issuance of Series U-2 preferred stock, net
 397,862 
Other
(1,725) 
Net cash provided by financing activities
10,392 402,571 
Net (decrease) increase in cash, cash equivalents, and restricted cash
(1,123,233)244,028 
Cash, cash equivalents, and restricted cash at beginning of the period
1,626,247 399,828 
Cash, cash equivalents, and restricted cash at end of the period
$503,014 $643,856 
See accompanying notes to unaudited condensed consolidated financial statements
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Aurora Innovation, Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(unaudited)
(1)    Overview of the Organization
Aurora Innovation, Inc. and its consolidated subsidiaries (the “Company” or “Aurora”) was initially incorporated as a Cayman Islands exempted company on October 2, 2020 and was formerly known as Reinvent Technology Partners Y (“RTPY”).
On November 3, 2021 (the “Closing Date” or “Closing”), the Company filed a notice of deregistration with the Cayman Islands Registrar of Companies, domesticated as a Delaware corporation, and changed its name to Aurora Innovation, Inc. As contemplated by the Agreement and Plan of Merger dated July 14, 2021 (the “Merger Agreement”), Aurora consummated a merger transaction (the “Merger”) whereby RTPY Merger Sub, Inc., a direct subsidiary of the Company, merged with and into Aurora Innovation Holdings, Inc. (“Legacy Aurora”), a Delaware corporation (f/k/a Aurora Innovation, Inc.). The Company’s common stock is listed on the NASDAQ under the symbol “AUR” and the Company’s warrants to purchase shares of Class A common stock are listed on the NASDAQ under the symbol “AUROW”. The Merger was accounted for as a reverse capitalization, and operations prior to the Closing presented are those of Legacy Aurora.
The Company designs and develops the Aurora Driver, which is the hardware, software, and data services that allow vehicles to drive themselves.
(2)    Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the financial statements of the Company and its consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rule and regulations of the Securities and Exchange Commission (“SEC”).
The information included herein should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2021, as amended. The condensed consolidated balance sheet as of December 31, 2021 included in the condensed consolidated financial statements was derived from the audited financial statements as of that date but does not contain all of the footnote disclosures from the annual financial statements.
The condensed consolidated financial statements reflect, in the opinion of management, all adjustments of a normal, recurring nature necessary for a fair statement of our financial position, results of operations, and cash flows for the periods presented but are not necessarily indicative of the expected results for the full fiscal year or any future period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties Including Business and Credit Concentrations
The Company’s principal operations are the research, design, and implementation of the Aurora Driver. The Company is currently researching and developing its proprietary technology with the goal of commercializing the Aurora Driver. The Company expects that it will need to raise additional capital to support its continued development and commercialization of the Aurora Driver. Risks and uncertainties to the Company’s operations include failing to secure additional funding and the threat of other companies developing and bringing to market similar technology at an earlier time than the Company.
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Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents and short-term investments. Cash and cash equivalents are generally deposited with domestic commercial banks and generally exceed the Federal Deposit Insurance Corporation insurable limit. Short-term investments are held in U.S. Treasury securities and are classified as available-for-sale debt securities. To date, the Company has not experienced any credit losses on its cash, cash equivalents and short-term investments.
Recently Adopted Accounting Standards
In December 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by revising or clarifying existing guidance in ASC 740, Income Taxes, as well as removing certain exceptions within ASC 740. The Company adopted the standard effective January 1, 2022 and there was not a material impact on the interim financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, that replaces the incurred loss impairment methodology in current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company adopted the standard effective January 1, 2022 and there was not a material impact on the interim financial statements.
(3)    Balance Sheet Detail
(a)Fair Value of Financial Instruments
The Company uses a three-level hierarchy, which prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information for fair value measurement based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. Fair value focuses on an exit price and is defined 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. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risk associated with those financial instruments.
The three-level hierarchy for fair value measurements is defined as follows:
Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2: Inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and
Level 3: Inputs to the valuation methodology, which are significant to the fair value measurement, are unobservable.
An asset or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
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The fair values for financial assets and liabilities measured on a recurring basis were as follows:
As of September 30, 2022
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds
$356,550 $ $ $356,550 
U.S. Treasury securities 129,429  129,429 
Total cash equivalents
$356,550 $129,429 $ $485,979 
Short-term investments:
U.S. Treasury securities$ $750,697 $ $750,697 
Total short-term investments$ $750,697 $ $750,697 
Liabilities:
Public warrants$5,742 $ $ $5,742 
Private placement warrants 4,183  4,183 
Earnout shares liability  5,076 5,076 
Total liabilities$5,742 $4,183 $5,076 $15,001 
As of December 31, 2021
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds
$1,609,919 $ $ $1,609,919 
Total cash equivalents
$1,609,919 $ $ $1,609,919 
Liabilities:
Public warrants
$37,999 $ $ $37,999 
Private placement warrants
 27,679  27,679 
Earnout shares liability  52,380 52,380 
Total liabilities$37,999 $27,679 $52,380 $118,058 
Cash equivalents and short-term investments are measured at fair value on a recurring basis based on quoted market prices or other readily available market information. The amortized cost, unrealized gains and losses, and fair value of available-for-sale debt securities were as follows:
As of September 30, 2022
Amortized costUnrealized lossesFair value
U.S. Treasury securities$883,473 $(3,347)$880,126 
The public warrants and private placement warrants (see Note 7: Derivative Liabilities) are measured at fair value on a recurring basis. The public warrants are valued based on the closing price of the publicly traded instrument. The private placement warrants are valued using observable inputs for similar publicly traded instruments.
The earnout shares liability (see Note 7: Derivative Liabilities) is measured at fair value on a recurring basis. The fair value was determined using a Monte Carlo simulation with a risk free rate of 3.87% and 1.52% and volatility of 50.00% and 50.00% as of September 30, 2022 and December 31, 2021, respectively.
Earnout shares liability
Balance as of December 31, 2021
$52,380 
Change in fair value
(47,304)
Balance as of September 30, 2022
$5,076 
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(b)Property and Equipment, Net
The components of property and equipment, net were as follows:
As of
September 30,
2022
December 31,
2021
Land
$13,503 $13,503 
Furniture and fixtures
11,005 10,893 
Test and lab equipment
13,803 11,984 
Leasehold improvements
64,734 61,173 
Computer and equipment
9,263 7,839 
Computer software
3,602 3,321 
Automobile
7,238 3,444 
Buildings
3,132 1,040 
126,280 113,197 
Less accumulated depreciation and amortization
(33,373)(19,680)
Total property and equipment, net
$92,907 $93,517 
(c)Goodwill
The changes in the carrying amount of goodwill were as follows:
As ofAs of
December 31,
2021
Goodwill impairmentSeptember 30,
2022
Goodwill$1,113,766 $— $1,113,766 
Accumulated impairment loss (1,000,081)(1,000,081)
Carrying amount of goodwill$1,113,766 $(1,000,081)$113,685 
During the second quarter of 2022, the market price of the Company’s Class A common stock and its market capitalization declined significantly. As a result, the Company determined that a triggering event had occurred and an interim goodwill impairment assessment was performed.
The Company utilized a market approach valuation method utilizing the observable market price of the Company’s Class A common stock as it represented the best evidence of the fair value of its reporting unit. Based on the results, the Company recognized a $1,000,081 goodwill impairment during the nine months ended September 30, 2022.
(d)Accrued Expenses and Other Current Liabilities
The components of accrued expenses and other current liabilities were as follows:
As of
September 30,
2022
December 31,
2021
Accrued compensation
$37,153 $51,401 
Other accrued expenses
18,972 18,605 
Total accrued expenses and other current liabilities
$56,125 $70,006 
(4)    Collaboration Revenue
In January 2021, the Company entered into a collaboration framework agreement with Toyota Motor Corporation (“Toyota”) with the intention of deploying the Aurora Driver into a fleet of Toyota Sienna vehicles, subject to further agreement of a collaboration project plan that was signed in August 2021. In the nine months ended September 30, 2022 and September 30, 2021, the Company received payments of $100,360 and $50,000, respectively, under the agreement. As of September 30, 2022, the Company has received all cash payments under the collaboration framework agreement with Toyota.
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Collaboration revenue is recognized using the input measure of hours expended as a percentage of total estimated hours to complete the collaboration project plan. In the three and nine months ended September 30, 2022, the Company recognized collaboration revenue of $2,897 and $65,628, respectively. To date, the Company has recognized cumulative revenue under the agreement of $148,166 through September 30, 2022.
Differences between collaboration revenue recognized and payments collected under the agreement are recognized as a contract asset or contract liability at the end of each reporting period.
(5)    Acquisitions
Apparate USA LLC
On January 19, 2021, the Company acquired 100% of the voting interests of Apparate USA LLC (“Uber Advanced Technologies Group” or “ATG”) which was a company developing self-driving technology.
The acquisition date fair value of the consideration transferred for ATG was approximately $1,915,708 which consisted of stock consideration. The stock consideration transferred comprised 110,437,359 shares of the Company’s Series U-1 preferred stock and 252,194,518 shares of the Company’s common stock. The preferred stock was valued referencing the concurrent purchase of the Company’s Series U-2 redeemable convertible preferred stock. The common stock was valued based on the fair value as of January 19, 2021, as determined by a third-party valuation expert using an Option Pricing Method model.
The transaction costs associated with the acquisition were $15,113 in the nine months ended September 30, 2021 and were recorded in selling, general and administrative.
The Company accounted for the ATG acquisition as a business combination, and therefore the assets acquired and liabilities assumed were recognized at their fair values on the date of the ATG acquisition. The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of the ATG acquisition:
Fair Value
Cash and cash equivalents
$310,540 
Prepaid expenses and other current assets
6,229 
Property and equipment, net
63,395 
Operating lease right-of-use assets
41,915 
Other assets
18,351 
Acquisition related intangible assets
545,500 
Goodwill
1,060,159 
Accounts payable
(1,860)
Related party payable
(46,970)
Accrued expenses and other current liabilities
(37,796)
Operating lease liabilities
(40,413)
Deferred tax liability(3,342)
Total
$1,915,708 
The sole identifiable intangible asset acquired in the ATG acquisition was in-process research and development (IPR&D) and has an indefinite useful life as of the date of the acquisition. The fair value of the IPR&D intangible asset was determined through a replacement cost approach, which identifies the costs that would be necessary to recreate the asset if the Company were to internally develop the acquired technology. Significant unobservable inputs include overhead costs, profit margin, opportunity cost, and obsolescence.
The asset has not been placed into service and there have been no impairments related to the intangible asset as of September 30, 2022.
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce, and is not deductible for tax purposes.
During the nine months ended September 30, 2021, the Company recognized $7,873 in non-cash severance paid by the former parent of ATG. This amount was allocated from total equity consideration transferred.
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OURS Technology, Inc.
On March 5, 2021, the Company acquired 100% of the voting interests in OURS Technology, Inc. (“OURS”), a silicon photonics company. The Company has included the financial results of OURS in the condensed consolidated financial statements prospectively from the date of acquisition. The OURS acquisition date fair value of the consideration transferred for OURS was approximately $40,821, which consisted of the following
Fair Value
Cash
$16,107 
Stock consideration
24,105 
Assumed liabilities related to third-party expenses
609 
Total
$40,821 
As part of the OURS acquisition, the Company assumed certain OURS compensation agreements, including the conversion of certain shares of OURS restricted stock into rights to receive the Company’s restricted stock, and assuming certain stock options with an estimated fair value of $3,789. For the stock options assumed, based on the service period related to the period prior to the OURS acquisition date, $2,145 was allocated to the purchase price, and $1,644 relating to post-acquisition services which will be recorded as operating expenses over the remaining requisite service periods.
The stock consideration transferred comprised 6,064,675 shares of the Company’s common stock including 396,067 shares of restricted stock granted. The restricted stock awards (RSAs) were valued based on the March 5, 2021 fair value, as determined by a third party valuation expert using an Option Pricing Method model, and the estimated fair value of the stock options assumed by the Company was determined using the Black-Scholes option pricing model. The RSAs vest monthly over a 2-year period starting on the vesting commencement date and expire once the holder ceases to be a service provider of the Company.
The Company has accounted for the OURS acquisition as a business combination, and therefore the assets acquired and liabilities assumed were recognized at their fair values on the date of the OURS acquisition. The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of the OURS acquisition:
Fair Value
Cash and cash equivalents
$153 
Prepaid expenses and other current assets
23 
Property and equipment, net
218 
Other assets
9 
Acquisition related intangible assets
19,000 
Goodwill
23,477 
Accounts payable
(46)
Deferred tax liability
(2,013)
Total
$40,821 
The sole identifiable intangible asset acquired in the OURS acquisition was in-process research and development (IPR&D) and has an indefinite useful life as of the date of the acquisition. The fair value of the IPR&D intangible asset was determined through a replacement cost approach, which identifies the costs that would be necessary to recreate the asset if the Company were to internally develop the acquired technology. Significant unobservable inputs include profit margin and opportunity cost.
The asset has not been placed into service and there have been no impairments related to the intangible asset as of September 30, 2022.
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce, and is not deductible for tax purposes.
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(6)    Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 1,000,000,000 shares of preferred stock with a par value of $0.00001 per share. There were no shares of preferred stock issued and outstanding at September 30, 2022 and December 31, 2021.
Common Stock
The Company is authorized to issue 51,000,000,000 shares of common stock with a par value of $0.00001 per share; of which 50,000,000,000 shares are designated Class A common stock and 1,000,000,000 shares are designated Class B common stock. Class A common stock holders are entitled to one vote for each share and Class B common stock holders are entitled to ten votes for each share. Class A and Class B have identical liquidation and dividend rights. Class B shares are convertible into Class A upon election by the holder or upon transfer (except for certain permitted transfers).
The Company had 733,134,746 and 641,721,837 shares of Class A common stock issued and outstanding at September 30, 2022 and December 31, 2021, respectively. The Company had 424,706,298 and 481,107,977 shares of Class B common stock issued and outstanding at September 30, 2022 and December 31, 2021, respectively.
(7)    Derivative Liabilities
Common Stock Warrants
On the consummation of the Merger, 12,218,750 publicly traded warrants for Class A common stock at an exercise price per share of $11.50 and 8,900,000 private placement warrants held by the Sponsor with an exercise price per share of $11.50 converted automatically into warrants of Aurora common stock.
Public warrants outstanding were 12,218,291 and 12,218,420 as of September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022, 129 public warrants were exercised for total cash proceeds of $1.
Private placement warrants outstanding were 8,900,000 and 8,900,000 as of September 30, 2022 and December 31, 2021, respectively.
The estimated fair value of the warrant liabilities was $9,925 and $65,678 at September 30, 2022 and December 31, 2021, respectively. For the three and nine months ended September 30, 2022, a $1,478 loss and $55,753 gain, respectively, was recognized in changes in fair value of derivative liabilities in the consolidated statements of operations.
Public Warrants
Public warrants were exercisable beginning on December 3, 2021. The Company may redeem the public warrants when the last reported sales price of Class A common stock for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference Value”) exceeds $10.00 or $18.00. Warrants are redeemable in whole and upon a minimum of 30 days’ prior written notice.
If the Reference Value exceeds $18.00, warrants are redeemable at $0.01 per warrant, in whole and upon a minimum of 30 days prior written notice that holders will be able to exercise their warrants.
If the Reference Value exceeds $10.00, warrants are redeemable at $0.10 per warrant, in whole and upon a minimum of 30 days prior written notice that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the fair market value of Class A ordinary shares. Fair market value of Class A common stock is the volume-weighted average price of Class A ordinary shares for the 10 trading days following the date on which the notice of redemption is sent. The number of ordinary shares received upon exercise is capped at 0.361 shares of Aurora Class A common stock per warrant.
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Private Placement Warrants
Private placement warrants are not redeemable by the Company as long as they are held by a Sponsor or its permitted transferees. If the Reference value exceeds $18.00 per share and the Company elects to redeem the public warrants, the private placement warrants are exercised.
If the public warrants are redeemed by the Company when the Reference Value equals or exceeds $10.00, the private placement warrants are also concurrently called for redemption on the same terms as of the public warrants.
If the public warrants are redeemed by the Company when the Reference Value exceeds $18.00 per share, the Sponsor will exercise the private placement warrants for cash or on a cashless basis.
Earnout Shares Liability
In connection with the execution of the Merger Agreement, the Company, Legacy Aurora and the Sponsor entered into the Sponsor Agreement on July 14, 2021. Under the agreement, the Sponsor was issued 5,162,314 earnout shares which were recorded as liabilities due to lock-up and price-based vesting conditions as follows:
1,720,772 shares vest when it has been at least 2 years since the Closing and the volume weighted average price (“VWAP”) of the Company’s class A common stock equals or exceeds $15.00 for 20 trading days of any consecutive 30 trading day period
1,720,771 shares vest when it has been at least 3 years since the Closing and the VWAP equals or exceeds $17.50 for 20 trading days of any consecutive 30 trading day period; and,
1,720,771 shares vest when it has been at least 4 years since the Closing and the VWAP equals or exceeds $20.00 for 20 trading days of any consecutive 30 trading day period.
The estimated fair value of the earnout shares liability was $5,076 and $52,380 at September 30, 2022 and December 31, 2021, respectively. For the three and nine months ended September 30, 2022, a $1,153 loss and $47,304 gain, respectively, was recognized in changes in fair value of derivative liabilities in the consolidated statements of operations. No earnout shares subject to lock-up and price-based vesting have vested as of September 30, 2022.
(8)    Equity Incentive Plans
The Company has outstanding awards granted under four equity compensation plans: the 2021 Equity Incentive Plan (the “Plan”), the Legacy Aurora 2017 Equity Incentive Plan (the “2017 Plan”), the Blackmore Sensors & Analytics, Inc. 2016 Equity Incentive Plan (the “Blackmore Plan”), and the OURS Technology Inc 2016 Stock Incentive Plan (the “OURS Plan”). The Company assumed awards under the 2017 Plan, the Blackmore Plan and the OURS Plan to the extent such employees continued as employees of the Company.
On November 2, 2021, the Company adopted the Plan. The Plan makes available for issuance Class A common shares equal to 120,900,000 shares plus any shares subject to awards assumed in the Merger that are forfeited or otherwise expire after the Closing. Additionally, the Plan includes an annual increase on the first day of each fiscal year beginning in fiscal 2022 and ending in fiscal 2031 equal to the lesser of (i) 120,900,000, (ii) 5% of total shares outstanding on the last day of the preceding fiscal year, and (iii) a lesser number of shares determined by the Plans’ administrator. Any stock options, restricted stock units (“RSU”s) or other awards from the 2017 Plan, the Blackmore Plan, or the OURS Plan that, on or after the Closing, expire or otherwise terminate without having been exercised or issued in full are added to the Plan up to a maximum of 120,692,205 shares. As of September 30, 2022, there were 82,078,448 shares available for grant under the Plan.
Under the Plan, equity-based compensation in the form of RSUs, restricted stock awards, incentive stock options, nonqualified stock options, stock appreciation rights, and performance units may be granted to employees, officers, directors, consultants, and others.
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Stock Options
The exercise price of stock options granted under the Plan and the 2017 Plan may not be less than 100% of the fair value of the Company’s common stock on the date of the grant. Stock options generally vest over one to four years starting on the vesting commencement date and expire, if not exercised, 10 years from the date of grant or, if earlier, three months after the option holder ceases to be a service provider of the Company. Stock options outstanding under the Blackmore Plan and the OURS Plan are not material.
Stock option activity under the Plan and the 2017 Plan was as follows:
Stock options outstanding
Number of
shares
Weighted
average
exercise price
Weighted average remaining contractual term (in years)Aggregate intrinsic value
Balance, December 31, 2021
79,644,550 $1.44 
Granted6,748,081 2.69 
Exercised
(19,002,590)0.63 
Forfeited
(4,144,285)2.49 
Balance, September 30, 2022
63,245,756 $1.75 7.1$51,428 
Exercisable, September 30, 2022
42,496,184 $1.32 6.4$46,398 
Stock-based compensation recognized for stock options for the three months ended September 30, 2022 and 2021 was $4,011 and $5,835, respectively. Stock-based compensation recognized for stock options for the nine months ended September 30, 2022 and 2021 was $12,797 and $18,293, respectively. The unrecognized stock-based compensation related to unvested stock options was $28,932 as of September 30, 2022 and will be recognized over a weighted average period of 1.4 years.
Restricted Stock Units
RSUs granted under the 2017 Plan generally are subject to two vesting requirements: (1) a time-based vesting requirement, and (2) a liquidity event. Generally, the time-based vesting requirement is quarterly over four years starting on the vesting commencement date, with a one-year cliff. The liquidity event vesting requirement was satisfied with the closing of the Merger in November 2021.
RSUs granted under the Plan generally are subject to a time-based vesting requirement. Generally, the time-based vesting requirement is quarterly over one to four years starting on the vesting commencement date, with a one-year cliff vesting for new hire awards.
RSU activity under the Plan and the 2017 Plan was as follows:
Unvested RSUs outstanding
Number of
shares
Weighted-
average grant
date fair value
Balance, December 31, 2021
34,054,713 $4.72 
Granted
106,875,524 3.74 
Vested(20,544,459)4.31 
Forfeited
(12,611,734)4.35 
Balance, September 30, 2022
107,774,044 $3.86 
Stock-based compensation recognized for RSUs for the three months ended September 30, 2022 and September 30, 2021 was $32,665 and $, respectively. Stock-based compensation recognized for RSUs for the nine months ended September 30, 2022 and September 30, 2021 was $92,420 and $, respectively. The unrecognized stock-based compensation related to unvested RSUs was $351,610 at September 30, 2022 and will be recognized over a weighted average period of 2.8 years.
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Related Party RSUs
Prior to the ATG acquisition, employees of ATG received grants of RSUs in the former ultimate parent company of ATG, which became a related party of the Company after the closing of the transaction. These awards were modified after the transaction to allow the awards to continue to vest for the first year subsequent to the closing of the acquisition as long as personnel remain employees of the Company. These awards are compensation for services provided to the Company and accounted for as stock-based compensation.
Awards representing 2,928,854 shares were modified on the acquisition date and 538,140 shares were forfeited before the final vesting in January 2022. The fair value of these awards was equal to the market value of the related party’s common stock on the date of modification.
Stock-based compensation recognized for related party RSUs for the three months ended September 30, 2022 and September 30, 2021 was $0 and $33,518, respectively. Stock-based compensation recognized for related party RSUs for the nine months ended September 30, 2022 and September 30, 2021 was $6,200 and $98,512, respectively. No unrecognized stock-based compensation remains for the related party RSUs as of September 30, 2022.
Stock-based Compensation Expense
Stock-based compensation is allocated on a departmental basis, based on the classification of the option holder or grant recipient. No income tax benefits have been recognized in the statement of operations for stock-based compensation arrangements and no stock-based compensation has been capitalized as of September 30, 2022.
Total stock-based compensation expense by function was as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Research and development
$31,592 $38,015 $99,243 $112,329 
Selling, general, and administrative
5,213 1,952 13,087 6,076 
Total
$36,805 $39,967 $112,330 $118,405 
(9)    Income Taxes
An income tax benefit was recognized in the nine months ended September 30, 2021 due to the release of a deferred tax asset valuation allowance as a result of deferred tax liabilities incurred from the acquisition of OURS Technology, Inc.
(10)    Leases
The Company leases its office facilities, data centers, and warehouses under non-cancelable operating lease agreements that expire between 2022 through 2042, including renewal options that are reasonably certain to be exercised by the Company.
At September 30, 2022 and December 31, 2021, the Company’s operating leases had a weighted average remaining lease term of 8.9 years and 9.3 years, respectively, and a weighted average discount rate of 6.4% and 6.2%, respectively.
Operating lease expense was $6,853 and $20,970 in the three and nine months ended September 30, 2022, respectively, and was $7,051 and $19,063 in the three and nine months ended September 30, 2021, respectively.
(11)    Commitments and Contingencies
From time to time the Company may be party to various claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses the need to record a liability for litigation and loss contingencies. Reserve estimates are recorded when and if it is determined that a loss related to certain matters is both probable and reasonably estimable. No material losses were recorded in the three and nine months ended September 30, 2022 and 2021.
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(12)    Supplemental Cash Flow Information
Non-cash investing and financing activities were as follows:
Nine Months Ended
September 30,
20222021
Noncash investing and financing activities:
Property and equipment included in accounts payable
$891 $3,632 
Vesting of early exercised stock options
22 165 
Non-cash acquisition
 1,939,804 
Cash paid for income taxes and interest were not significant in the nine months ended September 30, 2022 and 2021.
(13)    Earnings Per Share
The Company computes earnings per share of common stock using the two-class method required for participating securities. The participating securities did not impact the computation of earnings per share in the periods presented as no dividends were declared and the participating securities are not contractually obligated to share in losses.
Subsequent to the Merger, the Company has two classes of common stock with identical liquidation and dividend rights, Class A and Class B. The net loss is allocated in a proportionate basis to each class of common stock and results in the same net loss per share.
Share amounts and net loss per share have been recast for the nine months ended September 30, 2021 to reflect the Exchange Ratio from the Merger.
The following table presents the potential common stock outstanding excluded from the computation of diluted loss per share because including them would have had an antidilutive effect:
As of
September 30, 2022September 30, 2021
Redeemable convertible preferred stock
 444,912,850 
Stock options
64,655,088 85,270,695 
Restricted stock units
107,873,058 36,838,825 
Private placement warrants8,900,000  
Public warrants12,218,291  
Earnout shares liability5,162,314  
Total
198,808,751567,022,370
(14)    Related Parties
In January 2021, the Company paid $10,000 relating to financial advisory fees with a former related party for a contract that was entered into by the Company in December 2020. The Company recognized $8,250 in selling, general and administrative expenses and $1,750 as a reduction to redeemable convertible preferred stock for issuance costs in the nine months ended September 30, 2021.
The Company assumed a net liability of $46,970 from the ATG acquisition for an obligation due to the former owner of ATG, an affiliate of Uber Technologies, Inc. (“Uber”). Uber became a related party of the Company subsequent to the ATG acquisition. The net related party liability was paid during the nine months ended September 30, 2021.
In January 2021, Uber and its affiliates paid $7,873 in severance to former employees of ATG which was reimbursed by the Company. In December 2021 and January 2022, the Company made withholding tax payments for equity compensation for former employees of ATG and received a $12,770 reimbursement in the nine months ended September 30, 2022 from Uber and its affiliates.
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During the three and nine months ended September 30, 2022, the Company recognized operating expenses of $3,422 and $7,480, respectively, related to the transition service agreement and ongoing operating services provided by Uber and its affiliates. During the three and nine months ended September 30, 2021, the Company recognized operating expense of $1,363 and $4,450, respectively, related to the transition service agreement provided by Uber and its affiliates. The term of the transition service agreement expired during the first quarter of 2022.
At September 30, 2022 and December 31, 2021, the Company recorded related party payables to Uber and its affiliates of $3,326 and $540, respectively. At September 30, 2022 and December 31, 2021, the Company recorded related party receivables from Uber and its affiliates of $0 and $10,726, respectively.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “possible,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report include statements about:
our ability to recognize anticipated benefits of the Merger, which may be affected by, among other things, our ability to grow and manage growth profitably following the closing of the Merger;
our ability to commercialize the Aurora Driver safely, quickly, and broadly on the timeline we expect;
the market for autonomous vehicles and our market position;
our ability to compete effectively with existing and new competitors;
the ability to maintain the listing of our Class A Common Stock and warrants on Nasdaq;
our ability to raise financing in the future;
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
our ability to effectively manage our growth and future expenses;
the sufficiency of our cash and cash equivalents to meet our operating requirements;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
the impact of the regulatory environment and complexities with compliance related to such environment;
our ability to successfully collaborate with business partners;
our ability to obtain, maintain, protect and enforce our intellectual property;
economic and industry trends or trend analysis;
the impact of the COVID-19 pandemic; and
other factors detailed under the section entitled “Risk Factors.”
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. You should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations of Aurora should be read together with Aurora’s unaudited financial statements as of and for the three and nine months ended September 30, 2022 and 2021, together with related notes thereto, included elsewhere in this Quarterly Report. The discussion and analysis should also be read together with the section entitled “Aurora’s Business” below. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of Aurora’s control and actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in “Part II, Item 1A. Risk Factors” of this Quarterly Report and under the heading “Cautionary Statement Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report.
Percentage amounts included in this Quarterly Report have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report may vary from those obtained by performing the same calculations using the figures in our unaudited consolidated financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this Quarterly Report may not sum due to rounding.
Unless otherwise indicated or the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Aurora,” “we,” “us,” “our” and other similar terms refer to Legacy Aurora prior to the Merger and to Aurora and its consolidated subsidiaries after giving effect to the Merger.
Aurora’s Business
Aurora is developing the Aurora Driver based on what it believes to be the most advanced and scalable suite of self-driving hardware, software, and data services in the world to fundamentally transform the over $9 trillion global transportation market. The Aurora Driver is designed as a platform to adapt and interoperate amongst vehicle types and applications. To date, it has been successfully integrated into nine different vehicle platforms: from passenger vehicles to light commercial vehicles to Class 8 trucks. By creating one driver system for multiple vehicle types and use cases, Aurora’s capabilities in one market reinforce and strengthen its competitive advantages in others. For example, highway driving capabilities developed for trucking will carry to highway segments driven by passenger vehicles in ride hailing applications. We believe this approach will enable us to target and transform multiple massive markets, including the $4 trillion global trucking market, the $5 trillion global passenger mobility market, and the $400 billion U.S. local goods delivery market.
We expect that the Aurora Driver will ultimately be commercialized in a Driver as a Service (“DaaS”) business model, in which we will supply self-driving technology. We do not intend to own nor operate a large number of vehicles ourselves. Throughout commercialization, we expect to earn revenue on a fee per mile basis. We intend to partner with OEMs, fleet operators, and other third parties to commercialize and support Aurora-powered vehicles. We expect that these strategic partners will support activities such as vehicle manufacturing, financing and leasing, service and maintenance, parts replacement, facility ownership and operation, and other commercial and operational services as needed. We expect this DaaS model to enable an asset-light and high margin revenue stream for Aurora, while allowing us to scale more rapidly through partnerships. During the start of commercialization, though, we expect to briefly operate our own logistics and mobility services, where we own and operate a small fleet of vehicles equipped with our Aurora Driver. This level of control is useful during early commercialization as we will define operational processes and playbooks for our partners.
We plan to first launch Aurora Horizon, our driverless trucking subscription service, as we believe that is where we can make the largest impact the fastest, given the massive industry demand, attractive unit economics, and the ability to deploy on high volume highway-focused routes. Future success will be dependent on our ability to execute against our product roadmap to launch Aurora Horizon. From there, we plan to leverage the extensibility of the Aurora Driver to deploy and scale into the passenger mobility market with Aurora Connect, our driverless ride hailing subscription service, and longer-term the local goods delivery market.
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Results of Operations
Comparison of the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021
The following table sets forth a summary of our consolidated results of operations for the periods indicated, and the changes between periods.
Three Months Ended September 30,