EDGAR 10-K Filing

Company CIK: 1864448
Filing Year: 2023
Filename: 1864448_10-K_2023_0001864448-23-000068.json

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ITEM 1. BUSINESS
Item 1. Business
Wejo Group Limited is a publicly traded holding and exempted company limited by shares incorporated under the laws of Bermuda. As used in this Annual Report on Form 10-K, the terms “Company,” “we,” “us,” or “our” refer to Wejo Group Limited and all of its subsidiaries. Wejo’s predecessor, Wejo Limited, is a private limited liability company incorporated under the laws of England and Wales on December 13, 2013, with its primary office located in Manchester, England. Wejo is an emerging leader in the market of supporting an intelligent transport and mobility network (“Smart Mobility”), helping various business sectors through the collection, standardization and analysis of connected vehicle data. Connected vehicles contain hundreds of data sensors, emitting information such as location, speed, direction and events such as braking, temperature and weather conditions. This data, as used by the Company, creates intelligence, in near real-time and historically, which is unavailable from any other source.
Products and Services
The Company provides software and technology solutions to various market verticals in combination with services that utilize ingested and standardized connected vehicle and other high volume, high value datasets through its proprietary cloud software and analytics platform, Wejo Neural Edge (which includes our Wejo ADEPT platform). The Company’s sector solutions, primarily delivered at this time in the North America and Europe, provide valuable insights to our customers in public and private organizations, including, but not limited to, OEMs, first tier (“Tier 1”) automotive suppliers, fleet management companies (“Fleets”), departments of transportation, retailers, mapping companies, universities, insurance companies, advertising firms, construction firms and research departments. In particular, these solutions can be used to unlock unique insights about mobility journeys, city planning, electric vehicle (“EV”) usage, driver safety, audience and media measurement and more. Over the next several years, the Company expects to further expand its platform to ingest data globally from numerous additional OEMs and other valuable data sources, enabling the expansion into additional market verticals and geographic regions, as well as provide broader and deeper business insights to its OEM, Tier 1 and Fleet preferred partners.
Wejo Neural Edge is a cloud-based software and analytics platform that makes accessing and sharing vast volumes of connected vehicle data easier, by simplifying and standardizing data sets to maximize the insights gleaned from connected vehicle data to create a more robust mobility experience for drivers, and generate value for vehicle manufacturers and other adjacent businesses. The Wejo Neural Edge platform interfaces with the electronic data within vehicles from OEMs, Fleets, and Tier 1s who have partnered with Wejo. This data can be leveraged by the OEM partners as well as other private and public sector businesses in order to create rich analytics, machine learning and rapid insights. The Wejo Neural Edge platform also includes flexible implementation options and adaptable interfaces to ensure a successful and rapid roll out across territories. In addition, Wejo Neural Edge’s compliance approach supports legal and regulatory compliance, including country, federal, state and local regulations.
The Company has two primary business lines, Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions, which includes our Privacy Management Platform and other applications for both business lines. Wejo Marketplace Data Solutions utilizes ingested data from multiple sources that is transformed into standardized data sets, which generate rich insights to be utilized by our customers. Wejo Marketplace Data Solutions leverages data sets in products such as Real Time Traffic Intelligence, Historical Traffic Patterns, Journey Intelligence, and other products to share these valuable insights with our customers in a consumable and actionable format, as well as through data licenses of our proprietary data used by customers for ongoing and efficient access to quickly evolving data trends. Wejo Software & Cloud Solutions supports usage of these valuable data sets with solutions such as software platforms, software analytical tools, data management software, and data privacy solutions for our OEM partners, Tier 1 partners, Fleet partners, insurance companies and other customers in both business lines. Wejo Software & Cloud Solutions empowers customers to improve the management of their operations and creates a better customer experience through Software-as-a-Service (“SaaS”) licenses of software platforms, software analytical tools, data management software, privacy and data compliance software, and data visualization software.
The Company operates its business to take advantage of a sizeable market opportunity. Through the Company’s own bottom-up analysis, coupled with third party research, the Company estimates its Serviceable Addressable Market (“SAM”) to be worth approximately $61.0 billion by 2030. The Company determined the SAM as two components: Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions. For Wejo Marketplace Data Solutions, the Company used the data and research from the connected vehicle analyst firm Ptolemus Consulting Group (“Ptolemus”). The Company has projected Total Addressable Market numbers (“TAMs”) for each of its current and potential Wejo Marketplace Data Solutions products, each as described below (namely Traffic Management Services (“Traffic Management”), Audience and Media Measurement, End-to-End Insurance Services (the “Insurance Services”), Fleet Management Services offering (“Fleet Management”), Remote Diagnostic, and Roadside Assistance Services (“Roadside Assistance”)), by region and timeframe. The Company then applied a discount factor by calculating 70% of each TAM to create the Wejo SAM. For Wejo Software & Cloud Solutions, the Company utilized the data obtained from the research to determine the total spend in this area of SaaS solutions for the automotive industry to be approximately $30.0 billion.
Wejo Marketplace Data Solutions
Wejo currently plans to offer six product lines through Wejo Marketplace Data Solutions. These product lines utilize either (1) anonymized or de-identified data insights and solutions, or (2) personally identifiable information (“PII”) depending on the product and specific customer application. As discussed in greater depth later, PII is used with appropriate consent under our stringent privacy standards. Two of our product lines, Traffic Management Services and Audience and Media Measurement use anonymized or de-identified data, and the remaining products lines use PII. To date, most of our revenue has been generated from the Traffic Management product line described below. In 2023, we will expand capabilities to provide interpreted insights and visualization tools in Audience and Media Measurement Services, End-to-End Insurance Services, and Fleet Management Services. In the future, we plan to use our proprietary dataset to further develop Remote Diagnostic Services, Roadside Assistance Services, Car Sharing and Rental Services, and integrated payment services (“Integrated Payments”): Pay-by-Car product lines. The Marketplace Data Solutions will be offered to a broad group of customers in various market segments, including retail, real estate, transportation departments, engineering firms, universities and others, and third-party application providers allowing them to ingest data and develop insights for their own internal applications and analytics.
The two Wejo Marketplace Data Solutions product lines which are focused on the use of anonymized or de-identified data insights are as follows:
1-Traffic Management Services
Our Traffic Management Services offering provides near real-time and historic intelligence about traffic patterns, roads and related infrastructure, individual vehicle journeys and environmental conditions. The insights provided by Traffic Management help our customers understand traffic flow, average speeds, accidents and other incidents, road safety and the many conditions that affect these items, and the journeys people take. By identifying crashes and dangerous intersections, Traffic Management can provide a multitude of solutions from offering automatic traffic rerouting in the event of an accident or major weather event to helping our customers strategically support safer infrastructure planning with greater speed and accuracy.
The insights provided by Traffic Management are used by a wide range of customers for various purposes, providing insight into live traffic management, enhancing mapping and navigation services, road design and construction, parking demand analysis, public sector planning, geographic information services, and retail location analysis. Wejo’s approach is to be disruptive to existing private and public sector marketplaces that predominantly use other less insightful data sources, by adding significantly richer insights. Traffic Management customers include Departments of Transportation, mapping and navigation organizations, logistics companies, geospatial platform providers and traffic management organizations. Wejo’s solutions support the smart mobility revolution, such as that related to the expanded use of EVs through its partnership with Palantir Technologies Inc.’s (“Palantir”) EV Infrastructure Operating System to help scale and build efficient, and sustainable EV networks, and ensure equitable and universal access to EV charging stations, helping to solve one of the current biggest challenges to expanding the use of EVs.
We first began recognizing revenue from the Traffic Management vertical in May 2019 and introduced additional insights and data analytic capabilities to the market in 2021 through our Wejo Studio visualization platform. We expect to release additional enhancements in live traffic, intelligence, and insights in 2023 to bolster our Traffic Management solutions and maintain our market-leading position. The future TAM for the Traffic Management Services product line is estimated to be $3.0 billion.
2-Audience and Media Measurement Services
Our Audience and Media Measurement Services offering (“Audience Measurement”) provides audience data analytics that enable targeted advertising, and we expect in the future it will facilitate in-vehicle advertising through the infotainment capabilities of the vehicle. In particular, Audience Measurement helps our customers better understand outdoor advertising metrics, automate advertising displays for the right audience at the right time, provide more targeted outdoor advertising, and develop audience analytics for use in targeted advertising. We believe this service will benefit customers who are looking to use vehicle data to enhance their ad relevancy, reach new audiences, and drive habit-changing behaviors. Wejo intends to be a market maker for this type of solution. Our target customers for Audience Measurement include vehicle dealerships, retailers, quick service restaurants, advertising platforms, agencies and outdoor advertising organizations.
We first recognized revenue from Audience Measurement via traffic data licensing to outdoor advertising companies in August 2019. In 2023, after significantly expanding the data available that can be used for Audience Measurement applications, we are deploying further enhancements to Audience Measurement that will provide dedicated advertising insights. Based upon the availability of infotainment listening data, we expect to implement further enhancements in the development of Audio Listening Behaviors from the
connected car, accurately understanding audio market share in key defined market areas in a timely manner and attribution tools that we anticipate will be available for commercial release later in 2023. The future TAM for the Audience Measurement product line is estimated to be $2.0 billion.
As mentioned above, there are four Wejo Marketplace Data Solutions product lines that are focused on the use of PII applications and insights: End-to-End Insurance and Fleet Management, each of which are planned to launch in 2023, and Remote Diagnostic services and Roadside Assistance services, each of which are expected to be offered in the future. Further detail of these product lines are as follows:
1-End-to-End Insurance Services
Our End-to-End Insurance offerings, are still in development, and will focus on using connected vehicle data for usage-based insurance policies, including pay-as-you-drive and pay-how-you-drive. We also will develop applications in partnership with our customers to support risk assessment, risk management and claims management. Our Insurance Services use cases target more accurately estimating and paying damages, enabling claims savings and lowering insurance premiums.
As part of our Insurance Services, we intend to use vehicle and driving data to create driver risk profiles for users that opt-in, understand accurate vehicle usage, provide data for crash reconstruction, for claims analysis and to assist in fraud detection. We believe that these proposed services will allow insurers to provide value-added services to consumers, such as integrating vehicle data into their mobile apps and distributing policies directly through in-vehicle propositions. Our approach is focused on disrupting where existing data sources are used, and developing markets for new propositions that only connected vehicle data can enable. Target customers for our Insurance Services include insurers, underwriters, brokers and insurance management platforms.
In addition, we expect to soon offer Insurance Services that will allow insurance companies to monitor driving trends as an input to insurance risk and to validate the status of road networks to support claims analysis. In late 2021, the Company entered into an agreement with Sompo Holdings, Inc. (“Sompo Holdings”) that we believe lays the groundwork for creating a digital insurance product for the Japanese insurance market. In 2022, Wejo and Sompo Holdings expanded their relationship with our co-development agreement, and signed an agreement to provide Neural Edge ADEPT services to Sompo Holdings. In 2023, we expect to announce new relationships across End-to-End Insurance in the U.S. market. The future TAM for the Insurance Services product line is estimated to be $5.0 billion.
2-Fleet Management Services for Telematics and Leasing Shared Mobility Partners
We plan for our Fleet Management Services offering to provide live and historical vehicle tracking, driving safety, and vehicle status alerts. We believe Fleet Management will help optimize the running of a fleet, and help drive cost savings, improve safety, reduce vehicle environmental impact, and increase driver efficiency.
Fleet Management will use vehicle data to inform optimal routing to minimize fuel usage and carbon dioxide emissions, and alerts and notifications provided by our solution will help prevent vehicle downtime with early detection of potential issues. Our approach is focused on disrupting the existing fleet data marketplaces that typically rely on data from aftermarket devices by reducing the cost to access the fleet data and enriching the insights from the available dataset to deliver additional fleet services. We believe that our Fleet Management offering can provide the platform for data standardization, consent and privacy, as well as the underlying data management, allowing customers to focus on solutions and limit the requirement for big data management. Target customers for Fleet Management will include fleet management platforms, telematics services providers, leasing services providers, shared mobility providers, business services, delivery and logistics organizations and large enterprise fleets.
Fleet Management is currently in development with planned commercial release in 2023. The future TAM for the Fleet Management product line is estimated to be $850.0 million.
3-Remote Diagnostic Services
Connected vehicle data transforms “vehicle health” by transmitting diagnostic issue alerts, enabling the understanding of real-world component performance in specific mobility contexts, and generating personalized vehicle servicing and safety enhancements. These Remote Diagnostic Services (“Remote Diagnostics”) will include identifying and preventing component failures, determining consumable usage and tracking part quality, all remotely from the vehicle. In addition, we plan to leverage remote diagnostics data to assist in reducing depreciation of vehicles and providing a better ownership experience for the consumer over the lifetime of that vehicle.
We intend to use this information to reduce warranty costs, improve the efficiency and quality of vehicle parts, enhance repair and maintenance efficiency, inform dynamic servicing and help optimize vehicle residual value, all in an effort to provide valuable services to OEMs, dealerships, repair businesses and drivers. Wejo’s approach focuses on disrupting existing use cases that typically use costly and inefficient plug-in diagnostic devices to access vehicle health information. Target customers for our Remote Diagnostic services will include independent vehicle garages, repair centers, component and part manufacturers, and vehicle warranty providers. By leveraging our remote diagnostic data in conjunction with our insurance insights, we can increase the efficiency for repair centers in the event of a claim by sending diagnostic data ahead of time so they can begin to order parts and return the vehicle back to the customer as quickly as possible. This is also an advantage for our insurance partnerships as it will help in reducing the time it takes to settle claims.
Remote Diagnostic service offering is planned for commercial release sometime after 2023. The future TAM for the Remote Diagnostic product line is estimated to be $14.0 billion.
4-Roadside Assistance Services
We intend to provide Roadside Assistance services to transform existing roadside assistance services, such as breakdown support, vehicle recovery, emergency service response and driver assistance services. Our proposed Roadside Assistance services will include transmitting crash and breakdown alerts; helping our customers understand crash severity, occupancy, and vehicle status; and aiding in the automatic dispatch of recovery services based on identified issues and resolution requirements.
We anticipate that our Roadside Assistance services will combine data from crash and airbag sensors with body status sensors to identify the occurrence and severity of an incident. Roadside Assistance will also use data in connected vehicle components to automatically inform breakdown service providers of the in-vehicle issues requiring assistance, which we believe will enable rapid, appropriate and targeted response. The Company intends to act as both disruptor and market maker for this product, replacing legacy data sources whilst also enabling new propositions using vehicle connectivity. Although the primary customer targeted for Roadside Assistance is breakdown and recovery service organizations, we believe the data may also be used by sectors such as fleet management and insurance that require rapid notification of a crash or incident for first notification of loss.
We do not currently offer Roadside Assistance products; our first products targeting roadside assistance providers are planned for commercial release sometime after 2023. The future TAM for the Roadside Assistance services product line is estimated to be $5.0 billion.
Other Prospective Product Lines
Car Sharing & Rental
We intend to provide Car Sharing & Rental offerings (“Car Sharing & Rental”) to drive transformation in the established car rental market and support growth in car sharing with functionality such as remote vehicle unlock, digital keys, vehicle status information, vehicle monitoring and enhanced safety and security. We believe that our proposed Car Sharing & Rental services will also provide vehicle condition monitoring and alerts, vehicle usage and journey trends by location plus dynamic pricing models.
All types of connected vehicle data will be relevant for Car Sharing & Rental, with a particular focus on enabling enhanced consumer experiences and providing vehicle intelligence and usage analytics to the vertical service providers. This covers both peer-to-peer car sharing, fleet car sharing and traditional car rental.
Our approach with Car Sharing & Rental will focus on disrupting where existing data sources are used, and a market making for new propositions that only connected vehicle data can enable. Target customers for Car Sharing & Rental will include car rental providers, peer-to-peer car sharing operators, ride sharing operators and Smart Mobility platforms.
We do not currently offer Car Sharing & Rental services; our first products supporting Car Sharing & Rental do not yet have a targeted commercial release date.
Integrated Payments: “Pay-By-Car”
We intend to create integrated payment services to use connected vehicle data to enable automated payments for services such as parking, toll road usage and fuel/EV charging. We envision that Integrated Payment services will also provide for in-vehicle purchasing of goods and services, including food and drink, retail and on-demand insurance.
Our Integrated Payment services will use vehicle data to determine the amount of a product or service that the driver must pay for, such as length of stay at a car park, distance travelled on a toll road or amount of fuel delivered. Through this service, vehicle data will also enable dynamic pricing based on such things as occupancy, time of use, driving style and emissions. We believe that Wejo will disrupt existing marketplaces by creating new driver and vehicle owner propositions that simplify the payment process through data and vehicle connectivity. Target customers for Integrated Payment include EV charging and parking operators, toll road operators, and fuel and convenience stores.
We do not currently offer Integrated Payments products; our first products supporting integrated payments do not have a targeted commercial release date.
The combined future TAM of the Car Sharing & Rental and Integrated Payment services is estimated to be $1.5 billion.
Wejo Software & Cloud Solutions
In addition to the Wejo Marketplace Data Solutions discussed above, Wejo is continuing to innovate its software portfolio to commercialize data-centric software capabilities, including software platforms, software analytical tools, data management software, privacy and data compliance software, business insights and services enablers, as well as data visualization software to OEMs, Tier 1s, and larger enterprise customers such as Fleet and insurance companies. We expect to generate revenue through strategic partnerships offering to OEMs, Tier 1s, and larger enterprise customers via professional services fees, data processing, data management solutions, software platforms and business intelligence delivery based on connected vehicle data. In December 2021, we signed our first OEM customer contract for data management services with a major U.S. automaker for the development of customers solutions. Additional work was performed throughout 2022, and the services are expected to be fully launched in 2023.
We believe that Wejo Software & Cloud Solutions for OEMs will also increasingly provide detailed insights to manufacturers through enrichment and processing of the vehicle data from multiple sources. These services will leverage machine learning algorithms and other analytics processes to identify patterns in the data which could give near real-time information to OEMs on the design and performance of their vehicles, improvements that can be made to the design of automotive components, sales optimization marketing and aftermarket supply chains.
Sample insights from OEM, Tier 1, and enterprise customers will also include real-world vehicle usage intelligence, feature usage, powertrain and EV suitability, enhanced demographic profiles, dealership and after sales intelligence and vehicle maintenance and diagnostics. Wejo’s platform offers safe and efficient access to and consumption of such insights by users at OEM, Tier 1, and enterprise customers such as Fleet and insurance companies.
Our Industry
Wejo delivers an array of services and solutions serving the fast growing Smart Mobility market via our intelligent transport and mobility network platform, Wejo Neural Edge, developed for the automotive and mobility industries. Our technology and products support real-time data processing and the generation of insights from connected vehicles. Given our capabilities, we are well-positioned to serve two distinct markets with our offering. On one side sits automakers, Tier 1s, and Fleet providers whose ecosystem is expanding and becoming more connected, creating the explosion of autonomous, electric and connected vehicle data that fuels our software platform. On the other side resides connected vehicle data customers, which create new use cases for transportation and mobility information, as well as data analytic solutions that we are providing today and are developing for tomorrow. These new product verticals are addressed through our proprietary standardization, enrichment and visualization of connected vehicle data enabling us to uncover an immense wealth of information about mobility and enable solutions that serve both distinct markets.
Connected vehicle data is generated by a range of sensors that transmit information from connected vehicles, totaling billions of data points every day. This data can be temporal and geospatial, indicating when and where the information is generated. We ingest, standardize, store, and process this data, supporting our efforts to design and manage public, commercial, and personal solutions from traffic management and road intelligence to remote vehicle diagnostics, to name a few.
Our products, derived insights and software uniquely serve each distinct market. For the automakers and large enterprise customers, we ingest raw data, transform it and create valuable derived insights that these customers can use to manage their businesses. We also leverage insights from their connected vehicle data to fuel our data and analytics products. We also offer our tools to help automakers process their own data to create value for their internal use cases. For our new markets, we provide transportation information, analytics and services using connected vehicle data to support our product lines.
Our products leverage connected vehicle data to allow road transportation users and operators to benefit from safer and better travel experiences. We create strategies, along with the right products and services, that generate substantial value from this data. The benefits that we expect to create from our current and potential areas of service include increased road safety, reduced emissions, automated breakdown and recovery services, touchless payments, differentiation of the driving experience, optimization of internal vehicle processes, and more, all while creating new sources of revenue for us, our customers, and our OEM partners. Through this ecosystem, connected vehicle data brings tremendous benefit, while more than offsetting the complexity and cost to OEMs of connected vehicle data systems.
The total addressable market for Smart Mobility connected vehicle data is expected to grow in tandem with the automotive industry’s rollout of connected cars, trucks, motorcycles, vans, and buses, alongside the increased adoption of intelligent transportation systems. External and internal research projects that between 2020 and 2030 the total number of Smart Mobility connected vehicles will triple, from 196 million to 600 million, representing 44% of all vehicles globally at that time. By 2030, we estimate approximately 300 million vehicles will operate on the Wejo platform.
Geographic Footprint
As of December 31, 2022, Wejo had 29 OEM, Tier 1, and Fleet data access relationships, which span the North American, European and Asian regions, with plans to expand our footprint into Latin America and other regions in the coming years. Our Wejo Marketplace Data Solutions have been used primarily in North America and Europe. We are building the expertise and market vertical solutions that enable global roll-outs of all six of our Wejo Marketplace Data Solutions products and our Wejo Software & Cloud Solutions as we onboard new data access relationships around the world.
During the year ended December 31, 2022, the Company earned 74% of its revenue from the Wejo Marketplace Data Solutions and 26% of its revenue from the Wejo Software & Cloud Solutions. During the year ended December 31, 2021, the Company earned the majority of its revenue from the Wejo Marketplace Data Solutions and began earning revenue from Wejo Software & Cloud Solutions with its launch in the fourth quarter of 2021. For the years ended December 31, 2022 and 2021, the Company earned 95% and 90% of its revenue within the U.S., respectively. The region in which the revenue is generated is based on the address of the ultimate customer utilizing the solutions provided.
Competitive Strengths
Our leadership in the connected vehicle data market and the billions of data points that we ingest and standardize every day, live from vehicles in near real-time, enables us to provide products and services that make our roads safer, smarter, and more sustainable. While we are still early in the launch of many of our Wejo Marketplace Data Solutions products, we already have a proven track record of contributing to Traffic Management solutions, through the first product we have launched, Traffic Management. We have launched our visualization tools platform Wejo Studio and have gained our first major OEM customer for data management services. We expect to expand to numerous customers in Wejo Software & Cloud Solutions with expanded software and visualization tools, solutions and services.
One of Wejo’s fundamental competitive advantages for Smart Mobility is in its proprietary data sets sourced directly from vehicle-integrated sensors. This data, combined with insights that Wejo creates from numerous data sets, machine learning and artificial intelligence, provides more accurate near real-time and in-journey data as compared to current market technology that relies on inferred mobile data and after-market devices. For example, additional sensor data, from even a small subset of vehicles, allows our uniquely differentiated technology to provide near real-time insights into road and environmental conditions. As of December 31, 2022, Wejo had 20.8 million monetizable vehicles on the Wejo Neural Edge platform, a 29% increase over the prior year-end. Of these monetizable vehicles, 13.9 million were active on the Wejo Neural Edge platform within the last six months of which we ingested and standardized their related data, tracking over 78.8 million journeys and 17.6 billion data points a day, primarily in the United States. Based on existing OEM, automotive suppliers (Tier 1) and distributor (automotive dealer) relationships, we expect that near-real time live streaming vehicles on our platform will increase to 124 million connected vehicles by 2030.
Wejo’s relationships with OEMs have enabled us to develop a deep understanding of different ways connected vehicle data is generated; put simply, no two OEMs have the same way of describing data such as location, speed or braking events. As a result, the Company has developed a proprietary cloud platform, Wejo Neural Edge, which enables data from any OEM to be standardized into a common data model, and a portion of the data is used to develop a rich understanding of the environment around connected vehicles, even in areas where the number of connected vehicles is modest relative to the broader population of vehicles. Through Wejo Neural Edge, our customers may consume the data and data insights without having to deal with the complexities of large data sets and cumbersome data standardization behind the scenes. We expect that as we gain more customers, our common data model will become more widely recognized as the standard that customers expect. We believe that this will open the opportunity for our transformational impact on the future of mobility, autonomous vehicles and vehicle-to-infrastructure communications. Wejo aims to become the standard for Smart Mobility, as ubiquitous and recognizable as Bluetooth.
Wejo has fortified its market-leading position by creating Wejo Neural Edge, a technology moat that promotes the sharing, accessing, and use of connected vehicle data, while maintaining vigorous protocols for security and privacy.
Our advantages include the following key attributes:
•Accuracy and Coverage: Wejo works with six of the top ten US OEMs and is trusted with four times more data than its nearest competitor. Wejo ingests and processes data from over one hundred sensors from our connected vehicle fleet across multiple vehicle makes and models. Since the range and types of sensors vary with each OEM, Wejo has built a proprietary common data model to standardize data for the marketplace. As the preferred partner of a number of OEMs seeking to monetize connected vehicle data or to use their data to gain insights into their own business, we offer OEMs a suite of connectors to address the different technology choice of each OEM. These connectors include Apache Pulsar, Representational State Transfer JavaScript Object Notion or “REST JSON,” Avro, Message Queuing Telemetry Transport or “MQTT,” Advanced Message Queuing Protocol or “AMQP,” and Amazon Web Services (“AWS”) Kinesis.
•Privacy and Trust: Wejo is the trusted partner of global OEMs for the provision of data and regulatory and compliance solutions. These partnerships are built over time and based on trust with data protection as a fundamental component of our business model, allowing for greater development of these relationships in the future. All of Wejo’s data collection and handling processes aim to achieve compliance with all applicable laws, including, but not limited to, the General Data Protection Regulation 2016/679 (“GDPR”) in Europe and California’s Consumer Privacy Act (“CCPA”) in the U.S.
•Importance of Real-Time: Wejo is the only company that can process connected vehicle data in near real-time, while competitors are reliant on static data through mobile and batch data pulls. Wejo Neural Edge is capable of processing billions of data points every day and supports the processing that we need for growth in the market, and to enhance vehicle infrastructure communications. The use of RTTI will allow governmental authorities to react to developing traffic situations more quickly provide roadside assistance or emergency support services as needed and in the future may allow Autonomous Vehicles (“AVs”) to identify changes in road and traffic conditions for more efficient and safe journeys. Moreover, RTTI data could be communicated and exchanged with other AV’s to improve journey experience and safety for all road users.
•Opportunity for Growth: Wejo’s solutions are scalable, utilizing dynamic data for easy expansion into new product lines and markets versus competitive products built for niche markets with data that is unsuitable for expansion.
Competition
Wejo remains strongly positioned in the competitive landscape in which we operate. Our company was created with specific strategic parameters to govern our operations: to build strong OEM relationships, to advance transportation safety, and to improve the in- and-around the vehicle experience, all while building value. We have strong OEM, Tier 1 and Fleet provider relationships based on our 29 preferred partner relationships, which typically have terms of up to seven years. As of December 31, 2022, we process over 17.6 billion data points a day in live near real-time feeds directly from vehicles through our OEM relationships. These OEM data feeds do not come from brokers, the aftermarket, or mobile phone data resellers, which are frequently used as data sources by our competitors. This connected vehicle data comes directly from our OEM relationships and integrations with the connected vehicles.
Our current and future competitors vary in size and in the breadth and scope of the products and services they offer, and may be larger, have longer operating histories, or have greater available financial, technical, sales, marketing and other resources than we do, as well as larger installed customer bases. Our current principal competitors can or could include, but are not limited to, technology companies such as Hewlett Packard Enterprise and technology provider Ericsson, who offer vehicle connectivity and OEM solutions, while there are vertical specific players such as LexisNexis, Verisk and Octo that offer insights for specific product lines. In addition, data and technology conglomerates, such as Google, Apple, and Amazon, could provide intense competition given their data and technological capabilities and resources to fund rapid development.
The convergence of our vision, our technology, and our OEM relationships allows us to process and standardize unparalleled amounts of data to create our proprietary data set. We have relationships with OEMs in Asia, Europe and in North America with multiple different data standards that, as we onboard to our platform, will converge to one standard. We standardize up to 496,800 data points a second.
In addition to our technology and broad suite of planned products, OEMs continue to show willingness to evaluate many more incremental services that we offer. We see opportunities to use our platform to redistribute data internally to their businesses, to visualize their data for them, and to provide services that help them comply with legal and regulatory requirements. With these new experiences, we gain more insight into the data, and OEMs gain more insight into our capabilities. As the richness of our data analytics grows, so does the opportunity for us to develop and offer SaaS Solutions to the automotive industry.
While others may talk about privacy, we build privacy by design. Our global security certifications and process controls comply with GDPR. This privacy backbone gives OEMs confidence in the security of their data.
The competitive landscape continues to mature and as such, continues to shift dynamically in response to evolutions in the value chain. Historically, relationships in the automotive space have been defined by strong buyer-supplier dynamics, however the
market dynamics have prompted a shift towards more symbiotic arrangements between buyers and suppliers. Similarly, competitive relationships are trending towards more co-development between formerly direct competitors to accelerate innovation of new capabilities, while capitalizing on the ecosystem effect of those relationships. Our strong partnerships with companies such as General Motors Holdings LLC (“General Motors” or “GM”), Sompo Holdings, Palantir, and Microsoft Corporation (“Microsoft”) positions us to integrate and extend further into the emerging ecosystem.
Business Strategy
Our business strategy is supported by many unique and sustainable differentiators. The following is as of December 31, 2022:
•OEM Relationships: Wejo has forged strong relationships with OEMs, Tier 1s, and Fleet partners globally, allowing access to broad and deep vehicle attributes from embedded telematics devices within the vehicle. These relationships create more value over time as vehicle volumes increase, and geographies spread.
•Product Innovation: Wejo focuses on market creation through product innovation, including data, insights and applications aligned to specific verticals, producing monetization opportunities.
•Volume and Quality of data: Wejo receives data from 13.9 million live vehicles in near real-time, processing roughly 496,800 data points per second and ingesting over 17.6 billion data points per day on average.
•Wejo Software & Cloud Solutions: Wejo offers a growing range of SaaS solutions for OEMs, Tier 1s and large enterprise customers such as and Fleet operators or insurance companies partners enabling them to unlock further value in connected vehicle data across the vehicle development, sales and ownership lifecycle.
•Standardization of Data: Wejo Neural Edge provides a processing platform that delivers near real-time standardization of OEM data in actionable formats and the ability to unlock uniquely valuable insights from over 774.0 billion miles and 94.6 billion journeys for different end-users.
•Machine-learning Insights: Wejo utilizes advanced machine learning capabilities to deliver rich data formats that customers can easily consume.
•Patent Process: Wejo has 57 pending and 3 granted patents, with processes in place for protecting and growing our intellectual property portfolio.
Acquisition of New Customers
The Company believes there is significant opportunity to continue to expand Wejo's customer base. Through the growth of the Company's sales and marketing departments, the Company intends to engage prospective customers, increase brand awareness, and continue to educate investors with Wejo's platform and products. As of December 31, 2022, the Company had approximately 108 customers across a variety of industries and sectors, including universities, municipalities, and OEMs, representing a 59% increase over the prior year.
Expansion of Existing Customer Base
Wejo is expanding its customer base in multiple ways. Wejo Marketplace Data Solutions will expand from one product line currently in operation to multiple product lines over the next several years, and the number of market verticals to which we will sell these solutions will expand significantly as we roll out new product lines to serve these markets. We are expanding our base of larger enterprise customers in both Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions.
Technology Overview
Wejo Neural Edge is our proprietary cloud platform designed to support and maximize the value proposition in Smart Mobility connected vehicle data. The Company monetizes its proprietary data lake by delivering valuable insights for customers through product offerings via the Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions. Additionally, through machine learning and proprietary algorithms, Wejo can offer its own solutions for customers to offer compelling end market applications to enhance products and offer new value creating opportunities.
The Company's source-agnostic interfaces provide flexible integration with OEM and Fleet provider data, while the high- performance architecture, built by Wejo, rapidly ingests, cleanses and integrates the data into the Wejo Marketplace Data Solutions.
The data used in the Company's products is received live, directly from vehicle sensors via the OEM and cloud interface and not gathered from third-party devices or mobile data. This exclusive, proprietary data set creates a significant strategic advantage; insights the Company provides through its products are uniquely differentiated because we receive a majority of our data every 1-5 seconds in-journey (we are not limited to post-journey data), which allows us to provide near real-time insights to the marketplace. We are able to deliver data from vehicle to customer in less than 60 seconds.
Sustaining Innovation
Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain the Company's competitive advantage. With the Wejo Neural Edge platform, the Company currently ingests over 17.6 billion data points a day. Over the next two to three years, the Company expects to expand its platform to ingest data globally, to expand into additional marketplaces and continue to provide business insights to its OEM preferred partners.
Data Privacy
Various laws, including GDPR and CCPA, impose obligations restricting the collection, use and transfer of personal data. The U.S. Federal Trade Commission and various states enforce consumer protection laws to impose obligations on the collection and use of consumer data and on security measures for protecting that data. Similarly, any country that Wejo may enter into for business may have related or more stringent personal data, consumer protection and cybersecurity requirements. The obligations that these laws and regulations impose can be extensive, including but not limited to restrictions on when data can be collected from a person, requirements to obtain consent to collect data from a person, requirements to disclose how data is collected, used and stored, requirements for extensive record keeping on systems processing personal data, geographic limitations on where the data can be stored and processed, contractual obligations that must be maintained with data providers and data recipients, standard contract clauses approved by the European Union (“EU”) when transferring data outside of the European Economic Area, responding to consumer inquiries, notifying regulatory authorities about data breaches, and designating data protection officers. Wejo has incorporated into the platform and the operations features and processes that the Company believes allow us to comply with these types of laws and regulations in the locations where we currently collect data.
Before we begin services in a new country, we review applicable laws and regulations and create a plan to update our systems and operating procedures, including for managing PII, if necessary, to comply with all local data and related consumer protection requirements. In addition, we also maintain operations in the UK. The EU Commission has released a decision declaring UK data protection obligations adequate. Wejo is well-positioned to continue to transfer data between the UK and the EU. Failure to comply with any of the laws and regulations discussed in this section can result in fines and penalties. For example, failing to comply with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. If at any time our platform or operations are found noncompliant with these requirements, our business, results of operations, and financial condition may be materially and adversely impacted. Meeting the obligations imposed by any of the above laws and regulations or any similar laws and regulations that may apply to our current and future business will impact our business.
Information Security
The Company has maintained over the past 5 years, and will continue to strive to uphold security governance certifications, including Cyber Essentials Plus, IASME Gold and ISO27001 (since 2020) certifications, the combination of which indicates our approach to using that best practice and support our commitment to serving our data subjects and customers by protecting all data in keeping with legislative and regulatory requirements.
Human Capital Resources
Oversight and Management
Attracting, developing and retaining top talent is key to our growth, and our success depends on cultivating an engaged and motivated workforce. Our goal is to create a welcoming, diverse and inclusive environment for all our employees, and the tone is set from the top. Our Board of Directors and its committees provide oversight on certain human capital matters. For example, our Nominating and Corporate Governance Committee provides oversight of the environmental, social, governance trends, issues and concerns. In addition, our Compensation Committee is responsible for, among other things, developing and reviewing executive management succession plans and reviewing the Company’s compensation policies for executives. Our Human Resources department is tasked with managing employee-related matters, including recruiting and hiring, compensation and benefits, performance management, and learning and development. In addition, our management and cross-functional teams also work closely to evaluate human capital management issues.
Wejo strives to foster the best possible work environment for all employees. Integrity, honesty, and sound judgment are fundamental to our reputation and success. We comply with laws, rules and regulations, holding ourselves to high standards of ethical business conduct in every aspect of our business dealings. We have a Code of Conduct and Business Ethics (the “Code of Conduct”), which sets forth the basic guidelines that we all must follow. The Code of Conduct serves as a guide for what to do when faced with legal or ethical questions and promotes the high ethical standards to which we are committed.
Our Employees
As of December 31, 2022, Wejo had 275 employees, which included 251 permanent employees and 24 non-permanent employees, of which 38% are in Technology and 33% are in our commercial office, including our Sales & Marketing employees, with the rest making up our support functions. Geographically, as of December 31, 2022, 73% of our permanent employees were located in UK, 20% were located in the U.S., and the remaining 7% were located in Japan and elsewhere in Europe. In addition to the 251 permanent employees, Wejo had 24 contract-based, non-permanent employees; 17 such employees were in the UK; and 7 such employees were elsewhere in Europe.
Employee Compensation, Benefits and Wellness
We consider our people to be crucial to our success, meaning we value the importance of attracting and retaining the best talent. We offer market competitive compensation packages including equity and retirement benefits for all employees, with UK leaders and managers and all U.S. employees receiving healthcare benefits.
We value the importance of mental wellness and health, and promote regular work breaks and protected personal time. We are also committed to ensuring that proper working conditions exist for the safety of everyone. Where required, we provide home-office furniture, including ergonomic chairs and desks to ensure people’s working conditions are appropriate. We believe this contributes to our low work-related personnel injury rate.
Employee Engagement
Wejo places importance on the employee experience through communication, engagement, alignment and ensuring our employees feel valued. We strive to continually improve all elements of engagement through surveys, monthly all-staff briefings, social events, our internal intranet, goals and regular 1:2:1’s. While none of our employees are covered by a collective bargaining agreement, we do have employee representatives for the purpose of information sharing and consultation. This channel is used to communicate matters of interest affecting employees and social/charities. We review best practice in order to improve ways of working, including policy, legislative changes and/or employment terms.
Leadership Development and Training
Other key focus areas are Leadership Development and Success Management. We support career development by designing and investing in resources such as our Success Management tool designed to identify strengths and development areas by department. All employees have access to a blended solution of learning support, ranging from induction and on-the-job-training to e-learning solutions and coaching and professional development. We are also investing in our leadership population specifically, with our key signature programs aimed at building high performing teams and leading through change. Our learning and development strategy is aimed at building capability for today and the future and investing in our employee’s careers within Wejo.
Diversity & Inclusion
We are committed to creating and maintaining a workplace free from discrimination or harassment on the basis of race, color, citizenship status, religious creed, national origin, ancestry, gender identity, sexual orientation, age, marital status, veteran status, physical or mental disability, medical condition, or any other status protected by applicable law. Our management team and employees are expected to exhibit and promote honest, ethical, and respectful conduct in the workplace. All of our employees must adhere to our Code of Conduct, which sets standards for appropriate behavior, and are required to attend annual training on the Code of Conduct.
Wejo does not in any way or under any circumstances tolerate or ignore bullying, harassment, or victimization, and therefore the Company treats all allegations and situations seriously. We also sponsor charities for the good of embracing life's differences. We govern ourselves through our commitment to diversity and equality through our Equality, Diversity and Discrimination Policy, which embraces individual viewpoints, cultures, preferences and experiences.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
You should carefully consider the following risk factors, which are not exhaustive, in addition to the other information contained in this report, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes. If any of the events described in the following risk factors or the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.
Risks Related to Our Business and Industry
We have a limited operating history and may be unable to achieve or sustain profitability or accurately predict our future results.
We have been developing and selling new connected vehicle data products and services, including developing our technology, our customers, and our relationships with OEMs and other automotive vendors. Because our business and the market for our products are both new, evaluating the current business and its future performance is difficult and based upon limited historical data, a changing market, and our ability to influence the market. This applies to predictions of both revenue and expenses.
Building our business to date, we have accumulated losses. Our continued investment in new technology and services will add to our operating expenses. We cannot assure you that we will be profitable, that we will be able to sustain profitability, or of the magnitude of our profitability. Our financial performance may be adversely impacted if we fail to address the “Risk Factors” described in this section, or any other risks and challenges that we may face. If our assumptions for addressing the risks that we have identified and other business conditions are incorrect, our plans for operating the business may be impacted and we may not achieve our planned and expected results.
Growing our business requires us to continue investing in technology, resources, and new business capabilities; these investments may contribute to losses, and we cannot guarantee that any will be successful or contribute to profitability.
Our plans for operating our business and leading further growth of the connected vehicle data ecosystem include adding to our large data processing capabilities to create new products and services for a wide variety of participants in the road transportation industry and beyond. These plans include developing new products and services to and for transportation systems, OEMs, auto suppliers, and others. These investments could contribute to losses, and we cannot guarantee whether or when any of the new products and services will become operational, be successful with customers, or whether they will be profitable.
If we do not develop enhancements to our services and introduce new services that achieve market acceptance, our growth, business, results of operations and financial condition could be adversely affected.
Our ability to attract new customers for our connected vehicle data products and services and increase revenue from existing customers depends in part on our ability to enhance and improve our existing services, increase adoption and usage of our services, and introduce new services. The success of any enhancements or new services depends on several factors, including timely completion, adequate quality testing, actual performance quality, market accepted pricing levels and overall market acceptance.
Enhancements, such as additional technology features, and new connected vehicle data products and services that we develop may not be developed or introduced in a timely or cost-effective manner, may contain errors or defects, may have interoperability difficulties with our platform or other services or may not achieve the broad market acceptance necessary to generate significant revenue. Furthermore, our ability to increase the usage of our services depends, in part, on the development of new uses for our services, which may be outside of our control. Even if our new and improved products and services are successful, they may not operate without excessive and unforeseen costs, or without technical challenges that impair broader sales. As the growth of the connected vehicle data market involves new products and services that customers have not previously had an opportunity to acquire, our success depends upon whether, the extent that, and the timing of when, customers accept and purchase the new products and services. Since we cannot control any of these factors, we cannot guarantee that improved and new products and services will not contribute to losses or will operate or sustain profitable operation. If in reaching customer acceptance and adoption of improved and new products and services we need to increase sales expenses beyond what we anticipate, our ability to limit losses and reach and maintain profitability for those products and services may be adversely impaired.
We anticipate growth in the connected vehicle data market; if we do not successfully match our growth to the growth of the connected vehicle data market, our business could be materially and adversely affected.
Our strategy for investing in new products and services supports our expectations of demand for new products and services in the connected vehicle data market and for growth of that market in new regions and countries. For example, we plan to offer services that provide data processing capabilities to OEMs, Tier 1s, Fleet providers, and automotive ecosystem partners and that increase insights and visualizations from connected vehicle data. We also plan to sell current and future services in new countries where we do not already have customers. If our investments do not create successful new products and services that support growth of the business, or if our strategy for growth does not match demand for growing products and services in the connected vehicle data market, our business performance could be adversely impacted.
We cannot guarantee the success of our growth strategy or that our investments in growth of the business will lead to profitable returns. We may incur unexpected costs in developing technologies and services, we may generate insufficient capital from operations or elsewhere to fund growth, we may incur sales expenses that we did not plan for or anticipate, we may incorrectly identify areas of connected vehicle data market growth and the connected vehicle data market could grow more slowly than we anticipate or not at all. Any of these factors could impair our ability to grow the business as we plan and could materially and adversely impact our financial performance and profitability.
We will require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all. Our ability to raise additional capital, and even to access our own cash, may become more difficult due to recent bank failures.
We intend to continue to make investments to support our business and will require additional funds. In particular, we will require additional funds to develop new products and enhance our platform and existing products, expand our operations, including our sales and marketing organizations and our presence outside of the United States, improve our infrastructure or acquire complementary businesses, technologies, services, products and other assets. Accordingly, we will need to engage in equity or debt financings to secure additional funds.
We spent significant effort in 2022 and early 2023 identifying and optimizing alternative capital pathways to fund operations for the long-term, culminating with the Company raising over $38.0 million of bridge capital during that period through the following measures: (i) a Common Stock Purchase Agreement (the “CFPI Stock Purchase Agreement”) with CF Principal Investments LLC (“CFPI”); (ii) a private placement of common shares and warrants (the “July 2022 PIPE”) with various investors, which included a significant investment coming from Sompo Light Vortex, Inc. (“Sompo Light Vortex”), a wholly-owned subsidiary of Sompo Holdings, as well as current investors and certain members of the Company’s Board of Directors; (iii) the forward purchase agreement (the “Forward Purchase Agreement” or the “FPA”) Wejo Limited entered into with Apollo AN Credit Fund (Delaware), L.P., Apollo Atlas Master Fund, LLC, Apollo Credit Strategies Master Fund Ltd., Apollo PPF Credit Strategies, LLC, and Apollo SPAC Fund I, L.P. (collectively “Apollo”); (iv) a $10 million secured convertible note (the “SCN”) with GM; (v) a $3.5 million second lien note (the “Second Lien Note”) with an investor (the “Second Lien Noteholder”); and (vi) a $2 million unsecured note (the “Unsecured Notes”) with the Company’s Chairman, Tim Lee (see Notes 3, 6, 14, 15 and 25 to the accompanying audited consolidated financial statements). In addition, on December 22, 2022, the Company entered into that certain Open Market Sales Agreement (the “ATM Agreement”), with Jefferies LLC (“Jefferies”) under which the Company may in the future direct Jefferies to sell up to $100,000,000 of the Company’s common shares from time to time on the open market under the terms and conditions of the ATM Agreement (see Note 3 to the accompanying audited consolidated financial statements).
On January 10, 2023, the Company announced it entered into a business combination agreement (the “TKB Business Combination Agreement”) with TKB (see Note 25 to the accompanying audited consolidated financial statements). The Company expects the TKB Business Combination to close in late second quarter of 2023, but such closing is dependent on various closing conditions and other factors. The goal of this business combination and a potential Private Investment in Public Equity (“PIPE”) financing transaction is to raise enough capital through to the Company’s cash flow breakeven point, which the Company anticipates will occur in mid-2024, assuming revenue and expense reduction targets are met. Because the TKB Business Combination is subject to various closing and other conditions, however, there can be no guarantee that the transaction will close. No legally binding agreements are yet in place for a PIPE financing transaction or for bridge financing to continue the Company’s operations through to the closing of those transaction and therefore there can be no assurances that either of such transactions will complete.
On the closing of the TKB Business Combination, our shareholders are expected to suffer significant dilution. Further, if we raise additional funds through sales of our common shares under the ATM Agreement and other future issuances of equity or convertible debt securities through a PIPE or one or more bridge financing transactions prior to the closing of the TKB Business Combination and the PIPE, or the debt under the SCN provided under the Securities Purchase Agreement with GM (“GM Securities
Purchase Agreement” or “GM SPA”) is converted to common shares, our shareholders could suffer additional significant dilution. In addition, any new equity securities we issue could have rights, preferences and privileges superior to those holders of our common shares. Our existing debt and equity financing agreements also contain restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth, scale our infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired, and our business, results of operations and financial condition may be adversely affected.
In March 2023, the Federal Deposit Insurance Corporation (the “FDIC”) took control and was appointed receiver of Silicon Valley Bank (“SVB”), and New York regulators abruptly closed Signature Bank to stymie risk in the broader financial system. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to raise additional capital may become more difficult, which could have a material adverse effect on our business and financial condition. In addition, while to date we have had no difficulty accessing our cash in an account we hold at SVB, the FDIC taking control of SVB adds uncertainty to our ability to access our existing cash on deposit at SVB (despite our deposits currently being well below the FDIC insurance limits) and to coordinate payments to and from third parties, each of which could have a material adverse effect on our business and financial condition.
We have experienced growth and expect our growth to continue, and if we fail to effectively manage our growth, then our business, results of operations and financial condition could be adversely affected.
We have experienced substantial growth in our business. We have grown the number of OEMs who provide us data, the amount of data that our systems process, our customer base, and the services and upcoming services we offer. This growth has placed and may continue to place significant demands on our corporate culture, operational infrastructure, and management. If we grow and make organizational changes without preserving key aspects of our culture, we could adversely impact our chances for success, to recruit and retain personnel, and effectively focus on and pursue our corporate objectives. This, in turn, could adversely affect our business, results of operations and financial condition.
In addition, continued growth will require us to improve our operational, financial and management controls, compliance programs, and reporting systems. We may discover deficiencies in these controls, programs, and systems as we grow, which in turn could adversely affect our business, results of operations, and reputation. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase. If our growth continues, it could strain our ability to maintain reliable service levels for our customers. If we fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected.
Our business depends on maintaining and growing our customer base; if we fail to maintain and grow our customer base, our business, results of operations and financial condition could be adversely affected.
We are pioneering the connected vehicle data business, for which we expect a growing customer base. Our plan for growing revenue depends upon maintaining customers and obtaining new customers. Current and potential customers may not value or may be slow to value the benefit of our products and services, may not agree that our products and services are as valuable as we anticipate, may find alternative sources of information to replace the products and services that we offer and plan to offer, may not be satisfied with our delivery of our products and services, or may decide that our products and services are not the products and services that they need. We cannot predict if and when customers will decide to purchase or continue purchasing our products and services. In addition, acceptance by our current customers does not guarantee that future customers will desire, accept, or be able to receive some or all our products and services from our platform without the need for us to increase expenses beyond levels we anticipate in order to adapt our platform to meet future customers’ needs. When customers do purchase our products and services, we cannot predict the amount of data that customers will purchase. If for any of these reasons or others, we do not maintain and grow our customer base as we anticipate, then our business, results of operations, and financial condition could be adversely affected.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our products may become less competitive.
The market for products and services based upon connected vehicle data is in its early stages and evolving. It is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop new services that satisfy our customers and provide enhancements and new features for our existing services that keep pace with rapid technological and industry change, our business, results of operations and financial condition could be adversely affected. If new technologies emerge that can deliver competitive services at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete effectively.
Our platform must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we may need to continuously modify and enhance our services and platform to adapt to changes and innovation in these technologies. If OEMs and customers adopt new software platforms or infrastructure, we may be required to develop new or enhanced versions of our services to work with those new platforms or infrastructure. This development effort may require significant resources, which would adversely affect our business, results of operations, and financial condition. Any failure of our services and platform to operate effectively with evolving or new platforms and technologies could reduce the demand for our services. If we are unable to respond to these changes in a cost-effective manner, our services may become less marketable and less competitive or obsolete, and our business, results of operations, and financial condition could be adversely affected.
As a pioneer in the connected vehicle data business, we offer new products and services and depend upon the willingness of our automotive data providers to provide data for these new products and services.
The market for connected vehicle data products and services is new, as are many of the products and services that we develop, plan to develop, and offer. Our current financial plans depend largely upon the introduction of new products and services and the desire of our automotive data providers to provide data for use in these new products and services. Our success with our data providers with our current products and services does not guarantee that our data providers will support all our planned future products and services. From time to time, data providers have and may continue to extend time considering support for new products and services. In such cases, we may be slower than we planned, or even prevented from, introducing the impacted new products and services. Potential customers impacted by these delays may lose interest in the products and services or seek alternatives to our products and services, and if either of these occurs, our reputation with our customers or in the market may suffer. If we are unable to obtain connected vehicle data for our planned products and services, our business, results of operations, and financial condition could be adversely affected.
We rely, in part, on relationships with other businesses to demonstrate the value of our connected vehicle data products and services to end users of the data. This approach may impact our ability to meet financial objectives and to scale to a larger market.
For some customers, we deliver connected vehicle data products and services by entering into contracts with other entities that offer capabilities that we do not yet offer or did not plan to offer. This approach has the potential of adding unpredictable costs and complexities to the delivery of our products and services, as well as reducing our potential revenue. For example, we may incur expenses building a connection to another company’s system, or the IT and data security profiles of the other company may not meet our technological and security standards and may take longer to integrate and remediate than planned. In addition, the end customer may not be willing to pay a higher price because we and the other business are both involved in processing the data. As a result, our share of revenue from the data may be adversely impacted. Our ability to meet our anticipated market growth depends upon our ability to manage these relationships and to grow our capabilities to reduce dependence upon these relationships. If we do not successfully manage these relationships and adapt our products and services to address these challenges, we may not be able to grow our revenue or our business in the connected vehicle data market as we anticipate, and our business, results of operations, and financial condition could be adversely affected.
Our products rely on live data streams from OEMs on reasonable economic terms and with reasonable permissions; if we are unable to maintain sufficient contracts with such partners for data streams at reasonable prices, our ability to offer certain products and services or the value of our data products and services may be impaired.
Our products and services depend upon the availability of connected vehicle data. We obtain this data through our relationships with OEMs on reasonable economic terms. Some or all of the OEMs from whom we obtain connected vehicle data may decide to limit or withdraw the availability of their connected vehicle data if we do not meet their business goals for connected vehicle data, sales or revenue targets, or our obligations under our contracts. Some of our products require a minimum volume of connected vehicle data in a given market to provide meaningful value to customers. In addition, if the economic terms of our agreements with OEMs or such sources do not allow us to cover costs of our business as we anticipate, our revenue will be negatively impacted. We cannot offer our key products and services in a region or market where we do not have contracts to receive connected vehicle data. If we are unable to maintain sufficient contracts with OEMs for data streams that adhere to our quality-control standards and service-level agreements or obtain acceptable alternative data for the impacted market, we may be unable to offer certain data products and services and the value of those we offer may be limited. As a result, our business, results of operations and financial condition could be adversely affected.
If we are unable to expand our relationships with OEMs and add new OEMs as data providers, our business, results of operations, and financial condition could be adversely affected.
As part of our growth strategy, we intend to expand our relationships with our existing OEM connected vehicle data providers and add new relationships with additional OEMs. In addition to obtaining data from such partners, we offer services to OEMs, Tier 1s, Fleet providers, and participants in the automotive ecosystem to assist them in identifying, processing, and converting to a useable standard connected vehicle data that support useful services in the market. If connected vehicle data from new OEM suppliers does not meet our technical or quality standards, it may not be suitable for use in our products and services, or we may face increased technical costs processing the data, which could adversely impact our continued growth. If we fail to expand our relationships with existing OEMs or establish relationships with new OEMs in a timely and cost-effective manner, or at all, then our business, results of operations and financial condition could be adversely affected. Additionally, even if we are successful at building these relationships, but there are problems or issues with integrating our systems with those of the OEMs, our reputation and ability to grow our business may be harmed.
Any failure to offer high quality data user support may adversely affect our relationships with our customers and prospective customers, and adversely affect our business, results of operations and financial condition.
Many of our customers depend on our customer support team to assist them in deploying our services effectively, to help them to resolve post-deployment issues quickly, and to provide ongoing support. If we do not devote sufficient resources or are otherwise unsuccessful in assisting our data customers effectively, we could adversely affect our ability to retain existing data customers and could discourage prospective data customer from adopting our services. We may be unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could increase costs and adversely affect our business, results of operations and financial condition. Our revenues are highly dependent on our business reputation. Any failure to maintain high quality customer support, or a market perception that we do not maintain high quality customer support, could erode customer trust and adversely affect our reputation, business, results of operations and financial condition.
We may undertake acquisitions or divestitures, which may not be successful, and which could materially adversely affect our business, financial condition and results of operations.
From time to time, we may consider acquisitions, which may not be completed or, if completed, may not be ultimately beneficial to us. We also may consider potential divestitures of businesses from time to time. We routinely evaluate potential acquisition and divestiture candidates and engage in discussions and negotiations regarding potential acquisitions and divestitures on an ongoing basis; however, even if we execute a definitive agreement, there can be no assurance that we will consummate the transaction within the anticipated closing timeframe, or at all. Moreover, there is significant competition for acquisition and expansion opportunities in our industry.
Acquisitions involve numerous risks, including (i) failing to properly identify appropriate acquisition targets and to negotiate acceptable terms; (ii) incurring the time and expense associated with identifying and evaluating potential acquisition targets and negotiating potential transactions; (iii) diverting management’s attention from the operation of our existing business; (iv) using inaccurate estimates and judgments to evaluate credit, operations, funding, liquidity, business, management and market risks with respect to the acquisition target or assets; (v) litigation relating to an acquisition, particularly in the context of a publicly held acquisition target, that could require us to incur significant expenses, result in or delay or enjoin the transaction; (vi) failing to properly identify an
acquisition target’s significant problems, liabilities or risks; (vii) not receiving required regulatory approvals on the terms expected or such approvals being delayed or restrictively conditional; and (viii) failing to obtain financing on favorable terms, or at all. In addition, in connection with any acquisitions, we must comply with various antitrust requirements, and it is possible that perceived or actual violations of these requirements could give rise to litigation or regulatory enforcement action or result in us not receiving the necessary approvals to complete a desired acquisition.
Furthermore, even if we complete an acquisition, the anticipated benefits from such acquisition may not be achieved unless the operations of the acquired business, platform or technology are integrated in an efficient, cost-effective and timely manner. The integration of any acquisition includes numerous risks, including an acquired business not performing to our expectations, or not integrating it appropriately and failing to realize anticipated synergies and cost savings as a result, and difficulties, inefficiencies or cost overruns in integrating and assimilating the organizational cultures, operations, technologies, data, products and services of the acquired business with ours. The integration of any acquisition will require substantial attention from management and operating personnel to ensure that the acquisition does not disrupt any existing operations or affect our reputation or our clients’ opinions and perceptions of our platforms and solutions. We may spend time and resources on acquisitions that do not ultimately increase our profitability or that cause loss of, or harm to, relationships with key employees, clients, third-party providers or other business partners.
Divestitures also involve numerous risks, including: (i) failing to properly identify appropriate assets or businesses for divestiture and buyers; (ii) inability to negotiate favorable terms for the divestiture of such assets or businesses; (iii) incurring the time and expense associated with identifying and evaluating potential divestitures and negotiating potential transactions; (iv) management’s attention being diverted from the operation of our existing business, including to provide on-going services to the divested business; (v) encountering difficulties in the separation of operations, platforms, solutions or personnel; (vi) retaining future liabilities as a result of contractual indemnity obligations; and (vii) loss of, or damage to our relationships with, any of our key employees, clients, third-party providers or other business partners.
We cannot readily predict the timing or size of any future acquisition or divestiture, and there can be no assurance that we will realize any anticipated benefits from any such acquisition or divestiture. If we do not realize any such anticipated benefits, our business, financial condition and results of operations could be materially adversely affected.
We are highly dependent on the services of our CEO and founder, Richard Barlow.
We are highly dependent on our CEO and founder, Richard Barlow. Mr. Barlow has acted as Wejo’s Chief Executive Officer since our inception and, as such, is deeply involved in all aspects of our business. Our future business and results of operations depend in significant part upon the continued contributions of Mr. Barlow. If we lose those services or if he fails to perform in his current position, the development of our business plan could be adversely affected and harm our business. Negative public perception of, or negative news related to, Mr. Barlow may adversely affect our brand, relationship with customers or standing in the industry.
If we are unable to hire, retain and motivate key executives and other qualified employees, our business will suffer.
Our future success depends, in part, on our ability to continue to attract and retain key executives and highly skilled employees. Our executive team, in particular, has played and continues to play a key role in the development of our business. We believe that there is, and will continue to be, intense competition for highly skilled executive, management, technical, sales and other employees with experience in our industry and where we maintain offices. We must provide competitive compensation packages and a high-quality work environment to hire, retain and motivate such employees. If we are unable to retain and motivate our existing employees and attract qualified employees to fill key positions, we may be unable to manage our business effectively, including the development, marketing, and sale of our products, which could adversely affect our business, results of operations and financial condition. To the extent we hire employees from competitors, we also may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.
Public health crises, such as the COVID-19 pandemic, could materially adversely affect our business, financial condition and results of operations.
We are subject to risks related to public health crises, such as the COVID-19 pandemic, which had an adverse effect on our operating results in 2020 and 2021. Our business is based on our ability to provide products and services to customers throughout the United States and around the world, and the ability of those customers to use and pay for those products and services for their businesses and in their daily lives. As a result, our business, financial condition and results of operations could be materially adversely affected by a public health crisis that significantly impacts the way customers use and are able to pay for our products and services, the way our employees are able to provide services to our customers, and the ways that our partners and suppliers are able to provide products and services to us. For example, public and private sector policies and initiatives to reduce the transmission of COVID-19 and initiatives Wejo took in response to the health crisis to promote the health and safety of our employees and provide services to our customers, along with the related global slowdown in economic activity, resulted in decreased revenues and increased costs during 2020. In addition, such a crisis could significantly increase the probability or consequences of the risks our business faces in ordinary circumstances, such as risks associated with our supplier and vendor relationships, risks of an economic slowdown, regulatory risks, and the costs and availability of financing.
The extent to which COVID-19 or other widespread outbreaks of infectious disease impact our business going forward will depend on factors such as the duration and scope of infections; governmental, business, and individuals' actions in response to the health crisis; and the impact on economic activity including the possibility of financial market instability or recession. How a resurgence of COVID-19 or other potential global pandemics will affect us will depend on future developments that are highly uncertain and cannot be accurately predicted.
To the extent that a public health crisis, including any continuing impact from COVID-19 pandemic, adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section, including, but not limited to those relating to cyber-attacks and security vulnerabilities, interruptions or delays due to third-parties, or our ability to raise additional capital or generate sufficient cash flows necessary to fulfill our obligations under our existing indebtedness or to expand our operations.
Unfavorable conditions in our industry, the automotive industry, the global economy, or reductions in spending on technology could adversely affect our business, results of operations and financial condition.
Our business is impacted by changes in our industry, the automotive industry, or the global economy on our customers and automotive data providers. Our results of operations depend in part on customer investment in technology to connect to and utilize our products and services. In addition, our revenue is dependent on the usage of our products, which in turn is influenced by the scale of business that our customers are conducting and by their willingness to increase the scale of their purchases of our products and services. To the extent that weak economic conditions, geopolitical developments, such as existing and potential trade wars, and other events outside of our control result in a reduced volume of business by our customers and prospective customers, demand for, and use of, our products may decline. For example, the military conflict between Russia and Ukraine could result in regional instability and adversely impact commodity and other financial markets as well as economic conditions, especially in Europe. Additionally, this could magnify inflationary pressure resulting from the COVID-19 pandemic and extend any prolonged period of higher inflation.
To the extent that any of these factors impact the sale of new vehicles with connectivity or the investment by OEMs into vehicle connectivity, the supply of connected vehicle data in one or more of our existing or anticipated markets may fail to meet our expectations and we may not be able to offer the products and services that we anticipate and demand for and revenue from our products and services may slow or fall. If due to any of these factors, our customers reduce their use of our products, or prospective customers delay adoption or elect not to adopt our products, or if OEMs reduce their investments in vehicle connectivity as a result of a weak economy, this could adversely affect our business, results of operations and financial condition.
The market in which we participate is intensely competitive, and if we do not compete effectively, our business, results of operations and financial condition could be harmed.
The market for connected vehicle data products is rapidly evolving, fragmented and highly competitive, with relatively low barriers to entry in some segments. To compete effectively, we will have to maintain and grow credible relationships with OEMs, provide products and services that customers will accept, continue scaling our data processing and supporting operations to provide satisfactory service levels, and continue to build knowledge among current and potential customers of the value of our connected vehicle data products and services. The principal competitive factors in our market include completeness of offering, credibility with customers and OEMs, global reach, ease of integration and programmability, product features, platform scalability, reliability, deliverability,
security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, as well as the cost of deploying and using our products. Our competitors fall into four primary categories:
•Companies brokering or creating marketplaces for connected vehicle data;
•Companies that develop platforms for processing connected vehicle data;
•Large technology companies such as Google; and
•Automotive companies who may desire to independently market their connected vehicle data with partially or fully competing services.
With the introduction of new services and new market entrants, we expect competition to intensify in the future. Increased competition may result in pricing pressure and reduced margins and may impede our ability to increase the sales of our products or cause us to lose market share, any of which will adversely affect our business, results of operations and financial condition. Our competitors may be able to respond more quickly and effectively to new or changing opportunities, technologies, standards, or customer requirements, or pricing pressure. As a result, even if our products and services are more effective than the products and services that our competitors offer, potential customers might select competitive products and services in lieu of our services.
Larger and more well-funded companies with access to significant resources, large amounts of data or data collection methods, and sophisticated technologies may shift their business model to become competitive with us.
In addition, many of our potential competitors could have competitive advantages, such as greater name recognition, longer operating histories, significant install bases, broader geographic scope, and larger sales and marketing budgets and resources. Many of our potential competitors may have established relationships with independent software vendors, partners, and customers, greater customer experience resources, greater resources to make acquisitions, lower labor and development costs, larger and more mature intellectual property portfolios, and substantially greater financial, technical, and other resources. New competitors or alliances among competitors may emerge and rapidly acquire significant market share due to these or other factors.
Mergers and acquisitions in the technology industry increase the likelihood that our competitors in the future will be larger and have more resources. We expect this trend to continue as companies attempt to strengthen or maintain their market positions in an evolving industry. Companies resulting from these possible consolidations may create more compelling product offerings and be able to offer more attractive pricing options, making it more difficult for us to compete effectively.
We expect our results of operations to fluctuate on a quarterly and annual basis, which could cause the share price of the Company to fluctuate or decline.
Our quarterly and annual results of operations have fluctuated in the past and may vary significantly in the future. As such, historical comparisons of our operating results may not be meaningful. In particular, because some of our sales to date have been customers making limited purchases, sales in any given quarter can fluctuate based upon the timing and success of our sales efforts. Accordingly, the results of any one period should not be relied upon as an indication of future performance. Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and may not fully reflect the underlying performance of our business, including, but not limited to, the factors discussed in this Item 1A. These fluctuations could adversely affect our ability to meet our expectations or those of securities analysts or investors. If we do not meet these expectations for any period, the value of our business and our securities could decline significantly.
Our audited consolidated financial statements include significant intangible assets, which could be impaired.
We carry significant intangible assets on our Consolidated Balance Sheets. We had $7.3 million and $9.5 million of intangible assets as of December 31, 2022 and 2021, respectively. Pursuant to current accounting rules, we are required to assess intangibles for impairment at least annually or more frequently if impairment indicators are present. Impairment indicators include, but are not limited to, significant underperformance relative to historical or projected future operating results, a significant decline in share price or market capitalization and negative industry or economic trends. We assessed our intangible assets for impairment for the most recent reporting date as of December 31, 2022. We did not record impairment charges in 2022 or 2021. Other intangible assets, such as internally generated development costs, are amortized across their useful economic lives. However, if impairment indicators are present, we are required to test such intangible assets for impairment.
Risk Related to Intellectual Property, Cybersecurity and Data Privacy
We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our solutions economically or at all, which could diminish our brand and other intangible assets.
The success of our services and our business depends in part on our ability to obtain patents and other intellectual property rights, and maintain adequate legal protection for our products in the United States and other international jurisdictions. We rely on a combination of patent, copyright, service mark, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection. We cannot assure you that any patents will be issued with respect to our currently pending patent applications, including in a manner that gives us adequate defensive protection or competitive advantages, if at all, or that any of our patents will not be challenged, invalidated or circumvented. We have filed for patents in the United States and will also file for patents in certain international jurisdictions, but such protections may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights or may be difficult to enforce in practice, and competitors based in other countries may sell infringing products and services in one or more markets. Our currently issued patents and trademarks and any patents and trademarks that may be issued or registered, as applicable, in the future with respect to pending or future applications may not provide sufficiently broad protection or courts may not enforce them in actions against alleged infringers. An inability to adequately protect and enforce our intellectual property and other proprietary rights or an inability to prevent authorized parties from copying or reverse engineering our solutions or certain aspects of our solutions that we consider proprietary could adversely affect our business, operating results, financial condition and prospects.
We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to us or infringe our intellectual property.
Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and can be difficult, particularly with respect to international jurisdictions. Unauthorized parties may attempt to copy or reverse engineer our solutions or certain aspects of our solutions that are considered proprietary. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to prevent unauthorized parties from copying or reverse engineering our solutions, to determine the validity and scope of the proprietary rights of others or to block the importation of infringing products. Any such litigation, regardless of merit, could be costly, divert the attention of management and may not ultimately be resolved in our favor. Even if a potential litigation yields a favorable outcome, we may not be able to obtain adequate remedies. Further, many of our current and potential competitors could dedicate substantially greater resources to defending intellectual property infringement claims and to enforcing their intellectual property rights than we have. Attempts to enforce our rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us or result in a holding that invalidates or narrows the scope of our rights, in whole or in part.
In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how.
We rely upon proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection, or that we believe are best protected by means that do not require public disclosure.
We generally seek to protect this proprietary information by entering into confidentiality agreements, or consulting, services or employment agreements that contain non-disclosure and non-use provisions with our employees, consultants, contractors and third parties. However, we may fail to enter into the necessary agreements, and even if entered into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. We have limited control over the protection of trade secrets used by our current or future partners and suppliers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, contractors, advisors and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford limited or no protection to our trade secrets.
We also rely on physical and electronic security measures to protect our proprietary information, but we cannot provide assurance that these security measures will not be breached or that these measures will provide adequate protection. There is a risk that
third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights.
Third-party indemnity claims, including that we are infringing intellectual property, whether successful or not, could subject us to costly and time-consuming litigation or expensive licenses, which, if successful, could restrict us from using and providing our technologies and solutions to our customers or cause us to pay significant damages.
Although we have filed patent applications related to our products, a number of companies, both within and outside of the vehicle data service industry, hold other patents covering systems and methods for processing vehicle data. In addition to these patents, participants in this industry typically also protect their technology, especially software, through copyrights and trade secrets. As a result, there may be frequent litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. We may in the future receive inquiries from other intellectual property holders and may become subject to claims that we infringe their intellectual property rights, particularly as we expand our presence in the market. In addition, third parties may claim that the names and branding of our products infringe their trademark rights in certain countries or territories. If such a claim were to prevail, we may have to change the names and branding of our products in the affected territories and we could incur other costs, including liability for damages.
We currently have a number of agreements in effect pursuant to which we have agreed to defend, indemnify and hold harmless our customers, suppliers, and partners from damages and costs which may arise from the infringement by our products of third-party patents or other intellectual property rights, damages caused by us to property or persons, breach by us of confidentiality obligations, other liabilities relating to or arising from the use of our network and products, other liabilities relating to or arising from our use of networks and products of others, or other acts or omissions. The scope of these indemnity obligations varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. Our insurance may not cover all intellectual property infringement and other indemnity claims. A claim that our products infringe a third party’s intellectual property rights, even if without merit, could adversely affect our relationships with our customers, may deter future customers from purchasing our products and could expose us to costly litigation and settlement expenses. Even if we are not a party to any litigation between a customer and a third party relating to infringement by our products, an adverse outcome in any such litigation could make it more difficult for us to defend our products against intellectual property infringement claims in any subsequent litigation in which we are a named party. Any of these results could adversely affect our brand and operating results.
Our defense of intellectual property rights claims brought against us or our customers, suppliers and partners, with or without merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention, and force us to acquire intellectual property rights or licenses, which may involve substantial royalty or other payments and may not be available on acceptable terms or at all. Further, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial license fees or other damages or obtain an injunction forcing us to stop using technology found to be in violation of the third party’s rights or otherwise. An adverse determination also could invalidate our intellectual property rights and adversely affect our ability to offer our products to our customers and may require that we procure or develop substitute products that do not infringe, which could require significant effort and expense. Any of these events could adversely affect our business, operating results, financial condition and prospects.
Breaches of our networks or systems, or those of our data providers or partners, could degrade our ability to conduct business, compromise the integrity of our products, platform and data, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.
We depend upon our IT systems to conduct virtually all our business operations, ranging from our internal operations and technology and development activities to our marketing and sales efforts and communications with our customers and business partners. Individuals or entities may attempt to penetrate our network security, or that of our platform, and to cause harm to our business operations, including by misappropriating proprietary information or that of our data suppliers, data consumers, partners and employees or to cause interruptions to our products and platform. In general, cyberattacks and other malicious internet-based activity continue to increase in frequency and magnitude, and cloud-based companies have been targeted in the past and are likely to continue to be targeted in the future. In addition to threats from traditional computer hackers, malicious code (such as malware, viruses, worms, and ransomware), employee theft or misuse, password spraying, phishing, credential stuffing, and denial-of-service attacks, we also face threats from sophisticated organized crime, nation-state, and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risk to our systems (including those hosted on Amazon Web Services or other cloud services), internal networks, our customers’ systems and the information that they store and process. In addition, due to the political
uncertainty involving the Russia and Ukraine conflict, there is an increased likelihood that escalation of tensions could result in cyber-attacks that could either directly or indirectly impact our operations.
Although we devote significant financial and personnel resources to implement and maintain security measures, because the techniques used by such individuals or entities to access, disrupt or sabotage devices, systems and networks change frequently and may not be recognized until launched against a target, we may be required to make further investments over time to protect data and infrastructure as cybersecurity threats develop, evolve and grow more complex over time. We may also be unable to anticipate these techniques, and we may not become aware in a timely manner of security breaches, which could exacerbate any damage we experience. Additionally, we depend upon our employees and contractors to appropriately handle confidential and sensitive data, including customer data, and to deploy our IT resources in a safe and secure manner that does not expose our network systems to security breaches or the loss of data. Any data security incidents, including internal malfeasance or inadvertent disclosures by our employees or a third party’s fraudulent inducement of our employees to disclose information, unauthorized access or usage, introduction of a virus or similar breach or disruption of our business or our service providers, Microsoft Azure cloud, AWS, could result in loss of confidential information, damage to our reputation, erosion of customer trust, loss of customers, litigation, regulatory investigations, fines, penalties and other liabilities. Accordingly, if our cybersecurity measures or our service providers, fail to protect against unauthorized access, attacks (which may include sophisticated cyberattacks), or the mishandling of data by our employees and contractors, then our reputation, business, results of operations and financial condition could be adversely affected. While we maintain errors, omissions, and cyber liability insurance policies covering certain security and privacy damages, we cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage as to any future claim.
Any disruption of service at our cloud service providers that host our platform or other services or facilities that Wejo relies on could harm our business.
We currently host our platform primarily using Microsoft Azure cloud and AWS as the cloud service providers. We also rely on third parties for network services. Our continued growth depends on the ability of our customers to access our platform at any time and within an acceptable amount of time.
Although we have disaster recovery and business continuity plans, and geographically diverse instances of our platform, any incident affecting our cloud service provider’s infrastructure, or other services or facilities that may be caused by fire, flood, severe weather events (the frequency and severity of which may be impacted by climate change), earthquake or other natural disasters, cyber-attacks, terrorist or other attacks, and other similar events beyond our control could negatively affect our platform and our ability to deliver our services to our customers. A prolonged cloud service provider disruption affecting our platform or a prolonged disruption affecting our network services for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the cloud service providers we use.
If our cloud service provider and/or network services agreements are terminated, or there is a lapse of service, we would experience interruptions in access to our platform as well as significant delays and additional expense in arranging new facilities and services and/or re-architecting our solutions for deployment on a different cloud infrastructure or communications network, which would adversely affect our business, operating results and financial condition.
Any disruption of services that we operate or that we depend upon from OEMs could harm our business and risk losing customers.
Our services in part rely on live data streams both in the data that we receive from our OEM data suppliers and in many of the data products that we provide to our customers. Our products that rely on live stream connected vehicle data depend upon the continued operation and performance of OEM systems at levels meeting our minimum requirements. If one or more of these OEM’s systems do not continue to operate or do not operate at sufficient performance levels, whether through technical limitations or decisions of the OEM to prioritize other aspects of its business, then our products may have reduced marketability and value, which will reduce our ability to obtain revenue and impair the performance of the business. Similarly, if we do not maintain or operate our systems at sufficient performance levels, our products may have reduced marketability and value, which will reduce our ability to obtain revenue and impair the performance of the business. Either of these situations could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business. We may also incur significant costs reprogramming, patching, and/or re-architecting our solutions for deployment if we need to recover from reduced or failed performance of our live stream systems, which would adversely affect our business, operating results, and financial condition.
Some of our applications utilize open-source software, and any failure to comply with the terms of one or more of these open-source licenses could negatively affect our business.
Our platform incorporates open-source software, and we expect to continue to incorporate open-source software in our platform in the future. Few of the licenses applicable to open-source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products and platform.
Moreover, although we have implemented policies to regulate the use and incorporation of open-source software into our products and platform, we cannot be certain that we have not incorporated open-source software in our products or platform in a manner that is inconsistent with such policies. If we fail to comply with open-source licenses, we may be subject to certain requirements, including requirements that we offer our products that incorporate the open-source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open-source software and that we license such modifications or derivative works under the terms of applicable open-source licenses. If an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from generating revenue from customers using products that contained the open-source software and required to comply with onerous conditions or restrictions on these products. In any of these events, we and our customers could be required to seek licenses from third parties to continue offering our products and platform and to re-engineer our products or platform or discontinue offering our products to customers in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require us to devote additional technology and development resources to re-engineer our products or platform, which could result in customer dissatisfaction and may adversely affect our business, results of operations and financial condition.
Our business and operations are subject to risks related to climate change.
The long-term effects of global climate change present both physical risks (such as extreme weather conditions or rising sea levels) and transition risks (such as regulatory or technology changes), which are expected to be widespread and unpredictable. These changes could over time affect, for example, the availability and cost of products, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require. Changing market dynamics, global policy developments and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have the potential to disrupt our business, the business of our third-party suppliers and the business of our customers, and may cause us to experience losses and additional costs to maintain or resume operations. In addition, we may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.
Because we operate globally, we are susceptible to numerous international business risks that could increase our costs, disrupt the supply chain, and/or have a material adverse effect on our business, liquidity, financial condition and results of operations.
Our products and services are used in numerous countries, and we source data from foreign countries. Risks associated with international operations, any of which could have a material adverse effect on our business, liquidity, financial condition and/or results of operations, include: changes in local, political, economic, social, and labor conditions; economic and political instability, including international conflicts (such as that between Russia and Ukraine), invasions, acts of terrorism, civil strife, war and the threat thereof; potential disruption from socio-economic violence, including terrorism; tariffs, sanctions, and import and export requirements and border accessibility; global trade disputes; potential disruption of shipping and unloading of product or supplies; currency exchange rate fluctuations; a less developed and less certain legal and regulatory environment in some countries, which, among other things, can create uncertainty regarding contract enforcement; intellectual property rights; privacy obligations; real property rights and liability issues; and inadequate levels of compliance with applicable anti-bribery laws, including the Foreign Corrupt Practices Act.
Risks Related to Legal and Regulatory Matters and Being a Public Company
Our current and planned future business operations are and will be governed by various U.S. and international laws and regulations relating to privacy, data protection, consumer protection, and cybersecurity; if we fail to comply with any of these governing laws and regulations, the impact could harm our business, results of operations and financial condition.
Various laws, including the EU’s GDPR 2016/679 and the CCPA impose obligations restricting the collection, use and transfer of personal data. The U.S. Federal Trade Commission and various states enforce consumer protection laws to impose obligations on the collection and use of consumer data and on security measures for protecting that data. Similarly, any country that we may enter into for business may have related or more stringent personal data, consumer protection and cybersecurity requirements.
The obligations that these laws and regulations impose can be extensive, including, but not limited to, restrictions on when data can be collected from a person, requirements to obtain consent to collect data from a person, requirements to disclose how data is collected, used and stored, requirements for extensive record keeping on systems processing personal data, geographic limitations on where the data can be stored and processed, contractual obligations that must be maintained with data providers and data recipients, standard contract clauses approved by the EU when transferring data outside of the European Economic Area, responding to consumer inquiries, notifying regulatory authorities about data breaches, and designating data protection officers. We have incorporated into our platform and our operations features and processes that we believe allow us to comply with these types of laws and regulations in the locations where we currently collect data. Before we begin services into a new country, we review applicable laws and regulations and create a plan to update our systems and operating procedures, if necessary, to comply with all local data and related consumer protection requirements.
In addition, we maintain operations in the UK, which has left the EU. The EU Commission has released a draft decision declaring UK data protection obligations adequate, which, if ratified, would allow flow of data between from the EU to the UK with the same benefits as when the UK was part of the EU. If the decision is not ratified, we will be required to follow additional procedures, including implementing standard contract clauses approved by the EU to transfer data adequacy for processing or storage in the UK.
Failure to comply with any of the laws and regulations discussed in this section can result in fines and penalties. For example, failing to comply with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. If at any time our platform or operations are found noncompliant with these requirements, our business, results of operations, and financial condition may be materially and adversely impacted.
Meeting the obligations imposed by any of the above laws and regulations or any similar laws and regulations that may apply to our current and future business will impact our business. We will incur expenses investing in technology and procedures that allow our operations to comply with the applicable laws and regulations. We may be forced to store and process data in certain regions or countries. While we have taken this into account with our current plans, it is possible that complying with these requirements will require the business to spend additional expenses on operations, storage, and/or processing to meet our obligations.
Restrictions on the collection, use, sharing or disclosure of personal data or additional requirements and liability for security and data integrity may require us to modify our business practices, limit our ability to develop new products and features and subject us to increased compliance obligations and regulatory scrutiny. In addition, many consumer advocates, privacy advocates, and government regulators believe that existing laws and regulations do not adequately protect privacy or ensure the accuracy of personal data. As a result, such advocates and regulators are seeking further restrictions on the dissemination or commercial use of personal information to the public and private sectors, as well as contemplating requirements relative to data accuracy and the ability of consumers to opt to have their personal data removed from databases such as ours. If there are new data limitations in any jurisdiction in which we currently do business in or plan to enter to do business, our ability to offer our products and services may be materially impacted. For example, new restrictions may require additional investment in our technology, may limit the availability of data that we obtain, or may impose new requirements on how data is collected. These restrictions may be unique to certain countries or regions and could be inconsistent with requirements in other countries or regions. Any of these factors has the potential to reduce the profitability of our products and services, or to reduce our ability to offer our products and services, and our business, results of operations, and financial condition may be materially and adversely impacted.
In addition, additional jurisdictions may impose data localization laws, which require personal information, or certain subcategories of personal information to be stored in the jurisdiction of origin. These regulations may inhibit our ability to expand into those markets or prohibit us from continuing to offer our marketplace in those markets without significant additional costs.
Typically, our obligations to comply with the regulations and laws discussed in this section are reflected in our contracts with our data providers. If we or our customers fail to comply with the laws and regulations discussed in this section, our OEM data providers may decide to reduce or terminate availability of their connected vehicle data, impose further limitations upon us that impact our ability to provide data to our customers, or terminate their contracts with us.
OEMs that provide us data are typically bound by the same or similar regulatory requirements that we face. If our OEM data providers fail to comply with the laws and regulations discussed in this section, they could be subject to fines and new requirements on their systems and their ability to provide us connected vehicle data may be reduced or interrupted entirely. They may also face pressure from consumer advocates, privacy advocates, and government regulators who believe that existing practices, laws and regulations do not adequately protect privacy or ensure the accuracy of personal data. One consequence of this is that they may decide to comply with the laws and regulations or respond to pressure from various consumer and privacy advocates in a manner that may adversely impact our ability to deliver our products and services, either by increasing costs or by deciding not to make connected vehicle data available.
If we fail to comply with any of these laws or regulations or any of our data providers or customers fail to comply with these laws or regulations, the result could include fines and penalties, harm to reputation, and negative impact on the results of our operations and financial condition.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and NASDAQ, may strain our resources, increase our costs and divert management’s attention, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company, we are subject to the reporting requirements of the Exchange Act, and the corporate governance standards of the SOX and NASDAQ. We have a limited history operating as a public company, and these requirements may place a strain on our management, systems and resources. In addition, we have incurred, and expect to continue to incur significant legal, accounting, insurance and other expenses that we did not incur as a private company. The Exchange Act requires us to file annual, quarterly and current reports with respect to our business and financial condition within specified time periods and to prepare a proxy statement with respect to our annual meeting of shareholders. SOX requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. NASDAQ requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting and comply with the Exchange Act and NASDAQ requirements, significant resources and management oversight are required. This may divert management’s attention from other business concerns and lead to significant costs associated with compliance, which could have a material adverse effect on us and the market price of our common shares.
The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our committees or as our executive officers. Advocacy efforts by shareholders and third parties may also prompt even more changes in governance and reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of these costs. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common shares, fines, sanctions and other regulatory action and potentially civil litigation.
We are an “emerging growth company” (“EGC”), and the reduced disclosure requirements applicable to EGCs may make our common shares less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an EGC, we are permitted by SEC rules to (and plan to) rely on exemptions and relief from certain reporting requirements that are applicable to other SEC-registered public companies that are not EGCs. These exemptions and relief include (i) not being required to comply with the auditor attestation requirements of Section 404 of SOX, (ii) not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (iii) reduced disclosure obligations regarding executive compensation, and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, the information we provide shareholders will be different than the information that is available with respect to other public companies that are not EGCs. In this Annual Report on Form 10-K, we have not included, and do not plan to incorporate by reference, all of the executive compensation-related information that would be required if we were not an EGC.
In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we are not subject to the same new or revised accounting standards as other public companies that are not EGCs. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We may remain an EGC until the fiscal year-end following the fifth anniversary of the completion of the business combination among Virtuoso Acquisition Corp. (“Virtuoso”) and Wejo Limited (the “Virtuoso Business Combination”) (see Note 3 to the accompanying audited consolidated financial statements), though we may cease to be an EGC earlier under certain circumstances, including (1) if our gross revenue exceeds $1.07 billion in any fiscal year, (2) if we become a large accelerated filer, with at least
$700.0 million of equity securities held by non-affiliates, or (3) if we issue more than $1.0 billion in non-convertible notes in any three-year period.
We cannot predict whether investors will find our common shares less attractive if we rely on these exemptions and relief. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our stock price may decline and/or be more volatile.
We previously identified material weaknesses in our internal control over financial reporting in fiscal years 2021 and 2022, which the Company has concluded are now remediated. If additional material weaknesses are identified in the future, or we otherwise fail to maintain effective internal controls over financial reporting, our ability to timely and accurately report our financial condition and results of operations or comply with applicable laws and regulations could be impaired, which may adversely affect investor confidence in us and, as a result, our stock price could decline.
As a public company, we are required to maintain internal control over financial reporting and will be required to evaluate and determine the effectiveness of our internal control over financial reporting. Prior to the consummation of the Virtuoso Business Combination, we had been a private company with limited accounting personnel and other relevant resources with which to address our internal controls and procedures. In the course of the audit of our consolidated financial statements as of December 31, 2021, our management and our independent registered public accounting firm identified deficiencies that we concluded represented material weaknesses in our internal control over financial reporting primarily attributable to our lack of an effective internal control structure and sufficient financial reporting and accounting personnel with requisite knowledge and experience in the application of accounting principles generally accepted in the United States (“U.S. GAAP”), particularly in relation to the review of complex transactions and lack of appropriate internal controls over oversight, review and testing of the work performed by the Company’s third-party specialists. As a result of these material weaknesses, management identified errors in the recording of complex financial instruments, which led to us restating our previously issued 2020 audited consolidated financial statements and the previously issued unaudited condensed consolidated financial statements for the interim periods ended March 31, 2021, June 30, 2021 and September 30, 2021. Additionally, subsequent to filing of the Form 10-Q for the quarterly period ended September 30, 2021, our management identified an error in our unaudited condensed consolidated financial statements due to a misallocation of certain personnel and related expenses between cost categories. This error resulted in a restatement of the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021, which was restated in a Form 10-Q/A filed on December 17, 2021 and a Comprehensive Annual Report on Form 10-K/A filed on April 11, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement in our annual or interim condensed consolidated financial statements will not be prevented or detected on a timely basis. We identified material weaknesses in our internal control over financial reporting as of December 31, 2021. Specifically, these material weaknesses related to the insufficient design and implementation of processes and controls over financial reporting, and to the lack of sufficient accounting and financial reporting personnel with requisite knowledge and experience in the application of U.S. GAAP, which resulted in inadequate oversight, review, and testing of the work performed by the Company’s third-party specialists. We have concluded that these material weaknesses arose because we did not have the necessary processes, systems, personnel and related internal controls in place. At the time of this Annual Report on Form 10-K, these material weaknesses have been remediated. The Company has concluded that no material weaknesses are present as a result of improvements in systems, processes, and accounting and financial reporting personnel hired during 2022.
While management has remediated the material weaknesses, there is no assurance that these remediation efforts will prevent or detect future material weaknesses. Should new material weaknesses arise or be discovered in the future, material misstatements could occur and go undetected in the Company’s interim or annual consolidated financial statements and we may be required to restate our consolidated financial statements. In addition, we may experience delays in satisfying our reporting obligations or to comply with SEC rules and regulations, which could result in investigations and sanctions by regulatory authorities. Additional material weaknesses could be identified when the Company’s independent registered public accounting firm is required to assess the Company’s internal controls over financial reporting. If we are not able to maintain effective internal control over financial reporting, our consolidated financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business. If additional material weaknesses are identified in the future, our ability to timely and accurately report our financial condition and results of operations or comply with applicable laws and regulations could be impaired, which may adversely affect investor confidence in us and, as a result, our stock price could decline.
Our management team has limited experience managing a public company.
Our management team has limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage their new roles and responsibilities, our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws, and the continuous scrutiny of securities analysts and investors. These new obligations and constituents have and will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and operating results.
Risks Related to Going Concern, Indebtedness and Foreign Currency
We, as well as our independent registered public accounting firm, have expressed substantial doubt about our ability to continue as a going concern.
Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the years ended December 31, 2022 and 2021 with respect to substantial doubt over our ability to continue as a going concern. As the Company makes investments to increase the markets and customers it serves, we expect our operating losses to increase until the Company reaches the necessary scale to generate cash profits from operations. The Company has incurred operating losses and negative cash flows from operations since inception and expects to continue incurring losses for the foreseeable future. In addition, as of December 31, 2022, the Company’s current liabilities exceeded its current assets by $38.0 million. As such, the Company will be required to raise additional capital to fund its operations and continue to implement certain expense reduction measures. There can be no assurance that the Company will be able to (i) obtain additional financing on terms acceptable to the Company, on a timely basis or at all, (ii) successfully implement necessary expense reduction measures, or (iii) grow its revenues.
As described in detail in Note 1 to the accompanying audited consolidated financial statements and in Item 7, Management Discussion and Analysis of this Annual Report, we spent significant effort in 2022 and early 2023 identifying and optimizing alternative capital pathways to fund operations for the long-term, culminating with the Company raising over $38.0 million of bridge capital during that period. Over that time, the Company has also implemented and continues to implement various expense reduction measures. In addition, the Company entered into the TKB Business Combination Agreement and is pursuing a potential PIPE financing transaction because it anticipates those transactions would provide the Company with the capital required through to cash flow breakeven, which is expected to occur by mid-2024, assuming revenue and expense reduction targets are met. As part of this long-term capital strategy, the Company has been contacting strategic and other investors to fund a PIPE financing transaction in connection with the TKB Business Combination or otherwise from which it hopes to raise in the range of $50 to $75 million. Between the closing of the TKB Business Combination and a PIPE, the Company hopes to raise at least $100 million net of transaction costs on the closing of those transactions, if they occur. The Company is also in the process of negotiating additional debt or equity financing transactions to ensure that the Company has sufficient cash to continue its operations through to the consummation of these transactions.
Because the TKB Business Combination is subject to various closing and other conditions, there can be no guarantee that the transaction will close. No legally binding agreements are yet in place for a PIPE financing transaction or for bridge financing to continue the Company’s operations through to the closing of those transaction, and therefore there can be no assurances that any of such transactions will close.
The Company’s forecasts indicate that, despite the Company’s entry into the prior debt and equity financing transactions discussed above, the business can now only continue to operate until early April 2023 without raising such additional new financing such as would be provided by those transaction in process as discussed above. Certain of such financing plans are outside the Company’s control and may not materialize. During this period, the Company’s Board continues to be mindful of its fiduciary duties in the zone of insolvency and has sought the advice of insolvency experts in the key jurisdictions in which it operates to ensure it remains compliant with those obligations and any applicable regulations. If the Company has exhausted all options and no longer has a reasonable expectation of obtaining sufficient new funding, a filing for bankruptcy or administration would occur.
Based on the foregoing, management has concluded there is substantial doubt regarding the Company's ability to continue as a going concern within one year from the issuance date of the Company’s audited consolidated financial statements. The accompanying audited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The audited consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary from the outcome of this uncertainty.
In connection with the Forward Purchase Agreement with Apollo, we will likely receive only a portion of the Prepayment Amount, which could have a material adverse effect on our business, liquidity, financial condition and results of operations and impact our going concern.
Pursuant to the Forward Purchase Agreement with Apollo, described in Note 6 to the accompanying audited consolidated financial statements, Wejo Limited and Apollo entered into an equity prepaid forward transaction in which Apollo agreed to acquire up to 7.5 million Company common shares and later sell such shares and generate proceeds for itself and the Company under the terms of the FPA. Upon the closing of the Virtuoso Business Combination, Wejo Limited paid to Apollo the product of the number of shares subject to the Forward Purchase Agreement (the “Number of Shares”) and the Redemption Price (the “Prepayment Amount”). Subject to certain termination provisions, the FPA provides that on the 2-year anniversary of the closing of the Virtuoso Business Combination (the “FPA Maturity Date”) of the FPA, each Apollo seller will sell the remaining number of shares purchased by such seller (up to a maximum of 7,500,000 shares across all sellers) of Virtuoso Class A common stock, which, under the FPA, ultimately became the Company’s common shares after the share-for-share exchange provided under the Virtuoso Business Combination (the “FPA Shares”).
On August 22, 2022, Wejo Limited entered into the FPA Amendment with Apollo to allow the Company on or after the effective date of the FPA Amendment to direct each Apollo seller to sell the 5.6 million remaining FPA Shares remaining at that time, provided that such direction is made outside of a blackout period under the Company’s insider trading policy (the “Blackout Period”). The FPA Amendment also allows the Company to stop and subsequently resume, selling the remaining percentage of shares that have not yet become terminated (the “Excess Shares”), provided as well that such direction is made outside of a Blackout Period. For the year ended December 31, 2022, pursuant to the FPA, 1,662,785 common shares were sold at a weighted average price of $1.51, which generated aggregate proceeds of $2.5 million. For the year ended December 31, 2021, Apollo terminated 251,632 FPA Shares and paid $2.5 million back to the Company. As of December 31, 2022 and 2021, there were 5,585,583 and 7,248,368 total outstanding shares available, respectively.
Based on sales under the FPA to date, the Company will not be able to recoup the full Prepayment Amount. In addition, the timing of any future termination of FPA Shares by Apollo, or sales thereof by Apollo at the Company’s direction, and the proceeds received by the Company as a result of such sales each may be limited by the trading volume and price of the Company’s common shares, respectively. Further, the Company can direct Apollo to sell FPA shares only outside of the Blackout Period and when it is not in possession of material non-public information. These limitations on the timing and amount of proceeds the Company may receive under the FPA could have a material adverse effect on our business, liquidity, and financial condition, as well as our ability to continue as a going concern.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful and could be forced into bankruptcy or liquidation.
Our ability to make scheduled payments due on our debt obligations or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic, industry, and competitive conditions and to certain financial, business, legislative, regulatory, and other factors beyond our control, including those discussed elsewhere in this “Risk Factors” section. We may be unable to maintain a level of cash flow sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems. The agreements governing our secured credit facilities restrict, and any agreements governing our future indebtedness may restrict, our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due.
If we cannot make payments on our debt obligations, we will be in default and all outstanding principal and interest on our debt may be declared due and payable, the lenders under our secured credit facilities could terminate their commitments to loan money, our secured lenders (including the lenders under our secured credit facilities) could foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation. In addition, any event of default or declaration of acceleration under one debt instrument could result in an event of default under one or more of our other debt instruments.
Our business may be adversely impacted by changes in currency exchange rates.
As we operate across multiple jurisdictions and currencies, changes in currency exchange rates could lead to adverse impacts on our financial assets and liabilities, and in particular on our external debt and intercompany transactions. A deterioration in reported earnings as a result of currency exchange rate fluctuations could lead to a covenant breach and result in an event of default in our agreements relating to our outstanding indebtedness which, if not cured or waived, could result in our being required to repay these
borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or are unable to refinance these borrowings, our results of operations and financial condition could be adversely affected.
Risks Related to the TKB Business Combination
During the pre-closing period, we are prohibited from entering into certain transactions that might otherwise be beneficial to us or our shareholders.
Until the earlier of the consummation of the closing of the TKB Business Combination with TKB or termination of the TKB Business Combination Agreement, we are subject to certain limitations on the operations of our business. The limitations on our conduct of our business during this period could have the effect of delaying or preventing certain capital financing and other strategic transactions and may, in some cases, make it impossible to pursue business opportunities that are available only for a limited time.
Uncertainties about the TKB Business Combination during the pre-closing period may cause a loss of key management personnel and other key employees.
The Company is dependent on the experience and industry knowledge of its key management personnel and other key employees to operate its business and execute its business plans. Wejo Holdings Ltd.’s, the new public company to be created at the closing of the TKB Business Combination (“Holdco”) success following the TKB Business Combination will depend in part upon its ability to retain Wejo’s existing key management personnel and other key employees and attract new management personnel and other key employees. During the pre-closing period, current and prospective employees of Wejo may experience uncertainty about their roles with Holdco after the TKB Business Combination, which may adversely affect the ability of Holdco to retain or attract management personnel and other key employees.
The consummation of the TKB Business Combination is contingent upon the satisfaction of a number of conditions, including certain conditions that are outside of our control. As a result, one or more conditions to closing of the TKB Business Combination may not be satisfied and the TKB Business Combination may not be completed.
The consummation of the TKB Business Combination is subject to risks and uncertainties, including, but not limited to, the risks that the conditions to the TKB Business Combination are not satisfied, or if possible, waived, including, among others, (i) approval of the transaction by TKB’s shareholders and Wejo’s shareholders, (ii) approval of an extension of the time to consummate the transaction by TKB’s shareholders (which was approved on January 27, 2023 through to June 29, 2023 (the “TKB Consummation Deadline”)), (iii) absence of any adverse law or order promulgated, entered, enforced, enacted or issued by any governmental entity, that prohibits the consummation of the TKB Business Combination or the other transactions contemplated by the TKB Business Combination Agreement, (iv) the newly issued Holdco common shares and warrants of Wejo and TKB assumed by Holdco under the TKB Business Combination Agreement being approved for listing on NASDAQ, subject to official notice of issuance, (v) the Registration Statement on Form S-4 necessary to consummate the TKB Business Combination having become effective, (vi) absence of any pending action by any governmental entity that challenges or seeks to enjoin the TKB Business Combination or the other transactions contemplated by the TKB Business Combination Agreement, (vii) subject to certain materiality exceptions, the accuracy of certain representations and warranties of each of the parties contained in the TKB Business Combination Agreement and the compliance by each party with the covenants contained therein, (viii) TKB’s sponsor (“TKB Sponsor”) having delivered to Wejo a counterpart of a registration rights agreement (the “Registration Rights Agreement”) duly executed by the TKB Sponsor, the TKB Sponsor’s members and its or their transferees and the two individuals designated in writing by the Sponsor Director Nominees, (ix) Holdco having delivered to the TKB Sponsor a counterpart of the Registration Rights Agreement duly executed by Holdco; (x) no material adverse effect on Wejo or TKB, (xi) there being, at the closing of the TKB Business Combination Agreement, available cash on hand at Wejo or available cash to be borrowed pursuant to binding contractual commitments from third parties, in such amounts that, together with (A) the net proceeds of amounts in the TKB trust account (net of redemptions and transaction expenses), (B) any irrevocable and binding financing commitments entered into pursuant to the TKB Business Combination Agreement, and (C) any non-binding financing commitments or other sources of income that in the reasonable determination of Wejo or TKB, as applicable, are reasonably expected to be available following the closing, it will be sufficient to fund ordinary course working capital and other general corporate purposes of Wejo in accordance with its mid-term business plan, (xii) Wejo having complied in all material respects with its obligations under the TKB Business Combination Agreement with respect to the issues specifically identified therein, and (xiii) the closing of the transaction having occurred by August 31, 2023. In addition, the parties must close the TKB Business Combination by the TKB Consummation Deadline or, if they don’t, TKB must receive approval from its shareholders of an additional extension of such deadline. Certain of these conditions are beyond the control of the Company. The Company cannot predict whether and when these other conditions will be satisfied. The Company cannot provide any assurance that the TKB Business Combination will be completed or that there will not be a delay in the completion of the TKB Business Combination. If the TKB Business Combination is not completed as a result of failure by the parties to satisfy any conditions precedent, the Company’s business may each be materially and adversely affected.
Legal proceedings in connection with the TKB Business Combination, the outcomes of which are uncertain, could delay or prevent the completion of the TKB Business Combination.
Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into business combination or similar agreements and/or their officers and directors alleging, among other things, that a proxy statement/prospectus filed in connection with such business combination contains false and misleading statements and/or omits material information concerning the business combination. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on TKB’s and Wejo’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the TKB Business Combination, then that injunction may delay or prevent the TKB Business Combination from being completed or from being completed within the expected timeframe, which may adversely affect the Company’s business, financial condition and results of operation.
Although no such lawsuits have yet been filed in connection with the TKB Business Combination, it is possible that such actions may arise and, if such actions do arise, they generally seek, among other things, injunctive relief and an award of attorneys’ fees and expenses. Defending such lawsuits could require the Company to incur significant costs and draw the attention of the Company’s management team away from the TKB Business Combination. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the TKB Business Combination is consummated may adversely affect the combined company’s business, financial condition, results of operations and cash flows. Such legal proceedings could delay or prevent the TKB Business Combination from becoming effective within the agreed-upon timeframe.
The TKB Business Combination, and uncertainty regarding the TKB Business Combination, may cause customers, suppliers or strategic partners to delay or defer decisions concerning the Company and adversely affect its ability to effectively manage its business.
The TKB Business Combination will happen only if the stated conditions are met, including the relevant shareholder approvals, among other conditions. Many of the conditions are outside the Company’s control, and both parties also have certain rights to terminate the TKB Business Combination Agreement. Accordingly, there may be uncertainty regarding the completion of the TKB Business Combination. This uncertainty may cause customers, suppliers, vendors, strategic partners or others that deal with the Company to delay or defer entering into contracts with the Company or making other decisions concerning the Company or could cause such customers, suppliers, vendors, strategic partners or others to seek to change or cancel existing business relationships with the Company, which could negatively affect our business. Any delay or deferral of those decisions or changes in existing agreements could have an adverse impact on our business, regardless of whether the TKB Business Combination is ultimately completed.
Whether or not the TKB Business Combination is completed, the announcement and pendency of the TKB Business Combination will divert significant management resources to complete the TKB Business Combination, which could have an adverse effect on our business, financial results, and/or market price.
Whether or not the TKB Business Combination is completed, the announcement and pendency of the TKB Business Combination could cause disruptions in our business by directing the attention of management toward the completion of the TKB Business Combination. We have diverted significant management resources in an effort to complete the TKB Business Combination and we are subject to restrictions contained in the TKB Business Combination agreement on the conduct of our business in the period prior to the completion of the TKB Business Combination. If the TKB Business Combination is not completed, we will have incurred significant costs, including the diversion of management resources, for which we will have received little or no benefit.
Risks Related to Tax Matters
Changes in tax law, changes in our effective tax rate or exposure to additional tax liabilities could affect our profitability and financial condition.
Factors that could materially affect our future, effective tax rates, include, but are not limited to changes in tax laws or the regulatory environment; changes in accounting and tax standards or practices; changes in the composition of operating income by tax jurisdiction; and our operating results before taxes.
Because we do not have a long history of operating at our present scale and we have significant expansion plans, our effective tax rate may fluctuate in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit
can be recorded under U.S. GAAP, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.
If the Company were a passive foreign investment company for U.S. federal income tax purposes for any taxable year, U.S. holders of our common shares could be subject to adverse U.S. federal income tax consequences.
If the Company is or becomes a “passive foreign investment company” (“PFIC”), within the meaning of Section 1297 of the Code for any taxable year during which a U.S. holder (as defined in “Material United States Federal Income Tax Consequences to U.S. Holders”) holds our common shares, certain adverse U.S. federal income tax consequences may apply to such U.S. holder. The Company does not expect to be a PFIC for U.S. federal income tax purposes for the current taxable year or in the foreseeable future. However, PFIC status depends on the composition of a company’s income and assets and the fair market value of its assets from time to time, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. Accordingly, there can be no assurance that the Company will not be treated as a PFIC for any taxable year.
If the Company were treated as a PFIC, a U.S. holder of our common shares may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed distributions, interest charges on certain taxes treated as deferred, and additional reporting requirements. U.S. holders of our common shares should consult with their tax advisor regarding the potential application of these rules.
Risk Related to Our Common Shares, Organizational Structure and Governance
The market price of our common shares may be volatile, which could cause the value of your investment to decline.
The market price of our common shares may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common shares regardless of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results or dividends, if any, to shareholders, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industries we participate in or individual scandals, and in response the market price of our common shares could decrease significantly.
In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Our failure to regain compliance with NASDAQ Listing Rule 5450(a)(1) or otherwise meet the other continued listing requirements of NASDAQ could result in a delisting of our securities.
On January 18, 2023, the Company received a notice from the Listing Qualifications Staff (the “Staff”) of the NASDAQ notifying the Company that, based upon the closing bid price of the Company’s common shares, for the prior 30 consecutive business days, the Company no longer met the requirement to maintain a minimum bid price of $1.00 per share, as set forth in NASDAQ Listing Rule 5450(a)(1). In accordance with NASDAQ Listing Rules 5810(c)(3)(A), the Company was provided a period of 180 calendar days, or until July 17, 2023, in which to regain compliance with the minimum bid price requirement. In order to regain compliance with the minimum bid price requirement, the closing bid price of the Company’s common shares must be at least $1.00 per share for a minimum of ten consecutive business days during this 180-day period. If the Company does not regain compliance within this 180-day period, the Company may be eligible for an additional 180 calendar day compliance period provided that it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards, with the exception of the minimum bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period such as by effecting a reverse stock split, if necessary. If the Company fails to regain compliance prior to the expiration of the compliance period, including any extension thereof, the Staff will provide written notice to the Company that its securities are subject to delisting. The Company intends to actively monitor the closing bid price for its common shares and will consider available options to resolve the deficiency and regain compliance with NASDAQ Listing Rule 5450(a)(1).
If we fail to regain compliance with NASDAQ Listing Rule 5450(a)(1) or we fail to satisfy any other continued listing requirements of NASDAQ, such as the corporate governance requirements, NASDAQ may take steps to delist our securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the NASDAQ minimum share price requirement or prevent future non-compliance with NASDAQ’s listing requirements. Additionally, if our securities are not listed on, or become delisted from, NASDAQ for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on NASDAQ or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
The Company Bye-laws, as well as Bermuda law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common shares.
The Company’s Bye-laws, as well as Bermuda law, contain provisions that may discourage, delay or prevent a merger, amalgamation, acquisition, or other change in control that shareholders may consider favorable, including transactions in which you might otherwise receive a premium for common shares. These provisions may also prevent or frustrate attempts by our shareholders to replace or remove our management. Our corporate governance documents include provisions:
•authorizing blank check preference shares, which could be issued without shareholder approval and with voting, liquidation, dividend and other rights superior to our common shares;
•providing that any action required or permitted to be taken by our shareholders must be taken at a duly called annual or special meetings of such shareholders and may not be taken by any consent in writing by such shareholders;
•requiring, to the fullest extent permitted by applicable law, advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for shareholder-proposed nominations of candidates for election to our board of directors;
•establishing a classified board of directors, so that not all members of our board are elected at one time, with the election of directors requiring only a plurality of votes cast;
•providing that certain actions required or permitted to be taken by our shareholders, including amendments to the Company Bye-laws and certain specified corporate transactions, may be effected only with the approval of our board of directors, in addition to any other vote required by the Company Bye-laws and/or applicable law;
•prohibit us from engaging in a business combination with a person who acquires at least 10% of our common shares for a period of three years from the date such person acquired such common shares unless approved by our board of directors and authorized at an annual or special meeting of shareholders by the affirmative vote of at least two-thirds of our issued and outstanding voting shares that are not owned by such person, subject to certain exceptions; and
•providing that directors may be removed by shareholders only by resolution with cause upon the affirmative vote of at least two-thirds of our issued and outstanding voting shares.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for common shares. They could also deter potential acquirers of Wejo, thereby reducing the likelihood that you could receive a premium for your common shares in an acquisition.
You may have difficulty enforcing judgments of U.S. courts against us in Bermuda courts.
Wejo is organized as an exempted company pursuant to the laws of Bermuda. In addition, a number of our directors and executive officers are not residents of the United States, and a substantial portion of our assets and their assets are or may be located in jurisdictions outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon those persons or us or to recover against them or us on judgments of U.S. courts, including judgments predicated upon civil liability provisions of the U.S. federal securities laws.
We have been advised that there is no treaty in force between the United States and Bermuda providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. As a result, whether a U.S. judgment would be enforceable in Bermuda against us or our directors and officers depend on whether the U.S. court that entered the judgment is recognized by the Bermuda court as having jurisdiction over us or our directors and officers, as determined by reference to Bermuda conflict of law rules. A judgment debt from a U.S. court that is final and for a sum certain based on U.S. federal securities laws will not be automatically
enforceable in Bermuda unless the judgment debtor had submitted to the jurisdiction of the U.S. court, and the issue of submission and jurisdiction is a matter of Bermuda (not U.S.) law.
In addition, and irrespective of jurisdictional issues, the Bermuda courts will not enforce a U.S. federal securities law that is either penal or contrary to Bermuda public policy. We have been advised that an action brought pursuant to a public or penal law, the purpose of which is the enforcement of a sanction, power or right at the instance of the state in our sovereign capacity, will not be entertained by a Bermuda court. Certain remedies available under the laws of U.S. jurisdictions, including certain remedies under U.S. federal securities laws, would not be available under Bermuda law or enforceable in a Bermuda court, as they would be contrary to Bermuda public policy. Further, no claim may be brought in Bermuda against us or our directors and officers in the first instance for violation of U.S. federal securities laws because these laws have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may, however, impose civil liability on us or our directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Bermuda law.
Our shareholders may have more difficulty protecting their interests than shareholders of a U.S. corporation.
The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders under legislation or judicial precedent in many U.S. jurisdictions.
Class actions and derivative actions are generally not available to shareholders under Bermuda law. However, Bermuda courts ordinarily would be expected to follow English case law precedent, which would permit a shareholder to commence an action in the name of a company to remedy a wrong done to a company where the act complained of is alleged to be beyond the corporate power of a company, is illegal or would result in the violation of that company’s memorandum of association or Bye-laws.
Furthermore, consideration would be given by a Bermuda court to allow derivative action rights where acts that are alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our shareholders than actually approved it. The winning party in such an action generally would be able to recover a portion of attorneys’ fees incurred in connection with such action.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.
Additionally, under our Bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against Indemnified Persons (as defined in our Bye-laws and which includes our directors and officers) for any action taken by Indemnified Persons in the performance of their duties, provided that such waiver shall not apply to any claims or rights of action arising out of the fraud of such Indemnified Persons or to recover any gain, personal profit or advantage to which such Indemnified Persons is not legally entitled.
Wejo may become subject to taxation in Bermuda after March 31, 2035, which could have a significant and negative effect on our business and results of operations.
Currently there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our common shares. Wejo has obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax will not, until March 31, 2035, be applicable to us or to any of our operations or to our shares, debt or other obligations. Given the limited duration of any assurance by the Minister of Finance, Wejo can’t be certain that we will not be subject to any Bermuda taxes after March 31, 2035. Our business and results of operations could be significantly and negatively affected if we were to become subject to taxation in Bermuda.
The impact of the OECD’s efforts to eliminate harmful tax practices is uncertain and could adversely affect our tax status in Bermuda or other jurisdictions.
The Organization for Economic Cooperation and Development (the “OECD”) has published reports and launched a global dialogue among member and non-member countries on measures to limit harmful tax competition. These measures are largely directed at counteracting the effects of tax havens and preferential tax regimes in countries around the world. According to the OECD, Bermuda is a jurisdiction that has substantially implemented the internationally agreed tax standard and as such is listed on the OECD “whitelist”.
However, we are not able to predict whether any changes will be made to this classification or whether any such changes will subject us to additional taxes.
In addition, the OECD has continued its efforts regarding its Base Erosion and Profit Shifting reports and related attempts to coordinate multilateral action on international tax rules. These efforts included the December 2021 release of model rules which include a 15% global minimum tax regime. If these model rules are partially or fully implemented globally, we expect an increase to its annual global income tax expense and potentially an increase in our annual global income tax payments.
Related to these efforts, Bermuda implemented the Economic Substance Act 2018 which requires affected Bermuda registered companies to maintain a substantial economic presence in Bermuda. This legislation and/or other OECD efforts could require us to incur substantial additional costs to maintain compliance, result in the imposition of significant penalties, create additional tax liabilities globally, and possibly require us to re-domicile itself or any Bermuda subsidiary to a jurisdiction with higher tax rates.
Our business and results of operations could be significantly and negatively affected if we were to become subject to taxation in Bermuda or to other unanticipated tax liabilities. If OECD’s proposed global minimal tax rate of 15% is implemented and an accounting profit is attained in Bermuda, there could be a significant negative impact to Wejo’s overall business operations and global tax obligations.
Being that we have no current plans to pay cash dividends on our common shares, you may not receive any return on your investment unless you sell your common shares for a price greater than that which you paid for it.
We have no current plans to pay cash dividends. The declaration, amount and payment of any future dividends on our common shares will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our shareholders or by our subsidiaries to us and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends is limited by our credit facilities and may be limited by covenants of other indebtedness we or our subsidiaries incur in the future. As a result, you may not receive any return on an investment in our common shares unless you sell your common shares for a price greater than that which you paid for it.
The grant and future exercise of registration rights may adversely affect the market price of our common shares.
Pursuant to the registration rights agreements the Company has entered into in connection with the Virtuoso and TKB Business Combinations and other issuances of equity and equity-linked debt securities, the holders of the Company’s securities party to such registration rights agreements can each demand that the Company register their registrable securities under certain circumstances and certain of such holders also have piggy-back registration rights for these securities in connection with certain registrations of securities that the Company undertakes. The registration of these securities will permit the public sale of such securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our common shares.
Sale of a substantial number of our common shares in the public market could adversely affect the market price of the Company.
The market price of the Company’s common shares could decline as a result of substantial sales of our common shares, a large number of our common shares becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares. The Company entered into various financing transactions during 2022, which have and will continue to result in the sale of a substantial number of our common shares and warrants, including the CFPI Stock Purchase Agreement, the July 2022 PIPE, the GM Securities Purchase Agreement, and the ATM Agreement. On the closing of the TKB Business Combination Agreement, Holdco is expected to issue a substantial number of common shares in exchange for the TKB common shares and the Wejo common shares. In addition, a conversion of the SCN could result in the issuance of a significant number of common shares. The sale or other issuance of a significant number of our common shares in the public market, or the perception that such sales could occur, could reduce the market price of our common shares.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our principal executive offices, which serve as an administrative facility for our operations, are located at ABC Building 21-23 Quay St., Manchester, United Kingdom, M3 4AE pursuant to a lease agreement which originally expired in 2026. As part of management’s measurable actions taken to significantly reduce expenses, on December 29, 2022, the Company exercised its option to terminate its Manchester office lease on June 29, 2023. In addition, we also lease office space in Michigan and Chester, UK, which are monthly commitments. We believe that our properties are sufficient to meet our present needs and we do not anticipate any difficulty in securing additional space, as needed, on acceptable terms.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
For information regarding legal proceedings, refer to Note 22 to the accompanying audited consolidated financial statements.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders
Our common shares are currently traded on NASDAQ under the symbol “WEJO.” On March 28, 2023, there were 224 holders of record of the Company’s common shares. This figure does not include the significantly greater number of beneficial holders of our common shares.
Dividend Policy
We neither declared nor paid any cash dividend on our common shares during the past two fiscal years, and we do not currently anticipate paying cash dividends on our common shares. However, we evaluate our dividend policy on a regular basis and may pay dividends in the future, subject to compliance with any applicable debt covenants. The declaration and payment of future dividends to holders of our common shares will be at the discretion of our Board of Directors and will also depend upon many factors, including our financial condition, earnings, capital requirements of our businesses, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that the Board of Directors deems relevant.
In addition, since we are a holding company, substantially all of the assets shown on our audited Consolidated Balance Sheets are held by our subsidiaries. Accordingly, our earnings, cash flow and ability to pay dividends are largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of such earnings to us in the form of dividends.
Comparative Stock Performance
We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 201(e) of Regulation S-K, we are not required to provide the information required by this Item.
Recent Sales of Unregistered Securities
Virtuoso Business Combination Consideration and PIPE Financing
On November 18, 2021, the Company consummated a PIPE investment for an aggregate consideration of $128.5 million in a private placement (the “November 2021 PIPE”) pursuant to certain common shares subscription agreements entered into by Virtuoso and the Company with certain qualified institutional buyers and accredited investors, dated May 28, 2021 and June 25, 2021. The offering of the Company’s common shares issued in the November 2021 PIPE was not registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. As part of the Virtuoso Business Combination, the Company raised net proceeds of $206.8 million, consisting of $230.0 million cash received in the trust and $0.4 million of cash received in the operating accounts, less redemptions of $132.8 million and transaction fees paid by Virtuoso of $19.3 million, and $128.5 million, through a PIPE investment. In addition Wejo incurred transaction costs of $30.0 million, of which $22.3 million was included in Additional Paid in Capital with the remaining $7.7 million being recorded in General and administrative expenses. The $176.9 million in net proceeds were offset by a payment of $75.0 million by the Company to Apollo as stipulated in the Forward Purchase Agreement. In addition, in connection with the Virtuoso Business Combination, the Company consummated additional issuance of unregistered securities, in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, including (a) 5,750,000 common shares issued to Virtuoso Sponsor LLC pursuant to the
Agreement and Plan of Merger dated as of May 28, 2021 by and among Virtuoso, the Company, Yellowstone Merger Sub, Inc., Wejo Bermuda Limited and Wejo Limited, (b) exchangeable preferred shares of Wejo Bermuda Limited that are exchangeable for 6,600,000 common shares or cash, at Wejo Bermuda Limited’s option, and (c) grants of equity awards in accordance with the Equity Incentive Plan, including 4,227,759 restricted share units (“RSUs”) to certain directors.
Committed Equity Facility
On February 14, 2022, the Company issued 715,991 shares of its common shares to CFPI as a commitment fee upon execution of the stock purchase agreement among the parties providing for the Committed Equity Facility (the “CEF”). Pursuant to the terms of the CFPI Stock Purchase Agreement, on December 14, 2022, the Company delivered notice to CFPI of its election to terminate the CFPI Stock Purchase Agreement in accordance with its terms effective on December 19, 2022. This transaction is described in further detail in Note 3 to the accompanying audited consolidated financial statements.
Private Placement
On July 27, 2022, the Company entered into subscription agreements with various investors pursuant to which the Company agreed to issue and sell Company’s Units (as defined below) in a private placement, each consisting of (i) one of the Company’s common shares, and (ii) one third of one warrant (the “July 2022 Warrants,” and together with the common shares, the “PIPE Units”) to purchase one common share. This transaction is described in further detail in Note 3 to the accompanying audited consolidated financial statements.
Open Market Sales Agreement (“ATM Agreement”)
On December 22, 2022, the Company entered into the ATM Agreement with Jeffries. Pursuant to the ATM Agreement, the Company has the right to sell to Jeffries up to $100,000,000 of the Company’s common shares from time to time during the term of the ATM Agreement. This transaction is described in further detail in Note 3 to the accompanying audited consolidated financial statements.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
“For purposes of this section, “we,” “our,” “us,” “Wejo,” and the “Company” refer to Wejo Group Limited and all of its subsidiaries post the consummation of the Virtuoso Business Combination, unless the context otherwise requires. The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In conjunction with this Annual Report on Form 10-K, the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our 2021 Annual Report on Form 10-K/A should also be read. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth in Part II, Item 1A. Risk Factors of this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Virtuoso Business Combination
Wejo Group Limited was incorporated under the laws of Bermuda on May 21, 2021 for the purpose of effectuating the Virtuoso Business Combination contemplated by that certain Agreement and Plan of Merger (the “Agreement and Plan of Merger”), dated as of May 28, 2021, by and among Virtuoso, Yellowstone Merger Sub, Inc. (the “Merger Sub”), Wejo Bermuda Limited (“Wejo Bermuda”) and Wejo Limited (“Legacy Wejo”), described herein and becoming the parent company of the combined business following the consummation of the Virtuoso Business Combination with Virtuoso, a blank check company incorporated on August 25, 2020 as a Delaware corporation and 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. Until the consummation of the Virtuoso Business Combination, Virtuoso did not engage in any operations nor generate any revenue; however, it did generate interest on the funds held in the trust account and incurred costs around its formation and other operating costs.
Prior to the Virtuoso Business Combination, on January 26, 2021, Virtuoso consummated the Initial Public Offering (“IPO”) of 23,000,000 units (the “Units” and, with respect to the common shares included in the Units being offered, the “public shares”), at $10.00 per Unit, generating gross proceeds of $230.0 million. Simultaneously with the closing of the IPO, Virtuoso consummated the sale of 6,600,000 warrants (the “Private Placement Warrant”), at a price of $1.00 per Private Placement Warrant.
Through the Virtuoso Business Combination, among other things, (i) Merger Sub merged with and into Virtuoso, with Virtuoso being the surviving corporation in the merger and a direct, wholly-owned subsidiary of Wejo; and (ii) all of Legacy Wejo’s outstanding share options, warrants, and convertible loan notes were converted into shares in Legacy Wejo and the shareholders of Legacy Wejo exchanged all classes of their shares and Virtuoso exchanged all of their Class A and Class B common shares for common shares in Wejo, which became publicly listed on the NASDAQ as of the consummation of the Virtuoso Business Combination. As part of the Virtuoso Business Combination, we raised net proceeds of $206.8 million, consisting of $230.0 million cash received in the trust and $0.4 million of cash received in the operating accounts, less redemptions of $132.8 million and transaction fees paid by Virtuoso of $19.3 million, and $128.5 million, through a PIPE investment. In addition, we incurred transaction costs of $30.0 million, of which $22.3 million was included in Additional Paid in Capital with the remaining $7.7 million being recorded in General and administrative expenses. The $176.9 million in net proceeds were offset by a payment of $75.0 million by us to Apollo as stipulated in the Forward Purchase Agreement.
Business Overview
We were originally formed as Wejo Limited, a private limited liability company incorporated under the laws of England and Wales, on December 13, 2013. From our formation until 2018, we tested proof of concept and implemented original equipment manufacturer (“OEM”) engagement activities to assess and build the case for connected vehicle data business and to create our capabilities to process data using data sources such as vehicle plug-in devices.
These activities helped us understand the potential for the connected vehicle data business and design our platform for processing and analyzing large volume data flows. After obtaining our first OEM data contract in December 2018, we launched our proprietary cloud software and analytics platform, Wejo ADEPT (which has since become a part of Wejo Neural Edge, our current platform) for processing OEM data and began generating revenue from our Wejo Marketplace Data Solutions in 2019. Connected vehicles contain hundreds of data sensors, emitting information such as location, speed, direction, braking, temperature and weather conditions. This raw data when harnessed can create intelligence, both historical and in real-time that is unavailable from any other source.
Based on both external and internal research completed by our management, we expect that connected vehicles will make up 44% of all vehicles in 2030. This is a greater than three-fold gain, increasing from 196 million connected vehicles in 2020 to approximately 600 million connected vehicles in 2030. As of December 31, 2022, Wejo had 20.8 million monetizable vehicles on the
Wejo Neural Edge platform from currently onboarded OEMs, a 29% increase over the prior year-end. Of these monetizable vehicles, 13.9 million were active on our Wejo Neural Edge platform within the last six months of which we ingested and standardized their related data, tracking over 78.8 million journeys and 17.6 billion data points a day, primarily in the United States. Based on existing OEM, automotive suppliers (Tier 1) and distributor (automotive dealer) relationships, we expect that near real time live streaming vehicles on our platform will increase to 124 million connected vehicles by 2030. Wejo data, insights, and solutions enable customers, including, among others, departments of transportation, retailers, construction firms and research departments to unlock unique insights about vehicle journeys, city infrastructures, EV usage, road safety and more.
In addition to the strength of our intellectual property, as of December 31, 2022, we had relationships with 29 OEMs, Tier 1, and Fleet providers of connected vehicle data components. The OEMs on our platform provide the unique data sets that we ingest regularly in Wejo Neural Edge 24 hours a day. To date, no industry standard for connected vehicle data exists. This is where Wejo technology has a singular leadership position in the market, and by creating that standard, we will enable future product developments such as vehicle-to-vehicle communications, pay-as-you-drive insurance, automated breakdown recovery, predictive maintenance and touchless “pay-by-car” commerce for parking, retail and more.
We are also working with the OEMs, Tier 1s, and Fleet providers to provide Wejo Software & Cloud Solutions (comprised of platforms as a service, data processing capabilities, customer privacy management or business insights derived from connected vehicle data) such as component intelligence. Data For Good™: from our inception, this mantra has captured our Company’s values that connected vehicle data will reduce emissions, make roads safer and create positive driver experiences. Our foundation is built upon a total commitment to data privacy and security, including compliance with regulations including GDPR and CCPA. We plan to leverage our leading position in North America and continue expansion into Europe, Asia and the rest of the world. We continue to evolve, scaling past data traffic management solutions into a host of new compelling proprietary offerings and fields of use. As the business progresses, we expect an increasing level of subscription and licensing revenue to be generated by Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions.
In April 2022, we announced our revolutionary Real-Time Traffic Intelligence solution (“Wejo RTTI”). Wejo RTTI is a real-time traffic intelligence solution that can be utilized by public agencies, civil engineering firms, mapping and navigation providers, and logistics companies to get a more accurate view of real-time road conditions. These insights allow for a significant impact on road safety and congestion while enabling more efficient vehicle routing within a community by utilizing easily digestible real-time traffic data.
In June 2022, we announced Wejo Historic Traffic Patterns, Wejo Labs and Wejo Autonomous Vehicle Operating System (“AVOS”). These products, solutions, and platforms position us to accelerate our revenue, as they are scalable and reusable across many product verticals and SaaS solutions. Wejo Historic Traffic Patterns offers users the ability to request specific data and insights from highly granular and accurate historic traffic patterns over the last several years from any specific location in the U.S., even if no monitors or sensors were previously installed. Wejo Historic Traffic Patterns allows government agencies, civil engineering firms, mapping/navigation providers, logistics companies and commercial real estate developers to gather insights directly via an Application Programming Interface (“API”) from the Wejo platform or via the Wejo Studio analytics portal.
Wejo Labs is a cloud-based platform that allows researchers and data scientists from universities, research organizations and civil and traffic engineering consultancies to run traffic and mobility studies at scale with accurate connected vehicle data from tens of millions of connected vehicles across the U.S. and Europe.
Wejo AVOS is a platform that we anticipate will leverage billions of daily data points from millions of connected vehicles, including autonomous vehicle data, to generate autonomous vehicle outcomes. The platform is being developed to rapidly accelerate the development and adoption of autonomous vehicles for the world’s leading automakers and fleet developers by opening up and democratizing access to connected vehicle data. Wejo AVOS intended features include support for vehicle to vehicle communication, demonstration and simulation such as meta-verse concepts, road profile information for product development and deployment, and live road information support for autonomous driver decision making.
To become an integral partner within the AV ecosystem we endeavor to offer a full suite of services that leverage our data platform to generate insights and analytics which can help solidify the path forward.
We anticipate these services to include:
•Real Time Traffic Intelligence or RTTI for AVs: a focused offering of RTTI that will identify lane closures, road closures, and other traffic incident hot spots in real time for AVs to easily access while on the road.
•Event Reactions for AVs: a tool that leverages a catalog of driver reactions to inform an AV how to react on the road if they encounter a known hotspot.
•Road characterizations for AVs: a product that can help AV manufacturers minimize risk and maximize investment by using road profiles like speed limit, amount of traffic, and number of adverse events, to determine where the company should roll-out its next set of AVs.
•Road characterizations for DOTs: Similar to the previous product, but Road Characterization for DOTs is focused on helping regulators determine the safest place to roll out AVs based on specific road profile parameters.
•Journey Intelligence for AVs: Solution that can identify the most common types of journeys, informing AV companies of the most common types of trips its AVs should be trained for.
We operate our business to take advantage of a sizeable market opportunity. Through our own bottom-up analysis, coupled with third party research, we estimate our SAM to be worth approximately $61.0 billion by 2030. We determined the SAM as two components: Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions. For Wejo Marketplace Data Solutions, we used the data and research from the connected vehicle analyst firm Ptolemus. We have projected TAMs for each of our eight current and potential Wejo Marketplace Data Solutions products (namely Traffic Management, Audience and Media Measurement, End-to-End Insurance Services, Remote Diagnostic, Fleet Management, Car Sharing & Rental, Roadside Assistance, and Integrated Payments) by region and timeframe. We then applied a discount factor by calculating 70% of each TAM to create the Wejo SAM. For Wejo Software & Cloud Solutions, we worked with Gartner research to determine the total spend in this area of SaaS solutions for the automotive industry and calculated our SaaS SAM as 5% of the total SAM of $61.0 billion.
We have demonstrated our ability to standardize and generate valuable data insights, and in the process created a growing network effect of attracting additional OEMs, automotive suppliers, and customers. These forces converge to grow the products and services that consumers, and enterprises in the transportation industry want and are willing to pay for.
We build privacy by design into the core of our Wejo Neural Edge platform, enabling compliance with existing privacy laws and regulations. We operate to high global data privacy standards and are a leader in the industry on protection of data, assuring that we play a pivotal role in our industry.
Key Factors Affecting Our Results of Operations
Attract, Retain and Grow our Customer Base
Our recent growth is driven by the expansion of our customer base particularly in the area of traffic management and, related mapping and logistics, and high customer retention rates. Substantially all of our current sales come from U.S. connected vehicle data. We are in the early stages of monetization in its planned markets, starting with traffic management, including mapping. As seen in some of our key performance indicators outlined below, early-stage demand for connected vehicle data is very strong, and we believe that we will continue to see this demand in the future as we expand in traffic management and launch additional product offerings.
We are expanding its customer base in multiple ways. Wejo Marketplace Data Solutions will expand from one product line to six product lines over the next couple of years, and the number of market verticals to which we will sell these solutions will expand significantly as we rollout new product lines. We are expanding our base on larger enterprise customers in both Wejo Marketplace Data Solutions and Wejo Software & Cloud Solutions. This customer base expansion can be seen in 2022 through our reported Revenue, net and the following metrics (as projected by management and all as of December 31, 2022):
•Revenue, net increased to $8.4 million, or 227%, compared to the prior year.
•Total Contract Value increased to $39.4 million, or 92%, compared to the prior year. Of this amount, unrecognized total contract value is $16.5 million.1
•Gross Bookings of customers increased to $18.8 million, or 124%, compared to the prior year.1
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1 These key metrics are not considered in conformity with U.S. GAAP. The Company and its management believe that these key metrics are useful to investors in measuring the comparable results of the Company period-over-period.
We define Total Contract Value (“TCV”) as the projected value of all contracts the Company has ever signed to-date with its customers. The 92% increase in TCV as compared to the prior year, speaks to the Company’s ability to close deals and secure additional contracts. The increase in contracts represents the potential for an increase in revenue. Unrecognized total contract value represents estimated total contract value minus the amount of revenue recognized to-date before any revenue share payments to OEMs.
We define Gross Bookings as the total projected value of contracts signed in the relevant period, excluding taxes and renewal options available to customers in future periods, a portion of which often will be shared with certain OEM preferred partners. Gross
Bookings increased year-over-year by approximately 124% to $18.8 million for the year ended December 31, 2022 demonstrating a growth in additional new customers and expansion of existing customer relationships in 2022.
Notably, as Wejo offers new visualization tools and software solutions to its customers in multiple market verticals, it is migrating its revenue towards a stronger base of recurring revenue. As of December 31, 2022, Wejo had Annual Recurring Revenue (“ARR”) of $8.4 million, up from $4.5 million as of December 31, 2021, an increase of 87%. We calculate ARR by taking the gross Monthly Recurring Revenue (“MRR”) for the last month of the reporting period and multiplying it by twelve months. MRR for each month is calculated by aggregating revenue from customers with contracts with more than four months in duration and includes recurring software licenses, data licenses, and subscription agreements.
ARR and MRR should be viewed independently of revenue, and do not represent our revenue under U.S. GAAP on a monthly or annualized basis, as they are operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are helpful metrics to understand how the customer base is increasingly contracting on a recurring basis and are not intended to be replacements or forecasts of revenue.
We define Adjusted EBITDA, a non-GAAP measure, as Loss from operations excluding: (1) share-based payments to employees and third party vendors; (2) depreciation of equipment and amortization of intangible assets; (3) transaction-related bonuses and costs, and (4) restructuring charges. We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses. Adjusted EBITDA should not be considered in isolation or as a substitute for net loss or other income statement data prepared in accordance with U.S. GAAP. Our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA for the years ended December 31, 2022 and 2021 is as follows:
Year Ended December 31,
(in thousands) 2022 2021
Net loss $ (159,253) $ (217,778)
Income tax expense 413 357
Loss before taxation (158,840) (217,421)
Interest expense 5,249 9,597
Other expense, net 33,645 49,067
Loss from operations (119,946) (158,757)
Add:
Depreciation and amortization 4,037 4,411
Transaction-related bonus - 26,656
Transaction-related costs 11,558 7,686
Share-based payments 7,102 52,316
Adjusted EBITDA $ (97,249) $ (67,688)
The following expenses are excluded from our non-GAAP measure:
•Depreciation: is a non-cash expense relating to our office equipment and furniture and fixtures and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives.
•Amortization: is a non-cash expense related primarily related to our GM Data Sharing Agreement intangible asset and internally developed software which are amortized over their estimated lives.
•Transaction-related bonus and costs: consist of expenses primarily related to financing or merger-related activities including legal, advisory and other fund raising and professional services costs, as well as certain employment-related costs that are required to be expensed under U.S. GAAP. These costs are excluded from our assessment of performance because they are considered non-operational in nature and therefore are not indicative of current or future performance or the ongoing cost of doing business.
•Share-based payments to employees and third party vendors: consists of expense associated with awards that were granted under various stock and incentive plans and with shares granted as payment for goods or services provided by third parties. These expenses are not paid in cash and we view the economic costs of share-based payments to be the dilution to our share base; we will also include the related shares in our fully diluted shares outstanding for U.S. GAAP earnings per share (“EPS”) using the treasury stock method when they are no longer anti-dilutive. The change in our definition of Adjusted EBITDA to exclude share-based payment to third parties was undertaken due to on-going negotiations to make payments to certain third party vendors in common shares of the Company in lieu of cash. These payments are being excluded on the same basis as our exclusion of share-based payments. The impact of these costs had no impact on our quarterly or full-year results reported for any such periods in 2022 or 2021. For 2023 and beyond, management believes that excluding share-based payments to third parties from Adjusted EBITDA will more accurately present the Company’s actual cash usage.
•Restructuring charges: may consist of expense associated with implementing strategic workforce reductions, streamlining operations, and terminating certain non-core agreements. These costs are excluded from our assessment of performance because they are considered non-operational in nature and therefore are not indicative of current or future performance or the ongoing cost of doing business. The impact of these charges had no impact on our quarterly or full-year results reported for any such periods in 2022 or 2021. For 2023 and beyond, management believes that excluding restructuring charges from Adjusted EBITDA will more accurately present the Company’s actual cash usage.
Wejo is expanding its revenue base and at the same time expanding its base of monetizable connected vehicles. As of December 31, 2022, Wejo had 20.8 million monetizable vehicles on the Wejo Neural Edge platform from currently onboarded OEMs, a 29% increase over the prior year-end. Of these monetizable vehicles, 13.9 million vehicles were active on our Wejo Neural Edge platform. Gross Bookings per average monetizable connected vehicle in the year ended December 31, 2022 was $1.47 per vehicle, up 97% from $0.75 in the year ended December 31, 2021. We expect Gross Bookings per vehicle to significantly expand as we roll out new product lines to multiple market verticals in the Wejo Marketplace Data Solutions and customers in Wejo Software & Cloud Solutions.
We continue to add functionality to our Wejo Neural Edge platform to offer new and more valuable services to our customers. We believe that our business is at the genesis of the connected vehicle ecosystem, demonstrating new services that will one day be viewed as necessary, and positioned to pioneer even more desirable services in the future. As these services continue to demonstrate their value, many of our customers will move a greater percentage of their funds to connected vehicle data. We will fuel this growth with marketing efforts to increase awareness of our offerings.
Key Components of Results of Operations
Revenue, net
We work with some of the world’s leading OEMs to obtain, process, and create products using vast amounts of connected vehicle data. OEMs provide this data through license agreements. We process the data in our Wejo Neural Edge platform running in cloud data centers and offer services including live data feeds, batch feeds and analytics. These services provide customers with traffic intelligence, high frequency vehicle movements, and common driving events and trends, among other insights. Our customers pay fees to obtain one or more of these data services that may include a portion or all the data in their market including license fees, professional services fees, and platform and delivery fees. Our revenue is the amount of consideration we expect to receive in the form of Gross Bookings to customers, reduced by associated revenue share due under our data sharing agreements with OEMs, where we have determined that we are acting as an agent in the relationship.
Cost of Revenue (exclusive of depreciation and amortization)
Cost of revenue consists primarily of data acquisition costs and hosting service expenses for our Wejo Neural Edge platform as well as hardware, software and personnel to support the revenue process. In addition, cost of revenue includes fees paid for access to data from certain of our OEM partners, where we have determined that we are acting as the principal in the relationship with customers.
Technology and Development Expenses
Technology and development expenses consist primarily of compensation-related expenses incurred for our data scientists and other technology personnel for the research and development of, enhancements to, and maintenance and operation of our products, equipment and related infrastructure.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of compensation-related expenses to our direct sales and marketing personnel, as well as costs related to advertising, industry conferences, promotional materials, other sales and marketing programs, facility costs related to sales and marketing functions, advertising costs are expensed as incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation related expenses for executive management, finance, accounting, human resources, legal, and corporate information systems functions, professional fees, costs related to capital raising efforts and strategic initiatives.
Other Expense, net
Loss on Issuance of Convertible Loan Notes
In 2022, no convertible loans were outstanding. We issued convertible notes in January 2021 and April 2021 for which the initial fair value of the convertible notes was greater than the proceeds we received. We recognized the loss on issuance as the difference between the initial fair value of the convertible notes and cash proceeds received within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Loss on Extinguishment of Convertible Loan Notes
In 2022, no convertible loans were outstanding. In November 2021, in connection with the completion of the Virtuoso Business Combination, all of the outstanding principal and accrued interest under the convertible loan notes that were issued in 2021 and 2020 automatically converted into ordinary shares of Legacy Wejo, which were then converted into Wejo Group Limited common stock. We recorded a loss on extinguishment of convertible notes related to this conversion within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Gain on Fair Value of Derivative Liability
In 2022, no derivative liabilities were outstanding. In 2021, we issued convertible notes that contain redemption features, which met the definition of a derivative instrument. We classified these derivative instruments as a liability on our audited Consolidated Balance Sheets. We remeasured this derivative liability to fair value at each reporting date and recognized changes in the fair value of the derivative liability within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss. Upon the closing of the Virtuoso Business Combination, all of the outstanding principal and accrued interest under the convertible notes automatically converted into ordinary shares of Wejo Limited, which were ultimately converted into Wejo Group Limited common shares, the derivative liability was derecognized and no further fair value remeasurement needs to be performed.
Gain on Fair Value of Public Warrant Liabilities
We have an aggregate of 11,500,000 publicly traded warrants (the “Public Warrants”) we assumed as part of the Virtuoso Business Combination. We classify the warrants as a liability on our audited Consolidated Balance Sheets and we are required to remeasure to fair value at each reporting date. In 2022 and 2021, we recognized changes in the fair value of the public warrant liability within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss and will continue to do so until the warrants are exercised, expire or qualify for equity classification.
Loss on Fair Value of Forward Purchase Agreement
On November 10, 2021, Wejo Limited entered into the Forward Purchase Agreement with Apollo (See Note 6 to the accompanying audited consolidated financial statements). We account for the Forward Purchase Agreement in accordance with the guidance contained in ASC 815-40, under which the Forward Purchase Agreement does not meet the criteria for equity treatment and must be recorded as an asset. Accordingly, we classify the Forward Purchase Agreement as a current asset on our audited Consolidated Balance Sheets with changes in fair value in 2022 and 2021 reflected within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Gain on Fair Value of Exchangeable Right Liability
We have an aggregate of 6,600,000 Exchangeable Rights, as defined in Note 17 to the accompanying audited consolidated financial statements, we assumed as part of the Virtuoso Business Combination. We classify the Exchangeable Right as a liability on our audited Consolidated Balance Sheets and we are required to remeasure to fair value at each reporting date. In 2022 and 2021, we recognized changes in the fair value of the Exchangeable Right liability within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss and will continue to do so until they are exercised, expire or qualify for equity classification.
Loss on Issuance of Forward Purchase Agreement
We issued the Forward Purchase Agreement in November 2021 for which the initial fair value of the Forward Purchase Agreement was less than the amount we prepaid. We recognized the loss on issuance as the difference between the initial fair value of the Forward Purchase Agreement and cash prepaid within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Gain on Settlement of Forward Purchase Agreement
In November 2021, the partial Forward Purchase Agreement shares were terminated in part and the proceeds we received are greater than the fair value of terminated Forward Purchase Agreement shares. We recorded a gain on settlement of the terminated 251,632 shares under the Forward Purchase Agreement as the difference between the fair value of terminated Forward Purchase Agreement and the cash proceeds received within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Loss on Fair Value of Advanced Subscription Agreements
Prior to completing the Virtuoso Business Combination, we issued Advanced Subscription Agreements (“ASAs”) that contained an automatic conversion feature, which was triggered by either the occurrence of Series C round financing or share sale triggering a change of control. We concluded that it was appropriate to apply the fair value option to the ASAs because there were no non-contingent beneficial conversion features related to the ASAs. We classified these ASAs as a liability on our audited Consolidated Balance Sheets and remeasure them to fair value at each reporting date to the date of conversion, and recognized changes in the fair value of the ASAs within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss. All remaining outstanding ASAs converted into ordinary shares of Legacy Wejo on July 31, 2021, which were then converted into Wejo Group Limited common shares upon the closing of the Virtuoso Business Combination.
Loss on Issuance of GM Securities Purchase Agreement
We entered into a Securities Purchase Agreement with GM in December 2022 where we issued and sold to GM a secured convertible note and warrants to acquire common shares (the “GM Warrants”). Under that transaction, the initial fair value of the GM SPA was greater than the amount of proceeds. We recognized the loss on issuance as the difference between the initial fair value of the GM SPA and proceeds within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Gain on Fair Value of GM Securities Purchase Agreement
We classified the SCN as a current liability and the GM Warrants as a non-current liability on the audited Consolidated Balance Sheets with changes in fair value reflected within Other expense, net in the audited Consolidated Statements of Operations and Comprehensive Loss at each reporting period.
Other, net
Other, net primarily consists of foreign exchange gain or loss arising from foreign currency transactions and a benefit from research and development tax credits.
Income Taxes
Wejo Limited is a tax resident in the UK with business units taxable in other territories, including the U.S. Due to the nature of our business, we have generated losses since inception and therefore have not paid corporation tax in the UK or other territories.
UK operating losses may be carried forward indefinitely and may be offset against future taxable profits, subject to numerous utilization criteria and restrictions. The amount that can be offset each year is limited to £5.0 million plus an incremental 50% of UK taxable profits. After accounting for tax credits receivable, we had accumulated tax losses for carry forward in the UK of $297.0 million and $212.4 million as of December 31, 2022 and December 31, 2021, respectively. We do not recognize these losses on our audited Consolidated Balance Sheets.
Wejo Group Limited is incorporated under the laws of Bermuda and is a tax resident in Bermuda.
Results of Operations
Comparison of the years ended December 31, 2022 and 2021
The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):
Year Ended December 31,
$ Change % Change
Revenue, net $ 8,396 $ 2,566 $ 5,830 227 %
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below) 7,739 3,583 4,156 116 %
Technology and development 33,893 26,265 7,628 29 %
Sales and marketing 20,569 22,920 (2,351) (10) %
General and administrative 62,104 104,144 (42,040) (40) %
Depreciation and amortization 4,037 4,411 (374) (8) %
Total costs and operating expenses 128,342 161,323 (32,981) (20) %
Loss from operations (119,946) (158,757) 38,811 (24) %
Interest expense (5,249) (9,597) 4,348 (45) %
Other expense, net (33,645) (49,067) 15,422 (31) %
Loss before taxation (158,840) (217,421) 58,581 (27) %
Income tax expense (413) (357) (56) 16 %
Net loss $ (159,253) $ (217,778) $ 58,525 (27) %
Revenue, net
In 2022, Revenue, net increased by $5.8 million, or 227%, driven by strong growth in the Traffic Management product line of the Wejo Marketplace Data solutions, which increased by $4.4 million, driven by an increase in the average revenue, net, per revenue generating customer. Additionally, there was a $1.5 million increase in the Wejo Software & Cloud Solutions business line revenue, which was driven by the completion of various Wejo Software & Cloud Solutions projects. Revenue, net displayed strong growth in our fundamental performance in our markets, as seen with a 59% year-over-year increase in the number of customers and growth in Gross Bookings1 of 124%. At the same time, we ended 2022 with a $8.4 million Annual Recurring Revenue1 base. The majority of our revenue in the 2022 and 2021 was from the United States.
Cost of Revenue (exclusive of depreciation and amortization)
In 2022, Cost of revenue increased by $4.2 million, or 116%, driven by a $2.2 million increase in revenue share and minimum fees and a $1.5 million increase in data hosting costs, as we increased the number of live vehicles on platform by 18%.
Technology and Development Expenses
In 2022, Technology and development expenses increased by $7.6 million, or 29% primarily due to an increase of $10.7 million in IT expenses, driven by costs associated with the Master Subscription Agreement with Palantir and increased data
1 These key metrics are not considered in conformity with U.S. GAAP. The Company and its management believe that these key metrics are useful to investors in measuring the comparable results of the Company period-over-period.
storage costs. This was offset by a decrease of share-based compensation expense of $2.5 million (as a result of the vesting of stock awards that had been granted to employees prior to our Virtuoso Business Combination in November 2021).
Sales and Marketing Expenses
In 2022, Sales and marketing expenses decreased by $2.4 million, or 10%, driven primarily by a decrease of share-based compensation expense of $2.5 million.
General and Administrative Expenses
In 2022, General and administrative expenses decreased by $42.0 million, or 40%, driven by a decrease of $40.1 million of share-based compensation expense as a result of the vesting of stock awards that had been granted to employees and certain directors prior to our Virtuoso Business Combination in November 2021.
Depreciation and Amortization
In 2022, Depreciation and amortization remained relatively flat compared to 2021.
Interest Expense
In 2022, Interest expense decreased by $4.3 million, or 45%, as the Convertible Loan Notes were converted in November 2021.
Other expense, net
Year Ended December 31,
(in thousands) 2022 2021 $ Change % Change
Loss on issuance of convertible loan notes $ - $ (53,967) $ 53,967 NM
Loss on extinguishment of convertible loan notes - (25,598) 25,598 NM
Gain on fair value of derivative liability - 12,922 (12,922) NM
Gain on fair value of public warrant liabilities 12,056 13,800 (1,744) (13) %
Loss on fair value of Forward Purchase Agreement (40,452) (15,609) (24,843) 159 %
Gain on fair value of Exchangeable Right liability 10,751 34,452 (23,701) (69) %
Loss on issuance of Forward Purchase Agreement - (11,674) 11,674 NM
Gain on settlement of Forward Purchase Agreement - 399 (399) NM
Loss on fair value of Advanced Subscription
Agreements, including related party of nil and $(3,665), respectively
- (4,470) 4,470 NM
Loss on issuance of GM Securities Purchase Agreement (4,116) - (4,116) NM
Gain on fair value of GM Securities Purchase Agreement 1,883 - 1,883 NM
Other, net1
(13,767) 678 (14,445) NM
Other expense, net $ (33,645) $ (49,067) $ 15,422 (31) %
______________________
1 Line item Other, net was presented as Other income, net for the year ended December 31, 2021. Substantially all of the activity for 2022 is related to foreign exchange translation.
NM - Not meaningful.
Loss on Issuance of Convertible Loans
In 2022, no convertible loans were outstanding as compared to a loss on issuance of convertible loans of $54.0 million in 2021. The loss in the prior period was driven primarily by aggregate costs exceeding the allocated proceeds of the convertible loans.
Loss on Extinguishment of Convertible Notes
In November 2021, in connection with the completion of the Virtuoso Business Combination, all of the outstanding principal and accrued interest under the convertible loan notes that were issued in 2021 automatically converted into ordinary shares of Legacy Wejo, which were then converted into Wejo Group Limited common shares. In 2021, we recorded a loss on extinguishment of $25.6 million related to this conversion within Other expense, net on our audited Consolidated Statements of Operations and Comprehensive Loss. Upon the completion of the Virtuoso Business Combination, all of the outstanding principal and accrued interest under the convertible loans automatically converted into ordinary shares of Legacy Wejo, which were then converted into Wejo Group Limited common shares and carried zero balances on the audited Consolidated Balance Sheets as of December 31, 2022 and 2021.
Gain on Fair Value of Derivative Liability
In 2022, no derivative liabilities were outstanding as compared to a $12.9 million gain on the fair value of the derivative liability in 2021. The gain in the prior period was driven primarily by the increase in the embedded derivative liabilities that were bifurcated from the convertible loans issued between July 2020 and March 2021. The derivative liability carried a zero balance on the audited Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively, as the convertible loans associated with the derivative liability automatically converted into ordinary shares of Legacy Wejo, which were then converted into Wejo Group Limited common shares upon the Virtuoso Business Combination.
Gain on Fair Value of Public Warrant Liabilities
In 2022, we recognized a $12.1 million gain on fair value of public warrant liabilities, which is due to our quoted warrant liabilities’ price decreasing from $1.10 per share as of December 31, 2021 to $0.05 per share as of December 31, 2022. In 2021, we recognized a $13.8 million gain on fair value of public warrant liabilities due to our quoted warrant liabilities’ price decreasing from $2.30 as of November 18, 2021 to $1.10 per share as of December 31, 2021.
Loss on Fair Value of Forward Purchase Agreement
In 2022, we recognized a $40.5 million unrealized loss on the fair value of the Forward Purchase Agreement due to the decrease in the fair value of our common shares between December 31, 2021 and December 31, 2022. In 2021, we recognized a $15.6 million unrealized loss on the fair value of the Forward Purchase Agreement.
Gain on Fair Value of Exchangeable Right Liability
In 2022, we recognized a $10.8 million gain on fair value of Exchangeable Right Liability, due to the value decreasing from $1.69 per share as of December 31, 2021 to $0.06 per share as of December 31, 2022. In 2021, we recognized a $34.5 million gain on the fair value of the Exchangeable Right Liability, due to the value decreasing from $6.91 per share as of November 18, 2021 to $1.69 per share as of December 31, 2021.
Loss on Issuance of Forward Purchase Agreement
In November 2021, we entered into a Forward Purchase Agreement for which the initial fair value of the Forward Purchase Agreement of $63.3 million was less than the amount of $75.0 million we prepaid. We recognized the loss on issuance of $11.7 million within Other expense, net on our audited Consolidated Statements of Operations and Comprehensive Loss. There were no issuances in 2022.
Gain on Settlement of Forward Purchase Agreement
In November 2021, 251,632 Forward Purchase Agreement shares were terminated. The cash proceeds of $2.5 million we received was greater than the $2.1 million Terminated Shares’ fair value. We recorded $0.4 million gain on settlement of Forward Purchase Agreement related to within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. Settlement of FPA shares in 2022 was not material.
Loss on Fair Value of Advanced Subscription Agreements
In 2022, no Advanced Subscription Agreements were outstanding. In 2021, we recognized a $4.5 million loss on the fair value of the Advanced Subscription Agreements due to the fair value of the underlying ordinary shares increasing.
Loss on Issuance of the GM Securities Purchase Agreement
In December 2022, we entered into the GM Securities Purchase Agreement with an initial fair value of $13.6 million, which was more than the amount of proceeds received of $9.5 million. We recognized the loss on issuance of $4.1 million related to the issuance within Other expense, net in our audited Consolidated Statements of Operations and Comprehensive Loss.
Gain on Fair Value of the GM Securities Purchase Agreement
In 2022, we recognized a $1.9 million gain on the fair value of the GM Securities Purchase Agreement within Other expense, net, due to the fair value of the underlying shares decreasing.
Other, net
In 2022, Other, net decreased by $14.4 million due to unfavorable exchange rate movements related to assets and liabilities denominated in foreign currencies.
Income Tax Expense
In 2022, Income tax expense was $0.4 million for the year ended December 31, 2022. This income tax expense is the result of taxable income recognized by the operating entities in the United States.
Financial Condition
(in thousands) December 31, 2022 December 31, 2021 $ Change % Change
Total assets $ 31,133 $ 142,007 $ (110,874) (78) %
Total liabilities $ 99,896 $ 94,313 $ 5,583 6 %
Total shareholders’ (deficit) equity $ (68,763) $ 47,694 $ (116,457) (244) %
Total assets decreased by $110.9 million, or 78%, primarily due to a $58.7 million decrease in cash driven by our operating cash flow needs, a $42.9 million decrease in the fair value of the FPA driven by a decrease in our share price from $6.84 as of December 31, 2021 to $0.48 as of December 31, 2022 and a decrease of $10.8 million in Prepaid expense and other current assets associated with the Master Subscription Agreement with Palantir partially offset by the SCN and PIPE proceeds received of $9.5 million and $15.9 million, respectively, during the year ended December 31, 2022.
Total liabilities remained relatively flat compared to prior year with an increase of $5.6 million, or 6%.
Total shareholders’ (deficit) equity increased by $116.5 million, or 244%, primarily due to a $159.3 million increase in the Accumulated deficit as a result of our Net loss, which was partially offset by a $30.2 million increase in Additional paid in capital as a result of the July 2022 PIPE and CEF proceeds received during the year ended December 31, 2022.
Liquidity and Capital Resources
Sources of Liquidity
We have incurred significant operating losses since our formation, and consequently, we will need significant additional capital to fund our operations for the next twelve months, which we may obtain through the sale of equity, debt financings, or other capital sources. Prior to the closing of the Virtuoso Business Combination on November 18, 2021, we received gross proceeds of $175.8 million through sales of equity, ASAs, convertible loan notes and debt financings. In 2021, we issued Secured Loan Notes (as defined in Note 15 to the accompanying audited financial statements) with a principal amount of $39.0 million.
On November 18, 2021, we completed the Virtuoso Business Combination, which raised $206.8 million, consisting of $230.0 million cash received in the trust and $0.4 million of cash received in the operating accounts, less redemptions of $132.8 million and transaction fees paid by Virtuoso of $19.3 million, and $128.5 million, through a PIPE investment. After Wejo incurred transaction costs of $30.0 million, of which $22.3 million was included in Additional Paid in Capital with the remaining $7.7 million being recorded in General and administrative expenses, net proceeds were $176.9 million. The proceeds were offset by a payment of $75.0 million from us to Apollo as stipulated in the FPA. In November 2021, 251,632 shares were sold by Apollo under the FPA and $2.5 million was paid back to us. During 2022, pursuant to the FPA, 1,662,785 common shares were sold at a weighted average price of
$1.51 which generated aggregate proceeds of $2.5 million. As of December 31, 2022 and December 31, 2021, there were 5,585,583 and 7,248,368 total outstanding shares, respectively, under the FPA.
On July 27, 2022, we closed the PIPE Financing, which was anchored by Sompo Light Vortex and included current investors and certain members of the Company’s Board of Directors, and which raised $15.9 million before transaction costs of $0.2 million (see Note 3 to the accompanying audited consolidated financial statements).
On December 16, 2022, we entered into a Securities Purchase Agreement with GM. Pursuant to the GM Securities Purchase Agreement, we issued to GM the SCN for net proceeds of $9.5 million and the GM Warrant to acquire up to an aggregate amount of 1,190,476 common shares at an exercise price of $0.75112 per common share (see Note 14 to the accompanying audited consolidated financial statements).
As of December 31, 2022, we had cash of $8.6 million, of which $6.4 million was held outside the United States; however, at this time, we do not have the capital we need to fully fund our operations in the short-term.
Nevertheless, revenue is continuing to grow, and we have taken measurable actions to significantly reduce expenses against the 2022 operating plan, prioritizing growth in the traffic, insurance and audience measurement marketplaces, and delivering SaaS solutions for the automotive industry because of their near-term revenue opportunity. We are continuing to look at further measures to reduce cash burn from expenses, while continuing to grow revenue at rates in the range of 200% to 300% per year. Management believes that a combination of strong and disciplined expense management, rapid revenue growth and outside capital are necessary steps in the long-term capital strategy of Wejo.
Our long-term plans have not changed other than the timing of certain product launches as we have made choices to target cash flow breakeven in mid-2024. Cost reductions include a reduction in our workforce, elimination of non-revenue projects, and reductions in expenditures by negotiations with vendors in areas such as data acquisition, cloud costs, license fees for software, legal and professional fees, insurance and other costs. On March 22, 2023, our Board of Directors approved a plan to reduce our workforce by approximately 40 employees, representing approximately 16% of our total current global workforce. This decision was based on cost-reduction initiatives intended to reduce operating expenses, focus on revenue growth opportunities, and target cash flow positive operations prior to the end of the first half of 2024. As of March 22, 2023, we estimated that we will pay approximately $1.8 million in connection with the reduction in force, which consists of notice period and severance payments, previously accrued compensation expenses, and other related costs. We expect that these payments will be made in the second and third quarters of 2023, and that the reduction in force will be substantially complete in the third quarter of 2023, subject to local law and consultation requirements. The payments we expect to make are subject to assumptions, including local law requirements, and actual charges may differ from the estimate disclosed above. In the aggregate, we currently expect the reduction in force to result in approximately $9.0 million in annualized cash operating expense savings.
As a part of our efforts to reduce cash burn until we are able to generate positive operating cash flows, we are in discussions with key vendors to allow us to pay for services with our common shares in lieu of cash for some or all of the amounts owed. This partial payment in common shares, and any modification of the timing for such payments, would allow us to manage our cash obligations while we complete the capital raising initiatives discussed below or that otherwise may be available to us.
As of December 31, 2022, we have two funding options from which we can continue to raise cash, although the amounts to be received through those instruments are uncertain: (1) the ATM Agreement (upon the effectiveness of our Shelf Registration Statement) as described in Note 3 to the accompanying audited consolidated financial statements, and (2) the Forward Purchase Agreement as described in Note 6 to the accompanying audited consolidated financial statements (collectively, the “Facilities”). Both Facilities are driven by the future price of our common shares and future trading volumes of our common shares, each of which will likely limit the timing and actual level of funds that can be raised. In addition, the window in which we can utilize the Facilities may be restricted during “black-out periods” under our insider trading policy and if we are in possession of material non-public information. The FPA facility expires in November 2023.
In furtherance of its long-term capital strategy, on January 10, 2023, we announced that we entered into the TKB Business Combination Agreement as a result of which, at the closing of the transaction, we expect to acquire approximately $57.0 million in cash TKB has retained in trust, less any further redemptions by TKB shareholders in connection with the vote to approve the transaction as described in Note 25 to the accompanying audited consolidated financial statements. The goal of this business combination, combined with a PIPE financing, is to raise enough capital to provide us with the capital required through to cash flow breakeven, which is expected to occur by mid-2024, assuming revenue growth and expense reduction targets are met. As part of this long-term capital strategy, we have been reaching out to strategic, institutional and other investors to fund a PIPE equity financing transaction in connection with the TKB Business Combination from which we are targeting a capital raise of $75.0 million. As of March 31, 2023, we
entered into a non-binding letter of intent, subject to certain closing and other conditions, with a strategic investor to anchor the PIPE with a potential $20.0 million investment. Through a combination of the closing of the TKB Business Combination and the related PIPE, we hope to raise at least $100.0 million, net of transaction costs, on the closing of those transactions. In arriving at this goal of a $100.0 million total capital raise, we have considered the possibility of additional redemptions from the TKB trust in connection with the vote to approve that transaction.
In order to bridge to the TKB Business Combination and PIPE transactions, we are working to raise at least an additional $20.0 million (which would be an advance on the targeted $75.0 million PIPE) from investors in the form of debt that converts into common shares, at the option of the investor, before the closing of the TKB Business Combination or at the closing of that transaction and the related PIPE (the “Bridge Financing”). We expect to use the proceeds of the Bridge Financing to redeem the $3.7 million Second Lien Notes and the $2.0 million Unsecured Notes (each as described in Note 25 to the accompanying audited consolidated financial statements) and provide financing through the second quarter of 2023. We are currently negotiating this transaction and expect it to be completed during the second quarter of 2023. No legally binding agreement is yet in place for Bridge Financing and therefore there can be no assurances that this transaction will be completed.
Given the liquidity issues and the uncertainty whether the short and long-term capital financing transactions discussed above will close in the anticipated amounts and time frames, management has concluded there is substantial doubt regarding our ability to continue as a going concern within one year from the issuance date of our audited consolidated financial statements. Our accompanying audited consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The audited consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary from the outcome of this uncertainty.
Cash Flows
The following table summarizes our cash flows for each of the periods presented (in thousands):
Year Ended December 31,
2022 2021
Net cash used in operating activities $ (85,501) $ (106,566)
Net cash used in investing activities (2,876) (3,278)
Net cash provided by financing activities 29,987 159,441
Effect of exchange rate changes on cash (306) 3,304
Net (decrease) increase in cash $ (58,696) $ 52,901
Cash Used in Operating Activities
During the year ended December 31, 2022, net cash used in operating activities was $85.5 million, primarily resulting from our net loss of $159.3 million, partially offset by non-cash adjustments of $49.2 million and movements in our operating assets and liabilities of $24.5 million, driven by a decrease of $9.4 million in Prepaid expenses and other current assets due to prepaying insurance in 2021, a $8.2 million increase in Accounts Payable as a result of an increase in days payable outstanding, and a $8.9 million increase in Accrued expenses and other liabilities as a result of increased operating expenses, partially offset by a $2.8 million increase in Accounts receivable, as a result of an increase in Revenue, net.
During the year ended December 31, 2021, net cash used in operating activities was $106.6 million, primarily resulting from our net loss of $217.8 million, which was offset by non-cash adjustments of $110.3 million and net cash provided by changes in our operating assets and liabilities of $0.9 million. Significant changes in components of working capital consisted of an increase of $12.5 million in Accrued expenses and other liabilities, offset by an increase of $9.8 million in Prepaid expenses and other current assets.
Cash Used in Investing Activities
During the year ended December 31, 2022, net cash used in investing activities was $2.9 million, primarily driven by capitalized internally developed software costs of $2.6 million.
During the year ended December 31, 2021, net cash used in investing activities was $3.3 million, primarily driven by capitalized internally developed software costs of $2.7 million and purchase of office equipment of $0.6 million.
Cash Provided by Financing Activities
During the year ended December 31, 2022, net cash provided by financing activities was $30.0 million, primarily driven by the $18.4 million of net proceeds received from the issuance of common shares and $9.5 million net proceeds received from the SCN.
During the year ended December 31, 2021, net cash provided by financing activities was $159.4 million, primarily driven by $193.0 million net cash proceeds received from the Virtuoso Business Combination and November 2021 PIPE, partially offset by $75.0 million net prepayment related to the Apollo Forward Purchase Agreement, $31.9 million net cash proceeds received from issuance of the Secured Loan Notes, $16.2 million net cash proceeds received from issuance of convertible notes, $2.1 million cash proceeds received from the exercise of stock options by the holders thereof, and $0.6 million cash proceeds received from the exercise of warrants to purchase common shares by the holders thereof, offset by $10.1 million repayment of our related party debt.
Certain Information Concerning Contractual Obligations
Palantir Master Subscription Agreement
In May 2021, we entered into a master subscription agreement with Palantir for access to Palantir’s proprietary software for a six-year period. The remaining payments for this software subscription are $35.0 million.
Microsoft Customer Agreement
In June 2021, we entered into a cloud hosting agreement with Microsoft for access to Microsoft’s Azure cloud services platform for a five-year period. The remaining payments for this cloud computing service will be made as these cloud computing services are used; the total remaining commitment amount under the agreement is £70.3 million ($84.5 million) which is due in 2026.
Amazon Web Services
The Company is party to a cloud hosting agreement with Amazon Web Services, Inc. and Amazon Web Services EMEA SARL (collectively, “AWS”) for access to AWS’s cloud services platform for a three year period that ends in April 2023. The remaining payments for this cloud computing service are $5.5 million in 2023.
Fixed Rate Secured Loan Notes Issuance
In April 2021, we entered into a Loan Note Instrument Agreement providing for the Secured Loan Notes with Securis Investment Partners LLP, as security agent, under which we issued fixed rate secured loan notes in a principal amount of $21.5 million that bear interest at a fixed per annum rate of 9.2% until its maturity date in April 2024. Pursuant to the Loan Note Agreement, we issued further notes of $10.0 million in July 2021 and $7.5 million in October 2021. Under the Loan Note Instrument Agreement, the Company has the ability to issue further loan notes of $4.0 million.
GM Securities Purchase Agreement
On December 16, 2022, the Company entered into a Securities Purchase Agreement with GM under which it issued and sold to GM the SCN in the aggregate principal amount of $10.0 million, and the GM Warrants to acquire up to an aggregate amount of 1,190,476 common shares at an exercise price of $0.75112 per common share (the “Offering”). The GM Warrants may be exercised at any time following the closing of the Offering until December 16, 2025. The Company received $9.5 million of proceeds from GM associated with the Offering. The SCN accrues compounding interest at the rate of 5.0% per annum in arrears semi-annually until maturity date of December 16, 2023 (the “SCN Maturity Date”), which date will automatically be extended for an additional 24 months to December 16, 2025 (the “SCN Extended Maturity Date”) in the event that the Company engages in certain qualifying transactions. In the event that the maturity date of the SCN is extended to the SCN Extended Maturity Date, the principal under the SCN shall be payable in equal monthly installments beginning on December 16, 2023 and ending on the SCN Extended Maturity Date. The Company’s payment obligations pursuant to the SCN are guaranteed by all of its subsidiaries pursuant to a Guaranty dated December 16, 2022.
At GM’s option, at any time during the 20-business day period following certain qualifying transactions, GM may require the Company to redeem all or any part of the outstanding principal and accrued but unpaid interest of the SCN, in whole or in part, at a price of 120% of the then-outstanding principal amount plus all accrued and unpaid interest.
Critical Accounting Estimates
The preparation of our audited consolidated financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses, and the related disclosures of contingent liabilities in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our estimates form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
An accounting policy is critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the audited consolidated financial statements.
We believe that of our significant accounting policies, which are described in Note 2 to the accompanying audited consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations.
Revenue Recognition
We recognize revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”) for all periods presented.
Connected Vehicle Data Marketplace
Our customer agreements include one or a combination of the following contractual promises for a fixed contractual fee: (i) the supply of specified connected vehicle data and derived insights through the Wejo Neural Edge platform made available via a secured access to the Wejo Neural Edge platform or via a web-based portal; (ii) the granting of a nontransferable license to use the specified data in the manner described in each customer agreement; and, only if required; and (iii) Wejo Neural Edge platform set up and connectivity services. We assess our customer agreements under ASC 606 and determined that the above contractual promises collectively represent a single performance obligation.
The transaction price is comprised of the contractual fixed fee specified in each customer agreement and is allocated to the single performance obligation. We recognize revenue when our performance obligation is satisfied through the fulfillment of the contractual promises. Our performance obligation is generally fulfilled when we provide access to the specified data either throughout the duration of each customer agreement’s contractual term or upon delivery of a one-time batch of historic data. We may deliver data and the license without supplying connectivity services. As such, we recognize revenue for customers with a contractual agreement to provide data over a period ratably over the term of the contract which is typically one year. We recognize revenue for historic batches of data to the customer, upon delivery of such data. Standard payment terms are 30 days from the date of the invoice which is typically sent to the customer monthly or upon delivery of the one-time historic batch of data.
In arrangements where another party (i.e. OEMs) is involved in providing specified services to a customer, we evaluate whether we are the principal or agent. In this evaluation, we consider if we obtain control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment and discretion in establishing price. The terms of our OEM data sharing agreements vary, and in some situations, the OEMs retain certain rights over the connected vehicle data being supplied to the customers and in these situations where we have determined that the OEMs had retained control over the data we have determined that we act as the agent in these arrangements and recognize revenue on a net basis. In revenue arrangements where the Company provides intelligence data, visualization tools, or analytical products to customers, as well as in circumstances where it provides significant integration services to create a combined output, the Company has control over the underlying data and is acting as the principal, and, as a result, the Company recognizes revenue on a gross basis.
Software & Cloud Solutions
Our software and cloud customer agreements contain one or a combination of the following contractual promises: (i) access to a single-tenant SaaS platform; and (ii) professional services, which may include consulting, design, data evaluation, engineering, implementation and training. We assessed these customer agreements under ASC 606 (see Note 2 to accompanying audited consolidated financial statements) and determined that the above contractual promises each represent distinct performance obligations. In cases where the customer has a unilateral right to terminate the contract for convenience and without penalty, the contract term is limited to the
period through which the parties have enforceable rights and obligations. In addition to impacting the revenue recognition pattern, the shorter contract term also impacts our determination of performance obligations and transaction price, as certain services and their related fees are considered part of optional contract renewals, as opposed to the original contract.
To date, the transaction price of our software and cloud contracts has been comprised of contractual fees specified in each customer agreement with milestone-based payment terms. The transaction price is allocated to the performance obligations based on standalone selling price. Performance obligations around access to the SaaS platform are satisfied over time as Wejo provides the customer with access to the platform, and related revenue is recognized ratably over the term of the contract. Professional services performance obligations are satisfied over time as Wejo renders the service, and related revenue is recognized proportionate with performance on the basis of labor hours expended in relation to total budgeted labor hours.
We applied the practical expedient in ASC 606 to expense as incurred those costs to obtain a contract with a customer for which the amortization period would have been one year or less.
In accordance with ASC 606, we have not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Further, because customers with contracts with no substantive termination penalty have the ability to terminate for convenience, the total amount of the transaction price allocated to the unsatisfied performance obligation were not disclosed.
Internally Developed Software Costs
We capitalize certain costs incurred for the internal development of software. Internally developed software includes our proprietary portal software and related applications and various applications used in our management’s portals. We expense costs incurred during the preliminary project stage for internal software programs as incurred. We capitalize external and internal costs incurred during the application development stage of new software development, as well as for upgrades and enhancements for software programs that result in additional functionality. Where applicable, we amortize over a software’s estimated useful life costs for the internally developed software. We take impairment charges when circumstances indicate that the carrying values of the assets were not fully recoverable. In the years ended December 31, 2022 and 2021, we have not recognized any impairment charges.
Valuation of Advanced Subscription Agreements, Forward Purchase Agreement, Exchangeable Right Liability, Derivative Liability, and GM Securities Purchase Agreement.
We record our ASAs, Forward Purchase Agreement, Exchangeable Right Liability, and GM Securities Purchase Agreement at fair value with changes in fair value recorded in the audited Consolidated Statements of Operations and Comprehensive Loss.
Our previously outstanding convertible notes contained redemption features that meet the definition of a derivative instrument. We classified these instruments as a liability on our audited Consolidated Balance Sheets because the redemption features were not clearly and closely related to its host instrument and met the definition of a derivative. The derivative liability was initially recorded at fair value upon issuance of the convertible notes and was subsequently remeasured to fair value at each reporting date. Changes in the fair value of the derivative liability were recognized in the audited Consolidated Statements of Operations and Comprehensive Loss. In connection with the Virtuoso Business Combination in 2021, all of the outstanding principal and accrued interest under the convertible notes was automatically converted into ordinary shares of Wejo Limited, which were then converted into Wejo Group Limited common shares, and the derivative liability was extinguished.
As a result of the amendment to the FPA, the Company’s share price at December 31, 2022 approximates the fair value of the FPA most closely as the $10 per share ceiling is not probable to be triggered. Apollo’s rights to retain excess proceeds beyond the Forward Price economically serves as a cap for our potential future value per share. Following our entry into the FPA Amendment (see Note 6 to the accompanying audited consolidated financial statements), the Company may direct each Apollo seller to sell the remaining FPA Shares at any time, provided that such direction is made outside of a blackout period.
The fair value of the Exchangeable Right Liability was determined using a Black-Scholes model. The Company has 6,600,000 outstanding Exchangeable Rights. Each Exchangeable Right entitles the holder to exchange one Exchangeable Right for one of the Company’s common shares at an exercise price of $11.50 per share, subject to adjustment, or cash, at Wejo Bermuda’s option. The Exchangeable Rights cannot be exercised until 12 months after the issuance thereof, which occurred in connection with the closing of the Virtuoso Business Combination on November 18, 2021. Thereafter, it can be exercised at any time up until the fifth year following the close of the Virtuoso Business Combination.
The fair value of the GM Securities Purchase Agreement was determined utilizing the fair value option to determine the fair value of the SCN. The fair value of the SCN was calculated using a hybrid of the probability-weighted expected return method, scenario-based method, and binomial lattice methods as the ultimate maturity date and put price are contingent upon the Company’s engagement (or lack thereof) in certain qualifying transactions; accordingly, it is reasonable to estimate the SCN’s fair value in each scenario and to determine the probability-weighted value. Within each scenario, the binomial lattice model was applied to capture the various optionality available to borrower and lender. We utilized the Black-Scholes option pricing model to determine the fair value of the GM Warrants and we concluded that the GM Warrants be classified as a liability on the audited Consolidated Balance Sheets.
The fair value of the ASAs and derivative liability were determined using a scenario-based analysis. Five primary scenarios were considered: qualified financing, unqualified financing, merger or acquisition, held to maturity, and insolvency (“Exit Events”). The fair value of the Advanced Subscription Agreements and derivative liability is comprised of the value of a conversion component and a put option component. The estimated fair value of each component is calculated independently and the added together to determine the total estimated fair value of the Advanced Subscription Agreements or derivative liability under each scenario. The value of the Advanced Subscription Agreements and derivative liability under each scenario was then probability weighted to arrive at the respective instrument’s recorded estimated fair value.
Assumptions and inputs used to calculate the value of the conversion component include the following:
•the amount of principal and accrued interest, if applicable;
•the conversion price;
•the estimated time until the scenario’s respective Exit Event; and
•the current estimated fair value of our Ordinary share
The fair value of the conversion component was estimated using the Black-Scholes option pricing model (“OPM”).
Assumptions used in the ASAs and derivative liability OPM include the following:
•Expected volatility - We applied re-levered equity volatility based on the historical unlevered and re- levered equity volatility of our publicly traded peer companies.
•Expected dividend - Expected dividend yield of zero is because we have never paid cash dividends on ordinary shares and do not expect to pay any cash dividends in the foreseeable future.
•Expected term - The estimated time until the scenario’s respective Exit Event.
•Risk-free interest rate - The risk-free interest rate is determined by reference to the UK Treasury yield curve for the period commensurate with the expected timing of the Exit Event.
•Fair value of ordinary share - See “Share-Based Compensation” below for discussion of how the fair value of our ordinary share is determined.
Assumptions used in the Exchangeable Right Liability and the FPA include the following:
•Expected volatility - We applied volatility based on the volatility of our publicly traded peer companies.
•Expected dividend - Expected dividend yield of zero is because we have never paid cash dividends on ordinary shares and do not expect to pay any cash dividends in the foreseeable future.
•Expected term - is based on the term of Exchangeable Rights and the term corresponding to the date at which the FPA shares could be terminated early or the Valuation Date of the FPA as discussed in Item 1A: Risk Factors.
•Risk-free interest rate - The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for the period commensurate with the expected timing of the events.
Assumptions used in the SCN and the GM Warrants include the following:
•Expected volatility - Our historical volatility over a range of look-back periods and observable implied volatility data.
•Risk-free interest rate - The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for the period commensurate with the scenario-specific term to maturity of the notes.
•Estimated credit spread - The credit spread is determined by estimated credit spreads ranges (depending on the timeframe considered) based upon the results of two synthetic credit rating models that include considerations for items such as fundamental analysis per S&P Global Intelligence, discussions with Management, the Company's current liquidity position, and observed market data for CCC corporate bond composite yields.
•Value of common share - Stock price is determined using the Company’s closing price as of December 31, 2022.
•Expected term - is based on the maturity date of the SCN.
Share-Based Compensation
The Company recognizes compensation expense for option awards and restricted share units based on the grant date fair value of the award. For equity awards with a service condition only, the Company recognizes non-cash share-based compensation costs over the requisite service period, which is the vesting period, on a straight-line basis. For equity awards without a substantive service condition, the Company recognizes non-cash share-based compensation costs upon the grant date in full. For equity awards with a combination of service and performance conditions, the Company recognizes non-cash share-based compensation expense on a straight-line basis over the requisite service period when the achievement of a performance-based milestone is probable of being met, based on the relative satisfaction of the performance condition as of the reporting date. The Company accounts for forfeitures as they occur.
The Company uses the intrinsic value to determine the fair value of restricted share units granted to the directors. The fair value of each share option grant is estimated on the date of grant using the Black-Scholes option pricing model. See Note 18 to the accompanying audited consolidated financial statements for the Company’s assumptions used in connection with option grants made during the periods covered by these audited consolidated financial statements. Assumptions used in the option pricing model include the following:
Expected volatility - The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected share volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price.
Expected term - For those options granted and that become exercisable upon a performance condition, the Company uses the contractual term of the award to estimate its fair value and in the event that the option does not have a contractual expiration date, the Company uses an expected term determined by the expected timing of the performance condition. For those options granted by the Company, the expected term of the Company’s share options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.
Risk-free interest rate - The risk-free interest rate is determined by reference to the UK and U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to either the expected or contractual term of the award.
Expected dividend - Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.
Fair value of common shares - Given the absence of an active market for the Company’s common shares prior to the Virtuoso Business Combination, the Company calculated the fair value of its common shares in accordance with the guidelines in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The Company’s valuations of common shares were prepared using a market approach, based on precedent transactions in the shares, to estimate the Company’s total equity value using the OPM, which used a combination of market approaches and an income approach to estimate the Company’s enterprise value. After Virtuoso Business Combination, the fair value of common shares is determined by reference to the closing price of common shares on the NASDAQ on the date of grant.
The OPM derives an equity value such that the value indicated is consistent with the investment price, and it provides an allocation of this equity value to each class of the Company’s securities. The OPM treats the various classes of stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, each class of stock has value only if the funds available for distribution to shareholders exceed the value of the share liquidation preferences of the class or classes of stock with senior preferences at the time of
the liquidity event. A discount of lack of marketability of the common shares is then applied to arrive at an indication of value for the common shares. Key inputs and assumptions used in the OPM calculation include the following:
Expected volatility. The Company applied re-levered equity volatility based on the historical unlevered and re-levered equity volatility of publicly traded peer companies.
Expected dividend. Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.
Expected term. The expected term of the option or the estimated time until a liquidation event.
Risk-free interest rate. The risk-free interest rate is determined by reference to the UK Treasury yield curve for the period commensurate with the expected timing of the exit event.
In addition, the Company’s Board of Directors considered various objective and subjective factors to determine the fair value of its common shares as of each grant date, including:
•the prices at which the Company sold common shares;
•the Company’s stage of development and business strategy;
•external market conditions affecting the industry, and trends within the industry;
•the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating results;
•the lack of an active public market for its common shares;
•the likelihood of achieving a liquidity event, such as an IPO or a sale of the company in light of prevailing market conditions; and
•the analysis of IPOs and the market performance of similar companies in the industry.
The assumptions underlying the Company’s valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment. As a result, if the Company had used significantly different assumptions or estimates, the fair value of its common shares could be materially different.
Recently issued accounting pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to the accompanying audited consolidated financial statements appearing in this Annual Report on Form 10-K.
Emerging Growth Company Status
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to remain an EGC at least during the 2023 fiscal year and expect to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an EGC or is an EGC that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business, which are principally limited to interest rate fluctuations and foreign currency exchange rate fluctuations. We maintain significant amounts of cash that are in excess of federally insured limits in various currencies, placed with one or more financial institutions for varying periods according to expected liquidity requirements.
Interest Rate Risk
As of December 31, 2022, we held cash of $8.6 million. Our exposure to interest rate sensitivity is impacted by changes in the underlying U.S. and UK bank interest rates. We have not entered investments for trading or speculative purposes.
Foreign Currency Exchange Risk
The functional currency of Wejo is in US dollars (“US $”). The functional currency of the Company’s operating subsidiary, Wejo Limited, is British pounds sterling. The determination of the respective functional currency is based on the criteria stated in ASC 830, Foreign Currency Matters. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates.
Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in other expense, net in the audited Consolidated Statements of Operations and Comprehensive Loss. The financial statements of subsidiaries are translated from their functional currency into the reporting currency as follows: assets and liabilities are translated at the exchange rates at the balance sheet dates, revenue and expenses are translated at the average exchange rates and shareholders’ (deficit) equity is translated based on historical exchange rates. Translation adjustments are not included in determining net loss but are included as a foreign exchange adjustment to accumulated other comprehensive income, a component of shareholders’ (deficit) equity.
Our operating expenses are denominated in the currencies of the countries in which its operations are located, which are primarily in the UK and the U.S. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. We do not believe a 10% increase or decrease in the relative value of the U.S. dollar or pounds sterling would have a material impact on our operating results.
We may invest in a variety of financial instruments, principally cash deposits, money market funds, securities issued by the U.S. government and its agencies and corporate debt securities; as of December 31, 2022, our funds are principally held in the form of cash on hand. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk.
We do not currently have any auction rate or mortgage-backed securities. We do not believe our cash has significant risk of default or illiquidity; however, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The audited Consolidated Balance Sheets of Wejo as of December 31, 2022 and 2021 and the audited Consolidated Statements of Operations and Comprehensive Loss, Cash Flows and Shareholders’ (Deficit) Equity for each of the two years in the period ended December 31, 2022, the Notes to the audited consolidated financial statements, and the Report of the Independent Registered Public Accounting Firm are included below.
All of the schedules specified under Regulation S-X to be provided by Wejo have been omitted either because they are not applicable, are not required or the information required is included in the audited consolidated financial statements or notes thereto.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Wejo Group Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Wejo Group Limited (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, shareholders' (deficit) equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has had negative cash flows from operations since inception and expects to continue to incur negative cash flows from operations for the foreseeable future giving rise to substantial doubt about its ability to continue as a going concern. Its ability to continue to operate is dependent upon obtaining additional financial support. Management’s evaluation of the events and conditions and management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Manchester, United Kingdom
April 3, 2023
Wejo Group Limited
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31,
2022 2021
Assets
Current assets:
Cash $ 8,626 $ 67,322
Accounts receivable, net 4,264 1,416
Forward Purchase Agreement 2,687 45,611
Prepaid expenses and other current assets 6,727 17,518
Total current assets 22,304 131,867
Property and equipment, net 474 651
Operating lease right-of-use asset 452 -
Intangible assets, net 7,337 9,489
Other assets 566 -
Total assets $ 31,133 $ 142,007
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities:
Accounts payable, including due to related party of $967 and $1,464, respectively
$ 21,851 $ 15,433
Accrued expenses and other current liabilities 26,599 21,089
Current portion of operating lease liability 431 -
Secured Convertible Notes 11,390 -
Income tax payable - 282
Total current liabilities 60,271 36,804
Non-current liabilities:
Long term debt, net of unamortized debt discount and debt issuance costs 36,426 33,705
Long term portion of operating lease liability 21 -
Warrant liability - GM Securities Purchase Agreement 343 -
Public Warrants 594 12,650
Exchangeable Right liability 403 11,154
Other non-current liability 1,838 -
Total liabilities 99,896 94,313
Commitments and contingencies
Shareholders’ (deficit) equity
Common shares, $0.001 par value, 634,000,000 shares authorized; 109,461,562 and 93,950,205
shares issued and outstanding as of December 31, 2022 and 2021, respectively
109 94
Additional paid in capital 445,478 415,304
Accumulated deficit (529,204) (369,951)
Accumulated other comprehensive income 14,854 2,247
Total shareholders’ (deficit) equity (68,763) 47,694
Total liabilities and shareholders’ (deficit) equity $ 31,133 $ 142,007
The accompanying notes are an integral part of these consolidated financial statements.
Wejo Group Limited
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Year Ended December 31,
2022 2021
Revenue, net $ 8,396 $ 2,566
Costs and operating expenses:
Cost of revenue (exclusive of depreciation and
amortization shown separately below) 7,739 3,583
Technology and development 33,893 26,265
Sales and marketing 20,569 22,920
General and administrative 62,104 104,144
Depreciation and amortization 4,037 4,411
Total costs and operating expenses 128,342 161,323
Loss from operations (119,946) (158,757)
Interest expense (5,249) (9,597)
Other expense, net (33,645) (49,067)
Loss before taxation (158,840) (217,421)
Income tax expense (413) (357)
Net loss (159,253) (217,778)
Other comprehensive income:
Foreign currency exchange translation adjustment 12,607 2,541
Total comprehensive loss $ (146,646) $ (215,237)
Net loss per common share - basic and diluted $ (1.58) $ (5.00)
Weighted-average common shares - basic and diluted 100,795,106 43,553,504
The accompanying notes are an integral part of these consolidated financial statements.
Wejo Group Limited
Consolidated Statements of Shareholders' (Deficit) Equity
(in thousands, except share amounts)
Common Shares Additional
Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shareholders'
(Deficit) Equity
Shares Value
Balance at December 31, 2020 36,463,696 $ 36 $ 105,835 $ (294) $ (152,173) $ (46,596)
Debt discount related to beneficial conversion feature
of convertible loan notes (Note 10) - - 31,289 - - 31,289
Exercise of legacy warrants to purchase common shares 1,967,193 2 604 - - 606
Conversion of convertible loan notes 10,460,460 11 106,241 - - 106,252
Conversion of Advanced Subscription Agreements 1,053,273 1 12,756 - - 12,757
Exercise of share options 15,681,274 16 2,070 - - 2,086
Issuance of Common Shares in connection with the
business combination, net of transaction cost of $16,464
15,474,309 15 (18,511) - - (18,496)
Private Investment in Public Equity financing, net of issuance costs of $5,783
12,850,000 13 122,704 - - 122,717
Share-based compensation expense - - 52,316 - - 52,316
Unrealized gain on foreign currency translation - - - 2,541 - 2,541
Net loss - - - - (217,778) (217,778)
Balance at December 31, 2021 93,950,205 94 415,304 2,247 (369,951) 47,694
Issuance of common shares 4,182,216 4 7,550 - - 7,554
Issuance of common shares related to PIPE agreement, net of transaction costs of $186
11,329,141 11 13,792 - - 13,803
Issuance of warrants related to PIPE agreement - - 1,894 - - 1,894
Share-based compensation expense - - 6,938 - - 6,938
Unrealized gain on foreign currency translation - - - 12,607 - 12,607
Net loss - - - - (159,253) (159,253)
Balance at December 31, 2022 109,461,562 $ 109 $ 445,478 $ 14,854 $ (529,204) $ (68,763)
The accompanying notes are an integral part of these consolidated financial statements.
Wejo Group Limited
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
2022 2021
Operating activities
Net loss $ (159,253) $ (217,778)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount 2,649 5,163
Loss on issuance on financial instruments measured at fair value 4,116 65,641
Change in estimated fair value on financial instruments measured at fair value 15,762 (41,095)
Loss on extinguishment of convertible loans - 25,598
Gain on settlement of Forward Purchase Agreement - (399)
Expenses relating to capital raising activities 799 -
Gain on disposal of property and equipment - (4)
Depreciation and amortization 4,037 4,411
Non-cash share-based compensation expense 6,938 52,316
Non-cash expense settled by issuance of commitment shares 3,000 -
Non-cash loss (gain) on foreign currency remeasurement 11,929 (1,354)
Changes in operating assets and liabilities:
Accounts receivable (2,849) (727)
Prepaid expenses and other current assets 9,373 (9,775)
Accounts payable 8,177 (1,361)
Accrued expenses and other current liabilities 8,889 12,516
Income tax payable (372) 282
Other non-current liability 1,885 -
Other assets (581) -
Net cash used in operating activities (85,501) (106,566)
Investing activities
Purchases of property and equipment (311) (562)
Development of internal software (2,565) (2,716)
Net cash used in investing activities (2,876) (3,278)
Financing activities
Proceeds from issuance of ordinary shares to PIPE investors, net of issuance costs - 122,717
Proceeds from Virtuoso Business Combination - 70,308
Proceeds from issuance of common shares, net of transaction costs 18,358 -
Proceeds from issuance of warrants to purchase common shares 1,894 -
Proceeds from exercise of warrants to purchase common shares - 606
Proceeds from issuance of Secured Convertible Notes, net of discount 9,500 -
Proceeds from exercise of options - 2,086
Proceeds from issuance of convertible loans, net of transaction costs - 16,222
Payment of issuance costs of convertible loans - (1,004)
Net proceeds from issuance of long-term debt - 31,865
Payment of issuance costs of long-term debt - (638)
Payment of Virtuoso Business Combination costs (2,238) -
Repayment of other loan - (84)
Settlement of Forward Purchase Agreement 2,473 2,517
Advance payment of Forward Purchase Agreement - (75,012)
Repayment of related party debt - (10,142)
Net cash provided by financing activities 29,987 159,441
Effect of exchange rate changes on cash (306) 3,304
Net (decrease) increase in cash (58,696) 52,901
Cash at beginning of period 67,322 14,421
Cash at end of period $ 8,626 $ 67,322
Non-cash investing and financing activities
Property and equipment purchases in accounts payable $ - $ 90
Advanced Subscription Agreements converted into common shares $ - $ 12,757
Virtuoso Business Combination costs included in accounts payable and accrued expenses $ 6,159 $ 8,476
Expense related to capital raising activities included in accounts payable and accrued expenses $ 799 $ -
Conversion of convertible loan notes $ - $ 106,252
Convertible note issued through settlement of accounts payable and recognition of prepaid revenue share costs $ - $ 4,813
Net liabilities acquired in the Virtuoso Business Combination through issuance of common shares $ - $ 1,966
Supplemental cash flow information
Taxes paid $ 543 $ 56
Interest paid $ 2,399 $ 863
The accompanying notes are an integral part of these consolidated financial statements.
1. Description of the Business
In these audited consolidated financial statements and related notes, Wejo Group Limited and its consolidated subsidiaries are referred to collectively as “Wejo” and the “Company” unless the context requires otherwise. Wejo is an emerging leader in the Smart Mobility market, helping business sectors through the collection, standardization and analysis of connected vehicle data. Connected vehicles contain hundreds of data sensors, emitting information such as location, speed, direction and events such as braking, temperature and weather conditions. This data creates intelligence, that is collected in near real-time, which has, historically, been unavailable from any other source.
Wejo ingests and standardizes this data, mainly in the United States and Europe currently, through its proprietary cloud software and analytics platform Wejo Neural Edge. The Company’s products enable customers such as departments of transportation, retailers, construction firms and research departments to unlock unique insights about journeys, cities, electric vehicle usage, safety and more. Over the next two to three years, the Company expects to expand its platform to ingest data globally, and to expand into additional marketplaces as well as providing business insights to its customers, including: OEM preferred partners, Tier 1s, fleet providers, municipalities, universities and other businesses.
Wejo Group Limited was originally incorporated as an exempted limited company under the laws of Bermuda on May 21, 2021 for purposes of effectuating the Virtuoso Business Combination contemplated by that certain Agreement and Plan of Merger dated as of May 28, 2021, by and among Virtuoso, Merger Sub, Wejo Bermuda and Wejo Limited (a private limited liability company incorporated under the laws of England and Wales on December 13, 2013, herein referred to as “Legacy Wejo” or “Accounting Predecessor”). In connection with the Virtuoso Business Combination, the Company’s common shares and warrants were listed on the NASDAQ under the symbols WEJO and WEJOW, respectively.
Going Concern
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the audited consolidated financial statements are issued (the “Going Concern Period”). This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued, which are described below. When substantial doubt about the Company’s ability to continue as a going concern exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
As is common in early-stage companies with limited operating histories, the Company is subject to risks and uncertainties such as its ability to influence the connected vehicle market; successfully invest in technology, attract and retain resources and new business capabilities; maintain and grow the customer base; secure additional capital to support the investments needed and working capital requirements for its anticipated growth; comply with governing laws and regulations; and other risks and uncertainties such as those described in the Company’s 2022 Annual Report in Part I, Item 1A.
The Company has incurred significant operating losses since its formation. During the year ended December 31, 2022 and 2021, the Company incurred a loss from operations of $119.9 million and $158.8 million, respectively, and used $85.5 million and $106.6 million of cash in operating activities, respectively. As of December 31, 2022, the Company had cash of $8.6 million (which has decreased subsequent to this date in line with the forecasted spend), an accumulated deficit of $529.2 million, and the Company’s current liabilities exceeded its current assets by $38.0 million. The Company's current liabilities have continued to increase as it continues to operate and reflecting the current liquidity constraints. Despite increasing revenue levels as the Company scales, the operating losses are expected to continue as the Company makes investments to develop new products until the Company reaches the necessary scale to generate net cash inflow from operations. Accordingly, the Company has historically relied on private equity and debt to fund operations.
Management have taken measurable actions to significantly reduce expenses against the 2022 operating plan. Cost reductions include a reduction in its workforce, elimination of non-revenue projects, reductions in expenditures by negotiations with vendors in areas such as data acquisition, cloud costs, license fees for software, legal and professional fees, insurance and other costs. Furthermore,
the Company has decreased its cash utilization from $10.0 million per month at the start of 2022 to approximately $6.0 million per month during the fourth quarter of 2022 and the first quarter of 2023.
Until the Company reaches cash flow breakeven operationally, it is in discussions with key vendors to allow the Company to pay for past and current services with the Company’s common shares in lieu of cash for some or all of the amounts owed. This partial payment in common shares, and any modification of the timing for payment, would allow the Company to manage its cash obligations while it completes the capital raising initiatives discussed below or that otherwise may be available to the Company. The Secured Loan Notes (as defined in Note 15) may provide the lenders thereunder with certain rights if the Company commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness or grants a lien to another lender with respect to the collateral securing the Company’s obligations under the Secured Loan Notes. The Company believes it has the support of the lenders under its Secured Loan Notes to allow the above transactions to proceed, and anticipates that this support will continue to be provided. The Company believes that it is in compliance with all of the terms of the Secured Loan Notes. There can be no certainty that the creditors will continue to support the Company, and if they took action against the Company then the Company would have to take protective action.
Without additional cash coming into the business, the Company will run out of cash in early April 2023. The Company has two funding options to raise cash in the short term, although the amounts to be received through those options are uncertain: (1) the ATM Agreement (upon the effectiveness of the Company’s Shelf Registration Statement) as described in Note 3, and (2) the Forward Purchase Agreement as described in Note 6. Both Facilities are driven by the future price of the Company’s common shares and future trading volumes of the Company’s common shares, each of which will likely limit the timing and actual level of funds that can be raised. In addition, the window in which the Company can utilize these Facilities may be restricted during “black-out periods” under the Company’s insider trading policy and if it is in possession of material non-public information. The FPA facility expires in November 2023.
The Company has spent significant effort in 2022 and early 2023 identifying and optimizing alternative capital pathways to fund operations for the long-term, culminating with the raising over $38.0 million of bridge capital over that period through the following transactions, among others: (i) the CFPI Stock Purchase Agreement; (ii) the July 2022 PIPE; (iii) the Apollo FPA; (iv) the GM Securities Purchase Agreement; (v) the Second Lien SPA; and (vi) a $2.0 million short term loan from the Company’s Chairman, Tim Lee (see Notes 3 and 25).
In furtherance of its long-term capital strategy, on January 10, 2023, the Company announced it entered into a Business Combination Agreement with TKB as a result of which, at the closing of the transaction, the Company expects to acquire up to $57.0 million in cash TKB has retained in trust, net of any redemptions by TKB shareholders in connection with the vote to approve the transaction (see Note 25). As part of this long-term capital strategy, the Company has been reaching out to strategic, institutional and other investors to fund a PIPE equity financing transaction in conjunction with the TKB Business Combination from which it is targeting a capital raise of $75.0 million. The completion of the business combination with TKB is subject to certain key conditions, including, completion of the merger by June 27, 2023. As of March 31, 2023, we entered into a non-binding letter of intent, subject to certain closing and other conditions, with a strategic investor to anchor the PIPE with a potential $20.0 million investment.
In addition, in order to bridge to the TKB Business Combination and PIPE transactions, the Company is working to raise at least $20.0 million (which would be an advance on the targeted $75.0 million PIPE) from investors in the form of debt that converts into common shares, at the option of the investor, before the closing of the TKB Business Combination or at the closing of that transaction and the related PIPE (the “Bridge Financing”). The Company expects to use the proceeds of the Bridge Financing to redeem the $3.7 million Second Lien Notes (as described in Note 25) and provide financing through the second quarter of 2023. No legally binding agreement is yet in place for Bridge Financing and therefore there can be no assurances that this transaction will be completed.
Under the current operating plan, which includes the payment for services in the Company’s common shares discussed above, combined with use of the Apollo FPA, the Bridge Financing and the ATM Agreement (upon activation), the Company expects to have sufficient cash to operate the business until the completion of the PIPE and TKB Business Combination.
The Company’s cash flow forecasts indicate that the business can now only continue to operate for a very short period of time without raising additional new funding. The Company’s Board continues to be mindful of its fiduciary duties in the zone of insolvency and has sought the advice of insolvency experts in the key jurisdictions in which it operates to ensure it remains compliant with those obligations and any applicable regulations. If the Company has exhausted all options and no longer has a reasonable expectation of obtaining sufficient new funding, or it no longer retains the support of its creditors, then a filing for bankruptcy or administration would occur.
While the Company expects these transactions to close and the capital contemplated therefrom to be raised, as described in Item 1A, Risk Factors and elsewhere in this Annual Report, no legally binding agreement is yet in place for the Bridge Financing or the PIPE, and for that reason and others, there can be no assurances that the Bridge Financing, the PIPE and the TKB Business Combination will close or that the Company will raise sufficient funds from these transactions.
Given the Company’s current liquidity, cash burn rate and capital readily available to us, management has concluded there is substantial doubt regarding the Company's ability to continue as a going concern within one year from the issuance date of the Company’s audited consolidated financial statements. Further, there can be no assurances that it is probable the financing transactions discussed above will be completed on time or at all and the Company’s expectations will be achieved. The accompanying audited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The audited consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary from the outcome of this uncertainty.
2. Summary of Significant Policies
Basis of Presentation
The accompanying audited consolidated financial statements for the year ended December 31, 2022, include the accounts of the Company, and its subsidiaries, based upon information of Wejo Group Limited after giving effect to the transaction with Virtuoso completed on November 18, 2021. The comparative financial information for the year ended December 31, 2021 includes information of Legacy Wejo for the period prior to giving effect to the Virtuoso Business Combination. Prior to the Virtuoso Business Combination, Wejo Group Limited had no material operations, assets or liabilities. Upon closing of the Virtuoso Business Combination, outstanding capital stock of legacy shareholders of Legacy Wejo was converted to Wejo Group Limited’s common shares, in an amount determined by application of the respective exchange ratio (“Exchange Ratio”) for each share class, which was based on Legacy Wejo’s implied price per share prior to the Virtuoso Business Combination. For periods prior to the Virtuoso Business Combination, the reported share and per share amounts have been retroactively converted by applying the Exchange Ratio.
The Company has summarized certain non-operating income (expense) lines in its Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021 into a single line, Other expense, net in order to conform to the current year presentation. These non-operating income (expense) lines include: Loss on issuance of convertible loan notes, Loss on extinguishment of convertible loan notes, Gain on fair value of derivative liability, Gain on fair value of public warrant liabilities, Loss on fair value of Forward Purchase Agreement, Gain on fair value of Exchangeable Right liability, Loss on issuance of Forward Purchase Agreement, Gain on settlement of Forward Purchase Agreement, Loss on fair value of Advanced Subscription Agreements, and Other income, net (see Note 11).
The Company has also summarized certain non-operating (gain) loss lines in its Consolidated Statements of Cash Flows for the year ended December 31, 2021 into two lines, Loss on issuance on financial instruments measured at fair value and Change in estimated fair value on financial instruments measured at fair value. The Loss on issuance on financial instruments measured at fair value line includes Loss on issuance of convertible loans and Loss on issuance of Forward Purchase Agreement. The Change in estimated fair value on financial instruments measured at fair value line includes Loss on fair value of Advanced Subscription Agreements, Gain on fair value of derivative liability, Gain on fair value of public warrant liabilities, Loss on fair value of Forward Purchase Agreement, and Gain on fair value of Exchangeable Right liability.
These reclassifications for the year ended December 31, 2021 presented for a comparative purpose have no impact on the historical operating income, net income, total assets, liabilities, shareholders’ (deficit) equity or cash flows as previously reported by the Company.
The accompanying audited consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated upon consolidation.
Foreign Currency Translation
The functional currency of Wejo Group Limited is in US dollars (“US $”). The functional currency of the Company’s main operating subsidiary, Legacy Wejo, is British pounds sterling. The determination of the respective functional currency is based on the criteria stated in ASC 830, Foreign Currency Matters. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the
date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in Other expense, net in the audited Consolidated Statements of Operations and Comprehensive Loss. The Company recorded foreign exchange losses of $13.8 million for the year ended December 31, 2022 and foreign exchange gains of $0.2 million for the year ended December 31, 2021.
For financial reporting purposes, the audited consolidated financial statements of the Company have been presented in the U.S. dollar, the reporting currency. The financial statements of the subsidiaries are translated from each relevant functional currency into the reporting currency as follows: assets and liabilities are translated at the exchange rates at the balance sheet dates, revenue and expenses and are translated at the average exchange rates and shareholders’ (deficit) equity is translated based on historical exchange rates. Translation adjustments are not included in determining net loss but are included as a foreign exchange adjustment to Accumulated other comprehensive income, a component of Shareholders’ (deficit) equity.
Use of Estimates
The preparation of audited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the audited consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these audited consolidated financial statements include, but are not limited to, the fair value of the common shares, derivative liability, Advanced Subscription Agreements, Forward Purchase Agreement, Exchangeable Right Liability, GM Securities Purchase Agreement, warrant liabilities, income taxes, software development costs and the estimate of useful lives with respect to developed software, warrants, accounting for share-based payments, and timing of contractual obligations. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.
Concentrations of Credit Risk and Off-Balance Sheet Risk
Financial instruments that subject the Company to credit risk consist of accounts receivable and cash. The Company places cash in established financial institutions. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company periodically assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. The Company has no significant off-balance-sheet risk or concentration of credit risk, such as foreign exchange contracts, options contracts, or other foreign hedging arrangements.
Cash
Cash consists of cash on hand, which is unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.
Accounts Receivable
The Company records accounts receivable at the invoiced amount and in some cases charge interest on past due invoices. The Company reviews its accounts receivable from customers that are past due to identify specific accounts with known disputes or collectability issues. In determining the amount of the reserve, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations. Based on historical receipts and collections history, management has recognized an allowance for doubtful accounts of $0.6 million and $0.4 million, respectively, as of December 31, 2022, and 2021.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets, which are as follows:
Estimated Useful Life
Office equipment and computers 3 years
Furniture and fixtures 5 years
Intangible Assets
In December 2018, the Company acquired a multi-year license to access vehicle data from GM through a Data Sharing Agreement that represents a contract-based intangible asset in accordance with ASC 805, Business Combinations. The Company’s data sharing agreement was recognized at its fair value and is being amortized over its contract life of 7 years using the straight-line method as a finite-lived identifiable intangible asset in accordance with ASC 350, Intangible Assets.
Internally Developed Software Costs
The Company amortizes internally developed software on a straight-line basis over three years once the software testing is complete and certain costs incurred for the internal development of software are capitalized. Internally developed software includes the Company’s proprietary portal software and related applications and various applications used in the management of the Company’s portals. Costs incurred during the preliminary project stage for internal software programs are expensed as incurred. External and internal costs incurred during the application development stage of new software development, as well as for upgrades and enhancements for software programs that result in additional functionality are capitalized. Software development costs capitalized for the internal development of software are amortized over the estimated useful life of the applicable software. Impairment charges are taken as a result of circumstances that indicate that the carrying values of the assets were not fully recoverable. The Company has not recognized any impairment losses during the years ended December 31, 2022 and 2021.
Impairment of Long-Lived Assets
The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of Property, and equipment and finite-lived Intangible assets may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, the Company assesses the potential impairment by determining whether the carrying amount of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded in the audited Consolidated Statements of Operations and Comprehensive Loss. Fair values are determined based on quoted market prices or discounted cash flow analysis as applicable. The Company also regularly evaluates whether events and circumstances have occurred that indicate the useful lives of property and equipment and finite-lived intangible assets may warrant revision. The Company has not recognized any impairment losses during the years ended December 31, 2022 and 2021.
Revenue Recognition
The Company recognizes revenue under ASC 606. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
•Step 1: Identify the contract with the customer
•Step 2: Identify the performance obligations in the contract
•Step 3: Determine the transaction price
•Step 4: Allocate the transaction price to the performance obligations in the contract
•Step 5: Recognize revenue when the company satisfies a performance obligation
The Company applies the five-step model to contracts only when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
As part of the accounting for these arrangements, the Company must use its judgment to determine: (a) the number of performance obligations based on the determination under step (2) above; (b) the transaction price under step (3) above; (c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (4) above; and (d) the contract term and pattern of satisfaction of the performance obligations under step (5) above.
The Company works with the world’s leading automotive manufacturers to standardize connected vehicle data through a proprietary cloud software and analytics platform. These data points include, but are not limited to: traffic intelligence, high frequency vehicle movements, and common driving events and trends. This data is obtained from OEMs through license agreements. These contracts are referred to internally as “Ingress Agreements.” Wejo Neural Edge is hosted by cloud data centers, and as a function of this central hosting, the Wejo Neural Edge platform operates in a multi-tenancy environment, whereby all customers share the same standardized raw vehicle data. The end users of the Wejo Neural Edge platform can only access the data through a licensing agreement and do not have the ability to take possession of the software itself. These contracts are referred to internally as “Egress Agreements.”
The Company also has a limited number of “Data Management Agreements” in which customers have engaged Wejo to configure a single-tenant instance of Wejo’s Neural Edge platform. Once deployed, these platforms will be offered on a SaaS basis, meaning that the customer cannot take possession of the software and can only utilize the platform in conjunction with the hosting services provided by Wejo.
Revenue is measured net based on the amount of consideration the Company expects to receive, reduced by associated revenue share due to certain OEMs under data license arrangements and related taxes. The Company applied the practical expedient in ASC 606 to expense as incurred those costs to obtain a contract with a customer for which the amortization period would have been one year or less. See Note 5, Revenue from Customers, for further discussion on revenue.
Cost of Revenue (exclusive of depreciation and amortization)
Cost of revenue consists of data acquisition costs and hosting service expenses for the Company’s connected platform, including employee salaries and other employee costs that are related to the Company’s connected platform as well as revenue share and minimum fees for certain OEMs.
Technology and Development Expenses
Technology and development expenses consist primarily of compensation-related expenses to the Company’s technology and development personnel incurred for the research and development of, enhancements to, and maintenance and operation of the Company’s products, equipment and related infrastructure, as well as data acquisition costs.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of compensation-related expenses to the Company’s direct sales and marketing personnel, as well as costs related to advertising, industry conferences, promotional materials, and other sales and marketing programs. Advertising costs are expensed as incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation related expenses for executive management, finance, accounting, human resources, legal, and corporate information and technology, professional fees and facilities costs.
Share-Based Compensation
The Company grants equity awards under its share-based compensation programs, pursuant to the Company’s 2021 Equity Incentive Plan in the form of options and restricted share units.
The Company recognizes compensation expense for option awards and restricted share units based on the grant date fair value of the award. For equity awards with a service condition only, the Company recognizes non-cash share-based compensation costs over the requisite service period, which is the vesting period, on a straight-line basis. For equity awards without a substantive service condition, the Company recognizes non-cash share-based compensation costs upon the grant date in full. For equity awards with a combination of service and performance conditions, the Company recognizes non-cash share-based compensation expense on a straight-line basis over the requisite service period when the achievement of a performance-based milestone is probable of being met, based on the relative satisfaction of the performance condition as of the reporting date. The Company accounts for forfeitures as they occur.
The Company uses the intrinsic value to determine the fair value of restricted share units granted to employees. The fair value of each share option grant is estimated on the date of grant using the Black-Scholes option pricing model. See Note 18 for the Company’s assumptions used in connection with option grants made during the periods covered by these audited consolidated financial statements. Assumptions used in the option pricing model include the following:
Expected volatility - The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected share volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price.
Expected term - For those options granted and that become exercisable upon a performance condition, the Company uses the contractual term of the award to estimate its fair value and in the event that the option does not have a contractual expiration date, the Company uses an expected term determined by the expected timing of the performance condition. For those options granted by the Company, the expected term of the Company’s share options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.
Risk-free interest rate - The risk-free interest rate is determined by reference to the UK and U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to either the expected or contractual term of the award.
Expected dividend - Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.
Fair value of common shares - Given the absence of an active market for the Company’s common shares prior to the Virtuoso Business Combination, the Company calculated the fair value of its common shares in accordance with the guidelines in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The Company’s valuations of common shares were prepared using a market approach, based on precedent transactions in the shares, to estimate the Company’s total equity value using the Option Pricing Model (“OPM”), which used a combination of market approaches and an income approach to estimate the Company’s enterprise value. After the Virtuoso Business Combination, the fair value of common shares is determined by reference to the closing price of common shares on the NASDAQ on the date of grant.
The OPM derives an equity value such that the value indicated is consistent with the investment price, and it provides an allocation of this equity value to each class of the Company’s securities. The OPM treats the various classes of stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, each class of stock has value only if the funds available for distribution to shareholders exceed the value of the share liquidation preferences of the class or classes of stock with senior preferences at the time of the liquidity event. A discount of lack of marketability of the common shares is then applied to arrive at an indication of value for the common shares. Key inputs and assumptions used in the OPM calculation include the following:
Expected volatility. The Company applied re-levered equity volatility based on the historical unlevered and re-levered equity volatility of publicly traded peer companies.
Expected dividend. Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.
Expected term. The expected term of the option or the estimated time until a liquidation event.
Risk-free interest rate. The risk-free interest rate is determined by reference to the UK Treasury yield curve for the period commensurate with the expected timing of the exit event.
In addition, the Company’s Board of Directors considered various objective and subjective factors to determine the fair value of its common shares as of each grant date, including:
•the prices at which the Company sold common shares;
•the Company’s stage of development and business strategy;
•external market conditions affecting the industry, and trends within the industry;
•the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating results;
•the lack of an active public market for its common shares;
•the likelihood of achieving a liquidity event, such as an IPO or a sale of the company in light of prevailing market conditions; and
•the analysis of IPOs and the market performance of similar companies in the industry.
The assumptions underlying the Company’s valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment. As a result, if the Company had used significantly different assumptions or estimates, the fair value of its common shares could be materially different.
Market-Based Restricted Stock Unit
In order to value awards with market conditions, the Company uses a lattice model or a Monte Carlo simulation model because different share price paths or share price realizations result in different values for the award.
Key inputs and assumptions used in the Monte Carlo simulation include the following:
Estimated Volatility: The Company considered its own historical volatility, implied historical volatility of the Public Warrants and the historical volatility of comparable companies.
Risk-free interest rate: The risk-free interest rate is determined by reference to the US Government Bond yield curve as of the valuation date.
Expected dividend: Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.
Share Price: The closing price of the Company as of the valuation date.
Public Warrants
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Derivatives and Hedging - Contracts in Entity’s Own Equity (ASC 815-40). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The Company accounts for the 11,500,000 Public Warrants as warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s audited Consolidated Statements of Operations and Comprehensive Loss. The measurement of the Public Warrants as of December 31, 2022 and 2021 used the observable market quote in the active market.
Exchangeable Right Liability
The Exchangeable Rights are accounted for as a derivative liability under ASC 815-40 as they are freestanding instruments with provisions that preclude them from being indexed to the Company’s common shares. The Exchangeable Rights were initially recorded at fair value on the closing date of the Virtuoso Business Combination (November 18, 2021) and was subsequently remeasured at the balance sheet date with the changes in fair value recognized within its respective line in the audited Consolidated Statements of Operations and Comprehensive Loss (See Note 17).
Benefit from Research and Development Tax Credit
The Company files corporate income tax returns in the UK, US and other foreign jurisdictions. Due to the start-up nature of the business, the Company has generated significant taxable losses since its inception. The benefit from research and development tax credits is recognized in the audited Consolidated Statements of Operations and Comprehensive Loss as a component of Other expense, net, and represents the sum of the research and development tax credits recoverable in the UK.
As a company that carries out research and development activities, the Company submits tax credit claims under the UK Research and Development Expenditure Credit (“RDEC”) program. Qualifying expenditures largely comprise of employment costs for research staff, consumables and certain internal overhead costs incurred as part of research projects for which the Company does not receive income.
Each reporting period, the Company evaluates whether it is expected to be eligible for the tax relief program and records the amount in other income (expense) for the portion of the expense that it expects to qualify under the programs. A submission is made to HM Revenue and Customs (“HMRC”), which has a reasonable assurance that the amount will be realized. The Company follows the
criteria established by HMRC and expects a proportion of expenditures to be eligible for the RDEC programs for the years ended December 31, 2022 and 2021. The RDEC credits are not dependent on the Company generating future taxable income or on its ongoing tax status. The Company has assessed its research and development activities and expenditures to determine whether if this activity qualifies for credit under the tax relief programs established by the UK government. which are subject to interpretation. At the end of each period, the Company estimates the reimbursement calculation based on information available at the time.
The Company recognizes credits from the research and development incentives when the relevant expenditure has been incurred and there is reasonable assurance that the reimbursement will be received. The Company makes estimates of the research and development tax credit receivable as of each balance sheet date, based upon facts known at the time. Although the Company does not expect its estimates to be materially different from the amounts ultimately recognized, its estimates could differ from actual results. To date, there have not been any material adjustments to the Company’s prior estimates of the RDEC tax credit receivable.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the audited consolidated financial statements or in its tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the audited consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that deferred tax assets will be recovered in the future to the extent management believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
The Company accounts for uncertainty in income taxes in the audited consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed as the amount of benefit to recognize in the audited consolidated financial statements. The amount of benefits that may be used is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties. As of December 31, 2022 and 2021, the Company has not identified any uncertain tax positions.
The Company recognizes interest and penalties related to unrecognized tax benefits on the Income tax expense line in the accompanying audited Consolidated Statements of Operations and Comprehensive Loss. As of December 31, 2022 and 2021, no accrued interest or penalties are included on the related tax liability line in the audited Consolidated Balance Sheets.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in shareholders’ (deficit) equity that result from transactions and economic events other than those with shareholders.
Net Loss per Share
The Company has reported losses since inception and has computed basic net loss per share attributable to common shareholders by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The Company computes diluted net loss per ordinary share after giving consideration to all potentially dilutive common shares, including warrants and share options, outstanding during the period determined using the treasury-share and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share were the same for all periods presented.
Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, our Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating and reportable segment, which is the business of delivering connected vehicle data and related insights. The Company provides vehicle data to
customers, the significant majority of whom are in the U.S., and its headquarters are located in the UK. The majority of the Company’s tangible assets are held in the UK.
Fair Value of Financial Instruments
Financial instruments include cash, accounts receivable, accounts payable and accrued expenses, which approximate fair value because of their short-term maturities. Certain assets of the Company are carried at fair value under U.S. GAAP. “Fair value” is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
•Level 3 - Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Public Warrants are classified within Level 1 of the fair value hierarchy because its fair values are quoted from active markets. The FPA is classified within Level 2 as the Company’s share price approximates the fair value of the financial asset as the $10 per share ceiling is not probable to be triggered. The Company’s SCN, GM Warrants, Exchangeable Right Liability, Advanced Subscription Agreements and derivative liability associated with the convertible loans are classified within Level 3 of the fair value hierarchy because their fair values are estimated by utilizing valuation models and significant unobservable inputs. The Company’s convertible loans payable, long-term debt and debt from related parties are measured at amortized cost, given the fair value option was not elected.
Convertible Loans
The Company accounted for its convertible loans in accordance with ASC Topic 470-20, Debt with Conversion and Other Options. Convertible loans were classified as liabilities measured at amortized cost, net of debt discounts from the allocation of proceeds. Interest expense was recognized using the effective interest method over the expected term of the debt instrument pursuant to ASC Topic 835, Interest.
Derivative Liability
The Company’s convertible loans (see Note 13) before the conversion contained redemption features that met the definition of a derivative instrument. The Company classified these instruments as a liability on its audited Consolidated Balance Sheets because the redemption features were not clearly and closely related to its host instrument and met the definition of a derivative. The derivative liability was initially recorded at fair value upon issuance of the convertible loans and was subsequently remeasured to fair value at each reporting date. Changes in the fair value of the derivative liability were recognized within Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss.
Forward Purchase Agreement
On November 10, 2021, Apollo and the Company entered into the Forward Purchase Agreement, which is a freestanding financial instrument. The Company accounts for the Forward Purchase Agreement in accordance with ASC 815-40, under which the Forward Purchase Agreement does not meet the criteria for equity classification and must be recorded as an asset. Prior to the FPA Amendment, which occurred on August 22, 2022, the value of the Forward Purchase Agreement was measured by an option pricing approach considering Apollo's rights to retain proceeds in excess of $10 per share, or the “Forward Price”. As a result of the amendment to the FPA, the Company’s share price at December 31, 2022 approximates the fair value of the FPA most closely as the $10 per share ceiling is not probable to be triggered. Accordingly, the Company recognized the Forward Purchase Agreement within current assets on the audited Consolidated Balance Sheets as well as Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss with regards to changes in the fair value (see Note 6).
Private Placement of Common Shares and Warrants
On July 27, 2022, the Company entered into subscription agreements with various investors, including Sompo Light Vortex pursuant to which the Company agreed to issue and sell Company’s PIPE Units in a private placement, each consisting of (i) one of the common shares, and (ii) one third of one warrant to purchase one common share (the “July 2022 Warrants”). The terms of the July 2022 Warrants do not create any obligation to transfer cash to the investor but a fixed amount of common shares upon exercise. Therefore, the Company accounts for the July 2022 Warrants as equity-classified instruments (as part of additional paid in capital), based on an assessment of Distinguishing Liabilities from Equity (“ASC 480”). The assessment considers whether the July 2022 Warrants are freestanding financial instruments, meet the definition of a liability or whether the July 2022 Warrants meet all of the requirements for equity classification, including whether the July 2022 Warrants are indexed to the Company’s own shares, among other conditions for equity classification.
GM Securities Purchase Agreement
On December 16, 2022, the Company entered into a Securities Purchase Agreement with GM and pursuant to the GM Securities Purchase Agreement, issued and sold to GM the SCN and the GM Warrants to acquire common shares (see Note 14). As allowed under ASC 825, Financial Instruments (“ASC 825”), the Company has elected the fair value option in accounting for the SCN. The Company determined it was appropriate to apply the fair value option to the SCN because there are no substantial premiums associated with this instrument. The fair value of the SCN was calculated using a hybrid of the probability-weighted expected return method, scenario-based method, and binomial lattice methods as the ultimate maturity date and put price are contingent upon the Company’s engagement (or lack thereof) in certain qualifying transactions; accordingly, it is reasonable to estimate the SCN’s fair value in each scenario and to determine the probability-weighted value. Within each scenario, the binomial lattice model was applied to capture the various optionality available to borrower and lender. The Company concluded that the GM Warrants be classified as a liability on the audited Consolidated Balance Sheets in accordance with ASC 480 and ASC 815. The Company utilized the Black-Scholes option pricing model to determine the fair value of the GM Warrants.
Recently Issued Accounting Pronouncements Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases in their balance sheet as a right-of-use asset and a lease liability. Leases will be classified as either operating or finance, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. As an EGC, the Company has adopted the guidance for nonpublic entities during the interim and annual reporting periods beginning after December 15, 2021.
On January 1, 2022, the Company adopted ASU 2016-02, using the modified retrospective method for lease accounting. The Company recognized an operating lease right-of-use asset of $3.3 million, a current operating lease liability of $0.6 million, and a long term operating lease liability of $2.6 million in the audited Consolidated Balance Sheets as a result of the implementation of this standard. As a part of management’s measurable actions taken to significantly reduce expenses, the Company has exercised an option to modify its Manchester lease to change the lease termination date to June 29, 2023 (see Note 21).
On January 1, 2022, the Company adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), using the modified retrospective method for accounting for convertible instruments and contracts in an entity’s own equity. The standard simplifies the accounting for convertible instruments by removing major separation models required under current guidance. ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted EPS calculation in certain areas. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those annual reporting periods, with early adoption permitted. In applying this standard, the accounting for convertible instruments became less complex and improves the decision usefulness and relevance of the information provided to financial statement users. The adoption eliminated the presentation of the beneficial conversion feature on the consolidated statement of operations and had no other impact to the Company’s audited consolidated financial statements in the current period or comparative periods.
In December 2019, the FASB issued ASU 2019-12 (“Topic 740”), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes. This update removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted this standard during the second quarter of fiscal 2022 with an effective date of April 1, 2022 using the prospective method of adoption. The adoption of this standard did not have a material effect in the Company’s audited consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13 (“Topic 326”), Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Topic 326 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amounts. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. As an EGC, Topic 326 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. On January 1, 2023, the Company adopted ASU 2016-13 (“Topic 326”). The adoption of ASU 2016-13 (“Topic 326”) will not have a material impact on its audited consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers. As an EGC, Topic 805 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. On January 1, 2023, the Company adopted ASU 2021-08. The adoption of this standard did not have an impact for periods prior to adoption; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.
3. Transactions
Reorganization and Recapitalization
On May 28, 2021, Wejo Group Limited, Virtuoso, Merger Sub, Wejo Bermuda and the Accounting Predecessor entered into a definitive agreement and plan of merger to effectuate the Virtuoso Business Combination, which was completed on November 18, 2021. In order to effectuate the Virtuoso Business Combination, Wejo Group Limited acquired all of the shares of the Accounting Predecessor on November 18, 2021. Immediately following the acquisition of the Accounting Predecessor’s shares, Wejo Group Limited merged with Virtuoso, which was effectuated through a merger between Merger Sub and Virtuoso. Merger Sub is a newly formed subsidiary of Wejo Group Limited. Virtuoso survived the merger. The Accounting Predecessor and Virtuoso became indirect, wholly-owned subsidiaries of Wejo Group Limited following the Virtuoso Business Combination. Prior to the Virtuoso Business Combination, Wejo Group Limited had no material operations, assets or liabilities.
Exchangeable Right Liability
The Bermuda Preferred Shares contain an exchangeable right which entitles the Virtuoso Founder to exchange its preferred shares of Wejo Bermuda for, at the option of Wejo Bermuda, cash or shares of Wejo Group Limited (the “Exchangeable Right”). The Exchangeable Right cannot be exercised until 12 months after the issuance thereof, which occurred in connection with the closing of the Virtuoso Business Combination on November 18, 2021. Thereafter, it can be exercised at any time up until the fifth year following the close of the Virtuoso Business Combination. The Bermuda Preferred Shares are exchangeable into cash or shares at Wejo Bermuda’s option. Upon the fifth year following the close of the Virtuoso Business Combination, the Exchangeable Right expires.
The Exchangeable Right was initially recorded at fair value on the closing date of the Virtuoso Business Combination (November 18, 2021) using a Black-Scholes model and was subsequently remeasured at the balance sheet date (See Note 17).
Public Warrants
The Public Warrants represent the right to purchase one share of the Company’s common shares at a price of $11.50 per share. The Public Warrants were initially recorded at fair value on the closing date of the Virtuoso Business Combination (November 18, 2021) based on the public warrants listed trading price and are subsequently remeasured at the balance sheet date (See Note 16).
Earnout Shares
During the seven-year period following the closing of the Virtuoso Business Combination (the “Earnout Period”), Wejo Group Limited may issue up to 6,000,000 shares of common shares to the equity holders of the Accounting Predecessor (the “Earnout Shares”), comprised of four separate tranches of 1,500,000 shares of common shares each, issuable upon the occurrence of each Earnout Triggering Event (defined below). The issuance of these shares would dilute all common shares outstanding at that time. An “Earnout Triggering Event” means the date on which the closing volume weighted average price of one share of common shares quoted on the NASDAQ is greater than or equal to certain specified prices for any 20 trading days within any 30 consecutive trading day period within the Earnout Period.
The Earnout Shares were recognized at fair value upon the closing of the Virtuoso Business Combination and classified in shareholders’ equity. Because the Virtuoso Business Combination is accounted for as a reverse recapitalization, the issuance of the Earnout Shares was treated as a deemed dividend and since the Company does not have retained earnings, the issuance was recorded within additional-paid-in capital (“APIC”) and has a net nil impact on APIC.
Forward Purchase Agreement
On November 10, 2021, the Company entered into the Forward Purchase Agreement with Apollo for the purpose of purchasing up to $75.0 million of Virtuoso Class A common stock (“VOSO Shares”), prior to the Virtuoso Business Combination and Wejo Group Limited shares post-Virtuoso Business Combination, from holders of VOSO Shares, including holders who have redeemed VOSO Shares or indicated an interest in redeeming VOSO Shares. Apollo purchased $75.0 million of common shares of Virtuoso under this Forward Purchase Agreement. On November 19, 2021, Apollo was paid $75.0 million from the funds received from Virtuoso in the Virtuoso Business Combination that were related to the FPA Shares. During the year ended December 31, 2022, the Company and Apollo amended the Forward Purchase Agreement (see Note 6).
CFPI Stock Purchase Agreement
On February 14, 2022, the Company entered the CFPI Stock Purchase Agreement, which allows the Company to obtain, depending on its common shares market price and it meeting other conditions, up to the lesser of $100 million and the Exchange Cap through an equity financing facility. The Company issued 715,991 common shares to CFPI, representing a 3% commitment fee, incurred in connection with this agreement. The Company recognized expense of $3.0 million related to these shares within General and administrative expenses in the Company’s audited Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022. Sales of common shares pursuant to the CFPI Stock Purchase Agreement, and the timing of any sales, are solely at the Company’s option, and it is under no obligation to sell any securities to CFPI under the CFPI Stock Purchase Agreement. To the extent the Company sells common shares under the CFPI Stock Purchase Agreement, it planned to use any proceeds therefrom for working capital and general corporate purposes. During the year ended December 31, 2022, the Company sold 2,704,347 common shares at a weighted average price of $1.71 per share under the CFPI Stock Purchase Agreement. Pursuant to the terms of the CFPI Stock Purchase Agreement, on December 14, 2022, the Company delivered notice to CFPI of its election to terminate the CFPI Stock Purchase Agreement in accordance with its terms effective on December 19, 2022.
Private Placement of Common Shares and Warrants
On July 27, 2022, the Company entered into subscription agreements with various investors, which included a significant investment coming from Sompo Light Vortex, a wholly-owned subsidiary of Sompo Holdings, as well as current investors and certain members of the Company’s Board of Directors, pursuant to which the Company agreed to issue and sell in a private placement 11,329,141 of the Company’s Units, each consisting of (i) one of the Company’s common shares, and (ii) one third of one warrant to purchase one common share, exercisable for a period of five years at an exercise price of $1.56 per Unit at a purchase price of $1.40 per Unit. The purchase price of $1.40 per Unit satisfied the minimum price requirement under NASDAQ rules. The aggregate purchase price for the Units was $15.9 million before costs of $0.2 million.
The July 2022 Warrants do not contain any contingent exercise features and may be exercised only during the period commencing on July 29, 2022 and terminating five (5) years after the date of the closing of the sale of the PIPE Units, subject to certain conditions. As part of the July 2022 PIPE, the Company entered into a registration rights agreement, which requires the Company to use its best faith efforts to file a resale registration statement with the SEC to register for resale of the common shares, the July 2022 Warrants and the common shares issuable upon exercise of the July 2022 Warrants on or prior to December 31, 2022, at any time the Company is eligible to file a registration statement on Form S-3 (the “Shelf Registration Statement”) with the SEC. On December 21, 2022, the Company filed the Shelf Registration Statement with the SEC. The SEC has not yet declared the Shelf Registration Statement effective. As of December 31, 2022, there were no warrants exercised.
The relative fair value of the July 2022 Warrants were estimated to be $1.9 million on the date of the closing of the transaction. The July 2022 Warrants were valued using the Black-Scholes model. The following table summarizes the Level 3 significant unobservable inputs that are included in the valuation of the July 2022 Warrants as of July 27, 2022:
July 27, 2022
Unobservable Inputs Input Value
Estimated term 5 years
Estimated volatility 50.6%
Risk-free rate 2.8%
Secured Convertible Note
On December 16, 2022, the Company entered into a Securities Purchase Agreement with GM. Pursuant to the GM Securities Purchase Agreement, the Company issued and sold to GM a secured convertible note in the aggregate principal amount of a $10.0 million SCN with an interest rate of 5.0% per annum and the GM Warrants to acquire up to an aggregate amount of 1,190,476 common shares at an exercise price of $0.75112 per common share (see Note 14). On February 27, 2023, GM consented to the Company’s offering of the Second Lien Notes to the Second Lien Noteholder (see Note 25) and agreed to amend the Secured Convertible Note, solely to add additional events of default, and outside of such addition, the Secured Convertible Note remains unchanged and in full force and effect.
Open Market Sales Agreement
On December 22, 2022, the Company entered into that certain Open Market Sales Agreement (the “ATM Agreement”) with Jeffries. Pursuant to the ATM Agreement, the Company may direct Jefferies to sell up to $100,000,000 of the Company’s common shares from time to time during the term of the ATM Agreement. Jefferies is not required to sell any specific amount, but will act as the Company’s sales agent using commercially reasonable efforts consistent with its normal trading and sales practices. Jefferies will be entitled to compensation at a commission rate of 3.0% of the gross sales price per share sold under the ATM Agreement. The net proceeds, if any, that we receive from the sales of our common shares will depend on the number of shares actually sold and the offering price for such shares.
4. Fair Value Measurement
Assets and liabilities that are measured at fair value on a recurring basis, and the level of the fair value hierarchy utilized to determine such fair values, consisted of the following as of December 31, 2022 (in thousands):
Fair Value Measurements
Level 1 Level 2 Level 3 Total
Assets:
Forward Purchase Agreement $ - $ 2,687 $ - $ 2,687
Total $ - $ 2,687 $ - $ 2,687
Fair Value Measurements
Level 1 Level 2 Level 3 Total
Liabilities:
Public Warrants $ 594 $ - $ - $ 594
Exchangeable Right liability - - 403 403
Secured Convertible Note - - 11,390 11,390
Warrant liability - GM Securities Purchase Agreement - - 343 343
Total $ 594 $ - $ 12,136 $ 12,730
Assets and liabilities that are measured at fair value on a recurring basis, and the level of the fair value hierarchy utilized to determine such fair values, consisted of the following as of December 31, 2021 (in thousands):
Fair Value Measurements
Level 1 Level 2 Level 3 Total
Assets:
Forward Purchase Agreement $ - $ - $ 45,611 $ 45,611
Total $ - $ - $ 45,611 $ 45,611
Fair Value Measurements
Level 1 Level 2 Level 3 Total
Liabilities:
Public Warrants $ 12,650 $ - $ - $ 12,650
Exchangeable Right liability - - 11,154 11,154
Total $ 12,650 $ - $ 11,154 $ 23,804
The Company transferred the FPA out of Level 3 and into Level 2 for the year ended December 31, 2022. As a result of the amendment to the FPA, the Company’s share price at December 31, 2022 approximates the fair value of the FPA most closely as the $10 per share ceiling is not probable to be triggered. There were no transfers between Level 1 and Level 2 instruments for the year ended December 31, 2022. There were no transfers into or out of Level 3 instruments and/or between Level 1 and Level 2 instruments for the year ended December 31, 2021.
The following table provides a roll forward of the aggregate fair value of the Company’s Advanced Subscription Agreements, derivative liability, public warrant liability, Exchangeable Right Liability, Forward Purchase Agreement, and GM Securities Purchase Agreement (in thousands):
Advanced Subscription Agreements Derivative Liability Public Warrant Liability Exchange-
able Right Liability Forward Purchase Agreement GM Securities Purchase Agreement
Balance as of December 31, 2020
$ 8,120 $ 39,780 $ - $ - $ - $ -
Initial fair value of financial instruments - 42,589 - - 63,338 -
Acquired as part of the Business Combination - - 26,450 45,606 - -
Proceeds from sale of FPA Shares - - - - (2,118) -
Change in estimated fair value 4,470 (12,922) (13,800) (34,452) (15,609) -
Settlement of advanced subscription agreements into common shares (12,757) - - - - -
Extinguished upon conversion of convertible loan notes - (68,113) - - - -
Foreign currency translation loss (gain) 167 (1,334) - - - -
Balance as of December 31, 2021
- - 12,650 11,154 45,611 -
Initial fair value of financial instruments - - - - - 13,616
Proceeds from sale of FPA Shares - - - - (2,472) -
Change in estimated fair value - - (12,056) (10,751) (40,452) (1,883)
Balance as of December 31, 2022
$ - $ - $ 594 $ 403 $ 2,687 $ 11,733
The changes in estimated fair value are recorded in Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss and the foreign currency translation (gains) losses are recorded in the foreign currency translation adjustment in other comprehensive (loss) income in the audited Consolidated Statements of Operations and Comprehensive Loss. The Advanced Subscription Agreements and derivative liability were valued using a scenario-based analysis. Five primary scenarios were considered: qualified financing, unqualified financing, merger or acquisition, held to maturity, and insolvency. The value of the Advanced
Subscription Agreements and derivative liability under each scenario were probability weighted to arrive at their respective estimated fair values.
The Exchangeable Right Liability was valued using a Black-Scholes model. The following table summarizes the significant unobservable inputs that are included in the valuation of Exchangeable right liability as of December 31, 2022 and 2021:
December 31, 2022 December 31, 2021
Unobservable Inputs Input Value or Range Weighted Average Input Value or Range Weighted Average
Estimated term 3.9 years 3.9 years 4.9 years 4.9 years
Estimated volatility 93.0 % 93.0 % 45.0 % 45.0 %
Risk-free rate 4.1 % 4.1 % 1.2 % 1.2 %
Changes in the unobservable inputs noted above would impact the fair value of the Exchangeable Right Liability. Increases (decreases) in the estimates of the estimated volatility or the risk-free rate would increase (decrease) the fair value of the Exchangeable Right Liability and an increase (decrease) in the Company’s common share price would decrease (increase) the value of the Exchangeable Right Liability.
As of December 31, 2021, the Forward Purchase Agreement was valued using a Black-Scholes model. The following table summarizes the significant unobservable inputs that are included in the valuation of Forward Purchase Agreement:
December 31, 2021
Unobservable Inputs Input Value or Range Weighted Average
Estimated term 1.9 years 1.9 years
Estimated volatility 45.0 % 45.0 %
Risk-free rate 0.7 % 0.7 %
Changes in the unobservable inputs noted above would impact the fair value of the Forward Purchase Agreement. Increases (decreases) in the estimates of the estimated volatility or the risk-free rate would (decrease) increase the Forward Purchase Agreement and an increase (decrease) in the Company’s common share price would increase (decrease) the value of the Forward Purchase Agreement.
The fair value of the SCN under the GM Securities Purchase Agreement was determined utilizing the fair value option. The fair value of the SCN was calculated using a hybrid of the probability-weighted expected return method, scenario-based method, and binomial lattice methods as the ultimate maturity date and put price are contingent upon the Company’s engagement (or lack thereof) in certain qualifying transactions; accordingly, it is reasonable to estimate the SCN’s fair value in each scenario and to determine the probability-weighted value. Within each scenario, the binomial lattice model was applied to capture the various optionality available to the borrower and lender.
The following table summarizes the significant inputs that are included in the valuation of the SCN as of December 31, 2022 and December 16, 2022:
December 31, 2022 December 16, 2022
Unobservable Inputs Input Value or Range Weighted Average Input Value or Range Weighted Average
Probability of scenarios:
Financing of $35 million or more within 1 year 45.0 % 45.0 % 35.0 % 35.0 %
Financing of $25 to $35 million within 1 year 30.0 % 30.0 % 35.0 % 35.0 %
Financing of less than $25 million within 1 year 25.0 % 25.0 % 30.0 % 30.0 %
Timing of scenarios:
Term to maturity 1.0 years 1.0 years 1.0 years 1.0 years
Estimated market yield 18.0 % 18.0 % 18.9 % 18.9 %
Risk-free rate 4.7 % 4.7 % 4.6 % 4.6 %
Estimated credit spread 13.2 % 13.2 % 14.3 % 14.3 %
Value of common share $ 0.48 $ 0.48 $ 0.78 $ 0.78
Changes in the unobservable inputs noted above would impact the fair value of the SCN. Increases (decreases) in the estimates of the risk-free rate would increase (decrease) the fair value of the SCN and an increase (decrease) in the Company’s common share price would decrease (increase) the value of the SCN.
The GM Warrants under the GM Securities Purchase Agreement were valued using a Black-Scholes model. The following table summarizes the significant unobservable inputs that are included in the valuation of GM Warrants as of December 31, 2022 and December 16, 2022:
December 31, 2022 December 16, 2022
Unobservable Inputs Input Value or Range Weighted Average Input Value or Range Weighted Average
Estimated term 3.0 years 3.0 years 3.0 years 3.0 years
Estimated volatility 110.0 % 110.0 % 110.0 % 110.0 %
Risk-free rate 4.2 % 4.2 % 3.9 % 3.9 %
Changes in the unobservable inputs noted above would impact the fair value of the GM Warrants. Increases (decreases) in the estimates of the estimated volatility or the risk-free rate would increase (decrease) the fair value of the GM Warrants and an increase (decrease) in the Company’s common share price would decrease (increase) the value of the GM Warrants.
5. Revenue from Customers
Connected Vehicle Data Marketplace
The Company’s data marketplace customer agreements include one or a combination of the following contractual promises for a fixed contractual fee: (i) the supply of specified connected vehicle data and derived insights through the Wejo Neural Edge platform made available via a secured access to the Wejo Neural Edge platform or via the Company’s web-based portal, Wejo Studio; (ii) the granting of a non-transferable license to use the specified data in the manner described in each customer agreement; and (iii) Wejo Neural Edge platform set up and connectivity services. The Company assessed these customer agreements under ASC 606 and determined that the above contractual promises collectively represent one distinct performance obligation.
The transaction price is comprised of the contractual fixed fee specified in each customer agreement and is allocated to the single performance obligation. The Company recognizes revenue when the performance obligation is satisfied through the fulfillment of the contractual promises. The performance obligation is generally fulfilled by the Company providing access to the specified data either throughout the duration of each customer agreement’s contractual term or upon delivery of a one-time batch of historic data. The Company may deliver data and the license without supplying connectivity services. As such, the Company generally recognizes revenue
for customers with a contractual agreement to provide data over a period ratably over the term of the contract, which is typically one year. The Company recognizes revenue for historic batches of data to the customer upon delivery of such data. Standard payment terms are 30 days from the date of the invoice which is typically sent to the customer monthly or upon delivery of the one-time historic batch of data.
In arrangements where another party (i.e., OEMs) is involved in providing specified services to a customer, the Company evaluates whether it is the principal or the agent. In this evaluation, the Company considers if it obtains control of the specified goods or services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, and discretion in establishing price. The terms of the Company’s OEM data sharing agreements vary, and in some situations, certain rights retained by the OEMs over the connected vehicle data being supplied to the customers were determined to provide the OEMs with control over the data, and the Company has determined it acts as the agent in these arrangements and recognizes revenue on a net basis. The Company recognized a reduction of revenue of $3.7 million for each of the years ended December 31, 2022 and 2021, respectively. These reductions of revenue arise from revenue sharing and other fees paid to the Company’s OEM partners where the Company has determined that it is acting as an agent in the relationship. However, in situations where the Company has control over the connected vehicle data, the Company has determined that it acts as the principal and recognizes revenue on a gross basis. In revenue arrangements where the Company provides intelligence data, visualization tools, or analytical products to customers, as well as in circumstances where it provides significant integration services to create a combined output, the Company has control over the underlying data and is acting as the principal, and, as a result, the Company recognizes revenue on a gross basis.
Software & Cloud Solutions
The Company’s software and cloud customer agreements contain one or a combination of the following contractual promises: (i) access to a single-tenant SaaS platform; and (ii) professional services, which may include consulting, design, data evaluation, engineering, implementation and training. The Company assessed these customer agreements under ASC 606 and determined that the above contractual promises each represent distinct performance obligations. In cases where the customer has a unilateral right to terminate the contract for convenience and without penalty, the contract term is limited to the period through which the parties have enforceable rights and obligations, which in turn impacts the Company’s determination of performance obligations, transaction price, and revenue recognition pattern.
To date, the transaction price of the Company’s software and cloud contracts has been comprised of contractual fixed fees specified in each customer agreement with milestone-based payment terms. The transaction price is allocated based on standalone selling price for contracts with more than one performance obligation identified. SaaS performance obligations are satisfied over time as the Company provides the customer with access to the platform, and related revenue is recognized ratably over the term of the contract. Professional services performance obligations are satisfied over time as the Company renders the service, and related revenue is recognized proportionate with performance on the basis of labor hours expended in relation to total budgeted labor hours.
General
During the year ended December 31, 2022, the Company had two customers that individually generated 10% or more of the Company’s revenue for the period. These significant customers generated 14% and 11%, respectively, of the Company’s revenue. For the year ended December 31, 2021, the Company had one customer that individually generated 10% or more of the Company's revenue for the period. The one significant customer generated 13% of the Company’s revenue. In addition, the revenue recognized over time and at a point in time was 43% and 57%, respectively, during the year ended December 31, 2022 and 51% and 49%, respectively, during the year ended December 31, 2021.
During the years ended December 31, 2022 and 2021, the Company earned 74% and 75% of its revenue from Marketplace Data Solutions, respectively. For the years ended December 31, 2022 and 2021, the Company earned 95% and 90% of its revenue within the U.S., respectively. The country in which the revenue is generated is based on the address of the ultimate customer utilizing the solutions provided.
6. Forward Purchase Agreement
On November 10, 2021, Wejo Limited entered into the FPA with Apollo. Subject to certain termination provisions, the FPA provides that on the 2-year anniversary of the effective date of the FPA, each Apollo seller will sell to the Company the number of shares purchased by such seller (up to a maximum of 7,500,000 shares across all sellers) of Virtuoso Class A common shares, which, under the FPA, ultimately became the Company’s common shares after the share-for-share exchange provided under the Virtuoso Business Combination. On November 19, 2021, the Company paid Apollo $75.0 million (see Note 3).
At any time, and from time to time, after November 18, 2021 (the closing of the Virtuoso Business Combination), each Apollo seller may sell FPA Shares at its sole discretion in one or more transactions, publicly or privately and, in connection with such sales, terminate the FPA in whole or in part in an amount corresponding to the number of FPA Shares sold (“Terminated Shares”). On the settlement date of any such early termination, such Apollo seller will pay to the Company all the proceeds of any such sales up to $10 per share regardless of the sale price and Apollo will retain any amounts in excess of $10 per share. The Company may deliver a written notice to each seller requesting partial settlement of the transaction subject to there being a remaining percentage of the Excess Shares that has not become Terminated Shares within a six-month or one-year period. The amount paid in such early settlement to the Company is equal to the lesser of (i) the number of such Excess Shares sold in the early settlement multiplied by $10 per share or (ii) the net sale proceeds received by such seller for such Excess Shares sold in the early settlement.
Apollo Amendment
On August 22, 2022, Wejo Limited entered into the FPA Amendment with Apollo to allow the Company on or after the effective date of the FPA Amendment to direct each Apollo seller to sell the 5.6 million FPA Shares remaining at that time, provided that such direction is made outside of the Blackout Period. The FPA Amendment also allows the Company to direct each Apollo seller to stop and subsequently resume, selling such Excess Shares, provided as well that such direction is made outside of the Blackout Period.
For the year ended December 31, 2022, pursuant to the FPA, 1,662,785 common shares were sold at a weighted average price of $1.51 which generated aggregate proceeds of $2.5 million. For the year ended December 31, 2021, Apollo terminated 251,632 FPA Shares and paid $2.5 million back to the Company. As of December 31, 2022 and 2021, there were 5,585,583 and 7,248,368 total outstanding shares available, respectively. As of December 31, 2022, the fair value of the FPA was $2.7 million, compared to $45.6 million at December 31, 2021 and was recognized in its respective line in the audited Consolidated Balance Sheets.
The FPA was initially and subsequently measured at fair value using an option pricing approach up until the date of the FPA Amendment at which time the embedded derivative was terminated. During the year ended December 31, 2022, there was an immaterial gain on settlement of the terminated FPA shares, which was determined by the difference between the fair value of terminated FPA Shares and the cash proceeds received. A $40.5 million loss on the fair value of Forward Purchase Agreement was recognized and is included in Other expense, net in the audited Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2022. A $15.6 million loss on the fair value of the Forward Purchase Agreement was recognized in Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2021. An $11.7 million loss of issuance of Forward Purchase Agreement and a $0.4 million gain on settlement of Forward Purchase Agreement was recognized in Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2021.
7. Prepaid Expenses and Other Current Assets
Prepaid and other current assets consisted of the following (in thousands):
December 31,
Prepayments1
$ 2,683 $ 12,338
VAT recoverable 1,385 2,963
Prepaid insurance 1,117 1,346
Data and IT Implementation Costs 662 -
Research and development expenditure credit receivable 241 271
Other current assets 639 600
Total $ 6,727 $ 17,518
1 Prepayments are largely related to the Master Subscription Agreement, dated May 28, 2021, by and between Wejo Limited and Palantir Technologies Inc.
8. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
December 31,
Office equipment $ 1,429 $ 1,356
Furniture and fixtures 31 35
Total property and equipment 1,460 1,391
Less accumulated depreciation (986) (740)
Total $ 474 $ 651
Depreciation expense was $0.3 million for each of the years ended December 31, 2022 and 2021.
9. Intangible Assets, net
Intangible assets, net consisted of the following (in thousands):
December 31, 2022
Gross Book Value Accumulated Amortization Net Book Value
General Motors Data Sharing Agreement $ 9,376 $ (5,387) $ 3,989
Internally developed software 15,805 (12,457) 3,348
Total $ 25,181 $ (17,844) $ 7,337
December 31, 2021
Gross Book Value Accumulated Amortization Net Book Value
General Motors Data Sharing Agreement $ 10,555 $ (4,564) $ 5,991
Internally developed software 14,975 (11,477) 3,498
Total $ 25,530 $ (16,041) $ 9,489
The foreign currency exchange difference related to the gross book value of the GM Data Sharing Agreement as of December 31, 2022 compared to December 31, 2021 was $1.2 million which is recognized within Accumulated Other Comprehensive Income (Loss) in the audited Consolidated Statements of Shareholders' (Deficit) Equity. Amortization expense was $1.4 million and $1.5 million, for the years ended December 31, 2022 and 2021, respectively.
Amortization for internally developed software was $2.3 million and $2.6 million for the years ended December 31, 2022 and 2021, respectively. The Company did not recognize any intangible asset impairment losses for the years ended December 31, 2022 and 2021.
The estimated aggregate amortization expense, excluding effects of currency exchange rates, for intangible assets subject to amortization for each of the five succeeding fiscal years is as follows (in thousands):
Fiscal Year Ended December 31,
2023 $ 3,084
2024 2,572
2025 1,681
2026 -
2027 -
Total $ 7,337
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31, 2022
December 31, 2021
Compensation and benefits $ 10,995 $ 13,761
Professional fees 6,207 4,903
Development and technology1
4,312 635
Arma Provision2
1,413 -
Accrued revenue share costs 3,045 598
Marketing and commissions 218 334
Deferred income 200 225
Other liabilities 209 633
Total $ 26,599 $ 21,089
1 Includes accrual for shortfall on future AWS usage against minimum commitment.
2 This provision is recognized based on settlement reached with Arma Partners LLP (“Arma”) see Note 22. The long term portion of the settlement amount is recorded as an other non-current liability on the Consolidated Balance Sheets.
11. Supplementary Financial Information - Other expense, net
Year Ended December 31,
(in thousands) 2022 2021
Loss on issuance of convertible loan notes $ - $ (53,967)
Loss on extinguishment of convertible loan notes - (25,598)
Gain on fair value of derivative liability - 12,922
Gain on fair value of public warrant liabilities 12,056 13,800
Loss on fair value of Forward Purchase Agreement (40,452) (15,609)
Gain on fair value of Exchangeable Right liability 10,751 34,452
Loss on issuance of Forward Purchase Agreement - (11,674)
Gain on settlement of Forward Purchase Agreement - 399
Loss on fair value of Advanced Subscription
Agreements, including related party of nil and $(3,665), respectively
- (4,470)
Loss on issuance of GM Securities Purchase Agreement (4,116) -
Gain on fair value of GM Securities Purchase Agreement 1,883 -
Other, net1
(13,767) 678
Other expense, net $ (33,645) $ (49,067)
______________________
1 Line item Other, net was presented as Other income, net for the year ended December 31, 2021. Substantially all of the activity for 2022 is related to foreign exchange translation.
12. Advanced Subscription Agreements
Between September 2019 and March 2020, the Company entered into ASAs with future investors resulting in gross proceeds of £5.6 million (approximately $7.1 million). On July 31, 2021, all outstanding ASAs converted into ordinary shares of Legacy Wejo, which were converted into 1,053,273 common shares of the Company in connection with the Virtuoso Business Combination. The ASAs were carried at fair value, pursuant to which the associated liability was recorded at fair value and subsequently remeasured to fair value at each reporting date. During the years ended December 31, 2022 and 2021, the Company recognized losses of nil and $4.5 million, respectively, in the audited Consolidated Statements of Operations and Comprehensive Loss related to the change in the estimated fair value of the Advanced Subscription Agreements.
13. Convertible Loans
In July 2020, the Company executed a convertible loan agreement under which certain persons agreed to make convertible loans to the Company amounting to an aggregate of $12.6 million (the “Convertible Loan Agreement”). In November 2020 and December 2020, the Company received additional convertible loans under the Convertible Loan Agreement for an aggregate principal amount of $0.1 million and $14.1 million, respectively. During the three months ended March 31, 2021, the Company issued additional convertible loans with an aggregate principal amount of $16.2 million (such amounts, together with the other loan amounts under the Convertible Loan Agreement, the “Convertible Loans”).
The Convertible Loans bear interest at a fixed rate of 8.0% per annum until the earlier of July 21, 2023 (the “CL Maturity Date”) or the date on which they are redeemed or converted. Upon the CL Maturity Date, the Convertible Loans convert into the most senior class of shares in the Company at a price per share equal to 60.0% of the lowest price per share paid by an investor in the then most recent equity financing, subject to cap on the price per share at which the Loans convert into shares in the Company, determined by dividing a valuation cap for the Company of £206.5 million by the number of shares comprising the Company’s fully diluted share capital at the relevant time (the “Valuation Cap”).
In the event of an equity financing round, whereby the Company raises an amount equal to at least the aggregate amount of the Loans received by the Company at the time of such financing round, in newly committed capital prior to the CL Maturity Date from one or a series of related issuances of shares to investors (“Qualified Financing”), all outstanding principal and accrued interest will convert into the most senior class of shares with identical rights and preferences as attached to, and with the same obligations as, the securities issued to the investors in the Qualified Financing (including any warrants, options, bonus shares or other economic rights made available to investors in such Qualified Financing) at a price per share equal to 60.0% of the lowest price per share paid by an investor in the Qualified Financing, subject to the Valuation Cap.
In the event of an equity financing round that is not a Qualified Financing (“Non-Qualified Financing”), holders of the majority of the Convertible Loans then outstanding (excluding the single largest holder of the Convertible Loans) have the option to convert all the outstanding principal and unpaid interest of the Convertible Loans into the most senior class of shares with identical rights and preferences as attached to, and with the same obligations as, the securities issued to the investors in the Non-Qualified Financing (including any warrants, options, bonus shares or other economic rights made available to investors in such Non-Qualified Financing) at a price per share equal to 60.0% of the lowest price per share paid by an investor in the Non-Qualified Financing, subject to the Valuation Cap.
Upon a change of control in the Company, sale of all or substantially all of the group’s undertaking and assets, or an admission of all or any of the Company’s shares or securities to trading on certain exchanges (each, an “Exit”), the Convertible Loans will convert into the most senior class of shares in the Company in issue at the time of the Exit where: (i) a lender would receive a greater amount as cash consideration on an Exit for the sale of the shares that are issued to it on conversion of its Loan than it would otherwise receive had it been repaid its Loan with a redemption premium equal to 100% of the principal amount outstanding (the “Redemption Premium”); or the Lenders would receive any non-cash consideration for the sale of such shares (unless the single largest holder of the Convertible Loans (in respect of its Convertible Loan) or a majority the other lenders (in respect of the remaining loans) elect to redeem their loans), in each case at a price per share equal to 60.0% of the lowest price per share paid by an investor in the then most recent equity financing, subject to the Valuation Cap.
Upon an event of default, including failure to comply with the Company’s payment and other obligations under the Convertible Loans, the outstanding principal and accrued interest, together with the Redemption Premium, becomes due and payable. Rather than allow their Convertible Loans to convert on whichever applies of: (i) the CL Maturity Date, (ii) the date of a Qualified Financing, Non-Qualified Financing, or (iii) an Exit, a majority of the lenders (in respect of the remaining loans) may elect to receive repayment of their Convertible Loans together with the Redemption Premium.
The Convertible Loans are not voluntarily redeemable or prepayable at the election of the Company - redemption or prepayment of the Convertible Loans requires the prior written consent of each Lender.
The Company assessed whether an immediate beneficial conversion feature (“BCF”) existed with regards to the conversion option upon maturity at each issuance of the Convertible Loans. A beneficial conversion feature exists when convertible instruments are issued with an initial “effective conversion price” that is less than the fair value of the underlying share. The Company determined that there was a BCF associated with such conversion feature upon issuance of the December 2020 Convertible Loans, January 2021 Convertible Loans and April 2021 Convertible Loans, respectively, and recorded a total BCF of $10.0 million, $19.6 million and $11.7 million to additional paid-in capital on the Consolidated Balance Sheet, representing the intrinsic value of the in-the-money
portion of the conversion option upon maturity, with an offsetting reduction to the carrying amount of the December 2020 Convertible Loans, January 2021 Loans and April 2021 Loans as a debt discount upon issuance.
The Company concluded that the conversions in the event of a Qualified Financing and Non-Qualified Financing represented redemption features and, along with the redemption features upon an Exit and an event of default, each met the definition of embedded derivative that was required to be accounted for as a separate unit of accounting.
The Company recorded combined issuance-date fair value of the derivative liabilities of $42.6 million as a derivative associated with the January 2021 Convertible Loans and April 2021 Convertible Loans. The offsetting debt discount is limited to the proceeds allocated to the January 2021 Convertible Loans and April 2021 Convertible Loans. After reducing the carrying value of the January 2021 Convertible Loans and April 2021 Convertible Loans by the BCF of $31.3 million and debt issuance costs of $1.0 million, the issuance-date fair value of the derivative liabilities associated with the January 2021 Convertible Loans and April 2021 Convertible Loans exceeded its allocated proceeds by $54.0 million. As a result, the carrying value of the January 2021 Convertible Loans and April 2021 Convertible Loans were reduced to zero and a loss on issuance of $54.0 million was recorded in Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss.
The discounted carrying amount of the Convertible Loans is accreted to the mandatory redemption amount, equal to the aggregate of the principal, accrued interest, and Redemption Premium, through the stated redemption date of July 21, 2023. The derivative liability and Convertible Loans were extinguished on November 18, 2021 and converted into ordinary shares of Legacy Wejo, which were then converted into 10,460,460 common shares of the Company as a result of the Virtuoso Business Combination. During the year ended December 31, 2021, a loss on extinguishment on the Convertible Loans of $25.6 million and a gain on fair value of derivative liability of $12.9 million were recorded Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss. Additionally, the accretion of amortized cost of $3.6 million was recorded in interest expense, net in the audited Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2021.
14. GM Securities Purchase Agreement
On December 16, 2022, the Company entered into a Securities Purchase Agreement with GM under which it issued and sold to GM the SCN in the aggregate principal amount of $10.0 million, and the GM Warrants to acquire up to an aggregate amount of 1,190,476 common shares at an exercise price of $0.75112 per common share. The GM Warrants may be exercised at any time following the closing of the Offering until December 16, 2025. The Company received $9.5 million of proceeds from GM associated with the Offering. The SCN accrues compounding interest at the rate of 5.0% per annum in arrears semi-annually until maturity date of December 16, 2023, which date will automatically be extended for an additional 24 months to December 16, 2025 in the event that the Company engages in certain qualifying transactions. In the event that the maturity date of the SCN is extended to the SCN Extended Maturity Date, the principal under the SCN shall be payable in equal monthly installments beginning on December 16, 2023 and ending on the SCN Extended Maturity Date. The Company’s payment obligations pursuant to the SCN are guaranteed by all of its subsidiaries pursuant to a Guaranty dated December 16, 2022.
The Company’s obligations under the SCN are secured by a first lien on certain assets of its material subsidiaries, including certain assets of Wejo Limited and Wejo Data Services Inc. and the shares held by Wejo Bermuda in Wejo Limited (collectively, the “Collateral”); such security interest does not secure the assets that were previously encumbered in connection with the issuance of the Company’s Secured Loan Notes in April 2021.
At GM’s option, at any time during the 20-business day period (such period, the “Optional Redemption Period”) following certain qualifying transactions, GM may require the Company to redeem all or any part of the outstanding principal and accrued but unpaid interest of the SCN, in whole or in part, at a price of 120% of the then-outstanding principal amount plus all accrued and unpaid interest (the “Optional Redemption”). In addition, at GM’s option at any time after the issuance date, GM may require the Company to convert the SCN, in whole or in part, into common shares at a conversion price of $0.80323 per common share.
The SCN contains a beneficial ownership limitation that prohibits the Company from issuing shares to GM upon a conversion of the SCN if such conversion would result in GM beneficially owning over 19.99% of the number of the Company’s issued and outstanding common shares. Additionally, the SCN provides for customary events of default. If an event of default occurs, GM can provide notice to the Company that it is requiring the Company to repay the outstanding principal, any unpaid but accrued interest and any unpaid but accrued late charges within five business days of the delivery of receipt of such written notice.
Under the GM Securities Purchase Agreement, the Company is required to (i) file a resale registration statement with the SEC for resale of the common shares issuable upon conversion of the SCN and the GM Warrants granted to GM as part of the Offering no later than the later of (a) 30 days after the issuance date or (b) the date of filing by the Company with the SEC of the financial statements required to be included in the registration statement and (ii) use its commercially reasonable efforts to cause each the Registration
Statement to be declared effective as soon as practicable and in any event within 60 days of the filing thereof. On December 21, 2022, the Company filed the Shelf Registration Statement with the SEC.
The Company accounts for its GM Warrants in accordance with the guidance contained in ASC 815-40 and determined that the GM Warrants do not meet the criteria for equity treatment thereunder. As such, the GM Warrants must be recorded as a liability and is subject to re-measurement at each balance sheet date. Changes in fair value are recognized in gain on fair value of the GM Securities Purchase Agreement in Other expense, net on the Company’s audited Consolidated Statements of Operations and Comprehensive Loss.
The Company utilized the fair value option to determine the fair value of the SCN. The Company utilized the Black-Scholes option pricing model to determine the fair value of the GM Warrants. At issuance date, the Company recorded a $4.1 million loss on issuance of the GM Securities Purchase Agreement in Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss. As of December 31, 2022, the fair value of the SCN and the GM Warrants was $11.4 million and $0.3 million, respectively, and are classified as a current liability and non-current liability, respectively, on the Company’s audited Consolidated Balance Sheets. For the year ended December 31, 2022, the Company recorded a $1.9 million gain on fair value of the GM Securities Purchase Agreement in Other expense, net on the audited Consolidated Statements of Operations and Comprehensive Loss.
15. Long-term Debt, Net of Unamortized Debt Discount and Debt Issuance Costs
(in thousands) December 31, 2022 December 31, 2021
9.2% Secured Loan Notes, due April 2024
$ 39,000 $ 39,000
Less: unamortized discount and issuance costs (2,574) (5,295)
Carrying value of long-term debt $ 36,426 $ 33,705
In April 2021, the Company entered into a Loan Note Instrument with Securis Investment Partners LLP, as a security agent (the “Loan Note Instrument”), under which it issued secured loan notes in a principal amount of $21.5 million that bear interest at a fixed per annum rate of 9.2% until their maturity date in April 2024 (the “Secured Loan Notes”). The collateral securing the Company’s obligations under the Secured Loan Notes is certain material agreements and related infrastructure and intellectual property. In April 2021, the Company used $10.8 million of the proceeds to repay its outstanding debt balance and fees owed to GM under the credit facility.
The maturity date of the Secured Loan Notes is three years after the issuance date. The maturity may be extended for a one-year period if the Company and the noteholders holding at least 66.66% of the Secured Loan Notes outstanding deliver written notice to noteholders for extension. The principal on the Secured Loan Notes will be paid at maturity or upon an early redemption. The first interest payment of $2.0 million was due no later than six business days after the issue date for the period commencing on the issue date up to but excluding the first anniversary of the issue date. The first-year prepaid interest payment was treated as a discount to the debt. Thereafter, interest payments are due monthly until the Secured Loan Notes are repaid.
Pursuant to an amendment and consent agreement dated July 23, 2021, the Company has the option to issue further Secured Loan Notes in a principal amount of up to $21.5 million with the consent of the majority noteholders.
On July 26, 2021 and October 27, 2021, the Company issued an additional $10.0 million and $7.5 million of Secured Loan Notes that bear interest at a fixed per annum rate of 9.2% until their maturity date on April 21, 2024. These were treated as a modification to the long-term debt. The principal on the Secured Loan Notes will be paid at maturity, or upon an early redemption. The first-year prepaid interest payment was treated as a discount to the debt. Thereafter, interest payments are due monthly until the Secured Loan Notes are repaid. The first interest payment of $1.0 million was due no later than six business days after the issue date for the period commencing on the issue date up to but excluding the first anniversary of the issue date.
As of December 31, 2022, the carrying value of the Secured Loan Notes consisted of $39.0 million principal outstanding, less the unamortized debt discount of $2.4 million and the unamortized debt issuance costs of $0.2 million. As of December 31, 2021, the carrying value of the Secured Loan Notes consisted of $39.0 million principal outstanding, less the unamortized debt discount of $4.9 million and the unamortized debt issuance costs of $0.4 million. The debt discount and the debt issuance costs are being accreted to interest expense through the remaining term of the modified debt agreement using the interest method. Interest expense relating to the term Secured Loan Notes for the years ended December 31, 2022 and 2021 was $5.2 million and $2.5 million, respectively. Interest expense is calculated using the effective interest method and is inclusive of non-cash amortization of capitalized loan costs. At December 31, 2022 and 2021, the effective interest rate was 14.79% and 14.77%, respectively.
16. Public Warrants
The Company has 11,500,000 outstanding Public Warrants to purchase an aggregate of 11,500,000 shares of the Company’s common shares. There were no Public Warrants exercised during the year ended December 31, 2022.
The Company accounts for its outstanding Public Warrants in accordance with the guidance contained in ASC 815-40 and determined that the Public Warrants do not meet the criteria for equity treatment thereunder. As such, each Public Warrant must be recorded as a liability and is subject to re-measurement at each balance sheet date. Changes in fair value are recognized in gain on fair value of public warrant liability in Other expense, net on the Company’s audited Consolidated Statements of Operations and Comprehensive Loss.
Each Public Warrant entitles the holder to purchase one share of the Company’s common shares at an exercise price of $11.50 per share, subject to adjustment. The Public Warrants became exercisable 30 days after the completion of the Virtuoso Business Combination. The Public Warrants will expire five years after the completion of the Virtuoso Business Combination or earlier upon redemption or liquidation. The Company may call the Public Warrants for redemption for cash or for common shares under certain circumstances.
The exercise price and number of common shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation.
17. Exchangeable Right Liability
The Company has 6,600,000 outstanding Exchangeable Rights to purchase an aggregate of 6,600,000 shares of the Company’s common shares. There were no Exchangeable Rights exercised during the year ended December 31, 2022.
The Company accounts for the Exchangeable Rights in accordance with ASC 815-40 and determined that the Exchangeable Rights do not meet the criteria for equity treatment thereunder. As such, the Exchangeable Rights must be recorded as a liability and are subject to re-measurement at each balance sheet date. Changes in fair value are recognized in gain on fair value of exchangeable right liability in Other expense, net in the Company’s audited Consolidated Statements of Operations and Comprehensive Loss.
Each Exchangeable Right entitles the holder to exchange one Exchangeable Right for one of the Company’s common shares at an exercise price of $11.50 per share, subject to adjustment, or cash, at Wejo Bermuda’s option. The Exchangeable Rights cannot be exercised until 12 months after the issuance thereof, which occurred in connection with the closing of the Virtuoso Business Combination on November 18, 2021. Thereafter, it can be exercised at any time up until the fifth year following the close of the Virtuoso Business Combination.
The exercise price and number of common shares issuable upon exercise of the Exchangeable Rights may be adjusted in certain circumstances including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation.
18. Share-Based Compensation
2021 Equity Incentive Plan
In November 2021, the Company’s Board of Directors adopted, and the Company’s shareholders approved, the 2021 Equity Incentive Plan, or the “2021 Plan.” The 2021 Plan allows the Compensation Committee of the Board to make share-based and cash-based incentive awards to the Company’s officers, employees, directors and other key persons (including consultants).
The Company initially reserved 14,092,530 of its common shares for the issuance of awards under the 2021 Plan. On the first day of each fiscal year of the Company during the term of the 2021 Plan, commencing on January 1, 2022 and ending on January 1, 2031, the aggregate number of common shares that may be issued under the 2021 Plan shall automatically increase by a number equal to the lesser of (i) 3% of the total number of common shares actually issued and outstanding on the last day of the preceding fiscal year and (ii) a number of common shares determined by the Board (such amount, the “2021 Plan Evergreen”). The 2021 Plan Evergreen amount of shares added to the available share authorization under the 2021 Plan on each of January 1, 2022 and 2023 was 2,818,506 and 3,283,847, respectively. The Company has not yet registered the 2023 Equity Plan Evergreen shares on a registration statement on Form S-8 with the SEC.
Options under the 2021 Plan
During the year ended December 31, 2022, the Company granted options to purchase 359,297 common shares to employees under its 2021 Plan. The options issued under the 2021 Plan become exercisable in one-third increments on each of the first three anniversaries of the grant date, subject to the employee remaining employed on each vesting date, and expire 10 years after issuance.
Stock option transactions during the year ended December 31, 2022 are summarized as follows:
Options to purchase common share Number of Options Outstanding Weighted Average Strike Price Weighted Average Remaining Contractual Term
(in years) Aggregate Intrinsic Value
(in thousands)
Outstanding at December 31, 2021
2,456,102 $ 11.04 9.9 $ -
Granted
359,297 1.91
Exercised
- -
Forfeited
(806,263) 10.97
Outstanding at December 31, 2022
2,009,136 $ 9.44 9.0 $ -
Exercisable at December 31, 2022
549,943 $ 11.07 8.9 $ -
The weighted average grant-date fair value of share options granted by the Company was $1.00 per share during the year ended December 31, 2022.
As of December 31, 2022, there was $5.5 million of unrecognized compensation cost related to options to purchase common shares of the Company, which is expected to be recognized over a weighted-average period of 1.9 years.
Share Option Valuation
The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of the options under the 2021 Plan issued during the years ended December 31, 2022 and 2021:
Year Ended December 31,
2022 2021
Expected term (in years)
6.0 6.0
Expected volatility
55.4 % 46.4 %
Risk-free interest rate
3.0 % 1.3 %
Expected dividend yield
- % - %
Restricted Share Units under the 2021 Plan
On November 19, 2021, the Company granted 4,227,759 Restricted Share Units under the 2021 Plan.
The Company granted 939,502 RSUs to one director which were fully vested upon the grant date, and his share-based compensation expense of $10.7 million was immediately recognized in the general and administrative expenses during the year ended December 31, 2021. Under the relevant grant agreement, payment of 50% of the award to the director shall be made on each of the first two anniversaries of the grant date in the form of 60% common shares and 40% cash (based on the fair market value of the underlying common shares as of the applicable settlement date), or such other mix of common shares and cash as determined by the Company’s Compensation Committee. The Compensation Committee resolved to make the first 50% settlement of the award fully in common shares on November 19, 2022. As such, 469,751 of the RSUs were settled as of December 31, 2022.
The Company granted 2,818,506 RSUs in the aggregate to a director and an executive director, 50% of those RSUs shall vest on the 18-month anniversary of the grant date with the balance of the RSUs vesting on the 30-month anniversary of the grant date. As there is no substantive service condition for the 2,818,506 RSUs from accounting perspective, the share-based compensation expense of $32.1 million was immediately recognized in the general and administrative expenses during the year ended December 31, 2021.
There is a service condition for 469,751 RSUs issued to one executive director. One third of the RSUs will vest on each of the first, second and third anniversaries of grant date. Per the agreement, 156,583 of the RSUs were vested as of December 31, 2022.
During the year ended December 31, 2022, the Company granted 4,675,923 RSUs under the 2021 Plan. One third of the RSUs will vest on each of the first, second and third anniversaries of grant date.
RSU transactions during the year ended December 31, 2022 are summarized as follows:
Number of Units Outstanding Weighted Average Fair Value Per Unit
Outstanding at December 31, 2021
3,288,257 $ 11.38
Granted
4,675,923 2.00
Vested
(366,583) 6.60
Forfeited
(850,262) 1.84
Outstanding at December 31, 2022
6,747,335 $ 6.34
Market-Based Restricted Stock Units under the 2021 Plan
On July 15, 2022, the Company entered into agreements with Richard Barlow, the Company’s CEO, to award an equity grant that was originally approved by the Company’s Board at the closing of the Virtuoso Business Combination. The grant is in the form of 4,697,511 RSUs (that settle for common shares), which is equal to 5% of the number of the common shares outstanding as of the closing of the Virtuoso Business Combination. The RSUs will vest if the price of the Company’s common shares as quoted on the NASDAQ equals or exceeds $50.00 on any twenty trading days in any thirty-trading day period (the “Share Price Condition”) between November 18, 2026 and November 18, 2031. Under the RSU award agreement between the Company and Mr. Barlow, dated July 15, 2022, if the Share Price Condition is satisfied on or before November 17, 2026, the RSUs will lapse and Mr. Barlow may exchange the 1,000 Class B Ordinary shares he holds in Wejo Limited for 4,697,511 common shares of the Company under that certain Subscription Agreement Relating to B Ordinary Shares in the Capital of Wejo Limited by and among the Company, Mr. Barlow, and Wejo Limited, dated July 15, 2022.
Market-based RSU transactions during the year ended December 31, 2022 are summarized as follows:
Number of Units Outstanding Weighted Average Fair Value Per Unit
Unvested at December 31, 2021
- $ -
Granted
4,697,511 0.20
Vested
- -
Forfeited
- -
Unvested at December 31, 2022
4,697,511 $ 0.20
As of December 31, 2022, there was $9.6 million of unrecognized compensation expense related to unvested RSUs and market-based RSUs, which is expected to be recognized over a weighted-average period of 2.6 years. Of the total $9.6 million of unrecognized compensation expense, $8.7 million relates to RSUs and $0.9 million relates to market-based RSUs.
Share-based Compensation Expense
Share-based compensation expense recorded is as follows (in thousands):
Year Ended December 31,
General and administrative
$ 5,946 $ 46,029
Sales and marketing
749 3,218
Technology and development
193 2,718
Cost of revenue
50 351
Total
$ 6,938 $ 52,316
19. Income Taxes
Loss before taxation consists of the following (in thousands):
Year Ended December 31,
Foreign (United States) $ 1,504 $ 1,186
Foreign (Other)
(34,179) (23,191)
United Kingdom
(126,165) (195,416)
Total
$ (158,840) $ (217,421)
Year Ended December 31,
Current Provision:
Foreign (United States) 392 357
Foreign (Other)
21 -
Total
$ 413 $ 357
Deferred Provision (Benefit):
Total Provision (Benefit) for Income Taxes $ 413 $ 357
A reconciliation of income tax expense computed at the statutory UK income tax rate to income taxes as reflected in the audited consolidated financial statements is as follows (in thousands):
Year Ended December 31,
Income taxes at UK statutory rate
19.0 % 19.0 %
Permanent differences
(1.1) % (7.0) %
Foreign Rate Differential (4.1) % (2.0) %
Impact of tax rate change 5.1 % 5.9 %
Deferred true-up (0.1) % (1.9) %
Change in valuation allowance (20.2) % (14.3) %
Others 1.1 % 0.2 %
Effective income tax rate
(0.2) % (0.2) %
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 consist of the following (in thousands):
Year Ended December 31,
Deferred Tax Assets:
Net operating loss carryforwards
$ 75,113 $ 55,862
Corporate interest restriction 8,034 -
Accrued expenses 3,588 -
Share-based Compensation 783 -
Others 417 437
Amortization 185 -
Total Deferred Tax Assets 88,120 56,299
Valuation allowance (87,378) (55,261)
Deferred Tax Asset, net of valuation allowance 742 1,038
Deferred Tax Liabilities
Depreciation (198) (194)
Amortization - (40)
Cash to Accrual - Section 481(a) Adjustment (544) (804)
Total Deferred Tax Liability (742) (1,038)
Net Deferred Tax Assets (liability)
$ - $ -
As of December 31, 2022 and 2021, the Company had UK net operating loss carry forwards of $297.0 million and $212.4 million, respectively, that can be carried forward indefinitely.
As of December 31, 2022 and 2021, the Company had U.S. federal net operating loss carry forwards of $2.1 million and $4.3 million, respectively, that can be carried forward indefinitely.
As of December 31, 2022 and 2021, the Company had U.S. state net operating loss carry forwards of $4.7 million and $2.3 million, respectively, that begin to expire in 2038.
Utilization of the U.S. federal and state net operating loss carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization.
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2022 and 2021 related primarily to the increases in net operating loss carryforwards and were as follows (in thousands):
Year Ended December 31,
Valuation allowance at beginning of year
$ 55,261 $ 22,511
Increases recorded to income tax provision
32,117 31,003
Increase (decrease) recorded to APIC - 1,747
Valuation allowance at end of year
$ 87,378 $ 55,261
Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2022 and 2021, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets
will not be realized. Accordingly, the Company maintained a full valuation allowance against its net deferred tax assets as of December 31, 2022 and 2021.
The Company applies the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon the ultimate settlement with the relevant taxing authority. There were no material uncertain tax positions as of December 31, 2022 and 2021.
The Company will recognize interest and penalties related to uncertain tax positions in income tax expense when in a taxable income position. As of December 31, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s audited Consolidated Statements of Operations and Comprehensive Loss.
The Company and its subsidiaries file income tax returns in the UK, U.S., and other foreign jurisdictions. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state, or foreign tax authorities, if such tax attributes are utilized in a future period. Accordingly, all the tax years from 2018-2022 are open for audit in the UK.
20. Net Loss Per Share
Basic and diluted net loss per share attributable to common shareholders was calculated as follows (in thousands, except share and per share amounts):
Year Ended December 31,
Numerator:
Net loss
$ (159,253) $ (217,778)
Net loss attributable to ordinary shareholders - basic and diluted
$ (159,253) $ (217,778)
Denominator:
Weighted-average number of common shares used in net loss per share - basic and diluted
100,795,106 43,553,504
Net loss per share - basic and diluted
$ (1.58) $ (5.00)
The Company’s potentially dilutive securities, which include stock options and warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to shareholders is the same. The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:
Year Ended December 31,
Public Warrants to purchase common shares 11,500,000 11,500,000
Exchangeable Right liability 6,600,000 6,600,000
Earnout shares 6,000,000 6,000,000
Restricted share units 11,444,846 4,227,759
Options to purchase common shares 2,009,136 2,456,102
Warrants to purchase common shares related to July 2022 PIPE 3,776,380 -
Common shares to be issued related to Secured Convertible Note1
12,449,734 -
Warrants to purchase common shares related to GM Securities Purchase Agreement 1,190,476 -
Total 54,970,572 30,783,861
1 At GM’s option at any time prior to the maturity date, GM may require the Company to convert the SCN, in whole or in part, into common shares.
21. Leases
The Company adopted ASC 842, Leases (“ASC 842”) as of January 1, 2022 using the modified retrospective method, in which the Company did not restate prior periods. Upon adoption, the Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which, among other things, allowed it to carry forward the historical lease classification. There was no cumulative adjustment to retained earnings as a result of this adoption. This adoption resulted in a balance sheet presentation that is not comparable to the prior period in the first year of adoption.
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. Lease payments included in the measurement of the lease liability are comprised of fixed payments. The Company does not have variable lease components.
Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company has no material finance leases. The Company leases its corporate headquarters in Manchester, UK which will expire in June 2026 and is classified as an operating lease. This lease does not contain any renewal option, material residual value guarantees nor material restricted covenants. As part of management’s measurable actions taken to significantly reduce expenses, the Company exercised its option to terminate its Manchester office lease on June 29, 2023, effective December 29, 2022. In addition, we also lease office space in Michigan and Chester, UK, which are monthly commitments.
The modification was not accounted for as a separate contract under ASC 842, did not have any impact on the allocation of lease and non lease components and did not result in a change in the classification of the lease; however, it did reduce the Operating lease right-of-use asset by $2.1 million, the Current portion of operating lease liability by $0.4 million and the Long-term operating lease liability by $1.8 million.
ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company considers its short-term leases to be immaterial and has elected the short-term lease exemption. No right-of-use assets nor lease liabilities were recognized for short-term leases with lease terms of 12 months or less.
Leased Facilities
As of December 31, 2022 the Company's right-of-use asset and current and non-current lease liabilities are presented separately on the audited Consolidated Balance Sheets by calculating the present value of lease payments, at the Company’s weighted average discount rate based on the incremental borrowing rate of 11%, over the 0.7 years weighted average remaining lease term.
The following table provides supplemental cash flow information related to the Company’s operating leases:
(in thousands) Year Ended December 31, 2022
Cash outflows from operating activities attributable to operating leases $ 879
Right-of-use assets obtained in exchange for operating lease liabilities1
3,202
Modification of lease1
2,191
1 Non-cash financing activity
For the year ended December 31, 2022 and 2021, total lease expense of the Company’s leased facilities was $0.9 million and $1.0 million, respectively, and was included in General and administrative expenses on the audited Consolidated Statements of Operations and Comprehensive Loss. The Company does not have any leases that have not yet commenced which are material.
Future minimum discounted lease payments are as follows (in thousands):
Year Ended December 31,
2023 $ 440
2024 20
2025 5
2026 -
2027 -
Total minimum lease payments 465
Less: Imputed interest (13)
Present value of lease liability $ 452
22. Commitments and Contingencies
Commitments with Vendors
The Company is party to software and cloud hosting agreements to meet the demands of its customers in various marketplaces. The remaining payments for these services are as follows (in thousands):
2023 $ 18,724
2024 10,117
2025 9,424
92,490
2027 -
Total $ 130,755
1 Includes the total remaining commitment amount under the Microsoft Customer Agreement of $84.5 million which is due in 2026. However, the Company will begin to incur costs in 2023 through 2026 as it utilizes these cloud services.
Legal Proceedings
With respect to all legal, regulatory and governmental proceedings, and in accordance with ASC 450-20, Contingencies-Loss Contingencies, the Company considers the likelihood of a negative outcome. If the Company determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated amount of loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material matters is reasonably possible and the Company is able to determine an estimate of the amount of possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, the Company discloses the estimate of the amount of possible loss or range of loss. However, the Company in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, the matter, and in these instances the Company will disclose the nature of the contingency and describe why the Company is unable to determine an estimate of possible loss or range of loss.
On April 1, 2021, Arma, filed a lawsuit against the Company in the High Court of Justice, Business and Property Courts of England & Wales, Commercial Court (KBD) (claim no. CL-2021-000201) (the “Lawsuit”) and amended the claim on December 23, 2021. In the Lawsuit, Arma claim a declaration from the Court that Arma is entitled to remuneration arising from a successful acquisition of Legacy Wejo, and certain fundraising events that occurred during 2021 and 2020. As of December 31, 2022, the maximum damages claimed by Arma was approximately $16.0 million.
On March 3, 2023, the Company and Arma entered into that certain Deed of Settlement (the “Settlement Agreement”) under which the parties resolved the Lawsuit. Under the Settlement Agreement, (i) Legacy Wejo has agreed to pay Arma $3.25 million (inclusive of all costs and interest and resolving any future claims) in various installments over a 28-month period commencing on April 3, 2023, subject to acceleration and adjustment of the payment schedule based on the achievement by the Company of certain qualifying financing transactions, and (ii) the parties agreed to jointly seek a stay of the Lawsuit except for the purpose of carrying out the terms of the Settlement Agreement, with the understanding that such proceedings may be reinstated if any terms of the Settlement Agreement are breached. The Company has fully accrued $1.4 million in Accrued expenses and other current liabilities and $1.8 million in Other non-current liability on the audited Consolidated Balance Sheets as of December 31, 2022 for the settlement. The corresponding expense for
the Settlement Agreement was recorded in the General and administrative line on the audited Consolidated Statements of Operations and Comprehensive Loss.
The Company does not believe there are any other pending legal proceedings that will have a material impact on the Company’s audited consolidated financial statements and did not have contingency reserves established for any liabilities as of December 31, 2022 and 2021.
23. Employee Benefit Plans
In the UK, the Company makes contributions into salary sacrifice retirement plan on behalf of its employees. The Company paid $0.4 million and $0.2 million, during the years ended December 31, 2022 and 2021, respectively, into such plan.
In the U.S., the Company makes contributions into a defined contribution plan on behalf of its employees, which was established in the first quarter of 2021. The Company paid $0.4 million and $0.1 million into such plan during the years ended December 31, 2022 and 2021, respectively.
24. Related Party Transactions
General Motors
The Company is party to a (i) Data Sharing Agreement, dated December 21, 2018 (see Note 9), (ii) Advanced Subscription Agreement, dated December 13, 2019 (see Note 12), (iii) Convertible Loan Agreement, dated July 21, 2020 (see Note 13), (iv) and the GM Securities Purchase Agreement, dated December 16, 2022 (See Note 14). As of December 31, 2022, GM was deemed to beneficially own approximately 19.99% of the Company’s equity.
Pursuant to the terms of the Data Sharing Agreement as amended on December 7, 2022, the Company and GM share fees with respect to data licenses that support the opportunities for licensing of connected vehicle data. During the years ended December 31, 2022 and 2021, the Company recorded $3.6 million and $3.5 million, respectively, as a reduction to revenue, net on the audited Consolidated Statements of Operations and Comprehensive Loss for revenue sharing amounts owed to GM.
Pursuant to the terms of the GM Credit Facility, GM loaned $10.0 million to the Company in 2020, at an interest rate of 12.0%. The initial term of the GM Credit Facility was three months. In July 2020, the Company had a debt restructuring that modified the facility to extend the term until December 31, 2021. In April 2021, the Company repaid its outstanding debt balance and fees of $10.8 million owed to GM. Interest expense of nil and $0.4 million was recorded on the audited Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2022 and 2021, respectively.
In April 2021, as part of the Convertible Loan Agreement, the Company issued additional Convertible Loans to GM in the sum of £3.5 million ($4.8 million) through the settlement of accounts payable of $2.9 million and recognition of prepayment of $1.9 million. The Convertible Loans issued in April 2021 have the same terms as the Loans issued during the year ended December 31, 2020 (see Note 13).
On December 16, 2022, the Company entered into a Securities Purchase Agreement with GM under which it issued and sold to GM the SCN in the aggregate principal amount of $10.0 million, and the GM Warrants to acquire up to an aggregate amount of 1,190,476 common shares at an exercise price of $0.75112 per common share. The Company received $9.5 million of proceeds from GM associated with the transaction. The SCN accrues compounding interest at the rate of 5.0% per annum in arrears semi-annually until maturity date of December 16, 2023 (see Note 14).
As of December 31, 2022 and 2021, the Company had $1.0 million and $1.5 million, respectively, recorded to Accounts payable on the audited Consolidated Balance Sheets for amounts owed to GM.
Chief Executive Officer
The Chief Executive Officer of the Company currently holds more than 5.0% of the Company’s equity. The CEO also serves as an executive director of another company that entered into a service agreement with the Company, dated March 20, 2020, under which the Company agreed to provide certain proof of concept analysis and autonomous vehicle simulation services to the Company. The Company recognized nil and $0.6 million for the years ended December 31, 2022 and 2021, respectively, for professional and capital raising services rendered by that provider on behalf of the Company.
Chairman of the Board of Directors
The Chairman of the Company’s Board of Directors also serves as a non-employee director of two other companies. The Company and one of the companies entered into two service agreements dated February 12, 2020 and December 1, 2020 under which the Company agreed to provide certain consulting and related services to the Company, which services were not provided by the Chairman. Pursuant to the terms of the agreement, the Company recognized $0.1 million and $0.5 million in fees during the years ended December 31, 2022 and 2021, respectively, for professional services rendered by the Company.
Former Director of the Board of Directors
A company that is controlled by a former director, entered into a Consultancy Agreement, dated May 12, 2016, under which such former director provided certain consulting and related services to the Company. Pursuant to the terms of the Consultancy Agreement, the Company recognized nil and $0.8 million of expenses for the years ended December 31, 2022 and 2021, respectively, for professional and capital raising services rendered on behalf of the Company. Upon completion of the Virtuoso Business Combination, this agreement was effectively terminated.
Managing Member of Virtuoso Sponsor LLC
The Company engaged Jeffrey Warshaw under the Introducer Agreement, dated February 1, 2022 (the “Introducer Agreement”), to introduce the Company to CFPI and its affiliates and arrange the CFPI Stock Purchase Agreement for the Company (see Note 3). Mr. Warshaw is the managing member of Virtuoso Sponsor LLC, a former holder of over 5% of the Company’s common shares. In exchange for Mr. Warshaw’s services under the Introducer Agreement, upon the execution of the CFPI Stock Purchase Agreement, the Company paid Mr. Warshaw a fee (the “Introducer Fee”) equal to $1.9 million (1.85% of the face amount of the CEF secured by the Company under the CFPI Stock Purchase Agreement) during the year ended December 31, 2022, which was recorded within general and administrative expenses in the Company’s audited Consolidated Statements of Operations and Comprehensive Loss.
Apollo
On November 10, 2021, Apollo and the Company entered into the Forward Purchase Agreement. Under that agreement, Apollo entered into an equity prepaid forward transaction in which it acquired 7.5 million shares of Virtuoso Class A common shares at $10 per share, which, following the closing of the Virtuoso Business Combination, were exchanged to and represented more than 5% of the Company’s outstanding common shares. In May 2022, the Company delivered a written notice to Apollo to request partial settlement of the transaction and received net sale proceeds of $2.5 million through December 31, 2022, with respect to the remaining 25% of the purchased shares. As of December 31, 2022, Apollo holds 5,585,583 shares of the Company’s common shares.
On August 22, 2022, Wejo Limited entered into the FPA Amendment with Apollo, as described in Note 6.
Sompo Holdings, Inc.
On July 27, 2022, the Company entered into a subscription agreement with significant investment coming from Sompo Light Vortex, a wholly-owned subsidiary of Sompo Holdings, as described in Note 3. As a result of the July 2022 PIPE transaction, Sompo Holdings beneficially owns 10,301,760 common shares, which represented 9.5% of the Company’s outstanding common shares as of the closing of the transaction.
On October 8, 2022, the Company and Sompo Holdings entered into the Co-Development Agreement (“CDA”). Under the agreement, Sompo Holdings and the Company will collaborate and jointly develop solutions. The CDA shall have a term of 1 year, and shall renew automatically unless either party notifies the other party of their intention to terminate the CDA. The parties have commenced activities in support of the CDA.
During the years ended December 31, 2022 and 2021, the Company recognized revenue of $0.9 million and $0.4 million, respectively, related to software and cloud solutions work performed on behalf of Sompo Holdings.
Director PIPE Investment
On July 27, 2022, as part of the July 2022 PIPE, the Company entered into subscription agreements with certain investors, including the following members of its Board of Directors: Ann M. Schwister, John T. Maxwell (and his wife Kathleen Maxwell), Lawrence D. Burns, Richard Barlow, Samuel Hendel, and Timothy Lee (collectively, the “Board PIPE Investors”).
The Board PIPE Investors invested the following amounts in exchange for the following securities of the Company:
Investor Name Common Shares Warrants Total Purchase Price
Ann M. Schwister 73,513 24,504 $ 103,063
John T. Maxwell 36,757 12,252 51,532
Kathleen Maxwell 36,757 12,252 51,532
Lawrence D. Burns 73,513 24,504 103,063
Richard Barlow 147,026 49,009 206,126
Samuel Hendel 36,757 12,252 51,532
Timothy Lee 73,513 24,504 103,063
Total 477,836 159,277 $ 669,911
25. Subsequent Events
TKB Business Combination Agreement
On January 10, 2023, the Company entered into the TKB Business Combination Agreement with TKB, Green Merger Subsidiary Limited, an exempted company limited by shares incorporated under the laws of the Cayman Islands and a direct, wholly owned subsidiary of the Company (“Merger Sub 1”) which agreed to participate in the series of transactions in amongst and with Wejo Holdings Ltd., an exempted company limited by shares incorporated under the laws of Bermuda and a direct, wholly owned subsidiary of the Company (“Holdco”) and Wejo Acquisition Company Ltd, an exempted company limited by shares incorporated under the laws of Bermuda and a direct, wholly owned subsidiary of Holdco (“Merger Sub 2”).
Under the TKB Business Combination Agreement and subject to the satisfaction or waiver of the terms and conditions specified therein, (i) Merger Sub 1 will merge with and into TKB, with TKB continuing as the surviving company and a wholly owned subsidiary of Holdco (the “TKB Merger”) and (ii) Merger Sub 2 will merge with and into the Company, with the Company continuing as the surviving company and a wholly-owned subsidiary of Holdco (the “Wejo Merger”) so that, immediately following completion of the TKB Business Combination (the “Closing”), each of the Company and TKB will be a wholly-owned subsidiary of Holdco. At the Closing, by virtue of the Wejo Merger and without any action on the part of the holders of any shares of the capital stock of the Company, each common share of the Company issued and outstanding immediately prior to the effective time (other than (i) any common shares of the Company held in the treasury of the Company or owned by TKB and (ii) any common shares of the Company held by shareholders of the Company that have validly exercised dissenters rights) will be converted into the right to receive one (1) common share of Holdco, par value $0.001 per share (“Holdco Common Share”). Each warrant of the Company issued and outstanding immediately prior to the effective time of the Wejo Merger will be assumed by Holdco and automatically represent a warrant to acquire a Holdco Common Share. Each stock option of the Company that is outstanding immediately prior to the effective time of the Wejo Merger, whether vested or unvested, shall automatically and without any action on the part of the holder or beneficiary thereof be assumed by Holdco and converted into an option to purchase a number of Holdco Common Shares equal to the total number of Wejo Common Shares subject to the stock option immediately prior to the effective time of the Wejo Merger, and shall otherwise be subject to the same terms and conditions (including vesting schedule) as applicable to the corresponding stock option of the Company. At the effective time of the TKB Merger, by virtue of the TKB Merger and without any action on the part of the holders of any shares of the capital stock of TKB, each TKB ordinary share issued and outstanding immediately prior to the effective time (other than (i) any ordinary shares of TKB held by shareholders of TKB that have validly exercised redemption rights under the TKB organizational documents, (ii) any ordinary shares of TKB held in the treasury of TKB or owned by the Company and (iii) any ordinary shares of TKB held by shareholders of TKB that have validly exercised dissenters rights) will be converted into the right to receive Holdco Common Shares based on a floating exchange ratio. The exchange ratio will be determined by dividing $11.25 by the Company’s volume weighted price per share for the 15 consecutive trading days immediately preceding the second trading day prior to the TKB shareholders meeting to be held in connection with the TKB Business Combination, subject to a minimum exchange ratio of 3.75 and a maximum exchange ratio of 22.50. Each TKB warrant issued and outstanding immediately prior to the effective time of the TKB Merger will be assumed by Holdco and the exercise price and number of underlying Holdco Common Shares will be adjusted according to the exchange ratio. Each TKB unit issued and outstanding immediately prior to the effective time of the TKB Merger will be automatically detached and the holder of each unit will be deemed to hold one TKB Class A ordinary share and one-half of a TKB public warrant, which underlying Class A ordinary share and public warrant will be converted in accordance with the terms explained above.
The Closing is subject to customary closing conditions, including, among others, (i) approval of the transaction by TKB’s shareholders and the Company’s shareholders, (ii) approval of the extension of the term of TKB’s existence beyond its existing expiration date of January 29, 2023 (which was approved on January 27, 2023), (iii) subject to certain materiality exceptions, the accuracy of the representations and warranties made by Holdco, the Company, the Merger Subs, and TKB, respectively, and compliance by Holdco, the Company, the Merger Subs and TKB with their respective obligations under the TKB Business Combination Agreement, (iv) declaration of the effectiveness by the SEC of the Registration Statement on Form S-4 to be filed by Holdco (the “Registration Statement”), (v) the absence of any governmental order, statute, rule or regulation or governmental action enjoining or prohibiting the consummation of the TKB Business Combination, (vi) approval of Holdco Common Shares and warrants issued as consideration in the TKB Business Combination for listing on NASDAQ subject to official notice of issuance, (vii) the absence of material adverse effect that is continuing with respect to TKB and the Company, and (viii) there being at Closing, in the reasonable and good faith assessment of the Company or TKB, as applicable, available cash on hand at the Company or available cash to be borrowed pursuant to binding contractual commitments from third parties, in such amounts that, together with (A) the net proceeds of amounts in the trust account, (B) any irrevocable and binding financing commitments entered into pursuant to the TKB Business Combination Agreement and (C) any nonbinding financing commitments or other sources of income that in the reasonable determination of the Company or TKB, as applicable, are reasonably expected to be available following the Closing, will be sufficient to fund ordinary course working capital and other general corporate purposes of the Company in accordance with its mid-term business plan.
On January 31, 2023, the Company announced TKB retained approximately $56.7 million in its trust account after a final shareholder vote to extend the time it has to consummate a business combination to June 29, 2023. The vote, which was approved by approximately 99% of the votes cast at the meeting, representing approximately 82% of TKB’s outstanding shares, resulted in the retention of approximately $3.7 million more in TKB’s trust account than was initially reported by TKB on January 25, 2023. The Company has also begun the process of speaking with strategic investors about a PIPE raise contemplated in connection with the TKB Business Combination, which may close in late second quarter of 2023, but is dependent on various closing conditions and other factors.
Private Placement of Second Lien Note and Warrant
On February 27, 2023, the Company entered into that certain Securities Purchase Agreement (the “Second Lien SPA”) with an investor (the “Second Lien Noteholder”). Under the Second Lien SPA, for a purchase price of $3,500,000, the Company issued and sold to the Second Lien Noteholder a secured, non-convertible note in the aggregate principal amount of $3,684,210 (the “Second Lien Note”). The Second Lien SPA also requires the Company to issue a warrant to acquire the Company’s common shares (the “Second Lien Warrant”) upon the occurrence of a Subsequent Financing (as defined below) (the issuance of the Second Lien Note and the Company’s obligation to issue the Second Lien Warrant upon a Subsequent Financing together being referred to as the “Second Lien Offering”). The Company’s obligations under the Second Lien Note are secured by a second lien on certain assets of its subsidiaries, which are the same assets that are subject to first lien security interests under the Company’s SCN, namely certain assets of Legacy Wejo and the shares held by Wejo Bermuda in Legacy Wejo (collectively, the “Second Lien Collateral”); such second lien is subordinated to the first lien security interests under the SCN. The security interest does not secure assets that were previously encumbered in connection with the issuance of the Company’s Secured Loan Notes in April 2021. The Second Lien Note accrues compounding interest at the rate of 10.0% per annum, which will be payable in cash, in arrears semi-annually in accordance with the terms of the Second Lien Note. If the Company effects, directly or indirectly, an offering of any shares of any kind of its securities in a financing completed during the one-year period following the issuance of the Second Lien Note, then it must issue the Second Lien Noteholder a warrant exercisable for such number of the Company’s common shares determined by dividing $3,850,000 by the closing price of the Company’s common shares. The Second Lien Note matures on March 29, 2023 (the “Second Lien Note Maturity Date”). At the Second Lien Noteholder’s option at any time during the 20-business day period following certain fundamental transactions, the Second Lien Noteholder may require the Company to redeem all or any part of the outstanding principal and accrued but unpaid interest of the Second Lien Note, in whole or in part, at a price of 120% of the then-outstanding principal amount plus all accrued and unpaid interest.
On February 27, 2023, GM consented to the Second Lien Offering and agreed to amend the Secured Convertible Note, solely to add additional events of default, and outside of such addition, the Secured Convertible Note remains unchanged and in full force and effect.
On March 28, 2023, the Company and the Second Lien Noteholder executed that certain First Amendment to Secured Note (the “Second Lien Note Amendment”) under which they agreed to extend the Second Lien Note Maturity Date under the Second Lien Note to April 17, 2023 in exchange for an extension fee in the amount of $368,421, representing 10% of the principal amount of the Second Lien Note. Other than such amendments in the Second Lien Note Amendment, the Second Lien Note remains unchanged and in full force and effect.
Arma Settlement Agreement
On March 3, 2023, the Company and Arma entered into certain Deed of Settlement under which the parties resolved the Lawsuit. See Note 22 for further information.
Private Placement of Unsecured Note and Warrant
On March 21, 2023 (the “Unsecured Note Issuance Date”), the Company issued and sold to Tim Lee, the Company’s Chairman of its Board (the “Unsecured Noteholder”), the Unsecured Note in the aggregate principal amount of $2,000,000 (the “Principal”). The Unsecured Note also requires the Company to issue an Unsecured Note Warrant (as defined below) to acquire the Company’s common shares upon the occurrence of a Subsequent Financing (as defined below) (the issuance of the Unsecured Note and the Company’s obligation to issue the Unsecured Note Warrant upon a Subsequent Financing together being referred to as the “Unsecured Note Offering”). The Unsecured Note Offering closed on March 21, 2023. The Company intends to use the proceeds from the Unsecured Note Offering for general corporate purposes. The Unsecured Note matures on May 22, 2023 (the “Unsecured Note Maturity Date”). The Unsecured Note does not accrue interest, but the Company must pay a redemption premium of 110% of the outstanding principal (the “Redemption Premium”) amount to redeem the Unsecured Note at or before the Unsecured Note Maturity Date. The Unsecured Note provides for customary events of default. If an event of default occurs, the Unsecured Noteholder can provide notice to the Company that it is requiring the Company to repay the outstanding principal at the Redemption Premium within five business days of the delivery of receipt of such written notice. The Company will be subject to certain customary affirmative and negative covenants pursuant to the Unsecured Note. If the Company effects, directly or indirectly, an offering of any shares of capital stock, convertible securities, rights, options, warrants or any other kind of its securities in a financing completed during the one-year period following the issuance of the Unsecured Note (a “Subsequent Financing”) then it must issue the Unsecured Noteholder a five-year warrant exercisable for such number of the Common Shares determined by dividing 100% of the Principal by the closing price of the Common Shares as reported by NASDAQ on the trading day immediately prior to the issuance of securities in a Subsequent Financing, subject to a floor price equal to the higher of the closing bid price of the Common Shares and the “NASDAQ Minimum Price” (as defined in NASDAQ Rule 5635) as of the Unsecured Note Issuance Date, at an exercise price per share equal to 110% the closing bid price of the Common Shares as reported by NASDAQ on the trading day immediately prior to the Subsequent Financing, subject to a floor price equal to the higher of the closing bid price of the Common Shares and the NASDAQ Minimum Price as of the Issuance Date (the “Unsecured Note Warrant”).
Cost-Cutting Initiative
On March 22, 2023, the Board of Directors of the Company approved a plan to reduce the Company’s workforce by approximately 40 employees, representing approximately 16% of the Company’s total current global workforce. This decision was based on cost-reduction initiatives intended to reduce operating expenses. As of March 22, 2023, the Company estimated that it will pay approximately $1.8 million in connection with the reduction in force, which consists of notice period and severance payments, previously accrued compensation expenses, and other related costs. The Company expects that these charges will be incurred in the second and third quarters of 2023, and that the reduction in force will be substantially complete in the third quarter of 2023, subject to local law and consultation requirements. The charges the Company expects to incur are subject to assumptions, including local law requirements, and actual charges may differ from the estimate disclosed above.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022. Such controls and procedures cannot provide absolute certainty but can provide reasonable assurance regarding management's control objectives. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are (i) designed to provide such reasonable assurance and (ii) effective at that reasonable assurance level. as of December 31, 2022.
Previously Reported Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses were previously disclosed in our 2021 Annual Report and our first, second, and third quarter of 2022 disclosures. Specifically, these material weaknesses related to the insufficient design and implementation of processes and controls over financial reporting, including inadequate oversight, review and testing of the work performed by our third-party specialists and to the lack of sufficient accounting and financial reporting personnel with requisite knowledge and experience in the application of U.S. GAAP. We have concluded that these material weaknesses arose because we did not have the necessary processes, systems, personnel and related internal controls in place. As a result of the lack of accounting and financial reporting personnel with requisite knowledge and experience in the application of U.S. GAAP, the errors were not identified and corrected in a timely manner, as discussed in greater detail under the caption entitled “Remediation Efforts” below.
We have completed the design and implemented remediation measures to strengthen the effectiveness and operation of our internal control environment. At the time of filing this Annual Report on Form 10-K, the material weaknesses have been remediated. Management believes that the audited consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Remediation Efforts
We have taken certain measures to remediate the material weaknesses described above. During 2021, we had engaged third-party specialists to assist in our remediation efforts, including the design and establishment of processes and internal controls over financial reporting, the selection and implementation of upgraded financial reporting systems, and the design of our finance organization to identify additional finance and technical U.S. GAAP accounting resources we need to support effective internal controls. During 2021, we appointed key finance and technical U.S. GAAP accounting resources, including a Chief Financial Officer, a Corporate Controller, and a Head of Financial Reporting, all of whom have public company U.S. GAAP financial reporting experience. During 2022, we continued to hire additional personnel with strong accounting, internal control and U.S. GAAP experience, including a Head of SOX Compliance and a Senior Vice President-Corporate Finance. We believe that we have completed our required recruitment efforts at this time, which has significantly strengthened our internal control environment.
In the first quarter of 2022, Management initiated a remediation project to address the material weakness related to our insufficient design and implementation of processes, systems and internal controls over financial reporting, including inadequate oversight, review, and testing of internal controls. This project entailed assisting the business functions with the remediation of their control deficiencies, ensuring that adequate management action is taken and supporting evidence is maintained to prove the operating effectiveness of the remediated controls. Control owners have been educated on the principles and requirements of each control as well as the requisite accountabilities within each of the business processes. As a result, during the second quarter of 2022, we started the design testing of the remediated controls to validate the control design. In the third quarter of 2022, we completed the remediation project and all internal controls over financial reporting were tested by us during the fourth quarter of 2022 to determine if they are operating effectively. Additionally, another round of this control testing was performed against the fourth quarter of 2022 internal controls. Internal control tests results identified minimal selected controls that required remediation with no material weaknesses identified within internal controls over financial reporting.
The Company had also completed the critical first phase of implementation of new financial reporting systems, as part of our remediation efforts. The Company implemented a new Enterprise Resource Program (“ERP”) system, which included the core financial system (in the second quarter of 2022) and a Human Capital Management (“HCM”) module (in the third quarter of 2022), which systematically integrates key
processes and controls. We believe that we have achieved significant progress in strengthening the internal control environment during 2022 through the implementation of these systems.
While management has remediated these material weaknesses, there is no assurance that these remediation efforts, will prevent or detect future material weaknesses. If we are not able to retain these personnel with accounting, internal control and U.S. GAAP experience or maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business. In contrast, even if we are successful in strengthening our controls and procedures, in the future these controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements. If new material weaknesses arise or be discovered in the future, material misstatements could occur and go undetected in our interim or annual consolidated financial statements, and we may be required to restate our consolidated financial statements. In addition, we may experience delays in satisfying our reporting obligations or complying with SEC rules and regulations, which could result in investigations and sanctions by regulatory authorities. Any of these results could adversely affect our business and the value of our common shares. We cannot provide assurance that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined under the Exchange Act Rule 13a-15 (f)) to provide reasonable assurance regarding the reliability of financial reporting and that the consolidated financial statements have been prepared in accordance with U.S. GAAP. Such internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance (a) that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations from management and directors; and (b) regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management is further responsible for maintaining a system of internal accounting control designed to provide reasonable assurance that the Company's assets are adequately safeguarded, and that the accounting records reflect transactions executed in accordance with management's authorization. The system of internal control is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel and a program of internal audit.
Management conducted an evaluation of the effectiveness of internal controls over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission in Internal Control - Integrated Framework issued in 2013. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2022. The effectiveness of the Company's internal control over financial reporting as of December 31, 2022 does not include a 404(b) attestation report by Ernst & Young LLP, our independent registered public accounting firm, as stated in their report which is shown on page.
Changes in Internal Control Over Financial Reporting
As described above, under the caption entitled “Remediation Efforts”, in the second and third quarters of 2022, the Company implemented a new ERP system, including a new HCM module. In addition, the U.K. affiliate of the Company migrated to a global payroll system provider also used by the U.S. affiliate in the second quarter of 2022. An Equity Compensation Awards Management system was also implemented to monitor and record transactions within the Company’s share-based compensation program in the second quarter of 2022. These implementations resulted in certain new and/or changes to the Company’s processes and procedures, which required the Company to modify certain of its internal controls over financial reporting. The design of these controls has been formalized within the internal control framework. In addition, as a result of the on-going control remediation efforts described above, new or revised process controls have been applied to internal controls over financial reporting. All these changes to the Company’s processes and controls have been, and will continue to be, subject to the Company’s program for evaluating the design and operating effectiveness of internal control over financial reporting. There were no other changes in our internal controls over financial reporting that occurred during the year ended December 31, 2022, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
As previously announced, on February 27, 2023, the Company entered into the Second Lien SPA with the Second Lien Noteholder under which it issued the $3,500,000 Second Lien Note (see Note 25 to the accompanying audited consolidated financial statements).
On March 28, 2023, the Company and the Second Lien Noteholder executed the Second Lien Note Amendment under which they agreed to extend the maturity date under the Second Lien Notes to April 17, 2023 in exchange for an extension fee in the amount of $368,421, representing 10% of the principal amount of the Second Lien Note.
Other than as expressly modified pursuant to the Second Lien Note Amendment, the Second Lien Note remains in full force and effect. The foregoing description of the Second Lien Note Amendment is not complete and is qualified in its entirety by reference to the full text of the Second Lien Note Amendment, a copy of which is filed as Exhibit 10.13.1 hereto and is incorporated herein by reference.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Directors
The following table identifies our directors as of March 28, 2023:
Name Age Position
Richard Barlow 44 Chief Executive Officer and Director
Lawrence Burns 71 Director
Samuel Hendel 41 Director
Timothy Lee 72 Director
John T. Maxwell 58 Chief Financial Officer and Director
Ann M. Schwister 55 Director
Richard Barlow
Richard Barlow serves as the Chief Executive Officer and a Director at Wejo, responsible for strategic direction and managing all aspects of the business. Mr. Barlow founded Wejo in 2014, having founded, scaled and exited a highly profitable fintech data platform out of the UK. Realizing that the connected data technology in motor racing - one of his passions - would transition to mainstream automotive in the future, Mr. Barlow created Wejo and the mantra of “Data For Good™” - transforming connected vehicle data into mobility intelligence solutions that revolutionize the way we live, work and travel. Mr. Barlow has led Wejo from the front since the company’s inception, creating the automotive industry’s standardized data and communication stack for all types of connected vehicles.
We believe Mr. Barlow’s extensive experience as an executive, his experience in data exchange and prior experience as a director of Wejo Limited qualify him to serve as a director of Wejo Group Limited.
Lawrence Burns
Lawrence Burns joined our Board in connection with the closing of the Virtuoso Business Combination in November 2021 and currently serves as Chair of our Risk Management, Security and Data Privacy Committee (the “Risk Committee”) and as a member of our Compensation Committee and Corporate Governance Committee (the “Nominating Committee”). Dr. Burns has over 30 years of leadership experience in the automotive industry. Dr. Burns served as the Corporate Vice President of Research & Development and Planning of General Motors from 1998-2009 where he was responsible for advanced technology development, product portfolio planning, and capacity and strategic planning. He had previously held various leadership positions from 1988 - 1997 at General Motors, including industrial engineering, quality, production control, product/manufacturing/business planning, and product program management. In 2009, Dr. Burns founded the consulting, professional speaking and writing firm and, et al LLC. He has previously served as a consultant to Waymo (f/k/a Google Self-Driving Cars) from 2010 - 2021, Allstate from 2013 - 2016, and IHS Markit Ltd. from 2016 - 2017. Dr. Burns taught Engineering at the University of Michigan from 2010-2015. Dr. Burns is currently on the Advisory Boards of Kitson & Partners, a real estate developer, and Nanoramic Laboratories, a nano-carbon technology company, and the Board of Directors of Niron Magnetics. He is an Executive Advisor at Neural Propulsion Systems. He served on the Peloton Technology Inc. Board of Directors from 2016 - 2020 and as the Vice Chairman of Board of Directors of MRIGlobal from 2010 - 2013. Dr. Burns received a B.S. in Mechanical Engineering from General Motors Institute (now Kettering University), M.S. in Engineering/Public Policy from the University of Michigan, and Ph.D. in Civil Engineering from the University of California, Berkley.
We believe Dr. Burns’ extensive experience in automotive innovation, research and development, executive leadership and strategic planning qualify him to serve as a director of Wejo Group Limited.
Samuel Hendel
Samuel Hendel joined our Board in connection with the closing of the Virtuoso Business Combination in November 2021 and currently serves on our Audit, Compensation and Risk Committees. Mr. Hendel has 20 years of experience in the investment management industry and currently serves as Executive Chairman of JKBX, a company founded by Mr. Hendel. JKBX is the premiere royalties technology platform built to expand opportunities for all participants by revolutionizing the ownership of music royalty streams. Mr. Hendel previously served as Portfolio Manager at Kepos Capital where he was responsible for portfolio management, marketing, and business development. Mr. Hendel is a Co-Founder of Dataminr, an event and risk detection company, which he began with two of his former Yale classmates in 2009. Mr. Hendel currently serves as a founding board member of the new joint venture, Chord Music Partners, which will continue to scale by providing flexible capital solutions for artists and creators and exploring NFT monetization opportunities. Prior to Kepos Capital, he served as Portfolio Manager and President of Easterly Investment Partners, the $4
billion AUM value manager from 2009 to 2022. Prior to Joining Easterly, Mr. Hendel was Co-Portfolio Manager for risk arbitrage and event-driven strategies at Satellite Asset Management from 2006 to 2009. That position followed 3 years at UBS, from 2003 to 2006, where Mr. Hendel was an Associate Director, serving in both the portfolio trading and proprietary trading groups. In his personal capacity, Mr. Hendel is an Associate Fellow of Davenport College at Yale University in addition to being Co-Founder of Accelerate Yale, an alumni shared interest group focused on promoting entrepreneurship at Yale. Mr. Hendel has additional board experience, serving as the Chairman of OkayMedia, which includes OkayPlayer, a music and lifestyle website founded in 1999 by Ahmir (Questlove) Thompson of the hip hop band The Roots, and OkayAfrica, a digital media company focused on African culture. He also served on the board of Virtuoso from January 2021 through the closing of the Virtuoso Business Combination, where he also served as a member of the Audit and Compensation Committees. Mr. Hendel also serves on the board of ImpaCT, a Connecticut-based charity focused on providing support to underprivileged youth in the local community alongside his wife. Mr. Hendel received a B.A. from Yale University.
We believe Mr. Hendel’s extensive experience in investment management, executive leadership, and M&A qualify him to serve as a director of Wejo Group Limited.
Timothy Lee
Timothy Lee, Chairman of the Board of Directors, served as the Chairman of the Board of Directors of Wejo Limited since 2017 and then was appointed Chairman of the Board of Directors of the Company in connection with the closing of the Virtuoso Business Combination in November 2021. Mr. Lee currently serves as Chair of each of our Compensation Committee and our Nominating and Audit Committee. Prior to joining Wejo, Mr. Lee spent 45 years working at General Motors in international operations, manufacturing and engineering where he served as Executive Vice President, General Motors Manufacturing and Chairman of General Motors China until his retirement in 2014. Mr. Lee is a manager, member and holder of approximately 30% of the equity interests of Hawksbill Group, a firm he co-founded in August 2015, that provides strategic advice to executives. Mr. Lee also works with private equity groups Ontario Teachers’ Pension Plan and Atlas Holdings. Mr. Lee currently serves as the Chairman of the Board of private company Vantage Elevation, LLC, a private company owned by the Ontario Teachers Pension Plan. He is also a member of the Board of Directors of US Salt, a private company owned by Emerald Lake Capital. Mr. Lee received a BA from the General Motors Institute (now Kettering University) and an MS from Purdue University.
We believe Mr. Lee’s extensive experience as an executive, his experience in operations, and prior experience as a director of Wejo Limited qualify him to serve as a director of Wejo Group Limited.
John T. Maxwell
John T. Maxwell has served as the Chief Financial Officer and Director of the Company since March 2021. Mr. Maxwell has more than 30 years of experience driving financial growth, including in the technology and telecommunications industries. From January 2017 to December 2020, Mr. Maxwell served as Chief Financial Officer of Aquestive Therapeutics, a specialty pharmaceutical company with a focus on epilepsy and allergy treatments. Mr. Maxwell prepared the company for its IPO, raising $115 million of new equity capital in its 2018 IPO and 2019 follow-on offering. Mr. Maxwell also led a $100 million debt recapitalization and $125 million royalty monetization transaction at Aquestive. Prior to his role at Aquestive, from September 2000 to August 2006, Mr. Maxwell served as SVP of Finance and Administration at PanAmSat, which he helped take private, and subsequently brought public in 2005. Previously, Mr. Maxwell served as Chief Financial Officer at WIL Research. Mr. Maxwell started his career at Ernst & Young, and held various senior financial roles at General Signal, ADP, PanAmSat, INFONXX and Plainfield Asset Management. Mr. Maxwell earned his MBA in Finance and International Business from NYU’s Stern School of Business and received his BBA in Accounting from Texas Tech University. Mr. Maxwell is a Certified Public Accountant.
We believe Mr. Maxwell’s extensive experience as an executive, his experience in financial leadership and prior experience as a director of Wejo Limited qualify him to serve as a director of Wejo Group Limited.
Ann M. Schwister
Ann M. Schwister joined our Board in connection with the closing of the Virtuoso Business Combination in November 2021 and currently serves as Chair of our Audit Committee. Ms. Schwister has 29 years of domestic and international operational experience at Procter and Gamble. From January 2014 until June 2018, she served as Vice President and CFO of North America, Procter and Gamble’s largest and most profitable region. Previously, she served as VP and CFO of Greater China and VP and CFO of Global Oral Care for Procter and Gamble. Since retiring, Ms. Schwister has been a strategic advisor working with several organizations, including social enterprises and a small family-owned business. She currently serves on the boards of Haskell (a private Architecture, Engineering and Construction company) and the Impact Investing Committee of the Greater Cincinnati Foundation after nine years serving on the board. Ms. Schwister previously served on the board of PARTS iD, Inc. (NYSE American: ID), serving as Chair of the Audit Committee and a member of the Governance Committee. Finally, she has served on the CFO Committee of the Grocery Manufacturers Association and the Wisconsin School of Business Dean’s Advisory Board. In these roles, Ms. Schwister has amassed significant experience regarding Global P&L responsibilities, gained a deep understanding of consumers and digital and traditional retail environments, and gained experience with respect to small businesses. She has a BBA degree in Finance with a specialization in International Business from the University of Wisconsin-Madison.
We believe Ms. Schwister’s extensive experience in operations management, public company experience, finance and accounting, and executive leadership qualify her to serve as a director of Wejo Group Limited.
Director Independence
As required by the rules of NASDAQ, a majority of the directors on the Company’s Board of Directors are independent. An “independent director” is generally defined under applicable NASDAQ rules as a person other than an officer or employee of the Company or its subsidiaries or any other individual having a relationship which in the opinion of the Board, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.
Our board has determined that each of Mr. Hendel, Mr. Lee, Dr. Burns and Ms. Schwister is an “independent director” under applicable SEC and NASDAQ rules for purposes of serving on the Board and each committee on which they serve, as applicable. In making these determinations, our Board of Directors reviewed and discussed information provided by the directors with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
All our audit committee members also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act, and the listing standards of NASDAQ.
Committees of the Board of Directors
Our Board has established four standing committees - Audit, Compensation, Nominating and Corporate Governance, and Risk Management, Security and Data Privacy - each of which operates under a written charter that has been approved by our Board and is available on our corporate website at www.wejo.com. The information on our website is not deemed to be a part of or incorporated by reference into this report.
The members of each of the Board committees and committee Chairpersons as of March 28, 2023 are set forth in the following chart.
Name Audit Compensation Nominating and Corporate Governance Risk Management, Security and Data Privacy
Richard Barlow X
Lawrence Burns X X Chair
John T. Maxwell
Timothy Lee X Chair Chair
Samuel Hendel X X X
Ann M. Schwister Chair
Audit Committee
Our Audit Committee’s responsibilities include, among other things:
•appointing, compensating, retaining, evaluating, replacing and overseeing our independent registered public accounting firm;
•assessing our independent registered public accounting firm’s independence from management;
•reviewing, with our independent registered public accounting firm, the scope and results of their audit;
•approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
•coordinating with the Risk Committee to consider risks or exposure, including relating to cybersecurity;
•overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the quarterly and annual financial statements that we file with the SEC;
•overseeing our financial and accounting controls and compliance with legal and regulatory requirements;
•reviewing related person transactions; and
•establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters.
The Board appointed Samuel Hendel, Timothy Lee, and Ann M. Schwister to serve on the Audit Committee, with Ann M. Schwister serving as its Chair. Each of the members of our Audit Committee meets the definition of “independent director” for purposes of serving on the Audit Committee under Rule 10A-3 of the Exchange Act and the NASDAQ rules. Each member of our Audit Committee also meets the financial literacy requirements of NASDAQ listing standards. Each member of our Audit Committee has the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC.
Compensation Committee
Our Compensation Committee is responsible for assisting the Board in overseeing the Company’s employee compensation policies and practices, including evaluating, recommending and approving executive officer compensation arrangements, plans, policies and programs and administering Company-wide and executive bonuses plans or programs and equity-based compensation plans. In fulfilling its purpose, our Compensation Committee has the following principal duties:
•reviewing and approving the corporate goals and objectives, evaluating the performance of and reviewing and approving the compensation of our Chief Executive Officer and other executive officers;
•reviewing and approving or making recommendations to our Board regarding our incentive compensation and equity-based plans, policies and programs;
•reviewing and approving all employment agreements and severance arrangements for our executive officers, including our Chief Executive Officer and Chief Financial Officer;
•reviewing the Company’s compensation programs and approving any appropriate modifications or new plans, programs or policies;
•administering the Company’s equity and non-equity based compensation plans for employees of the Company as provided by the terms of such plans, including authorizing all awards made pursuant to such plans;
•overseeing the adoption and administration of any employee retirement plan, and other material employee benefit plan, and any material modification of any such plans;
•making recommendations to our Board regarding the compensation of non-executive directors;
•reviewing the Company’s human capital management strategies, initiatives and programs with respect to the Company’s culture, talent recruitment, development, succession, and retention, employee engagement, and diversity and inclusion; and
•retaining and overseeing any compensation consultants.
The Board appointed Lawrence Burns, Timothy Lee, and Samuel Hendel to serve on the Compensation Committee, with Timothy Lee serving as its Chair. Each of our Compensation Committee members meets the definition of “independent director” for purposes of serving on the compensation committee under the NASDAQ rules, including the heightened independence standards for members of a compensation committee.
Nominating and Corporate Governance Committee
Our Nominating Committee’s responsibilities include:
•identifying, screening and recommending to our Board director candidates for election or re-election consistent with criteria approved by the Board;
•overseeing succession planning for members of our Board of Directors;
•periodically reviewing our Board of Directors’ leadership structure and recommending any proposed changes to our Board of Directors;
•reviewing periodically the committee structure of the Board and recommend to the Board for approval the appointment of directors to Board committees and assignment of committee chairs;
•overseeing an annual evaluation of the effectiveness of our Board of Directors and its committees; and
•developing and recommending to our Board of Directors a set of corporate governance guidelines.
The Board appointed Lawrence Burns and Timothy Lee to serve on the Nominating Committee, with Timothy Lee serving as its Chair, each of whom meets the definition of “independent director” under the NASDAQ rules.
Risk Management, Security and Data Privacy Committee
Our Risk Committee’s responsibilities include:
•overseeing our risk management process, focusing on our general risk management strategy;
•overseeing the implementation of risk mitigation strategies by management to ensure that the Company is taking the appropriate measures to achieve prudent balance between risk and reward in both ongoing and new business activities;
•monitoring the effectiveness of the privacy, security and risk management framework;
•reviewing the business continuity plan;
•coordinating its activities with the audit committee in instances where there is any overlap with audit activities including reviewing results of audits regarding information technology and information security issues; and
•discussing our policies with respect to risk assessment and risk management with management.
The Board appointed Richard Barlow, Lawrence Burns, and Samuel Hendel to serve on the Risk Management, Security and Data Privacy Committee, with Lawrence Burns serving as its Chair.
Executive Officers
The following table identifies our executive officers as of March 28, 2023:
Name Age Position
Richard Barlow 44 Chief Executive Officer and Director
John T. Maxwell 58 Chief Financial Officer and Director
Mina Bhama 44 General Counsel and Company Secretary
Benoit Joly 50 Chief Commercial Officer
Sarah J. Larner 41 Executive Vice President of Strategy and Innovation
Den Power 59 Chief People Officer
David Jack 57 Chief Technology Officer
Richard Barlow
See biography under “Directors” section above.
John T. Maxwell
See biography under “Directors” section above.
Mina Bhama
Mina Bhama, General Counsel and Company Secretary, has served as General Counsel for Wejo since February 2018, and as the Company Secretary since January 2019. Ms. Bhama is responsible for managing the legal function and advising the Company and Board of Directors on the Company’s legal, regulatory and governance matters. Prior to these roles, Ms. Bhama served as legal consultant to Wejo from November 2016 to January 2018. Ms. Bhama has a strong background in corporate commercial and M&A and corporate governance having previously served as General Counsel and Company Secretary for Conviviality Plc, from January 2015 to October 2016, where she advised the Board of Directors, was a member of the executive team driving strategic direction, managed filings and led the corporate legal M&A activities, including a reverse takeover. She also served as a senior legal advisor at Moneysupermarket.com Group Plc and a legal advisor at Innospec Inc. Ms. Bhama has an LLB (Hons) from Staffordshire University, postgraduate diploma in Legal Practice from the College of Law, Chester, is admitted as a solicitor by the Solicitors Regulation Authority in 2003 and is an Associate Chartered Company Secretary graduating from the Institute of Chartered Secretaries and Administrators (ICSA).
Benoit Joly
Benoit Joly, Chief Commercial Officer, joined Wejo as EVP Ingress (later retitled as EVP Automotive & Mobility) in May 2021. In December 2021, Mr. Joly became our Chief Commercial Officer and is charged with developing business with automotive and mobility players and ensuring Wejo delivers insights and services that maximize the business value they can generate from their connected vehicle and business data. Between 2016 and 2021, Mr. Joly headed the Services business unit for Renault Group, developing the company strategy, portfolio, and business for both traditional & connected services, in strong coordination with the Renault-Nissan Alliance in which he contributed to the Alliance Ventures investment fund. Building on over 25 years’ experience in the telecom, tech and automotive industries, Mr. Joly started his career by developing MCI WorldCom network solutions before joining Technicolor in 2002 to cover the go-to-market of the world’s leading voice and video over IP solution at that time. Appointed SVP of Technicolor Marketing in 2010, Mr. Joly supervised overall group marketing and managed the Connected Home Division’s marketing plan for six years. In 2015, he received a CES Innovation Award for an innovative Digital Life solution that addresses the Internet of Things opportunity. Mr. Joly has a master’s degree in Network and IT Engineering from E.S.I.E.E and an MBA from E.S.S.E.C, where he majored in Strategy and Marketing.
Sarah J. Larner
Sarah J. Larner, Executive Vice President of Strategy and Innovation, has served in that role at Wejo since June 2021, and is responsible for the formulation and management of the strategic initiatives at Wejo. Ms. Larner has been at Wejo since 2015, playing an integral role in the organization’s growth and success serving as Executive Vice President, Sales and Partnership, from March 2020 to June 2021, Executive Vice President, Partnerships, from July 2019 to March 2020, and Head of Sales, from April 2015 to July 2019. Previously, as EVP for Sales & Partnerships at Wejo, Ms. Larner gained a deep understanding of the connected vehicle landscape across automotive and the marketplace. Ms. Larner brings relevant experience to her role at Wejo, previously managing strategic partnerships across motor and home insurance channels for Moneysupermarket.com Group Plc where she was responsible for maximizing channel revenue. She also spent time as a sales executive at Merrill Lynch where she focused on uncovering financial services opportunities in both emerging and established markets.
Den Power
Den Power, Chief People Officer, has served in that role at Wejo since July 2019, managing the human resources function for the business which includes establishing organizational design principals, determining reward and recognition mechanisms, and growing and attracting talent. Before Wejo, from December 2018 to May 2020, Ms. Power was a management consultant at Project 55 Ltd., a human resource consulting services organization. Ms. Power has been instrumental in transformational change programs across many companies, including Shop Direct Group, MBNA, Jack Wills, Ted Baker, King Fisher and B&Q, reporting directly into the board. Her past work also includes Human Resource Director at LeadX as well as consulting across many sectors including travel, utilities and nuclear. Ms. Power attended the University of Manchester where she received her BA in Humanities. Ms. Power also holds the CIPD qualification as a chartered HR professional.
David Jack
David Jack, Chief Technology Officer, has served in that role since December 2, 2022, after having served in that capacity on an interim basis since July 6, 2022. Mr. Jack is responsible for all aspects of the Company’s technology function - development, operation, support and security. Prior to his employment at Wejo, for the previous four years he was Chief Technology Officer at dunnhumby, the world's leading customer data science company, which is a subsidiary of Tesco PLC. Mr. Jack has been an advisory board member of CIONET since March 2018 and an advisory board member of Clarion Events since October 2021. Mr. Jack also provides advisory services to private equity companies on an ad-hoc basis through his company, Yourtab.
Code of Conduct
We have a written Code of Conduct and Business Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We have posted a current copy of the Code of Conduct and Business Ethics on our investor relations website, wejo.com/investors, in the “Governance” section. In addition, we intend to post on our website all disclosures that are required by law or the NASDAQ rules concerning any amendments to, or waivers from, any provision of the Code of Conduct and Business Ethics.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. The SEC has designated specific due dates for these reports and we must identify in this Annual Report on Form 10-K those persons who did not file these reports when due. Based solely on our review of copies of the reports filed with the SEC and the written representations of our directors and executive officers, we believe that all reporting requirements for fiscal year 2022 were complied with by each person who at any time during the 2022 fiscal year was a director or an executive officer or held more than 10% of our common stock, except Messrs. Hendel and Masarek each filed a late Form 4 with respect to distributions to each of them in connection with the dissolution of Virtuoso Sponsor LLC (the “Sponsor”) and distribution of all of the Sponsor’s assets, comprised of the Company’s common shares and exchangeable preferred shares of Wejo Bermuda Limited, to its members (the “Members”) on a pro rata basis in accordance with each Member’s percentage interest in the Sponsor. The late filings, each of which were made on December 6, 2022, were due to administrative oversight.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
We qualify as an EGC under the Jumpstart Our Business Startups Act of 2012. As a result, we are permitted to and rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included compensation information for only our principal executive officer and our two next most highly compensated executive officers serving at fiscal year-end and have not included a compensation discussion and analysis of our executive compensation programs or tabular compensation information other than the Summary Compensation Table and the Outstanding Equity Awards Table set forth below. In addition, for so long as we are an emerging growth company, we will not be required to submit certain executive compensation matters to our shareholders for advisory votes, such as “say-on-pay” and “say-on-frequency” of say-on-pay votes.
This section discusses the material components of the executive compensation program for our executive officers who are named in the “Summary Compensation Table” below. In 2022, our “named executive officers” (collectively, the “NEOs”) and their positions were as follows:
•Richard Barlow, Chief Executive Officer
•John T. Maxwell, Chief Financial Officer
•Sarah J. Larner, Executive Vice President of Strategy and Innovation
Summary Compensation Table
The following table sets forth information concerning the compensation of our NEOs for the years ended December 31, 2022 and 2021. Amounts for 2022 and 2021 paid in pounds sterling have been converted to U.S. dollars based on an average annual exchange rate of $1.2369 to 1 pound sterling and $1.3757 to 1 pound sterling, respectively.
Name and Principal Position Year Salary ($)(1)
Bonus ($)(2)
Stock awards ($)(3)
Option awards ($)(4)
Nonequity incentive plan compensation ($)(5)
Nonqualified deferred compensation earnings ($) All other compensation ($)(6)
Total ($)
Richard Barlow, Chief Executive Officer 2022 600,000 - 933,000 - - - 3,956 1,536,956
2021 562,418 10,000,000 21,383,066 - 868,840 - 1,360,112 34,174,436
John T. Maxwell, Chief Financial Officer 2022 436,852 300,000 - - - - 111,959 848,811
2021 337,615 450,000 5,431,185 2,442,244 420,000 - 103,342 9,184,386
Sarah J. Larner, Executive Vice President of Strategy and Innovation 2022 320,048 - 397,688 - - - 3,684 721,420
2021 279,540 500,000 - 1,691,957 114,257 - 39,462 2,625,216
_________________________
(1) The amounts reported in this column represent the base salary earned by each NEO in the applicable fiscal year, including, for 2021, accrued and unused vacation time, if any, and “on-call” pay (as defined below), if any, earned during that year. For 2021, Richard Barlow earned $46,530 in accrued, unused vacation days, and Sarah J. Larner earned $4,400 in on-call pay. “On-call” pay was additional compensation paid to various employees, including Ms. Larner, who were required to work/be available to work over the Christmas and New Year 2020 and Easter 2021 holiday periods, including bank holidays and weekends.
(2) The amounts reported in this column reflect (i) for 2021, Transaction Bonuses earned by our NEOs in connection with the closing of the Virtuoso Business Combination and (ii) on account of 2021 and 2022 in the aggregate with respect to Mr. Maxwell, $600,000 for the Maxwell LTIP Cash Award earned by Mr. Maxwell, in each case as further described below under the caption entitled “Cash Compensation.”
(3) For 2022, the amounts represent the grant date fair value of an RSU award made to Ms. Larner and a market-based RSU (the “Market-Based RSU”) award made to Mr. Barlow, each calculated in accordance with FASB ASC Topic 718, based on the closing share price on the date of grant for the RSUs and, in the case of the Market-Based RSU grant, the probable satisfaction of the Share Price Condition for such Market-Based RSU as of the date of grant. Assuming the Share Price Condition is achieved for Richard Barlow’s 2022 Market-Based RSU award, the maximum value of this awards at the grant date would be $6,153,739. For 2021, the amounts represent the aggregate grant date fair value of (i) RSU awards granted to granted to Messrs. Barlow and Maxwell in accordance with FASB ASC Topic 718, based on the closing share price on the date of grant, and (ii) Wejo Limited Class A Ordinary Shares granted to Mr. Maxwell prior to the closing of the Virtuoso Business Combination in the amount of $85,419.
(4) The amounts reported in this column represent the aggregate grant date fair value of stock option awards. The amounts were calculated in accordance with FASB ASC Topic 718 and are based on a number of key assumptions described in Note 18 (entitled “Share-Based Compensation”) to the accompanying audited consolidated financial statements. The amount of compensation, if any, actually realized by a NEO from the exercise and sale of vested options will depend on numerous factors, including the continued employment of the NEO through the vesting period of the award and the amount by which the share price on the day of exercise and sale exceeds the option exercise price. The vesting terms and conditions of the awards granted to our NEOs are described below under the table entitled “Outstanding Equity Awards at Fiscal 2022 Year-End.”
(5) Amounts may be awarded under the Company’s annual incentive plan (the “Annual Incentive Plan”) as further described below under the caption entitled “Cash Compensation.” For 2022, subject to Compensation Committee approval, the NEOs each earned the following Annual Incentive Plan awards: (a) Mr. Barlow - $826,002; (b) Mr. Maxwell - $154,092; and (c) Ms. Larner - $162,343. Because, as of March 28, 2023, the payment of those awards remains subject to the Compensation Committee’s discretion and capitalization of the Company, which is expected to occur in mid-2023, the Summary Compensation Table discloses no Annual Incentive Plan awards for any of the NEOs.
(6) Amounts shown in this column for fiscal 2022 are detailed as follows:
Life Insurance Premiums ($) Health Insurance Premiums ($) Pension Contributions Plan ($) Gross Up ($)1
Total ($)
Richard Barlow - - 3,956 - 3,956
John T. Maxwell 1,303 35,846 12,200 62,610 111,959
Sarah J. Larner - 821 2,863 - 3,684
(1) The amount reported in this column was paid to Mr. Maxwell to compensate him for his underwithheld income tax liability to the UK government for the 2021 taxable year in the amount of the British pound sterling equivalent of $62,610 as of March 31, 2022.
Elements of the Company’s Executive Compensation Program
Cash Compensation
The NEOs receive a base salary to compensate them for services rendered to our company. The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. For 2021 and 2022, our NEOs’ annual base salaries paid are reflected in the “Summary Compensation Table” above. In addition to base salaries, in 2021 we made a payment to our NEOs for accrued, unused vacation days and on-call time as described in footnote 1 to the “Summary Compensation Table” above.
We maintained a discretionary Annual Incentive Plan cash bonus program for 2021 and 2022 in which each of our NEOs participated. Amounts paid to our NEOs under this program are reflected in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” above. Annual Incentive Plan awards are an important part of the overall compensation we pay our NEOs. Unlike base salary, which is fixed, Annual Incentive Plan awards are paid only if specified performance levels are achieved. The Committee believes that annual incentive awards encourage our NEOs to focus on specific short-term business and financial goals, without sacrificing our long-term objectives. The Committee recognizes the importance of achieving an appropriate balance between supporting the Company’s objective of rewarding executives for strong performance over the short-term and establishing realistic targets that continue to motivate and retain executives. As a result, our Annual Incentive Plan provides for measurable, rigorous
performance targets that are designed to be achievable but challenge our executives to drive business results that produce stockholder value.
Paid in 2022, our NEOs’ Annual Incentive Plan awards based on 2021 service were as follows: (a) Mr. Barlow - $868,840; (b) Mr. Maxwell - $420,000; and (c) Ms. Larner - $114,257. For 2023, based on 2022 service, subject to Compensation Committee approval, the NEOs each earned the following Annual Incentive Plan awards: (a) Mr. Barlow - $826,002; (b) Mr. Maxwell - $154,092; and (c) Ms. Larner - $162,343. Because, as of March 28, 2023, the payment of those awards remains subject to the Compensation Committee’s discretion and capitalization of the Company, which is expected to occur in mid-2023, the Summary Compensation Table discloses no Annual Incentive Plan awards for any of the NEOs.
In addition, in recognition of the tremendous efforts of certain officers and other employees of the Company that were key to completing the Virtuoso Business Combination, in November 2021, the Board awarded such employees, including, but not limited to, the NEOs, special transaction bonuses (the “Transaction Bonuses”) to be paid 60% at or around the closing of the Virtuoso Business Combination, with the remaining 40% to be paid in separate payments of 30% and 10% following completion of the Apollo Forward Purchase Agreement and subject to the discretion of the Board as to the timing of such awards. The full amount of each 2021 Transaction Bonus is included in the “Summary Compensation Table” above for each such NEO as follows: Mr. Barlow: $10,000,000; Mr. Maxwell: $150,000; and Ms. Larner: $500,000. As of March 28, 2023, the Company has yet to pay the pound sterling equivalent of approximately $3,000,000 and $50,000 of the Transaction Bonuses earned by Mr. Barlow and Ms. Larner, respectively, based on an average annual exchange rate of $1.2369 to 1 pound sterling. The Company expects to pay the NEOs the balance of these awards in the future based on the Company’s liquidity position at that time and other considerations as determined by the Compensation Committee in its discretion.
Equity Compensation
Equity Incentive Plan
We adopted, and our shareholders approved, our 2021 Equity Incentive Plan (“2021 Plan”), under which the Company may grant share options (both incentive and non-qualified), share appreciation rights, restricted share awards, RSUs, and share-based awards to any employee, officer, non-employee director or any natural person who is a consultant or other personal service provider of the Company or any of its subsidiaries or affiliates in order to attract, retain and motivate key personnel upon whose judgment, initiative and effort the successful conduct of the Company’s business is largely dependent. The 2021 Plan may be administered by the Compensation Committee of our Board, such other committee of the Board appointed by the Board to administer the 2021 Plan.
The purpose of the 2021 Plan is to align the interests of eligible participants with our shareholders by providing incentive compensation tied to the Company’s performance. The intent of the 2021 Plan is to advance the Company’s interests and increase shareholder value by attracting, retaining and motivating key personnel.
An initial aggregate of 14,092,530 common shares is available for issuance under the 2021 Plan, and the maximum number of common shares that may be issued pursuant to the exercise of incentive share options granted under the 2021 Plan is 14,092,530. The aggregate number of common shares that may be issued pursuant to awards under the 2021 Plan will be subject to an annual increase on January 1 of each calendar year (commencing with January 1, 2022 and ending on and including January 1, 2031) equal to the lesser of a number of shares (such amount of shares, the “Evergreen Shares”) (i) equal to 3% of the aggregate common shares outstanding as of December 31 of the immediately preceding calendar year, and (ii) as determined by the Board. On January 1, 2022 and 2023, the Evergreen Shares added to available shares under the 2021 Plan were 2,818,506 and 3,283,847, respectively. The 2023 Evergreen Shares are not available for issuance under the 2021 Plan until the Company registers those shares on a registration statement on Form S-8 with the SEC.
If any award granted under the 2021 Plan is cancelled, repurchased, expired, forfeited, surrendered, exchanged for cash, settled in cash or otherwise terminated without consideration or delivery of the shares to the participant, including the payment of divided equivalents in cash in conjunction with any outstanding award, then such shares will be returned to the 2021 Plan and be available for future awards under the 2021 Plan. However, shares that are withheld from any share option or SAR award in payment of the exercise, base or purchase price or taxes, or shares that are repurchased on the open market by the Company using option proceeds will not be returned to the 2021 Plan nor be available for future awards under the 2021 Plan. The share reserve will be reduced by one share for each share subject to an award. If a share that was subject to an award is returned to the share reserve, the share reserve will be credited with one share. The payment of dividend equivalents in cash in conjunction with any outstanding award will not reduce the share reserve.
Virtuoso Business Combination Closing Equity Awards to our Named Executive Officers
In connection with the closing of the Virtuoso Business Combination, the Board granted Richard Barlow, the Company’s Chief Executive Officer, a RSU award pursuant to a sub-plan of the 2021 Plan, which represents the right to receive 1,879,004 common shares upon vesting (the “2021 Barlow RSUs”). One-half of the 2021 Barlow RSUs vest on the 18-month anniversary of November 18, 2021 (the “Closing Date”), and one-half of the 2021 Barlow RSUs vest on the 30-month anniversary of the Closing Date. In the event of Mr. Barlow’s termination of employment by the Company for any reason other than Cause or on a Change in Control (both as defined in the 2021 Plan), any then unvested 2021 Barlow RSUs shall vest in full.
In connection with the closing of the Virtuoso Business Combination, the Board granted John T. Maxwell, the Company’s Chief Financial Officer, a RSU award pursuant to the 2021 Plan, which represents the right to receive 469,751 common shares upon vesting (the “Maxwell RSUs”). The Maxwell RSUs will vest in equal annual installments over three years, with 1/3 of the Maxwell RSUs vesting on each of November 19, 2022, November 19, 2023 and November 19, 2024. In connection with the closing of the Virtuoso Business Combination, the Board granted Mr. Maxwell an option to purchase 469,751 common shares (the “Maxwell Options”) pursuant to the 2021 Plan. The Maxwell Options will vest in equal annual installments over three years, with 1/3 of the Maxwell Options vesting on each of November 19, 2022, November 19, 2023 and November 19, 2024. In the event of Mr. Maxwell’s termination of employment by the Company without Cause or his resignation for Good Reason (as such terms are defined in the Employment Agreement between the Company and Mr. Maxwell, dated as of July 30, 2021), any unvested Maxwell Options and Maxwell RSUs will vest, and vested Maxwell Options will remain exercisable until the earlier of the second anniversary of such termination and the tenth anniversary of the grant date, subject to Mr. Maxwell’s execution of a general release of claims within 60 days of termination of employment. If Mr. Maxwell’s employment terminates for any other reason, any then unvested Maxwell Options and Maxwell RSUs will be forfeited immediately, automatically, and without consideration, and vested Maxwell Options will remain exercisable in accordance with the schedule set forth in the award agreement. In the event Mr. Maxwell’s service is terminated for Cause, all vested Maxwell Options and Maxwell RSUs will also be forfeited immediately, automatically, and without consideration.
In connection with the closing of the Virtuoso Business Combination, the Board granted Ms. Larner an option to purchase 328,125 common shares (the “Larner Options”) pursuant to the 2021 Plan. The Larner Options will vest in equal annual installments over three years, with 1/3 of the Larner Options vesting on each of November 19, 2022, November 19, 2023, and November 19, 2024. As with grants to most other employees under the 2021 Plan, if Ms. Larner’s service is terminated for any reason, any then unvested Larner Options will be forfeited immediately, automatically and without consideration.
In addition, following the effectiveness of the Company’s Registration Statement on Form S-8 (the “S-8 Registration Date”), the Board granted to certain of our executive officers, including Ms. Larner, RSU awards pursuant to the 2021 Plan, which will vest in equal annual installments on each of the first through third anniversaries of the S-8 Registration Date. On April 20, 2022, following the effectiveness of the Registration Statement on Form S-8, the Board finalized those RSU awards, including by issuing Mr. Larner 131,250 RSUs.
Richard Barlow Market-Based RSU
On July 15, 2022, the Company entered into agreements with Mr. Barlow to award an equity grant that was originally approved by the Company’s Board at the closing of the Virtuoso Business Combination. The Market-Based RSU grant is in the form of 4,697,511 RSUs (that settle for common shares), which is equal to 5% of the number of the common shares outstanding as of the closing of the Virtuoso Business Combination. The Market-Based RSUs will vest if the price of the Company’s common shares as quoted on the NASDAQ equals or exceeds $50.00 on any twenty trading days in any thirty-trading day period (the “Share Price Condition”) between November 18, 2026 and November 18, 2031. Under the Market-Based RSU award agreement between the Company and Mr. Barlow, dated July 15, 2022, if the Share Price Condition is satisfied on or before November 17, 2026, the Market-Based RSUs will lapse and Mr. Barlow may exchange the 1,000 Class B Ordinary shares he holds in Wejo Limited for 4,697,511 common shares of the Company under that certain Subscription Agreement Relating to B Ordinary Shares in the Capital of Wejo Limited by and among the Company, Mr. Barlow, and Wejo Limited, dated July 15, 2022.
TKB Business Combination Change in Control Waivers
On January 9 and 10, 2023, Messrs. Maxwell and Barlow issued separate letters to the Company, respectively, providing that the consummation of the TKB Business Combination will not constitute or result in (or be deemed to constitute or result in) a “Change in Control” under the terms of the 2021 Plan, the award agreements with respect to each of the 2021 Barlow RSUs and the Market-Based RSUs (collectively, the “Barlow Award Agreements”), or the Maxwell Agreement. Under Mr. Barlow’s letter, each of the Company and Mr. Barlow agreed that (i) the consummation of the TKB Business Combination will not result in the accelerated vesting and/or settlement of any such awards thereunder, (ii) each of his awards will remain outstanding, will vest and become payable in
accordance with the original schedule set forth in each of the Barlow Award Agreements; and (iii) other than as modified in the letter, each of his awards shall continue to be subject to the terms and conditions set forth in the 2021 Plan and each of the Barlow Award Agreements.
Employee Share Purchase Plan
We also have a 2021 Employee Share Purchase Plan (the “ESPP”), which the Company has not yet fully implemented, under which eligible employees and/or eligible service providers of either the Company or an affiliate may be given an opportunity to purchase common shares at a discount. The ESPP includes two components: a “423 Component”, which is intended to qualify as an employee stock purchase plan pursuant to Section 423 of the U.S. Tax code, and a “Non-423 Component.” In addition, the ESPP authorizes grants of (i) purchase rights under the Non-423 Component that do not meet the requirements of an employee stock purchase plan under Section 423 of the Code and (ii) purchase rights under sub-plans, including the Company’s Save As You Earn Share Option Plan 2021 (the “SAYE Plan”). Eligible employees will be able to participate in the 423 Component or Non-423 Component of the ESPP. Eligible service providers (who may or may not be eligible employees) will only be able to participate in the Non-423 Component of the ESPP.
Save As You Earn Share Option Plan
We also have a SAYE Plan, which the Company has not yet fully implemented, under which eligible employees of either the Company or a subsidiary will be given an opportunity to purchase common shares at a discount. The SAYE Plan will allow for employees in the United Kingdom to be given the opportunity to make regular savings towards the exercise price of an option which, on exercise, we believe will benefit from tax-advantaged treatment under the tax laws of the United Kingdom.
Retirement Plans
Wejo Limited provides participation in an occupational pension plan for all of UK-based full-time employees, including the NEOs, and contributes an amount equal to three percent of each such employee’s qualifying earnings (capped at £50,270) each year to the scheme for the participant (paid in equal monthly installments), unless the participant chooses to opt out of the scheme.
For our U.S. employees, we also offer a retirement savings plan in which eligible associates, including our NEOs, may participate. The savings plan includes a traditional 401(k) pre-tax savings option and a post-tax Roth 401(k) option. We provide a matching contribution of 100% on the first 4% of eligible compensation that is deferred, up to the Internal Revenue Code limit for each respective year in which the eligible employee participates in the plan.
Employee Benefits and Perquisites
Our UK-based full-time employees, including our NEOs, are eligible to participate in our private medical insurance plan, life insurance plan and other standard employee benefit plans and programs offered. Our U.S.-based employees receive similar life and health insurance benefits, including medical, dental and vision health insurance coverage.
We provide limited perquisites to our NEOs to facilitate the performance of their managerial roles, which include Company-paid life insurance premiums. We believe this is appropriate to provide a competitive compensation package to our NEOs.
Outstanding Equity Awards at Fiscal 2022 Year-End
The following table summarizes the number of common shares underlying outstanding equity incentive plan awards for each NEO as of December 31, 2022.
Option Awards Stock Awards
Name Grant Date Number of securities underlying unexercised options (#) Exercisable Number of securities underlying unexercised options (#) Unexercisable(1)
Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested(2)
Market value of shares or units of stock that have not vested ($)(3)
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Richard Barlow 7/15/22 - - - - - - 4,697,511(5)
2,254,805(6)
11/19/21 - - - - 1,879,004(4)
901,922 - -
John T. Maxwell 11/19/21 156,583 313,168(7)
11.38 11/19/32 - - - -
11/19/21 - - - - 313,168(8)
150,321 - -
Sarah J. Larner 4/20/22 - - - - 131,250 63,000 - -
11/19/21 109,375 218,750 11.38 11/19/32 - - - -
_________________________
(1) Unless otherwise noted, all options (i) vest one-third on each of the first three anniversaries of the grant date; (ii) will immediately be forfeited upon a termination of employment by us for cause; and (iii) that have not vested will be forfeited immediately, and unexercised vested options will be (a) exercisable for a period of 90 days in the event of termination of employment for any other reason, (b) exercisable for a period of 12 months days in the event of termination due to death or disability, or (c) forfeited in the event of termination by us for cause.
(2) The amounts set forth in this column represent unvested RSU awards. Unless otherwise noted, all RSU awards (i) vest one-third on each of the first three anniversaries of the grant date; and (ii) vest only in the event that the recipient remains continuously employed by us on each vesting date; provided, however, that all unvested RSUs will vest if the NEO’s employment is terminated by us without cause within two years following a change in control.
(3) The amounts set forth in this column represent the fair market value per common share of $0.48, which was the closing price of our common shares on December 30, 2022 (the last trading day of 2022), multiplied by the number of shares that had not vested as of that date for each grant listed in this column.
(4) See the discussion above under the caption entitled “Closing Equity Awards to our Named Executive Officers” for the vesting and other terms of the 2021 Barlow RSUs.
(5) See the discussion above under the caption entitled “Richard Barlow Market-Based RSU” for the vesting and other terms of the Market-Based RSU award to Mr. Barlow.
(6) This amount represents the fair market value of the Market-Based RSUs held by Mr. Barlow using a market price of $0.48 per share, which was the closing price of our common shares on December 30, 2022 (the last trading day of 2022).
(7) See the discussion above under the caption entitled “Closing Equity Awards to our Named Executive Officers” for the vesting and other terms of the Maxwell Options.
(8) See the discussion above under the caption entitled “Closing Equity Awards to our Named Executive Officers” for the vesting and other terms of the Maxwell RSUs.
Employment Arrangements
Richard Barlow
On July 30, 2021, in connection with the Virtuoso Business Combination, Mr. Barlow entered into an employment agreement with Wejo Limited, effective as of and upon the Closing (the “Barlow Agreement”), which replaced and superseded his agreement with Wejo Limited. The Barlow Agreement provides for the following compensation: a base salary of $600,000 per year, an annual discretionary target bonus equal to 100% of base salary and an additional discretionary annual bonus of up to a further 100% of base salary, a tax equalization payment and certain other benefits and perquisites, which are discussed in detail in the Barlow Agreement. The Barlow Agreement is for an indefinite term of employment terminable at any time without cause upon 12 months’ notice (or immediately upon payment in lieu of the notice period or remainder thereof). The payment in lieu of notice comprises the following: base salary; the cost to the Company of providing life insurance, employer pension contributions and (if it is not possible or practicable to continue such cover for the notice period) private medical insurance; salary in respect of holiday entitlement; and annual bonus at 100% of base salary, in each case for the notice period or remainder thereof.
As a result of the Barlow Agreement and in connection with the Virtuoso Business Combination, Mr. Barlow was awarded certain awards. The Barlow Agreement also provides that in 2022 Mr. Barlow will be granted an equity long-term incentive award to the value of $2,500,000 in a mixture of RSUs and options (the “2022 Barlow Equity Award”). The Company did not make the 2022 Barlow Equity Award during 2022. In March 2023, the Compensation Committee approved the making of the award in 2023 at the Company’s discretion as to the timing of the award, with the mix of RSUs and option to be 50/50. The Barlow Agreement further provides that all options and other equity awards granted to Mr. Barlow during the term of his employment shall be granted on terms such that those options or other awards which are unvested at the date of the termination of Mr. Barlow’s employment shall vest in full at the date of
such termination and (in the case of options) be exercisable, notwithstanding termination has occurred, from the date of termination until immediately prior to the second anniversary of the date of termination.
The Barlow Agreement provides for a covenant not to compete, generally prohibiting Mr. Barlow from providing services to a competitor, soliciting employees, and soliciting or dealing in competition with actual or prospective customers for 12 months from termination of employment and confidentiality obligations which continue after his termination of employment.
John T. Maxwell
Mr. John T. Maxwell became our Chief Financial Officer on March 16, 2021. On July 30, 2021 and in connection with the Virtuoso Business Combination, Mr. Maxwell entered into an employment agreement with the Company and Wejo, Inc., effective as of and upon the closing of the Virtuoso Business Combination (the “Maxwell Agreement”). The Maxwell Agreement provides for Mr. Maxwell to serve as Chief Financial Officer and for the following compensation: a base salary of $420,000 per year, an annual target bonus equal to 50% of base salary and a maximum bonus of 100% of base salary, a one-time transaction bonus of $150,000 upon the closing of the Virtuoso Business Combination, a discretionary long-term cash incentive award established every two years, with the first award being $600,000 to cover both calendar years 2021 and 2022 (the “Maxwell LTIP Cash Award”), a tax equalization payment and certain other benefits and perquisites, which are discussed in detail in the Maxwell Agreement. Mr. Maxwell has received payment of only $300,000 the 2021/2022 Maxwell LTIP Cash Award. The Company expects to pay Mr. Maxwell the balance of this award in the future based on the Company’s liquidity position at that time.
The Maxwell Agreement provides that Mr. Maxwell will be granted long-term incentive equity awards from the Company in the form of share options and RSUs equal to 1% of the fully diluted capitalization of the Company as of the closing of the Virtuoso Business Combination, subject to the vesting terms and conditions as determined by the Company’s Board. On November 19, 2021, the Board made such award to Mr. Maxwell in the form of 469,751 RSUs and 469,751 options, each of which vest in one-third increments on each of the first three anniversaries of the grant date.
Mr. Maxwell will be eligible to receive additional long-term incentive cash awards and equity awards on terms and conditions determined by the CEO and the Company’s Board, as applicable. In the event of a termination of employment by Wejo without Cause or by Mr. Maxwell for Good Reason (as those terms are defined in the Maxwell Agreement), Mr. Maxwell will receive (i) continuation of annual base salary, payable over 12 months in accordance with regular payroll practices, (ii) a monthly payment of the employer portion of health plan premiums for 12 months or an earlier termination of COBRA benefits, (iii) accelerated vesting of any then-unvested equity awards, and (iv) extended exercisability of vested share options until the second anniversary of the termination date (but in no event beyond the original expiration date). Any such severance payments will be subject to Mr. Maxwell’s execution and non-revocation of a general release of claims and continued compliance with restrictive covenant provisions. In addition, the Maxwell Agreement includes a “gross up” provision, which provides that if any severance payment or other benefit payable to Mr. Maxwell constitutes a “parachute payment” within the meaning of Section 280G of the Code, then Mr. Maxwell will receive a payment equal to the sum of the excise tax payable, plus the amount necessary to put Mr. Maxwell in the same after-tax position (taking into account any applicable taxes, including taxes payable upon such payment) that he would have been in if he had not incurred such excise tax.
The Maxwell Agreement incorporates by reference an agreement that provides for a covenant not to compete, generally prohibiting Mr. Maxwell from providing services to a competitor or soliciting employees or business contacts for nine months, and confidentiality obligations which continue indefinitely after his termination of employment.
Sarah Larner
On the commencement of her employment with Wejo on March 2, 2015, Sarah Larner entered into an employment agreement with the Company, which the parties amended in 2021 (the “Larner Agreement”). The Larner Agreement provides for Ms. Larner to serve as EVP Strategy and Innovation at a base salary of £250,00 per year and an annual target bonus equal to 75% of base salary. The Larner Agreement also provides for, among other things, (i) payment of reasonable expenses, (ii) 30 working days’ paid holiday entitlement, (iii) a six months notice period for termination, and (iv) certain post-termination restrictive covenants, including non-solicitation and non-competition provisions.
Director Compensation
The following table sets forth information concerning the compensation of our non-employee directors for 2022. Amounts paid in pounds sterling have been converted to U.S. dollars based on an average annual exchange rate for 2022 of $1.2369 to 1 pound sterling. Messrs. Barlow and Maxwell did not receive any additional compensation for service as directors in 2022.
Name Fees earned or paid in cash ($)(3)
Stock awards ($)(4)
All other compensation ($) Total ($)
Timothy Lee 38,500 281,050 - 319,550
Lawrence Burns 28,750 281,050 - 309,800
Sam Hendel 31,750 281,050 - 312,800
Alan B. Masarek(1)
29,000 281,050 - 310,050
Diarmid Ogilvy(2)
27,000 281,050 8,813(5)
316,863
Ann M. Schwister 59,000 281,050 - 340,050
_________________________
(1) Alan Masarek resigned from the Board effective as of November 19, 2022.
(2) Diarmid Ogilvy resigned from the Board effective as February 28, 2023.
(3) The amounts set forth in this column represent fees earned or paid in cash on account of Board and Committee service, by (i) the directors other than Ms. Schwister and Mr. Masarek with respect to in the quarters ended March 31 and June 30, 2022, (ii) Ms. Schwister with respect to the full year 2022, and (iii) Mr. Masarek with respect to in the quarters ended March 31 and June 30, 2022 and for the pro rata portion of the time he served on the Board during the quarter ended December 31, 2022 prior to his resignation from the Board effective as of November 19, 2022. See discussion of “Temporary Payment of Director Quarterly Cash Retainer in Common Shares” below regarding the future payment of the balance of such directors’ 2022 Cash Fees (as defined below) in common shares.
(4) Amounts shown represent the aggregate grant date fair value of the (i) Virtuoso Closing RSUs, and the (ii) Annual RSU Grants (each as defined below). The amounts shown were calculated in accordance with FASB ASC Topic 718. In connection with the Virtuoso Business Combination closing, the Board approved, contingent upon and effective as of the S-8 Registration Date, the future grant to each of our non-employee directors of a RSU award pursuant to the 2021 Plan, which represents the right to receive 35,000 common shares (the “Virtuoso Closing RSUs”). On April 20, 2022, the S-8 Registration Date, the Company award each of the non-employee directors the Virtuoso Closing RSUs, each of which had a grant date fair value of $106,050 based on the number of Virtuoso Closing RSUs multiplied by $3.03, which was the closing price of our common shares on the grant date. As contemplated at the time of the Virtuoso Business Combination, the Virtuoso Closing RSUs vest 100% on the first anniversary of the closing of the Virtuoso Business Combination. On June 15, 2022, the date of our 2022 Annual Meeting of Shareholders, each non-employee director was granted an Annual RSU Grant of 136,719 RSUs under the 2021 Plan. Each Annual RSU Grant had a grant date fair value of $175,000 based on the number of RSUs multiplied by $1.28, which was the closing price of our common shares on the grant date. The Annual RSU Grants vest 100% on the first anniversary of the grant date. Messrs. Masarek and Ogilvy forfeited their Annual RSU Grants on the dates of each of their respective resignation from the Board.
(5) Represents fees earned by Mr. Ogilvy for consulting with the Company in connection with the Lawsuit brought against the Company by Arma (see Note 22 to the accompanying audited consolidated financial statements).
Non-Employee Director Compensation Program
The Company’s non-employee director compensation consists of the following (collectively, the “Non-Employee Director Compensation Program”):
•annual cash retainers in the following amounts: (i) $30,000 for Board service (the “Board Fee”), (ii) $20,000 for service as Board chair (the “Board Chair Fee”), (iii) $20,000 for service as the chair of the Audit Committee, $15,000 for service as the chair of the Compensation Committee, $8,000 for service as the chair of the Nominating Committee, and $8,000 for service as the chair of the Risk Committee (collectively, the “Committee Chair Fees”); (iv) $10,000 for service as a member of the Audit Committee, $7,5000 for service as a member of the Compensation Committee, $4,000 for service as a member of the Nominating Committee, and $4,000 for service as a member of the Risk Committee (collectively, the “Committee Member Fees”),
•a per meeting fee of $1,000 for each Board or Committee meeting attended during such quarter beyond each quarterly, regular scheduled meeting of the Board and its Committees (the “Extra Meeting Fees,” and together with the Board Fee, the Board Chair Fee, Committee Chair Fees, and the Committee Member Fees, the “Cash Fees”);
•an annual grant under the 2021 Plan of such number of RSUs equal to $175,000 based on the closing price of the Company’s common shares on the date of the Company’s Annual Meeting of Shareholders, vesting on the first anniversary of the grant date (the “Annual RSU Grant”); and
• the reimbursement of reasonable out of pocket expenses incurred in the performance of services as a member of the Board.
The Cash Fees are paid in equal quarterly installments during the month following the end of each of the Company’s fiscal quarters (with proration for any partial period of service) along with the reimbursement of any reasonable out-of-pocket expenses incurred by a director in the performance of services as a member of the Board during such quarter.
The Company’s employee directors, namely Messrs. Barlow and Maxwell, receive no additional compensation for service as directors.
Temporary Payment of Director Quarterly Cash Retainer in Common Shares
On October 14, 2022, in order to preserve liquidity, the Board amended its Non-Employee Director Compensation Program to provide for the payment of the directors’ quarterly Cash Fees in common shares (the “Temporary Retainer Program”) for a period of four quarters, commencing with fees in respect of the quarter ended September 30, 2022 and ending with fees in respect of the quarter ended June 30, 2023 (each such quarter, the “Applicable Quarter,” and collectively the “Applicable Period”). All non-employee directors other than Ann M. Schwister (each, a “Participating Director”) opted to participate in the Temporary Retainer Program. For each Applicable Quarter during the Applicable Period, in lieu of any quarterly Cash Fees that otherwise would be due and owing to a Participating Director in respect of an Applicable Quarter, such director will receive, on the second full trading day following the Company’s release of earnings for the Applicable Quarter, a Share-Based Award (as defined in the 2021 Plan) in the form of fully vested common shares in an amount equal to the quotient of (A) the total dollar value of quarterly Cash Fees that otherwise would be due and owing to a Participating Director in respect of an Applicable Quarter divided by (B) the closing price of the Company’s common shares on the first full trading day after the release of the Company’s earnings results (the “Applicable Period Share Grants”) except that the Applicable Period Share Grants in lieu of quarterly Cash Fees for the quarters ended September 30, 2022 and December 31, 2022 will both be made on the second full trading day following the Company’s release of earnings for fiscal year 2022.
Non-employee directors will continue to receive the Annual RSU Grant in addition to the shares they will receive under the Temporary Retainer Program. If a Participating Director ceases to serve as a member of the Board for any reason during any Applicable Quarter, then instead of receiving an Applicable Period Share Grant in respect of such Applicable Quarter, such Participating Director will be paid in cash a pro rata portion of such Participating Director’s quarterly Cash Fees promptly following such Applicable Quarter.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one or more officers serving on our board of directors.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information with respect to holdings of our common shares by (i) shareholders who beneficially owned more than 5% of the outstanding common shares and (ii) each of our directors (which includes all nominees), each of our executive officers and all directors and executive officers as a group as of December 31, 2022, unless otherwise indicated.
The number of shares beneficially owned by each shareholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Unless otherwise indicated, the address of all listed shareholders is c/o Wejo Group Limited, Canon’s Court, 22 Victoria Street, Hamilton, H12, D0, HM12. Each of the shareholders listed has sole voting and investment power with respect to the shares beneficially owned by the shareholder unless noted otherwise.
We have based our calculation of the percentage of beneficial ownership on 109,461,562 common shares outstanding as of December 31, 2022.
Number of shares beneficially owned Percentage of shares beneficially owned
5% or Greater Shareholders
GM Entities(1)
22,438,927 19.99 %
Apollo Entities(2)
5,585,583 5.10 %
Virtuoso Sponsor LLC(3)
10,301,760 9.21 %
Richard Barlow(4)
8,640,380 7.89 %
Named Executive Officers and Directors
Diarmid Ogilvy(5)
3,096,097 2.83 %
Timothy E. Lee(6)
3,480,933 3.18 %
John T. Maxwell(7)
312,169 *
Mina Bhama(8)
342,889 *
Den Power(9)
215,351 *
Sarah J. Larner(10)
370,373 *
Samuel Hendel(11)
277,328 *
Ann M. Schwister(12)
133,017 *
David Jack 0 *
Lawrence Burns(12)
133,017 *
Benoit Joly 17,083 *
All executive officers and directors as a group (12 individuals) 17,018,637 15.54 %
_________________________
*Beneficial ownership of less than 1%.
(1)Reflects beneficial ownership by GM Holdings and GM and together with GM Holdings, the “GM Entities”) as of December 22, 2022, as reported on the GM Entities’ Schedule 13G/A, reporting shared voting and shared dispositive power over (i) 18,781,681 common shares, (ii) the Convertible Note, in an aggregate principal amount of $10,000,000 and convertible, in whole or in part, at the option of GM Holdings into up to 12,449,734 common shares, at a conversion price of $0.80323 per Wejo Common Share, subject to adjustment and subject to the blocker described below, and (iii) the GM Warrant, exercisable, in whole or in part, at the option of GM Holdings, to purchase up to 1,190,476 common shares at an exercise price of $0.75112 per Wejo Common Share, subject to adjustment and subject to the blocker described below. Each of the Convertible Note and the GM Warrant contains a “blocker” provision, which prohibits the conversion of any portion of the Convertible Note or the exercise of any portion of the GM Warrant if, after giving effect to such conversion and/or exercise, the holder together with the other Attribution Parties (as defined in the Convertible Note and the GM Warrant) would beneficially own in excess of 19.99% of the outstanding common shares. As of the date of the GM Schedule 13G/A, based on 108,593,517 common shares outstanding (as reported in the Company’s Quarterly Report on Form 10-Q filed on November 21, 2022), and 18,781,681 Common Shares owned by GM Holdings and any Attribution Parties, the Convertible Note could be converted, and the GM Warrant could be exercised, for an aggregate of up to 3,657,246 common shares. Accordingly, the GM Schedule 13G/A reported beneficial ownership by the GM Entities of an aggregate of 22,438,927 common shares. The business address of the GM Entities is 300 Renaissance Center, Detroit, MI, 48265.
(2)Reflects beneficial ownership of, shared voting, and shared dispositive power for the following entities (collectively, the “Apollo Entities”) as reported on Schedule 13G/A filed with the SEC on March 14, 2023: (i) Atlas - 299,879; (ii) Atlas Management - 299,879; (iii) PPF Credit Strategies - 799,892; (iv) Credit Strategies - 3,000,000; (v) ST Management - 3,000,000; (vi) ST Operating - 3,000,000; (vii) ST Capital - 3,000,000; (viii) ST Management Holdings - 3,000,000; (ix) A-N Credit - 400,229; (x) A-N Credit Management - 400,229; (xi) SPAC Fund I - 2,748,368; (xii) SPAC Management I - 2,748,368; (xiii) SPAC Management I GP - 2,748,368; (xiv) Capital Management - 7,248,368; (xv) Capital Management GP - 7,248,368; (xvi) Management Holdings - 7,248,368; and (xvii) Management Holdings GP - 7,248,368, each as of December 31, 2022. None of the Apollo Entities have sole power to vote or direct the vote or sole power to dispose or to direct the disposition of any of their holdings reported. The business address of each of Atlas, PPF Credit Strategies, A-N Credit, and SPAC Fund I is One Manhattanville Road, Suite 201, Purchase, New York 10577. The business address of Credit Strategies is c/o Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman, KY-9008, Cayman Islands. The business address of each of Atlas Management, ST Management, ST Operating, ST Capital, ST Management Holdings, A-N Credit Management, SPAC Management I, SPAC Management I GP, Capital Management, Capital Management GP, Management Holdings, and Management Holdings GP is 9 W. 57th Street, 43rd Floor, New York, New York 10019.
(3)Reflect beneficial ownership by Sompo Holdings as of July 29, 2022, as reported on Schedule 13G filed with the SEC on July 29, 2022, including (a) 500,000 common shares held directly by Sompo Holdings, (b) 7,351,320 common shares acquired by Sompo Light Vortex, a direct wholly-owned subsidiary of Sompo Holdings, in a private placement on July 29, 2022, and (c) 2,450,440 common shares subject to an outstanding warrant exercisable by Sompo Light Vortex within 60 days of July 29, 2022, and reporting sole voting and dispositive power over 500,000 common shares and shared voting and dispositive power over 9,801,760 common shares. The business address of the Sompo Entities is 26-1 Nishi-Shinjuku 1-chome, Shinjuku-ku, 160-8338, Tokyo, Japan.
(4)Reflects beneficial ownership by Mr. Barlow as of December 31, 2022, as reported on Schedule 13G/A filed with the SEC on February 3, 2023, reporting sole voting and dispositive power over 8,640,380 common shares, including a warrant exercisable, in whole or in part, at the option of Mr. Barlow, to purchase up to 49,009 common shares at an exercise price of $1.564345 per Wejo Common Share.
(5)Includes 80,210 common shares held by Fleury Capital Ltd. Mr. Ogilvy resigned from Wejo’s Board of Directors effective as of February 28, 2023.
(6)Includes (a) 107,634 common shares held by Calibogue Capital Fund One LLC, as to which Mr. Lee has shared voting and investment power and in respect of which Mr. Lee disclaims such beneficial ownership, and (b) a warrant exercisable, in whole or in part, at the option of Mr. Lee, to purchase up to 24,504 common shares at an exercise price of $1.564345 per Wejo Common Share.
(7)Includes (a) 156,583 common shares that can be acquired upon the exercise of options exercisable on December 31, 2022, or within 60 days thereafter; (b) a warrant exercisable, in whole or in part, at the option of Mr. Maxwell, to purchase up to 12,252 common shares at an exercise price of $1.564345 per Wejo Common Share; and (c) the following securities held by Mr. Maxwell’s wife, which he is deemed to indirectly beneficially own: (i) 36,757 common shares; and (ii) a warrant exercisable, in whole or in part, at the option of Mrs. Maxwell, to purchase up to 12,252 common shares at an exercise price of $1.564345 per Wejo Common Share.
(8)Includes 87,500 common shares that can be acquired upon the exercise of options exercisable on December 31, 2022, or within 60 days thereafter.
(9)Includes 87,500 common shares that can be acquired upon the exercise of options exercisable on December 31, 2022, or within 60 days thereafter.
(10) Includes 109,375 common shares that can be acquired upon the exercise of options exercisable on December 31, 2022, or within 60 days thereafter.
(11) Includes a warrant exercisable, in whole or in part, at the option of Mr. Hendel, to purchase up to 12,252 common shares at an exercise price of $1.564345 per Wejo Common Share.
(12) Includes a warrant exercisable, in whole or in part, at the option of Ms. Schwister or Mr. Burns, as applicable, to purchase up to 24,504 common shares at an exercise price of $1.564345 per Wejo Common Share.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information about our common shares that may be issued upon the exercise of options and RSUs (including the Market-Based RSUs) under all of our existing equity compensation plans as of December 31, 2022:
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
(a) (b) (c)
Equity compensation plans approved by security holders:
2021 Equity Incentive Plan 13,453,982(2)
$9.44(3)
5,509,272(4)
2021 Employee Share Purchase Plan N/A N/A 3,913,122(5)
Equity compensation plans not approved by security holders1
N/A N/A N/A
Total 13,453,982 9,422,394
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1 As of December 31, 2022, there were no equity compensation plans not approved by shareholders under which equity securities of the Company were authorized for issuance.
2 Represents common shares subject to outstanding awards granted, of which (i) 4,697,511 common shares are subject to outstanding Market-Based RSUs (ii) 6,747,335 common shares are subject to outstanding RSUs and (iii) 2,009,136 common shares are subject to outstanding options.
3 The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the common shares that will be issued upon the vesting of outstanding awards of restricted shares or RSUs, which have no exercise price.
4 The 2021 Equity Incentive Plan contains an “evergreen” provision pursuant to which the number of common shares reserved for issuance under the plan increases on the first day of each year beginning in 2022 equal to the lesser of (i) 3% of the total number of common shares actually issued and outstanding on the last day of the preceding fiscal year, and (ii) a number of common shares determined by the Company’s Board (such amount, the “Equity Plan Evergreen”). The Equity Plan Evergreen amount of shares added to the available share authorization under the 2021 Equity Incentive Plan on each of January 1, 2022 and 2023 was 2,818,506 and 3,283,847, respectively. The Company has not yet registered the 2023 Equity Plan Evergreen shares on a registration statement on Form S-8 with the SEC.
5 The 2021 Employee Share Purchase Plan contains an “evergreen” provision pursuant to which the number of common shares reserved for issuance under the plan increases on the first day of each year beginning in 2022 equal to the lesser of (i) 1% of the total number of common shares actually issued and outstanding on the last day of the preceding fiscal year, (ii) a number of common shares determined by the Company’s Board, and (iii) 1,879,004 common shares (such amount, the “ESPP Evergreen”). The ESPP Evergreen amount of shares added to the available share authorization under the 2021 Employee Share Purchase Incentive Plan on each of January 1, 2022 and 2023 was 939,502 and 1,094,616, respectively. The Company has not yet registered the 2023 ESPP Evergreen shares on a registration statement on Form S-8 with the SEC.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Policies and Procedures for Related Person Transactions
Our Board of Directors has adopted a written Related Person Transaction Policy, setting forth the policies and procedures for the review and approval or ratification of related person transactions.
A “Related Person Transaction” is a transaction, arrangement or relationship in which the post- combination company or any of its subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest. A “Related Person” means:
•any person who is, or at any time during the applicable period was, one of our executive officers or directors;
•any person who is the beneficial owner of more than 5% of the Company’s voting stock;
•any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5% of the Company’s voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of the Company’s voting stock; and
•any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
The Company has policies and procedures designed to minimize potential conflicts of interest arising from any dealings it may have with its affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to its audit committee charter, the audit committee will have the responsibility to review, approve or ratify related party transactions.
The following are certain transactions, arrangements and relationships with our directors, executive officers and shareholders owning 5% or more of our outstanding common shares, or any member of the immediate family of any of the foregoing persons, since January 1, 2022.
General Motors Holdings LLC
The Company is party with GM to a (i) Data Sharing Agreement, dated December 21, 2018 (as amended) (see Note 9 to the accompanying audited consolidated financial statements), and (ii) GM Securities Purchase Agreement, dated December 16 2022 (See Note 14 to the accompanying audited consolidated financial statements). As of December 31, 2022, GM was deemed to beneficially own approximately 19.99% of the Company’s equity.
Pursuant to the terms of the Data Sharing Agreement, the Company and GM share fees with respect to data licenses that support the opportunities for licensing of connected vehicle data. During the year ended December 31, 2022, the Company recorded $3.6 million as a reduction to revenue, net on the audited Consolidated Statements of Operations and Comprehensive Loss for revenue sharing amounts owed to GM.
On December 16, 2022, the Company entered into a Securities Purchase Agreement with GM and pursuant to the Securities Purchase Agreement, issued and sold to GM a secured convertible note and warrants to acquire common shares (see Note 14 to the accompanying audited consolidated financial statements).
As of December 31, 2022, the Company had $1.0 million recorded to Accounts payable on the audited Consolidated Balance Sheets for amounts owed to GM.
Managing Member of Virtuoso Sponsor LLC
The Company retained Jeffrey Warshaw under that certain Introducer Agreement, dated as of February 1, 2022, to introduce the Company to CFPI and its affiliates and to help arrange a committed equity facility for the Company. Mr. Warshaw is the managing member of Virtuoso Sponsor LLC, a holder of 9.21% of the Company’s common stock. In exchange for Mr. Warshaw’s services under the Introducer Agreement, upon the Company’s entry into the CFPI Stock Purchase Agreement, the Company paid Mr. Warshaw a fee
equal to $1.9 million (1.85% of the face amount of the CEF secured by the Company under the CFPI Stock Purchase Agreement) during the year ended December 31, 2022.
Apollo
On November 10, 2021, Apollo and the Company entered into the Forward Purchase Agreement described in Note 6 to the accompanying audited consolidated financial statements. Under that agreement, Apollo entered into an equity prepaid forward transaction in which it agreed to acquire up to 7.5 million shares of Virtuoso Class A common stock at $10 per share, which, following the closing of the Virtuoso Business Combination, were exchanged to and represented more than 5% of the Company’s outstanding common stock. In May 2022, the Company delivered a written notice to Apollo to request partial settlement of the transaction and received net sale proceeds of $2.5 million through December 31, 2022. As of December 31, 2022, Apollo holds 5,585,583 shares of the Company’s common stock.
On August 22, 2022, Wejo Limited entered into the FPA Amendment with Apollo, as described in Note 6 to the accompanying audited consolidated financial statements.
Sompo Holdings, Inc.
On July 27, 2022, the Company entered into a subscription agreement with significant investment coming from Sompo Light Vortex, a wholly-owned subsidiary of Sompo Holdings, as described in Note 3 to the accompanying audited consolidated financial statements. As a result of the July 2022 PIPE transaction, Sompo Holdings beneficially owns 10,301,760 common shares, which represented 9.5% of the Company’s outstanding common shares as of the closing of the transaction.
On October 8, 2022, the Company and Sompo Holdings entered into the Co-Development Agreement (“CDA”). Under the agreement, Sompo Holdings and the Company will collaborate and jointly develop solutions. The CDA shall have a term of 1 year, and shall renew automatically unless either party notifies the other party of their intention to terminate the CDA. The parties have commenced activities in support of the CDA.
During the year ended December 31, 2022, the Company recognized revenue of $0.9 million related to software and cloud solutions work performed on behalf of Sompo Holdings.
Director PIPE Investment
On July 27, 2022, as part of the July 2022 PIPE, the Company entered into subscription agreements with certain investors, including the following members of its Board of Directors: Ann M. Schwister, John T. Maxwell (and his wife Kathleen Maxwell), Lawrence D. Burns, Richard Barlow, Samuel Hendel, and Timothy Lee (collectively, the “Board PIPE Investors”).
The Board PIPE Investors invested the following amounts in exchange for the following securities of the Company:
Investor Name Common Shares Warrants Total Purchase Price
Ann M. Schwister 73,513 24,504 $ 103,063
John T. Maxwell 36,757 12,252 51,532
Kathleen Maxwell 36,757 12,252 51,532
Lawrence D. Burns 73,513 24,504 103,063
Richard Barlow 147,026 49,009 206,126
Samuel Hendel 36,757 12,252 51,532
Timothy Lee 73,513 24,504 103,063
Total 477,836 159,277 $ 669,911

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The following table summarizes the fees of EY, our independent registered public accounting firm, incurred by us for each of the last two fiscal years for audit services, and billed to us in each of the last two fiscal years for other services:
Fee Category 2022 2021
Audit Fees $ 4,671,204 $ 2,154,634
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
Total Fees $ 4,671,204 $ 2,154,634
Audit Fees
Audit fees for the years ended December 31, 2022 and 2021 relate to professional services provided by EY for the audit of the Company's annual financial statements and interim reviews for such years. Audit fees also include fees associated with the statutory audits of subsidiary financial statements and fees related to SEC registration statements, including consents and review of draft responses to SEC comment letters.
Audit Committee Pre-Approval Policy and Procedures
The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent registered public accounting firm. For each proposed service, the independent registered public accounting firm provides the Audit Committee with a description of the service and sufficient information to confirm the independent registered public accounting firm’s determination that the provision of such service will not impair the independent registered public accounting firm’s independence. Any requests for audit, audit-related, tax and other services must initially be submitted to the Company’s CFO. Any requests preliminarily approved by the CFO are then submitted to the Audit Committee for approval in the case of services requiring specific pre-approval or reported to the Audit Committee periodically in the case of services generally pre-approved.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(1)Financial Statements
The following documents are filed as part of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 1438).
Consolidated Balance Sheets as of December 31, 2022 and 2021.
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021.
Consolidated Statements of Shareholders' (Deficit) Equity for the years ended December 31, 2022 and 2021.
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021.
Notes to Consolidated Financial Statements.
(2)Financial Statement Schedules
All other schedules have been omitted since they are not applicable, not required, or because the information required is included in the consolidated financial statements and notes thereto.
(3)Exhibits
The information called for by this item is incorporated herein by reference to the Exhibit Index in this report.