METROMILE, INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Section                                 Page
  Overview                                                            24
  Our Model                                                           25
  Reinsurance                                                         25
  Key Performance Indicators                                          26
  Recent Developments Affecting Comparability                         28
  Key Factors and Trends Affecting our Operating Performance          28
  Components of Our Results of Operations                             29
  Results of Operations                                               31
  Non-GAAP Financial Measures                                         33
  Liquidity and Capital Resources                                     34
  Contractual Obligations                                             36
  Financing Arrangements                                              36

  Critical Accounting Policies and Estimates                          37
  New Accounting Pronouncements                                       37

Overview

At its core, insurance financially protects the insured customer from the
occurrence of specific future events. If these events can be more accurately
estimated, using data and data science, then the insurance provided can be more
accurately priced - lower likelihood events would cause the price of insurance
to go down and higher likelihood events would cause the price of insurance to go
up. The proliferation of sensor data, from cars, mobile phones, and elsewhere,
means we have a greater ability to estimate the likelihood of future events and,
thus, help many customers who are overpaying for insurance save money.

We founded Metromile in 2011 to realize this opportunity and tackle the broken
auto insurance industry. With data science as our foundation, we offer our
insurance customers real time, personalized auto insurance policies, priced and
billed by the mile, with rates based on precisely how and how much they actually
drive, instead of using the industry standard approximations and estimates that
make prices unfair for most customers.

Through our digitally native offering, built around the needs of the modern
driver, we believe our per-mile insurance policies save our customers, on
average, 47% over what they were paying their previous auto insurer. We base
this belief on data our customers self-reported in 2018 with respect to premiums
paid to providers before switching to Metromile.
We believe the opportunity for our personalized per-mile insurance product is
significant. Federal Highway Administration data indicates that approximately
35% of drivers drive more than half the total miles driven. We believe there is
a correlation between the number of miles driven and the number of insurable
losses. An October 2016 report by the Insurance Information Institute noted that
the increase in claims frequency appears directly linked to the increase in the
number of miles driven. Notwithstanding the relationship between miles driven
and claims, auto insurance premiums have historically been priced based on a
driver's "class" - and drivers are charged the same basic premium rate as others
in their class no matter the actual miles driven. In the traditional pricing
model, a driver's age, credit score, accident history, and geography influence
the premium paid more than the actual miles driven. Thus, the 35% of drivers who
account for more than half the total miles driven are not paying premiums based
on how often they are behind the wheel and increasing the potential for an
insurable loss claim. We believe the traditional pricing model is inherently
unfair to the majority of drivers - the 65% of drivers who drive less than half
the miles driven - as they are effectively subsidizing the minority of drivers
who are high-mileage drivers. By offering auto insurance using a per-mile rate
and then billing each customer monthly based on their actual miles driven, we
are able to provide significant savings to the 65% of drivers who drive less
than half the miles driven. Customers can simply use their connected car or use
The Pulse to share their data with us - which includes miles driven, and in
certain states where permitted by insurance regulators (four of the eight in
which we currently operate), driving habits, such as phone use, speeding,
hard-braking, accelerating, cornering, and location. Our customers are able to
choose when and how to drive and share this information with us to realize these
data driven savings every day.

The U.S. auto insurance market is massive, dominated by insurers stuck on legacy
technology infrastructure who offer antiquated services. U.S. personal auto
insurers write approximately $250 billion of premiums each year, with no carrier
currently achieving more than 20% market share. We believe we are strategically
positioned to succeed as industry incumbents struggle to meet the significant
structural changes underway in an increasingly digital world. The advent of
mobile phones has revolutionized modern mobility, while connected and autonomous
technologies are drastically
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changing consumer relationships. As we scale and accumulate more data, we
believe that we can deliver increasingly better service, pricing and experiences
for customers across all stages of the policy lifecycle.

Additionally, with the per-mile insurance that Metromile provides, customers are
incentivized to drive less and choose more environmentally friendly
transportation methods. We found that after customers switch to per-mile
insurance, they tend to decrease their overall miles driven. Not only does this
equate to a lower bill, but also a significant reduction in carbon emissions.

Recent Developments

On November 8, 2021, we entered into an Agreement and Plan of Merger (the
"Agreement") with Lemonade, Inc., a Delaware corporation ("Lemonade"), Citrus
Merger Sub A, Inc., a Delaware corporation and a wholly-owned subsidiary of
Lemonade ("Acquisition Sub I") and Citrus Merger Sub B, LLC, a Delaware limited
liability company and wholly owned subsidiary of Lemonade ("Acquisition Sub
II"), pursuant to which (i) Acquisition Sub I will merge with and into Metromile
(the "First Merger" and the effective time of the First Merger, the "First
Effective Time"), with Metromile continuing as the surviving entity (the
"Initial Surviving Corporation"), and (ii) the Initial Surviving Corporation
will merge with and into Acquisition Sub II (the "Second Merger"), with
Acquisition Sub II continuing as the surviving entity as a wholly owned
subsidiary of Lemonade (the First Merger, the Second Merger and the other
transactions contemplated by the Agreement, collectively, the "Proposed
Transaction"). The Proposed Transaction implies a fully diluted equity value of
approximately $500 million, or an enterprise value of about $340 million net of
unrestricted cash and cash equivalents as September 30, 2021. In accordance with
the Agreement, at the First Effective Time, each share of our common stock
issued and outstanding immediately prior to the First Effective Time will be
converted into the right to receive 0.05263 (the "Exchange Ratio") validly
issued, fully paid and non-assessable shares of common stock of Lemonade, par
value $0.00001 per share ("Lemonade Common Stock"). Although the applicable
waiting period for the Proposed Transaction under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, has expired and we have received
approval of the Proposed Transaction from our stockholders, the Proposed
Transaction is conditioned on certain additional customary closing conditions,
including receipt of applicable regulatory approvals, and is expected to close
in the second quarter of 2022.

For additional information related to the Proposed Transaction, please see Note
1, Basis of Presentation and Significant Accounting Policies to our Consolidated
Financial Statements and our Current Report on Form 8-K filed with the SEC on
November 9, 2021 as well as the proxy statement/prospectus filed with the SEC on
December 29, 2021.

Our Model

The traditional auto insurance industry is focused on charging customers static
insurance rates based on a "class" of driver, which is determined based on a set
of variables that approximate and estimate risk. The traditional approach
requires little ongoing customer engagement and requires manual claims
servicing, which results in lower gross margins. In contrast, our model is
digitally native, automated, and built using predictive models. Our product
provides customized rates for each individual driver, using telematics data and
proprietary predictive models to assess risk and determine pricing for each
customer, while billing customers based on their actual miles driven. We have
automated the claims approval process, resulting in higher margins, and reduced
fraud rates through real-time reporting from telematics devices, resulting in
lower loss ratios.

We have experienced strong growth since inception; however, our focus has been
on prioritizing unit economics rather than solely focusing on revenue growth
through increased net losses. Our priority has been on developing a durable
business advantage.

Total revenue increased from $17.3 million for the three months ended March 31,
2021 to $20.7 million for the three months ended March 31, 2022. Our gross
profit/(loss), defined as total revenue as adjusted for losses and LAE, policy
servicing expense and other and amortization of capitalized software, and which
is impacted by our reinsurance arrangements, decreased from $(2.1) million for
the three months ended March 31, 2021 to $(10.1) million for the three months
ended March 31, 2022. Our accident period contribution profit/(loss), a non-GAAP
financial measure that excludes from gross profit/(loss) the results of prior
period development on loss and LAE, decreased from $2.4 million for the three
months ended March 31, 2021 to $(4.5) million for the three months ended
March 31, 2022 largely due to an increase in losses, despite an increase in
direct written and earned premium for both periods. Accident period refers to
the period in which the loss occurs, and estimates are made to determine the
ultimate expected cost of that loss. These estimates are reassessed each
subsequent period, and the movement from the initial estimate of that accident
period is known as prior period development. We view accident period
contribution margin as the most relevant metric of current product profitability
and use accident period contribution margin to consistently evaluate the
variable contribution to our business from insurance operations from period to
period based on the most current product profitability. Contribution
profit/(loss), a non-GAAP financial measure that includes the results of prior
period development accident period contribution profit/(loss), decreased from
$(1.9) million for the three months ended March 31, 2021 to $(4.4) million for
the three months ended March 31, 2022. We use contribution profit/(loss) as a
key measure of our progress towards profitability and to consistently evaluate
the variable contribution to our business from insurance operations from period
to period. See the section entitled "- Non-GAAP Financial Measures" for
additional information regarding our use of accident period contribution
profit/(loss) and contribution profit/(loss)and a reconciliation to the most
comparable GAAP measure.

Reinsurance

We review our need to obtain reinsurance to help manage our exposure to property
and casualty insurance risks.

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The reinsurance arrangement covering the periods May 1, 2017 to April 30, 2018
and May 1, 2018 to April 30, 2019 covered 85% of our renewal policies and
beginning May 1, 2019, the reinsurance arrangements expanded to also include new
policies. Thus, from May 1, 2019 through April 30, 2021, we ceded a larger
percentage of our premium than in prior periods, resulting in a significant
decrease in our revenues as reported under GAAP. In addition, under the
reinsurance agreements from various years, LAE was ceded at a fixed rate ranging
from 3% to 6% of ceded earned premium. In February 2021, we commuted 67% of our
reinsurance program, resulting in 34.2% of the book being ceded as of March
2021. As of March 31, 2022 we have commuted the remainder of the aforementioned
agreements, and entered into new reinsurance programs effective January 2022
with Swiss Reinsurance America Corporation ("Swiss Re") and Mapfre Re, Compania
de Reaseguros, S.A ("Mapfre"). For additional information, please see Note 7,
Reinsurance, to our consolidated financial statements.

As we change our reinsurance arrangements, whereby the terms and structures may
vary widely, our prior results, impacted by reinsurance, may not be a good
indicator of future performance, including the fluctuations experienced in gross
profit. Thus, we use accident period contribution profit/(loss) and contribution
profit/(loss) as key measures of our performance.

Key Performance Indicators

We regularly review key operating and financial performance indicators to
evaluate our business, measure our performance, identify trends in our business,
prepare financial projections and make strategic decisions. We believe these
non-GAAP financial and operational measures are useful in evaluating our
performance, in addition to our financial results prepared in accordance with
GAAP. See the section entitled "- Non-GAAP Financial Measures" for additional
information regarding our use of accident period contribution profit/(loss),
contribution profit/(loss), accident period loss ratio and accident period LAE
ratio and a reconciliation to the most comparable GAAP measures.

The following table presents these metrics as of and for the periods presented:

                                                       Three Months Ended
                                                            March 31,
                                                       2022             2021
                                                   ($ in millions, except for
                                                      Direct Earned Premium
                                                           per Policy)
Policies in Force (end of period)                      101,294          

95,958

Direct Earned Premium per Policy (annualized)   $        1,142     $     1,100
Direct Written Premium                          $         29.3     $      28.0
Direct Earned Premium                           $         28.1     $      25.8
Gross Profit/(Loss)                             $        (10.1)    $      (2.1)
Gross Margin                                             (48.4)  %       (12.0) %
Accident Period Contribution Profit/(Loss)      $         (4.5)    $       2.4
Accident Period Contribution Margin                      (16.1)  %         9.1  %
Contribution Profit/(Loss)                      $         (4.4)    $      (1.9)
Contribution Margin                                      (15.6)  %        (7.1) %
Direct Loss Ratio                                         86.5   %        78.6  %
Direct LAE Ratio                                          16.4   %        14.4  %
Accident Period Loss Ratio                                85.1   %        65.1  %
Accident Period LAE Ratio                                 18.3   %        11.5  %


Policies in Force

We define policies in force as the number of current and active policyholders as
of the period end date. We view policies in force as an important metric to
assess our financial performance because policy growth drives our revenue
growth, increases brand awareness and market penetration, generates additional
data to continue to improve the performance of our platform, and provides key
data to assist strategic decision making for our company.

Direct Earned Premium per Policy

We define direct earned premium per policy as the ratio of direct earned premium
divided by the average policies in force for the period, presented on an
annualized basis. We view premiums per policy as an important metric because it
is a reliable indicator of revenue earned in any given period, and growth in
this metric would be a clear indicator of the growth of the business. However,
as evidenced by the substantial reduction in miles driven during the COVID-19
pandemic, near-term fluctuations in miles driven can lead to fluctuations in
direct earned premium. Thus, we refer to policies in force as a more stable
indicator of overall growth. Direct earned premium excludes the impact of
premiums
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ceded to reinsurers such that it reflects the actual business volume and direct
economic benefit generated from our customer acquisition efforts. Additionally,
premiums ceded to reinsurers can change based on the type and mix of reinsurance
structures we use.

Direct Written Premium

We define direct written premium as the total amount of direct premiums on
policies that were bound during the period. Direct written premium is a standard
insurance metric and is included here for consistency. However, given that much
of our premium is written and earned as customer miles are driven (i.e.,
customers are billed based on true use), unlike our competitors that write all
premium up-front, we believe earned premium is a more meaningful comparison to
other insurers. Direct written premium excludes mileage-based premium that has
not yet been earned. It also excludes the impact of premiums ceded to reinsurers
such that it reflects the actual business volume and direct economic benefit
generated from our customer acquisition efforts. Additionally, premiums ceded to
reinsurers can change based on the type and mix of reinsurance structures we
use.

Direct Earned Premium

We define direct earned premium as the amount of direct premium that was earned
during the period. Premiums are earned over the period in which insurance
protection is provided, which is typically six months. We view direct earned
premium as an important metric because it allows us to evaluate our growth prior
to the impact of ceded premiums to our reinsurance partners. It is the primary
driver of our consolidated GAAP revenues and represents the result of our
sustained customer acquisition efforts. As with direct written premium, direct
earned premium excludes the impact of premiums ceded to reinsurers to manage our
business, and therefore should not be used as a substitute for net earned
premium, total revenue, or any other measure presented in accordance with GAAP.

Gross Profit/(Loss)

Gross profit/(loss) is defined as total revenue minus losses and LAE, policy
servicing expense and other, and amortization of capitalized software. Gross
margin is equal to gross profit/(loss) divided by total revenue. Gross
profit/(loss) includes the effects of reinsurance, thereby increasing volatility
of this measure without corresponding changes in the underlying business or
operations.

Contribution Profit/(Loss) and Accident Period Contribution Profit/(Loss)

Contribution profit/(loss), a non-GAAP financial measure, is defined as gross
profit/(loss), excluding the effects of reinsurance arrangements on both total
revenue and losses and LAE and excludes enterprise software revenues, investment
income earned at the holding company, amortization of internally developed
software, and devices, while including bad debt, report costs and other policy
servicing expenses. Accident period contribution profit/(loss), a non-GAAP
financial measure, further excludes the results of prior period development on
losses and LAE. We believe the resulting calculations are inclusive of the
variable costs of revenue incurred to successfully service a policy, but without
the volatility of reinsurance. We use contribution profit/(loss) as a key
measure of our progress towards profitability and to consistently evaluate the
variable contribution to our business from insurance operations from period to
period because it is the result of direct earned premiums, plus investment
income earned at the insurance company, minus direct losses, direct LAE, premium
taxes, bad debt, payment processing fees, data costs, underwriting reports, and
other costs related to servicing policies. Accident period contribution
profit/(loss) further excludes the results of prior period development on loss
and LAE, thereby providing the most accurate view of the performance of our
underlying insurance product, which drives our growth investment decisions and
is a strong indicator of future loss performance.

See the section entitled "- Non-GAAP Financial Measures" for a reconciliation of
total revenue to accident period contribution profit/(loss) and contribution
profit/(loss).

Contribution Margin and Accident Period Contribution Margin

Contribution margin, a non-GAAP financial measure, is defined as contribution
profit/(loss) divided by adjusted revenue. Adjusted revenue, a non-GAAP
financial measure, is defined as total revenue, excluding the net effect of our
reinsurance arrangements, revenue attributable to our enterprise segment,
interest income generated outside of our insurance company, and bad debt
expense. We view contribution margin as an important metric because it most
closely correlates to the economics of our core underlying insurance product and
measures our progress towards profitability. Accordingly, we use this non-GAAP
financial measure to consistently evaluate the variable contribution to our
business from insurance operations from period to period. Accident period
contribution margin, a non-GAAP financial measure, is defined as accident period
contribution profit/(loss) divided by adjusted revenue. We view accident period
contribution margin as an important metric as it excludes the results of prior
period development on loss and LAE, thereby providing the most meaningful view
of the performance of our current underlying insurance product, which drives our
growth investment decisions and is a strong indicator of future loss
performance.

See the section entitled "- Non-GAAP Financial Measures" for a reconciliation of
total revenue to contribution profit/(loss) and accident period contribution
profit/(loss).
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Direct and Accident Period Loss Ratio

We define direct loss ratio expressed as a percentage, as the ratio of direct
losses to direct earned premium. Direct loss ratio excludes LAE. We view direct
loss ratio as an important metric because it allows us to evaluate losses and
LAE separately prior to the impact of reinsurance.

We define accident period loss ratio as direct loss ratio excluding prior
accident period development on losses. We view accident period loss ratio as an
important metric because it allows us to evaluate the expected ultimate losses,
including losses not yet reported, for the most recent accident period.

Direct and Accident Period LAE Ratio

We define direct LAE ratio expressed as a percentage, as the ratio of direct LAE
to direct earned premium. We view the direct LAE ratio as an important metric
because it allows us to evaluate losses and LAE separately prior to the impact
of reinsurance. We actively monitor the direct LAE ratio as it has a direct
impact on our results regardless of our reinsurance strategy.

We define the accident period LAE ratio as the direct LAE ratio excluding prior
quarter development on LAE. We view accident period LAE ratio as an important
metric because it allows us to evaluate the expected ultimate LAE, including LAE
for claims not yet reported, for the most recent accident period.

Recent Developments Affecting Comparability

Business Combination with INSU

In February 2021, we completed the Merger, pursuant to which Metromile Operating
Company (formerly MetroMile, Inc.) became our wholly owned direct subsidiary.
The Merger was accounted for as a reverse recapitalization in accordance with
GAAP. Under this method of accounting, although INSU was the legal acquirer,
INSU is treated as the "acquired" company for financial reporting purposes and
Metromile Operating Company is treated as the accounting acquirer. This
determination was primarily based on the fact that Metromile Operating Company's
stockholders prior to the Merger have a majority of our voting power, Metromile
Operating Company's senior management now comprise substantially all of our
senior management, the relative size of Metromile Operating Company compared to
our company, and that Metromile Operating Company's operations comprise our
ongoing operations. Accordingly, for accounting purposes, the Merger is treated
as the equivalent of a capital transaction in which Metromile Operating Company
issued stock for our net assets, which are stated at historical cost, with no
goodwill or other intangible assets recorded, and Metromile Operating Company's
financial statements became the Company's financial statements.

In connection with the Business Combination, we received approximately $310.0
million of cash, which we used to repay certain indebtedness as described
herein. We expect to use our cash on hand for working capital and general
corporate purposes. We may also use the proceeds for the acquisition of, or
investment in, technologies, solutions, or businesses that complement our
business.

COVID-19 Impact

In March 2020, the World Health Organization declared COVID-19 a global
pandemic. We are closely monitoring the impact of the COVID-19 pandemic on all
aspects of our business. We have taken measures in response to the ongoing
COVID-19 pandemic, including closing our offices and implementing a work from
home policy for our nationwide workforce; implementing additional safety
policies and procedures for our employees; and restricting employee travel and
in-person meetings. We may take further actions that alter our business
operations as may be required by federal, state, or local authorities or that we
determine are in the best interests of our employees, customers, and
stockholders.

For the three months ended March 31, 2022, we generated $28.1 million in direct
earned premium, an increase of $2.3 million or 9%, as compared to $25.8 million
for the three months ended March 31, 2021. This increase was primarily due to a
year-over-year increase in direct earned premium per policy, which is a
reflection of both miles driven and growth in the business. Based on internal
data, miles driven increased by 17% for the first three months of 2022 as
compared to the same period in 2021. We believe that the potential long-term
impacts of COVID-19, as more companies embrace work from home policies,
represent an opportunity for us to increase our customer base as drivers
continue to look for value-driven insurance solutions that provide the same or a
better quality product that aligns to their own driving behaviors.

The future impact of the COVID-19 pandemic on our operational and financial
performance will depend on certain developments, including the duration and
spread of the pandemic, impact on our customers and their spending habits,
impact on our marketing efforts, and effect on our suppliers, all of which are
uncertain. Public and private sector policies and initiatives to reduce the
transmission of COVID-19 and disruptions to our operations and the operations of
our third-party suppliers, along with the related global slowdown in economic
activity, may result in decreased revenues and increased costs. Impacts on our
revenue and costs may continue through the duration of this crisis. It is
possible that the COVID-19 pandemic, the measures taken by federal, state, or
local authorities and businesses affected and the resulting economic impact may
materially and adversely affect our business, results of operations, cash flows
and financial positions as well as our customers.

Key Factors and Trends Affecting our Operating Performance

Our financial condition and results of operations have been, and will continue
to be, affected by a number of factors, including the following:

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Our Ability to Attract New Customers

Our long-term growth will depend, in large part, on our continued ability to
attract new customers to our platform. Our growth strategy is centered around
accelerating our existing position in markets that we already serve, expanding
into new markets nationally across the United States, developing new strategic
partnerships with key players in the automotive industry.

Our Ability to Retain Customers

Turning our customers to lifetime customers is key to our success. We realize
increasing value from each customer retained as a recurring revenue base, which
forms a basis for organic growth for our new product offerings and improves our
loss ratios over time. Our ability to retain customers will depend on a number
of factors, including our customers' satisfaction with our products, offerings
of our competitors and pricing of our products.

Our Ability to Expand Nationally Across the United States

Our long-term growth opportunity will benefit from our ability to provide
insurance across more states in the United States. Today, we are licensed in 49
states and the District of Columbia, with licenses active in 46 states and the
District of Columbia, and writing business in eight states. We plan to apply our
highly scalable model nationally, with a tailored approach to each state, driven
by the regulatory environment and local market dynamics. This will allow us to
expand rapidly and efficiently across different geographies while maintaining a
high level of control over the specific strategy within each state.

Our Ability to Introduce New and Innovative Products

Our growth will depend on our ability to introduce new and innovative products
that will drive the organic growth from our existing customer base as well as
from potential customers. Our insurance offerings provide us with a foundation
to provide a broad set of insurance products to consumers in the future.

Our Ability to Manage Risk Through Our Technology

Risk is managed through our technology, artificial intelligence, and data
science, which we utilize to accurately determine the risk profiles of our
customers. Our ability to manage risk is augmented over time as data is
continuously collected and analyzed by our machine learning with the objective
of lowering our loss ratios over time. Our success depends on our ability to
adequately and competitively price risk.

Our Ability to Manage Risks Related to Severe Weather Events and Climate Change

Both seasonal and severe weather events impact the level and amount of claims we
receive. These events, as well as climate change and its potential impact on
weather patterns, include hurricanes, wildfires, coastal storms, winter storms,
hailstorms, and tornados.

Components of Our Results of Operations

Revenue

Revenues are generated primarily from the sale of our pay-per-mile auto
insurance policies within the United States, revenue related to policy
acquisition costs recovered as part of the reinsurance arrangement, and through
sales of our proprietary AI claims platform. Revenue excludes premiums ceded to
our reinsurers (see the section entitled "- Reinsurance" for further
information).

Premiums Earned, net

Premiums earned, net represents the earned portion of our gross written premium,
less the earned portion that is ceded to third-party reinsurers under any
reinsurance agreements. Revenue from premiums is earned over the term of the
policy, which is written for six-month terms. The premium for the policy
provides for a base rate per month for the entire policy term upon the binding
of the policy plus a per-mile rate multiplied by the miles driven each day
(based on data from the telematics device, subject to a daily maximum).

Investment Income

Investment income represents interest earned from our fixed maturity and
short-term investments less investment expenses and is recorded as the income is
earned. Investment income is directly correlated with the size of our investment
portfolio and with the market level of interest rates. The size of our
investment portfolio is expected to increase in future periods, and therefore
investment income is also expected to increase, as we continue to invest both
customer premiums and equity proceeds into our investment portfolio.

Other Revenue

Other revenue consists of enterprise revenue, revenue related to policy
acquisition costs recovered as part of a reinsurance arrangement with
reinsurance partners, reinsurance profit commissions based on performance of the
ceded business, gain on reinsurance commutation and policy commissions earned
from NGI. We have developed technologies
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intended for internal use to service our insurance business and have started
offering our technologies to third-party insurance carriers. Enterprise revenue
represents revenues generated from the licensing of such internally developed
software on a subscription basis, and sales of our professional services, which
includes customization and implementation services for customers. We also earned
revenues from policy acquisition costs recovered for policies newly ceded to our
reinsurance partners, and we earn commissions for policies underwritten by NGI
prior to becoming a full-stack insurance carrier in 2016.

Costs and Expenses

Our costs and expenses consist of losses and LAE, policy servicing expense and
other, sales, marketing, and other acquisition costs, research and development,
amortization of capitalized software, and other operating expenses.

Losses and LAE

Our losses and LAE consist of the net cost to settle claims submitted by our
customers. Losses consist of claims paid, case reserves, as well as claims
incurred but not reported, net of estimated recoveries from salvage and
subrogation. LAE consists of costs borne at the time of investigating and
settling a claim. Losses and LAE represents management's best estimate of the
ultimate net cost of all reported and unreported losses occurred through the
balance sheet date. Estimates are made using individual case-basis valuations
and statistical analyses and are continually reviewed and adjusted as necessary
as experience develops or new information becomes known. These reserves are
established to cover the estimated ultimate cost to settle insured losses.

Both losses and LAE are net of amounts ceded to reinsurers. We evaluate whether
to enter into reinsurance contracts to protect our business from losses due to
concentration of risk and to manage our operating leverage ratios, as well as to
provide additional capacity for growth. Our reinsurance contracts consist of
quota-share reinsurance agreements with our reinsurance partners under which
risks are covered on a pro-rata basis for all policies underwritten by us (see
the section entitled "- Reinsurance" for further discussion). These expenses are
a function of the size and term of the insurance policies we write and the loss
experience associated with the underlying risks. Losses and LAE may be paid out
over a period of years.

Various other expenses incurred during claims processing are allocated to losses
and LAE. These amounts include claims adjusters' salaries and benefits, employee
retirement plan related expenses and stock-based compensation expenses
(Personnel Costs); software expenses; and overhead allocated based on headcount
(Overhead).

It is possible that changes in economic conditions, the supply chain, labor
market and geopolitical tensions, along with actions taken by the government,
could lead to inflationary impacts outside of the Company's expectations. Such
factors could drive an increase or decrease in the Company's loss costs and the
need to strengthen or reduce loss and loss adjustment expense reserves. Labor
shortages, higher costs of vehicle, parts and equipment, and supply shortages
for raw materials are adversely impacting severity in our business and the
industry and may continue to do so in future quarters.

Policy Servicing Expense and Other

Policy servicing expense and other includes personnel costs related to our
technical operations and customer experience teams, data transmission costs,
credit card and payment processing expenses, premium taxes, and amortization of
telematics devices. Policy servicing expense and other is expensed as incurred.

Sales, Marketing and Other Acquisition Costs

Sales, marketing, and other acquisition costs includes spend related to
advertising, branding, public relations, third-party marketing, consumer
insights, reinsurance ceding commissions, and expense recognized due to return
of onboarding allowance as part of reinsurance commutations. These expenses also
include related personnel costs and overhead. We incur sales, marketing and
other acquisition costs for all product offerings including our newly introduced
software as a service ("SaaS") platform which provides access to our developed
technology under SaaS arrangements, along with professional services to
third-party customers ("Enterprise business solutions"). Sales, marketing and
other acquisition costs are expensed as incurred, except for costs related to
deferred acquisition costs that are capitalized and subsequently amortized over
the same period in which the related premiums are earned.

Research and Development

Research and development consist of costs that support our growth and expansion
initiatives inclusive of website development costs, software development costs
related to our mobile app and Enterprise business solution, and new product
development costs. These costs include third-party services related to data
infrastructure support; personnel costs and overhead for product design,
engineering, and management; and amortization of internally developed software.
Research and development costs are expensed as incurred, except for costs
related to internally developed software that are capitalized and subsequently
amortized over the expected useful life. We expect that research and development
expenses will increase in both absolute dollars and percentage of revenues in
future periods in the near-term. We expect that, in the long-term, our research
and development expenses will decrease as a percentage of revenue as these
represent largely fixed costs.
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Amortization of Capitalized Software

Amortization of capitalized software relates to the amortization recorded for
the capitalized website and software development costs for the period presented.

Other Operating Expenses

Other operating expenses primarily relate to personnel costs and overhead for
corporate functions, external professional service expenses and depreciation
expense for computers, furniture, and other fixed assets. General and
administrative expenses are expensed as incurred.

We expect to incur incremental operating expenses to support our global
operational growth and enhancements to support our reporting and planning
functions.

We expect to incur significant additional operating expenses as a result of
operating as a public company, including expenses related to compliance with the
rules and regulations of the SEC and the listing standards of the Nasdaq Capital
Market, additional corporate, director and officer insurance expenses, greater
investor relations expenses and increased legal, audit and consulting fees.

Interest expense

Interest expense primarily relates to interest incurred on our long-term debt,
the amortization of debt issuance costs.

(Decrease) increase in fair value of stock warrant liability

(Decrease) increase in fair value of stock warrant liability primarily relates
to changes in the fair value of warrant liabilities.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and March 31, 2021:

The following table presents our consolidated statement of operations for the
three months ended March 31, 2022 and 2021, and the dollar and percentage change
between the two periods:

                                                  Three Months Ended
                                                      March 31,
                                               2022               2021              $ Change              % Change
Revenue                                              (unaudited)
Premiums earned, net                       $  19,165          $    1,125          $  18,040                     1604  %
Investment income                                 45                  36                  9                       25  %
Other revenue                                  1,489              16,115            (14,626)                     (91) %
Total revenue                                 20,699              17,276              3,423                       20  %
Costs and expenses
Losses and loss adjustment expenses           22,060              12,263              9,797                       80  %
Policy servicing expense and other             5,283               4,443                840                       19  %
Sales, marketing and other acquisition
costs                                          6,459              47,294            (40,835)                     (86) %
Research and development                       4,277               3,650                627                       17  %
Amortization of capitalized software           3,368               2,651                717                       27  %
Other operating expenses                      13,702               8,589              5,113                       60  %
Total costs and expenses                      55,149              78,890            (23,741)                     (30) %
Loss from operations                         (34,450)            (61,614)            27,164                      (44) %
Other expense
Interest expense                                   -              15,876            (15,876)                    (100) %

(Decrease) increase in fair value of stock
warrant liability                               (131)             26,137            (26,268)                    (101) %
Total other expense                             (131)             42,013            (42,144)                    (100) %
Loss before taxes                            (34,319)           (103,627)            69,308                      (67) %

Net loss                                   $ (34,319)         $ (103,627)         $  69,308                      (67) %


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Revenue

Premiums Earned, net

Net premiums earned increased $18.0 million, or 1604%, from $1.1 million for the
three months ended March 31, 2021 to $19.2 million for the three months ended
March 31, 2022, which was primarily attributable to a $15 million decrease in
premiums ceded to our reinsurance partners, and a $2.3 million increase in
direct earned premium, The increase in direct earned premiums was primarily
attributable to an increase in policies in force during the three months ended
March 31, 2022 as well as increase in miles driven during the same period. We
believe direct earned premium is the best measure of top-line revenue, as it
excludes the impacts of reinsurance.

Investment Income

Investment income increased $9 thousand, or 25%, from $36 thousand for the three
months ended March 31, 2021 to $45 thousand for the three months ended March 31,
2022. The increase was primarily due to a higher level of invested assets.

Other Revenue

Other revenue decreased $14.6 million, or 91%, from $16.1 million for the three
months ended March 31, 2021 to $1.5 million for the three months ended March 31,
2022. The decrease was primarily reinsurance related. There was an $11.3 million
gain recognized in 2021 on reinsurance commutation settlement and a $3.5 million
decrease year over year in revenues from policy acquisition costs recovered for
policies onboarded into our 2021 reinsurance program.

Costs and Expenses

Losses and LAE

Losses and LAE increased $9.8 million, or 80%, from $12.3 million for the three
months ended March 31, 2021 to $22.1 million for the three months ended
March 31, 2022. Ceded losses and LAE decreased $4.7 million as a result of
commuting most of our reinsurance programs during the first quarter of 2021 and
replacing with a new reinsurance program effective January 2022 under which we
cede a smaller portion of our portfolio. Direct losses and LAE increased by $5.1
million due to an overall increase in claims cost as a result of inflationary
trends, frequency, and severity.

Policy Servicing Expense and Other

Policy servicing expense and other increased $0.8 million, or 19%, from $4.4
million for the three months ended March 31, 2021 to $5.3 million for the three
months ended March 31, 2022. The increase was primarily attributable to an
increase in our technical operations costs to support our customer platform,
customer experience and other policy servicing personnel related expenses to
support our business initiatives.

Sales, Marketing, and Other Acquisition Costs

Sales, marketing, and other acquisition costs decreased $40.8 million from $47.3
million for the three months ended March 31, 2021 to $6.5 million for the three
months ended March 31, 2022. Of this decrease, $40.8 million was
reinsurance-related to the 2021 commutation, in which we recorded a gain of
$11.3 million in Other Revenue as well as Sales, Marketing, and Other
Acquisition Cost expense of $40.1 million related to a return of revenues from
policy acquisition costs recovered for policies onboarded into our reinsurance
program. Aside from reinsurance related impacts, there was a net decrease of
$1.0 million in our marketing campaign spend.

Research and Development

Research and development increased $0.6 million, or 17%, from $3.7 million for
the three months ended March 31, 2021 to $4.3 million for the three months ended
March 31, 2022. The increase was primarily attributable to employee personnel
costs related to our expansion initiatives in the engineering and technology
areas of approximately $3.2 million, and an increase in stock compensation
expense for related departments of $0.7 million, partially offset by a decrease
of $3.2 million in capitalized software costs which serves as an offset to
research and development expense.

Amortization of Capitalized Software

Amortization of capitalized software increased by 27%, from $2.7 million for the
three months ended March 31, 2021 to $3.4 million for the three months ended
March 31, 2022. The increase was primarily related to the amortization of our
website development costs and capitalized costs related to internal use
software.

Other Operating Expenses

Other operating expenses increased $5.1 million, or 60%, from $8.6 million for
the three months ended March 31, 2021 to $13.7 million for the three months
ended March 31, 2022. The increase was primarily driven by an increase of $3.9
million increase in general and administrative costs as a result of operating as
a public company, including expenses related to compliance with the rules and
regulations of the SEC and the listing standards of the Nasdaq Capital Market,
additional
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corporate, director and officer insurance expenses, and increased legal, audit
and consulting fees, as well as $0.3 million transaction costs incurred in 2022
in connection with an intended merger with Lemonade.

Interest Expense

Interest expense decreased $15.9 million, or 100%, from $15.9 million for the
three months ended March 31, 2021 to $0.0 million for the three months ended
March 31, 2022. The decrease was attributable to no debt outstanding in 2022, as
debt was paid off during the first quarter of 2021.

Decrease in fair value of stock warrant liability

Fair value of stock warrant liability decreased $26.3 million, from $26.1
million for the three months ended March 31, 2021 to $(0.1) million for the
three months ended March 31, 2022. The decrease was driven by the change in fair
value of our public and private placement warrants as described in Note 2 of the
unaudited consolidated financial statements included in Part I, Item 1, of this
Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

The non-GAAP financial measures below have not been calculated in accordance
with GAAP, and should be considered in addition to results prepared in
accordance with GAAP and should not be considered as a substitute for, or
superior to, GAAP results. In addition, accident period contribution
profit/(loss) and contribution profit/(loss) should not be construed as
indicators of our operating performance, liquidity or cash flows generated by
operating, investing and financing activities, as there may be significant
factors or trends that these non-GAAP measures fail to address. We caution
investors that non-GAAP financial information, by its nature, departs from
traditional accounting conventions. Therefore, its use can make it difficult to
compare our current results with our results from other reporting periods and
with the results of other companies.

Our management use these non-GAAP financial measures, in conjunction with GAAP
financial measures, as an integral part of managing our business and to, among
other things: (1) monitor and evaluate the performance of our business
operations and financial performance; (2) facilitate internal comparisons of the
historical operating performance of our business operations; (3) facilitate
external comparisons of the results of our overall business to the historical
operating performance of other companies that may have different capital
structures and debt levels; (4) review and assess the operating performance of
our management team; (5) analyze and evaluate financial and strategic planning
decisions regarding future operating investments; and (6) plan for and prepare
future annual operating budgets and determine appropriate levels of operating
investments.
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The following table provides a reconciliation of total revenue to contribution
profit/(loss) and accident period contribution profit/(loss) for the periods
presented:

                                                                   Three Months Ended
                                                                       March 31,
                                                                   2022           2021
                                                                    ($ in millions)
Total revenue                                                       20.7          17.3
Losses and LAE                                                     (22.1)        (12.3)
Policy servicing expense and other                                  (5.3)   

(4.4)

Amortization of capitalized software                                (3.4)         (2.7)
Gross profit/(loss)                                                (10.1)         (2.1)
Gross margin                                                       (48.4)  %     (12.0) %

Less revenue adjustments:
Revenue Adjustments Related to Reinsurance                           8.4    

8.9

Revenue from Enterprise Segment                                     (1.2)   

(1.0)

Interest Income and Other                                            0.5    

1.0

Less costs and expense adjustments:
Loss and LAE Adjustments Related to Reinsurance                     (7.1)   

(11.8)

Loss and LAE Adjustments Related to Prior Period Development (0.1)

4.3

Bad Debt, Report Costs and Other Expenses                            0.4    

(0.6)

Amortization of Internally Developed Software                        3.4    

2.7

Devices                                                              1.3    

1.0

Accident period contribution profit/(loss)                     $    (4.5)       $  2.4

Prior Period Development                                       $     0.1        $ (4.3)
Contribution profit/(loss)                                     $    (4.4)       $ (1.9)

Total revenue                                                  $    20.7        $ 17.3
Revenue adjustments                                                  7.7           8.9
Adjusted revenue                                               $    28.4        $ 26.2

Accident period contribution margin                                (16.1)  %       9.1  %
Contribution margin                                                (15.6)  %      (7.1) %

Liquidity and Capital Resources

We are a holding company that transacts a majority of our business through
operating subsidiaries. Through our insurance subsidiaries, we sell pay-per-mile
auto insurance policies to customers and through our Enterprise subsidiary, we
sell our insurance solution technology to third-party insurance carriers. From
inception through completion of the Merger, we financed our operations primarily
through sales of insurance policies, sales of our Enterprise platform, and the
net proceeds received from the issuance of preferred stock, debt, and sales of
investments. As of March 31, 2022, we had $84.3 million in unrestricted cash and
cash equivalents compared to unrestricted cash and cash equivalents of $120.9
million as of December 31, 2021. Our cash and cash equivalents primarily consist
of bank deposits and money market funds. Our marketable securities consist of
U.S. treasury securities, municipal securities, corporate debt securities,
residential and commercial mortgage-backed securities, and other debt
obligations.

Insurance companies in the United States are also required by state law to
maintain a minimum level of capital and surplus. Insurance companies are subject
to certain RBC requirements as specified by NAIC. These standards for property
and casualty insurers are used as a means of monitoring the financial strength
of insurance companies. Under these requirements, the amount of capital and
surplus maintained by an insurance company is to be determined based on the
various risk factors related to it. Such regulation is generally for the
protection of the policyholders rather than
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stockholders. As of March 31, 2022 and December 31, 2021, our capital and
policyholders' surplus exceeded the minimum RBC requirements. We believe that
our existing cash and cash equivalents, marketable securities, and cash flow
from operations will be sufficient to support working capital and capital
expenditure requirements for at least the next 12 months. Our future capital
requirements will depend on many factors, including our insurance premium growth
rate, renewal activity, including the timing and the amount of cash received
from customers, the timing and extent of spending to support development
efforts, the introduction of new and enhanced products, the continuing market
adoption of offerings on our platform, and the current uncertainty in the global
markets resulting from the worldwide COVID-19 pandemic.

Our principal sources of liquidity are funds generated by operating activities,
and available cash and cash equivalents, subject to the limitations set forth in
the merger agreement related to the Proposed Transaction.

The following table summarizes our cash flow data for the periods presented:

                                                           Three Months Ended
                                                                March 31,
                                                          2022 [1]          2021
                                                             ($ in millions)
Net cash used in operating activities                 $    (28.0)         $ 

(29.4)

Net cash (used in) provided by investing activities (17.1)

0.7

Net cash provided by financing activities                      -            

273.5

[1] Cash activities in 2022 include cash flows related to Enterprise Business
Solutions classified as held for sale beginning in the first quarter of 2022.
See Note 16, Business Disposition, of Notes to Consolidated Financial Statements
for discussion of this transaction.

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2022
was $28.0 million, which was a decrease of net cash used of $1.4 million from
$29.4 million for the three months ended March 31, 2021. Cash used during this
period included $23.1 million from net loss for the three months ended March 31,
2022, excluding the impact of changes in fair value of our outstanding warrants,
depreciation expense and stock-based compensation and other non-cash expenses.
Net cash provided by changes in our operating assets and liabilities decreased
by $30.1 million, which is primarily attributable to reinsurance recoverables on
paid and unpaid losses, loss and LAE reserves which reflect an increase in paid
claims year over year, a decrease in accounts payable and accrued expenses, and
prepaid reinsurance premium, partially offset by ceded reinsurance premiums,

Net cash used in operating activities for the three months ended March 31, 2021
was $29.4 million. Cash used during this period included $54.5 million from net
loss for the three months ended March 31, 2021, excluding the impact of changes
in fair value of our outstanding warrants, depreciation expense and stock-based
compensation and other non-cash expenses. Net cash provided by changes in our
operating assets and liabilities increased by $32.5 million, which is primarily
attributable to ceded reinsurance premiums, reinsurance recoverable on unpaid
losses, accounts payable and accrued expense, prepaid reinsurance premium,
premiums receivable which outpaced reinsurance recoverable on paid losses,
prepaid expenses and other, unearned premium reserve, and loss and LAE reserves.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2022
was $17.1 million compared to net cash provided by investing activities of $0.7
million during the three months ended March 31, 2021, which was primarily driven
by a change from net proceeds to net payments for securities, as well as
continued investment in our website and software development, partially offset
by a decline in investment in telematics devices, leasehold improvements, and
other equipment.

Financing Activities

Net cash provided by financing activities for the three months ended March 31,
2022 was $0.0 million compared to $273.5 million in cash provided by financing
activities for the three months ended March 31, 2021. The decrease in cash
provided by financing activities is primarily due to cash received from the
trust account and the private placements in connection with the Closing in
February 2021.
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Contractual Obligations

The following is a summary of material contractual obligations and commitments
as of March 31, 2022:

                                                       2022 (remaining
                                      Total             nine months)            2023 - 2024           2025 - 2026          Thereafter
                                                                              (in millions)
Long-term debt                     $       -          $            -          $          -          $          -          $        -
Interest on long-term debt                 -                       -                     -                     -                   -
Operating Leases                        22.3                     2.3                   6.4                   4.9                 8.7
Purchase Commitments                     3.3                     3.3                     -                     -                   -
Total                              $    25.6          $          5.6          $        6.4          $        4.9          $      8.7



Financing Arrangements

Subordinated Note Purchase and Security Agreement

In April 2020, we entered into the Note Purchase Agreement with Hudson, which
was amended in February 2021 to reflect the consummation of the Merger by adding
INSU as a guarantor and reflecting our new corporate structure. An executive of
Hudson is on our board of directors and is a related party, as discussed in Note
15 of the unaudited consolidated financial statements included in Part I, Item
1, of this Quarterly Report on form 10-Q.

Under the Note Purchase Agreement, we could issue up to $50.0 million in
aggregate principal amount of senior secured subordinated PIK notes due in 2025
(the "Notes"). The Note Purchase Agreement further provided for additional funds
of up to an aggregate of $15.0 million over time from Hudson, the timing of
which was subject to reinsurance settlement timing. Notes issued under the Note
Purchase Agreement were due on the fifth anniversary of their issuance, starting
in April 2025, and bore interest at the following rates: 2% per annum payable
quarterly in arrears in cash, and a varying interest rate of 9.0% to 11.0% PIK
interest. The PIK interest was based on the aggregate outstanding principal
balance as follows: (i) 11.0% if the outstanding balance was less than $5.0
million; (ii) 10.0% if the outstanding balance was greater than or equal to $5.0
million but less than $10.0 million, and (iii) 9.0% if the outstanding balance
was greater than or equal to $10.0 million. PIK interest represents
contractually deferred interest that was added to the principal balance
outstanding each quarter and due at maturity. The Notes were secured by
substantially all of our assets. We had the right to prepay the Notes at any
time subject to payment of a fee. As of December 31, 2020, $31.6 million
aggregate principal amount of the Notes was outstanding, along with $0.9 million
of capitalized PIK interest. Subsequent to December 31, 2020, we issued
additional Notes having an aggregate principal amount of $2.0 million. As of
March 30, 2021, there was approximately $36.6 million of principal and PIK
interest outstanding under the Hudson debt facility, which we repaid on such
date, along with the prepayment fee of $0.4 million. Accordingly, there are no
longer any Notes outstanding.

As part of the entry into the original Note Purchase Agreement, we issued
warrants for up to 8,536,938 of Series E convertible preferred shares, which we
estimated to have a fair value of $12.5 million at issuance, which was recorded
as a discount to the debt and is being amortized to interest expense over the
term of the debt. These warrants were net exercised immediately prior to the
Effective Time (as defined in the Merger Agreement) and are no longer
outstanding.

Paycheck Protection Program Loan

In April 2020, we were granted a loan under the Paycheck Protection Program
offered by the Small Business Administration under the CARES Act, section
7(a)(36) of the Small Business Act for approximately $5.9 million. The balance
outstanding for the Paycheck Protection Program loan was $5.9 million at
December 31, 2020. We repaid this loan concurrent with the consummation of the
Merger and it is no longer outstanding.

2019 Loan and Security Agreement

In December 2019, we entered into a Loan and Security Agreement (the "2019 Loan
and Security Agreement") with us, as borrower, certain of our subsidiaries, as
guarantors and certain affiliates of Multiplier Capital, LLC and other financial
institutions, as lenders and agent, providing for a term loan in aggregate
principal amount of $25.0 million. Minimum payments of interest were due monthly
through December 2021. Beginning in January 2022, equal payments of principal
would have been due monthly in an amount necessary to fully amortize the loan by
June 5, 2024. An end of term payment of $0.6 million was due at maturity or date
of any prepayment. The loan was secured by substantially all of our and the
guarantor's assets. Lender's consent was required to be obtained regarding
certain dispositions, and changes in business, management, or ownership
including mergers and acquisitions, such as the Merger, as more fully described
in the 2019 Loan and Security Agreement. The balance outstanding net of debt
issuance costs for the 2019 Loan and Security Agreement was $24.3 million as of
December 31, 2020.

The loan could be prepaid in an amount equal to the outstanding principal,
accrued interest, and the end of term fee, plus a prepayment charge of 3% if
paid in the first two years after the effective date, 2% if paid in the third
year after the effective date, or 1% if prepaid after the third year subsequent
to the effective date. Accordingly, we prepaid this loan in connection with the
consummation of the Merger and is no longer outstanding.
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At the time of origination, the lender was granted a warrant to purchase Series
E convertible preferred stock, estimated to have a fair value of $0.5 million at
issuance. These warrants were net exercised immediately prior to the Effective
Time and are no longer outstanding.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation
of the consolidated financial statements in conformity with GAAP requires our
management to make a number of estimates and assumptions relating to the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the period. We evaluate our
significant estimates on an ongoing basis, including, but not limited to,
estimates related to reserves for loss and LAE, premium write-offs, and
stock-based compensation. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results could differ from those estimates.

See Note 1, Summary of Significant Accounting Policies, to our unaudited
consolidated financial statements included in Part I, Item 1, of this Quarterly
Report on Form 10-Q for material changes to our critical accounting policies
from the ones described under the section Critical Accounting Policies and
Estimates of Management's Discussion and Analysis of Financial Condition and
Results of Operations and Summary of Significant Accounting Policies of Notes to
Consolidated Financial Statements included in the Company's 2021 Form 10-K
Annual Report.

New Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies, to our unaudited
consolidated financial statements included in Part I, Item 1, of this Quarterly
Report on Form 10-Q.