tsp-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40326

TuSimple Holdings Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			86-2341575
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
9191 Towne Centre Drive, Suite 600 San Diego, CA			92122
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (619) 916-3144

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

TSP

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of August 31, 2023, the number of shares of the registrant’s Class A common stock outstanding was 205,103,184 and the number of shares of the registrant’s Class B common stock outstanding was 24,000,000.

Table of Contents


		Page
	Special Note Regarding Forward-Looking Statements	ii
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29
	Signatures	30

EXPLANATORY NOTE

As previously reported, we were unable to file this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, as well as our Quarterly Report on Form 10-Q for the quarter June 30, 2023, with the Securities and Exchange Commission ("SEC") on a timely basis as a result of our prior independent registered public accounting firm's resignation on November 17, 2022. Except as otherwise noted, the information in this report speaks as of the period covered thereby.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” or the negative version of these words and similar expressions are intended to identify forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future performance, including our revenue, cost of revenue, and operating expenses;

•the sufficiency of our cash and cash equivalents to meet our operating requirements;

•our ability to scale our Autonomous Freight Network;

•our ability to attract new users to our products and services;

•our ability to effectively manage our business strategy and future expenses;

•the estimated timing for when additional routes will be available;

•our ability to compete in a market that is rapidly evolving and subject to technological developments;

•our estimated total addressable market, the market for autonomous truck and freight transport solutions, and our market position;

•our ability to successfully collaborate with business partners and the willingness of business partners to work with us;

•our ability to obtain, maintain, protect, and enforce our intellectual property;

•our ability to comply with modified or new laws and regulations applicable to our business or industry;

•our involvement in and ability to resolve on favorable terms, if at all, any regulatory or government actions, inquiries or investigations, or securities litigation;

•our ability to attract and retain employees with the technical skills we require and other qualified personnel;

•our ability to achieve our driver-out milestones on the timeline expected;

•our anticipated investments in research and development, sales, and marketing, and the effect of these investments on our results of operations;

•the increased expenses associated with being a public company; and

•the potential impact of inflation, rising interest rates, wars, and other global hostilities on our and our partners’ business and results of operations, and on the global supply chain and economy generally.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part I, Item 1A, “Risk Factors” of the Annual Report on Form 10-K for the year ended December 31, 2022 and that are otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Except as required by applicable law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by applicable law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TuSimple Holdings Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(unaudited)


	December 31, 2022		March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	615,386	$	510,008
Short-term investments	377,312		397,034
Accounts receivable, net	1,377		231
Prepaid expenses and other current assets	13,477		16,721
Total current assets	1,007,552		923,994
Property and equipment, net	17,083		14,709
Operating lease right-of-use assets	44,952		43,844
Other assets	4,692		4,386
Total assets	$	1,074,279	$	986,933
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,855	$	6,572
Amounts due to joint development partners	5,753		4,353
Accrued expenses and other current liabilities	48,260		32,255
Short-term debt	1,645		1,659
Operating lease liabilities, current	6,007		5,972
Total current liabilities	71,520		50,811
Operating lease liabilities, noncurrent	42,169		40,658
Long-term debt	3,668		3,244
Other liabilities	2,441		824
Total liabilities	119,798		95,537
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $0.0001 par value; 100,000,000 shares authorized as of December 31, 2022 and March 31, 2023; zero shares issued and outstanding as of December 31, 2022 and March 31, 2023, respectively	—		—
Common stock, $0.0001 par value; 4,876,000,000 Class A shares authorized as of December 31, 2022 and March 31, 2023; 201,707,557 and 202,384,736 Class A shares issued and outstanding as of December 31, 2022 and March 31, 2023, respectively; 24,000,000 Class B shares authorized, issued and outstanding as of December 31, 2022 and March 31, 2023, respectively	22		22
Additional paid-in-capital	2,567,723		2,584,528
Accumulated other comprehensive loss	(3,559)		(2,237)
Accumulated deficit	(1,609,705)		(1,690,917)
Total stockholders’ equity	954,481		891,396
Total liabilities and stockholders’ equity	$	1,074,279	$	986,933

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended March 31,
	2022		2023
Revenue	$	2,264	$	215
Cost of revenue	4,089		508
Gross loss	(1,825)		(293)
Operating expenses:
Research and development	78,158		61,602
Selling, general and administrative	32,215		28,687
Total operating expenses	110,373		90,289
Loss from operations	(112,198)		(90,582)
Interest income	460		9,877
Other expense, net	(165)		(507)
Loss before provision for income taxes	(111,903)		(81,212)
Provision for income taxes	—		—
Net loss	$	(111,903)	$	(81,212)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.50)	$	(0.36)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	222,526,454		226,405,466

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2023
Net loss	$	(111,903)	$	(81,212)
Other comprehensive income, net of tax:
Unrealized gain on available-for-sale securities	—		403
Foreign currency translation adjustment	199		919
Comprehensive loss	$	(111,704)	$	(79,890)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Balance as of December 31, 2021	221,833,195	$	22	$	2,464,730	$	77	$	(1,137,851)	$	1,326,978
Adjustments for prior periods from adopting ASC 842	—	—		—		—		191		191
Issuance of common stock from exercise of options	534,019	—		871		—		—		871
Issuance of common stock from release of RSUs and SVAs	537,980	—		—		—		—		—
Issuance of common stock under the Employee Stock Purchase Plan	87,215	—		1,292		—		—		1,292
Vesting of early exercised stock options	—	—		21		—		—		21
Stock-based compensation	—	—		27,527		—		—		27,527
Foreign currency translation adjustment	—	—		—		199		—		199
Net loss	—	—		—		—		(111,903)		(111,903)
Balance as of March 31, 2022	222,992,409	$	22	$	2,494,441	$	276	$	(1,249,563)	$	1,245,176

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
Balance as of December 31, 2022	225,707,557	$	22	$	2,567,723	$	(3,559)	$	(1,609,705)	$	954,481
Issuance of common stock from exercise of options	22,230	—		—		—		—		—
Issuance of common stock from release of RSUs and SVAs	654,949	—		—		—		—		—
Stock-based compensation	—	—		16,805		—		—		16,805
Unrealized gain on available-for-sale debt securities, net	—	—		—		403		—		403
Foreign currency translation adjustment	—	—		—		919		—		919
Net loss	—	—		—		—		(81,212)		(81,212)
Balance as of March 31, 2023	226,384,736	$	22	$	2,584,528	$	(2,237)	$	(1,690,917)	$	891,396

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2023
Cash flows from operating activities:
Net loss	$	(111,903)	$	(81,212)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	27,527		16,805
Depreciation and amortization	2,735		1,567
Noncash operating lease expense	1,222		1,347
Accretion of discount on short-term investments, net	—		(2,057)
Impairment of long-lived assets	—		1,335
Other adjustments	(8)		3
Changes in operating assets and liabilities:
Accounts receivable	(202)		1,146
Prepaid expenses and other current assets	(422)		(3,194)
Other assets	(758)		1,041
Accounts payable	227		(3,046)
Amounts due to joint development partners	454		(1,400)
Accrued expenses and other current liabilities	(18,286)		(18,201)
Operating lease liabilities	(1,642)		(1,819)
Other liabilities	426		5
Net cash used in operating activities	(100,630)		(87,680)
Cash flows from investing activities:
Purchases of short-term investments	—		(38,998)
Proceeds from maturities of short-term investments	—		21,558
Purchases of property and equipment	(1,356)		(680)
Proceeds from disposal of property and equipment	19		—
Purchases of intangible assets	(40)		—
Net cash used in investing activities	(1,377)		(18,120)
Cash flows from financing activities:
Proceeds from the issuance of common stock under the Employee Stock Purchase Plan	1,292		—
Proceeds from exercised stock options	871		—
Principal payments on finance lease obligations	(293)		(217)
Principal payments on loans	(358)		(410)
Net cash provided by (used in) financing activities	1,512		(627)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	155		924
Net decrease in cash, cash equivalents, and restricted cash	(100,340)		(105,503)
Cash, cash equivalents, and restricted cash - beginning of period	1,339,092		617,465
Cash, cash equivalents, and restricted cash - end of period	$	1,238,752	$	511,962

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2023
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents	$	1,237,246	$	510,008
Restricted cash included in prepaid expenses and other current assets	1,506		1,954
Total cash, cash equivalents, and restricted cash	$	1,238,752	$	511,962

Supplemental disclosure of cash flow information:
Cash paid for interest	$	281	$	158
Supplemental schedule of non-cash investing and financing activities:
Acquisitions of property and equipment included in liabilities	$	1,038	$	197
Right-of-use assets obtained in exchange for operating lease obligations	$	44,549	$	—
Right-of-use assets obtained in exchange for finance lease obligations	$	5,240	$	—
Vesting of early exercised stock options	$	21	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TuSimple Holdings Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

TuSimple Holdings Inc. ("TuSimple" or the "Company") is a global autonomous driving technology company headquartered in San Diego, California, with operations in the United States ("U.S.") and Asia-Pacific region ("APAC"). Founded in 2015, TuSimple is working to revolutionize the global truck freight market by developing proprietary technologies that enable the scaled development and deployment of autonomous freight transportation.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements (“Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The Financial Statements include the accounts of the Company and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes as of and for the year ended December 31, 2022, included in the Company's Annual Report on Form 10-K.

The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP. In management’s opinion, the accompanying Financial Statements reflect all normal recurring adjustments necessary for their fair presentation. Other than described below, there have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2022 that have had a material impact on the Company’s Financial Statements.

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and the accompanying notes. Interest income has been reclassified from other income (expense), net to interest income.

Note 2. Investments and Fair Value Measurements

Investments

Investments on the condensed consolidated balance sheets consisted of the following (in thousands):


	As of March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		Cash and Cash Equivalents		Short-term Investments
Available-for-sale debt securities:
U.S. treasury securities	$	9,915	$	—	$	(45)	$	—	$	9,870	$	—	$	9,870
U.S. government agency securities	122,410		73		(444)		—		122,039		—		122,039
Commercial paper	118,507		—		(115)		—		118,392		9,896		108,496
Corporate debt securities	157,993		77		(1,441)		—		156,629		—		156,629
Total	$	408,825	$	150	$	(2,045)	$	—	$	406,930	$	9,896	$	397,034


	As of December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		Cash and Cash Equivalents		Short-term Investments
Available-for-sale debt securities:
U.S. treasury securities	$	9,843	$	—	$	(86)	$	—	$	9,757	$	—	$	9,757
U.S. government agency securities	97,139		34		(521)		—		96,652		—		96,652
Commercial paper	138,973		10		(207)		—		138,776		25,390		113,386
Corporate debt securities	159,045		55		(1,583)		—		157,517		—		157,517
Total	$	405,000	$	99	$	(2,397)	$	—	$	402,702	$	25,390	$	377,312

The fair value and amortized cost of the Company’s debt securities with a stated contractual maturity or redemption date were as follows (in thousands):


	As of March 31, 2023
	Amortized Cost		Fair Value
Due in one year or less	$	261,783	$	260,635
Due in one year through five years	147,042		146,295
Total	$	408,825	$	406,930

The Company purchases investment grade marketable debt securities rated by nationally recognized statistical credit rating organizations in accordance with its investment policy, which is designed to minimize the Company's exposure to credit losses. The Company regularly reviews its investment portfolios to determine if any investment is impaired due to changes in credit risk or other potential valuation concerns.

As of March 31, 2023, investments in an unrealized loss position for which an allowance for credit losses has not been recognized had an aggregate fair value of $359.0 million. None of these investments were in a continuous unrealized loss position for more than twelve months. The Company does not intend to sell these investments until the recovery of their amortized cost basis or maturity and further believes that it is not more-likely-than-not that it will be required to sell these investments. The unrealized losses were primarily related to changes in interest rates, market spreads, and market conditions subsequent to purchase. The Company believes none of these debt securities were impaired due to credit risk or other valuation concerns, and, therefore, did not record a credit loss or an allowance for credit losses.

Interest income from cash and cash equivalents and short-term investments was $0.5 million and $9.9 million for the three months ended March 31, 2022 and 2023, respectively.

Fair Value Measurements

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation (in thousands):


	As of March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	424,480	$	424,480	$	—	$	—
Commercial paper	9,896		—		9,896		—
Total cash equivalents	$	434,376	$	424,480	$	9,896	$	—
Short-term investments:
U.S. treasury securities	$	9,870	$	9,870	$	—	$	—
U.S. government agency securities	122,039		—		122,039		—
Commercial paper	108,496		—		108,496		—
Corporate debt securities	156,629		—		156,629		—
Total short-term investments	$	397,034	$	9,870	$	387,164	$	—
Total	$	831,410	$	434,350	$	397,060	$	—


	As of December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	530,674	$	530,674	$	—	$	—
Commercial paper	25,390		—		25,390		—
Total cash equivalents	$	556,064	$	530,674	$	25,390	$	—
Short-term investments:
U.S. treasury securities	$	9,757	$	9,757	$	—	$	—
U.S. government agency securities	96,652		—		96,652		—
Commercial paper	113,386		—		113,386		—
Corporate debt securities	157,517		—		157,517		—
Total short-term investments	$	377,312	$	9,757	$	367,555	$	—
Total	$	933,376	$	540,431	$	392,945	$	—

Note 3. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net as of December 31, 2022 and March 31, 2023, was as follows (in thousands):


	As of
	December 31, 2022		March 31, 2023
Electronic equipment	$	4,385	$	4,424
Office and other equipment	8,697		8,729
Vehicles	4,046		3,423
Leasehold improvements	12,267		12,329
Buildings	1,841		—
Construction in progress	358		705
Property and equipment, gross	31,594		29,610
Accumulated depreciation and amortization	(14,511)		(14,901)
Property and equipment, net	$	17,083	$	14,709

Depreciation and amortization expense was $2.7 million and $1.6 million for the three months ended March 31, 2022 and 2023, respectively.

As of December 31, 2022, property and equipment financed under finance leases was $1.6 million, net of accumulated amortization of $0.9 million. As of March 31, 2023, the Company no longer has any finance lease assets.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of December 31, 2022 and March 31, 2023 were as follows (in thousands):


	As of
	December 31, 2022		March 31, 2023
Accrued payroll	$	35,563	$	21,217
Accrued professional fees	4,798		5,147
Other	7,899		5,891
Accrued expenses and other current liabilities	$	48,260	$	32,255

Note 4. Commitments and Contingencies

Indemnification Obligations

The Company has entered into indemnification agreements with its officers, directors, and certain current and former employees, and its certificate of incorporation and bylaws contain certain indemnification obligations. It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, the Company has a limited history of prior indemnification claims, and the payments it has made under such agreements have not had a material adverse effect on its results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by the Company could be significant and could have a material adverse effect on its results of operations or cash flows in a particular period.

Litigation and Legal Proceedings

Except as described below, the Company believes it is not presently a party to any litigation the outcome of which, if determined adversely against the Company, would individually or in the aggregate have a material adverse effect on the Company’s business, financial condition, cash flows, or results of operations.

Shareholder Securities Litigation

On August 31, 2022, a securities class action complaint (the “August 2022 Action”) was filed, in the United States District Court for the Southern District of California, against the Company and certain of its current and former directors and officers (Xiaodi Hou, Mo Chen, Cheng Lu, Patrick Dillon, and James Mullen), and the underwriters who underwrote its IPO, on behalf of a putative class of stockholders who acquired its securities from April 15, 2021 through August 1, 2022. The August 2022 Action is captioned: Dicker v. TuSimple Holdings, Inc. et al., 3:22-cv-01300-JES-MSB (S. D. Cal.). The complaint filed in the August 2022 Action alleges, among other things, that the Company and certain of its current and former directors and officers violated Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act by making materially false or misleading statements, or failing to disclose information it was required to disclose, regarding the Company's autonomous driving technology. The complaint seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees.

On November 10, 2022, a second securities class action (the “November 2022 Action”) complaint was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former directors and officers (Xiaodi Hou, Mo Chen, Cheng Lu, Eric Tapia, Patrick Dillon, and James Mullen), and the underwriters who underwrote its IPO, on behalf of a putative class of stockholders who acquired its securities from April 15, 2021 through October 31, 2022. The November 2022 Action was originally captioned: Woldanski v. TuSimple Holdings, Inc., et al., 1:22-cv-09625-AKH (S.D.N.Y.). The complaint in the November 2022 Action alleges, among other things, that the Company and certain of its current and former directors and officers violated Sections 11, 12(a), and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, by making false or misleading statements, or failing to disclose information it was required to disclose, regarding the Company's related party transaction with Hydron and its sharing of confidential information and proprietary technology with Hydron without approval from the Board. The complaint seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. The November 2022 Action has since been transferred to the Southern District of California: Woldanski v. TuSimple Holdings, Inc., et al., 3:23-cv-00282-JES-MSB (S. D. Cal.).

On May 3, 2023, the Company made a motion to consolidate the August 2022 Action and the November 2022 Action, which was granted by the Court on July 20, 2023. At this time, the Company is unable to estimate the potential loss or range of loss, if any, associated with this, or any similar, lawsuit, which could be material. The plaintiffs have until October 2, 2023 to file a consolidated and amended complaint. The consolidated and amended complaint, and any future amended complaint, may include additional or alternate allegations regarding liability or alternate or additional claims for relief.

Shareholder Derivative Actions

On November 28, 2022, a shareholder derivative action was filed in the Delaware Court of Chancery by a stockholder purportedly on behalf of the Company against certain of its current and former directors and officers (Xiaodi Hou, Mo Chen, Brad Buss, Karen Francis, Michelle Sterling, and Reed Warner) alleging, among other things, that certain of the Company’s current and former directors and officers breached their fiduciary duties to the Company in connection with a related party transaction with Hydron: Nusbaum v. Hou et al., 2022-1095-NAC (Del. Ch.). The shareholder derivative action also alleges breaches of fiduciary duties against certain of the Company’s current and former directors and officers in connection with the restructuring of the Company’s Board.

On December 15, 2022, a second shareholder derivative action was filed in the Delaware Court of Chancery by a stockholder purportedly on behalf of the Company against certain of its current and former directors and officers (Xiaodi Hou, Mo Chen, Cheng Lu, Patrick Dillon, Eric Tapia, James Mullen, Brad Buss, Charles Chao, Karen Francis, Michelle Sterling, Reed Werner, and Bonnie Zhang) alleging similar claims to the action filed on November 28, 2022: Young v. Hou et al., 2022-1157-NAC (Del. Ch.). The second shareholder derivative action additionally asserts, among other things, claims regarding the safety of the Company’s technology and alleged inadequacy of the Company’s internal controls.

On March 6, 2023, a third shareholder derivative action was filed in the Delaware Court of Chancery by a stockholder purportedly on behalf of the Company against certain of its current and former directors and officers (Xiaodi Hou, Brad Buss, Mo Chen, Charles Chao, Karen Francis, Wendy Hayes, Cheng Lu, James Lu, Michael Mosier, Michelle Sterling, Reed Werner, and Bonnie Zhang), alleging similar claims to the actions filed on November 28, 2022 and December 15, 2022: Wolfson v. Hou et al., 2023-0279-NAC (Del. Ch.). The stockholder has since purported to voluntarily dismiss her action.

On March 29, 2023, the Company made a motion to consolidate all of the above shareholder derivative actions. The Court granted the motion and consolidated the shareholder derivative actions on May 5, 2023. A consolidated complaint was filed on July 24, 2023 against Xiaodi Hou, Mo Chen, Brad Buss, Karen C. Francis, Reed Werner, and Hydron Inc., and TuSimple as nominal defendant, containing substantially the same claims as asserted in the complaint filed in Nusbaum v. Hou et al., 2022-1095-NAC (Del. Ch.).

On August 17, 2023, the Delaware Court of Chancery entered an order staying the consolidated action through February 9, 2024 pending an investigation by a special litigation committee ("SLC") formed by the Company’s Board of Directors to assess and determine whether the pursuit of derivative claims asserted in the consolidated action would be in the Company’s best interests. The Board previously delegated to the SLC its authority to take all actions advisable, appropriate, and in the best interests of the Company and its shareholders with respect to the pending shareholder derivative litigation.

The Company is unable to estimate the potential loss or range of loss, if any, associated with this, or any similar, lawsuit, which could be material.

Regulatory Investigations

Committee on Foreign Investments in the United States (“CFIUS”)

The Company is cooperating with an inquiry by CFIUS concerning its compliance with the National Security Agreement (“NSA”) entered into with the U.S. government as it relates to information shared by TuSimple U.S. with TuSimple's China-based businesses (“TuSimple China”), Hydron and Hydron’s partners. If CFIUS concludes that information shared with TuSimple China, Hydron and Hydron’s partners was shared in violation of the terms of the NSA, it may impose a civil penalty on the Company. At this time, the Company is unable to estimate the likelihood of a negative outcome or the potential loss or range of loss associated with this matter. The Audit Committee and the Government Security Committee of the Board of Directors, the Board, and the Company are committed to cooperating fully as discussions with CFIUS continue.

The Company is unable to estimate the potential loss or range of loss, if any, associated with this, or any similar, investigation, which could be material.

Securities and Exchange Commission ("SEC")

As disclosed on November 7, 2022, in connection with the filing of the Company’s Current Report on Form 8-K regarding the initial findings of the Audit Committee’s internal investigation into the related party transaction with Hydron, the Company proactively reached out to the SEC and received an initial request for information from the SEC. Since the initial outreach, the Company and certain current and former directors and officers received subpoenas from the SEC requesting the production of Company documents, and, with respect to certain individuals, subpoenas for testimony. The Company is unable to estimate the likelihood of a negative outcome or the potential loss or range of loss associated with this matter. The Company has cooperated, and intends to continue to fully cooperate, with the SEC’s investigation.

The Company is unable to estimate the potential loss or range of loss, if any, associated with this, or any similar, investigation, which could be material.

Note 5. Stock-Based Compensation

Equity Compensation Plans

The Company maintains three equity compensation plans that provide for the issuance of shares of its Class A common stock to its employees, directors, and consultants: the 2017 Share Plan (the “2017 Plan”), the 2021 Equity Incentive Plan (the “2021 Plan”), and the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which have all been approved by the board of directors. Following the Company's initial public offering ("IPO") in 2021, the 2017 Plan was terminated, but continues to govern the terms and conditions of the outstanding awards previously granted under the 2017 Plan. Subsequent to the IPO, the Company has only issued awards under the 2021 Plan and the 2021 ESPP. These plans provide for the issuance of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), restricted shares, restricted stock units (“RSUs”), share value awards (“SVAs”), stock appreciation rights (“SARs”), and other awards.

2021 Employee Stock Purchase Plan

During the three months ended March 31, 2023, the Company did not issue any shares under the 2021 ESPP.

Stock Options

A summary of the stock option activity, including the CEO Performance Award, for the three months ended March 31, 2023 is as follows (in thousands, except share amounts, per share amounts, and years):


	Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2022	2,623,511	$	15.16	6.72	$	798
Exercised	(22,230)	$	0.0001
Cancelled/Forfeited	(428,938)	$	29.16
Outstanding at March 31, 2023	2,172,343	$	12.55	5.73	$	678
Vested and exercisable at March 31, 2023	1,733,634	$	10.01	5.17	$	546

As of March 31, 2023, there was $5.0 million of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average service period of 2.10 years.

RSUs

The following table summarizes the activity related to RSUs for the three months ended March 31, 2023:


	RSUs Outstanding	Weighted-Average Grant Date Fair Value per Share
Unvested and outstanding at December 31, 2022	17,847,473	$	10.73
Granted	4,325,085	$	1.97
Vested	(724,078)	$	21.97
Cancelled	(1,797,851)	$	18.66
Unvested and outstanding at March 31, 2023	19,650,629	$	7.66
Vested and outstanding at March 31, 2023	165,637	$	27.28

SVAs

The following table summarizes the activity related to SVAs for the three months ended March 31, 2023:


	SVAs Outstanding	Weighted-Average Grant Date Fair Value per Share
Unvested and outstanding at December 31, 2022	79,438	$	8.24
Vested	(44,918)	$	3.70
Cancelled	(5,918)	$	14.14
Unvested and outstanding at March 31, 2023

SEC Form 10-Q filed by TuSimple Holdings Inc.