The following discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K. This discussion contains forward-looking statements reflecting our
current expectations, estimates and assumptions concerning events and financial
trends that may affect our future operating results or financial position.
Actual results and the timing of events may differ materially from those
contained in these forward-looking statements due to a number of factors,
including those discussed in the sections entitled "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements and Summary Risk Factors"
and "Summary Risk Factors" appearing elsewhere in this Annual Report on Form
10-K.
Overview
We European Biotech Acquisition Corp. ("Company" or "we") are a blank check
company incorporated on January 8, 2021 as a Cayman Islands exempted company
formed for the purpose of effecting a Business Combination. We will not be
limited to a particular industry or geographic region in our identification and
acquisition of a target company.
On March 18, 2021, we consummated our IPO of 12,000,000 Units, at $10.00 per
Unit, generating gross proceeds of $120.0 million, and incurring offering costs
of approximately $7.1 million, of which $4.2 million was for deferred
underwriting commissions (see Note 3 to our consolidated financial statements
included in this Annual Report on Form 10-K for the year ended December 31,
2022). We granted the underwriter a 45-day option to purchase up to an
additional 1,800,000 Units at the IPO price to cover over-allotments, if any. On
April 29, 2021, the underwriters partially exercised the over-allotment option,
and the closing of the issuance and sale of the additional 754,784
Over-Allotment Units occurred on May 3, 2021. The issuance by the Company of the
Over-Allotment Units at a price of $10.00 per unit resulted in total gross
proceeds of approximately $7.5 million.
Simultaneously with the closing of the IPO, we consummated the Private Placement
of 440,000 units, at a price of $10.00 per Private Placement Unit with the
Sponsor, generating gross proceeds of $4.4 million (see Note 4 to our
consolidated financial statements included in this Annual Report on Form 10-K
for the year ended December 31, 2022). Simultaneously with the issuance and sale
of the Option Units, the Company consummated the private placement with the
Sponsor of 15,096 Additional Private Placement Units, generating total proceeds
of $150,960.
Approximately $127.5 million of the net proceeds of the IPO were placed in a
Trust Account, located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, and invested only in United States "government
securities" within the meaning of Section 2(a)(16) of the Investment Company
Act, having a maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act
which invests only in direct U.S. government treasury obligations, as determined
by us, until the earlier of: (i) the completion of a Business Combination and
(ii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the sale of Private Placement Units, although
substantially all of the net proceeds are intended to be applied generally
toward consummating a Business Combination. There is no assurance that we will
be able to complete a Business Combination successfully.
We must complete one or more initial Business Combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(excluding the deferred underwriting commissions and taxes payable on the
interest earned on the Trust Account) at the time of the signing of the
agreement to enter into the initial Business Combination. However, we will only
complete a Business Combination if the post-transaction company owns or acquires
50% or more of the outstanding voting securities of the target or otherwise
acquires a controlling interest in the target sufficient for it not to be
required to register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination within the Combination
Period, we will (i) cease all operations except for the purpose of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate
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amount then on deposit in the Trust Account, including interest earned on the
funds held in the Trust Account and not previously released to us to pay our
income taxes, if any (less up to $100,000 of interest to pay dissolution
expenses) divided by the number of the then-outstanding Public Shares, which
redemption will completely extinguish Public Shareholders' rights as
shareholders (including the right to receive further liquidation distributions,
if any); and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining shareholders and the board of
directors, liquidate and dissolve, subject in the case of clauses (ii) and
(iii), to our obligations under Cayman Islands law to provide for claims of
creditors and the requirements of other applicable law. There will be no
redemption rights or liquidating distributions with respect to our warrants,
which will expire worthless if we fail to consummate a Business Combination
within the Combination Period.
Proposed Business Combination
On October 17, 2022, we entered into a Business Combination Agreement (as it may
be amended and/or restated from time to time, the "Business Combination
Agreement") with Oculis SA, a public limited liability company (société anonyme)
incorporated and existing under the laws of Switzerland ("Oculis"). Oculis is a
clinical-stage biopharmaceutical company, based in Switzerland, with substantial
expertise in therapeutics used to treat ocular diseases, and engaged in the
development of innovative drug candidates which have the potential to address
many eye-related conditions. Oculis's focus is on advancing therapeutic
candidates intended to treat significant and growing ophthalmic diseases which
result in vision loss, blindness or reduced quality of life, for which there are
currently limited or no treatment options. Upon the terms and subject to the
conditions of the Business Combination Agreement and in accordance with
applicable law, as soon as practicable following the date hereof, (i) EBAC will
form, or cause to be formed, (a) Oculis Holding AG, a public limited liability
company incorporated and existing under the laws of Switzerland and that will be
a direct wholly owned subsidiary of EBAC ("New Parent"), (b) a new Cayman
Islands exempted company that will be a direct wholly owned subsidiary of New
Parent ("Merger Sub 1"), (c) another new Cayman Islands exempted company that
will be a direct wholly owned subsidiary of New Parent ("Merger Sub 2") and
(d) a new limited liability company (Gesellschaft mit beschränkter Haftung)
incorporated and existing under the laws of Switzerland that will be a direct
wholly owned subsidiary of New Parent ("Merger Sub 3") and (ii) EBAC will cause
New Parent, Merger Sub 1, Merger Sub 2 and Merger Sub 3 to become a party to the
Business Combination Agreement.
In connection with the transactions contemplated by the Business Combination
Agreement, among other things, (i) Merger Sub 1 will merge with and into EBAC,
with EBAC surviving such merger as a wholly owned subsidiary of New Parent (the
"First Merger"), (ii) as a result of the First Merger, (a) each issued and
outstanding share of EBAC Common Stock will automatically convert into one class
of ordinary shares of the surviving company in the First Merger ("Surviving EBAC
Shares"), (b) each issued and outstanding warrant issued by EBAC to purchase
Class A Common Stock of EBAC will be automatically converted into warrants of
the surviving company in the First Merger ("Surviving EBAC Warrants"), and
(c) EBAC will deposit or cause to be deposited with the Exchange Agent the
Surviving EBAC Shares and Surviving EBAC Warrants, (iii) following the First
Merger Effective Time but prior to the Second Merger Effective Time, the
Exchange Agent will contribute the Surviving EBAC Shares and Surviving EBAC
Warrants to New Parent in exchange for New Parent Class A ordinary shares,
nominal value CHF 0.01 per share (the "New Parent Shares") and a right to
acquire New Parent Shares (each, a "New Parent Warrant"), with both New Parent
Shares and New Parent Warrants to be held by the Exchange Agent solely on behalf
of the holders of Surviving EBAC Shares and Surviving EBAC Warrants (the "New
Parent Interests Consideration, (iv) prior to the Second Merger Effective Time,
the Exchange Agent will undertake to (a) distribute the New Parent Shares as
part of the New Parent Interests Consideration to the holders of Surviving EBAC
Shares and (b) distribute the New Parent Warrants as part of the New Parent
Interests Consideration to the holders of Surviving EBAC Warrants, (v) after the
First Merger Effective Time and following the completion of the Exchange Agent
Contribution Actions, EBAC will merge with and into Merger Sub 2, with Merger
Sub 2 as the surviving company and remaining a wholly owned subsidiary of New
Parent, (vi) consenting Oculis shareholders executing the Company Shareholders
Support Agreements will contribute their shares of Oculis to New Parent in
exchange for New Parent Shares and (vii) approximately 30 days after the
Acquisition Closing Date, Oculis will merge with and into Merger Sub 3, with
Merger Sub 3 as the surviving company.
The Business Combination Agreement and the transactions contemplated thereby
were approved by the boards of directors of each of EBAC and Oculis.
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PIPE Subscription Agreements
In connection with the foregoing and concurrently with the execution of the
Business Combination Agreement, we entered into subscription agreements with the
Initial PIPE Investors (the "Initial Subscription Agreements"), pursuant to
which the Initial PIPE Investors have agreed to purchase from us, severally and
not jointly, and we have agreed to issue from treasury and sell to the Initial
PIPE Investors, a number of EBAC Class A Common Stock equal to (i) the total
subscription amount from the Initial PIPE Investors divided by (ii) $10.00 (the
"Initial PIPE Financing"). Subsequent to the Initial PIPE Financing, on
January 26, 2023, EBAC entered into subscription agreements (the "Subsequent
Subscription Agreements", and together with the Initial Subscription Agreements,
the "Subscription Agreements") with certain subscribers (the "Subsequent PIPE
Investors", and together with the Initial PIPE Investors, the "PIPE Investors"),
pursuant to which the Subsequent PIPE Investors have agreed to subscribe for,
and we have agreed to issue to the Subsequent Subscribers, an aggregate of
788,500 EBAC Class A Common Stock at a price of $10.00 per share, for aggregate
gross proceeds of $7,885,000 (the "Subsequent PIPE Financing", and together with
the Initial PIPE Financing, the "PIPE Financing"). The aggregate amount of EBAC
Class A Common Stock to be issued pursuant to the PIPE Financing is 7,118,891
shares for aggregate gross proceeds of $71,188,910. The shares of EBAC Class A
Common Stock to be issued from treasury pursuant to the Subscription Agreements
have not been registered under the Securities Act, in reliance upon the
exemption provided in Section 4(a)(2) of the Securities Act (as defined below).
Upon the Acquisition Closing, New Parent will grant the PIPE Investors certain
customary registration rights in connection with the PIPE Financing (as defined
below), including demand and piggyback rights, as set forth in the Amended
Registration Rights and Lock-Up Agreement (as defined below). The PIPE Financing
is contingent upon, among other things, the Acquisition Closing.
Non-Redemption Agreements
Concurrently with the execution of the Business Combination Agreement, certain
shareholders of EBAC (the "EBAC Voting Shareholders") entered into
non-redemption agreements (the "Non-Redemption Agreements") with EBAC and
Sponsor.
Pursuant to the Non-Redemption Agreements, each EBAC Voting Shareholder agreed
for the benefit of EBAC to not redeem and to vote all of their EBAC ordinary
shares now owned or hereafter acquired (the "Subject EBAC Equity Securities"),
representing 700,789 EBAC ordinary shares in the aggregate, in favor of the
transaction proposals. In connection with these commitments from the EBAC Voting
Shareholders, Sponsor has agreed to transfer to each Investor one New Parent
Share for every ten EBAC ordinary shares owned by such investor (for a total of
70,079 New Parent Shares), on or promptly following the Acquisition Closing
Date. The EBAC Voting Shareholders also each agreed to a lock-up to not transfer
any Subject EBAC Equity Securities for a period of 90 calendar days after the
Acquisition Closing Date.
The foregoing description of the Non-Redemption Agreement is subject to and
qualified in its entirety by reference to the full text of the form of
Shareholder Non-Redemption Agreement, a copy of which is included as Exhibit
10.10 hereto, and the terms of which are incorporated by reference.
Sponsor Letter Agreement
Concurrently with the execution of the Business Combination Agreement, the
Sponsor entered into a letter agreement (the "Sponsor Letter Agreement") with
EBAC and Oculis pursuant to which the Sponsor agreed, among other things, to
(i) vote all of the EBAC Common Stock it beneficially owns in favor of the
Business Combination and related transactions and to take certain other actions
in support of the Business Combination Agreement and related transactions,
(ii) not transfer its shares of EBAC Common Stock and EBAC Warrants, in each
case until the consummation of the Acquisition Closing (subject to certain
customary exceptions), (iii) waive certain anti-dilution adjustments and
(iv) waive certain redemption rights.
Amended and Restated Registration Rights and Lock-Up Agreement
On the Acquisition Closing Date, the Sponsor and certain shareholders of Oculis
and New Parent will enter into an amended and restated registration rights
agreement and lock-up agreement (the "Amended and Restated Registration Rights
and Lock-Up Agreement") pursuant to which, among other things, certain
shareholders of New Parent will be granted certain customary demand and
"piggy-back" registration rights with respect to their respective New Parent
Shares.
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The Amended and Restated Registration Rights and Lock-Up Agreement will contain
certain restrictions on transfer of New Parent Shares and other Registrable
Securities (as defined therein) to be held by the Holders immediately following
the Acquisition Closing (the "Lock-up Securities"). Such restrictions begin on
the Acquisition Closing Date and end on the earlier of (x) (i) for the Sponsor
the 270 days after the Acquisition Closing Date and (ii) for the rest of the
Holders 180 days from the Acquisition Closing Date and (y) the last reported
trading price of the New Parent Shares on Nasdaq exceeds $15.00 for 20 trading
days within any 30 trading day period commencing at least 150 days after the
Acquisition Closing Date.
RESULTS OF OPERATIONS
We have neither engaged in any operations (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our entire activity since inception up to December 31, 2022 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination (see recent developments above). We will not be generating
any operating revenues until the closing and completion of our initial Business
Combination, at the earliest. We generate non-operating income in the form of
income from investments held in the Trust Account and change in fair value of
warrant liability. We incur expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses in our search for and completion of a Business
Combination.
For the year ended December 31, 2022, we had net income of approximately
$343,000, which consisted of approximately $1.3 million of non-operating gain
from changes in fair value of derivative warrant liabilities and approximately
$1.8 million in income from investments held in the Trust Account, partially
offset by approximately $2.8 million of general and administrative expenses and
approximately $33,000 of capital tax expense.
For the period from January 8, 2021 (inception) through December 31, 2021, we
had net income of approximately $1.5 million, which consisted of approximately
$2.9 million of non-operating gain from changes in fair value of derivative
warrant liabilities and approximately $8,000 in income from investments held in
the Trust Account, partially offset by approximately $1.1 million of general and
administrative expenses, and a non-operating expense of approximately $315,000
related to offering costs allocated to the derivative warrant liabilities.
Liquidity and Going Concern
As of December 31, 2022, we had approximately $308,000 in our operating bank
account and working capital deficit of approximately $406,000 (not taking into
account approximately $33,000 in tax obligations that may be paid using
investment income classified in the Trust Account).
Our liquidity needs through the consummation of the Initial Public Offering were
satisfied through a payment of $25,000 from the Sponsor to purchase Founders
Shares, and the loan proceeds from the Sponsor of $300,000 under the Note (see
Note 4 to our consolidated financial statements). We repaid the Note in full on
March 22, 2021. Subsequent to the consummation of the Initial Public Offering,
our liquidity needs have been satisfied through the net proceeds from the
consummation of the Initial Public Offering and the Private Placement held
outside of the Trust Account. In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor or an affiliate of the
Sponsor, or certain of our officers and directors may, but are not obligated to,
provide us Working Capital Loans (as defined in Note 4). As of December 31, 2022
and 2021, there were no amounts outstanding under Working Capital Loans.
Management does not believe the current cash on hand will be sufficient to cover
obligations that come due within one year of release. Management has determined
that the liquidity, the mandatory liquidation and subsequent dissolution that
will be required if the Company does not complete a business combination before
March 18, 2023 raises substantial doubt about the Company's ability to continue
as a going concern. Although Management expects that it will be able to raise
additional capital to support its planned activities and complete the proposed
business combination on or prior to March 18, 2023, it is uncertain whether it
will be able to do so. No adjustments have been made to the carrying amounts of
assets or liabilities should we be required to liquidate after March 18, 2023.
The consolidated financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
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We continue to evaluate the impact of the COVID-19 pandemic and the
Russia/Ukraine military conflict and have concluded that the specific impact is
not readily determinable as of the date of the balance sheets. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that the Company's securities were first listed on the
Nasdaq, the Company agreed to pay affiliates of the Sponsor a total of $20,000
per month for office space, administrative and support services. Such agreement
terminated as of October 17, 2022.
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$2.4 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per unit, or $4.2 million in the aggregate will be
payable to the underwriters for deferred underwriting commissions. On May 3,
2021 the underwriters partially exercised their over-allotment option. As a
result, the underwriters were entitled to an additional underwriting discount of
approximately $151,000, which was paid upon closing of the over-allotment. In
addition, $264,000 will be payable to the underwriters for deferred underwriting
commissions. The deferred fee will become payable to the underwriters from the
amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of our consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, income and expenses and the disclosure of
contingent assets and liabilities in our financial statements. On an ongoing
basis, we evaluate our estimates and judgments, including those related to fair
value of financial instruments and accrued expenses. We base our estimates on
historical experience, known trends and events and various other factors that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The Company has
identified the following as its critical accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC 815-40, "Derivatives and Hedging-Contracts in Entity's Own Stock"
("ASC 815-40").
The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is re-assessed at the end of
each reporting period. The 4,251,595 warrants issued in connection with the
Initial Public Offering (the "Public Warrants") and the 151,699 Private
Placement Warrants are recognized as derivative liabilities in accordance with
ASC 815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value
and adjusts the instruments to fair value at each reporting period. The
liabilities are subject to remeasurement at each balance sheet date until
exercised, and any change in fair value is recognized in the statement of
operations. The fair value of the Public Warrants issued in connection with the
Public Offering and Private Placement Warrants were initially measured at fair
value using a Monte Carlo simulation model. For periods subsequent to the
detachment of the Public Warrants from the Units, on May 13, 2021, the fair
value of the Public Warrants is based on the observable listed price for such
warrants. Since the Private Placement Warrants have substantially the same terms
as the Public Warrants, the Company determined that the fair value of each
Private Placement Warrant is equivalent to that of each Public Warrant. The
determination of the fair value of the warrant liability may be subject to
change as more current information becomes available and, accordingly, the
actual results could differ significantly. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
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Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480, "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that features redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within the Company's control) are classified as temporary equity. At all
other times, Class A ordinary shares are classified as shareholders' equity. Our
Class A ordinary shares feature certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, 12,754,784 shares of Class A ordinary shares subject to
possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' equity section of our consolidated balance sheet.
We have elected to recognize changes in redemption value immediately as they
occur and subsequently adjust (for interest income and dissolution expenses) the
carrying value of the redeemable Class A ordinary shares subject to possible
redemption to equal the redemption value at the end of each reporting period.
Increases or decreases in the carrying amount of redeemable ordinary shares are
affected by charges against additional paid-in capital (if available) and
accumulated deficit. The change in the carrying value of redeemable shares of
Class A ordinary shares resulted in charges against additional paid-in capital
(to the extent available) and accumulated deficit.
Net Income Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. Net income (loss) per common
share is calculated by dividing the net income (loss) by the weighted average
shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) does not consider the effect of the
warrants underlying the Units sold in the IPO (including the consummation of the
Over-allotment) and the private placement warrants to purchase an aggregate of
4,403,294 Class A ordinary shares in the calculation of diluted income (loss)
per share, because their inclusion would be anti-dilutive under the treasury
stock method. As a result, diluted net income (loss) per share is the same as
basic net income (loss) per share for the year ended December 31, 2022 and for
the period from January 8, 2021 (inception) through December 31, 2022.
Remeasurement associated with the redeemable Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value.
We have considered the effect of Class B ordinary shares that were excluded from
the weighted average number of shares outstanding for the basic calculation as
they were contingent on the exercise of over-allotment option by the
underwriters. Since the contingency was satisfied, we have included these shares
in the weighted average number as of the beginning of the period to determine
the dilutive impact of these shares, resulting in a greater number of Class B
ordinary shares being included in weighted average shares for the diluted
calculation for the applicable periods.
Recent Accounting Standards
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820, "Fair Value
Measurement of Equity Securities Subject to Contractual Sale Restrictions". The
ASU amends ASC 820 to clarify that a contractual sales restriction is not
considered in measuring an equity security at fair value and to introduce new
disclosure requirements for equity securities subject to contractual sale
restrictions that are measured at fair value. The ASU applies to both holders
and issuers of equity and equity-linked securities measured at fair value. The
amendments in this ASU are effective for the Company in fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. Early
adoption is permitted for both interim and annual financial statements that have
not yet been issued or made available for issuance. We are still evaluating the
impact of this pronouncement on the consolidated financial statements.
Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying financial statements.
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Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we have evaluated the benefits of relying on the other reduced
reporting requirements provided by the JOBS Act. Subject to certain conditions
set forth in the JOBS Act, if, as an "emerging growth company," we choose to
rely on such exemptions we may not be required to, among other things,
(i) provide an auditor's attestation report on our system of internal controls
over financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis) and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our Initial Public Offering or until we are no longer an
"emerging growth company," whichever is earlier.
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