KEZAR LIFE SCIENCES, INC. You should read the following management's discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and related notes thereto for the year endedDecember 31, 2020 included in our Annual Report on Form 10-K, as filed with theU.S. Securities and Exchange Commission , or theSEC , onMarch 11, 2021 , or the Annual Report. Overview We are a clinical-stage biotechnology company discovering and developing breakthrough treatments in immune-mediated and oncologic disorders. We believe therapies that inhibit multiple drivers of disease by targeting fundamental upstream control processes within the cell have the potential for profound therapeutic benefit in a number of difficult-to-treat diseases. To that end, we are advancing two drug development programs that harness different master regulators of cellular function: the first targets the immunoproteasome which is responsible for protein degradation in cells of the immune system and drives many key aspects of immune cell function, and the second targets the Sec61 translocon, which is located on the endoplasmic reticulum and represents the beginning of the protein secretion pathway. Targeting these fundamental regulators of cellular function offers an attractive approach to treating many diseases. Our lead product candidate, KZR-616, is a first-in-class selective immunoproteasome inhibitor that has completed Phase 1a testing in healthy volunteers and a Phase 1b trial in patients with systemic lupus erythematosus, or SLE. We are now leveraging its broad therapeutic potential in two Phase 2 clinical trials, MISSION and PRESIDIO, treating patients with severe autoimmune diseases characterized by high levels of unmet need. The Phase 2 portion of our MISSION clinical trial is evaluating KZR-616 in patients with lupus nephritis, or LN. The PRESIDIO Phase 2 clinical trial is evaluating KZR-616 in dermatomyositis, or DM, and polymyositis, or PM, indications for which we have been granted orphan drug designation, or ODD, by theU.S. Food and Drug Administration , or FDA. Based on Phase 1 clinical data generated to date with KZR-616, as well as preclinical data with selective immunoproteasome inhibitors, we believe that KZR-616 has the potential to address multiple chronic immune-mediated disorders. We believe that the immunoproteasome is a validated target for the treatment of a wide variety of immune-mediated disorders given its ability to regulate multiple drivers of the inflammatory disease process. Many inflammatory disorders are currently treated one cytokine or cell type at a time, but the immunoproteasome affects a broad spectrum of immune regulators. The compelling published activity seen with non-selective proteasome inhibitors administered to patients with severe autoimmune diseases provides proof of principle that inhibiting the immunoproteasome results in broad immunomodulatory benefit. Based on the results from our Phase 1a studies in healthy volunteers and the Phase 1b portion of our MISSION clinical trial, KZR-616 has largely avoided the adverse effects associated with currently marketed non-selective proteasome inhibitors, as exhibited in clinical studies conducted by third parties, including side effects which we believe prevent them from being utilized as a chronic treatment in autoimmune disorders. We have seen encouraging clinical activity and biomarker data in the SLE and LN patients who received KZR-616 in the Phase 1b portion of the MISSION trial. We acquired exclusive worldwide rights to KZR-616 pursuant to a license agreement withOnyx Therapeutics, Inc. , a wholly owned subsidiary of Amgen, Inc., inJune 2015 . Additionally, we are advancing our novel research platform targeting the Sec61 translocon and the protein secretion pathway to discover and develop small molecule therapeutics for oncology and autoimmune indications. Our first clinical candidate in this program, KZR-261, has demonstrated broad anti-tumor activity in preclinical models of both solid and hematologic malignancies. We recently submitted an investigational new drug, or IND, application for KZR-261 to the FDA, and we plan to initiate a Phase 1 clinical trial of KZR-261, which will assess safety, tolerability and preliminary tumor activity of KZR-261 in solid tumors. We believe this discovery platform has the potential to yield additional small molecule product candidates that offer the potential of combination therapy in a single agent. If successfully developed and approved, these small molecules could serve as alternatives to currently marketed biologic therapeutics to act as cytotoxic anti-cancer agents or to block the secretion of novel targets of interest in immuno-oncology or inflammation. Since the commencement of our operations, we have devoted substantially all of our resources to performing research and development activities in support of our product development efforts, hiring personnel, raising capital to support and expand such activities and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily from the issuance and sale of equity securities. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates and programs. We have incurred significant operating losses since our inception. Our net losses were$41.7 million and$26.0 million for the year endedDecember 31, 2020 and the six months endedJune 30, 2021 , respectively, and we expect to continue to incur significant losses for the foreseeable future. As ofJune 30, 2021 , we had an accumulated deficit of$152.0 million . We anticipate that a substantial portion of 15
-------------------------------------------------------------------------------- our capital resources and efforts in the foreseeable future will be focused on discovering new potential therapeutics, completing the necessary development, obtaining regulatory approval and preparing for potential commercialization of our product candidates. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on other research and development activities. We expect our expenses will increase substantially over time as we:
• continue the ongoing and planned development of KZR-616 and KZR-261;
• seek to discover and develop additional product candidates, including
preclinical studies and clinical trials for such product candidates;
• maintain, protect and expand our portfolio of intellectual property
rights, including patents, trade secrets and know-how
• seek marketing approvals for KZR-616, KZR-261 and any future product
candidates that successfully complete clinical trials;
• establish a sales, marketing, manufacturing and distribution
infrastructure to commercialize any product candidate for which we may
obtain marketing approval;
• continue to build a portfolio of product candidates through the
acquisition or in-license of drugs, product candidates or technologies;
• implement operational, financial, management and compliance systems; and
• attract, hire and retain additional administrative, clinical, regulatory
and scientific personnel.
Recent Highlights
InApril 2021 , we presented preclinical data at theAmerican Association for Cancer Research (AACR) 2021 Virtual Annual Meeting examining the activity of KZR-261 and a closely related small molecule inhibitor of the Sec 61 translocon in hundreds of tumor cell lines. The objective was to compare drug activity and identify sensitivity to gene mutations and impact on gene expression levels. No single gene predicted the activity of KZR-261, consistent with the known impact of KZR-261 on multiple targets. However, representative gene modules identified through mechanism agnostic analysis were associated with sensitivity in tumor cells and showed high overlap with key processes involved in protein secretion. Analyses of primary tumor and tissue expression datasets predict that many tumor types will be more sensitive than normal tissues and cells. Data from these analyses will inform selection of tumor types for study in future clinical trials. Global proteomic profiling of protein secretion in tumor cells and non-transformed cells was also conducted. KZR-261 and the related molecules reduce expression of Sec61 clients, namely secreted and transmembrane proteins, many of which can be measured from clinical samples in future clinical trials. In tumor cells, these compounds reduced expression of less than 10% of Sec61 clients by at least two-fold. However, in non-transformed cells, KZR-261 inhibited the expression of less than 5% of measured Sec61 clients. These findings further illustrate the specific anti-tumor activity of KZR-261. InJune 2021 , our Board appointedMicki Klearman , M.D. to the Board as a Class II director, to serve until the Company's 2023 annual meeting of stockholders and until her successor is duly elected and qualified, or her earlier resignation or removal. InJune 2021 , we presented the results of the completed Phase 1b portion of our MISSION clinical trial at the AnnualEuropean Congress of Rheumatology (EULAR). The dose escalation study evaluated doses of 45 mg to 75 mg of KZR-616 administered subcutaneously once weekly in 47 patients with SLE, including two patients with active proliferative LN. Six cohorts were completed in which patients received 13 weekly doses of KZR-616 and were followed for an additional 12 weeks, and 35 of 47 patients completed the study. We observed encouraging trends in exploratory efficacy across cohorts, including the improvement of seven SLE-specific disease activity scores. Mean disease activity scores improved in patients who completed the 13-week treatment period (n=35), and improvement in disease activity persisted following the end-of-treatment. Improvement in key biomarkers indicating a reduction in disease activity were also observed. Eight of eight patients with elevated anti-double-stranded DNA antibody (anti-dsDNA) levels at baseline showed a reduction in anti-dsDNA levels. Improvement in disease activity generally persisted following the end-of-treatment. The safety and tolerability of KZR-616 was favorable and consistent with needs for a long-term therapy. Most treatment emergent adverse events occurred early and diminished with later doses with the most common being injection site reactions. As previously reported, two of two patients with active proliferative LN had a greater than 50% reduction in urine protein to creatinine ratio, or UPCR, and experienced reductions in SLEDAI-2K scores and anti-dsDNA levels, suggesting an important anti-inflammatory 16
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effect not achieved with the background therapies. Both patients also had a reduction in urine CD163, a new biomarker of inflammatory activity in the kidney in patients with LN.
InAugust 2021 , we submitted an IND application for KZR-261 to the FDA. We plan to initiate a Phase 1 clinical trial of KZR-261, which will be an open-label dose-escalation study to assess safety, tolerability and preliminary tumor activity of KZR-261 in solid tumors.
Our Pipeline
The following table sets forth the status and initial focus of our product candidates and protein secretion program:
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Compound therapeutic indication development stage discovery preclinical phase 1 phase 2 phase 3 KZR-616 lupus nephritis (LN) mission Dematomyositis (DM) / Polymyositis presidio Protein secretion inhibition KZR-261 oncology IND-enabling activities KZR-TBD oncology & autoimmunity
Financial Operations Overview
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:
• employee-related expenses, which include salaries, benefits and
stock-based compensation;
• fees paid to consultants for services directly related to our product
development and regulatory effort;
• expenses incurred under agreements with third-party contractorganizations, investigative clinical trial sites and consultants that
conduct research and development activities on our behalf;
• costs associated with preclinical studies and clinical trials;
• costs associated with technology and intellectual property licenses;
• the costs related to production of clinical supplies; and
• facilities and other allocated expenses, which include expenses for rent
and other facility related costs and other supplies.
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers. We are eligible under theAusIndustry Research and Tax Development Tax Incentive Program to obtain a cash amount from theAustralian Taxation Office . The tax incentive is available to us on the basis of specific criteria with which we must comply related to research and development expenditures inAustralia . These research and development tax incentives are recognized as contra research 17 -------------------------------------------------------------------------------- and development expenses when the right to receive the tax incentive has been attained and funds are considered to be collectible. The amounts are determined based on a cost-reimbursement basis, and the incentive is related to our research and development expenditures and is due to us regardless of whether any Australian tax is owed. Amounts related to theAusIndustry Research and Development Tax Incentive Program are recognized when there is reasonable assurance that the incentive will be received, the relevant expenditure has been incurred by our Australian subsidiary,Kezar Life Sciences Australia Pty Ltd , a proprietary company limited by shares, and the amount of the consideration can be reliably measured.
The following table summarizes our research and development expenses incurred during the respective periods (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(unaudited) (unaudited)
Research and development expenses by
program:
KZR-616 $ 6.0 $ 4.0 $ 11.9 $ 8.9
Protein Secretion 3.3 3.1 6.7 5.7
Total research and development
expenses $ 9.3 $ 7.1 $ 18.6 $ 14.6
We expect our research and development expenses to increase substantially for
the foreseeable future as our product candidates advance into later stages of
development. The process of conducting the necessary clinical research to obtain
regulatory approval is costly and time-consuming, and the successful development
of our product candidates is highly uncertain. As a result, we are unable to
determine the duration and completion costs of our research and development
projects or when and to what extent we will generate revenue from the
commercialization and sale of any of our product candidates.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs, allocated facilities costs and expenses for outside professional services, including legal, human resource, information technology and audit services. Personnel costs consist of salaries, benefits and stock-based compensation. We will incur additional expenses as we increase the size of our administrative function to support the growth of our business.
Interest Income
Our interest income consists of interest income earned on our cash, cash equivalents and marketable securities.
Results of Operations
Comparison of the Three Months Ended
Three Months Ended June 30,
(dollars in millions) 2021 2020 $ Change
Operating expenses:
Research and development $ 9.3 $ 7.1 $ 2.2
General and administrative 3.7 2.7 1.0
Total operating expenses 13.0 9.8 3.2
Loss from operations (13.0 ) (9.8 ) (3.2 )
Interest income - 0.3 (0.3 )
Net loss $ (13.0 ) $ (9.5 ) $ (3.5 ) Research and Development Expenses
Research and development expenses increased by$2.2 million for the three months endedJune 30, 2021 , compared to the three months endedJune 30, 2020 . The increase was primarily due to an increase of$0.8 million in manufacturing and research expenses driven by increased drug substance and drug product manufacturing, an increase of$0.8 million in clinical trial related costs for KZR-616 and$0.2 million in clinical start-up costs for KZR-261, an increase of$0.6 million in personnel expenses due to an increase in headcount and salaries, an increase of$0.3 million in stock-based compensation, an increase of$0.2 million in consulting expenses and an increase of$0.2 million in facility-related expenses, offset by a decrease of$0.9 million in preclinical expenses related to the Protein Secretion program. 18 --------------------------------------------------------------------------------
General and Administrative Expenses
General and administrative expenses increased by$1.0 million for the three months endedJune 30, 2021 , compared to the three months endedJune 30, 2020 . The increase was primarily due to an increase of$0.4 million in stock-based compensation, an increase of$0.4 million in personnel and recruiting expenses due to an increase in headcount and salaries, an increase of$0.1 million in directors and officers liability insurance, and an increase of$0.1 million in facilities related expenses. Interest Income Interest income decreased by$0.3 million for the three months endedJune 30, 2021 , compared to the three months endedJune 30, 2020 . The decrease was due to lower interest rates.
Comparison of the Six Months Ended
Six Months Ended June 30,
(dollars in millions) 2021 2020 $ Change
Operating expenses:
Research and development $ 18.6 $ 14.6 $ 4.0
General and administrative 7.5 5.7 1.8
Total operating expenses 26.1 20.3 5.8
Loss from operations (26.1 ) (20.3 ) (5.8 )
Interest income 0.1 0.8 (0.7 )
Net loss $ (26.0 ) $ (19.5 ) $ (6.5 ) Research and Development Expenses
Research and development expenses increased by$4.0 million for the six months endedJune 30, 2021 , compared to the six months endedJune 30, 2020 . The increase was primarily due to an increase of$1.9 million in research and manufacturing expenses driven by increased drug product manufacturing, an increase of$0.5 million in clinical trial related costs for KZR-616 and$0.4 million in clinical start-up costs for KZR-261, an increase of$1.1 million in personnel expenses due to an increase in headcount and salaries, an increase of$0.6 million in stock-based compensation, an increase of$0.5 million in consulting expenses, and an increase of$0.3 million in facility-related expenses, offset by a decrease of$1.3 million in preclinical expenses related to the Protein Secretion program.
General and Administrative Expenses
General and administrative expenses increased by$1.8 million for the six months endedJune 30, 2021 , compared to the six months endedJune 30, 2020 . The increase was primarily due to an increase of$0.9 million in stock-based compensation and an increase of$0.5 million in personnel and recruiting expenses due to an increase in headcount and salaries, an increase of$0.2 million in directors and officers liability insurance, and an increase of$0.2 million in facilities related expenses.
Interest Income
Interest income decreased by
Liquidity and Capital Resources
Overview
As ofJune 30, 2021 , we had$26.4 million in cash and cash equivalents and$102.6 million of marketable securities invested in aU.S. Treasury money market fund,U.S. Treasury securities, commercial paper and corporate debt securities. As ofJune 30, 2021 , our cash equivalents and marketable securities had an average maturity of approximately four months and the longest maturity was twelve months. We have incurred operating losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses for at least the foreseeable future. Our net loss was$26.0 million for the six months endedJune 30, 2021 , and we had an accumulated deficit of$152.0 million as ofJune 30, 2021 . We believe that our cash, cash equivalents and marketable securities as ofJune 30, 2021 will be sufficient to meet our projected operating requirements through at least the next 12 months from the date these financial statements are issued. We have based this 19
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estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
At-the-Market Offering Program
InSeptember 2020 , we entered into a Sales Agreement, or the ATM Agreement, withCowen and Company, LLC , or Cowen, pursuant to which we can offer and sell, from time to time at our sole discretion through Cowen, as our sales agent, shares of our common stock having an aggregate offering price of up to$50.0 million . Any shares of our common stock sold will be issued pursuant to our shelf registration statement on Form S-3 (File No. 333-248752). We will pay Cowen a commission equal to 3.0% of the gross sales proceeds of any shares of our common stock sold through Cowen under the ATM Agreement and also have provided Cowen with indemnification and contribution rights. We have sold an aggregate of 1,705,800 shares of our common stock for gross proceeds of approximately$11.0 million at a purchase price of$6.45 per share pursuant to the ATM Agreement, all of which occurred inFebruary 2021 .
Funding Requirements
Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses. We will require additional financing to fund working capital and pay our obligations. We may pursue financing opportunities through the issuance of debt or equity. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable to us or at all. Our future funding requirements will depend on many factors, including the following:
• the progress, timing, scope, results and costs of our clinical trials and
preclinical studies for our product candidates, including the ability to
enroll patients in a timely manner for our clinical trials;
• the costs of obtaining clinical and commercial supplies for KZR-616,
KZR-261 and any other product candidates we may identify and develop;
• the cost, timing and outcomes of regulatory approvals;
• the extent to which we may acquire or in-license other product candidates
and technologies;
• the cost of attracting, hiring and retaining qualified personnel;
• our ability to successfully commercialize any product candidates for which
we obtain regulatory approval; and
• the cost of preparing, filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights.
Further, our operating plan may change, and we may need additional funds to meet
operational needs and capital requirements for clinical trials and other
research and development expenditures. Because of the numerous risks and
uncertainties associated with the development and commercialization of our
product candidates, we are unable to estimate the amounts of increased capital
outlays and operating expenditures associated with our current and anticipated
clinical studies.
If we need to raise additional capital to fund our operations, funding may not
be available to us on acceptable terms, or at all. The COVID-19 pandemic
continues to rapidly evolve and could result in significant disruption of global
financial markets. If such a disruption occurs, we could experience an inability
to access additional capital, which could in the future negatively affect our
operations. If we are unable to obtain adequate financing when needed, we may
have to delay, reduce the scope of or suspend one or more of our preclinical
studies, clinical trials, research and development programs or commercialization
efforts. We may seek to raise any necessary additional capital through a
combination of public or private equity offerings, debt financings,
collaborations and other licensing arrangements. If we raise additional capital
through debt financing, we may be subject to covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends.
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--------------------------------------------------------------------------------Cash Flows
The following summarizes our cash flows for the periods indicated:
Six Months Ended June 30,
2021 2020
(dollars in millions) (unaudited)
Net cash used in operating activities $ (21.4 ) $ (18.4 )
Net cash provided by (used in) investing activities 15.6 (76.6 )
Net cash provided by financing activities 11.0 97.4
Effect of exchange rate changes on cash and cash equivalents - (0.1 ) Net increase in cash and cash equivalents $ 5.2 $ 2.3
Cash Flows from Operating Activities
During the six months endedJune 30, 2021 , cash used in operating activities was$21.4 million , which consisted of a net loss of$26.0 million and a net change of$1.1 million in our net operating assets and liabilities, adjusted by non-cash charges of$5.7 million . The non-cash charges consisted of$3.9 million for stock-based compensation expense,$1.0 million of amortization of premium and discounts on marketable securities and$0.7 million for depreciation and amortization. The change in our net operating assets and liabilities was primarily due to a decrease of$0.6 million in accounts payable and accrued liabilities and a decrease of$0.5 million in operating lease liabilities. During the six months endedJune 30, 2020 , cash used in operating activities was$18.4 million , which consisted of a net loss of$19.5 million and a net change of$1.8 million in our net operating assets and liabilities, adjusted by non-cash charges of$2.9 million . The non-cash charges consisted of$0.7 million for depreciation and amortization and$2.4 million for stock-based compensation expense, offset by$0.2 million of amortization of premium and discounts on marketable securities. The change in our net operating assets and liabilities was primarily due to an increase of$0.2 million in prepaid expenses and other current assets, a decrease of$0.4 million in operating lease liabilities and a decrease of$1.2 million in accounts payable and accrued expenses due to timing of payments and decreased research and manufacturing expenditures.
Cash Flows from Investing Activities
Net cash provided by investing activities was$15.6 million for the six months endedJune 30, 2021 , primarily relating to the maturities of marketable securities exceeding purchases of such marketable securities. Payments for the purchases of property and equipment were$24,000 during the six months endedJune 30, 2021 . Net cash used in investing activities was$76.6 million for the six months endedJune 30, 2020 , primarily relating to the purchases of marketable securities exceeding maturities of such marketable securities. Payments for the purchases of property and equipment were$0.1 million during the six months endedJune 30, 2020 .
Cash Flows from Financing Activities
Net cash provided by financing activities for the six months endedJune 30, 2021 was$11.0 million , primarily relating to the net proceeds received from sales of common stock under the ATM Agreement and$0.3 million from the issuance of common stock pursuant to our employee equity plans. Net cash provided by financing activities for the six months endedJune 30, 2020 was$97.4 million , which consisted of$97.2 million of net proceeds received from the underwritten public offerings and$0.1 million from the issuance of common stock pursuant to our employee equity plans.
Contractual Obligations and Other Commitments
During the six months endedJune 30, 2021 , there were no material changes to our contractual obligations and commitments described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements and do not have holdings in any variable interest entities.
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--------------------------------------------------------------------------------Critical Accounting Polices and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are 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 may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.
Status as an
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we are not 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(b) of the Sarbanes-Oxley Act of 2002, (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 thePublic Company Accounting Oversight Board 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 Chief Executive Officer's compensation to median employee compensation. These exemptions will apply untilDecember 31, 2023 or until we no longer meet the requirements of being an emerging growth company, whichever is earlier. We are also a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by nonaffiliates is less than$250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than$100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than$700.0 million measured on the last business day of our second fiscal quarter. 22
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