PLIANT THERAPEUTICS, INC. The following discussion and analysis should be read in conjunction with our condensed financial statements and related notes appearing elsewhere in this Report, as well as our audited financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 , filed with theSEC . This discussion and analysis contains forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intention, beliefs and projections. Our actual results and the timing of events could differ materially from those anticipated in or implied by these forward-looking statements as a result of several factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A of this Report and under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or the negative of these terms or other similar expressions. 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 Report, 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 we have conducted 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. Overview We are a clinical stage biopharmaceutical company focused on discovering and developing novel therapies for the treatment of fibrosis and related diseases. Our initial focus is on treating fibrosis by inhibiting integrin-mediated activation of TGF-ß. We have applied our deep understanding of fibrosis biology, along with our medicinal chemistry and translational medicine expertise to develop a set of proprietary tools designed to discover and de-risk product candidates quickly and efficiently. Our wholly owned lead product candidate, PLN-74809, is an oral, small-molecule, dual selective inhibitor of ?v?6 and ?v?1 integrins that we are developing for the treatment of idiopathic pulmonary fibrosis, or IPF, and primary sclerosing cholangitis, or PSC. We have completed a Phase 1a SAD/MAD trial and a Phase 1b proof-of-mechanism trial of PLN-74809 in IPF and are currently recruiting three Phase 2a trials in our lead indications: two in IPF and one in PSC. Our second product candidate, PLN-1474, is a small-molecule selective inhibitor of ?v?1 for the treatment of liver fibrosis associated with nonalcoholic steatohepatitis, or NASH, which we have partnered with Novartis. PLN-1474 successfully completed a Phase 1 SAD/MAD trial inMarch 2021 , and the Investigational New Drug, or IND, application was transferred to Novartis in the first quarter of 2021. Novartis is responsible for all PLN-1474 development, manufacturing and commercialization activities after the initial development period. In addition to our clinical programs, we currently have preclinical integrin-based programs targeting oncology and muscular dystrophies. Third Quarter and Recent Highlights •Positive interim results from Phase 2a PET imaging clinical trial show ?v?6 target engagement up to 98% in the lungs of patients with idiopathic pulmonary fibrosis (IPF). The ongoing Phase 2a open-label PET imaging clinical trial is evaluating ?v?6 target engagement levels achieved by PLN-74809 across single-doses of 60, 120, 240 or 320 mg in up to 12 IPF patients. Interim results showed a dose response and a greater than 50% target engagement across all doses and established a model of the dose and plasma concentration response. Furthermore, these data support potential anti-fibrotic activity of PLN-74809 at the doses being evaluated in the ongoing Phase 2a INTEGRIS-IPF trial. •PLN-74809 Phase 2a trial in idiopathic pulmonary fibrosis (IPF) enrollment on track with topline data anticipated by mid-2022. INTEGRIS-IPF is a 12-week randomized, dose-ranging, double-blind, placebo-controlled trial evaluating the safety, tolerability and pharmacokinetics of PLN-74809 at doses of 40, 80 or 160 mg in IPF patients. Exploratory endpoints include quantitative lung fibrosis (QLF) imaging, pulmonary function tests as well as biomarkers. Enrollment is currently on track to be completed by the end of 2021 with topline data anticipated by mid-2022. 23 -------------------------------------------------------------------------------- •Data anticipated in the first quarter of 2022 from additional doses in the PLN-74809 Phase 1b proof-of-mechanism study evaluating inhibition of TGF-? signaling in the lungs of healthy volunteers. In a previously reported Phase 1b proof-of-mechanism study, 40 mg once-daily dosing of PLN-74809 inhibited activation of TGF-?, a key driver of fibrosis. Based on additional safety and pharmacokinetic data from the Phase 1a study, Pliant initiated an extension of the Phase 1b study. This study extension evaluates inhibition of TGF-b signaling at doses above 40mg of PLN-74809. These data, coupled with the recently reported positive interim Phase 2a PET target engagement data, will provide important information about the relationship between PLN-74809 plasma exposure, target engagement, TGF-? signaling inhibition and potential antifibrotic activity across the dose range currently being tested in the INTEGRIS-IPF trial. Data from this Phase 1b study is anticipated in the first quarter of 2022. •PLN-74809 Phase 2a trial in primary sclerosing cholangitis (PSC) enrollment on track. INTEGRIS-PSC is a 12-week randomized, dose-ranging, double-blind, placebo-controlled trial evaluating the safety, tolerability, and pharmacokinetics PLN-74809 at doses of 40, 80 or 160 mg in PSC patients. Exploratory endpoints include fibrosis biomarkers such as Pro-C3 and ELF, changes in ALP and liver imaging. Enrollment is currently anticipated to be completed by mid-2022. •Phase 1 drug-drug Interaction (DDI) study results show low potential of PLN-74809 to elicit drug-drug interactions with PLN-74809 appearing combinable with nintedanib or pirfenidone. Results from a Phase 1 DDI study showed no meaningful impact on concentrations of PLN-74809 or co-administered drugs. These data suggest that PLN-74809 may be co-administered with agents such as nintedanib or pirfenidone without dose adjustments. •Muscular Dystrophy and Oncology programs advancing towards IND. Early-stage integrin targeting programs focused on developing novel therapies in oncology and muscular dystrophies continue to advance towards IND. The muscular dystrophy program utilizes an antibody to improve muscle function through activation of an integrin compensatory mechanism. The oncology program focuses on increasing tumor sensitivity to checkpoint inhibitors through small molecule inhibition of ?v?8. Since inception, we have had significant operating losses. Our net loss was$27.0 million and$72.7 million for the three and nine months endedSeptember 30, 2021 . As ofSeptember 30, 2021 , we had an accumulated deficit of$190.6 million and cash, cash equivalents and short-term investments of$221.0 million . We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will increase in connection with our ongoing activities, as we: •perform research and development activities to identify and develop product candidates; •advance product candidates into and through clinical development; •require the manufacture of supplies to support research and development, preclinical studies and clinical trials; •seek regulatory approvals for any product candidates that successfully complete clinical trials; •expand our operational, financial and management systems and increase personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; •maintain, expand and protect our intellectual property portfolio; and •invest in or in-license other technologies or product candidates. COVID-19 Pandemic InMarch 2020 , theWorld Health Organization declared the outbreak of a novel coronavirus, or COVID-19, as a pandemic, which, to date, continues to spread throughoutthe United States and worldwide. We have been, and in the future could be, materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the outbreak of COVID-19. While difficult to predict or quantify the overall impact to our operations, among other things, our clinical trials have experienced delays, and may experience additional delays in the future, extending the timelines and increasing the overall costs to finish the clinical trials, as our fixed costs are not 24 -------------------------------------------------------------------------------- substantially reduced while the clinical trials are delayed. For example, the clinical site conducting our Phase 2a PET trial of PLN-74809 in IPF was closed to clinical research inMarch 2020 , but resumed enrollment and trial activities in the third quarter of 2020. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations have been and will be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19. Components of Operations
Revenue
We have not generated any revenue from product sales and do not expect to do so in the near future. Our revenue to date is derived from a Collaboration and License Agreement with Novartis, or the "Novartis Agreement," that was executed in 2019. Our revenue from Novartis is included under the caption "Revenue - related party" because Novartis had aggregate holdings of our outstanding common stock of greater than 5% upon the close of our IPO. As ofSeptember 30, 2021 andDecember 31, 2020 , Novartis owned approximately 6.0% and 6.1%, respectively, of our outstanding shares of common stock on a fully diluted basis. The Novartis Agreement is for the development and commercialization of PLN-1474 and up to three additional integrin research targets. Under the terms of the Novartis Agreement, we received an upfront license fee payment of$50.0 million for the worldwide, exclusive license to PLN-1474 and an additional$25.0 million upon first patient dosed in our Phase 1 trial of PLN-1474 in the first quarter of 2020. We are eligible to receive additional milestone payments of up to$391.0 million in total, if defined developmental, regulatory and commercialization milestones are achieved, and tiered royalties on a product-by-product basis based on annual nets sales of products. Additionally, Novartis is providing up to$19.6 million and up to$13.4 million in funding for the initial research and development activities associated with PLN-1474 and integrin research targets, respectively. Operating Expenses Research and Development Our research and development expenses consist of expenses incurred in connection with the development of our product candidates. Research and development expenses include: •employee-related expenses, which include salaries, benefits and stock-based compensation for our research and development personnel; •expenses incurred under agreements with third-party contract organizations for pre-clinical studies, clinical trials and consultants that conduct research and development activities on our behalf; •costs associated with the manufacture of supplies to support research and development, preclinical studies and clinical trials; •depreciation of laboratory equipment and costs of equipment and supplies; •costs associated with technology and intellectual property licenses; and •facilities and other allocated expenses, which include expenses for rent and other facility related costs and other supplies. General and Administrative Our general and administrative expenses consist primarily of salaries, benefits and stock-based compensation for our general and administrative personnel, allocated facilities costs, insurance and other expenses for outside professional services, including legal, marketing, investor relations, human resource and accounting services. Interest and Other Income (Expense), net 25 -------------------------------------------------------------------------------- Our interest and other income (expense), net consists of interest income earned on cash and cash equivalents, money market funds and short-term investments, realized gains and losses on investments and foreign exchange transactions. Financial Operations Overview Comparison of the three months endedSeptember 30, 2021 and 2020 (in thousands) Three months ended September 30, 2021 2020 $ Change Revenue-related party$ 1,610 $ 4,814 $ (3,204) Operating expenses: Research and development (21,052) (16,884) (4,168) General and administrative (7,671) (4,591) (3,080) Total operating expenses (28,723) (21,475) (7,248) Loss from operations (27,113) (16,661) (10,452) Interest and other income (expense), net 68 127 (59) Net loss$ (27,045) $ (16,534) $ (10,511) Revenue-Related Party Revenue-related party was$1.6 million for the three months endedSeptember 30, 2021 compared to$4.8 million for the three months endedSeptember 30, 2020 . The decrease of$3.2 million is primarily attributable to development work associated with the Phase 1 clinical trial of PLN-1474 in healthy volunteers which had completed prior to the second quarter of 2021. Research and Development Expenses The following table summarizes our research and development expenses for the three months endedSeptember 30, 2021 and 2020 (in thousands): Three months
ended
2021 2020 $ Change
Employee-related expenses $ 4,774
3,439 3,607 (168)
Clinical trials expenses 9,960 6,506 3,454
Depreciation of lab equipment and costs of equipment and supplies
1,282 1,183 99
Technology and intellectual property licenses 13 29 (16)
Facilities and other allocated expenses 1,584 1,532 52
Total research and development expenses $ 21,052 Research and development expenses for the three months endedSeptember 30, 2021 was$21.1 million compared to$16.9 million for the three months endedSeptember 30, 2020 . The increase of$4.2 million is primarily attributable to employee related expenses, driven by headcount, salaries and stock-based compensation expense, and an increase in clinical trial expenses largely due to underlying clinical conduct associated with our Phase 2 trials for PLN 74809. We do not allocate our costs by product candidates or by preclinical programs as these are in early stages of clinical trials or development, and our internal expenses are not allocated between product candidates and programs. Although external third-party costs are allocable between product candidates and programs, we do not perform this allocation. We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates and our preclinical programs and as they advance into later stages of development. General and Administrative Expenses 26 -------------------------------------------------------------------------------- General and administrative expenses for the three months endedSeptember 30, 2021 was$7.7 million compared to$4.6 million for the three months endedSeptember 30, 2020 . The increase of$3.1 million is primarily attributable to employee related expenses, driven by salaries and stock-based compensation expense, and increased costs associated with our operating as a public company, for example, insurance premiums and accounting and audit expenses. We expect our general and administrative expenses to increase for the foreseeable future as we continue to build our administrative function to support our growth in operations and to meet the requirements of operating as a public company, particularly as we cease being an emerging growth company onDecember 31, 2021 . Interest and Other Income (Expense), net Interest and other income (expense), net for the three months endedSeptember 30, 2021 was$68,000 compared to$127,000 for the three months endedSeptember 30, 2020 . The decrease of$59,000 resulted from lower interest income in the current period owing to smaller investment balances compared to the third-quarter of 2020. Comparison of the nine months endedSeptember 30, 2021 and 2020 (in thousands) Nine Months Ended September 30, 2021 2020 $ Change Revenue-related party $ 5,573$ 37,352 $ (31,779) Operating expenses: Research and development (58,797) (48,339) (10,458) General and administrative (19,712) (11,642) (8,070) Total operating expenses (78,509) (59,981) (18,528) Loss from operations (72,936) (22,629) (50,307) Interest and other income, net 204 123 81 Net loss$ (72,732) $ (22,506) $ (50,226) Revenue-Related Party Revenue-related party was$5.6 million for the nine months endedSeptember 30, 2021 compared to$37.4 million for the nine months endedSeptember 30, 2020 . The decrease of$31.8 million is primarily attributable to a$25.0 million milestone achieved in the first quarter of 2020 for first-patient-first-dose in our Phase 1 clinical trial of PLN-1474 in healthy volunteers and associated development work. Research and Development Expenses The following table summarizes our research and development expenses for the nine months endedSeptember 30, 2021 and 2020 (in thousands): Nine Months
Ended
2021 2020 $ Change
Employee-related expenses $ 15,087
9,666 10,692 (1,026)
Clinical trials expenses 25,304 17,440 7,864
Depreciation of lab equipment and costs of equipment and supplies
4,302 3,380 922
Technology and intellectual property licenses 34 2,465 (2,431)
Facilities and other allocated expenses 4,404 3,665 739
Total research and development expenses $ 58,797 Research and development expenses for the nine months endedSeptember 30, 2021 was$58.8 million compared to$48.3 million for the nine months endedSeptember 30, 2020 . The increase of$10.5 million is primarily attributable to employee related expenses, driven by headcount, salaries and stock-based compensation expense, and an increase 27 -------------------------------------------------------------------------------- in clinical trial expenses for PLN 74809 and manufacturing activities to support our clinical and early research programs. These increases were partially offset by a decrease in expenses related to intellectual property rights as we expensed a$2.4 million milestone payment due to theUniversity of California in the second quarter of 2020, upon the close of our IPO, associated with certain patents and technology relating to ?vß1. We do not allocate our costs by product candidates or by preclinical programs as these are in early stages of clinical trials or development, and our internal expenses are not allocated between product candidates and programs. Although external third-party costs are allocable between product candidates and programs, we do not perform this allocation. We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates and our preclinical programs and as they advance into later stages of development. General and Administrative Expenses General and administrative expenses for the nine months endedSeptember 30, 2021 was$19.7 million compared to$11.6 million for the nine months endedSeptember 30, 2020 . The increase of$8.1 million is primarily attributable to employee related expenses, driven by salaries and stock-based compensation expense, and increased costs associated with our operating as a public company, for example, insurance premiums and accounting and audit expenses. We expect our general and administrative expenses to increase for the foreseeable future as we continue to build our administrative function to support our growth in operations and to meet the requirements of operating as a public company, particularly as we cease being an emerging growth company onDecember 31, 2021 . Interest and Other Income (Expense), net Interest and other income (expense), net for the nine months endedSeptember 30, 2021 was$204,000 compared to$123,000 for the nine months endedSeptember 30, 2020 . The increase of$81,000 resulted from higher interest income in the current period owing to larger average investment balances for the year to date period following the increase in cash, cash equivalents and short-term investments resulting from our IPO. Liquidity and Capital Resources Overview As ofSeptember 30, 2021 , we had$221.0 million of cash, cash equivalents and short-term investments. Our short-term investments consist ofU.S. Treasury securities,U.S. Government agency securities and highly rated, investment-grade corporate debt securities. During the third quarter, we entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") withCantor Fitzgerald & Co. , as sales agent, pursuant to which we may issue and sell up to$150.0 million of shares of common stock from time to time. The issuance and sale of these shares pursuant to the Sales Agreement are deemed an "at-the-market" offering and are registered under the Securities Act of 1933, as amended. We have not issued any shares pursuant to any at-the-market offerings but may do so at a future date. Based on our current operating plan, we anticipate that the aggregate of our current cash, cash equivalents and short-term investments will be sufficient to fund our planned operations, commitments and contractual obligations for a period of at least one year following the date of this Report and into 2023. However, our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect, and we will in any event require additional capital in order to complete clinical development of any of our current programs. Our operations have been financed primarily through the issuance and sale of convertible preferred stock, our collaboration with Novartis and issuance of common stock via our IPO. We completed our IPO inJune 2020 and received$148.3 million , net of underwriting discounts, commissions and offering expenses. Concurrent with the completion of the IPO, we also issued 625,000 shares of our common stock to Novartis for proceeds of$10.0 million . 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. Our future funding requirements will depend on many factors, including the following: •the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates; 28 -------------------------------------------------------------------------------- •the clinical development plans we establish for these product candidates; •the timelines of our clinical trials and the overall costs to conduct and complete the clinical trials, which may be impacted by the COVID-19 pandemic; •the number and characteristics of product candidates that we develop; •the outcome, timing and cost of meeting regulatory requirements established by theU.S. Food and Drug Administration , or FDA, and other comparable foreign regulatory authorities; •whether we enter into any collaboration agreements and the terms of any such agreements; •the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; •the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates; •the effect of competing technological and market developments; •the cost and timing of completion of commercial-scale outsourced manufacturing activities; •the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own; and •the cost of operating as a public company. 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. If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. 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. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. Cash Flows Comparison of the nine months endedSeptember 30, 2021 and 2020 The following summarizes our cash flows for the periods indicated (in thousands): Nine Months Ended September 30, $ Change 2021 2020 Net cash used in operating activities$ (55,578) $ (20,786) (34,792) Net cash provided by/(used in) investing activities 47,916 (222,772) 270,688 Net cash provided by financing activities 2,011 212,975 (210,964) Net (decrease)/increase in cash and cash equivalents $
(5,651)
Cash Used in Operating Activities Net cash used in operating activities increased by$34.8 million to$55.6 million for the nine months endedSeptember 30, 2021 compared to the same period in 2020. The change over prior year is primarily attributable to an increase in operating expenses of approximately$18.5 million and less revenues owing to the achievement, and receipt, of a$25.0 million milestone in the first quarter of 2020 associated with the PLN-1474 collaboration with Novartis. Cash Provided by/Used in Investing Activities 29 -------------------------------------------------------------------------------- Net cash provided by investing activities increased by$270.7 million to$47.9 million for the nine months endedSeptember 30, 2021 compared to the same period in 2020. The difference is driven by the initial purchase of securities following receipt of financing proceeds from the Series C preferred stock offering, private placement and IPO in 2020. Cash Provided by Financing Activities Net cash provided by financing activities decreased by$211.0 million to$2.0 million for the nine months endedSeptember 30, 2021 compared to the same period in 2020. The decrease is attributable to proceeds from the IPO, private placement and Series C preferred stock being received in 2020 whereas the only financing activity during 2021 was derived from the exercise of stock options. Contractual Obligations and Other Commitments There have been no material changes to our contractual obligations and other commitments as ofSeptember 30, 2021 , as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . Off-Balance Sheet Arrangements During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements or holdings in any variable interest entities. Critical Accounting Polices and Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance withU.S. GAAP. 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 and estimates from those described in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 filed with theSEC . Recent Accounting Pronouncements See Note 2 to our condensed financial statements appearing elsewhere in this Report for more information. Emerging Growth Company Status and JOBS Act Accounting Election Based on the market value of our common stock held by our non-affiliates as ofJune 30, 2021 , we will be considered a "large accelerated filer" onDecember 31, 2021 and thus lose our status as an emerging growth company as of such date. Accordingly, we will be required to adopt ASU No. 2016-02 (Topic 842), Leases and ASU No. 2016-13 (Topic 326), Financial Instruments - Credit Losses in our Annual Report on Form 10-K for the year endingDecember 31, 2021 and interim periods thereafter. Emerging growth companies, as defined in the JOBS Act, are permitted to 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. Accordingly, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. In addition, we have relied upon other exemptions and reduced reporting requirements provided by the JOBS Act such as not being 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 30
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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, 2021 . Item 3. Quantitative and Qualitative Disclosures About Market Risk. The primary objectives of our investment activities are to ensure liquidity and to preserve capital. We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. We had cash, cash equivalents and short-term investments of$221.0 million as ofSeptember 30, 2021 which consisted of bank deposits, highly liquid money market funds and short-term investments inU.S. treasury securities,U.S. government agency securities and corporate debt securities. Historical fluctuations in interest rates have not been significant for us. We had no outstanding debt as ofSeptember 30, 2021 . Due to the short-term maturities of our cash equivalents and short-term investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents or short-term investments. To minimize the risk, we maintain our portfolio of cash equivalents and short-term investments in institutional market funds that are composed ofU.S. Treasury andU.S. Treasury -backed repurchase agreements or short-termU.S. Treasury securities,U.S. government agency securities and corporate debt securities. We do not believe that inflation, interest rate changes, or exchange rate fluctuations had a significant impact on our results of operations for any periods presented herein. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As ofSeptember 30, 2021 , our management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as ofSeptember 30, 2021 , the design and operation of our disclosure controls and procedures were effective at a reasonable assurance level. Changes in Internal Control over Financial Reporting There was no change in our internal controls over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter endedSeptember 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We considered our internal controls over financial reporting in regards to the impact of COVID-19 and concluded that our controls continue to operate in a remote environment without material effect on our internal controls over financial reporting.
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