SINGULAR GENOMICS SYSTEMS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included in Item 1 of this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed under the section titled "Risk Factors" elsewhere in this report. See the section titled "Special Note Regarding Forward-Looking Statements" elsewhere in this report.
Overview
We are a life science technology company that is leveraging novel,
next-generation sequencing ("NGS") and multiomics technologies to empower
researchers and clinicians. We developed a unique and proprietary NGS
technology, which we refer to as our Sequencing Engine. This Sequencing Engine
is the foundational platform technology that forms the basis of our products in
development as well as our core product tenets: power, speed, flexibility and
accuracy. We are currently developing two products that are purpose-built to
target applications in which these core product tenets matter most. Our first
product, the G4, targets the NGS market and is comprised of an instrument and
associated menu of consumable kits. Our second product in development, the PX,
combines single-cell analysis, spatial analysis, genomics and proteomics in one
integrated instrument to offer a versatile multiomics solution.
The core of our Sequencing Engine is comprised of unique and proprietary
chemistry, including novel chemical compounds, polymers and enzymes. This
chemistry is designed to produce high sequencing accuracy and rapid cycle times
that we believe can drive improvements in NGS. To take full advantage of the
proprietary chemistry, we have developed and continue to develop purpose-built
instrumentation consisting of high-speed, high-resolution imaging and innovative
fluidic design. We believe that our Sequencing Engine, together with our
proprietary innovations in molecular biology techniques, will enable
differentiated applications in fast-growing markets, supported by our
intellectual property portfolio.
The G4 is a benchtop next-generation sequencer designed to produce fast and
accurate sequencing results. The G4 is designed to target the NGS market in
particular applications that require power, speed, flexibility and accuracy. We
believe the G4 will expand and accelerate the use of DNA sequencing across a
wide range of applications, such as identifying cancer-associated genetic
mutations, deep sequencing to detect minimum residual disease in circulating
cell-free DNA, profiling the immune system, analyzing single-cell RNA
transcription and rapidly sequencing exomes and whole genomes. We are executing
a three-step commercialization plan for the G4 consisting of: (i) collaborating
with select partners to conduct beta pilot tests, which we completed in 2021;
(ii) collaborating with potential customers in our early access program, which
we concluded in the second quarter of 2022; and (iii) offering the G4 broadly to
the market. We commercially launched the G4 in December of 2021. We expect
shipments to begin in the second quarter of 2022.
The PX is our second product in development and is a multiomics platform
designed to target the markets for single-cell, spatial analysis and proteomics.
The PX will leverage our Sequencing Engine as a readout mechanism to provide a
high-resolution view of biology at the single-cell and tissue level. We believe
the PX, when launched, will be a high-throughput, versatile platform capable of
measuring levels of RNA transcription, protein expression and sequence specific
information directly in cells and tissues. We believe the PX will have broad
application across many areas of biology. We are initially focused on
applications in oncology and immunology, with future expansion into other
applications such as neurology. We are currently in an advanced prototype
development stage for the PX. We anticipate initiating a technology access
program in the second half of 2022, which will be similar to our early access
program, but we intend to initially bring samples and collaborators in-house. We
anticipate commercially launching the PX in late 2023.
Corporate and Financial Overview
Since we were incorporated in 2016, we have devoted substantially all of our resources to research and product development activities, initiating our commercialization plans, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, building our commercial infrastructure and providing general and administrative support for these activities. Since our incorporation, we have incurred significant losses and negative cash flows from operations. During the three months endedMarch 31, 2022 , we incurred a net loss of$22.0 million and used$19.8 million of cash in our operations. As ofMarch 31, 2022 , we had an accumulated deficit of$173.9 million . We expect to continue to incur significant and increasing losses and do not expect positive cash flows from operations for the foreseeable future, and our net losses may fluctuate significantly from period to period depending on the timing of and expenditures on our planned commercialization and research and development activities. 22
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OnJune 1, 2021 , we closed our initial public offering ("IPO") in which we sold 11,730,000 shares of our common stock (which includes 1,530,000 shares that were offered and sold pursuant to the full exercise of the underwriters' option to purchase additional shares) at a public offering price of$22.00 per share, resulting in net proceeds of approximately$237.2 million after deducting offering costs, underwriting discounts and commissions of$20.9 million . From the date of our incorporation throughMarch 31, 2022 , we have financed our operations primarily through private placements of convertible preferred stock and convertible promissory notes and the net proceeds from our IPO. We have raised aggregate net proceeds of approximately$447.4 million , net of issuance costs, including the$130.5 million we raised through the issuance of convertible promissory notes inFebruary 2021 (the "2021 Convertible Notes"), and including$10.5 million of advances on our loan agreement withSilicon Valley Bank (the "Loan Agreement"). As ofMarch 31, 2022 , we had cash, cash equivalents and short-term investments of$316.0 million .
We expect our expenses to increase significantly in connection with our ongoing activities as we:
•
commercialize and continue to enhance the G4;
•
continue to develop our planned PX;
•
attract, hire and retain qualified personnel;
•
expand our sales, marketing, service, support and distribution infrastructure to support our commercialization plans and engage in commercialization activities;
•
build-out and expand our in-house manufacturing capabilities and engage in larger scale manufacturing activities;
•
continue to engage in research and development of other products and enhancements;
•
implement operational, financial and management information systems; and
•
obtain, maintain, expand and protect our intellectual property portfolio.
Columbia License Agreement and Sponsored Research Agreement
InAugust 2016 , we entered into an Exclusive License Agreement (the "License Agreement") withColumbia . The License Agreement includes a number of diligence obligations that require us to use commercially reasonable efforts to research, discover, develop and market Patent Products and/or Other Products (as defined in the License Agreement) by certain dates. Under the License Agreement, we pay an annual license fee that increases each year, until it reaches a low six-digit fee for the fifth year, and for each subsequent year, for so long as the License Agreement remains in force. For any products within the scope of the License Agreement that we commercialize, we are required to pay royalties ranging from low to mid-single digits on net sales of Patent Products and low single-digit royalty rates on net sales of Other Products. We can credit our yearly annual license fee against any yearly royalty fees payable toColumbia . Additionally, if we receive any income in connection with any sublicenses, we must payColumbia a high single-digit percentage of that income. Finally, the License Agreement provides for payments toColumbia based on our achievement of certain development and commercialization milestones, which could total up to$3.9 million over the life of the License Agreement.
In addition to the License Agreement, the Company entered into a sponsored
research agreement to fund a research program with
COVID-19 Pandemic We are continuing to assess the impact of the COVID-19 pandemic on our current and future business and operations, as well as on our industry and the healthcare system. The COVID-19 pandemic and efforts to reduce its spread have adversely impacted and may materially and adversely impact our business and operations in the future. For instance, there were previously standing "stay-at-home" orders inCalifornia , and specifically inSan Diego County , where our headquarters is located. We have continued to operate within the rules applicable to our business; however, while many of these mandates have begun to expire, an extended implementation of these governmental mandates or institution of other mandates could further impact our ability to operate effectively and conduct ongoing research and development or other activities. Additionally, we have experienced longer lead times from our suppliers of components used in our product development and manufacturing operations, including due to supply chain challenges currently being experienced generally in the economy. Pandemic precautions and preventative measures may also impact our commercialization plans due to restrictions on our customers' ability to access laboratories, causing delays in the delivery and installation of our products, training such customers on our products and their ability to conduct research. The ongoing build-out of our new headquarters and manufacturing facilities may also be delayed by COVID-19 related restrictions. The COVID-19 pandemic has also had an adverse effect on our ability to attract, recruit, interview and hire at the pace we would typically expect to support our rapidly expanding operations. To the extent that any governmental authority imposes additional regulatory requirements, or continues to maintain regulatory requirements or changes existing laws, regulations and policies that apply to our business and operations, such as additional workplace safety measures, our product development plans may be delayed, and we may incur further costs in bringing our business and operations into compliance with new laws, regulations and policies. 23
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Components of Our Results of Operations
Revenue
We have not generated any revenue from product sales to date and may not do so in the future.
Operating Expenses Research and Development Research and development expenses consist primarily of: salaries, payroll taxes, employee benefits and stock-based compensation for personnel engaged in research and development activities; fees paid to consultants; license fees paid to third parties for use of their intellectual property; laboratory supplies and development compound materials; and allocated facilities and depreciation costs. All research and development costs are charged to expense as incurred. We plan to continue to increase our investment in our research and development efforts related to our product development pipeline and our proprietary technology, including related to the G4 and planned PX. Therefore, we expect our research and development expenses will increase as we incur expenses associated with hiring additional personnel, purchasing supplies and materials and the allocation of facility expense associated with the ongoing build-out of our expansion facilities to support our research and development efforts.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of: salaries, payroll taxes, employee benefits and stock-based compensation for personnel in our executive management, operations, sales, finance, human resources and administrative functions; directors and officers insurance costs; professional service fees, including for legal, accounting, patent, auditing and other services; allocated facilities and depreciation costs; and other costs to support our operations. We plan to continue to increase our investment in our personnel as we grow. We also have incurred and expect to incur additional costs as a result of operating as a public company, including costs of legal, audit, accounting, regulatory and tax compliance services, directors and officers insurance costs, and investor and public relations costs. As a result, we expect our selling, general and administrative expenses will increase in future periods.
Other Income and Expenses
Interest and Other Income
Interest and other income primarily consists of interest earned on cash, cash
equivalents and short-term investments primarily from holdings in corporate
notes,
Interest Expense
Interest expense consists of interest related to our Loan Agreement with
Change in Fair Value of Convertible Promissory Notes
Prior to the IPO, we accounted for the convertible promissory notes (the "2021
Convertible Notes") in accordance with the provisions of Accounting Standards
Codification ("ASC") 480, Distinguishing Liabilities from Equity and ASU
2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.
We adjusted the carrying value of the liability for the 2021 Convertible Notes
to its estimated fair value at the end of each reporting period through
conversion, with increases in fair value recorded as other income or expense in
the statements of operations.
Change in Fair Value of Warrant Liability
Prior to the IPO, we accounted for the warrant for preferred stock (the "SVB
Warrant," see Note 8 to our condensed financial statements included in Item 1)
in accordance with the provisions of ASC 480, Distinguishing Liabilities from
Equity, which requires that warrants for the purchase of shares in contingently
redeemable instruments be accounted for as liabilities. We adjusted the carrying
value of the SVB Warrant liability to its estimated fair value at the end of
each reporting period through conversion, with increases or decreases in fair
value recorded as other income or expense in the statements of operations.
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Table of Contents Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the periods
indicated:
Three Months Ended March 31,
2022 2021 $ Change % Change
(in thousands)
Operating expenses:
Research and development $ 10,645 $ 6,608 $ 4,037 61 %
Selling, general and administrative 11,375 3,654 7,721 211 %
Loss from operations $ (22,020 ) $ (10,262 ) $ (11,758 ) 115 %
Interest and other income 156 131 25 19 %
Interest expense (142 ) (188 ) 46 -24 %
Change in fair value of convertible - (11,400 )
promissory notes 11,400 -100 %
Change in fair value of warrant - (2,202 )
liability 2,202 -100 %
Net loss $ (22,006 ) $ (23,921 ) $ 1,915 -8 %
Research and Development Expense
The following table summarizes our research and development expense for the
periods indicated:
Three Months Ended March 31,
2022 2021 $ Change % Change
(in thousands)
Research and development expense
$ 4,037 61 % Research and development expense increased by$4.0 million , or 61%, in the three months endedMarch 31, 2022 compared to the same period in 2021. The increase was primarily due to an increase of$2.3 million in employee compensation costs, including$0.7 million of stock-based compensation, to support the development efforts of our G4 and our beta development for the PX. Other increases include$1.0 million related to products and supplies used for in-house research and$0.7 million related to the expansion of our facilities and information technology costs to support growth.
Selling, General and Administrative Expense
The following table summarizes our selling, general and administrative expense
for the periods indicated:
Three Months Ended March 31,
2022 2021 $ Change % Change
(in thousands)
Selling, general and administrative
expense $ 11,375 $ 3,654 $ 7,721 211 %
Selling, general and administrative expense increased by $7.7 million , or 211%,
in the three months ended March 31, 2022 compared to the same period in 2021.
The increase was primarily due to a $5.0 million increase in employee
compensation costs, including $1.8 million of stock-based compensation,
resulting from hiring additional personnel to support our growth and prepare for
commercialization of the G4. Other increases include $2.0 million in
professional and consulting fees related to insurance, legal, audit and other
costs associated with becoming a public company, as well as $0.3 million related
to the expansion of our facilities and information technology costs to support
growth.
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Other Income (Expense)
The following table summarizes our other income (expense) for the periods
indicated:
Three Months Ended March 31,
2022 2021 $ Change % Change
(in thousands)
Interest and other income $ 156 $ 131 25 19 %
Interest expense (142 ) (188 ) 46 -24 %
Change in fair value of convertible
promissory notes - (11,400 ) 11,400 -100 %
Change in fair value of warrant
liability - (2,202 ) 2,202 -100 %
Total 14 (13,659 ) 13,673 -100 %
Other income (expense) decreased by $13.7 million , or nearly 100%, in the three
months ended March 31, 2022 compared to the same period in 2021. This decrease
is due to the change in the fair value of the 2021 Convertible Notes of $11.4
million and the change in the fair value of the SVB Warrant liability of $2.2
million during three months ended March, 2021. Each of these instruments
converted in connection with the IPO in 2021 and were not outstanding during the
three months ended March 31, 2022 .
Liquidity and Capital Resources
Since we incorporated inJune 2016 , we have devoted substantially all of our resources to research and product development activities, initiating our commercialization plans, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, building our commercial infrastructure and providing general and administrative support for these activities. Since our incorporation, we have not generated any revenues from product sales and have incurred significant operating losses and negative cash flows from operations. From incorporation throughMarch 31, 2022 , we have financed our operations primarily through private placements of convertible preferred stock and convertible promissory notes and the net proceeds from our IPO. We expect to continue to incur significant and increasing losses and do not expect positive cash flows from operations for the foreseeable future, and our net losses may fluctuate significantly from period to period depending on the timing of, and expenditures on, our commercialization and research and development activities. In particular, we expect to incur increasing costs in the near term in connection with the commercialization of the G4, which includes, among others, increasing our sales and marketing and other commercialization efforts to drive market adoption and scaling our manufacturing and customer support capabilities. During the three months endedMarch 31, 2022 , we incurred a net loss of$22.0 million and used$19.8 million of cash in operations. As ofMarch 31, 2022 , we had an accumulated deficit of$173.9 million . As ofMarch 31, 2022 , we had cash, cash equivalents and short-term investments of$316.0 million . Our capital obligations include minimum lease payments of$3.9 million for the remainder of 2022,$6.9 million in 2023 and$227.4 million thereafter. Our capital obligations also include minimum payments under our Loan Agreement withSilicon Valley Bank of$0.3 million for the remainder of 2022,$0.5 million in 2023 and$11.7 million thereafter. Our capital obligations also include payments under our License Agreement withColumbia . Under the License Agreement, we will pay a low six-digit annual license fee for so long as the License Agreement remains in force. For any products within the scope of the License Agreement that we commercialize, we are required to pay royalties ranging from low to mid-single digits on net sales of Patent Products and low single digit royalty rates on net sales of Other Products, as such terms are defined in the License Agreement. We can credit our yearly annual license fee against any yearly royalty fees payable toColumbia . Additionally, if we receive any income in connection with any sublicenses, we must payColumbia a high single-digit percentage of that income. Finally, the License Agreement provides for payments toColumbia based on our achievement of certain development and commercialization milestones, which could total up to$3.9 million over the life of the License Agreement. Our leases and the License Agreement are further described in Note 9 to the unaudited financial statements contained elsewhere in this report. The Loan Agreement is further described in Note 8 to the unaudited financial statements contained elsewhere in this report. Our future capital requirements will depend on many factors including executing on our commercialization plans, continuing to invest into our research and development projects and other factors described in the section titled "Risk Factors" elsewhere in this report. Based on our current operating plan, we believe our existing cash, cash equivalents and short-term investments will enable us to fund our planned operations for at least 12 months from the issuance date of this report. We have based our estimate of capital requirements on assumptions that may prove to be incorrect, and, as we continue to face challenges and uncertainties, our available capital resources may be consumed more rapidly than currently expected due to a variety of factors, including those factors described in the section titled "Risk Factors" elsewhere in this report. 26
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We may need to seek additional financing in the future to support our operations, research and development activities and commercialization plans. If we are not able to generate sufficient revenue to finance our cash requirements, if the maximum availability of$35.5 million under our Loan Agreement is not sufficient to finance our cash requirements, or if we are not able to raise additional capital or enter into financing agreements or arrangements when required on favorable terms, or at all, we may have to delay, reduce the scope of, or discontinue one or more development programs, delay potential commercialization or reduce the scope of sales or marketing activities and pursue other cost cutting measures, including the reduction of headcount, scope of operations and planned capital expenditures, which may have a material adverse effect on our business, results of operations, financial condition or ability to fund our scheduled obligations on a timely basis or continue as a going concern. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities or that, if we achieve profitability, we will be able to sustain it.
Cash Flows
The following table sets forth the sources and uses of cash, cash equivalents and restricted cash for each of the periods presented below:
Three Months Ended March 31,
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (19,839 ) $ (9,185 )
Investing activities 8,386 (90,461 )
Financing activities 23 133,484
Net (decrease) increase in cash and cash
equivalents and restricted cash $ (11,430 ) $ 33,838
Operating Activities
During the three months ended March 31, 2022 , cash used in operating activities
was $19.8 million attributable to a net loss of $22.0 million and changes in
working capital of $3.7 million , offset by non-cash charges of $5.9 million .
Non-cash charges primarily consisted of $3.6 million of stock-based compensation
expense and $1.2 million related to the amortization of premiums on the
Company's short-term investments.
During the three months ended March 31, 2021 , cash used in operating activities
was $9.2 million attributable to a net loss of $23.9 million and changes in
working capital of $0.3 million , offset by non-cash charges of $15.1 million .
Non-cash charges primarily consisted of an $11.4 million change in the fair
value of the 2021 Convertible Notes, a $2.2 million change in the fair value of
the SVB Warrant liability and $1.1 million of stock-based compensation expense.
Investing Activities
During the three months endedMarch 31, 2022 , cash provided by investing activities was$8.4 million , which related to proceeds from sales and maturities of available-for-sale securities of$44.5 million , offset by purchases of available-for-sale securities of$35.2 million and$0.9 million in payments for purchases of property and equipment. During the three months endedMarch 31, 2021 , cash used in investing activities was$90.5 million , which related to purchases of available-for-sale securities of$101.6 million and$0.5 million in payments for purchases of property and equipment, offset by proceeds from sales and maturities of available-for-sale securities of$11.6 million .
Financing Activities
During the three months ended
During the three months ended
Indebtedness
InNovember 2019 , we entered into a loan and security agreement withSilicon Valley Bank pursuant to whichSilicon Valley Bank agreed to lend us up to$15.0 million in a series of term loans (the "2019 SVB Loan"). We borrowed an aggregate of$10.0 million under the 2019 SVB Loan. The 2019 SVB Loan was to mature onSeptember 1, 2023 and bore interest at an annual rate equal to the greater of (a) 0.65% above the prime rate or (b) 5.90%. Payment on the 2019 SVB Loan was for interest only throughSeptember 30, 2021 . In addition, a final payment equal to the original principal amount of each advance multiplied by 5.50% was to be due on the maturity date. 27
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OnSeptember 30, 2021 , we refinanced our 2019 SVB Loan. In connection with the refinancing, we entered into the Loan Agreement (together with the 2019 SVB Loan, the "SVB Loans") withSilicon Valley Bank . The Loan Agreement provides for term loans in an aggregate principal amount of up to$35.5 million to be delivered in three tranches. The tranches consist of: (i) a term loan advance to us in an aggregate principal amount of$10.5 million on the loan closing date (the "First Tranche"); (ii) an additional term loan advance available to us throughSeptember 30, 2022 in an aggregate principal amount of$15.0 million ; and (iii) subject toSilicon Valley Bank's approval, our right to request thatSilicon Valley Bank make an additional term loan advance in an aggregate principal amount of$10.0 million . The proceeds from the First Tranche were used to repay in full the existing indebtedness under the 2019 SVB Loan. The Loan Agreement matures onSeptember 1, 2026 and bears interest at an annual rate equal to the greater of (a) 0.75% plus the prime rate as reported in The Wall Street Journal and (b) 4.00%. The Loan Agreement has an initial interest-only period of 36 months. In addition, a final payment ("Final Payment Fee") equal to the original principal amount of each advance multiplied by 4.00% will be due on the maturity date. We are subject to customary affirmative and restrictive covenants under the Loan Agreement. Our obligations under the Loan Agreement are secured by a first priority security interest in substantially all of our current and future assets, other than intellectual property. We have agreed not to encumber our intellectual property assets, except as permitted by the Loan Agreement. The Loan Agreement provides for events of default customary for term loan facilities of this type, including but not limited to: non-payment; breaches or defaults in the performance of covenants or representations and warranties; bankruptcy and other insolvency events; and the occurrence of a material adverse change as defined in the Amended Agreement. After the occurrence of an event of default,Silicon Valley Bank may, among other remedies, accelerate payment of all obligations.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles ("GAAP"). The preparation of financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Changes in estimates are reflected in reported results for the period in which they become known. Actual results could differ significantly from the estimates made by our management. Except as set forth below, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Leases We adopted Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842"), effectiveJanuary 1, 2022 . ASC 842 requires us to recognize on the balance sheet lease liabilities and corresponding right-of-use ("ROU") lease assets for our operating leases where we are the lessee. We determine if an arrangement is or contains a lease at contract inception. Lease liabilities represent our obligation to make payments under our operating leases. ROU lease assets represent our right to use assets under our operating leases. We determine the value of lease liabilities and ROU lease assets on a lease-by-lease basis. A lease liability is recognized at the commencement date of an operating lease based on the present value of the future lease payments over the expected lease term. A corresponding ROU lease asset is recognized at the commencement date of an operating lease based on the value of the lease liability, adjusted for any lease incentives received, any initial direct costs incurred and any lease payments made at or before the lease commencement date. We calculate the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily determined. In that case, we use our incremental borrowing rate based on information available at the date of lease commencement. The incremental borrowing rate is the estimated rate of interest that we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over the expected lease term. Determining the incremental borrowing rate requires using assumptions that require management's judgment. The assumptions used in estimating the incremental borrowing rate include our recent borrowing activity and industry data for loans with similar terms. Changes to any of these assumptions would impact our estimate of our incremental borrowing rate and thus could significantly impact the value recorded for our lease liabilities and ROU lease assets.
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our financial statements included elsewhere in this report.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements,
as such term is defined in the rules and regulations of the
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Table of Contents JOBS Act We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"). We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than$1.07 billion in annual gross revenue; (ii) the date we qualify as a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, with at least$700 million of equity securities held by non-affiliates; (iii) the issuance, in any three-year period, by us of more than$1.0 billion in non-convertible debt securities; or (iv)December 31, 2026 . As a result of this status, we have taken advantage of certain exemptions from various reporting requirements in this report that are applicable to other publicly traded entities that are not emerging growth companies and may elect to take advantage of other exemptions from reporting requirements in our future filings with theSEC . In particular, in this report, these exemptions include:
•
the option to present only two years of audited financial statements and only two years of Management's Discussion and Analysis of Financial Condition and Results of Operations;
•
not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended;
•
not being required to submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay," "say-on-frequency," and "say-on-golden parachutes;" and
•
not being required to 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. As a result, we do not know if some investors will find our common stock less attractive. The result may be a less active trading market for our common stock, and the price of our common stock may become more volatile. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to avail ourselves of this exemption and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies. Accordingly, the information contained herein may be different than the information you receive from other public companies.
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