X4 PHARMACEUTICALS, INC. The following information should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with theSecurities and Exchange Commission ("SEC"), onMarch 17, 2022 , the ("Annual Report"). This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under "Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q. Such factors may be amplified by the ongoing COVID-19 pandemic and its potential impact on our business and the overall global economy.
Overview
We are a late-stage clinical biopharmaceutical company discovering and
developing novel therapies for the treatment of diseases of the immune system,
with a focus on rare diseases and those with limited treatment options. Our lead
clinical candidate, mavorixafor, is a first-in-class, small molecule antagonist
of chemokine receptor CXCR4 being developed as a once-daily oral therapy. We
believe that inhibition of the CXCR4 pathway creates the potential to provide
therapeutic benefit across a wide variety of immune-system related diseases,
including chronic neutropenic disorders and certain types of cancer.
We are currently evaluating the safety and efficacy of mavorixafor in a 52-week,
global Phase 3 clinical trial ("4WHIM trial") for the treatment of patients with
WHIM (Warts, Hypogammaglobulinemia, Infections, and Myelokathexis) syndrome, a
rare, inherited, primary immunodeficiency disease caused by genetic mutations in
the CXCR4 receptor gene. We are also studying mavorixafor in two Phase 1b
clinical trials - one in patients with chronic neutropenic disorders, including
congenital, idiopathic, and cyclic neutropenia, and one in combination with the
Bruton tyrosine kinase inhibitor ("BTKi") ibrutinib in patients with a rare
B-cell lymphoma called Waldenström's macroglobulinemia and confirmed mutations
to both the CXCR4 and MYD88 genes.
We completed enrollment of the 4WHIM trial in the third quarter of 2021, with 31
patients aged 12 and older enrolled, and we expect to report results from the
trial in the fourth quarter of 2022. We have begun building our commercial team
in anticipation of a possible New Drug Application ("NDA") submission to the
U.S. Food and Drug Administration ("FDA") early in the second half of 2023, with
the goal of obtaining approval for mavorixafor for the treatment of people in
the U.S. aged 12 and older with WHIM syndrome, should the final Phase 3 data
support the NDA filing.
We are continuing to enroll patients in the Phase 1b chronic neutropenia trial,
with results expected in the third quarter of 2022. We have completed enrollment
of 16 patients in the Waldenström's trial and recently reported positive results
from the Phase 1b study, which we expect will conclude in December of 2022.
In July 2022 , we announced a strategic re-prioritization of our resources
towards advancing mavorixafor solely in chronic neutropenic disorder
indications, including WHIM syndrome, while pausing our pre-clinical
immunodeficiency program and only progressing our oncology programs upon
completion of strategic partnership(s). As a result, any further development of
mavorixafor for any oncology indication, including Waldenström's
macroglobulinemia, will be subject to completion of a strategic partnership.
Similarly, we are currently completing pre-clinical toxicology studies on our
candidate X4P-002, a novel, small-molecule CXCR4 antagonist that has
demonstrated potential in a number of oncology indications; any regulatory
filings to begin clinical development of XP4-002 will now be subject to
completing a strategic partnership. In addition, we have paused pre-clinical
development of X4P-003, a novel, small-molecule CXCR4 antagonist on which patent
applications have been filed; further advancement of X4P-003 for any
immunodeficiency indication will be dependent on the potential first approval of
mavorixafor and our lifecycle management strategy for the company's product
portfolio.
Mavorixafor has received multiple special designations from global regulatory
authorities: in WHIM syndrome, mavorixafor has been granted Breakthrough Therapy
Designation, Fast Track Designation, and Rare Pediatric Designation in the U.S. ,
and Orphan Drug Status in both the U.S. and European Union ; mavorixafor has also
been granted Orphan Drug Designation in the U.S. in Waldenström's
macroglobulinemia, regardless of CXCR4 mutation status. In addition, X4 is
eligible to receive a Priority Review Voucher ("PRV") as a result of
mavorixafor's Rare Pediatric Designation in WHIM syndrome in the U.S.
To date, we have not generated revenue from product sales and do not expect to
generate significant revenue from the sale of our products in the foreseeable
future. If our development efforts for our product candidates are successful and
result in regulatory approval, we may generate revenue in the future from
product sales. We cannot predict if, when, or to what extent
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--------------------------------------------------------------------------------we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
Our Pipeline
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COVID-19 Business Update In light of the ongoing COVID-19 pandemic, we have implemented business continuity measures designed to address and mitigate the impact of the COVID-19 pandemic on our employees, our business, including our clinical trials, supply chains and third-party providers. We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans and response strategy. Following easing of governmental restrictions, in the fourth quarter of 2020, we opened our new corporate headquarters inBoston, Massachusetts under a return-to-work plan with a limited phased approach that is principles-based and local in design, with a focus on employee safety and optimal work environment. While we are currently operating under a "hybrid" model where full-time in-person attendance in the office is optional, all employees who have been fully vaccinated have returned to the office. While we are experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the COVID-19 pandemic and continued uncertainty, our business, financial condition, results of operations and growth prospects could be materially adversely affected. Clinical Development With respect to clinical development, we continue to implement risk-based approaches in accordance with FDA andEuropean Medicines Agency ("EMA") COVID-19 guidance, which includes virtual and remote patient visits and monitoring where possible, while prioritizing patient safety, maintaining trial continuity and preserving data integrity. We have experienced, and expect to continue to experience, a disruption or delay in our ability to initiate trial sites and/or enroll and assess patients in several of our clinical programs as a result of the ongoing COVID-19 pandemic, notwithstanding substantial vaccination efforts. While not currently impacted, there could be an impact on our ability to supply study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations ("CROs") or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the ongoing COVID-19 pandemic. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience further disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects. 28 -------------------------------------------------------------------------------- Supply Chain We continue to work closely with our third-party manufacturers, distributors and other partners to manage our supply chain activities and mitigate potential disruptions to our clinical supply as a result of the ongoing COVID-19 pandemic. We have business continuity plans in place and have manufacturing plans that will meet our global supply demands going forward. To best support our patients, we continue to work with our vendors to provide the option for direct-to-patient drug shipments from clinical sites. If the ongoing COVID-19 pandemic impacts essential distribution systems we could experience disruptions to our supply chain and operations, which could adversely impact our ability to carry out our clinical trials. Regulatory Activities We expect that we could experience delays in the timing of review and/or our interactions with the FDA or theEuropean Commission ("EC") due to, for example, inability to conduct planned physical inspections related to regulatory approval, or the diversion of efforts of the FDA or EC and attention to approval of other therapeutics or other activities related to COVID-19, which could delay approval decisions with respect to the preparation and submission to the FDA of a new drug application ("NDA"), or the preparation and submission to the EC of a Marketing Authorization Application ("MAA"), and otherwise delay or limit our ability to make planned regulatory submissions or obtain new product approvals. Financial Impact The ongoing COVID-19 pandemic continues to evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.
Results of Operations
Comparison of the Three and Six Months Ended
The following table summarizes the results of our operations for the three and
six months ended
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 13,821 $ 13,193 $ 628 $ 27,934 $ 25,297 $ 2,637
Selling, general and
administrative 6,749 5,804 945 14,413 11,636 2,777
Gain of sale of non-financial
asset - - - (509) - (509)
Total operating expenses 20,570 18,997 1,573 41,838 36,933 4,905
Loss from operations (20,570) (18,997) (1,573) (41,838) (36,933) (4,905)
Total other expense, net (638) (635) (3) (1,312) (1,369) 57
Loss before provision for income
taxes (21,208) (19,632) (1,576) (43,150) (38,302) (4,848)
Provision for income taxes 4 6 (2) 27 12 15
Net loss $ (21,212) $ (19,638) $ (1,574) $ (43,177) $ (38,314) $ (4,863)
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in
connection with the discovery and development of our product candidates,
including employee salaries and related expenses, preclinical and clinical
development expenses for our product candidates; internal and third-party costs
of manufacturing our drug products for use in our preclinical studies and
clinical trials; facility, depreciation and other expenses; costs related to
compliance with regulatory requirements; and payments made under third-party
licensing agreements. We expense research and development costs as incurred.
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Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
(in thousands
Direct research and development expenses by product candidate:
Mavorixafor $ 4,527 $ 6,915 $ (2,388) $ 10,676 $ 13,262 $ (2,586)
X4P-002 1,056 289 767 1,944 446 1,498
X4P-003 106 136 (30) 196 750 (554)
Unallocated expense 8,132 5,853 2,279 15,118 10,839 4,279
Total research and development
expenses $ 13,821 $ 13,193 $ 628 $ 27,934 $ 25,297 $ 2,637
Research and development expenses were relatively consistent for the three
months ended June 30, 2022 as compared to the same period in the prior year and
increased $2.6 million in the six months ended June 30, 2022 as compared to the
same period in the prior year. Expenses related to our Phase 3 clinical trials
of mavorixafor were lower in both the three and six month periods as compared to
the prior year as we incurred more start-up costs in the prior year to ramp up
these clinical trials. These decreases in the current year were partial offset
by higher expenses related to our X4P-002 oncology program for the three and six
months ended June 30, 2022 as compared to the same periods in the prior year.
Unallocated research and development expenses increased $2.3 million and $4.3
million in the three and six months ended June 30, 2022 , respectively, as
compared to the same periods in the prior year primarily due to an increase in
head count in our research and development function.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and
related costs, including stock-based compensation, for personnel in sale and
marketing, executive, finance and administrative functions. Selling, general and
administrative expenses also include direct and allocated facility-related costs
as well as professional fees for legal, patent, consulting, investor and public
relations, accounting, and audit services. Selling, general and administrative
expenses were higher as compared to the prior year primarily due to an increase
in compensation, including stock-based compensation costs, as a result of an
increase in head count. We expect selling, general and administrative expenses
will grow in the future as we continue to build out our selling, general and
administrative functions.
Gain on Sale of Non-Financial Asset
During the six months ended June 30, 2022 , a third party, who had previously
acquired rights to certain intellectual property from us, terminated the
arrangement and transferred these rights back us and we transferred these rights
to another third party in return for $0.5 million . We have no continuing
involvement in any ongoing research and development activities associated with
the intellectual property. We concluded that these third parties are
"non-customers" as the underlying intellectual property transferred to and from
these third parties supports potential drug candidates that are not aligned with
our strategic focus and, therefore, are not an output of our ordinary
activities. Accordingly, we classified this transaction as a "gain on sale of
non-financial asset" for the six month period ended June 30, 2022 . There was no
such transaction in the same period of the prior year.
Other Expenses, Net
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
(in thousands)
Interest income $ 4 $ 3 $ 1 $ 7 $ 5 $ 2
Interest expense (918) (905) (13) (1,831) (1,797) (34)
Change in fair value of
derivative liability 335 57 278 511 26 485
Other (expense) income (59) 210 (269) 1 397 (396)
Total other expense, net $ (638) $ (635) $ (3) $ (1,312) $ (1,369) $ 57
Other expenses, net, for the three and six months ended June 30, 2022 were
consistent with same period in the prior year. For each period, decreases in the
fair value of an embedded derivative liability associated with our Hercules Loan
Agreement were offset by foreign exchange losses related to our Austrian
subsidiary due to the decline in the Euro as compared to the U.S. dollar.
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Provision for Income Taxes
We did not record a U.S. federal or state income tax benefit for our losses for
the three and six months ended June 30, 2022 and 2021, respectively, due to our
conclusion that a full valuation allowance is required against our U.S. federal
and state deferred tax assets. For the three and six months ended June 30, 2022
and 2021, we recorded an immaterial amount of income tax expense related to our
Austrian subsidiary.
Liquidity and Capital Resources
To date, we have primarily funded our operations with proceeds from sales of common stock, warrants and pre-funded warrants for the purchase of our preferred stock and common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements, such as our existing loan and security agreement with Hercules Capital, Inc. (the "Hercules Loan Agreement") as more fully described in the notes to our condensed consolidated financial statements included herein. InAugust 2020 , we entered into a Controlled Equity OfferingSM Sales Agreement, (the "ATM Sales Agreement"), withB. Riley Securities, Inc. ,Cantor Fitzgerald & Co. andStifel, Nicolaus & Company, Incorporated , (collectively, the "Sales Agents"), pursuant to which we may offer and sell, at our sole discretion through one or more of the Sales Agents, shares of our common stock having an aggregate offering price of up to$50.0 million . InMarch 2021 , we entered into a securities purchase agreement with several institutional and accredited investors pursuant to which we sold shares of common stock and, in lieu of common stock, pre-funded warrants to purchase shares of common stock for gross proceeds of$53.0 million , before deducting offering expenses payable by us. InNovember 2021 , we raised approximately$10.0 million through the sale of pre-funded warrants to an investor. InJanuary 2022 , we entered into a common stock purchase agreement withLincoln Park Capital Fund LLC ("Lincoln Park") pursuant to which Lincoln Park has committed to purchase, at our request from time to time over a 36-month period, shares of our common stock having an aggregate offering price of up to$50.0 million , subject to certain limitations. InMarch 2022 , we raised$3.0 million for the sale of shares of our common stock and pre-funded warrants for the purchase of shares of common stock in a private placement.
In
As ofJune 30, 2022 , we have borrowed$32.5 million through ourHercules Loan Agreement. Under our Hercules facility, we may borrow up to an additional$17.5 million in term loans throughDecember 2022 , at Hercules's sole discretion. Principal payments under the Hercules Loan Agreement commence inFebruary 2023 and the Hercules Loan Agreement matures inJuly 2024 . Going Concern Since our inception, we have incurred significant operating losses and negative cash flows from our operations. We have not yet commercialized any products and we do not expect to generate revenue from sales of any products for several years, if at all. As ofJune 30, 2022 , our cash and cash equivalents were$47.4 million , and our restricted cash balance was$1.3 million . We expect that our research and development and selling, general and administrative expenses will continue to increase as we focus on completing the necessary development, obtaining regulatory approval and preparing for potential commercialization of our product candidates. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the first half of 2023. As further discussed in Note 7 to our condensed consolidated financial statements, our Hercules Loan Agreement has a covenant that would require us to maintain a minimum level of cash beginning onSeptember 1, 2022 . Based on our current financial projections and assuming we do not achieve certain financial and operational milestones that would reduce this minimum cash requirement, we believe we would be in violation of this covenant in the first half of 2023. If we are in violation of this covenant, Hercules could require the repayment of all outstanding debt under the Hercules Loan Agreement. As a result, we believe that, in aggregate, these conditions raise substantial doubt about our ability to continue as a going concern for the one-year period following the issuance of these condensed consolidated financial statements for the quarterly period endedJune 30, 2022 . Unless and until we reach profitability in the future, we will require additional capital to fund our operations. We intend to raise further capital through a combination of equity offerings, debt financings, other third party funding, marketing and distribution arrangements and collaborations and strategic alliances; however, no assurances can be made as to when and if we will obtain such funding. If we are unable to obtain funding, we could be forced to delay, reduce or 31 --------------------------------------------------------------------------------
eliminate some or all of our research and development programs, product portfolio expansion or pre-commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue or be required to scale down operations.
Cash Flows
The following table summarizes our cash flow activities for each of the periods
presented:
Six Months Ended June 30,
2022 2021
(in thousands)
Net loss $ (43,177)
4,083 4,345
Changes in operating assets and liabilities 391 (3,672)
Net cash used in operating activities (38,703) (37,641)
Net cash used in investing activities (60) (582)
Net cash provided by financing activities 4,609 54,117
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(271) (103)
Net (decrease) increase in cash, cash equivalents and restricted cash
(34,425) 15,791
Cash, cash equivalents and restricted cash, beginning of period
$ 83,108 $ 80,702 Cash, cash equivalents and restricted cash, end of period$ 48,683 $ 96,493 Operating Activities During the six months endedJune 30, 2022 , net cash used in operating activities was$38.7 million , primarily resulting from our net loss of$43.2 million , adjusted for noncash expenses of$4.1 million and changes in our operating assets and liabilities of$0.4 million . Non-cash expenses primarily includes stock-based compensation expense, non-cash lease expense and non-cash interest expense. Net cash used in operating activities for the six months endedJune 30, 2021 was$37.6 million , primarily resulting from our net losses of$38.3 million , adjusted for noncash expenses of$4.3 million and changes in our operating assets and liabilities of$3.7 million . Net cash used in changes in our operating assets and liabilities primarily consisted of an increase in prepaid expense and other current assets due to the timing of payments to our CROs.
Investing Activities During the six months ended
Financing Activities During the six months endedJune 30, 2022 , net cash provided by financing activities was$4.6 million , consisting primarily of$5.8 million of net proceeds from private placement equity offering that closed during the period and the sale of shares of our common stock to Lincoln Park and through our employee stock purchase plan, partially offset by$1.2 million of end-of-term payments made pursuant to our Hercules Loan Agreement and fees related to amendments to the agreement during the period. During the six months endedJune 30, 2021 , net cash provided by financing activities was$54.1 million , consisting of gross proceeds on our private placement sale of shares of our common stock before offering costs and redeemable common stock repayments. Funding Requirements As noted above, the Hercules Loan Agreement contains a minimum cash covenant that is effective onSeptember 1, 2022 . Based on our current financial projections, assuming we do not achieve certain operational and financial milestone contained within the Hercules Loan Agreement that would reduce this minimum cash requirement, we would be in violation of this covenant in the first half of 2023. If we are in violation of this covenant, Hercules could require the repayment of all outstanding debt under the Hercules loan facility. To fund our operations, we will be required to raise additional capital, which may be through a combination of equity offerings, such as through our ATM Sales Agreement or through our common stock purchase agreement withLincoln Capital , debt financings, including refinancing of our Hercules Loan Agreement or entering into new debt arrangements with other third-parties, marketing and distribution arrangements and collaborations and strategic alliances. However, our ability to raise such funding, the timing of such funding and the amount of funding cannot be assured. During 2022 and beyond, we expect our expenses to continue to increase in connection with our ongoing activities, particularly as we advance the current and anticipated clinical trials of our product candidates in development. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we 32 --------------------------------------------------------------------------------
are unable to estimate the exact amount of our funding requirements. Our short-term and long-term funding requirements will depend on and could increase significantly as a result of many factors, including:
•the scope, number, initiation, progress, timing, costs, design, duration, any potential delays, and results of clinical trials and nonclinical studies for our current or future product candidates, particularly our ongoing Phase 3 pivotal clinical trial of mavorixafor for the treatment of patients with WHIM syndrome, our ongoing Phase 1b clinical trial of mavorixafor in chronic neutropenic disorders, and the conclusion of our Phase 1b clinical trial of mavorixafor in Waldenström's;
•the continued global impact of the ongoing COVID-19 pandemic and its effect on our ongoing clinical trials, our supply chain and the financial markets in general;
•the outcome, timing and cost of regulatory reviews, approvals or other actions to meet regulatory requirements established by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies for our product candidates than those that we currently expect;
•our ability to obtain marketing approval for our product candidates;
•the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights covering our product candidates, including any such patent claims and intellectual property rights that we have licensed fromGenzyme pursuant to the terms of our license agreement withGenzyme ;
•our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;
•the cost and timing of completion of commercial-scale outsourced manufacturing activities with respect to our product candidates;
•our ability to establish and maintain licensing, collaboration or similar arrangements on favorable terms and whether and to what extent we retain development or commercialization responsibilities under any new licensing, collaboration or similar arrangement;
•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;
•the success of any other business, product or technology that we acquire or in which we invest;
•the costs of acquiring, licensing or investing in businesses, product candidates and technologies;
•our need and ability to hire additional management and scientific and medical personnel;
•the costs to continue to operate as a public company, including the need to implement additional financial and reporting systems and other internal systems and infrastructure for our business;
•market acceptance of our product candidates, to the extent any are approved for commercial sale; and
•the effect of competing technological and market developments.
If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development efforts or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Hercules Loan Agreement Please see Note 7 to the notes to our condensed consolidated financial statements for a full description of our Hercules Loan Agreement.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles inthe United States . The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the 33 -------------------------------------------------------------------------------- results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. During the three and six months endedJune 30, 2022 , there were no material changes to our critical accounting policies as reported for the year endedDecember 31, 2021 as part of our Annual Report. In addition, see Note 2 of these condensed consolidated financial statements under the heading "Recently Adopted Accounting Pronouncements" for new accounting pronouncements or changes to the accounting pronouncements during the three and six months endedJune 30, 2022 .
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company ("EGC"), as defined in the Jumpstart Our
Business Startups Act of 2012 (the "JOBS Act"). The JOBS Act permits an EGC to
take advantage of an extended transition period to comply with new or revised
accounting standards applicable to public companies until those standards would
otherwise apply to private companies. We have irrevocably elected to "opt out"
of this provision and, as a result, we will comply with new or revised
accounting standards when they are required to be adopted by public companies
that are not EGCs.
In addition, we are also a smaller reporting company as defined in 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 non-affiliates 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.
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