References to "we," "us," "our" or the "Company" are to Kismet Acquisition One
Corp, except where the context requires otherwise. The following discussion
should be read in conjunction with our unaudited condensed financial statements
and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Our forward-looking statements include, but are
not limited to, statements regarding our or our management team's expectations,
hopes, beliefs, intentions or strategies regarding the future, including the
proposed business combination. In addition, any statements that refer to
projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. The words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking. These forward-looking statements are subject
to known and unknown risks, uncertainties and assumptions about us that may
cause our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. For
information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements,
please refer to the Risk Factors section of the Company's Annual Report on Form
10-K/A (defined below) filed with the U.S. Securities and Exchange Commission
(the "SEC"). The Company's securities filings can be accessed on the EDGAR
section of the SEC's website at www.sec.gov. Except as expressly required by
applicable securities law, the Company disclaims any intention or obligation to
update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
Kismet Acquisition One Corp was newly incorporated in the British Virgin Islands
on June 3, 2020 as a business company with limited liability and formed for the
purpose of acquiring, engaging in a share exchange, share reconstruction and
amalgamation, contractual control arrangement with, purchasing all or
substantially all of the assets of, or engaging in any other similar initial
business combination with one or more businesses or entities ("Business
Combination"). Although we are not limited to a particular industry or
geographic region for purposes of consummating a Business Combination, we intend
to focus on companies in the telecommunications infrastructure, internet and
technology and consumer goods and services sectors operating in Russia. We are
an emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
At March 31, 2021, we had not yet commenced operations. All activity for the
period from June 3, 2020 (inception) through March 31, 2021 relates to our
formation, our initial public offering (the "Initial Public Offering"), which is
described below, and since the Initial Public Offering, the search for a
potential target. We will not generate any operating revenues until after the
completion of our initial Business Combination, at the earliest. We will
generate non-operating income in the form of interest income on cash and cash
equivalents from the proceeds derived from the Initial Public Offering.
Our sponsor is Kismet Sponsor Limited, a business company incorporated in the
British Virgin Islands with limited liability (the "Sponsor"). The registration
statement for our Initial Public Offering was declared effective on August 5,
2020. On August 10, 2020, we consummated our Initial Public Offering of
25,000,000 Units, at $10.00 per Unit, generating gross proceeds of $250.0
million, and incurring offering costs of approximately $14.3 million, inclusive
of approximately $8.8 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated a
private placement (the "Private Placement") of 6,750,000 warrants (the "Private
Placement Warrants"), at a price of $1.00 per Private Placement Warrant, to our
Sponsor, generating gross proceeds of approximately $6.8 million, and incurring
offering costs of approximately $11,000.
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Upon the closing of the Initial Public Offering and the Private Placement in
August 2020, $250.0 million ($10.00 per Unit) of the net proceeds of the Initial
Public Offering and certain of the proceeds of the Private Placement were placed
in a trust account ("Trust Account") initially invested in cash and subsequently
in U.S. "government securities" within the meaning of Section 2(a)(16) of the
Investment Company Act having a maturity of 185 days or less or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government treasury
obligations, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of its Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or August 10, 2022 (as may be extended
by approval of our shareholders, the "Combination Period"), we will (i) cease
all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account including interest earned on the
funds held in the Trust Account and not previously released to us to pay our
taxes, if any (less up to $100,000 of interest to pay dissolution expenses),
divided by the number of then outstanding Public Shares, which redemption will
completely extinguish Public Shareholders' rights as shareholders (including the
right to receive further liquidation distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining shareholders and our board
of directors, commence a voluntary liquidation and thereby a formal dissolution
of us, subject in each case to our obligations under British Virgin Islands law
to provide for claims of creditors and the requirements of other applicable law.
Proposed Business Combination
On January 31, 2021, we entered into a Business Combination Agreement (the
"Business Combination Agreement") with Nexters Inc., a British Virgin Islands
business company ("Pubco"), our sponsor, solely in its capacity as our
Representative, Nexters Global Ltd. ("Nexters Global"), a private limited
liability company domiciled in Cyprus, Fantina Holdings Limited, a private
limited liability company domiciled in Cyprus, solely in its capacity as Nexters
Global Shareholders Representative, and the shareholders of Nexters Global.
Pursuant to the Business Combination Agreement, among other things, we agreed to
combine with Nexters Global in a business combination whereby we will merge with
and into Pubco and Pubco will purchase all shares of Nexters Global, making
Nexters Global a direct wholly-owned subsidiary of Pubco. Pubco is a newly
formed entity that was formed for the sole purpose of entering into and
consummating the transactions set forth in the Business Combination Agreement.
Nexters Global is one of the largest and most seasoned European gaming unicorns
with deep expertise in mobile game development and marketing. It is a developer
and publisher of Hero Wars mid-core RPG franchise, currently available on mobile
(iOS, Android) and PC (via web and Facebook) and is looking to launch three new
titles in 2021.
The proposed business combination is subject to certain conditions, including:
(i) our shareholders having approved, among other things, the transactions
contemplated by the Business Combination Agreement; (ii) the absence of any law
or governmental order that would prohibit the proposed transactions; (iii) the
termination or expiration of all required waiting periods under the
Hart-Scott-Rodino Act; (iv) our company having at least $5,000,001 of net
tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the
Exchange Act) remaining after the closing; (v) our company and Pubco having at
least $100 million of cash either in or outside of the Trust Account, after
taking into accounts payments by us for the redemption and any proceeds received
by Pubco under the Amended and Restated Forward Purchase Agreement (the "A&R
Forward Purchase Agreement"); (vi) the Registration Statement having been
declared effective by the SEC and remaining effective; and (vii) the Pubco
ordinary shares and Pubco warrants having been approved for listing on Nasdaq,
subject only to official notice thereof. The proposed business combination is
more fully described in Note 1 to the financial statements included in Item 8 of
this Annual Report.
20
Results of Operations
Our entire activity since inception up to March 31, 2021 was in preparation for
our formation and the preparation of the Initial Public Offering, and since our
Initial Public Offering, our activity has been limited to the search for a
prospective initial Business Combination. We will not be generating any
operating revenues until the closing and completion of our initial Business
Combination, at the earliest.
For the three months ended March 31, 2021, we had a net loss of approximately
$187,000, which consisted of approximately $17,000 gain from investments held in
trust account, a decrease in fair value of derivative warrant liabilities of
approximately $2.0 million offset by approximately $2.2 million in general and
administrative expenses.
Liquidity and Capital Resources
As of March 31, 2021, we had approximately $282,000 in our operating bank
account, and working capital deficit of approximately $1.8 million.
Through March 31, 2021, our liquidity needs have been satisfied through a
payment of $25,000 from our Sponsor to cover certain offering costs in exchange
for the issuance of the Founder Shares, a loan from our Sponsor pursuant to a
promissory note (the "Note") of $191,000, and the net proceeds from the
consummation of the Private Placement not held in the Trust Account. We fully
repaid the Note balance of approximately $191,000 on August 12, 2020. In
addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, provide us with loans (the
"Working Capital Loans"). As of March 31, 2021 and December 31, 2020, there were
no amounts outstanding under the Working Capital Loans.
Based on the foregoing, our management believes that we will have sufficient
working capital and borrowing capacity from our Sponsor or an affiliate of our
Sponsor, or certain of our officers and directors to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, we will be using these funds for paying existing
accounts payable, identifying and evaluating prospective initial Business
Combination candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating the
Business Combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Related Party Transactions
Founder Shares
On June 8, 2020, we issued 6,250,000 ordinary shares to our Sponsor (the
"Founder Shares"). Our Sponsor paid for certain offering costs of $25,000 on
behalf of the Company in exchange for issuance of the Founder Shares. In July
2020, we performed a 1.23 share split resulting in our Sponsor holding an
aggregate of 7,687,500 Founder Shares. All shares and associated amounts have
been retroactively restated to reflect the share capitalization. The Sponsor had
agreed to forfeit up to an aggregate of 937,500 Founder Shares, on a pro rata
basis, to the extent that the option to purchase additional units is not
exercised in full by the underwriters so that the Founder Shares would represent
20% of the Company's issued and outstanding shares after the Initial Public
Offering plus the number of ordinary shares to be sold pursuant to the Forward
Purchase Agreement (as defined below). On September 17, 2020, the underwriters
notified us that the over-allotment option was not exercised; as a result, these
Founder Shares were forfeited, effective as of September 19, 2020.
Our Sponsor agreed, subject to limited exceptions, not to transfer, assign or
sell any of its Founder Shares until the earlier to occur of: (x) one year after
the date of the completion of the initial Business Combination or earlier if,
subsequent to the initial Business Combination, the last reported sale price of
the ordinary shares equals or exceeds $12.00 per share (as adjusted for share
splits, share dividends, reorganizations and recapitalizations) for any 20
trading days within any 30-trading day period commencing at least 150 days after
the initial Business Combination, or (y) we consummate a subsequent liquidation,
merger, stock exchange or other similar transaction which results in all of our
shareholders having the right to exchange their ordinary shares for cash,
securities or other property.
21
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated a
Private Placement of 6,750,000 Private Placement Warrants, at a price of $1.00
per Private Placement Warrant, to our Sponsor, generating gross proceeds of
approximately $6.8 million, and incurring offering costs of approximately
$11,000.
Each whole Private Placement Warrant is exercisable for one whole ordinary share
at a price of $11.50 per share. A portion of the proceeds from the Private
Placement Warrants was added to the proceeds from the Initial Public Offering
held in the Trust Account. If we do not complete a Business Combination within
the Combination Period, the Private Placement Warrants will expire worthless.
The Private Placement Warrants will be non-redeemable and exercisable on a
cashless basis so long as they are held by the Sponsor or its permitted
transferees.
Related Party Loans
On June 10, 2020, our Sponsor agreed to loan us up to $200,000 to be used for
the payment of costs related to the Initial Public Offering pursuant to the
Note. The Note was non-interest bearing, unsecured and due upon the date the
Company consummated the Initial Public Offering. The Company repaid the balance
of the Note of approximately $191,000 in full on August 12, 2020.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds pursuant to
the Working Capital Loans. If we complete a Business Combination, we would repay
the Working Capital Loans out of the proceeds of the Trust Account released to
us. Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the Trust Account. In the event that a Business Combination does not
close, we may use a portion of proceeds held outside the Trust Account to repay
the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. Except for the foregoing, the terms of
such Working Capital Loans, if any, have not been determined and no written
agreements exist with respect to such loans. The Working Capital Loans would
either be repaid upon consummation of a Business Combination, without interest,
or, at the lender's discretion, up to $1.5 million of such Working Capital Loans
may be convertible into warrants of the post Business Combination entity at a
price of $1.00 per warrant. The warrants would be identical to the Private
Placement Warrants. As of March 31, 2021 and December 31, 2020, there were no
amounts outstanding under the Working Capital Loans.
Administrative Services Agreement
Commencing on the date of the final prospectus for the Initial Public Offering,
we agreed to pay an affiliate of our Sponsor a total of up to $10,000 per month
for office space, administrative and support services. For the three months
ended March 31, 2021, we did not incur any expense for these services. Upon
completion of the Initial Business Combination or our liquidation, we will cease
paying these monthly fees.
Forward Purchase Agreement
On August 5, 2020, we entered into a forward purchase agreement (the "Forward
Purchase Agreement") with our Sponsor, which provides for the purchase of
$20,000,000 of units, with each unit consisting of one ordinary share (the
"Forward Purchase Shares") and one half of one warrant (the "Forward Purchase
Warrants"), for a purchase price of $10.00 per unit, in a private placement to
occur concurrently with the closing of the initial Business Combination. The
purchase under the Forward Purchase Agreement is required to be made regardless
of whether any ordinary shares are redeemed by the Public Shareholders. The
Forward Purchase Shares and Forward Purchase Warrants will be issued only in
connection with the closing of the initial Business Combination. The proceeds
from the sale of Forward Purchase Shares and Forward Purchase Warrants may be
used as part of the consideration to the sellers in the initial Business
Combination, expenses in connection with the initial Business Combination or for
working capital in the post-transaction company.
Amended and Restated Forward Purchase Agreement
On January 31, 2021, we, Pubco and our sponsor entered into the A&R Forward
Purchase Agreement. The A&R Forward Purchase Agreement amends the forward
purchase agreement by, among other things, increasing the sponsor's purchase
commitment thereunder from $20 million to $50 million and replacing the
sponsor's commitment to acquire our public units with a commitment to acquire
Pubco ordinary shares and Pubco public warrants in a private placement to occur
after, and subject to, the Merger closing and prior to the Share Acquisition
closing.
22
Commitments and Contingencies
Registration Rights Agreement
The holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any ordinary shares
issuable upon the exercise of the Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans) are entitled to
registration rights pursuant to a registration rights agreement, requiring us to
register such securities for resale. The holders of the majority of these
securities are entitled to make up to three demands, excluding short form
demands, that we register such securities. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination and rights to
require us to register for resale such securities pursuant to Rule 415 under the
Securities Act.
In connection with the proposed transactions, Pubco, our sponsor and three of
Holders will enter into the New Registration Rights Agreement, pursuant to
which, among other things, subject to certain requirements and customary
conditions, including with regard to the number of demand rights that may be
exercised, the Holders may demand at any time or from time to time, that Pubco
file a registration statement with the SEC to register the securities of Pubco
held by such Holders. The New Registration Rights Agreement will also provide
the Holders with "piggy-back" registration rights, subject to certain
requirements and customary conditions.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the prospectus for
the Initial Public Offering to purchase up to 3,750,000 additional Units at the
Initial Public Offering price less the underwriting discounts and commissions.
On September 17, 2020, the underwriters notified us that the over-allotment
option was not exercised; as a result, 937,500 Founder Shares were forfeited,
effective as of September 19, 2020.
The underwriters were entitled to an underwriting commission of $0.20 per unit,
or $5.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, the underwriters were entitled to a deferred underwriting
commission of $0.35 per unit, or approximately $8.8 million in the aggregate.
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that we complete a Business
Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. We have identified the following as our critical
accounting policies:
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. The investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheets at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in net gain on investments held in
Trust Account in the accompanying unaudited condensed statement of operations.
The estimated fair values of investments held in the Trust Account are
determined using available market information.
23
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that
are either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within our control) are classified as
temporary equity. At all other times, ordinary shares are classified as
stockholders' equity. Our ordinary shares feature certain redemption rights that
are considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, at March 31, 2021 and December 31, 2020,
22,906,930 and 22,925,656 ordinary shares subject to possible redemption are
presented as temporary equity, respectively, outside of the stockholders' equity
section of the accompanying unaudited condensed balance sheets.
Net Income (Loss) per Ordinary Share
We comply with accounting and disclosure requirements of ASC Topic 260,
"Earnings Per Share." Net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of ordinary shares outstanding
during the period, excluding ordinary shares subject to forfeiture by the
Sponsor. Weighted average shares were reduced for the effect of an aggregate of
937,500 ordinary shares that were subject to forfeiture if the option to
purchase additional Units is not exercised by the underwriters. On September 17,
2020, the underwriters notified us that the over-allotment was not exercised,
and as a result, 937,500 ordinary shares were forfeited and cancelled, effective
as of September 19, 2020. We have not considered the effect of the warrants sold
in the Initial Public Offering and Private Placement to purchase an aggregate
of 19,250,000 shares of ordinary shares in the calculation of diluted earnings
per share, since their inclusion would be anti-dilutive under the treasury stock
method. As a result, diluted loss per share is the same as basic loss per share
for the period presented.
Our statement of operations includes a presentation of income (loss) per share
for ordinary shares subject to redemption in a manner similar to the two-class
method of income (loss) per share. Net income per ordinary share, basic and
diluted for redeemable ordinary shares for three months March 31, 2021 is
calculated by dividing the interest income earned on investments held in the
trust account of approximately $17,000 by the weighted average number of
redeemable ordinary shares outstanding for the period. Net loss per ordinary
share, basic and diluted for non-redeemable ordinary shares for three months
ended March 31, 2021 is calculated by dividing the net loss of approximately
$187,000, less income attributable to redeemable ordinary shares, by the
weighted average number of non-redeemable ordinary shares outstanding for the
period.
Share-based Compensation
We comply with the accounting and disclosure requirement of ASC Topic 718,
"Compensation - Stock Compensation." We record share-based compensation to
employees and non-employees over the requisite service period based on the
estimated grant-date fair value of the awards. Share-based awards with
graded-vesting schedules are recognized on a straight-line basis over the
requisite service period for each separately vesting portion of the award. We
recognize the expense for share-based compensation awards subject to
performance-based milestone vesting over the remaining service period when
management determines that achievement of the milestone is probable. Management
evaluates when the achievement of a performance-based milestone is probable
based on the expected satisfaction of the performance conditions at each
reporting date. Share-based compensation will be recognized in general and
administrative expense in the condensed statements of operations. In August
2020, the Company has issued option awards that contain both a performance
condition and service condition. The option awards vest upon the consummation of
the initial Business Combination and will expire in five years after the date on
which they first become exercisable. We have determined that the consummation of
an initial Business Combination is a performance condition subject to
significant uncertainty. As such, the achievement of the performance is not
deemed to be probable of achievement until the consummation of the event, and
therefore no compensation has been recognized for the three months ended March
31, 2021.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants and forward purchase agreements, to determine if
such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to ASC 480 and ASC 815-40. The classification of
derivative instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
24
Simultaneously with the closing of the initial public offering, we consummated a
Private Placement of 6,750,000 Private Placement Warrants, at a price of $1.00
per Private Placement Warrant, to our sponsor, which are recognized as
derivative warrant liabilities in accordance with ASC 815-40. Accordingly, we
recognize the private placement warrants as liabilities at fair value and adjust
the instruments to fair value at each reporting period. The liabilities are
subject to re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statement of operations. The fair
value of our Private Placement Warrants is measured using Black-Scholes Option
Pricing model at each balance sheet date.
Recent Adopted Accounting Standards
In August 2020, the FASB issued ASU No. 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 ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current generally accepted accounting principles. The ASU also
removes certain settlement conditions that are required for equity-linked
contracts to qualify for the derivative scope exception, and it simplifies the
diluted earnings per share calculation in certain areas. We adopted ASU 2020-06
on January 1, 2021. Adoption of the ASU did not impact our financial position,
results of operations or cash flows.
Recent Issued Accounting Standards
Our management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material impact on
our unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K. No unaudited quarterly
operating data is included in this quarterly report 10-Q, as we have conducted
no operations to date.
JOBS Act
The Jumpstart Our Business Startups Act of 2012, or JOBS Act, contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our initial public offering or until we are no
longer an "emerging growth company," whichever is earlier.
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