References to "we", "us", "our" or the "Company" are to CENAQ Energy 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 Quarterly Report on Form 10-Q.
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, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. 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. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a newly organized blank check company incorporated as a Delaware
corporation on June 24, 2020, for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination with one or more businesses.
Our sponsor is CENAQ Sponsor, LLC, a Delaware limited liability company. The
registration statement for the initial public offering was declared effective on
August 12, 2021. On August 17, 2021, we consummated our initial public offering
("Public Offering" or "IPO") of 15,000,000 units, at $10.00 per unit, generating
gross proceeds of $150,000,000. The underwriter was granted a 45-day option from
the date of the final prospectus relating to the IPO to purchase up to 2,250,000
additional units to cover over-allotments, if any, at $10.00 per unit. On August
19, 2021, the underwriters exercised the over-allotment in full, generating
additional gross proceeds of $22,500,000. Transaction costs of our IPO and the
over-allotment amounted to $17,771,253 consisting of $3,450,000 of underwriting
discount, $6,037,500 of deferred underwriting discount, an excess of fair value
of the founder shares acquired by the Anchor Investors of $6,265,215, fair value
of the 189,750 representative shares of $1,442,100 and $576,438 of other cash
offering costs were charged to additional paid in capital.
Simultaneously with the closing of the IPO, we consummated the private placement
("Private Placement") of 6,000,000 warrants, at a price of $1.00 per warrant,
generating gross proceeds to us of $6 million. On August 19, 2021, the
underwriters exercised the over-allotment in full and consummated the private
placement of additional 675,000 warrants, at a price of $1.00 per warrant,
generating gross proceeds to us of $675,000.
Upon the closing of the IPO and the Private Placement, $174,225,000 ($10.10 per
share) of the net proceeds of the sale of the Units in the IPO and the Private
Placement were placed in the Trust Account.
If we are unable to complete an initial Business Combination within the
Combination Period, until February 16, 2023, 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 its franchise and income taxes
as well as expenses relating to the administration of the Trust Account (less up
to $100,000 of interest released to us to pay dissolution expenses), divided by
the number of then outstanding public shares, which redemption will completely
extinguish public stockholders' rights as stockholders (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 our remaining stockholders and our board of directors,
liquidate and dissolve, subject, in each case, to our obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable
law.
Proposed Business Combination
Business Combination Agreement
On August 12, 2022, the Company, Verde Clean Fuels OpCo, LLC, a Delaware limited
liability company and wholly-owned subsidiary of the Company ("OpCo"), and, for
a limited purpose, the Sponsor, entered into a business combination agreement
(as the same may be amended from time to time, the "Business Combination
Agreement") with Bluescape Clean Fuels Holdings, LLC, a Delaware limited
liability company ("Holdings"), and Bluescape Clean Fuels Intermediate Holdings,
LLC, a Delaware limited liability company ("Intermediate"). The transactions
contemplated by the Business Combination Agreement are collectively referred to
herein as the "business combination." In connection with the closing of the
business combination (the "Closing"), the Company will change its name to Verde
Clean Fuels, Inc. ("Verde Inc.").
Pursuant to the Business Combination Agreement, during the period between the
consummation of the business combination and the earlier of the five year
anniversary from the consummation of the business combination or the date of the
consummation of a sale of the post combination company (the "Earn Out Period"),
OpCo may transfer up to 3,500,000 Class C common units of OpCo and a
corresponding number of shares of Class C common stock, par value $0.0001 per
share ("Class C common stock"), of the post combination company to Holdings
within five business days after the occurrence of certain triggering events.
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Sponsor Letter
In connection with the execution of the Business Combination Agreement, on
August 12, 2022, the Sponsor entered into a letter agreement with Intermediate,
Holdings and the Company, pursuant to which, among other things, the Sponsor
agreed to (i) forfeit 2,475,000 of its Private Placement Warrants, (ii) comply
with the lock-provisions in the Letter Agreement, dated August 12, 2021, by and
among the Company, the Sponsor and the Company's directors and officers, (iii)
vote all of its shares of Class A common stock and Founder Shares in favor of
the adoption and approval of the Business Combination Agreement and the business
combination, (iv) not redeem any of its shares of Class A common stock in
connection with such stockholder approval, (v) waive its anti-dilution rights
with respect to its Founder Shares in connection with the consummation of the
business combination and (vi) subject a portion of the shares of Class A common
stock as a result of the conversion of its Founder Shares to forfeiture if
certain triggering events do not occur during the Earn Out Period.
Underwriters Letter
In connection with the execution of the Business Combination Agreement, on
August 12, 2022, the Company, Intermediate and Holdings entered into a letter
agreement with the underwriters, pursuant to which, among other things, (i)
Imperial Capital, LLC agreed to forfeit all of its 1,423,125 Private Placement
Warrants and all of its 156,543 Representative Shares, (ii) I-Bankers
Securities, Inc. agreed to forfeit all of its 301,875 Private Placement Warrants
and all of its 33,207 Representative Shares and (iii) the underwriters agreed to
reduce their deferred underwriting fees related to the IPO from $6,037,500 to
$4,312,500.
Subscription Agreements
In connection with the execution of the Business Combination Agreement, on
August 12, 2022, the Company entered into separate subscription agreements with
certain investors (the "PIPE Investors"), pursuant to which the PIPE Investors
agreed to purchase, and the Company agreed to sell to the PIPE Investors, an
aggregate of 8,000,000 shares of Class A common stock for a purchase price of
$10.00 per share and an aggregate purchase price of $80,000,000 in a private
placement (the "PIPE Financing"). Of the $80,000,000 of commitments, Holdings
has agreed to purchase 800,000 shares to be sold in the PIPE Financing for an
aggregate commitment of $8,000,000. Arb Clean Fuels Management LLC ("Arb Clean
Fuels"), an entity affiliated with a member of the Sponsor, has agreed to
purchase 7,000,000 shares to be sold in the PIPE Financing for an aggregate
commitment of $70,000,000; provided, that, to the extent funds in the Trust
Account immediately prior to the consummation of the business combination, after
giving effect to the Company stockholders' redemption rights, exceed
$17,420,000, each $10.00 increment of such excess funds shall reduce Arb Clean
Fuels' commitment by $10.00 up to a maximum reduction of $20,000,000.
Additionally, an entity unaffiliated with the Sponsor has agreed to purchase
200,000 shares for an aggregate commitment of $2,000,000.
Lock-Up Agreement
In connection with the execution of the Business Combination Agreement, on
August 12, 2022, Holdings entered into a Lock-Up Agreement, pursuant to which
Holdings agreed to subject its shares of common stock received in connection
with the business combination to the lock-up provisions therein.
Agreements to be Executed at Closing
The Business Combination Agreement also contemplates the execution by the
parties of various agreements at the Closing, including, among others, the
below.
Tax Receivable Agreement
In connection with the business combination, the Company will enter into the tax
receivable agreement (the "Tax Receivable Agreement") with Holdings (together
with its permitted transferees, the "TRA Holders," and each a "TRA Holder") and
the Agent (as defined therein), which will generally provide for the payment by
Verde Inc. to each TRA Holder of 85% of the net cash savings, if any, in U.S.
federal, state and local income tax and franchise tax (computed using
simplifying assumptions to address the impact of state and local taxes) that
Verde Inc. realizes (or is deemed to realize in certain circumstances) in
periods after the business combination as a result of (i) certain increases in
tax basis that occur as a result of Verde Inc.'s acquisition (or deemed
acquisition for U.S. federal income tax purposes) of all or a portion of such
TRA Holder's Class C OpCo Units pursuant to an OpCo Holder Exchange set forth in
the A&R LLC Agreement, and (ii) imputed interest deemed to be paid by Verde Inc.
as a result of, and additional tax basis arising from, any payments Verde Inc.
makes under the Tax Receivable Agreement. Verde Inc. will retain the benefit of
the remaining 15% of these net cash savings.
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Payments generally will be made under the Tax Receivable Agreement as Verde Inc.
realizes actual cash tax savings in periods after the consummation of the
business combination from the tax benefits covered by the Tax Receivable
Agreement. However, if the Tax Receivable Agreement terminates early (at Verde
Inc.'s election or due to other circumstances, including Verde Inc.'s breach of
a material obligation thereunder or upon certain changes of control described in
the Tax Receivable Agreement), Verde Inc. would be required to make an immediate
payment to each TRA Holder equal to the present value of the anticipated future
payments to be made by it under the Tax Receivable Agreement (based upon certain
valuation assumptions and deemed events set forth in the Tax Receivable
Agreement), such payments not to exceed $50 million, in the aggregate, in the
case of certain changes of control.
Verde Inc. will depend on OpCo to make distributions to Verde Inc. in an amount
sufficient to cover Verde Inc.'s obligations under the Tax Receivable Agreement.
A&R LLC Agreement
Following the Closing, Verde Inc. will operate its business through OpCo. On the
Closing Date, Verde Inc. and Holdings will enter into an amended and restated
limited liability company agreement of OpCo (the "A&R LLC Agreement"). The A&R
LLC Agreement will provide, among other things, that each Class C OpCo Unit will
be exchangeable, subject to certain conditions, for one share of Class A common
stock, and a corresponding share of Class C common stock will be cancelled in
connection with such exchange, pursuant to and in accordance with the terms of
the A&R LLC Agreement.
A&R Registration Rights Agreement
In connection with the Closing, that certain Registration Rights Agreement dated
August 17, 2021 (the "IPO Registration Rights Agreement") will be amended and
restated and Verde Inc., certain stockholders of CENAQ prior to the Closing (the
"Initial Holders") and certain stockholders receiving Class A common stock and
Class C common stock pursuant to the business combination (the "New Holders" and
together with the Initial Holders, the "Reg Rights Holders") will enter into an
amended and restated IPO Registration Rights Agreement (the "A&R Registration
Rights Agreement").
Pursuant to the A&R Registration Rights Agreement, Verde Inc. will agree that,
within thirty (30) days after the Closing, it will use its commercially
reasonable efforts to file with the SEC (at Verde Inc.'s sole cost and expense)
a registration statement registering the resale of certain securities held by or
issuable to the Reg Rights Holders (the "Resale Registration Statement"), and
Verde Inc. will use its commercially reasonable efforts to have the Resale
Registration Statement declared effective as soon as reasonably practicable
after the filing thereof. In certain circumstances, the Reg Rights Holders can
demand Verde Inc.'s assistance with underwritten offerings and block trades, and
the Reg Rights Holders will be entitled to certain piggyback registration
rights.
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Results of Operations
As of September 30, 2022, we have not commenced any operations. All activity for
the period from June 24, 2020 (inception) through September 30, 2022 relates to
our formation and Public Offering, and, since the completion of the IPO,
searching for a target to consummate a Business Combination. We will not
generate any operating revenues until after the completion of a Business
Combination, at the earliest. We will generate non-operating income in the form
of interest income from the proceeds derived from the Public Offering and placed
in the Trust Account (defined below).
For the three months ended September 30, 2022, we had a net loss of $2,387,015.
We incurred $3,013,729 of general and administrative expenses, which includes
$2,501,501 in costs related to identifying a target business. We also incurred
$3,150 of interest expense on promissory note from related party and $126,744 of
provision for income taxes. We earned interest income of $757,106 and $498 of
unrealized loss on marketable securities held in Trust Account.
For the nine months ended September 30, 2022, we had a net loss of $3,566,151.
We incurred $4,408,361 of general and administrative expenses, which includes
$3,410,564 in costs related to identifying a target business. We also incurred
$4,212 of interest expense on promissory note from related party and $131,832 of
provision for income taxes. We earned interest income of $978,254 on marketable
securities held in Trust Account.
For the three months ended September 30, 2021, we had a net loss of $67,295,
which consists of formation and operating costs of $68,294 and interest income
of $999.
For the nine months ended September 30, 2021, we had a net loss of $72,647,
which consists of formation and operating costs of $73,646 and interest income
of $999.
Liquidity and Going Concern
As of September 30, 2022, we had $8,242 in our operating bank account, and
working capital deficit of $3,600,490.
Until the consummation of a Business Combination, the Company will be using the
funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
acquire, and structuring, negotiating and consummating the Business Combination.
In order to finance transaction costs in connection with a Business Combination,
the Company's Sponsor or an affiliate of the Sponsor or certain of the Company's
officers and directors committed to provide the Company with Working Capital
Loans up to $1,500,000, as defined later (see Note 5). As of the date of the
filing of these financial statements, the period of time for the Company to
complete a business combination under its amended and restated certificate of
incorporation is extended for a period of 3 months from November 16, 2022 to
February 16, 2023. In connection with the Extension, the Sponsor has deposited
$1,725,000, representing 1% of the gross proceeds of the IPO, into the Trust
Account for its public stockholders. This commitment extends through February
16, 2023. To date, there were no amounts outstanding under any Working Capital
Loans.
If the Company's estimate of the costs of identifying a target business,
undertaking in-depth due diligence and negotiating a Business Combination are
less than the actual amount necessary to do so, the Company may have
insufficient funds available to operate its business prior to the Business
Combination. Moreover, the Company may need to obtain additional financing
either to complete its Business Combination or because it becomes obligated to
redeem a significant number of its public shares upon consummation of the
Business Combination, in which case the Company may issue additional securities
or incur debt in connection with such Business Combination. Subject to
compliance with applicable securities laws, the Company would only complete such
financing simultaneously with the completion of the Business Combination. If the
Company is unable to complete its Business Combination because it does not have
sufficient funds available to it, the Company will be forced to cease operations
and liquidate the Trust Account. In addition, following the Business
Combination, if cash on hand is insufficient, the Company may need to obtain
additional financing in order to meet its obligations.
We cannot assure you that our plans to raise capital or to consummate an initial
business combination will be successful. These factors, among others, raise
substantial doubt about our ability to continue as a going concern, which is
considered to be one year from the issuance of the financial statements. The
financial statements contained elsewhere in this Quarterly Report on Form 10-Q
do not include any adjustments that might result from our inability to continue
as a going concern.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that if the Company is unable to complete a Business
Combination by February 16, 2023, then the Company will cease all operations
except for the purpose of liquidating. The liquidity condition and date for
mandatory liquidation and subsequent dissolution raise substantial doubt about
the Company's ability to continue as a going concern. No adjustments have been
made to the carrying amounts of assets or liabilities should the Company be
required to liquidate after February 16, 2023.
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Underwriters agreement
We granted the underwriters a 45-day option from the date of our Public Offering
to purchase up to an additional 2,250,000 units to cover over-allotments, if
any. On August 19, 2021, the over-allotments were exercised in full.
Simultaneously with the closing of the Public Offering and the over-allotment,
the underwriters were paid an underwriting discount of 2% of the gross proceeds
of the Public Offering and the over-allotment, or $3,450,000. Additionally, the
underwriters will be entitled to a deferred underwriting discount of 3.5% of the
gross proceeds of the Public Offering and the over-allotment upon the completion
of our initial Business Combination.
Contractual Obligations
As of September 30, 2022, we did not have any long-term debt, capital or
operating lease obligations.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements and related disclosures in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Making estimates requires management to exercise
significant judgment. It is possible that the estimates management considered
could possibly change due to one or more future events. The most significant
estimates that affected the financial statements as of September 30, 2022 are
the calculations of the fair values of the over-allotment option, fair values of
the representative shares and the fair values of the anchor shares. These
estimates are uncertain due to the assumptions used in the stock valuations.
These estimates and assumptions have not changed significantly during the year.
Actual results could materially differ from those estimates. We have identified
the following as our critical accounting policies:
Offering Costs associated with the Initial Public Offering
Offering costs consist of underwriting, legal, accounting and other expenses
incurred through the balance sheet date that are directly related to the IPO. We
comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A "Expenses of Offering". Offering costs are allocated
to the separable financial instruments, if any, issued in the IPO based on a
relative fair value basis compared to total proceeds received.
Class A Common Stock Subject to Possible Redemption
We account for the Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) are classified as
a liability instrument and measured at fair value. Conditionally redeemable
common stock (including common stock 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 the Company's control) are
classified as temporary equity. At all other times, common stock is classified
as stockholders' equity.
We recognize changes in redemption value immediately as they occur. Immediately
upon the closing of the IPO, we recognized the subsequent re-measurement under
ASC 480-10-S99 from initial carrying amount to redemption value. The change in
the carrying value of redeemable common stock resulted in charges against
additional paid-in capital and accumulated deficit.
Net Loss Per Common stock
We have two classes of common stock, which are referred to as Class A common
stock and Class B common stock. Income and losses are allocated on pro rata
basis between redeemable and non-redeemable common stock. The 19,612,500
potential common shares for outstanding warrants to purchase our stock were
excluded from diluted earnings per share for the three and nine months ended
September 30, 2022 and 2021 because the warrants are contingently exercisable,
and the contingencies have not yet been met. As a result, diluted net loss per
common share is the same as basic net loss per common share for the periods.
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Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-06,
Debt -debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging -Contracts in Entity' Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity' Own Equity ("ASU 2020-06"),
which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. 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. The guidance was adopted starting January 1,
2022. Adoption of the ASU did not impact the Company's financial position,
results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or
Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of
the FASB Emerging Issues Task Force). This guidance clarifies certain aspects of
the current guidance to promote consistency among reporting of an issuer's
accounting for modifications or exchanges of freestanding equity-classified
written call options (for example, warrants) that remain equity classified after
modification or exchange. The amendments in this update are effective for all
entities for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted for all entities,
including adoption in an interim period. The guidance was adopted starting
January 1, 2022. Adoption of the ASU did not impact the Company's financial
position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the accompanying unaudited condensed financial statement.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any shares of Class
A common stock issuable upon the exercise of the Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital Loans and upon
conversion of the Founder Shares) will be entitled to registration rights
pursuant to a registration rights agreement to be signed prior to or on the
effective date of the Public Offering, requiring us to register such securities
for resale (in the case of the Founder Shares, only after conversion to our
Class A common stock). 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. However, the registration rights agreement provides that we will not permit
any registration statement filed under the Securities Act to become effective
until termination of the applicable lock-up period, which occurs (i) in the case
of the Founder Shares, on the earlier of (A) six months after the completion of
the initial Business Combination or (B) subsequent to the initial Business
Combination, (x) if the last sale price of our Class A common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading day period commencing at least 75 days after the initial Business
Combination, or (y) the date on which we complete a liquidation, merger, capital
stock exchange, reorganization or other similar transaction that results in all
of our stockholders having the right to exchange their shares of common stock
for cash, securities or other property and (ii) in the case of the Private
Placement Warrants and the respective Class A common stock underlying such
warrants, 30 days after the completion of the initial Business Combination. We
will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriters Agreement
We granted the underwriters a 45-day option from the date of the Public Offering
to purchase up to an additional 2,250,000 units to cover over-allotments, if
any. On August 19, 2021, the over-allotments were exercised in full.
Simultaneously with the closing of the Public Offering and the over-allotment,
the underwriters were paid an underwriting discount of 2% of the gross proceeds
of the Public Offering and the over-allotment, or $3,450,000. Additionally, the
underwriters will be entitled to a deferred underwriting discount of 3.5% of the
gross proceeds of the Public Offering and the over-allotment upon the completion
of our initial Business Combination.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The 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 will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We have elected to irrevocably opt out of such extended transition
period, which means that when a standard is issued or revised and it has
different application dates for public or private companies, we will adopt the
new or revised standard at the time public companies adopt the new or revised
standard. This may make comparison of our financial statements with another
emerging growth company that has not opted out of using the extended transition
period difficult or impossible because of the potential differences in
accountant standards used.
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 IPO or until we are no longer an "emerging
growth company," whichever is earlier.
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