Stardust Power Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Cautionary Note Regarding Forward-Looking Statements All statements other than statements of historical fact included in this section and elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. Overview We are a blank check company incorporated on November 3, 2020 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses or entities. We intend to effectuate our initial Business Combination using cash from the proceeds of the Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, equity and debt. The issuance of additional shares in a Business Combination: 1. may significantly dilute the equity interest of existing investors, which dilution would increase if the anti-dilution provisions in the Class B Ordinary Shares resulted in the issuance of Class A Ordinary Shares on a greater than one-to-one basis upon conversion of the Class B Ordinary Shares; 2. may subordinate the rights of holders of Class A Ordinary Shares if Preference shares are issued with rights senior to those afforded our Class A Ordinary Shares; 3. could cause a change in control if a substantial number of our Class A Ordinary Shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; 4. may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and 5. may adversely affect prevailing market prices for our Units, Class A Ordinary Shares and/or warrants; and may not result in adjustment to the exercise price of our warrants. Similarly, if we issue debt or otherwise incur significant debt, it could result in: 6. default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; 7. acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; 8. our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; 20 9. our inability to pay dividends on our Class A Ordinary Shares; 10. using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A Ordinary Shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; 11. limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; and 12. increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. As indicated in the accompanying financial statements, as of March 31, 2024, we had approximately $2,000 of cash and negative working capital of approximately $9,927,000. Further, we expect to incur significant costs in the pursuit of our initial Business Combination and if we cannot complete a Business Combination by, as extended on January 14, 2024, July 14, 2024 we could be forced to wind up our operations and liquidate unless we receive an extension approval from our shareholders. We cannot assure you that our plans to complete our initial Business Combination will be successful. Business Combination Agreement On November 21, 2023, the Company, entered into the Business Combination Agreement with First Merger Sub, Second Merger Sub, and Stardust Power. The Business Combination Agreement provides for, among other things, the following transactions to occur at or immediately prior to the closing of the transaction (the “Closing”), including the Domestication (as defined below) and the Mergers (as defined below, and together with Domestication, the “Transactions”): (i) the Company will change its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”); (ii) following the Domestication, First Merger Sub will merge with and into Stardust Power, with Stardust Power as the surviving company in the merger (the “First Merger”); and (iii) immediately following the First Merger, and as part of the same overall transaction as the First Merger, Stardust Power will merge with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Mergers”), with Second Merger Sub being the surviving company of the Second Merger, and as a result of which the surviving company will become a wholly-owned subsidiary of the Company. Upon the Closing, the Company will change its name to “Stardust Power Inc.” and will continue trading on Nasdaq under the new symbols “SDST” and “SDSTW,” respectively, following Closing. At Closing, in connection with the Transactions, the Company and certain stockholders of Stardust Power will enter into a Shareholder Agreement, a Registration Rights Agreement and a Lock-Up Agreement, each in form and in substance to be agreed, to be effective upon the Closing. The Company and Stardust Power expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the business combination. Stardust Power may also incur additional costs to retain key employees. All expenses incurred in connection with the Business Combination Agreement and the transactions contemplated thereby, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs, provided that if the Closing occurs, the Company will bear and pay at or promptly after Closing all of the Company and Stardust Power’s transaction expenses. The aggregate transaction expenses as a result of the business combination are expected to be approximately $10.0 million. Such transaction expenses do not include the deferred underwriting commissions incurred in connection with the Company’s initial public offering because UBS Securities LLC and RBC Capital Markets, LLC, the underwriters for the Company’s initial public offering, have each agreed to waive the deferred underwriting commission aggregating approximately $10,500,000 in connection with the closing of the business combination. The per-share amount we will distribute to shareholders who properly exercise their redemption rights will not be reduced by the transaction expenses and after such redemptions, the per-share value of shares held by non-redeeming shareholders will reflect our obligation to pay the transaction expenses. 21 The Business Combination is expected to close in the first half of 2024, prior to July 14, 2024, following the receipt of the required approval by the Company’s shareholders and the fulfillment or waiver of other customary closing conditions. The Business Combination Agreement and the Transactions contemplated thereby to occur at or immediately prior to the Closing are discussed in further detail in Note 2 to the Company’s December 31, 2023 financial statements, which were approved by the boards of directors of each of the Company and Stardust Power, and are incorporated by reference herein. Recent Developments Extension of Combination Period On January 9, 2024, we held the 2024 Extension Meeting: (i) to amend, by way of special resolution, the Company’s amended and restated memorandum and articles of association to extend the date by which the Company has to consummate a business combination from January 14, 2024 to July 14, 2024 for a total of an additional six months after January 14, 2024, unless the closing of a business combination shall have occurred prior thereto; (ii) to eliminate, by way of special resolution, from the Company’s amended and restated memorandum and articles of association the limitation that the Company may not redeem Class A Ordinary Shares to the extent that such redemption would result in the Company having net tangible assets of less than $5,000,001 in order to allow the Company to redeem Public Shares irrespective of whether such redemption would exceed the Redemption Limitation; and (iii) to provide, by way of special resolution, that Public Shares may be issued to the Sponsor by way of conversion of Class B Ordinary Shares into Public Shares, despite the restriction on issuance of additional Public Shares. The shareholders of the Company approved the Proposals at the 2024 Extension Meeting and on January 11, 2024, the Company filed the 2024 Articles Amendment with the Registrar of Companies of the Cayman Islands. In connection with 2024 Extension Meeting, the holders of 2,137,134 Class A Ordinary Shares properly exercised their right to redeem their shares for an aggregate price of approximately $11.05 per share, for an aggregate redemption amount of approximately $23,615,331. Following the redemptions, 1,794,585 Class A Ordinary Shares remain outstanding. In connection with the 2024 Extension Meeting, the Sponsor entered into the Non-Redemption Agreements with several unaffiliated third parties, pursuant to which such third parties agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of 1,503,254 Class A Ordinary Shares in connection with the 2024 Extension Amendment Proposal. In exchange for the foregoing commitments not to redeem such Class A Ordinary Shares, the Sponsor agreed to transfer or cause to be issued for no consideration an aggregate of 127,777 shares of the Company and simultaneous forfeiture of 127,777 shares of the Company in connection with the Company’s completion of its initial Business Combination. On February 13, 2024, the Company and the Sponsor entered into an amendment to the January 13, 2023 Note to (1) extend the maturity date of the January 13, 2023 Note to the earlier of (i) July 14, 2024, (ii) the consummation of a business combination of the Company and (iii) the liquidation of the Company and (2) increase the principal sum of the January 13, 2023 Note from $3,000,000 to $4,000,000. On February 13, 2024, the Company and the Sponsor entered into an amendment to the August 1, 2022 Note, as amended on January 13, 2023, to extend the maturity date of the August 1, 2022 Note to the earlier of (i) July 14, 2024, (ii) the consummation of a business combination of the Company and (iii) the liquidation of the Company. 22 Nasdaq Delisting Notices On January 16, 2024, we received a notice from the staff of the Listing Qualifications Department of Nasdaq indicating that, unless we timely request a hearing before the Nasdaq Hearing Panel (the “Panel”), our securities (shares, warrants, and rights) would be subject to suspension and delisting from The Nasdaq Capital Market due to our non-compliance with Nasdaq IM-5101-2, which requires that a SPAC must complete one or more business combinations within 36 months of the effectiveness of its initial public offering registration statement. Since our registration statement for its initial public offering became effective on January 14, 2021, the Company was required by IM-5101-2 to complete its initial business combination by no later than January 14, 2024. On January 23, 2024, the Company timely submitted a hearing request to appeal Nasdaq’s determination to the Nasdaq Hearings Panel to request sufficient time to complete a business combination, pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series (the “Hearing Request”). The Hearing Request stayed the suspension of our securities and the termination of registration of the securities with Nasdaq as required by the rules of the SEC pending the Panel’s decision and, therefore, Nasdaq’s notice had no immediate effect on the listing of our securities on Nasdaq. On January 29, 2024, we received a notice from the Nasdaq stating that we failed to hold an annual meeting of shareholders within 12 months after its fiscal year ended December 31, 2022, as required by Nasdaq Listing Rule 5620(a). This matter served as an additional basis for delisting our securities from Nasdaq and the Panel considered this additional matter in its decision regarding our continued listing on the Nasdaq Capital Market. The Company presented its views with respect to this additional deficiency to the Panel in writing on February 5, 2024. The Nasdaq Hearing Panel’s hearing for the Company was held on April 2, 2024. The Nasdaq Hearing Panel granted the Company’s request for an extension until June 3, 2024, subject to possibly extension until but no later than the New Termination Date. Results of Operations For the period from November 3, 2020 (date of inception) to March 31, 2024, our activities consisted of formation and preparation for the Public Offering and, subsequent to completion of the public offering on January 14, 2021, identifying and completing a suitable initial Business Combination. As such, we had no operations or significant operating expenses until after the completion of the Public Offering in January 2021. Our normal operating costs since January 14, 2021 include costs associated with our search for an initial Business Combination (see below), costs associated with our governance and public reporting (see below), and a charge of $25,000 per month from our Sponsor for administrative services. Costs for such Sponsor provided administrative services aggregate approximately $75,000 for each of the three months ended March 31, 2024 and 2023. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $159,000 and $248,000, respectively, for the three months ended March 31, 2024 and 2023. Professional costs for work associated with reviewing potential Business Combinations as well as with the January 2024 and 2023 proxy and Extension Meetings was approximately $1,857,000 and $744,000, respectively, in the three months ended March 31, 2024 and 2023. During the three months ended March 31, 2024, the Company negotiated settlement and release agreements with various creditors in exchange for certain payments made and resulting in the reversal of accruals totaling approximately $2,961,000 which is included as a credit to operating expenses in the accompanying unaudited condensed consolidated statements of operations. As we evaluate initial Business Combination candidates, our costs are expected to increase significantly in connection with investigating potential initial Business Combination candidates, as well as professional, due diligence and consulting fees and travel costs that are required and professional and other costs associated with negotiating and executing a definitive agreement and related agreements and related required public reporting and governance matters. 23 Other income (expense) includes both interest income and the change in the fair value of the Public Warrants and Private Placement Warrants at each reporting date. Interest income was approximately $273,000 and 921,000 respectively, for the three months ended March 31, 2024 and 2023. The variation in interest income reflects market conditions as well as changing Trust Account balances due to redemptions. The Company is required to measure the fair value of the Public Warrants and Private Placement Warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for each current period. The change in fair value of warrants was item of other expense of an aggregate of approximately $641,000 and $1,890,000 (including the approximately $130,000 write-off of forfeited contingent warrants for shares redeemed), respectively in the three months ended March 31, 2024 and 2023. There were no income tax expenses for the three months ended March 31, 2024 or 2023 because we are a Cayman Islands exempted company and are not subject to income tax in the United States or in the Cayman Islands. We did not withdraw any interest from the Trust Account in the three months ended March 31, 2024 or 2023. Liquidity and Capital Resources On January 14, 2021, we consummated the Public Offering of an aggregate of 30,000,000 Units at a price of $10.00 per unit generating gross proceeds of approximately $300,000,000 before underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the private placement of 5,566,667 Private Placement Warrants, each exercisable to purchase one share of our Class A Ordinary Shares at $11.50 per share, to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds, before expenses, of approximately $8,350,000. At that time, the proceeds in the Trust Account were initially invested in cash. At March 31, 2024 and December 31, 2023, the proceeds in the Trust Account were invested in cash. The net proceeds from the Public Offering and private placement were approximately $301,471,000, net of the non-deferred portion of the underwriting commissions of $6,000,000 and offering costs and other expenses of approximately $904,000 (including approximately $554,000 of offering expenses and approximately $350,000 of insurance that is accounted for as prepaid expense). $300,000,000 of the proceeds of the Public Offering and the private placement have been deposited in the Trust Account and are not available to us for operations (except certain amounts to pay taxes, if any). At March 31, 2024 and December 30, 2023, we had approximately $2,000 and $22,000, respectively, of cash available outside of the Trust Account to fund our activities until we consummate an initial Business Combination. On January 11, 2023, certain shareholders elected to redeem 26,068,281 Class A Ordinary Shares at $10.167 per share, approximately $265,050,000, from the Trust Account following the 2023 Extension Meeting. On January 9, 2024, in connection with the 2024 Extension Meeting, holders of 2,137,134 Class A Ordinary Shares exercised their right to redeem their shares for cash at a redemption price of approximately $11.05 per share, for an aggregate redemption amount of approximately $23,615,331. Following the redemptions, 1,794,585 Class A Ordinary Shares remain outstanding. Further, in connection with the 2024 Extension Meeting, the Company entered into Non-Redemption Agreements with holders of 1,503,254 Class A Ordinary Shares in exchange for the transfer of 127,777 shares. During the three months ended March 31, 2024, the Company’s liquidity was also impacted by the forfeiture by two underwriters of the entire underwriters deferred commissions of $10,500,000. Until the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of our Class B Ordinary Shares for $25,000 by the Sponsor, and the availability of loans to us of up to $300,000 by our Sponsor under the Note, a total of $199,000 was actually loaned by the Sponsor against the issuance of the Note. The Note was non-interest bearing and was paid in full on January 14, 2021 in connection with the closing of the Public Offering, accordingly, no amounts are available or were outstanding under the Note at March 31, 2024 and December 31, 2023. 24 Mandatory Liquidation and Going Concern: At March 31, 2024, the Company has approximately $2,000 in cash and approximately $9,927,000 in working capital deficit. The Company has incurred significant costs and expects to continue to incur additional costs in pursuit of its Business Combination. Further, if the Company cannot complete an initial Business Combination by July 14, 2024, it could be forced to wind up its operations and liquidate unless it receives an extension approval from its shareholders. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the unaudited condensed consolidated financial statements are issued. In connection with its financial position and intention to complete a Business Combination, the Company has secured financing from its Sponsor. The Company’s plan to deal with these uncertainties is to use the financing from the Sponsor to complete a Business Combination prior to the Termination Date. There is no assurance for the Company that, (1) the financing from the Sponsor will be adequate and (2) plans to consummate a Business Combination will be successful by July 14, 2024. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. On August 1, 2022, the Company issued a promissory note in the principal amount of up to $2,000,000 to its Sponsor (the “August 1, 2023 Note”). The August 1, 2023 Note was issued in connection with advances the Sponsor may make to the Company for expenses reasonably related to its business and the consummation of the Business Combination. The August 1, 2023 Note bears no interest and was due and payable upon the earlier to occur of (i) January 14, 2023 and (ii) the consummation of an initial Business Combination. On January 13, 2023, the Company and the Sponsor agreed to extend the date of maturity of the August 1, 2023 Note to the earlier of (i) the Termination Date of January 14 2024, (ii) the consummation of a Business Combination of the Company and (iii) the liquidation of the Company. As of March 31, 2024 and December 31, 2023, the outstanding principal balance under the August 1, 2023 Note was approximately $755,000 and $755,000, respectively. On January 3, 2023, the Company issued the January 3, 2023 Note in the principal amount of up to $250,000 to its Sponsor. The January 3, 2023 Note was issued in connection with advances the Sponsor may make to the Company for expenses reasonably related to its business and the consummation of the Business Combination. The January 3, 2023 Note bears no interest and is due and payable upon the Business Combination. As of March 31, 2024, no amount has been drawn down and there is no outstanding principal balance under the January 3, 2023 Note. At the election of the Payee, $250,000 of the unpaid principal amount of the January 3, 2023 Note may be converted into warrants of the Company (“Warrants”), at a price of $1.50 per warrant, each warrant exercisable for one Class A Ordinary Share of the Company. The Warrants shall be identical to the Private Placement Warrants issued to the Sponsor at the time of the Company’s Public Offering. . As of March 31, 2024 and December 31, 2023, the outstanding principal balance under the January 3, 2023 Note was approximately $3,186,761 and $2,726,355, respectively. On January 13, 2023, the Company issued the January 13, 2023 Note in the principal amount of up to $4,000,000, as amended on February 13, 2024, to its Sponsor. The January 13, 2023 Note was issued in connection with advances the Sponsor may make to the Company for contributions to the Trust Account in connection with the 2023 Extension Amendment Proposal and other expenses reasonably related to its business and the consummation of the Business Combination. The January 13, 2023 Note bears no interest and is due and payable upon the Business Combination. At the election of the Payee, up to $1,750,000 of the January 13, 2023 Note may be converted, at the option of the lender, into Warrants, at a price of $1.50 per warrant, each warrant exercisable for one Class A Ordinary Share of the Company. The Warrants shall be identical to the Private Placement Warrants issued to the Sponsor at the time of the Public Offering. During the three months ended March 31, 2024 and 2023, the Company made drawdowns aggregating approximately $461,000 and $604,000, respectively, under the January 13, 2023 Note for working capital and in order to pay extension payments. The Company records such notes at par value and believes that the fair value of the conversion feature is not material based upon the trading price of the similarly termed Public Warrants. At March 31, 2024 and December 31, 2023, the outstanding principal balance under the January 13, 2023 Note was approximately $3,187,000 and $4,327,000, respectively. Subsequent to March 31, 2024 the Company borrowed an aggregate $130,406 to fund its working capital needs. We expect our principal liquidity requirements during this period to include legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting a successful Business Combination; legal and accounting fees related to regulatory reporting obligations; payment for investment professionals’ services and support services; Nasdaq continued listing fees; and general working capital that will be used for miscellaneous expenses and reserves. 25 Our estimates of expenses may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a Target Business or as a down payment or to fund a “no-shop” provision (a provision designed to keep Target Businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such Target Businesses) with respect to a particular proposed Business Combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a Target Business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific Business Combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective Target Businesses. Moreover, we may need to obtain additional financing to complete our initial Business Combination, either because the transaction requires more cash than is available from the proceeds held in our Trust Account, or because we become obligated to redeem a significant number of our Public Shares upon completion of the Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. If we have not consummated our initial Business Combination by the New Termination Date because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. The Company has, as extended at the 2024 Extension Meeting, until July 14, 2024 to complete an initial business combination. If the Company does not complete an initial business combination by the Termination Date, the Company will: (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public Class A Ordinary Shares for a pro rata portion of the Trust Account, including interest earned on funds held in the Trust Account and not previously released to pay income taxes, but less up to $100,000 of such interest to pay dissolution expenses; and (iii) as promptly as reasonably possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining shareholders, as part of its plan of dissolution and liquidation. The initial shareholders have waived their redemption rights with respect to their founder shares; however, if the initial shareholders or any of the Company’s officers, directors or their affiliates acquire Class A Ordinary Shares in or after the initial Business Combination, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete an initial Business Combination within the required time period. In the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per unit in the initial public offering. Off-balance sheet financing arrangements We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any agreements for non-financial assets. Contractual obligations At March 31, 2024, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with the Public Offering, we entered into an Administrative Support Agreement with the Sponsor, pursuant to which the Company pays the Sponsor $25,000 per month for office space, utilities and secretarial and administrative support. In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, the Company may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account. 26 JOBS Act The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will 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 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, our 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 of the Sarbanes-Oxley Act, (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 Public Company Accounting Oversight Board 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 Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Public Offering or until we are no longer an “emerging growth company,” whichever is earlier. Critical Accounting Estimates The requirement under 229.303 (Item 303) Management’s discussion and analysis of financial condition and results of operations is: Critical accounting estimates. Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. Critical accounting estimates provide qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations to the extent the information is material and reasonably available. This information should include why each critical accounting estimate is subject to uncertainty and, to the extent the information is material and reasonably available, how much each estimate and/or assumption has changed over a relevant period, and the sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation. The preparation of financial statements and related disclosures in conformity with U.S. 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. Actual results could materially differ from those estimates. Management has determined that the Company has no critical accounting estimates.