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ACCOLADE, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

HASBRO, INC. : Change in Directors or Principal Officers, Financial Statements and Exhibits (form 8-K)
Written by Publishing Team

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
and the related notes and the discussion under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
the fiscal year ended February 28, 2021 included in the Annual Report on Form
10-K. Our fiscal year ends on the last day of February, and our fiscal quarters
end on May 31, August 31, November 30, and the last day of February.

This discussion, particularly information with respect to our future results of
operations or financial condition, business strategy and plans and objectives of
management for future operations, includes forward-looking statements that
involve risks and uncertainties as described under the heading "Special Note
Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You
should review the disclosure under the heading "Risk Factors" in this Quarterly
Report on Form 10-Q for a discussion of important factors that could cause our
actual results to differ materially from those anticipated in these
forward-looking statements.

Abstract


We provide personalized, technology-enabled solutions that help people better
understand, navigate, and utilize the healthcare system and their workplace
benefits. Our customers are primarily employers that deploy Accolade solutions
in order to provide employees and their families (our "members") a single place
to turn for their health, healthcare, and benefits needs. Our innovative
platform combines open, cloud-based intelligent technology with multimodal
support from a team of empathetic and knowledgeable Accolade Health Assistants
and clinicians (including nurses, physician medical directors, and behavioral
health specialists). With the completion of our acquisition of PlushCare, we
also offer virtual primary care and mental health support directly to consumers
along with our enterprise customers.  We leverage our integrated capabilities,
connectivity with providers and the broader healthcare ecosystem, and
longitudinal data to engage across the entire member population, rather than
focusing solely on high-cost claimants or those with chronic conditions. Our
goal is to build trusted relationships with our members that ultimately position
us to deliver personalized recommendations and interventions. We believe that
our platform dramatically improves the member experience, encourages better
health outcomes, and lowers costs for both our members and our customers.

Accolade Total Health and Benefits has historically been our most comprehensive
offering and most closely aligns to our "Premier" solution on which the company
was founded and from which the majority of our revenues are derived today. Our
technology platform enabled us to unbundle aspects of this comprehensive
offering to create two additional standalone offerings: Accolade Total Benefits
(focused on member benefits engagement) and Accolade Total Care (focused on
guiding members to high-quality, cost-effective providers). Following our
acquisition of 2nd.MD in March 2021, we began offering customers expert medical
consultation (primarily for high-complexity, high-cost conditions) as a
standalone service as well as a capability that can be incorporated into other
core offerings. Following our acquisition of PlushCare in June 2021, we began
offering virtual primary care and mental health services directly to consumers
and commercial customers. We have further leveraged our technology platform to
develop add-on offerings and to integrate acquired solutions that target
specific challenges faced by our customers.

In September 2021, we announced new solutions and new naming for the solutions
described above. The new solutions - Accolade One and Accolade Care - combine
the capabilities of Accolade's historical navigation and advocacy solutions with
our acquired primary care, mental health, and expert medical opinion services,
augmented by artificial intelligence, machine learning, and data-driven
recommendations. The new solutions are in their early stages of implementation,
with initial customer implementations beginning in January 2022. Additionally,
we announced new solution bundles incorporating all of our existing solutions to
reflect the evolution and maturation of our offering portfolio. With these
changes, our current offerings include:

Accolade Core and Accolade Plus – Includes items from all Accolade

? Solutions include Advocacy, Accolade Expert MD, Accolade Care and

Accolade ecosystem partner


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? Accolade Expert MD – Expert medical opinion including acquired abilities

On the 2nd acquisition.MD

? Accolade Care – Integrated Primary Care and Mental Health

Accolade One – A value-based option that includes all Accolade solutions

? and Accolade partner ecosystem with a pricing structure that includes a

A higher proportion of revenue associated with results-based measures

We were founded in 2007 and launched our initial offering in 2009. We have seen
significant growth in recent years since the changes to our executive management
team in 2015 and the subsequent investments we have made in product, technology,
sales, and distribution. Our customers represent a diversified set of
industries, including media, technology, financial services, transportation,
energy, and retail. Additionally, we serve consumers directly through our
PlushCare solution.

In September 2021, we acquired substantially all the assets of HealthReveal,
Inc. (HealthReveal). HealthReveal is a clinical artificial intelligence company
focused on ensuring patients receive optimal, personalized chronic care to
preempt adverse outcomes. Under the terms of the agreement, we issued 252,808
shares of common stock as consideration at closing. We will issue up to 28,089
additional shares of common stock that are subject to an indemnity holdback, and
these shares will be released 18 months following the closing.

For the three months ended November 30, 2021, our total revenue was $83.5
million, representing 117% year-over-year growth compared to total revenue of
$38.4 million for the three months ended November 30, 2020. For the nine months
ended November 30, 2021, our total revenue was $216.3 million, representing 95%
year-over-year growth compared to total revenue of $111.1 million for the nine
months ended November 30, 2020. For the three months ended November 30, 2021 and
2020, our net income (loss) was $22.5 million and $(16.6) million, respectively.
For the nine months ended November 30, 2021 and 2020, our net income (loss) was
$(88.6) million and $(45.9) million, respectively.

Our business model


We provide our solutions primarily to employers that deploy Accolade offerings
to our members. We earn revenue from providing personalized health guidance
solutions, expert medical opinion services, virtual primary care services, and
mental health support to the members of our employer customers' health plans and
to members of fully insured plans offered via health insurance companies. Our
advocacy solutions are priced based on a recurring per-member-per-month (PMPM)
fee, typically consisting of both a base fee and a performance-based fee
component. As a result, generally, a portion of our potential revenue is
variable, subject to our achievement of performance metrics and the realization
of savings in healthcare spend by our customers resulting from the utilization
of our solutions. We typically achieve a substantial portion of the contractual
performance metrics and realization in savings of healthcare spend. We also
provide expert medical opinion services, which are typically charged on a PMPM
or case rate basis, and virtual primary care and mental health support, which
are typically priced on a fee per visit basis for consumers and a PMPM plus
visit fee basis for employer customers.

The primary cost of delivering our service includes the personnel costs of
Accolade Health Assistants, clinicians, including registered nurses, physician
medical directors, pharmacists, behavioral health specialists, women's health
specialists, case management specialists, expert medical opinion providers and
virtual primary care physicians, as well as software and tools for telephony,
workforce management, business analytics, allocated overhead costs, and other
expenses related to delivery and implementation of our solutions. As we support
more customers with an increasing number of members over time, we expect that
our support costs per member will decline due to economies of scale and improved
operational efficiencies driven by continued enhancements of our technology
platform and capabilities. We have experienced and expect to continue to achieve
operational efficiencies realized from continued enhancements of our technology
platform and capabilities.

We use a multi-pronged market reach strategy to increase the adoption of our solutions for new and existing clients. We primarily sell our solutions through our direct sales team which is stratified by account size (i.e. strategy

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(more than 35,000 employees), enterprise (5,000 to 35,000 employees), and
mid-market (500 to 5,000 employees)), region, and existing versus prospective
customer. Our sales team possesses deep domain expertise in health benefits
management and brings substantial experience selling to key decision makers
within our current and prospective customer organizations (human resource
officers, CFOs, benefits executives, consultants, and brokers). We believe the
effectiveness of our sales organization is evidenced by growing adoption of our
platform by large strategic customers, recent traction with enterprise and
mid-market customers and demonstrated demand for add-on offerings from existing
customers.

We have chosen to invest significantly in growing our customer base, and plan to
continue both adding new customers and expanding our relationships with existing
customers, which we believe will allow us to increase margins over time. When a
customer renews their contract or purchases additional solutions or
enhancements, the value realized from that customer increases because we
generally do not incur significant incremental acquisition or implementation
costs for the renewal or expansion. We believe that as our customer base grows
and a higher percentage of our revenue is attributable to renewals and upsells
or cross-sells to existing customers, relative to acquisition of new customers,
associated sales and marketing expenses and other upfront costs will decrease as
a percentage of revenue.

In addition, we have strategically curated our offering portfolio to ensure we
have a compelling value proposition at an appropriate price point that resonates
with each identified customer segment. Based on our experience, the opportunity
to cross-sell is meaningfully enhanced once a customer has been on-boarded onto
our platform and has benefited from a measurable and compelling return on their
investment. Our customer partnerships team provides strategic insights, point
solution recommendations, and day-to-day account support to our customers. They
are focused on existing customer retention, cross-sell, and upsell.

We maintain relationships with a range of third parties, including brokers,
agents, benefits consultants, carriers, third-party administrators, trusted
suppliers, and co-marketing and co-selling partners. These third parties provide
an important source of referrals for our sales organization. We also selectively
form strategic alliances to further drive customer acquisition and adoption of
our solutions. We believe the breadth of our go-to-market and distribution
strategy enables us to reach customers of nearly every size and across markets.

We have demonstrated a consistent track record of product and technology
innovation over time as evidenced by continuous improvement of our platform and
new offerings. This innovation is driven by feedback we receive from our
customers, industry experts, and the market generally. Our technology platform
enabled us to unbundle aspects of our core navigation capability to create
various offerings for our customers, while integrating capabilities from our
recent acquisitions to deliver our Personalized Healthcare solution that
combines our core navigation with expert medical consultations and virtual
primary care and mental health support. Our investments in product and
technology have been focused on increasing the value we provide via our
personalized member health guidance solutions and expanding the market segments
we can serve with a portfolio of offerings and associated price points.

COVID-19 Update


COVID-19 has created uncertainty for Accolade's employees, members, and
customers. We consider the impact of the pandemic on our business by evaluating
the health of our operations, any changes to our revenue outlook, and the degree
to which perceptions of and interest in Accolade solutions have evolved during
this unprecedented time. We measure our performance through several key metrics,
including but not limited to customer satisfaction, member engagement, and
health assistant availability. As gauged by these core performance metrics,
service levels have been high, and member engagement and satisfaction have
remained strong. To ensure we could address our members' many COVID-19-related
concerns, our operations and clinical leaders trained our frontline teams on
evidence-based guidelines and continue to equip them with relevant resources to
help them ably serve under these exceptional circumstances.

While the COVID-19 pandemic has not had a material adverse impact on our
financial condition and results of operations to date, the future impact of the
COVID-19 outbreak on our operational and financial performance will depend on
certain developments, including the duration and spread of the outbreak, impact
on our customers and our sales cycles, impact on our marketing efforts, and any
decreases of workforce or benefits spending by our customers, all of which are
uncertain and cannot be predicted. We have a diverse set of customers across a
variety of industries. While some have faced headwinds, others have experienced
growth, and our membership count from existing employer customers has

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remained steady in the aggregate since the start of the calendar year. However,
we may experience increased member attrition to the extent our existing
customers reduce their respective workforces in response to changes in economic
conditions. Any layoffs or reductions in employee headcounts by our employer
customers would result in a reduction in our base and variable PMPM fees. When
customer headcount reductions occur, we may not experience the impact of changes
to our customers' headcounts immediately because employees that are on furlough
or are receiving continued health coverage pursuant to COBRA may still have
access to our services during such periods and would be included in our member
count. During fiscal 2021, we engaged with our airline customers to act as a
partner in helping manage their cash needs during the COVID-19 pandemic,
resulting in modified payment terms in fiscal 2021. All payments due from our
airline customers as a result of such modifications have been collected.

We believe our value proposition now resonates with an even broader audience of
employers as they turn their focus to safely reopening their workplaces and
managing the ongoing health and well-being of employees and their families. To
directly address the former, we developed Accolade COVID Response Care, a
solution that allows employers of all sizes to leverage Accolade's platform to
support employee education, testing, care plans, contact tracing, and
return-to-work clearance. On the latter, we believe that the current disruptions
to traditional care consumption have reinforced the need for navigation
services, and that projected increases in healthcare costs (due to some
combination of COVID-19-related testing and care, complications stemming from
neglected non-COVID conditions, pent-up demand for elective services, and strain
on individuals' mental health) prompt the need for solutions such as ours that
bend the cost curve, and improve health outcomes, by driving good utilization up
and wasteful utilization down.

Factors that affect our performance


The following factors have been important to our business and we expect them to
impact our business, results of operations, and financial condition in future
periods:

Growth of Our Customer Base
We believe there is a substantial opportunity to further grow our customer base
in our large and under-penetrated market through our sales and marketing
strategy. Across our existing customer base and as we acquire new customers, we
intend to expand and deepen these relationships. As we build trust through our
proven model, we seek to cross-sell our add-on offerings, such as Trusted
Supplier Program, COVID Response Care and Mental Health Integrated Care. We plan
to continue to invest in sales and marketing in order to grow our customer base
and increase sales to existing customers. Any investments we make in our sales
and marketing organization will occur in advance of experiencing any benefits
from such investments, so it may be difficult for us to determine if we are
efficiently allocating our resources in these areas.

Adopting current and future solutions


We are constantly innovating to enhance our model and develop new offerings. Our
ability to act as a trusted advisor to our members and customers positions us to
identify new opportunities for additional offerings that can meet their existing
and emerging needs. Our open technology platform also allows us to efficiently
add new offerings and applications on top of our existing technology stack,
which we have demonstrated with the roll-out of Accolade Total Benefits and
Accolade Total Care, as well as our add-on offerings, Accolade Boost, our
Trusted Supplier Program, Accolade COVID Response Care, and Mental Health
Integrated Care that target specific challenges faced by our customers. Our open
technology platform is instrumental for integration of the capabilities acquired
through our acquisitions of 2nd.MD and PlushCare. We believe that as we expand
our customer base and enter into new markets, we will be adept at identifying
and deploying innovative new solutions whether developed internally or through
acquisitions. In September 2021, we announced two new solutions - Accolade One
and Accolade Care - that combine some or all of the elements of Accolade's
historical solutions and the acquired capabilities from 2nd.MD and PlushCare.
The new solutions are in their early stages of implementation, with initial
customer launches in January 2022.

Revenue based on performance

In most of our contracts, a portion of our potential fees are variable, contingent upon our achievement of performance measures and savings in healthcare spending by our clients as a result of using our solutions.

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and thus we might record higher revenue in some quarters compared to others.
Examples of performance metrics included in our customer contracts are
achievement of specified member engagement levels, member satisfaction levels,
and various operational metrics. Although we have earned over 95% of the
aggregate maximum potential revenue under our contracts (measured on the
corresponding calendar year basis) in fiscal years 2021 and 2020, our revenue
and financial results in the future may vary as a result of our ability to earn
this performance-based revenue. In addition, because our customers typically pay
both the base PMPM fees and variable PMPM fees in advance on a periodic basis,
any required refund as a result of our failure to earn the performance-based
revenue could have a negative impact on cash flows.

Investments in technology


Significant investments in our technology platform have enhanced our
capabilities with respect to how we engage with our members and deliver our
solutions and care interventions. By leveraging our technology in areas such as
machine learning, predictive analytics, and multimodal communication, we believe
we can generate more efficiencies in our operating model while simultaneously
improving our ability to deliver better health outcomes and lower costs for both
our members and our customers. We will continue to invest in our technology
platform to empower our Accolade Health Assistants, our clinicians, and our
members to further improve and optimize efficiencies in our operating model.
However, our investments in our technology platform may be more expensive or
take longer to develop than we expect and may not result in operational
efficiencies.

Customer focus


We have historically relied on a limited number of customers for a significant
portion of our total revenue. If we do not retain some or all of those
customers, it could have a material negative impact on future results. In prior
reporting periods, we have had one or more customers accounting for more than
10% of our total revenue. However, for the three and nine months ended November
30, 2021, we had no customers that accounted for more than 10% of our total
revenue. The loss of any of our largest customers, the renegotiation of any of
our largest customer contracts or a significant decrease in the employee
headcount of our largest customers could adversely affect our results of
operations. In the ordinary course of business, we engage in active discussions
and renegotiations with our customers in respect to the solutions we provide and
the terms of our customer agreements, including our fees. Most of our customer
contracts have a three-year term, and some have rights to terminate prior to the
end of the term.

Certain financial measures not compliant with GAAP standards


We use the following non-GAAP financial measures to help us evaluate trends,
establish budgets, measure the effectiveness and efficiency of our operations,
and determine employee incentives.




                                                 For the three months ended                    For the nine months ended
                                                       November 30,                                  November 30,
                                                 2021                   2020                   2021                   2020

                                             (in thousands, except percentages)            (in thousands, except percentages)
Adjusted Gross Profit                     $            39,243      $        16,053      $           93,170       $        45,753
Adjusted Gross Margin                                    47.0 %            
  41.8 %                  43.1 %                41.2 %
Adjusted EBITDA                           $          (11,944)      $      (11,429)      $         (44,193)       $      (29,618)



Adjusted Gross Profit and Adjusted Gross Margin


Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue
less cost of revenue, excluding depreciation and amortization, and excluding
stock-based compensation. We define Adjusted Gross Margin as our Adjusted Gross
Profit divided by our revenue. We expect Adjusted Gross Margin to continue to
improve over time to the extent that we are able to gain efficiencies through
technology and successfully cross-sell and upsell our current and future
offerings. However, our ability to improve Adjusted Gross Margin over time is
not guaranteed and will be impacted by the factors affecting our performance
discussed above and the risks outlined in the section titled "Risk Factors." We
believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors,
as they eliminate the impact of certain non-cash

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expenses and allow a direct comparison of these measures between periods without the effect of non-cash expenses and some other non-recurring operating expenses.

Adjusted EBITDA


Adjusted EBITDA is a non-GAAP financial measure that we define as net income
(loss) adjusted to exclude interest expense (net), income tax expense (benefit),
depreciation and amortization, stock-based compensation, acquisition and
integration-related costs, and change in fair value of contingent consideration.
We believe Adjusted EBITDA provides investors with useful information on
period-to-period performance as evaluated by management and comparison with our
past financial performance. We believe Adjusted EBITDA is useful in evaluating
our operating performance compared to that of other companies in our industry,
as this measure generally eliminates the effects of certain items that may vary
from company to company for reasons unrelated to overall operating performance.

Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA have certain
limitations, including that they exclude the impact of certain non-cash charges,
such as depreciation and amortization, whereas underlying assets may need to be
replaced and result in cash capital expenditures, and stock-based compensation
expense, which is a recurring charge. These non-GAAP financial measures may also
not be comparable to similarly titled measures of other companies because they
may not calculate such measures in the same manner, limiting their usefulness as
comparative measures. In evaluating these non-GAAP financial measures, you
should be aware that in the future we expect to incur expenses similar to the
adjustments in this presentation. Our presentation of non-GAAP financial
measures should not be construed as an inference that our future results will be
unaffected by these expenses or any unusual or nonrecurring items. When
evaluating our performance, you should consider these non-GAAP financial
measures alongside other financial performance measures, including the most
directly comparable GAAP measures set forth in the reconciliation tables below
and our other GAAP results. The following table presents, for the periods
indicated, the calculation of our Adjusted Gross Profit and Adjusted Gross
Margin:


                                                   For the three months ended                    For the nine months ended
                                                         November 30,                                  November 30,
                                                   2021                   2020                   2021                    2020

                                               (in thousands, except percentages)            (in thousands, except percentages)
Revenue                                     $            83,450      $        38,444      $           216,265       $      111,126
Less:
Cost of revenue, excluding depreciation
and amortization                                       (45,156)             (22,743)                (125,426)             (66,052)
Gross profit, excluding depreciation and
amortization                                             38,294               15,701                   90,839               45,074

Add:

Stock­based compensation, cost of revenue                   949                  352                    2,331                  679
Adjusted Gross Profit                       $            39,243      $        16,053      $            93,170       $       45,753
Gross margin, excluding depreciation and
amortization                                               45.9 %               40.8 %                   42.0 %               40.6 %
Adjusted Gross Margin                                      47.0 %               41.8 %                   43.1 %               41.2 %


Gross margin, excluding depreciation and amortization, for the three months
ended November 30, 2021 and 2020, increased to 45.9% from 40.8%, respectively,
and Adjusted Gross Margin for the three months ended November 30, 2021 and 2020,
increased to 47.0% from 41.8%, respectively. Gross margin, excluding
depreciation and amortization, for the nine months ended November 30, 2021 and
2020, increased to 42.0% from 40.6%, respectively, and Adjusted Gross Margin for
the nine months ended November 30, 2021 and 2020, increased to 43.1% from 41.2%,
respectively. The increase in gross margin and Adjusted Gross Margin for the
comparable three and nine-month periods is driven primarily by incremental
performance guarantee revenues compared to the prior fiscal year.

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The following table presents, for the indicated periods, a reconciliation between adjusted EBITDA and our net income (loss):


                                        For the three months ended        For the nine months ended
                                              November 30,                      November 30,
                                           2021             2020            2021             2020

                                              (in thousands)                   (in thousands)
Net income (loss)                     $       22,503     $  (16,595)    $    (88,568)     $  (45,926)
Adjusted for:
Interest expense, net                            743              35            2,137           3,663
Income tax expense (benefit)                   3,325              29          (9,501)              85
Depreciation and amortization                 11,250           2,114           30,967           6,090
Stock­based compensation                      18,377           2,946           45,827           6,310
Acquisition and
integration­related costs                        311               -           13,208               -
Change in fair value of contingent
consideration                               (68,428)               -         (38,282)               -
Other expense (income)                          (25)              42               19             160
Adjusted EBITDA                       $     (11,944)     $  (11,429)    $    (44,193)     $  (29,618)



Basics of presentation and components of income and expenses

We operate our business through a single reportable segment. We operate on a
fiscal year ending at the end of February of each year, and our fiscal quarters
end on May 31, August 31, November 30, and the last day of February.

he won


We earn revenue from providing personalized technology-enabled solutions and
expert medical opinion services to the members of our employer customers' health
plans and to members of fully insured plans offered via health insurance
companies. We also earn revenue from providing virtual primary care services and
mental health support to consumers and members of enterprise customer health
plans. Our advocacy solutions are priced based on a recurring PMPM fee and
frequently include both a base PMPM fee based on eligible members and a
performance-based component. As a result, a portion of our potential fee is
typically variable, subject to our achievement of performance metrics, the
realization of savings in healthcare spend by our customers resulting from the
utilization of our solutions, and the number of eligible members during the
respective period. We also provide expert medical opinion services, which are
typically charged on a PMPM or case rate basis, and virtual primary care and
mental health support, which are typically priced on a fee per visit basis for
consumers and a PMPM plus visit fee basis for employer customers.

Cost of revenue excluding depreciation and amortization


Our cost of revenue, excluding depreciation and amortization, consists primarily
of personnel costs including salaries, wages, bonuses, stock-based compensation
expense and benefits, as well as software and tools for telephony, workforce
management, business analytics, allocated overhead costs, and other expenses
related to delivery and implementation of our personalized technology-enabled
solutions, expert medical opinion services, virtual primary care services,
and
mental health support.

Operating Expenses
Product and technology.    Product and technology expenses include costs to
build new offerings, add new features to our existing solutions, and to manage,
operate, and ensure the reliability and scalability of our existing technology
platform. Product and technology expenses consist of personnel expenses,
including salaries, bonuses, stock-based compensation expense, and benefits for
employees and contractors for our engineering, product, and design teams, and
allocated overhead costs, as well as costs of software and tools for business
analytics, data management, and IT applications that are not directly associated
with delivery of our solutions to customers. We expect product and technology
expenses to increase in absolute dollars but decrease as a percentage of revenue
over time.

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Sales and marketing. Sales and marketing expenses consist of personnel expenses, including sales commissions for our direct sales force and our market and business development workforce, as well as digital marketing costs, promotional costs, client conferences, public relations and other marketing events, and custom overhead costs. Employee expenses include salaries, bonuses, stock-based compensation expenses, and benefits for employees and contractors. We expect sales and marketing expenses to increase in absolute dollars but remain stable as a percentage of revenue over time.

General and administrative.    General and administrative expenses consist of
personnel expenses and related expenses for our executive, finance and
accounting, human resources, legal, and corporate organizations. Personnel
expenses include salaries, bonuses, stock-based compensation expense, and
benefits for employees and contractors. In addition, general and administrative
expenses include external legal, accounting, and other professional fees, as
well as tools for financial and human capital management, and allocated overhead
costs. We expect general and administrative expenses to increase in absolute
dollars as we incur costs associated with being a public company, but decrease
as a percentage of revenue over time.

Depreciation and amortization.    Depreciation and amortization expenses are
primarily attributable to our capital investments and consist of fixed asset
depreciation, amortization of intangibles considered to have definite lives, and
amortization of capitalized internal-use software costs.

Operations results

The following table presents a summary of our consolidated operations data for the periods indicated:


                                                  For the three months ended          For the nine months ended
                                                        November 30,                        November 30,
                                                     2021             2020              2021             2020

                                                        (in thousands)                     (in thousands)
Revenue                                         $       83,450     $    38,444      $     216,265     $   111,126
Cost of revenue, excluding depreciation and
amortization(1)                                         45,156          22,743            125,426          66,052
Operating expenses:
Product and technology(1)                               22,846          13,018             61,297          36,624
Sales and marketing(1)                                  24,616           8,644             63,134          23,841
General and administrative(1)                           21,464           8,414             69,636          20,537
Depreciation and amortization                           11,250           2,114             30,967           6,090
Change in fair value of contingent
consideration                                         (68,428)               -           (38,282)               -
Total operating expenses                                11,748          32,190            186,752          87,092
Income (loss) from operations                           26,546        (16,489)           (95,913)        (42,018)
Interest expense, net                                    (743)            (35)            (2,137)         (3,663)
Other income (expense)                                      25            (42)               (19)           (160)
Income (loss) before income taxes                       25,828        (16,566)           (98,069)        (45,841)
Income tax benefit (expense)                           (3,325)            (29)              9,501            (85)
Net income (loss)                               $       22,503     $  (16,595)      $    (88,568)     $  (45,926)

(1) The compensation expense based on the shares listed above was as follows:




                                             For the three months ended          For the nine months ended
                                                   November 30,                        November 30,
                                               2021               2020            2021               2020

                                                   (in thousands)                     (in thousands)
Cost of revenue                           $          949      $        352    $       2,331      $        679
Product and technology                             5,303             1,060           13,491             2,212
Sales and marketing                                3,608               702            9,035             1,494
General and administrative                         8,517               832           20,970             1,925
Total stock­based compensation            $       18,377      $      2,946
   $      45,827      $      6,310




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The following table shows our consolidated operating data, expressed as a percentage of revenue:


                                               For the three months ended        For the nine months ended
                                                     November 30,                      November 30,
                                                2021               2020            2021             2020
Revenue                                              100 %              100 %          100 %            100 %
Cost of revenue, excluding depreciation
and amortization                                      54 %               59 %           58 %             59 %
Operating expenses:
Product and technology                                27 %               34 %           28 %             33 %
Sales and marketing                                   29 %               22 %           29 %             21 %
General and administrative                            26 %               22 %           32 %             18 %
Depreciation and amortization                         13 %                5 %           14 %              5 %
Change in fair value of contingent
consideration                                       (82) %                - %         (18) %              - %
Total operating expenses                              14 %               84 %           86 %             78 %
Income (loss) from operations                         32 %             (43)
%         (44) %           (38) %
Interest expense, net                                (1) %              (0) %          (1) %            (3) %
Other income (expense)                                 0 %              (0) %          (0) %            (0) %
Income (loss) before income taxes                     31 %             (43) %         (45) %           (41) %
Income tax benefit (expense)                         (4) %              (0)
%            4 %            (0) %
Net income (loss)                                     27 %             (43) %         (41) %           (41) %



Comparison between three and nine months ended November 30, 2021 and 2020

Revenue


              For the three months ended
                    November 30,                   Changes
               2021               2020          Amount      %

                   (in thousands, except percentages)
Revenue    $      83,450      $      38,444    $ 45,006    117 %




Revenue increased $45.0 million, or 117%, to $83.5 million for the three months
ended November 30, 2021, as compared to $38.4 million for the three months ended
November 30, 2020. The increase was attributable primarily to $11.9 million and
$15.6 million in revenues derived from the 2nd.MD and PlushCare acquisitions,
respectively, incremental performance guarantee revenues compared to the prior
fiscal year, and growth in the number of customers served during such period, as
compared to the prior year's corresponding period.


              For the nine months ended
                    November 30,                  Changes
               2021              2020          Amount      %

                   (in thousands, except percentages)
Revenue    $     216,265     $     111,126    $ 105,139    95 %




Revenue increased $105.1 million, or 95%, to $216.3 million for the nine months
ended November 30, 2021, as compared to $111.1 million for the nine months ended
November 30, 2020. The increase was attributable primarily to $35.9 million and
$28.4 million in revenues derived from the 2nd.MD and PlushCare acquisitions,
respectively, incremental performance guarantee revenues compared to the prior
fiscal year, and growth in the number of customers served during such period, as
compared to the prior year's corresponding period.





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Cost of revenue excluding depreciation and amortization


                                                 For the three months ended
                                                       November 30,                   Changes
                                                  2021               2020          Amount      %

                                                     (in thousands, except percentages)
Cost of revenue, excluding depreciation
and amortization                              $      45,156      $      22,743    $ 22,413     99 %




Cost of revenue, excluding depreciation and amortization increased $22.4
million, or 99%, to $45.2 million for the three months ended November 30, 2021,
as compared to $22.7 million for three months ended November 30, 2020. The
increase was attributable primarily to cost of revenue incurred by 2nd.MD and
PlushCare as well as an increase in personnel and related costs to serve the
customer base which grew in the third quarter of fiscal 2022, as compared to the
third quarter of fiscal 2021.


                                                 For the nine months ended
                                                       November 30,                  Changes
                                                   2021              2020         Amount      %

                                                    (in thousands, except percentages)
Cost of revenue, excluding depreciation
and amortization                              $      125,426     $     66,052    $ 59,374     90 %




Cost of revenue, excluding depreciation and amortization increased $59.4
million, or 90%, to $125.4 million for the nine months ended November 30, 2021,
as compared to $66.1 million for the nine months ended November 30, 2020. The
increase was attributable primarily to cost of revenue incurred by 2nd.MD and
PlushCare, which contributed revenues from the acquisition date as of March 3,
2021 and June 9, 2021, respectively, through November 30, 2021, as well as an
increase in personnel and related costs to serve the customer base which grew in
the first nine months of fiscal 2022, as compared to the first nine months
of
fiscal 2021.

Operating expenses


                                               For the three months ended
                                                     November 30,                    Changes
                                                 2021               2020          Amount       %

                                                    (in thousands, except percentages)
Operating expenses:
Product and technology                      $        22,846     $     13,018    $    9,828      75 %
Sales and marketing                                  24,616            8,644        15,972     185 %
General and administrative                           21,464            8,414        13,050     155 %
Depreciation and amortization                        11,250            2,114         9,136     432 %
Change in fair value of contingent
consideration                                      (68,428)                -      (68,428)     N/A
Total operating expenses                    $        11,748     $     32,190    $ (20,442)    (64) %




Product and technology.    Product and technology expense increased $9.8
million, or 75%, to $22.8 million for the three months ended November 30, 2021,
as compared to $13.0 million for the three months ended November 30, 2020. The
increase was primarily driven by increases in personnel added via the 2nd.MD and
PlushCare acquisitions, along with the addition of personnel in product
development and product management to support the development of new and
existing offerings in connection with the expansion of our business.

Sales and marketing.    Sales and marketing expense increased $16.0 million, or
185%, to $24.6 million for the three months ended November 30, 2021, as compared
to $8.6 million for the three months ended November 30, 2020. The increase was
primarily driven by increases in personnel added via the 2nd.MD and PlushCare
acquisitions, digital marketing costs associated with customer acquisition spend
related to PlushCare, along with an increase in the size of our direct sales
force, account management, marketing, and supporting functions associated with
the expansion of our business.

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General and administrative.    General and administrative expense increased
$13.1 million, or 155%, to $21.5 million for the three months ended November 30,
2021, as compared to $8.4 million for the three months ended November 30, 2020.
The increase was primarily due to the addition of general and administrative
costs from the 2nd.MD and PlushCare businesses, and costs to operate as a public
company.

Depreciation and amortization.    Depreciation and amortization expense
increased $9.1 million, or 432%, to $11.3 million for the three months ended
November 30, 2021, as compared to $2.1 million for the three months ended
November 30, 2020. The increase was primarily due to amortization of intangible
assets acquired during fiscal 2022.

The change in the fair value of the contingent consideration. This operating expense represents the change in the fair value of the contingent liabilities associated with the purchase of 2nd.MD and PlushCare. For the three months ending November 30, 2021, the change in the fair value of the contingent consideration has decreased primarily due to the decrease in our share price.


                                              For the nine months ended
                                                    November 30,                   Changes
                                                 2021              2020         Amount       %

                                                   (in thousands, except percentages)
Operating expenses:
Product and technology                      $        61,297     $   36,624    $   24,673      67 %
Sales and marketing                                  63,134         23,841        39,293     165 %
General and administrative                           69,636         20,537        49,099     239 %
Depreciation and amortization                        30,967          6,090        24,877     408 %
Change in fair value of contingent
consideration                                      (38,282)              -      (38,282)     N/A
Total operating expenses                    $       186,752     $   87,092    $   99,660     114 %




Product and technology.    Product and technology expense increased $24.7
million, or 67%, to $61.3 million for the nine months ended November 30, 2021,
as compared to $36.6 million for the nine months ended November 30, 2020. The
increase was primarily driven by increases in personnel added via the 2nd.MD and
PlushCare acquisitions, along with the addition of personnel in product
development and product management to support the development of new and
existing offerings in connection with the expansion of our business.

Sales and marketing.    Sales and marketing expense increased $39.3 million, or
165%, to $63.1 million for the nine months ended November 30, 2021, as compared
to $23.8 million for the nine months ended November 30, 2020. The increase was
primarily driven by increases in personnel added via the 2nd.MD and PlushCare
acquisitions, digital marketing costs associated with customer acquisition spend
related to PlushCare, along with an increase in the size of our direct sales
force, account management, marketing, and supporting functions associated with
the expansion of our business.

General and administrative.    General and administrative expense increased
$49.1 million, or 239%, to $69.6 million for the nine months ended November 30,
2021, as compared to $20.5 million for the nine months ended November 30, 2020.
The increase was primarily due to $13.2 million of acquisition and
integration-related costs along with the addition of general and administrative
costs from the 2nd.MD and PlushCare businesses, as well as costs to operate as a
public company.

Depreciation and amortization.    Depreciation and amortization expense
increased $24.9 million, or 408%, to $31.0 million for the nine months ended
November 30, 2021, as compared to $6.1 million for the nine months ended
November 30, 2020. The increase was primarily due to amortization of intangible
assets acquired during fiscal 2022.

The change in the fair value of the contingent consideration. This operating expense represents the change in the fair value of the contingent liabilities associated with the purchase of 2nd.MD and PlushCare. From the date of the 2nd.MD acquisition in March 3, 2021 via November 30, 2021, the change in the fair value of the contingent consideration has decreased primarily due to the decrease in our share price.

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Interest expense, net


                           For the three months ended
                                  November 30,                   Changes
                             2021                2020        Amount       %

                                  (in thousands, except percentages)
Interest expense, net    $         743        $       35    $    708    2,023 %




Interest expense, net increased $0.7 million, or 2,023%, to $0.7 million for the
three months ended November 30, 2021, as compared to $0.0 million for the three
months ended November 30, 2020.  The increase was primarily due to expenses
associated with the convertible notes issued during the first quarter of fiscal
2022.


                           For the nine months ended
                                 November 30,                   Changes
                             2021              2020         Amount       %

                                 (in thousands, except percentages)
Interest expense, net    $      2,137      $      3,663    $ (1,526)    (42) %




Interest expense, net decreased $1.5 million, or 42%, to $2.1 million for the
nine months ended November 30, 2021, as compared to $3.7 million for the nine
months ended November 30, 2020.  The decrease was primarily due to a decrease in
our Term Loan and 2019 Revolver borrowings during the nine months ended November
30, 2021 as compared to the nine months ended November 30, 2020, resulting from
our repayment of the Term Loan and 2019 Revolver borrowings during July 2020,
offset by expenses associated with the convertible notes issued during the first
quarter of fiscal 2022.

Liquidity and capital resources

We had cash and cash equivalents of $366.0 million as of November 30, 2021. Our
cash equivalents are comprised primarily of money market accounts held at banks
and United States treasury bills with original maturities of less than 90 days.

Our debt arrangements

From November 30, 2021, we had $287.5 million In the outstanding debts relating to convertible bonds issued in March 2021. We also currently have a Revolving Credit Facility (2019 Revolver), which we have entered into July 2019.


On March 29, 2021, we issued an aggregate of $287.5 million principal amount of
0.50% Convertible Senior Notes due 2026 (the Notes), including the exercise in
full by the initial purchasers of their option to purchase up to an additional
$37.5 million aggregate principal amount of the Notes, pursuant to an Indenture
dated as of March 29, 2021 (the Indenture), between us and U.S. Bank National
Association, as trustee. The Notes will bear interest at a rate of 0.50% per
annum, payable semiannually in arrears on April 1 and October 1 of each year,
beginning on October 1, 2021. The Notes will mature on April 1, 2026, unless
earlier converted, redeemed or repurchased. The Notes are convertible into cash,
shares of our common stock or a combination of cash and shares of our common
stock, at our election.

The 2019 Revolver provides for a senior secured revolving line of credit in the
amount of up to $80.0 million, with borrowing availability subject to certain
monthly recurring revenue calculations.   The interest rate on any outstanding
borrowings will be at LIBOR plus 350 basis points or the lending institution's
base rate plus 250 basis points, subject to certain floors, and interest
payments are to be made in installments of one, two, or three months as chosen
by us. We also have an outstanding letter of credit to serve as an office
landlord security deposit in the amount of $1.1 million. This letter of credit
is secured through the revolving credit facility, thus reducing the capacity of
the revolving credit facility to $78.9 million.

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During March 2020, we borrowed the available capacity of $48.7 million to
increase our cash position given the uncertainty in the overall business
environment due to the COVID-19 pandemic.  During July 2020, we repaid the 2019
Revolver in full, including all outstanding interest. The 2019 Revolver expires
in July 2022.

The 2019 Revolver contains a liquidity covenant calculated based on cash on hand
plus available borrowings under the 2019 Revolver, a revenue covenant and
certain reporting covenants.  On August 21, 2020, we entered into an amendment
to the 2019 Revolver which revised the terms of the revenue covenant and imposed
minimum LIBOR and Base Rate levels. On September 11, 2020, we entered into
another amendment to the 2019 Revolver which modified the allocation
requirements of our cash to be held at each of the two lenders participating in
the 2019 Revolver.   On November 6, 2020, we entered into another amendment to
the 2019 Revolver which increased the capacity from $50.0 million to $80.0
million. On March 2, 2021, we entered into another amendment to the 2019
Revolver in association with the acquisition of 2nd.MD and amended certain
revenue covenants. On March 23, 2021, we entered into another amendment to the
2019 Revolver in association with the convertible senior notes offering. On May
26, 2021, we entered into another amendment to the 2019 Revolver in association
with the acquisition of PlushCare which modified certain reporting covenants.

We were in compliance with all such applicable covenants as of November 30,
2021, and believe we are in compliance as of the date of this Quarterly Report
on Form 10-Q. We do not expect to need to draw on the 2019 Revolver, but our
access to draw on the 2019 Revolver could be limited in the future if we do not
have enough monthly recurring revenues to cover the borrowing availability
calculations.

cash flow

The following table summarizes our cash flows for the indicated periods:


                                               For the nine months ended
                                                     November 30,
                                                  2021             2020

                                                    (in thousands)

Net cash used in operating activities $ (60,066) $ (35628)
Net cash used in investing activities

             (263,081)        (1,932)
Net cash provided by financing activities           255,245        423,343



Operating Activities.   Net cash used in operating activities increased by $24.4
million to $60.1 million during the nine months ended November 30, 2021 from
$35.6 million during the nine months ended November 30, 2020, primarily due to
higher net loss, which included $13.2 million in acquisition and
integration-related charges, as well as changes in accounts receivable and
accrued compensation, partially offset by changes in deferred revenue and due to
customers. The change in accrued compensation is primarily due to the cash
payout in May 2021 of employee annual bonuses related to the fiscal year ended
February 28, 2021 whereas annual bonuses related to the fiscal year ended
February 29, 2020 were paid in the form of stock options in lieu of cash.

Investing Activities.    Net cash used in investing activities increased by
$261.1 million to $263.1 million during the nine months ended November 30, 2021,
from $1.9 million during the nine months ended November 30, 2020, primarily due
to cash paid for the acquisitions of 2nd.MD and PlushCare during the nine months
ended November 30, 2021.

Financing Activities.    Net cash provided by financing activities decreased by
$168.1 million to $255.2 million during the nine months ended November 30, 2021
from $423.3 million during the nine months ended November 30, 2020, primarily
due to the absence of proceeds from our public offerings which occurred in the
prior year period and the purchase of capped calls associated with the
Convertible Senior Notes, partially offset by the issuance of the Convertible
Senior Notes.

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Contractual Obligations

The following table summarizes our contractual obligations as of November 30,
2021:


                                                                      Payments due by period
                                              Less than                                        More than
                                                1 year       Years 2 ­ 3      Years 4 ­ 5       5 years        Total

                                                                          (in thousands)
Operating lease obligations(1)               $     8,363    $      15,341    $      12,887    $    11,489    $  48,080
Convertible Senior Notes                               -                -          287,500              -      287,500
Interest and fees on debt(2)                       1,571            2,875            2,156              -        6,602
Data license in connection with joint
development agreement                                226              498               65              -          789
Other purchase obligations(3)                      5,261           15,143           19,051              -       39,455


(1) The lease includes (a) the company’s joint premises in Plymouth meetingAnd

Pennsylvania, which ends in June 2027, subject to some early

Termination rights, (b) the company’s joint headquarters in Seattle, WashingtonAnd

that ends in September 2030Subject to certain early termination rights,

(c) Office space in Houston, Texas, expiring on December 2025, (Dr)

office space Scottsdale, Arizona, which ends in April 2024, subject to

Certain early termination rights, (e) office space in Prague, Czech RepublicAnd

    which expires in September 2027, (f) office space in Santa Monica,
    California, which expires in February 2023, and (g) office space in San
    Francisco, California, which expires in February 2022.

(2) Interest is calculated on our convertible senior bonds as applicable

Fixed interest rate. Fees are calculated on our Revolving Credit Facility as follows:

25 basis points of the commitment amount, payable on a quarterly basis.

(3) Other purchase obligations include all other non-cancellable contractual contracts

Obligations that relate primarily to cloud computing costs.

Balance Sheet Arrangements

We did not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other purposes. We did not have
any other off-balance sheet arrangements, except to the extent reflected under
"- Contractual Obligations" above and in Notes 2 and 11 to our audited
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q.

Significant accounting policies and estimates

Our condensed consolidated financial statements are prepared in accordance with
U.S. GAAP. The preparation of these condensed consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, and expenses, as well as related disclosures.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are
based on historical experience and various other assumptions that we believe to
be reasonable under the circumstances. Our actual results could differ from
these estimates.

Business Combinations and Contingent Consideration was added as a critical
accounting policy in our Quarterly Report on Form 10-Q for the period ended May
31, 2021. Other than the addition of Business Combinations and Contingent
Consideration, there have been no significant changes in our critical accounting
policies and estimates during the nine months ended November 30, 2021, as
compared to the critical accounting policies and estimates described in our
Annual Report on Form 10-K for the year ended February 28, 2021 filed with
the
SEC.

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Business integration and potential considerations


We account for acquisitions in a business combination under the U.S. GAAP
business combinations guidance.  This accounting requires that assets acquired
and liabilities assumed be recognized at their fair values as of the acquisition
date. Any excess purchase consideration over the fair value of the assets
acquired and liabilities assumed is recorded as goodwill. The results of
acquired businesses are included in our consolidated financial statements from
the date of acquisition. Acquisition-related costs are not considered part of
the purchase consideration and are accounted for as operating expenses as
incurred.

We account for contingent consideration in accordance with applicable guidance
provided within the business combination accounting rules. As part of our
consideration for the 2nd.MD and PlushCare acquisitions, we are contractually
obligated to pay certain consideration resulting from the outcome of future
events. Therefore, we are required to update our assumptions each reporting
period, based on new developments, and record such contingent consideration
liabilities at fair value until the contingency is resolved. Changes in the fair
value of the contingent consideration liabilities are recognized each reporting
period and included in our consolidated statements of operations.

Determining the fair value of assets acquired and liabilities assumed in a
business combination requires significant management judgment and estimates,
including determining appropriate discount rates and useful lives, selecting
valuation methodologies, and estimating future revenues, expenses, and cash
flows. In valuing the contingent consideration, the probability of the
occurrence of future events is a critical estimate. We may engage third-party
valuation specialists to assist with determining the fair value of assets
acquired, liabilities assumed, and contingent consideration. These estimates are
inherently uncertain and unpredictable, and if different estimates were used the
purchase price for the acquisition could be allocated to the assets acquired and
liabilities assumed differently from the allocation that we have made. In
addition, unanticipated events and circumstances may occur, which may affect the
accuracy or validity of such estimates, and if such events occur we may be
required to record a charge against the value ascribed to an acquired asset or
an increase in the amounts recorded for liabilities assumed.

Newly issued and approved accounting statements

For more information about recent accounting statements, see Note 2 in the notes to accompany our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

The case of a startup growth company


We are an "emerging growth company," as defined in the Jumpstart Our Business
Startups Act of 2012. We remain an emerging growth company until the earlier of
(i) February 28, 2026 (the last day of the fiscal year following the fifth
anniversary of our initial public offering), (ii) the last day of the
fiscal year in which we have total annual gross revenue of at least
$1.07 billion, (iii) the last day of the fiscal year in which we are deemed to
be a "large accelerated filer", as defined in the rules under the Exchange Act,
and (iv) the date on which we have issued more than $1.0 billion in
non-convertible debt during the prior three-year period. Based on the market
value of our common stock held by non-affiliates as of August 31, 2021, we will
meet the conditions to be deemed a "large accelerated filer" as of February 28,
2022 and will consequently no longer be an emerging growth company as of that
date.

We have elected to take advantage of certain of the reduced disclosure
obligations in this Quarterly Report on Form 10-Q and may elect to take
advantage of other reduced reporting requirements in our future filings with the
SEC. As a result, the information that we provide to our stockholders may be
different from the information you might receive from other public reporting
companies in which you hold equity interests. In particular, Section 107 of the
JOBS Act provides that an emerging growth company can take advantage of the
extended transition period provided in Section 7(a)(2)(B) of the Securities Act
of 1933, as amended (the Securities Act) for complying with new or revised
accounting standards. Thus, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies. We have elected to avail ourselves of this extended
transition period and, as a result, so long as we remain an emerging growth
company, we will not be subject to the same implementation timing of new or
revised accounting standards as other public companies that are not emerging
growth companies until these standards apply to private companies unless we
elect to early adopt as permitted by the relevant guidance for private
companies. Based on

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the closing price of our common stock and the market value of our common stock
held by non-affiliates as of August 31, 2021, we have determined that we will no
longer be an emerging growth company as of February 28, 2022. As a result, we
will no longer be able to take advantage of reduced disclosure and other
obligations that are available to emerging growth companies after that date.

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