IMARA You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Form Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Business Overview
We are a biopharmaceutical company that has been dedicated to developing and
commercializing novel therapeutics to treat patients suffering from serious
diseases.
In
Following an extensive process of evaluating strategic alternatives, including
identifying and reviewing potential candidates for a strategic acquisition or
other transaction, on
On
• Dissolve and liquidate our assets. If, for any reason, the Merger does not
close, our board of directors may conclude that it is in the best interest
of stockholders to dissolve the Company and liquidate our assets. In that
event, we would be required to pay all of our debts and contractual
obligations, and to set aside certain reserves for potential future claims.
There would be no assurances as to the amount or timing of available cash
remaining to distribute to stockholders after paying our obligations and
setting aside funds for reserves.
• Pursue another strategic transaction. We may resume the process of
evaluating a potential strategic transaction in order to attempt another
strategic transaction like the Merger.
• Operate our business. Our board of directors may elect to seek new product
candidates for development.
Asset Purchase Agreement
Pursuant to the terms of the Asset Purchase Agreement, we agreed to sell
tovinontrine and all of our other assets related to our PDE9 program to
Cardurion. As consideration for the Asset Sale, in addition to
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payment of
Merger Agreement
Subject to the terms and conditions of the Merger Agreement, at the effective
time of the Merger, or the Effective Time, (a) each then-outstanding share of
Enliven common stock (including shares of Enliven common stock issued upon
conversion of Enliven preferred stock, which conversion will occur immediately
prior to the Effective Time and shares of Enliven common stock issued in the
Financing Transaction (as defined below)) will be converted into the right to
receive a number of shares of our common stock (subject to the payment of cash
in lieu of fractional shares and after giving effect to the Reverse Stock Split
(as defined below)) calculated in accordance with the Merger Agreement (the
ratio of such conversion, the Exchange Ratio); and (b) each then-outstanding
Enliven stock option to purchase Enliven common stock will be assumed by us,
subject to adjustment as set forth in the Merger Agreement.
Subject to the terms and conditions of, and the calculation of the Exchange
Ratio pursuant to, the Merger Agreement, it is currently anticipated that upon
the closing of the Merger, our pre-Merger stockholders will own approximately
16% of the combined company and pre-Merger Enliven stockholders (including those
purchasing Enliven shares in the Financing Transaction) will own approximately
84.1% of the combined company on a pro forma basis, based on the number of
shares of our common stock expected to be issued in connection with the Merger.
The provisions for calculating the Exchange Ratio are set forth in the Merger
Agreement, and assume a valuation for Enliven equal to
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Consummation of the Merger is subject to certain closing conditions, including, among other things, (1) approval by our stockholders of the Required Voting Proposal, (2) approval by the Enliven stockholders of the adoption of the Merger Agreement, (3) Nasdaq's approval of the listing of the shares of our common stock to be issued in connection with the Merger, (4) the effectiveness of the Registration Statement, (5) our net cash as determined in accordance with the Merger Agreement being between$75 million and$95 million , (6) the waiting period under the HSR Act having expired or been terminated and (7) our closing of the previously announced Asset Sale. The closing condition set forth in clause (2) above was satisfied onJanuary 25, 2023 , when the Enliven stockholders approved adoption of the Merger Agreement. The closing condition set forth in clause (4) above was satisfied when the Registration Statement was declared effective by theSEC onJanuary 23, 2023 . The closing condition set forth in clause (6) above was satisfied onNovember 28, 2022 , when the waiting period under the HSR Act expired without extension or a request for additional information or documentary material. The closing condition set forth in clause (7) above was satisfied onNovember 10, 2022 , when the Asset Sale was completed. Each party's obligation to consummate the Merger is also subject to other specified customary conditions, including the representations and warranties of the other party being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, generally subject to an overall material adverse effect qualification, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the Merger. Enliven's obligation to consummate the Merger is also subject to the completion of the Financing Transaction such that Enliven receives gross proceeds of at least$131.6 million and our obligation to consummate the Merger is subject to the completion of the Financing Transaction such that Enliven receives gross proceeds of at least$75.0 million . The Merger Agreement contains certain termination rights of each of us and Enliven, including, subject to compliance with the applicable terms of the Merger Agreement, the right of each party to terminate the Merger Agreement to enter into a definitive agreement for a superior proposal. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay Enliven a termination fee of$3.0 million and Enliven may be required to pay us a termination fee of$9.75 million . In addition, Enliven will be required to pay us a termination fee of$3.0 million if Enliven or we terminate the Merger Agreement at specified times with all conditions to closing of the Merger satisfied other than completion of the Financing Transaction such that Enliven receives gross proceeds of at least$131.6 million or$75 million , respectively. At the Effective Time, the board of directors of the combined company is expected to consist of nine members, eight of whom will be designated by Enliven and one of whom will be designated by us. Enliven's designees are expected to be the current members of the board of directors of Enliven. Our designee is expected to beRahul Ballal , our President and Chief Executive Officer. Concurrently with the execution and delivery of the Merger Agreement, Enliven entered into a common stock purchase agreement, or the Purchase Agreement with certain new and existing Enliven investors, pursuant to which Enliven agreed to issue and sell to such investors, and such investors agreed to purchase from Enliven, shares of Enliven common stock for an aggregate purchase price of approximately$164.5 million , or the Financing Transaction. The closing of the Financing Transaction is conditioned on the satisfaction or waiver of the closing conditions to the Merger as set forth in the Merger Agreement and other customary closing conditions, and is expected to occur immediately prior to the closing of the Merger, in accordance with the terms of the Purchase Agreement. The shares of Enliven common stock to be issued in connection with the Financing Transaction will be converted into the right to receive a number of shares of our common stock in the Merger in accordance with the Exchange Ratio, or the Converted Financing Stock (subject to the payment of cash in lieu of fractional shares and after giving effect to the Reverse Stock Split). At or prior to the Effective Time, we will enter into a Contingent Value Rights Agreement, or the CVR Agreement, with a rights agent, or the Rights Agent, pursuant to which our pre-Merger common stockholders will receive one contingent value right (each, a CVR) for each outstanding share of our common stock held by such stockholder on such date. Each CVR will represent the contractual right to receive payments upon the occurrence of certain events related to the Asset Sale, subject to and in accordance with the terms and conditions of, the CVR Agreement. The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. In the event that no such proceeds are received, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that holders of CVRs will receive any amounts with respect thereto. The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with theSEC . The CVRs will not have 56
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any voting or dividend rights and will not represent any equity or ownership interest in us or any of our affiliates. No interest will accrue on any amounts payable in respect of the CVRs.
Financial Overview
Since our inception in 2016, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of tovinontrine. To date, we have funded our operations primarily through the sale of common stock and the sale of convertible preferred stock.
On
On
Excluding the gain on the Asset Sale recognized in the current year, we have
incurred significant operating losses since inception. Our losses from
operations were
We are not currently developing any product candidates and we do not have any products approved for sale. If the Merger does not close, if we decide to pursue any future product development efforts, we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for any future product candidate. In addition, if we obtain regulatory approval for any product candidate and to the extent that it engages in commercialization activities on our own, we expect we will incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities.
Moreover, if we decide to pursue any future product development efforts, we will need substantial additional funding to support our continuing operations and develop a growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we would expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into other arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when, needed, could have a material adverse effect on our business, results of operations, and financial condition. We will need to generate significant revenue to achieve profitability, and may never do so.
As of
Impact of COVID-19 Pandemic
In
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Although we have not experienced any significant adverse impact from the COVID-19 pandemic on our financial condition, results of operations or liquidity as of the date of this Annual Report on Form 10-K, the COVID-19 pandemic has resulted in disruptions to our clinical trial operations. In addition, our employees are currently working remotely.
Our financial condition, results of operations and liquidity could be negatively impacted by the impact of the COVID-19 pandemic in future periods. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which remain uncertain and cannot be predicted, including new information that may emerge concerning the continued severity of COVID-19 and variants of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. As the impact of the COVID-19 pandemic continues, it may have an adverse effect on our results of future operations, financial position and liquidity, and on our ability to access capital. Even after the primary impact of the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.
Financial Operations Overview
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If we decide to pursue any future product development efforts and such efforts are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Operating Expenses
Research and Development. Research and development expenses consist primarily of
costs incurred in connection with the preclinical and clinical development and
manufacture of our products. We expect our future research and development
expenses to decrease significantly as compared to research and development
expenses in 2021 and the first half of 2022, as a result of our
• costs related to the impact of the COVID-19 pandemic;
• personnel-related expenses, including salaries, benefits and stock-based
compensation expenses, for individuals involved in research and
development activities;
• external research and development expenses incurred under agreements with
contract research organizations, or CROs, investigative sites, and
consultants that conducted our preclinical studies and clinical trials and
other scientific development services;
• costs incurred under agreements with contract manufacturing organizations,
or CMOs, who developed and manufactured material for our preclinical
studies and clinical trials;
• costs related to compliance with regulatory requirements; and
• milestone fees incurred in connection with our license agreement with
Lundbeck.
Historically, we expensed research and development costs as incurred. We recognized external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities were based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid expenses or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities were deferred and capitalized, even when there was no alternative future use for the research and development. The capitalized amounts were expensed as the related goods were delivered or the services are performed.
A significant portion of our research and development costs have been external costs, which we tracked after a clinical product candidate had been identified. Our internal research and development costs are primarily personnel-related costs and
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other indirect costs. Our research and development expenses to-date have been incurred in connection with our development of tovinontrine in SCD and ?-thalassemia.
The following table summarizes our research and development expenses for the
periods indicated:
Year Ended December 31,
2022 2021
(in thousands)
IMR-687 $ 13,600 $ 29,239
Personnel expenses (including stock-based compensation) 4,532 7,804
Other expenses 808 1,399
Total research and development expenses $ 18,940 $ 38,442 If we were to decide to pursue any future product development efforts, the successful development of any product candidates is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that would be necessary to complete the potential development and commercialization of any future product candidates. We are also unable to predict when, if ever, material net cash inflows would commence from the sale of potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
• the impact of the COVID-19 pandemic and our response to it;
• the timing and progress of preclinical and clinical development activities;
• the number and scope of preclinical and clinical programs we decide to
pursue;
• our ability to maintain research and development programs or to establish
new ones;
• establishing an appropriate safety profile with investigational new drug
application, or IND, enabling studies;
• successful patient enrollment in, and the initiation of, clinical trials;
• the successful completion of clinical trials with safety, tolerability and
efficacy profiles that are satisfactory to the U.S. Food and Drug
Administration , or FDA, or any comparable foreign regulatory authority;
• the timing, receipt and terms of any regulatory approvals from applicable
regulatory authorities;
• our ability to establish new licensing or collaboration arrangements;
• the performance of our future collaborators, if any;
• establishing commercial manufacturing capabilities or making arrangements
with third-party manufacturers;
• obtaining, maintaining, defending and enforcing patent claims and other
intellectual property rights;
• launching commercial sales of our product candidates, if approved, whether
alone or in collaboration with others; and
• maintaining a continued acceptable safety profile of the product
candidates following approval.
Any changes in the outcome of any of these variables with respect to the potential development of any future product candidates could mean a significant change in the costs and timing associated with the development of these product candidates. If we were to decide to pursue any future product development efforts, we may never obtain regulatory approval for any product candidates. Drug commercialization takes several years and millions of dollars in development costs and the potential success of such programs is difficult to predict and are often not successful.
General and Administrative. General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits, and stock-based compensation expenses for personnel in executive, finance, accounting, human resources, legal and other administrative functions. Other significant general and administrative expenses include the cost of director and officer insurance premiums, legal fees relating to patent, intellectual property and corporate matters, and fees paid for accounting, consulting and other professional services.
Our future general and administrative expenses will be significantly dependent on the outcome of our strategic process, including whether or not we successfully consummate the Merger, and on whether we decide to pursue any future product development efforts.
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Total Other Income, Net
Total Other Income, Net. Total other income, net primarily consists of interest
earned on our cash, cash equivalents and investments during the years ended
Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in thousands) Operating expenses: Research and development$ 18,940 $ 38,442 General and administrative 15,330 13,000 Total operating expenses 34,270 51,442 Gain on Asset Sale 35,000 - Income (loss) from operations 730 (51,442 ) Total other income, net 846 58 Income Tax Provision (88 ) - Net income (loss)$ 1,488 $ (51,384 )
Research and Development Expenses
Research and development expenses decreased by approximately
• a $15.6 million decrease in costs related to the development and
manufacturing of clinical materials, clinical research and oversight of
our clinical trials and investigative fees for tovinontrine following
discontinuation of clinical development;
• a $3.3 million decrease in personnel-related costs; and
• a $0.6 million decrease in other research and development operational
costs, including professional services, supplies, travel, and facilities.
General and Administrative Expenses
General and administrative expenses increased by approximately
• a $2.2 million increase in consulting and professional fees, including
legal fees incurred in connection with the Asset Sale, business
development, accounting and audit fees; and
• a $0.1 million increase in stock-based compensation expense.
Total Other Income, Net
Total other income, net was
Liquidity and Capital Resources
Sources of Liquidity
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Since our inception, we have incurred significant losses on an aggregate basis.
We have not yet commercialized or generated revenue from sales of any product
candidate. Through
On
On
As of
While we do not currently expect that the COVID-19 pandemic will have a material adverse impact on our short-term or long-term liquidity, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. See "Impact of COVID-19 Pandemic."
Cash Flows
The following table provides information regarding our cash flows for the
periods indicated:
Year Ended December 31,
2022 2021
(in thousands)
Net cash used in operating activities $ (35,568 ) $ (46,771 )
Net cash provided by (used in) investing activities 76,515 (1,632 )
Net cash provided by (used in) financing activities (1,233 ) 49,101
Net increase in cash, cash equivalents, and
restricted cash $ 39,714 $ 698
Net cash used in operating activities for the year ended
Net cash used in operating activities for the year ended
Net Cash Provided by and Used in Investing Activities
Net cash provided by investing activities for the year ended
Net cash used in investing activities for the year ended
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Net cash used in financing activities for the year ended
Net cash provided by financing activities for the year ended
Funding Requirements
Based on our current operating plan, we expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of filing of this Annual Report on Form 10-K. However, we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
Our future capital requirements will depend on the results of our ongoing strategic evaluation, including whether we complete the Merger. If the Merger is not completed, we will reconsider our strategic alternatives which may include a dissolution of the company, pursuit of another strategic transaction or the pursuit of future product development. If the Merger does not close, or if we decide to pursue any future product development efforts, our future funding requirements would depend on, and could increase significantly as a result of, many factors, including:
• our ability to consummate an alternative strategic transaction and the
nature and type of such transaction;
• our ability to bring any product candidates through preclinical and
clinical development, and the timing and scope of these research and
development activities;
• the costs of obtaining clinical and commercial supplies of any product
candidates we may seek to develop;
• our ability to successfully commercialize any product candidates we may
develop;
• the manufacturing, selling and marketing costs associated with any product
candidates we may develop, including the cost and timing of establishing
our sales and marketing capabilities;
• the amount and timing of sales and other revenues from any product
candidates we may identify and develop, including the sales price and the
availability of coverage and adequate third-party reimbursement;
• the time and cost necessary to respond to technological and market
developments;
• the extent to which we may acquire or in-license other product candidates
and technologies;
• our ability to attract, hire and retain qualified personnel;
• the impact of the COVID-19 pandemic and our response to it;
• the costs of maintaining, expanding and protecting our intellectual
property portfolio; and
• the costs associated with operating as a public company and maintaining
compliance with exchange listing and SEC requirements.
A change in the outcome of any of these or other variables with respect to the development of any product candidate we may develop in the future could significantly change the costs and timing associated with the development of that product candidate. Further, our need for additional funds is heavily dependent on the outcome of our ability to complete a strategic transaction, including the Merger.
Moreover, if we decide to pursue future product development, until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of cash-on-hand, equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of such stockholders. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring
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additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research program or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
In the normal course of business, we enter into agreements that contain contractual obligations, of which the most significant to date included our former licensing agreement with Lundbeck. In connection with the Asset Sale, our license agreement with Lundbeck was assigned to Cardurion.
Our license agreement with Lundbeck, as well as certain other agreements, required us to pay third parties upon achievement of certain development, regulatory or commercial milestones. Amounts related to contingent payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory and commercial milestones that may not be achieved. We have not included payments contingent upon the achievement of certain development, regulatory or commercial milestones on our consolidated balance sheets. For further information regarding our former license agreement with Lundbeck, please see Note 7 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Further, on
Critical Accounting Policies and Estimates
This management's discussion and analysis is based on our consolidated financial
statements, which have been prepared in accordance with
While our critical accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates. See Note 2 of the notes to our annual consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies.
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued third-party research and development expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced
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or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.
We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.
Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts incurred.
Stock-Based Compensation
We measure stock-based compensation issued to employees and non-employees based on the grant date fair value of the stock-based awards and recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award. We have also granted stock-based awards with performance-based vesting conditions. We recognize compensation expense for awards with performance-based vesting conditions over the remaining service period using the accelerated attribution method when the performance condition is deemed to be probable. We account for forfeitures as they occur.
We classify stock-based compensation expense in our consolidated statements of operations in the same manner in which the award recipient's salary and related costs are classified or in which the award recipient's service payments are classified. In future periods, we expect stock-based compensation expense to increase, due in part to our existing unrecognized stock-based compensation expense and as we grant additional stock-based awards to continue to attract and retain our employees.
We determine the fair value of stock-based awards based on the fair value of our
common stock on the date of grant. The fair value of each stock option grant is
estimated on the date of grant using the Black-Scholes option-pricing model,
which requires inputs based on certain subjective assumptions, including the
expected stock price volatility, the expected term of the option, the risk-free
interest rate for a period that approximates the expected term of the option,
and our expected dividend yield. Given our limited trading history as a public
company, we determine the volatility for awards granted based on an analysis of
reported data for a group of guideline companies that issued options with
substantially similar terms. The expected volatility has been determined using a
weighted-average of the historical volatility measures of this group of
guideline companies. We expect to continue to do so until we have adequate
historical data regarding the volatility of our own traded stock price. The
expected term of our stock options granted to employees has been determined
utilizing the "simplified" method for awards that qualify as "plain-vanilla"
options. Prior to our IPO, the expected term of our stock options granted to
non-employees also used the "simplified" method. Following our IPO, the expected
term of options granted to non-employees is determined by contractual term. The
risk-free interest rate is determined by reference to the
Following our IPO, we have determined the fair value of our common stock based on the quoted market price of our common stock on the Nasdaq Global Select Market.
Emerging Growth Company Status
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We are an "emerging growth company," or EGC, under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities.
As an EGC, we may take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:
• we may present only two years of audited financial statements and only two
years of related Management's Discussion and Analysis of Financial
Condition and Results of Operations within registration statements;
• we may avail ourselves of the exemption from providing an auditor's
attestation report on our system of internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
• we may avail ourselves of the exemption from complying with any
requirement that may be adopted by the Public Company Accounting Oversight
Board , or PCAOB, regarding mandatory audit firm rotation or a supplement
to the auditor's report providing additional information about the audit
and the financial statements, known as the auditor discussion and
analysis;
• we may provide reduced disclosure about our executive compensation
arrangements; and
• we may not require nonbinding advisory votes on executive compensation or
stockholder approval of any golden parachute payments.
We will remain an EGC until the earliest of (i)
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