ACUMEN PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the audited financial statements and notes thereto as of and for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy, plans and objectives of management for future operations and the potential impact that the ongoing COVID-19 pandemic may have on our business, 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 the Annual Report for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company developing a novel disease-modifying approach to target what we believe to be a key underlying cause of Alzheimer's Disease, or AD. Alzheimer's disease is a progressive neurodegenerative disease of the brain that leads to loss of memory and cognitive functions and ultimately results in death. Our scientific founders pioneered research on soluble amyloid-beta oligomers, or AßOs, which are globular assemblies of the Aß peptide that are distinct from Aß monomers and amyloid plaques. We are currently focused on advancing a targeted immunotherapy drug candidate, ACU193, through clinical proof of mechanism trials in early AD patients. We have confirmed that ACU193 is a consensus IgG2 subclass. We initiated a Phase 1 clinical trial of ACU193 in 2021, which we named "INTERCEPT-AD." This trial is enrolling patients with mild dementia or mild cognitive impairment due to AD, conditions referred to as "early AD." INTERCEPT-AD is aU.S. -based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose, or SAD, and multiple ascending dose, or MAD, cohorts involving a total of approximately 62 patients with early AD. The overall objective of the trial is to evaluate the safety and tolerability and establish clinical proof of mechanism of ACU193 administered intravenously. The primary trial endpoints are focused on safety and immunogenicity. An important safety measure will be the use of magnetic resonance imaging, or MRI, to assess the presence or absence of amyloid-related imaging abnormalities. Secondary endpoints include pharmacokinetics in plasma and cerebrospinal fluid, or CSF, and target engagement as evidenced by detection of ACU193 bound to AßOs in CSF. Clinical scales typically used in AD trials as well as computerized cognitive testing are included as exploratory measures. InOctober 2021 , we announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients. InOctober 2022 , theU.S. Food and Drug Administration , or FDA, granted Fast Track designation for ACU193 for the treatment of early AD. Due to delays in clinical trial site activation and patient enrollment that we believe are principally related to the effects of the COVID-19 pandemic, we expanded the anticipated number of trial sites to support our enrollment objectives and anticipated timelines. As ofNovember 11, 2022 , 17 clinical trial sites have been activated, and patient recruitment and enrollment is ongoing and progressing. Based on current site activations and enrollment rates, we anticipate completing enrollment in INTERCEPT-AD in the first quarter of 2023 and reporting our topline data from the INTERCEPT-AD trial in the second half of 2023. We have incurred net losses and negative cash flows from operations since our inception. Our net losses were$30.0 million and$92.3 million for the nine months endedSeptember 30, 2022 and 2021, respectively. As ofSeptember 30, 2022 , we had an accumulated deficit of$157.6 million and working capital of$195.9 million . Our net losses and cash flows from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of nonclinical studies, clinical trials and our expenditures on other research and development activities. We expect our expenses and operating losses will increase substantially for the foreseeable future as we advance ACU193 in clinical trials, seek to expand our product candidate portfolio through developing additional product candidates, grow our clinical, regulatory and quality capabilities, and incur additional costs associated with operating as a public company. It is likely that we will seek third-party collaborators for the future commercialization of ACU193 or any other product candidate that is approved for marketing. However, we may seek to commercialize our products at our own expense, which would require us to incur significant additional expenses for marketing, sales, manufacturing and distribution. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities. 19
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As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. However, global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in theU.S. and worldwide, rising inflation and supply disruptions resulting from the effects of COVID-19, the ongoing conflict betweenRussia andUkraine and related sanctions, and otherwise. If these conditions persist and deepen, we could experience an inability to access additional capital, or our liquidity could otherwise be impacted. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or future commercialization efforts. 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.
As of
COVID-19 and Macroeconomic Update
InMarch 2020 , theWorld Health Organization declared COVID-19 a global pandemic andthe United States declared a national emergency with respect to COVID-19. In response to the COVID-19 pandemic, a number of governmental orders and other public health guidance measures have been implemented across much ofthe United States , including in the locations of our office, clinical trial sites and third parties on whom we rely. We implemented a work-from-home policy allowing employees and consultantswho can work from home to do so. Business travel has been limited, and online video and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development activities, while work in laboratories by our partners has been organized to reduce risk of COVID-19 transmission. InOctober 2021 , we announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients. InOctober 2022 , the FDA granted Fast Track designation for ACU193 for the treatment of early AD. Due to delays in clinical trial site activation and patient enrollment that we believe were principally related to effects of the COVID-19 pandemic, we expanded the anticipated number of trial sites to support our enrollment objectives and anticipated timelines. However, we cannot assure that we will not experience additional delays in site activation or enrollment. As ofNovember 11, 2022 , 17 clinical trial sites have been activated and patient recruitment and enrollment is ongoing and progressing. Based on current site activations and enrollment rates, we anticipate completing enrollment in INTERCEPT-AD in the first quarter of 2023 and reporting our topline data from this trial in the second half of 2023. The ultimate impact of the COVID-19 pandemic, geopolitical events such as the ongoing conflict betweenRussia andUkraine and related sanctions, and macroeconomic events, including higher inflation and supply chain disruptions, on our business, results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our business, results of operations, financial position and cash flows may be materially adversely affected.
Components of Results of Operations
Operating Expenses
Our operating expenses consist of research and development expenses and general and administrative expenses.
Research and Development Expenses
Research and development costs primarily consist of direct costs associated with consultants and materials, biologic storage, third party, contract research organization costs and contract development and manufacturing expenses, salaries and other personnel-related expenses. Research and development costs are expensed as incurred. More specifically, these costs include:
• costs of funding research performed by third parties that conduct
research and development and nonclinical and clinical
activities on
our behalf;
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Table of Contents • costs of manufacturing drug supply and drug product;
• costs of conducting nonclinical studies and clinical trials of our
product candidates;
• consulting and professional fees related to research and development
activities, including equity-based compensation to non-employees;
• costs related to compliance with clinical regulatory requirements; and
employee-related expenses, including salaries, benefits and
stock-based compensation expense for our research and development
personnel.
As we currently only have one product candidate, ACU193, in development, we do
not separately track expenses by program. We expect that our research and
development expenses will increase substantially in connection with our clinical
development activities for our ACU193 program.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other personnel related expenses, including stock-based compensation, as well as costs for insurance, professional fees for legal, consulting, accounting, auditing, tax and recruiting services, investor and public relations, board of directors' expenses, franchise taxes, meetings, travel and rent, among others. We expect that our general and administrative expenses will increase as our organization and headcount needed in the future grows to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses. Additionally, we expect to incur increased expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing andSEC requirements, director and officer insurance costs, and investor and public relations costs. Other Income (Expense) Other income (expense) primarily includes interest income, net and other income, net. Following our initial public offering, or IPO, we made investments in marketable securities and the interest income earned, as well as the amortization and accretion of premiums and discounts are recorded in interest income, net. Other income, net generally consists of sublease income offset by fees incurred on our investments in marketable securities. Prior to our IPO onJuly 6, 2021 , changes in the fair values of the Series A-1 warrant liability and the Series B tranche rights were recognized as a component of other income (expense). The Series A-1 warrant liability and the Series B tranche rights were initially recorded at fair value as liabilities on our balance sheet. Each was subsequently re-measured at fair value at the end of each reporting period and also upon the exercise of the warrant onJune 22, 2021 , and upon settlement of the tranche rights with the milestone closing for the Series B onJune 17, 2021 . 21
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
2022 2021 Change
Operating expenses
Research and development $ 8,309 $ 1,800 $ 6,509
General and administrative 3,062 2,135 927
Total operating expenses 11,371 3,935 7,436
Loss from operations (11,371 ) (3,935 ) (7,436 ) Other income (expense) Interest income, net 663 14 649 Other income, net (2 ) 19 (21 ) Total other income 661 33 628 Net loss (10,710 ) (3,902 ) (6,808 ) Other comprehensive loss Unrealized loss on marketable securities - (28 ) 28 Comprehensive loss$ (10,710 ) $ (3,930 ) $ (6,780 )
Research and Development Expenses
Research and development expenses were$8.3 million and$1.8 million for the three months endedSeptember 30, 2022 and 2021, respectively. The$6.5 million increase was primarily due to increases of$2.1 million in contract research organization, or CRO, costs,$1.7 million for materials,$1.2 million in additional personnel expense,$1.0 million in consulting costs and$0.4 million in drug safety testing, as well as increases in miscellaneous expenses totaling$0.1 million ; all related to our ongoing clinical trial which was initiated in 2021 and nonclinical research and development activity.
General and Administrative Expenses
General and administrative expenses were$3.1 million and$2.1 million for the three months endedSeptember 30, 2022 and 2021, respectively. The$0.9 million increase was primarily due to increases of$0.7 million in personnel expenses,$0.2 million in accounting costs,$0.2 million in marketing costs and$0.1 million for each of the following: recruiting and travel expenses. These increases were partially offset by reductions of$0.2 million in both insurance and consulting expenses. Other Income (Expense) Other income was$0.7 million for the three months endedSeptember 30, 2022 , which was primarily due to net interest income on the Company's portfolio of marketable securities. Other income was de minimis for the three months endedSeptember 30, 2021 . 22
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Comparison of the Nine Months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended
2022 2021 Change
Operating expenses
Research and development $ 21,615 $ 6,632 $ 14,983
General and administrative 9,374 4,537 4,837
Total operating expenses 30,989
11,169 19,820
Loss from operations (30,989 ) (11,169 ) (19,820 ) Other income (expense) Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability - (81,157 ) 81,157 Interest income, net 1,000 22 978 Other income, net (1 ) 47 (48 ) Total other income (expense) 999 (81,088 ) 82,087 Net loss (29,990 ) (92,257 ) 62,267 Other comprehensive loss Unrealized loss on marketable securities (734 ) (28 ) (706 ) Comprehensive loss$ (30,724 ) $ (92,285 ) $ 61,561
Research and Development Expenses
Research and development expenses were$21.6 million and$6.6 million for the nine months endedSeptember 30, 2022 and 2021, respectively. The$15.0 million increase was primarily due to our ongoing clinical trial which was initiated in 2021 and nonclinical research and development activity, and includes increases of$4.2 million of CRO costs,$3.4 million in consulting costs,$3.0 million for materials,$2.7 million in personnel costs, and$1.5 million for drug safety testing, as well as$0.2 million for other miscellaneous expenses.
General and Administrative Expenses
General and administrative expenses were$9.4 million and$4.5 million for the nine months endedSeptember 30, 2022 and 2021, respectively. The$4.8 million increase was primarily due to increases of$2.1 million in personnel costs,$1.3 million in insurance costs,$0.5 million in legal costs,$0.4 million in marketing costs,$0.2 million for each of the following: travel expenses and recruiting costs, and$0.1 million for other miscellaneous expense.
Other Income (Expense)
Other income was$1.0 million for the nine months endedSeptember 30, 2022 , which was due to net interest income on the Company's portfolio of marketable securities. Other expense was$81.1 million for the nine months endedSeptember 30, 2021 , primarily due to increases in the fair values of the Series B tranche liability and Series A-1 warrant liability of$76.2 million and$5.0 million , respectively.
Liquidity and Capital Resources
OnJuly 6, 2021 , we issued 9,999,999 shares of common stock in our IPO, and onJuly 8, 2021 , we issued an additional 1,499,999 shares of common stock that were purchased by the underwriters pursuant to the underwriters' option to purchase additional shares at the public offering price less underwriting discounts and commissions. The price to the public for each share was$16.00 . The aggregate net proceeds from our IPO, after underwriting discounts and commissions and other offering expenses of$15.4 million , were$168.6 million . 23
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As ofSeptember 30, 2022 , our cash and cash equivalents and marketable securities totaled$200.2 million . Our available-for-sale marketable securities mature over the next 12 months. Based on our current operating plan, we expect that our existing cash and cash equivalents and marketable securities will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through 2025. We enter into contracts in the normal course of business with CROs and contract manufacturing organizations, or CMOs, for clinical trials, nonclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are generally cancelable by us upon prior notice of 30 days. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation.
Future minimum lease payments under our
Shelf Registration and At-The-Market Equity Offering
OnJuly 1, 2022 , we filed a shelf registration statement on Form S-3, or the Registration Statement. Pursuant to the Registration Statement, we may offer and sell securities having an aggregate public offering price of up to$200.0 million . In connection with the filing of the Registration Statement, we also entered into a sales agreement withBofA Securities, Inc. andStifel, Nicolaus & Company, Incorporated , or the Sales Agents, pursuant to which we may issue and sell shares of our common stock for an aggregate offering price of up to$50.0 million under an at-the-market offering program, or ATM, which is included in the$200.0 million of securities that may be offered pursuant to the Registration Statement. Pursuant to the ATM, we will pay the Sales Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of our common stock. We are not obligated to make any sales of shares of our common stock under the ATM. We had not sold any shares of our common stock under the ATM as ofSeptember 30, 2022 .
Cash Flows
The following table summarizes our sources and uses of cash (in thousands):
Nine
Months Ended
2022 2021
Net cash used in operating activities $ (23,950) $ (14,322)
Net cash provided by (used in) investing activities 59,605 (94,109)
Net cash provided by (used in) financing activities (277) 200,456
Net change in cash and cash equivalents $ 35,378 $ 92,025
Operating Activities
Net cash used in operating activities was $24.0 million and $14.3 million for
the nine months ended September 30, 2022 and 2021, respectively. Net cash used
in operating activities during the nine months ended September 30, 2022
primarily consisted of our net loss of $30.0 million , which was reduced by
non-cash adjustments of $2.2 million for stock-based compensation, $0.6 million
for net accretion and amortization on marketable securities, and $0.1 million of
amortization on our right-of-use asset, plus cash provided of $2.1 million by
prepaid expenses mainly associated with research and development and insurance
and cash provided by accounts payable of $1.0 million and $0.3 million from
accrued expenses and other current liabilities mainly due to research and
development liabilities, partially offset by cash used of $0.1 million each for
other assets and our operating lease.
Net cash used in operating activities during the nine months ended September 30,
2021 primarily consisted of our net loss of $92.3 million , which was reduced by
non-cash adjustments of $81.2 million related to the change in the fair values
of the Series B tranche liability and the Series A-1 warrant liability, and
$0.6 million for stock-based compensation, plus cash provided of $0.7 million
from accrued expenses and other current liabilities, offset by cash used of
$4.3 million for prepaid expenses associated with ongoing research and
development activities as we commenced our clinical trial, as well as costs
associated with the transition from a private to a public company and insurance
costs.
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Investing Activities
Cash provided by investing activities for the nine months ended
Cash used in investing activities for the nine months endedSeptember 30, 2021 was$94.1 million and was predominantly related to the purchase of marketable securities, but also included nominal purchases of computer hardware.
Financing Activities
Net cash used in financing activities was$0.3 million for the nine months endedSeptember 30, 2022 and was primarily due to payment of deferred offering costs related to the Registration Statement, which were partially offset by proceeds from stock option exercises. Net cash provided by financing activities was$200.5 million for the nine months endedSeptember 30, 2021 and was primarily due to our IPO for net proceeds of$168.6 million , the closing of the second tranche of our Series B convertible preferred stock for gross proceeds of$30.0 million , plus a total of$1.3 million received from the exercise of the Series A-1 preferred warrant, as well as proceeds from exercises of common stock warrants of$0.6 million .
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development, conduct clinical trials, and seek marketing approval for our current and any of our future product candidates. Furthermore, we have and expect to incur additional costs associated with operating as a public company following ourJuly 2021 IPO. It is likely that we will seek third-party collaborators for the future commercialization of ACU193 or any other product candidate that is approved for marketing. However, we may seek to commercialize our products at our own expense, which would require us to incur significant additional expenses for marketing, sales, manufacturing and distribution, which costs we may seek to offset through entry into collaboration agreements with third parties. As a result, we expect that we will need to obtain substantial additional funding in connection with our future operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Based on our current operating plan, we expect that our existing cash and cash equivalents and marketable securities will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through 2025. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
• the scope, progress, results and costs of discovery, nonclinical
development, laboratory testing and clinical trials for other potential
product candidates we may develop, if any;
• the costs, timing and outcome of regulatory review of ACU193 or any
future product candidates;
• our ability to establish and maintain collaborations on favorable terms,
if at all;
• the achievement of milestones or occurrence of other developments that
trigger payments under any collaboration agreements we might have at such
time;
• the costs and timing of future commercialization activities, including
product sales, marketing, manufacturing and distribution, for any of
ACU193 or any future product candidates for which we receive marketing
approval;
• the amount of revenue, if any, received from commercial sales of ACU193
or any future product candidates, should any of our product candidates
receive marketing approval;
• the costs of preparing, filing and prosecuting patent applications,
obtaining, maintaining and enforcing our intellectual property rights and
defending intellectual property-related claims;
• our headcount growth and associated costs as we expand our business
operations and our research and development activities; and
• the costs of operating as a public company.
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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our longer-term cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect rights as a common stockholder. Any debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise 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 programs or product candidates or to 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.
Critical Accounting Policies, Significant Judgments and Use of Estimates
The preparation of financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. A description of our significant accounting policies is included in our Annual Report. Please read the unaudited condensed financial statements in conjunction with our audited financial statements and accompanying notes in our Annual Report. Our critical accounting policies that require significant judgments and estimates are more fully described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies, Significant Judgments and Use of Estimates" in our Annual Report and in Note 2 to our audited financial statements contained in our Annual Report. There have been no significant changes to our critical accounting policies that require significant judgments and estimates from those disclosed in our Annual Report.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements applicable to us, adopted and not yet adopted as of the date of this report, is included in Note 2 to our unaudited condensed financial statements located in "Part I - Financial Information, Item 1. Financial Statements" in this Quarterly Report on Form 10-Q.
Emerging Growth Company and Smaller Reporting Company Status
InApril 2012 , the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. 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, 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 elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
• an exception from compliance with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;
• reduced disclosure about our executive compensation arrangements in
our periodic reports, proxy statements and registrationstatements;
• exemptions from the requirements of holding non-binding advisory votes
on executive compensation or golden parachute arrangements; and
• an exemption from compliance with the requirements of the Public
Company Accounting Oversight Board regarding the communication of
critical audit matters in the auditor's report on financial
statements.
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We may take advantage of these provisions until we no longer qualify as an emerging growth company. We will cease to qualify as an emerging growth company on the date that is the earliest of: (i)December 31, 2025 , (ii) the last day of the fiscal year in which we have more than$1.235 billion in total annual gross revenues, (iii) the date on which we are deemed to be a "large accelerated filer" under the rules of theSEC , which means the market value of our common stock that is held by non-affiliates exceeds$700 million as of the priorJune 30th , or (iv) the date on which we have issued more than$1.0 billion of non-convertible debt over the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting requirements in this Quarterly Report on Form 10-Q and our other filings with theSEC . Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests. We are also a "smaller reporting company," meaning that the market value of our shares held by non-affiliates is less than$700 million and our annual revenue was less than$100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either: (i) the market value of our shares held by non-affiliates is less than$250 million or (ii) our annual revenue was less than$100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than$700 million . If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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