Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with the SEC on March 28, 2024 (the Annual Report). Some of the information contained in this discussion and analysis or set forth elsewhere, 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” sections of this Quarterly Report on Form 10-Q as well as our Annual Report, 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. You should carefully read the “Risk Factors” sections of this Quarterly Report on Form 10-Q and our Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. Investors and others should note that we routinely use the Investor Relations section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investor Relations section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that we share on the Investors section of our website, https://ir.arrivent.com/ .
Overview
We are a clinical-stage biopharmaceutical company dedicated to the identification, development and commercialization of differentiated medicines to address the unmet medical needs of patients with cancers. We seek to utilize our team’s deep drug development experience to maximize the potential of our lead development candidate, firmonertinib, and advance a pipeline of novel therapeutics, such as next-generation antibody drug conjugates, through approval and commercialization in patients suffering from cancer, with an initial focus on solid tumors. Firmonertinib is currently being evaluated in multiple clinical trials across a range of epidermal growth factor receptor mutant (EGFRm) in non-small cell lung cancer (NSCLC), including a pivotal Phase 3 clinical trial in treatment naïve, or first-line, patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations. We received Breakthrough Therapy Designation for firmonertinib for this disease from the United States Food and Drug Administration (FDA) in October 2023, and Orphan Drug Designation for treatment of NSCLC with EGFRm or human epidermal growth factor receptor 2 (HER2) mutations or human epidermal growth factor receptor 4 (HER4) mutations in February 2024. A product candidate can receive Breakthrough Therapy Designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for development. The receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and does not increase the likelihood that the product candidate will ultimately receive FDA approval for any indication.
Firmonertinib is an investigational, novel, epidermal growth factor receptor (EGFR) mutant-selective tyrosine kinase inhibitor (TKI) that we are developing for the treatment of NSCLC patients across a broader set of EGFRm than are currently served by approved EGFR TKIs. Firmonertinib is currently only approved and commercially distributed by Shanghai Allist Pharmaceuticals Co. Ltd. (Allist) in China as a first-line therapy to treat classical EGFRm NSCLC. The FDA has not approved firmonertinib for any use. We selected firmonertinib for global development against nonclassical, or uncommon, mutations based on preliminary reductions in tumor size observed in seven out of ten patients in first-line treatment with EGFR exon 20 insertion mutations in the ongoing Phase 1b clinical trial, the FAVOUR trial, conducted by Allist in China, and preclinical activity in EGFR P-loop and-alpha-c-helix compressing (PACC) mutations, each a subtype of uncommon mutation. In a subsequent interim data readout from the FAVOUR trial of firmonertinib in first-line patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations, 79% of patients (n=22 out of 28 patients) were observed to experience a reduction in tumor size of at least 30%. If the future clinical trial results of the FAVOUR trial are unfavorable, our clinical development plans for firmonertinib, which include
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conducting our global, pivotal Phase 3 FURVENT clinical trial in first-line non-squamous locally advanced or metastatic EGFRm NSCLC patients with exon 20 insertion mutations, may be adversely affected. In 2021, we licensed from Allist the right to develop and commercialize firmonertinib worldwide, with the exception of greater China, which includes mainland China, Hong Kong, Macau and Taiwan.
As one of the most prevalent cancers in the world, lung cancer imposes a significant global burden on human health, and EGFRm NSCLC represents a significant proportion of those affected. Despite progress in the therapeutic landscape for EGFRm NSCLC, many patients, particularly those with uncommon mutations, such as exon 20 insertions or PACC mutations, are underserved by existing treatments. In an interim data readout from the FAVOUR trial of firmonertinib in first-line patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations, 79% of patients (n=22 out of 28 patients) were observed to experience a reduction in tumor size of at least 30% from the baseline in a patient without evidence of progression as measured by RECIST 1.1 criteria, which measurement of reduction is the threshold in this trial for a partial response and for inclusion in determination of the overall response rate (ORR), which is the primary endpoint of this trial. In the same interim data readout, those 79% of patients were observed to experience a 15.2 month median duration of response (DOR). Interim results may not be indicative of final results; however, we believe these interim clinical results underscore firmonertinib’s potential in patients whose tumors contain an uncommon EGFRm.
We have entered into the Global Technology Transfer and License Agreement (Allist License Agreement), pursuant to which, we have, among other things, secured an exclusive, royalty bearing and sublicensable license under certain intellectual property, including patents and know-how, owned or controlled by Allist to develop and commercialize any product containing firmonertinib or any of its salts or derivatives as an active ingredient of a product, which is led by a joint collaboration committee, comprising of representatives from both Allist and us. Under the Allist License Agreement, we are obligated to pay Allist milestone payments up to an aggregate of $765.0 million upon the achievement of certain development, regulatory and sales milestone events as set forth in the Allist License Agreement. During the six months ended June 30, 2024 and 2023, no clinical milestones were met or achieved. We are also obligated under the Allist License Agreement to pay Allist tiered royalties based on net sales of Licensed Products (as defined in the Allist License Agreement). See “Business — Licenses, Partnerships and Collaborations — Allist Agreements” in our Annual Report.
Since our inception in April 2021, we have devoted substantially all of our resources to organizing and staffing our company, acquiring the rights to develop firmonertinib, clinical development of firmonertinib, business planning, raising capital, identifying potential product candidates, enhancing our intellectual property portfolio and undertaking research and clinical and preclinical studies for our development programs. We do not have any products approved for sale and have not generated any revenue from product sales or otherwise. We have funded our operations to date primarily through the private placement of convertible preferred stock and our initial public offering in January 2024.
On January 30, 2024, we completed the closing of our initial public offering of 9,722,222 shares of common stock at a price of $18.00 per share. Additionally, the underwriters exercised their option to purchase an additional 1,458,333 shares of common stock at a price of $18.00 per share. The shares of common stock began trading on the Nasdaq Global Market on January 26, 2024, under the symbol “AVBP”. We received net proceeds of $183.2 million, after deducting underwriting discounts and commissions and other offering expenses. In addition, as a result of the closing of our initial public offering, our convertible preferred stock converted into 19,567,306 shares of common stock in January 2024.
We have incurred significant operating losses since our inception and have not yet generated any revenue. Our net losses were $39.3 million and $33.7 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $197.1 million. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies, clinical trials and our expenditures on other research and development activities. We expect to continue to incur losses for the foreseeable future. We anticipate these losses will increase substantially as we:
● advance our lead product candidate, firmonertinib, through clinical trials;
● acquire or in-license additional product candidates;
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● advance our preclinical programs to clinical trials;
● further invest in our pipeline;
● further support our external partners’ manufacturing capabilities;
● seek regulatory approval for our product candidates;
● pursue commercialization of our product candidates;
● maintain, expand, protect and defend our intellectual property portfolio;
● secure facilities to support continued growth in our research, development and commercialization efforts;
● increase our headcount to support our development efforts and to expand our clinical development team; and
● incur additional costs and headcount associated with operating as a public company.
In addition, if we obtain regulatory approval for firmonertinib or any product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.
We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us 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.
Key Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
To date, our research and development expenses have been related primarily to the development of firmonertinib, preclinical studies and other clinical activities related to our portfolio. Research and development costs are expensed as incurred and payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized when the goods or services are received.
Research and development costs include:
● salaries, payroll taxes, employee benefits and stock-based compensation expenses for those individuals involved in research and development efforts;
● external research and development costs incurred under agreements with contract research organizations (CROs) and consultants to conduct our clinical trials and other preclinical studies;
● costs related to manufacturing our product candidates, including fees paid to third-party manufacturers and raw material suppliers;
● license fees and research funding; and
● other allocated expenses, which include direct and allocated expenses, insurance, equipment and other supplies.
Our direct research and development expenses consist principally of external costs, such as fees paid to CROs and consultants in connection with our clinical trials for firmonertinib, preclinical and toxicology studies and costs related to
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manufacturing materials for clinical and preclinical studies. Prior to our identification of potential product candidates in 2022, we did not track external costs by program. Subsequent to the identification of potential product candidates, a significant majority of our direct research and development costs have been related to firmonertinib. We deploy our personnel resources across all of our research and development activities.
We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of firmonertinib and the identification and development of new product candidates. We cannot determine with certainty the timing of initiation, the duration or the completion costs of future clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly based on factors such as:
● per patient trial costs;
● the number of patients needed to determine a recommended dose;
● the number of trials required for approval;
● the number of sites included in the trials;
● the countries in which the trials are conducted;
● the length of time required to enroll eligible patients;
● the number of patients that participate in the trials;
● the number of doses that patients receive;
● the drop-out or discontinuation rates of patients;
● potential additional safety monitoring requested by regulatory agencies;
● the duration of patient participation in the trials and follow-up;
● the phase of development of the product candidate; and
● the efficacy and safety profile of the product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, payroll taxes, employee benefits and stock-based compensation expenses for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.
Interest Income
Interest income consists of interest earned on our cash equivalents.
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Results of Operations
Comparison of the Three Months Ended June 30, 2024 and 2023
The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:
Three Months Ended June 30,
(in thousands)
2024
2023
Change
Operating expenses:
Research and development
$
21,778
$
20,358
$
1,420
General and administrative
3,919
2,226
1,693
Total operating expenses
25,697
22,584
3,113
Operating loss
(25,697)
(22,584)
(3,113)
Interest income
3,823
1,017
2,806
Net loss
$
(21,874)
$
(21,567)
$
(307)
Research and Development
We track outsourced clinical and preclinical costs and other external research and development costs associated with our lead product candidate, firmonertinib, and other discovery-stage programs. We do not track internal research and development costs by product candidate. The following table summarizes our research and development expenses for the three months ended June 30, 2024 and 2023:
Three Months Ended June 30,
(in thousands)
2024
2023
Change
Firmonertinib:
FURTHER
$
3,909
$
5,142
$
(1,233)
FURVENT
6,996
10,567
(3,571)
FAVOUR
18
619
(601)
Other Firmonertinib costs
520
225
295
Total Firmonertinib
11,443
16,553
(5,110)
Discovery-stage programs
6,201
491
5,710
Personnel-related and other internal costs
4,134
3,314
820
Total research and development expenses
$
21,778
$
20,358
$
1,420
Research and development expenses were $21.8 million and $20.4 million for the three months ended June 30, 2024 and 2023, respectively. The increase of $1.4 million was primarily due to a decrease of $5.1 million related to our lead product candidate, firmonertinib, offset by increases of $5.7 million in preclinical discovery work and $0.8 million in personnel-related costs due to increased headcount. Costs related to firmonertinib decreased as a result of decreased costs related to our FURVENT Phase 3 clinical trial of $3.6 million, a $0.6 million decrease in costs related to our FAVOUR trial, and a $1.2 million decrease in costs related to our FURTHER Phase 1 clinical trial, partially offset by an increase in general firmonertinib costs. Discovery-stage program costs increased due to an up-front payment related to the collaboration with Jiangsu Alphamab Biopharmaceuticals Co., Ltd. (Alphamab).
General and Administrative
General and administrative expenses were $3.9 million and $2.2 million for the three months ended June 30, 2024 and 2023, respectively. The increase of $1.7 million was due primarily to increases of $1.0 million in personnel-related costs, and $0.7 million in insurance, taxes, and outside services.
Interest Income
Interest income was $3.8 million and $1.0 million for the three months ended June 30, 2024 and 2023, respectively. The increase in interest income is due to increased invested balances and increased average market yields.
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Comparison of the Six Months Ended June 30, 2024 and 2023
The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:
Six Months Ended June 30,
(in thousands)
2024
2023
Change
Operating expenses:
Research and development
$
38,753
$
30,594
$
8,159
General and administrative
7,618
4,162
3,456
Total operating expenses
46,371
34,756
11,615
Operating loss
(46,371)
(34,756)
(11,615)
Interest income
7,080
1,017
6,063
Net loss
$
(39,291)
$
(33,739)
$
(5,552)
Research and Development
We track outsourced clinical and preclinical costs and other external research and development costs associated with our lead product candidate, firmonertinib, and other discovery-stage programs. We do not track internal research and development costs by product candidate. The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023:
Six Months Ended June 30,
(in thousands)
2024
2023
Change
Firmonertinib:
FURTHER
$
7,334
$
8,248
$
(914)
FURVENT
15,300
13,629
1,671
FAVOUR
30
1,009
(979)
Other Firmonertinib costs
1,569
590
979
Total Firmonertinib
24,233
23,476
757
Discovery-stage programs
6,614
700
5,914
Personnel-related and other internal costs
7,906
6,418
1,488
Total research and development expenses
$
38,753
$
30,594
$
8,159
Research and development expenses were $38.8 million and $30.6 million for the six months ended June 30, 2024 and 2023, respectively. The increase of $8.2 million was primarily due to an increase of $0.8 million related to our lead product candidate, firmonertinib, an increase of $1.5 million in personnel-related costs due to increased headcount, and an increase of $5.9 million in preclinical discovery work. Costs related to firmonertinib increased as a result of increased costs related to our FURVENT Phase 3 clinical trial of $1.7 million, a $1.0 million increase in other general firmonertinib costs, offset by a $0.9 million decrease in costs related to our FURTHER Phase 1 clinical trial, and a decrease of $1.0 million related to our FAVOUR trial.
General and Administrative
General and administrative expenses were $7.6 million and $4.2 million for the six months ended June 30, 2024 and 2023, respectively. The increase of $3.5 million was due primarily to increases of $1.6 million in personnel-related costs, $0.9 million in outside services, and $1.0 million in software, insurance, and taxes.
Interest Income
Interest income was $7.1 million and $1.0 million for the six months ended June 30, 2024 and 2023, respectively. The increase in interest income is due to increased invested balances and increased average market yields.
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Liquidity and Capital Resources
Sources of Liquidity
We have previously funded our operations primarily through the private placement of convertible preferred stock and our initial public offering of common stock. To date, we have raised gross proceeds of $305.0 million from the issuance of convertible preferred stock. Additionally, in the first quarter of 2024, we completed our initial public offering of 11,180,555 shares of our common stock at a price to the public of $18.00 per share, including the exercise in full by the underwriters of their option to purchase 1,458,333 additional shares of our common stock for aggregate proceeds of $183.2 million, net of underwriting discounts, commissions and other offering expenses. As of June 30, 2024, we had cash and cash equivalents of $298.7 million.
Future Funding Requirements
We plan to continue to fund our operating expenses and capital expenditure requirements through additional public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. Debt or equity financing or collaborations and partnerships with other entities may not be available on a timely basis, on acceptable terms, or at all. In addition, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount or reduce other operating expenses. This could have an adverse impact on our ability to achieve certain of our planned objectives, and thus, materially harm our business. Our ability to successfully transition to profitability will depend upon obtaining additional financing and achieving a level of product sales adequate to support our cost structure. We cannot be assured that we will ever be profitable or generate positive cash flows from operating activities.
We believe that our existing cash and cash equivalents as of June 30, 2024 will be sufficient to meet our anticipated cash requirements into 2026. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.
Our future capital requirements will depend on many factors, including:
● the initiation, progress, timing, costs and results of drug discovery, preclinical studies and clinical trials of our lead product candidate, firmonertinib, and any other product candidates;
● the number and characteristics of product candidates that we pursue;
● the outcome, timing and costs of seeking regulatory approvals;
● the cost of manufacturing firmonertinib, if approved, and future product candidates for clinical trials in preparation for marketing approval and in preparation for commercialization;
● the costs of any third-party products used in our combination clinical trials that are not covered by such third party or other sources;
● the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;
● the receipt of marketing approval and revenue received from any potential commercial sales of firmonertinib or other product candidates;
● the cost of commercialization activities for firmonertinib and future product candidates we develop if we receive marketing approval, including marketing, sales and distribution costs;
● the emergence of competing therapies and other adverse market developments;
● the ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements;
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● the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
● the extent to which we in-license or acquire other products and technologies; and
● the costs of operating as a public company.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our platform technology, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. 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 our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Six Months Ended June 30,
(in thousands)
2024
2023
Net cash (used in) provided by:
Operating activities
$
(37,715)
$
(25,487)
Investing activities
—
(25,000)
Financing activities
185,995
44,949
Net increase in cash and cash equivalents
$
148,280
$
(5,538)
Operating Activities
Net cash used in operating activities was $37.7 million for the six months ended June 30, 2024 reflecting our net loss of $39.3 million, offset by $1.4 million in stock-based compensation and a $0.2 million net decrease in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities.
Net cash used in operating activities was $25.5 million for the six months ended June 30, 2023 reflecting our net loss of $33.7 million, offset by $0.4 million in stock-based compensation, and a $7.8 million net decrease in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities.
Investing Activities
No net cash was provided by investing activities for the six months ended June 30, 2024. Net cash used by investing activities was $25.0 million for the six months ended June 30, 2023. This was attributable to the purchase of short-term investments.
Financing Activities
Net cash provided by financing activities was $186.0 million for the six months ended June 30, 2024, due to the net proceeds from our initial public offering.
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Net cash provided by financing activities was $45.0 million for the six months ended June 30, 2023, primarily due to the issuance of Series B convertible preferred stock.
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with third-party CROs and clinical trial sites for our clinical trials, and with supply vendors for other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts. We have leases for office space in Gaithersburg, Virginia and Burlingame, California that extend through January 2025 and January 2026, respectively. Amounts related to future lease payments as of June 30, 2024 totaled $0.2 million, to be paid within the next 12 months.
As of June 30, 2024, except for the operating leases, we did not have any long-term obligations, capital lease obligations, purchase obligations or long-term liabilities.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development and stock-based compensation expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no changes to our critical accounting policies from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Use of Estimates” included in the Annual Report.
JOBS Act and Emerging Growth Company Status
As an emerging growth company under the Jumpstart Our Business Startups (JOBS) Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act (Sarbanes-Oxley).
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our initial public offering , (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (Exchange Act), which would occur if, among other factors, the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year (subject to certain conditions) or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most
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recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 3 to our accompanying financial statements appearing elsewhere in this Quarterly Report.
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