Item 7. 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 consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (the “Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section titled “Risk Factors,” 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.
Overview
Vor Bio is a clinical-stage biopharmaceutical company focused on developing a novel therapy in the treatment of autoimmune diseases. In June 2025, we in-licensed telitacicept from RemeGen Co., Ltd. (“RemeGen”). Pursuant to our license agreement with RemeGen, we were granted an exclusive license to develop and commercialize telitacicept outside of the Greater China region, which includes mainland China, Hong Kong, Macau and Taiwan. RemeGen retains development and commercialization rights in Greater China. Telitacicept is approved in China for the treatment of generalized myasthenia gravis (“gMG”), systemic lupus erythematosus (“SLE”) and rheumatoid arthritis (“RA”), and has two Biologics License Applications (“BLAs”) filed and pending in China for the treatment of Sjögren’s disease (“SjD”) and IgA nephropathy (“IgAN”).
Telitacicept is currently being evaluated in a global Phase 3 clinical trial, for which we have assumed responsibility from RemeGen in connection with the license agreement, for the treatment of gMG. The trial is currently recruiting patients in North America, Europe, Latin America, and Asia to support potential approval in the United States, Europe, Japan and other countries. In July 2024, the clinical trial enrolled a patient in the United States, the first in the global clinical trial. Topline data from the trial is anticipated in the first half of 2027.
Telitacicept was evaluated by RemeGen in a Phase 3 clinical trial in patients with gMG in China. Most recently, the 48-week data from Part B of the Phase 3 trial were presented at the American Association of Neuromuscular & Electrodiagnostic Medicine (“AANEM”) Annual Meeting in October 2025.
We have recently initiated a global Phase 3 clinical trial evaluating telitacicept for the treatment of SjD, with first patient dosing in March 2026. The trial anticipates recruiting approximately 250 adults with SjD in the United States, Europe, South America, and Asia. The trial is a randomized, double-blind, placebo-controlled trial.
Telitacicept was evaluated by RemeGen in a Phase 3 clinical trial in patients with active SjD in China. Most recently, the 48-week data including Stage A and B from the Phase 3 trial were presented at the American College of Rheumatology (“ACR”) Annual Meeting in October 2025.
We have incurred significant operating losses since inception, including net losses of $696.0 million for the year ended December 31, 2025 and $116.9 million for the year ended December 31, 2024. As of December 31, 2025, we had an accumulated deficit of $1,153.0 million.
As of December 31, 2025, we had cash, cash equivalents and marketable securities of $455.2 million. Based on our current operating plan, we expect that our cash, cash equivalents and marketable securities, together with the expected proceeds from our 2026 Private Placement, will enable us to fund our operating expenses and capital expenditure requirements into early 2029.
Restructuring Plan
On May 5, 2025, our board of directors approved the wind down of our then-existing clinical and manufacturing operations focused on previous product candidates (the “Restructuring Plan”). We publicly announced this plan on May 8, 2025. In conjunction with the Restructuring Plan, we announced a reduction of our workforce by 154 full-time employees, or approximately 99% of our then-current employee base.
During the year ended December 31, 2025, we incurred restructuring costs related to the Restructuring Plan of $29.7 million comprised of severance payments, stock-based compensation modifications, loss on disposal of long-lived assets and accelerated depreciation and amortization on long-lived assets and right-of-use assets.
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 our development efforts for our product candidates 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 agreements.
Expenses
Research and Development Expenses
Research and development expenses consist primarily of external and internal expenses incurred in connection with our research and development activities, including our drug discovery efforts and the development of our product candidates. External expenses include:
research and development expenses incurred under agreements with clinical research organizations (“CROs”) and other scientific development services;
costs of consultants, including their fees and related travel expenses;
costs related to compliance with quality and regulatory requirements;
costs of laboratory supplies and acquiring and developing preclinical and clinical trial materials, including expenses associated with our clinical manufacturing organizations (“CMOs”); and
payments made and consideration issued under third party licensing agreements.
Internal expenses include:
personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses, for employees involved in research and development activities;
facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, insurance, and other internal operating costs; and
research and development related restructuring costs incurred with the Restructuring Plan, including severance payments, stock-based compensation modifications, loss on disposal of long-lived assets and accelerated depreciation and amortization on long-lived assets and right-of-use assets.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are 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 are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
A significant portion of our research and development costs have been external costs, which we track by program.
Research and development activities are central to our business model. We expect that our research and development expenses will increase significantly for the foreseeable future as we continue to identify and develop product candidates, particularly as our product candidates move into later stages of clinical development.
The successful development of our product candidates in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of our product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, many of which are outside of our control, including the uncertainty of:
the timing and progress of clinical development activities;
the number and scope of clinical programs we decide to pursue;
our ability to maintain our current research and development programs and to establish new ones;
establishing an appropriate safety profile with IND-enabling studies;
the number of sites and patients included in the clinical trials;
the countries in which the clinical trials are conducted;
per patient trial costs;
successful patient enrollment in, and the initiation of, clinical trials, as well as drop out or discontinuation rates;
the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
the number of trials required for regulatory approval;
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 current and future collaborators, if any;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
significant and changing government regulation and regulatory guidance;
the impact of any business interruptions to our operations or to those of the third parties with whom we work;
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 could mean a significant change in the costs and timing associated with the development of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits and stock-based compensation expenses for employees involved in our executive, finance, corporate, business development and administrative functions, as well as expenses for outside professional services, including legal, audit, accounting and tax-related services and other consulting fees, facility-related expenses, which include depreciation costs and other allocated expenses for rent and maintenance of facilities, insurance costs, recruiting costs, travel expenses and other general administrative expenses. General and administrative costs also consist of restructuring costs incurred under the Restructuring Plan, including severance payments, stock-based compensation modifications, and accelerated depreciation and amortization on long-lived assets and right-of-use assets.
We expect that our general and administrative expenses will increase as our business expands and we hire additional personnel to support our continued development of our clinical programs. We also anticipate continued increased expenses associated with being a public company, including costs for legal, audit, accounting, investor and public relations, regulatory and tax-related services related to compliance with the rules and regulations of the SEC, Nasdaq listing standards and director and officer insurance premiums.
Other Income (Expense)
Interest Income
Interest income consists of interest income earned on our cash, cash equivalents and marketable securities held in financial institutions.
Other Income
Other income represents the proceeds received from the sale of certain intellectual property related to our previous product candidates trem-cel, VCAR33 and VADC45.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities represents the change in the fair value of liability-classified warrants due to changes in their intrinsic value resulting from changes in the quoted price of our common stock underlying the warrants.
Results of Operations
Comparison of Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended
December 31,
Change
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income:
Interest income
Other income
Change in fair value of warrant liabilities
Total other (expense) income
Net loss
Research and Development Expenses
The following table summarizes our research and development expenses incurred for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended
December 31,
Change
External research expenses:
Telitacicept - gMG
Telitacicept - SjD
Trem-cel
VCAR33
Other research and development
Internal research expenses:
Salaries and benefits (including stock-based compensation)
Manufacturing, facilities, and other research expenses
Total research and development expenses
Research and development expenses were $321.5 million for the year ended December 31, 2025, compared to $93.3 million for the year ended December 31, 2024. The increase of $228.2 million was primarily attributable to the $222.6 million of expense incurred in 2025 for the purchase of the telitacicept license (included as a component of other research and development), a $25.0 million increase due to new spend for Telitacicept-gMG, an increase in manufacturing, facilities, and other expenses of $7.8 million primarily due to lease impairments taken in 2025 in connection with the Restructuring Plan, and a $3.3 million increase due to new spend for Telitaciept- SjD. These increases were offset in part by a $11.9 million decrease in personnel-related costs due to the Restructuring Plan, and decreases of $9.5 million in Trem-cel spend and $2.9 million in VCAR33 spend due to the discontinuation of those programs in the first half of 2025. In addition, the increase in Other research and development attributed to the telitacicept license was partially offset by a decrease of $7.1 million in non-license spend, attributable primarily to decreases in lab supplies and consumables, consulting fees, and software expenses, due to our decrease in related activities as part of the Restructuring Plan.
General and Administrative Expenses
General and administrative expenses were $50.1 million for the year ended December 31, 2025, compared to $27.9 million for the year ended December 31, 2024. The increase of $22.2 million was primarily attributable to an increase of $11.8 million in stock-based compensation, an increase of $4.9 million in legal and professional fees, an increase of $3.9 million in personnel costs, and an increase of $1.6 million in facilities, equipment, and other costs. The increase in stock-based compensation was primarily driven by grants to new hires, including grants to the new executives hired during the year, as well as an appreciation in our stock price and incremental expense recognized from award modifications which took place during the year. The increase in personnel costs was driven by the severance costs incurred in connection with the Restructuring Plan, partially offset by a reduction in headcount compared to the prior year. The increase in legal and professional fees was driven primarily by increased consulting costs incurred in the current year compared to prior year due to our transition after the implementation of the Restructuring Plan. The increase in these fees was also attributable to an increase in legal fees driven by the increase in transactions which occurred during the year, as well as accounting fees relating to incremental reviews of significant transactions. The increase in facilities and other costs was primarily driven by an increase in rent expense allocated to general and administrative expense as a result of the shift in headcount brought on by the Plan, and an increase in software related expenses in the current year.
Other Income (Expense), net
Other income (expense), net decreased by $328.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily due to the $334.4 million loss on the change in fair value of warrant liabilities, partially offset by a $1.6 million increase in interest income due to an increase in cash, cash equivalents and marketable securities and $4.1 million of income recognized from the sale of intellectual property in 2025.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. We have funded our operations primarily through the sale of equity securities and have received aggregate net proceeds from these transactions of approximately $1,019.1 million as of December 31, 2025.
In order to fund our future operations, including our ongoing and planned clinical trials, we filed a universal shelf registration statement, which was declared effective on March 31, 2025, to provide for aggregate offerings of up to $350.0 million of common stock, preferred stock, debt securities, warrants or any combination thereof. As of December 31, 2025, $164.2 million remained available under the shelf registration statement, including $48.9 million reserved for at-the market offerings discussed below.
At-the-Market Sales Agreements
In December 2022, we entered into a Sales Agreement with Stifel, Nicolaus & Company, Incorporated (“Stifel”) as the agent (the “Stifel ATM Facility”). Pursuant to the Stifel ATM Facility, we may offer and sell shares of common stock with an aggregate value of up to $125.0 million. We pay Stifel a commission of up to 3.0% of the gross proceeds of any common stock sold through Stifel. We sold 1,910,861 and 12,454 shares of common stock under the Stifel ATM Facility during the years ended December 31, 2025 and 2024, respectively at a weighted average price per share of $37.06 and $32.09, respectively, for aggregate net proceeds of $70.1 million and $0.3 million, respectively, after deducting commissions. As of December 31, 2025, $48.9 million remained available to be sold under the Stifel ATM Facility.
2024 Private Placement
On December 27, 2024, we entered into a purchase agreement with certain institutional investors pursuant to which we issued and sold in a private placement an aggregate of (i) 2,793,562 shares of common stock and (ii) warrants to purchase up to 3,491,953 shares of common stock at the closing of the private placement on December 30, 2024 (the "December 2024 Private Placement"). Net proceeds from the private placement were $52.7 million, after deducting placement fees and issuance costs payable by us. If exercised for cash, the warrants would result in additional gross proceeds to us of up to approximately $58.5 million.
June 2025 Private Placement
On June 25, 2025, we entered into a purchase agreement with certain institutional investors, pursuant to which we issued and sold in a private placement pre-funded warrants to purchase up to an aggregate of 34,999,999 shares of common stock (the “2025 PIPE Warrants”) at the closing on June 27, 2025 (the "June 2025 Private Placement"). Net proceeds from the private placement were $174.4 million, after deducting issuance costs payable by us.
November 2025 Public Offering
On November 10, 2025, we entered into an underwriting agreement relating to the issuance and sale in a public offering of 11,500,000 shares of common stock, including 1,500,00 shares purchased by the underwriters under a 30-day option to purchase additional shares (the “November 2025 Offering”) at a public offering price of $10.00 per share. The net proceeds from the November 2025 Offering were $107.7 million after deducting the underwriting discounts and commissions and offering expenses.
December 2025 Private Placement
On December 15, 2025, we entered into a purchase agreement with certain investors pursuant to which we issued and sold an aggregate of 13,876,032 shares of common stock, at a price per share of $10.81, for net proceeds of $149.9 million after deducting issuance costs payable by us (the "December 2025 Private Placement").
March 2026 Private Placement
On March 26, 2026, we entered into a purchase agreement with certain institutional investors pursuant to which we agreed to issue and sell an aggregate of 5,338,078 shares of common stock, at a price per share of $14.05, for gross proceeds of $75.0 million before deducting issuance costs payable by us. The closing of the private placement is expected to occur on March 30, 2026, subject to satisfaction of customary closing conditions.
Cash Requirements
As of December 31, 2025, we had cash, cash equivalents and marketable securities of $455.2 million. We will need to raise additional capital to fund our planned future operations.
We expect that our existing cash, cash equivalents and marketable securities at December 31, 2025, together with the expected proceeds from our 2026 Private Placement, will enable us to fund our operating expenses and capital expenditure requirements into early 2029. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
We expect our expenses to increase substantially if, and as, we:
continue clinical development of our product candidate and any future product candidates, including in particular the expenses associated with our clinical trials;
incur third party manufacturing costs to support our clinical trials of our product candidate and any future product candidates and, if approved, their commercialization;
seek to identify and develop additional product candidates;
seek regulatory and marketing approvals for our product candidate and any future product candidates;
establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates;
adapt our regulatory compliance efforts to incorporate requirements to applicable marketed products;
acquire or in-license products, product candidates, or technologies;
maintain, expand, enforce, defend and protect our intellectual property;
hire additional clinical, quality control, manufacturing and other scientific personnel;
add operational, financial and management information systems and personnel;
expand our office facility or establish dedicated laboratory and manufacturing facilities; and
experience any delays or encounter any issues with any of the above.
In addition, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, investor and public relations, regulatory, tax-related, director and officer insurance premiums, investor relations and other expenses. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for at least several years, if ever.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the public or private sale of our equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. To the extent that we raise additional capital through the sale of our equity or convertible debt
securities, including through the use of the Stifel ATM Facility, the ownership interest of our shareholders 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 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 are unable to obtain additional funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be to us and/or may reduce the value of our common stock. Our ability to raise additional funds may be impacted by global economic conditions and to and in the credit and financial markets in the United States and worldwide resulting from geopolitical tensions and macroeconomic conditions or otherwise. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses, and there is no assurance that we will ever be or generate cash flow from operating activities.
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.
Cash Flows
The following table provides information regarding our cash flows for the periods presented (in thousands):
Year Ended December 31,
Net cash used in operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Net increase in cash, cash equivalents and restricted cash equivalents
Operating Activities
Net cash used in operating activities was $142.7 million for the year ended December 31, 2025, primarily reflecting a net loss of $696.0 million, offset primarily by non-cash charges of $543.1 million. The non-cash charges primarily consisted of the fair value of warrants issued in connection with entering into the Telitacicept License Agreement of $177.4 million, a $334.4 million loss due to the change in fair value of warrant liabilities, stock-based compensation expense of $18.9 million, non-cash lease expense of $5.6 million, a $3.3 million loss on the sale of equipment, and depreciation expense of $2.9 million, offset by non-cash interest accretion of $0.1 million. Changes in working capital balances increased by a net of $10.2 million during the year, driven primarily by an increase in accrued expenses and accounts payable due to increases in accrued clinical and manufacturing expenses, partially offset by a decrease in accrued expenses for personnel costs. The net cash used was also impacted by the $45.0 million payment made to Remegen for the telitacicept license.
Net cash used in operating activities was $99.7 million for the year ended December 31, 2024, primarily reflecting a net loss of $116.9 million, offset primarily by non-cash charges of $17.2 million. The non-cash charges primarily consisted of stock-based compensation expense of $9.8 million, non-cash lease expense of $5.0 million and depreciation expense of $3.5 million, offset by non-cash interest accretion of $1.1 million.
Investing Activities
Net cash used in investing activities was $48.8 million for the year ended December 31, 2025, which consisted of purchases of $53.7 million of marketable securities and $0.9 million of property and equipment, partially offset by proceeds of $5.0 million from the maturity of marketable securities and $0.8 million from the sale of equipment.
Net cash provided by investing activities was $96.9 million for the year ended December 31, 2024, which consisted of purchases of $9.9 million of marketable securities and $0.2 million of property and equipment offset by proceeds of $107.0 million from the maturity of marketable securities.
Financing Activities
Net cash provided by financing activities was $503.8 million for the year ended December 31, 2025, which consisted of $175.0 million of proceeds from the June 2025 Private Placement, $150.0 million of proceeds from the December 2025 Private Placement, $108.1 million of proceeds received from the November 2025 Offering, $70.1 million of proceeds from the sale of common stock under the Stifel ATM Facility, and proceeds of $2.2 million from the exercise of stock options and purchases of common stock under our ESPP. These amounts were offset by the payment of $1.3 million of issuance costs related to the private placements and underwritten offering and $0.3 million of taxes paid related to net share settlement of equity awards.
Net cash provided by financing activities was $53.4 million for the year ended December 31, 2024, which consisted of proceeds of $55.6 million from the proceeds of the December 2024 Private Placement, $0.3 million from the sale of common stock under the Stifel ATM Facility and proceeds of $0.2 million from the exercise of stock options and purchases of common stock under our ESPP, offset by the payment of $2.3 million of issuance costs related to the private placement and $0.3 million of taxes paid related to net share settlement of equity awards.
Contractual Obligations and Other Commitments
Contractual obligations relate to future minimum lease payments for our existing non-cancellable lease relating to corporate office space, with a term expiring in August 2031. Future minimum annual rental payments required under this operating lease agreement as of December 31, 2025 are described in more detail in Note 9 to our audited consolidated financial statements included elsewhere in this Annual Report.
Other commitments include license and collaboration agreements we have entered into with certain parties. Such arrangements require ongoing payments, including payments upon the achievement of certain development, regulatory and commercial milestones, receipt of sublicense income, as well as royalties on commercial sales. Refer to Note 10 to our audited consolidated financial statements included elsewhere in this Annual Report.
We also have agreements with certain vendors for various services, including services related to clinical operations and support, which we are not contractually able to terminate for convenience and avoid any and all future obligations to the vendors. Under such agreements, we are contractually obligated to make certain payments to vendors to reimburse them for their unrecoverable outlays incurred prior to cancellation. The exact amounts of such obligations are dependent on the timing of termination and the exact terms of the relevant agreement and cannot be reasonably estimated. We do not include these payments in this summary as they are not fixed and estimable.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements. Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and
assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. During the year ending December 31, 2025, there were no material changes to these assumptions.
While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report, we believe that the following accounting policy is the most critical in the preparation of our consolidated financial statements.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our applicable 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 or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report.
Emerging Growth Company and Smaller Reporting Company Status
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:
being permitted to present only two years of audited consolidated financial statements in addition to any required unaudited interim consolidated financial statements, with correspondingly reduced disclosure in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
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 registration statements;
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 consolidated financial statements.
We may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of our initial public offering or such earlier time that 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, 2026; (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 the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June
30th and we have been a public company for at least 12 months and have filed one annual report on Form 10-K; 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 this Annual Report. 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.” If we are a smaller reporting company at the time that 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 consolidated financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.
Item 8. Financial Statement s and Supplementary Data.
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.
