KORRO BIO, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. "Risk Factors" and under "Forward-Looking Statements" in this Annual Report. You should review the section titled "Risk factors" in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described below.
Overview
We are pioneering a new category in regenerative medicine that aims to restore human function by developing therapeutics that activate a person's innate regenerative potential within the body through the activation of progenitor cells. We believe our progenitor cell activation, or PCA, approach can impact a wide range of degenerative diseases. Our lead preclinical program is designed to activate oligodendrocyte precursor cells with the goal of inducing remyelination and potential functional recovery for individuals living with multiple sclerosis (MS).
Our first application of this technology was for the restoration of the cochlea, with a focus on treating sensorineural hearing loss, or SNHL, which is the most prevalent type of hearing loss. Our lead cochlear regeneration program, FX-322, was designed to treat the underlying cause of SNHL by regenerating cells in the inner ear required for hearing through the activation of progenitor cells already present in the cochlea. Since 2019, we ran five FX-322 clinical studies, all with the aim of understanding safety as well as severities and etiologies that FX-322 might treat and the appropriate dose regime. In several of these studies, we observed that a single dose of FX-322 was associated with statistically significant improvements in hearing function as measured by improved speech perception in subjects with SNHL giving us confidence in the potential of FX-322 as a potential drug candidate for hearing loss.
In 2021 we commenced our sixth study, a Phase 2b clinical trial of FX-322
(FX-322-208), a randomized, placebo-controlled, multi-center study designed to
evaluate the impact of a single administration of FX-322 on speech perception in
124 subjects, ultimately enrolling 142 subjects, with either noise-induced or
sudden SNHL, the same hearing loss severities and etiologies as those subjects
in which statistically significant improvements in speech perception were
observed in prior FX-322 clinical trials. The study's primary endpoint was
speech perception, a measure of sound clarity and understanding speech. In a
Type-C meeting, the FDA agreed that speech perception is an acceptable primary
efficacy endpoint. In
Also in 2021, we introduced a second hearing program, called FX-345, which we
believed might expand the opportunity to treat different types of SNHL as FX-345
was designed to achieve exposure at desired drug concentrations through a large
portion of the cochlea. Cochlear pharmacokinetic measures and human modeling
data in a preclinical setting showed that FX-345 achieved exposure at desired
concentrations through a larger portion of the cochlea for longer time as
compared to FX-322. The FX-345 program commenced dosing in a Phase 1b study
(FX-345-101) in
We are now working to rapidly advance discovery efforts using our PCA approach to potentially remyelinate neurons in individuals with MS. MS induces demyelination, stripping axons of the myelin sheaths that support neuronal signal conduction and axonal survival. We previously reported that we had identified a novel target relevant to myelination. Modulation of this target induces robust oligodendrocyte differentiation and expression of myelin proteins in vitro. We have identified multiple novel chemical entities that induce robust remyelination following demyelination in an adult in vivo animal model.
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The MS Program is independent of the hearing program, with a distinct molecular target, mechanism, progenitor cell population, and small molecule drug candidates. Further, a well-defined clinical path with objective biomarkers such as visual evoked potential (VEP) and magnetic resonance imaging (MRI) exist for studying the performance of remyelination therapies in MS patients. Our novel agents substantially outperform other clinically studied remyelination agents in head-to-head in vivo studies. We plan to begin our clinical program for remyelination in MS in the first half of 2024.
On
Since our formation in 2014, we have devoted substantially all our resources to developing our PCA approach, conducting research and development activities, including product candidate development, recruiting skilled personnel, establishing our intellectual property portfolio, and providing general and administrative support for these operations. We have financed our operations primarily through private and public securities financings, a term loan, and amounts received under a collaboration agreement.
Since our formation, we have incurred significant operating losses and have not
generated any revenue from the sale of products. Our ability to generate any
product revenue or product revenue sufficient to achieve profitability will
depend on the successful development and eventual commercialization of one or
more of our product candidates. Our net losses were
Our operating expenses discussed in this section reflect our development programs around FX-322, FX-345, MS and any future programs as well as our operations as a public company. We will not generate revenue from product sales unless and until we successfully complete clinical development, obtain regulatory approval for, and successfully commercialize our product candidates, or until our collaborators do so, which could result in milestone payments or royalties to us. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.
As a result of these anticipated expenditures, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our cash needs through a combination of public or private equity or debt financings and other sources, which may include current and new collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We cannot be sure that we will ever generate sufficient revenue to achieve profitability. Because of the numerous risks and uncertainties associated with the development of therapeutics, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we can generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital on terms that are unfavorable to us or we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
License and collaboration agreements
Astellas Pharma Inc.
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have the sole right to commercialize the Astellas licensed products in
As consideration for the licensed rights under the Astellas Agreement, Astellas
paid us an upfront payment of
In
Upon entering into the MIT License, we paid a
In
In
Massachusetts Eye and Ear (
In
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Upon entering into the MEE License, we made a
In
Upon entering into the CALIBR License, we made a
Components of our results of operations
Revenue
To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from product sales in the foreseeable future. In
Research and development expenses
Research and development expenses presented in this section consist primarily of costs related to activities largely focused on hearing restoration and MS. These expenses include the following:
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salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
•
expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct preclinical research and development activities and clinical trials on our behalf;
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costs to manufacture our clinical trial material for use in our preclinical studies and clinical trials;
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costs of outside consultants, including their fees and related travel expenses;
•
costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;
•
option and license payments made to third parties, including
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•
facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs if specifically, identifiable to research activities.
We track external research and development costs, including the cost of services, outsourced research and development, clinical trials, contract manufacturing, laboratory equipment and maintenance, and certain other development costs, by product candidate when the costs are specifically identifiable to a product candidate. Internal and external costs associated with infrastructure resources, other research and development costs, facility-related costs, and depreciation and amortization that are not identifiable to a specific product candidate are included in the platform development, early-stage research, and unallocated expenses category.
We cannot determine with certainty the duration and costs of future clinical trials of any product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. The duration, costs, and timing of clinical trials and development of any product candidate we may develop will depend on a variety of factors, including:
•
the scope, rate of progress, expense and results of clinical trials of product candidates and other research and development activities that we may conduct;
•
the actual probability of success for our product candidates, including their safety and efficacy, early clinical data, competition, manufacturing capability, and commercial viability;
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significant and changing government regulation and regulatory guidance;
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the timing and receipt of any marketing approvals;
•
the progress of the development efforts of parties with whom we may enter into collaboration agreements;
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our ability to secure manufacturing supply through relationships with third parties;
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the commercialization of our product candidates, if and when approved;
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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
•
the impact of public health emergencies, such as COVID-19, on our ongoing and planned trials.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.
General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development, and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; investor and public relations costs; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities, and other operating costs that are not specifically attributable to research and development activities.
Interest income
Interest income consists of interest earned on cash equivalents and marketable securities.
Interest expense
Interest expense consists of interest paid on our term loan.
Realized gain (loss) on investments
Realized gain (loss) on investments represents the gain or loss realized on our marketable securities.
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Foreign exchange (loss) gain
Foreign exchange (loss) gain represents the loss or gain recorded as a result of remeasuring the financial statements of our foreign subsidiaries.
Other income (expense), net
Other income (expense), net consists of amortization expense and accretion income on investments as well as sublease income.
Income taxes
Since our inception in 2014, we have generated cumulative federal and state net operating loss and research and development credit carryforwards for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within the respective carryforward periods.
As of
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Results of operations
Comparison of years ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Years ended December 31, 2022 2021 Revenue $ -$ 14,068 Operating expenses: Research and development 49,418 60,923 General and administrative 33,584 37,176 Total operating expenses 83,002 98,099 Loss from operations (83,002 ) (84,031 ) Interest income 1,327 397 Interest expense (961 ) (764 ) Realized gain (loss) on investments 3 (23 ) Foreign exchange (loss) gain (5 ) 16 Other income (expense), net 1,056 (266 ) Loss before income taxes (81,582 ) (84,671 ) Tax benefit (provision) 2 (15 ) Net loss$ (81,580 ) $ (84,686 ) Revenue
No revenue was recognized for the year ended
Research and development expenses
Years ended December 31, Increase
2022 2021 (Decrease)
(in thousands)
Direct research and development expenses
by therapeutic area and product candidate:
FX-322 $ 10,855 $ 10,334 $ 521
FX-345 4,217 5,471 (1,254 )
Multiple Sclerosis 4,782 6,627 (1,845 )
Platform development, early-stage research
and
unallocated expenses:
Employee-related 20,015 25,557 (5,542 )
Laboratory supplies 272 716 (444 )
Outsourced research and development 403 2,305 (1,902 )
Facility-related 6,403 6,898 (495 )
Depreciation and amortization 1,618 1,599 19
Other research and development 853 1,416 (563 )
Platform development, early-stage research
and unallocated expenses total 29,564 38,491 (8,927 )
Total research and development expenses
The
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The
The
The
General and administrative expenses
The
Interest income
Interest income was
Interest expense
Interest expense was
Realized gain (loss) on investments
Realized gain on investments was
Foreign exchange (loss) gain
Foreign exchange loss was
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Other income (expense), net
Other income, net was
Income taxes
Income tax benefit was
Liquidity and capital resources
Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. We expect that our research and development and general and administrative costs will continue to fluctuate, in connection with conducting preclinical studies and clinical trials for our product candidates, contracting with contract manufacturing organizations, or CMOs, to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
We do not currently have any approved products and have never generated any
revenue from product sales. We have financed our operations primarily through
proceeds from private and public securities financings, a term loan, and amounts
received under a collaboration agreement. To date, we have raised approximately
In
In
On
On
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Cash flows
The following table summarizes our sources and uses of cash for the periods
presented:
Year Ended
December 31,
2022 2021
(in thousands)
Net cash used in operating activities $ (58,237 ) $ (76,059 ) Net cash provided by (used in) investing activities 31,133 (66,126 ) Net cash (used in) provided by financing activities (577 ) 1,358 Net decrease in cash and cash equivalents
$ (27,681 ) $ (140,827 )
Cash flows for the year ended
Operating activities
Net cash used in operating activities for the year ended
The decrease in net cash used in operating activities for the year ended
Investing activities
Net cash provided by investing activities for the year ended
The increase in net cash provided by investing activities for the year ended
Financing activities
Net cash used in financing activities for the year ended
The increase in net cash used in financing activities for the year ended
Cash flows for the year ended
Operating activities
Net cash used in operating activities for the year ended
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revenue related to the Astellas Agreement was recognized in the year ended
Investing activities
Net cash used in investing activities for the year ended
Financing activities
Net cash provided by financing activities for the year ended
Funding requirements
We expect our future operating expenses to reflect our ongoing research and development for our MS Program, preclinical activities, studies for INDs, and initiation of clinical trials. In addition, we expect to maintain general and administrative costs to manage the requirements of operating as a public company.
Specifically, our costs and expenses will increase as we:
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pursue the preclinical and clinical development of a candidate for remyelination in MS and any other product candidates using our PCA approach; and
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maintain, expand, and protect our intellectual property portfolio.
We believe that our existing cash, cash equivalents, and marketable securities, will enable us to fund our operating expenses and capital expenditure requirements into 2025. We have based this estimate on assumptions that may prove to be incorrect, and we could utilize our available capital resources sooner than we expect.
Because of the numerous risks and uncertainties associated with the research, development, and commercialization of therapeutics, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
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the progress, costs, and results of our research and preclinical development program for remyelination in MS;
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the outcome, timing and cost of meeting regulatory requirements established by the FDA and comparable foreign regulatory authorities, if applicable, for our product candidates;
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business and operations interruptions resulting from public health emergencies, such as the COVID-19 global pandemic;
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the costs and timing of internal process development, manufacturing activities, and clinical trial management associated with product candidates we advance through preclinical and clinical development;
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our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;
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the scope, progress, results, and costs of any product candidates that we may derive from our PCA approach or any other product candidates we may develop alone or with collaborators;
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the extent to which we in-license or acquire rights to other products, product candidates, or technologies;
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additions or departures of key scientific or management personnel;
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the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and protecting our intellectual property rights, and defending against any intellectual property-related claims; and
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution for any product candidates for which we or our collaborators obtain marketing approval.
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Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our cash needs through a combination of public or private equity or debt financings and other sources, which may include current and new collaborations with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred 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 additional funds through other sources, such as collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, product development, and research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds 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 products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and commitments
We are party to an operating lease of approximately 61,307 square feet of office
and laboratory space in
Payment obligations for future milestone payments under our collaboration and
license agreements are contingent upon future events, such as the achievement of
specified product development milestones or generating product sales, and we are
unable to estimate the timing or likelihood of achieving these milestones or
generating future product sales. We were also required to use diligent efforts
to develop and commercialize the
We also enter into contracts in the normal course of business with CROs, CMOs, universities, and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancelable by us upon prior written notice although, purchase orders for clinical materials are generally non-cancelable. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation or upon completion of a manufacturing run. The amount and timing of such payments are not known or are not material.
Critical accounting policies and use of estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our audited consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue recognition
We account for contracts with customers in accordance with Accounting Standards Codification (ASC), Topic 606, Revenue from Contracts with Customers (ASC 606), including all amendments thereto. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as collaborative arrangements and leases. Our disclosure in the accompanying consolidated financial statements reflects the Company's accounting policies in compliance with this standard.
Under ASC 606, an entity recognizes revenue when or as its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To recognize revenue for arrangements that an entity determines are within the scope of ASC 606, the entity performs the
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following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies its performance obligations. We only apply the five-step model to contracts when it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and identifies as a performance obligation each promise to transfer to the customer either (a) a good or service (or bundle of goods and services) that is distinct, or (b) a series of distinct goods and services that are substantially the same and have been the same pattern of transfer to the customer.
We assess whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner (the "customer" in this type of arrangement) and the availability of the associated expertise in the general marketplace. We also consider the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. For each arrangement that results in revenues, we identify all performance obligations, which may include, for example, a license to IP and know-how, research and development activities, and/or manufacturing services.
In addition to any upfront payment, if the consideration promised in a contract includes a variable amount, we estimate the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. We determine the amount of variable consideration by using the expected value method or the most likely amount method. We include the estimated variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.
If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. If it is probable that a significant revenue reversal will not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or of the licensee such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
For contracts that include sales-based royalties (including milestone payments based on the level of sales) promised in the exchange for licenses of intellectual property, and the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue and sales-based milestone payments at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. In determining the transaction price, we adjust the promised amount of consideration for the effects of the time value of money if the timing of payments provides the Company or the Company's customer with a significant benefit of financing the transfer of goods and services. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assess each of its revenue generating arrangements in order to determine whether a significant financing component exists. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time. For performance obligations satisfied over time, we measure progress toward completion of its performance obligations using an input method based on our efforts and inputs to satisfy its performance obligations relative to total expected inputs to the satisfaction of that performance obligation.
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Amounts received from a customer prior to revenue recognition are recorded as deferred revenue. Amounts received from a customer that are expected to be recognized as revenue within the 12 months following the balance sheet date are classified as a current liability in the consolidated balance sheets.
Our only revenue recognized since inception is related to the Astellas
Agreement. At commencement of the Astellas Agreement, we estimated the
performance obligation, the completion of the Phase 2a clinical trial of
(FX-322-202), would be satisfied by
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. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. Most 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 our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to the following:
•
CROs and other third parties in connection with performing research and development activities and conducting preclinical studies and clinical trials on our behalf;
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Vendors in connection with preclinical development activities; and
•
CMOs and other vendors in connection with product manufacturing and development and distribution of preclinical supplies.
We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct and manage preclinical studies and clinical trials and CMOs that manufacture product for our research and development activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may cause us to report amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.
Stock-based compensation
We measure stock options and other stock-based awards granted to our employees, directors, consultants, advisors based on the fair value on the date of the grant, awards, net of actual forfeitures, over the requisite service period, which is generally the vesting period of the respective award. For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed.
We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options, and our expected dividend yield. Although we do not expect our estimates to be materially different from amounts actually incurred, our option pricing model may cause us to report amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of stock-based compensation expense.
Recent accounting pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations, or cash flows is disclosed below:
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In
There are no other recent accounting pronouncements that we believe will have a material impact on our consolidated financial statements.
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