Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "may," "might," "can," "will," "to be," "could," "would," "should," "expect," "intend," "plan," "objective," "anticipate," "believe," "estimate," "predict," "project," "potential," "likely," "continue," "ongoing" or similar expressions, or the negative of such words, are intended to identify "forward-looking statements." We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below in this Quarterly Report on Form 10-Q and those in our Annual Report on Form 10-K, in each case under the caption "Risk Factors," and in our other filings with the Securities and Exchange Commission, or SEC. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, 2020, which are included in our Annual Report on Form 10-K filed with the SEC on March 30, 2021.

Overview

We are developing a pipeline of medicines designed to fulfill the substantial potential of the immune system to defeat cancer and other diseases. We are utilizing two unique approaches. The first is our ImmunoPhage™ platform, which is a powerful, self-adjuvanted and highly differentiated immunotherapy approach that is designed to utilize bacteriophage to induce a robust, focused and coordinated innate and adaptive immune response. We are engineering our ImmunoPhage product candidates to directly target antigen presenting cells, or APCs. We believe our ImmunoPhage platform has the potential to deliver on the promise of personalized, off-the-shelf product candidates tailored to a patient's specific tumor. The versatility of our ImmunoPhage platform allows us to design product candidates in a modular fashion, based on a cocktail of common and patient-specific antigens built from our proprietary library of ImmunoPhages, which we refer to as Phortress. We are currently conducting a 60-patient Phase 1/2 clinical trial of our most advanced product candidate, SNS-301, in combination with the PD-1 inhibitor pembrolizumab, as a potential treatment for squamous cell carcinoma of the head and neck (SCCHN). As of March 9, 2021, 17 patients were enrolled in the trial. As of December 10, 2020, we had evaluated ten for safety and ten patients for efficacy. Treatment with SNS-301 was generally well tolerated. We observed disease control in seven of the patients evaluable for efficacy, including one patient with a partial response (PR), and two patients who have achieved longstanding stable disease (SD) for greater than 36 weeks following treatment. We anticipate reporting a substantial subset of data from this trial by the end of 2021. If the results of this trial are positive, we intend to discuss with the FDA the design of a randomized, registration-enabling trial for SNS-301. The second approach is our monoclonal antibody (mAb) and nanobody platform, which is comprised of human monoclonal antibodies and alpaca derived nanobodies selectively active in the tumor microenvironment. Through the targeted use of this platform, we believe we can further enhance therapeutic activity.

We are leveraging the insights from our experience with SNS-301 to expand our development pipeline to include SNS-401 for the treatment of merkel cell carcinoma (MCC) and a human mAb program targeting the novel immune checkpoint VISTA. Since our inception, we have devoted the majority of our efforts and financial resources to research and development activities related to our ImmunoPhage platform and our most advanced product candidate SNS-301, including raising capital, protecting our intellectual property portfolio and conducting preclinical studies and clinical trials. As our pipeline advances, we are dedicating more of our spend toward mAb and nanobody programs, including increased spend related to lead generation activities of our SNS-VISTA product candidate. We do not have any product candidates approved for sale, have not generated any revenue from product sales, and do not expect to generate any revenue from product sales for at least the next several years. We have largely funded our operations with proceeds from the sale of convertible preferred stock, common stock and convertible debt. Through the date of this report, we have raised an aggregate of $123.4 million of gross proceeds from private placements of our equity and convertible debt securities and net proceeds of $138.5 million from our initial public offering, or IPO, in February 2021.

We have incurred significant operating losses over the last several years. Our net loss was $8.0 million and $4.7 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $120.4 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:



    •   complete our Phase 1/2 clinical trial of SNS-301 and continue clinical
        development of SNS-301;


    •   prepare to file INDs and then initiate clinical development of additional
        product candidates, including SNS-VISTA from our mAb program, and SNS-401
        from our ImmunoPhage platform.


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  • continue the research and development of our other product candidates;


  • invest in our ImmunoPhage platform;


    •   seek to discover and develop additional product candidates or acquire or
        in-license drugs, product candidates or technologies;


    •   seek regulatory approvals for any product candidates that successfully
        complete clinical trials;


    •   ultimately establish a sales, marketing and distribution infrastructure
        and scale up manufacturing capabilities to commercialize any product
        candidates for which we may obtain regulatory approval;


    •   manufacture our product candidates or otherwise secure the clinical and
        commercial supply of our product candidates;


    •   hire additional research and development and selling, general and
        administrative personnel;


  • maintain, expand and protect our intellectual property portfolio; and


  • incur additional costs associated with operating as a public company.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses and negative cash flows for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants, and incur other increased costs associated with being a public company. In addition, if we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product.

Recent Security Issuances

From December 2020 through January 2021, we issued and sold 165,956,208 shares of our Series BB convertible preferred stock at a purchase price of $0.207383 per share for aggregate gross proceeds of $34.4 million, of which approximately $23.5 million was received in January 2021.

In February 2021, we issued and sold an aggregate of 8,030,295 shares of our common stock at a price to the public of $19.00 per share for aggregate gross proceeds of $152.6 million in our initial public offering.

Impact of COVID-19

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization and to date, the COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and are difficult to predict. While we continue to conduct our research and development activities, the COVID-19 pandemic may cause disruptions that impact the timing of our ongoing and planned clinical trials of SNS-301 and affect our ability to complete preclinical studies, future clinical trials or to procure items that are essential for our research and development activities.

In addition, a recurrence or "second wave" of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest. We plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our business operations, as we deal with the disruptions and uncertainties relating to the COVID-19 pandemic. In an effort to provide a safe work environment for our employees, we have, among other things, implemented various social distancing measures in our office and labs including replacing in-person meetings with virtual interactions, and are working remotely when possible. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic. To date, there has not been a significant impact on the development of SNS-301 or the rest of our pipeline; however we cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic could potentially have on our ongoing business plan, financial condition and operations.



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Components of Our Results of Operations

Operating Expenses

Research and Development Expense

Our research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. These expenses include:



    •   expenses incurred under agreements with CROs, as well as investigative
        sites and consultants that conduct our clinical trials and preclinical
        studies;


    •   the cost of manufacturing our product candidates including the potential
        cost of CMOs that manufacture product for use in our preclinical studies
        and clinical trials and perform analytical testing, scale-up and other
        services in connection with our development activities;


  • the cost of outsourced professional scientific development services;


    •   employee-related expenses, including salaries, benefits and stock-based
        compensation for employees engaged in the research and development
        function;


    •   expenses relating to regulatory activities, including filing fees paid to
        regulatory agencies;


    •   fees for maintaining licenses and other amounts due under our third party
        licensing agreements;


    •   laboratory materials and supplies used to support our research activities;
        and


  • allocated expenses for utilities and other facility-related costs.

We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

Our direct external research and development expenses consist primarily of external costs, such as fees paid to CROs, CMOs, research/testing laboratories and outside consultants in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate these costs to specific product candidates because many of them are deployed across several of our development programs and, as such, are not separately classified. We use internal resources primarily to conduct research and manage our preclinical development, outsourced clinical trials, process development, manufacturing and clinical development activities. These employees work across multiple development programs and, therefore, we do not track their costs by program and, as such, are not separately classified. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our registration-enabling clinical trial of SNS-301 in patients with SCCHN, conduct other clinical trials and prepare regulatory filings for our product candidates.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our other product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:



    •   the scope, progress, outcome and costs of our preclinical studies and
        clinical trials of SNS-301, our other product candidates and any other
        product candidates we may acquire or develop;


    •   manufacturing of our product candidates or making arrangements with
        potential third-party manufacturers for both clinical and commercial
        supplies of these product candidates;


    •   successful patient enrollment in, and the initiation, duration and
        completion of clinical trials;


    •   the cost of gaining regulatory approvals for our product candidates,
        subject to the successful outcome of ongoing and future clinical trials;
        and


    •   the extent of any required post-marketing approval commitments to
        applicable regulatory authorities.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in



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achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. 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. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and significant additional development costs.

General and Administrative Expense

General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing and prosecution costs and professional fees for legal, auditing and tax services, and insurance costs.

We anticipate that our general and administrative expenses will increase as a result of increased payroll, expanded infrastructure and higher consulting, legal and tax-related services associated with maintaining compliance with Nasdaq listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company.

Other Expense

Our other expense consists of changes in the fair value of our derivative liability related to an embedded derivative on certain convertible debt, gain on debt extinguishments and interest expense.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020



The following sets forth our results of operations for the three months ended
March 31, 2021 and 2020:



                                      Three Months Ended March 31,
      (in thousands)                    2021                 2020           Change
      Operating expenses:
      Research and development     $        3,365       $        2,195     $  1,170
      General and administrative            4,604                1,908        2,696
      Total operating expenses              7,969                4,103        3,866
      Loss from operations                 (7,969 )             (4,103 )     (3,866 )
      Total other expense                      (3 )               (589 )        586
      Net loss                     $       (7,972 )     $       (4,692 )   $ (3,280 )

Research and Development Expenses

Research and development expenses were $3.4 million for the three months ended March 31, 2021, compared to $2.2 million for the three months ended March 31, 2020. The increase of $1.2 million was primarily attributable to increased headcount to support our research, development, and manufacturing activities.

General and Administrative Expenses

General and administrative expenses were $4.6 million for the three months ended March 31, 2021, compared to $1.9 million for the three months ended March 31, 2020. The increase of $2.7 million was primarily attributable to increased personnel costs, including stock-based compensation, to support our business, as well as increased professional service fees and directors and officers insurance costs.



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Other Expense

Other expense decreased $0.6 million in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, which was primarily attributable to fair value adjustments of embedded derivative liabilities associated with certain convertible debt, as well as lower interest expense on debt due to the redemption of convertible debt in 2020.

Liquidity and Capital Resources

Sources of Liquidity

We have not generated any product revenue and have incurred net losses and negative cash flows from our operations. We have financed our operations through sales of our common stock, convertible preferred stock and convertible debt. Through the date of this report, we have raised an aggregate of $123.4 million of gross proceeds from private placements of our equity and convertible debt securities and net proceeds of $138.5 million from our initial public offering, or IPO, in February 2021. Our net loss was $8.0 million and $4.7 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $120.4 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

As of March 31, 2021, we had cash and cash equivalents of $169.4 million. From December 2020 to January 2021, we issued and sold 165,956,208 shares of Series BB convertible preferred stock to a group of investors, in exchange for $34.4 million of new gross proceeds, of which approximately $23.5 million was received in January 2021. In February 2021, we issued an aggregate of 8,030,295 shares of common stock in our initial public offering at a price to the public of $19.00 per share, for aggregate gross proceeds of $152.6 million. We paid underwriting discounts and commissions of $10.7 million, and we also incurred expenses of $3.4 million in connection with the offering. As a result, the net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were $138.5 million.

Cash Flows



The following table summarizes our sources and uses of cash for each of the
periods below:



                                                  Three Months Ended March 31,
   (in thousands)                                   2021                 2020
   Net cash used in operating activities       $       (10,767 )     $      (6,460 )
   Net cash used in investing activities                  (487 )               (52 )
   Net cash provided by financing activities           164,076              10,557
   Net increase in cash and cash equivalents   $       152,822       $       4,045




Operating Activities

During the three months ended March 31, 2021, our operating activities used $10.8 million of cash, primarily resulting from our net loss. During the three months ended March 31, 2020, our operating activities used $6.5 million of cash, primarily resulting from our net loss. The increase in net cash used in operating activities for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 is attributed to the increase in net loss.

Investing Activities

During the three months ended March 31, 2021 and 2020, net cash used in investing activities was $0.5 million and $0.1 million, respectively, and related to purchases of property and equipment.

Financing Activities

During the three months ended March 31, 2021, net cash provided by financing activities was $164.1 million, primarily from the net proceeds from the issuance of common stock as part of our IPO, as well as proceeds from the issuance of Series BB convertible preferred stock prior to the IPO. During the three months ended March 31, 2020, net cash provided by financing activities was $10.6 million primarily from the issuance of Series AA convertible preferred stock.



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Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and potentially seek marketing approval for, our product candidates. In addition, we expect to incur significant costs associated with operating as a newly public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. The timing and amount of our operating expenditures will depend largely on:



    •   the initiation, progress, timing, costs and results of current and future
        preclinical studies and clinical trials for SNS-301, SNS-401 and SNS-VISTA
        and our other product candidates;


    •   the cost and timing of the manufacture of additional clinical trial
        material as well as any costs related to the scale-up of manufacturing
        activities;


    •   the costs to seek regulatory approvals for any product candidates that
        successfully complete clinical trials;


    •   the extent to which we or any third-party service providers on whom we
        rely experience delays or interruptions to preclinical studies and
        clinical trials, or to our supply chain due to the COVID-19 pandemic;


    •   the need to hire additional clinical, quality assurance, quality control
        and other scientific personnel;


    •   the number and characteristics of product candidates that we develop or
        may in-license;


    •   the outcome, timing and cost of meeting and maintaining compliance with
        regulatory requirements;


    •   the cost of filing, prosecuting, defending and enforcing our patent claims
        and other intellectual property rights;


    •   the terms of any collaboration agreements we may choose to enter into,
        including the achievement of milestones or occurrence of other
        developments that trigger payments under any license or collaboration
        agreements we might have at such time;


    •   the cost associated with the expansion of our operational, financial and
        management systems and increased personnel, including personnel to support
        our operations as a public company; and


    •   the cost of establishing sales, marketing and distribution capabilities
        for any product candidates for which we may receive regulatory approval in
        regions where we choose to commercialize our products, if approved, on our
        own.

We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements at least into the second half of 2023. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:



    •   the scope, progress, results and costs of product discovery, preclinical
        studies and clinical trials;


    •   the scope, prioritization and number of our research and development
        programs;


  • the costs, timing and outcome of regulatory review of our product candidates;


    •   our ability to establish and maintain collaborations on favorable terms,
        if at all;


    •   the extent to which we are obligated to reimburse, or entitled to
        reimbursement of, clinical trial costs under collaboration agreements, if
        any;


    •   the costs of preparing, filing and prosecuting patent applications,
        maintaining and enforcing our intellectual property rights and defending
        intellectual property-related claims;


    •   the extent to which we acquire or in-license other product candidates and
        technologies;


  • the costs of securing manufacturing arrangements for commercial production;


    •   the costs of establishing or contracting for sales and marketing
        capabilities if we obtain regulatory approvals to market our product
        candidates; and


    •   the impact of the COVID-19 pandemic and the corresponding responses of
        businesses and governments.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred



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equity financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in fixed payment obligations.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, 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 through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, 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.

Internal Control Over Financial Reporting

During the audit of our financial statements for the year ended December 31, 2020, material weaknesses were identified in our internal control over financial reporting. Under standards established by the PCAOB, a "material weakness" is a deficiency, or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We are in the process of implementing a number of measures to address the material weaknesses and deficiencies that have been identified including: (i) hiring additional accounting and financial reporting personnel with generally accepted accounting principles in the United States, or US GAAP, and SEC reporting experience, (ii) developing, communicating and implementing an accounting policy manual for our accounting and financial reporting personnel for recurring transactions and period-end closing processes, and (iii) establishing effective monitoring and oversight controls for non-recurring and complex transactions to ensure the accuracy and completeness of our company's consolidated financial statements and related disclosures.

These additional resources and procedures are designed to enable us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our internal control procedures. With the oversight of senior management and our audit committee, we have begun taking steps and plan to take additional measures to remediate the underlying causes of the material weaknesses.

We intend to complete the implementation of our remediation plan during the remainder of 2021. Although we believe that our remediation plan will improve our internal control over financial reporting, additional time may be required to fully implement it and to make conclusions regarding the effectiveness of our internal control over financial reporting. Our management will closely monitor and modify, as appropriate, the remediation plan to eliminate the identified material weakness.

If our remediation of the material weaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

We, and our independent registered public accounting firm, were not required to report on our evaluation of the Company's internal control over financial reporting as of March 31, 2021 in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we have identified all, or that we will not in the future have additional, material weaknesses. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting as required by reporting requirements under Section 404 of the Sarbanes-Oxley Act.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the U.S. Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgements and Estimates

This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which are prepared in accordance with US GAAP. The preparation of our financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates



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and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. During the three months ended March 31, 2021, there were no significant changes to our critical accounting policies disclosed in our audited financial statements for the year ended December 31, 2020, which are included in our Annual Report on Form 10-K, as filed with the SEC on March 30, 2021.

Recent Accounting Pronouncements

See note 2 in our condensed consolidated financial statements included elsewhere in this Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements. Other than as disclosed in our financial statements, we do not expect that any recently issued accounting standards will have a material impact on our financial statements or will otherwise apply to our operations.

Emerging Growth Company and Smaller Reporting Company Status

We qualify as an EGC, as defined in the JOBS Act. As an EGC, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an EGC earlier if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1.0 billion of non-convertible debt securities over a three-year period. For so long as we remain an EGC, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. We may choose to take advantage of some, but not all, of the available exemptions.

In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to "opt out" of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an EGC. Therefore, the reported results of operations contained in our consolidated financial statements may not be directly comparable to those of other public companies.

We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.

If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to EGCs, smaller reporting companies have reduced disclosure obligations regarding executive compensation.



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