Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

References to the "Company," "Kuvatris Therapeutics, Inc.," "our," "us," or "we" herein refer to Kuvatris Therapeutics, Inc, formerly PaxMedica, Inc. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report") and with our audited financial statements for the fiscal year ended December 31, 2023, as included in our annual report on Form 10-K, filed with the SEC on March 11, 2024 (our "Annual Report"). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as "anticipate," "believe," "envision," "estimate," "expect," "anticipate," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "scheduled to," "contemplate" and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:

	●	our lack of operating history;
	●	the expectation that we will incur significant operating losses for the foreseeable future and will need significant additional capital, including through future sales and issuances of equity securities, which could also result in substantial dilution to our stockholders;
	●	our current and future capital requirements to support our development and commercialization efforts for our product candidates and our ability to satisfy our capital needs;
	●	our dependence on our product candidates, which are still in preclinical or early stages of clinical development;
	●	our, or our third-party manufacturers', ability to manufacture cGMP batches of our product candidates as required for pre-clinical and clinical trials and, subsequently, our ability to manufacture commercial quantities of our product candidates;
	●	whether we will be successful in obtaining a priority review voucher, or PRV, for KV-101 and the commercial value to be realized from any such PRV, if any;
	●	our ability to complete required clinical trials for our product candidates and obtain approval from the FDA or other regulatory agencies in different jurisdictions;
	●	our lack of a sales and marketing organization and our ability to commercialize our product candidates if we obtain regulatory approval;
	●	our dependence on third parties to manufacture our product candidates;
	●	our reliance on third-party CROs to conduct our clinical trials;
	●	our ability to obtain, maintain or protect the validity of our intellectual property, including our granted or potential future patents;
	●	our ability to internally develop new inventions and intellectual property;
	●	interpretations of current laws and the passages of future laws;

	●	acceptance of our business model by investors;
	●	adverse developments affecting the financial services industry;
	●	the accuracy of our estimates regarding expenses and capital requirements; and
	●	our ability to adequately support organizational and business growth.

The following discussion should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under Item 1A- "Risk Factors" of our Annual Report and under Item 1A - "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" of this Item 2.

Overview

We are a clinical stage biopharmaceutical company focusing on the development of anti-purinergic drug therapies ("APT") for the treatment of disorders with intractable neurologic symptoms, ranging from neurodevelopmental disorders, including autism spectrum disorder ("ASD"). APTs have been shown to block the effects of excess production and extracellular receptor activity of adenosine triphosphate ("ATP"), which acts as both the main energy molecule in all living cells and a peripheral and central nervous system neurotransmitter via receptors that are found throughout the nervous system. Excess purinergic signaling can offset homeostasis and trigger immune responses that result in localized and systemic increases in inflammatory chemokines and cytokines, ultimately stimulating ATP production. APTs may also impact immunologic and inflammatory mechanisms that may be causing or exacerbating symptoms in these seemingly unrelated disorders, which may be caused in part by similar mechanisms of ATP overproduction.

One of our primary points of focus is currently the development and testing of our lead program, KV-101, an intravenous formulation of suramin, in the treatment of ASD and for the treatment of Human African Trypanosomiasis, a fatal parasitic infection commonly known as African sleeping sickness ("HAT").

In February 2021, we announced positive topline data from our Phase 2 dose-ranging clinical trial evaluating KV-101 (commonly known as intravenous suramin) for the treatment of the core symptoms of ASD, as described in more detail below. We also intend to submit data to support a New Drug Application (an "NDA") for KV-101 under the Tropical Disease Priority Voucher Program of the U.S. Food and Drug Administration (the "FDA") for HAT, leveraging suramin's historical use in treating HAT outside of the United States. We have exclusively licensed clinical data from certain academic or international government institutions to potentially accelerate KV-101's development plans in the United States through this regulatory program and intend to seek approval in the United States for the treatment of East African HAT (as defined below) as early as late 2024 or in the first half of 2025.

We are also pursuing the development of next generation ATP product development candidates for neurodevelopmental indications. These candidates include KV-102, our proprietary intranasal formulation of suramin, as well as other new chemical entities that are more targeted and selective antagonists of particular purine receptor subtypes. We believe our lead drug candidate (suramin), if approved by the FDA, may be a significant advancement in the treatment of ASD.

In July 2023, we announced positive topline results from the KV-101 (intravenous suramin) Phase 3 African Sleeping Sickness Study, PAX-HAT-301. The conclusions of the study confirmed that the retrospective, non-randomized, externally controlled, interventional efficacy and safety study of suramin for the treatment of Stage 1 TBR HAT demonstrated better health outcomes when compared with a natural history control group of patients evaluated and treated from 1900-1910, prior to the availability of suramin in Africa. The adverse event profile of suramin observed in the study was consistent with what has been widely reported in published medical and clinical literature.

On October 26, 2023, we completed a type-B meeting with the FDA, where we discussed the results of our recent data from our PAX-HAT-301 study of suramin in HAT. We received constructive feedback that will aid in the completion of the remaining work necessary to file a NDA for that indication, which is expected to take place in second half of 2026.

On June 27^th, 2024, we completed a type-C meeting with the FDA, where we discussed our Chemistry, Manufacturing, and Controls ("CMC") regulatory guidelines for our KV-101 candidate. We received constructive feedback which will aid in the completion of our remaining work to file a NDA expected in the second half of 2026 or in the second quarter of 2026. Most of the work to achieve this important milestone will focus on completing the production of commercial lots of KV-101 under CMC regulatory guidelines, underway now and scheduled to conclude in early 2026. Additionally, we discussed the implementation and completion of a registry for patients treated with KV-101 for the indication of HAT to be submitted along with the NDA.

On September 4^th, 2024, we completed a type-C meeting with the FDA, where we discussed our disease registry study for KV-101 in Malawi. We received constructive feedback on the design of the registry that will address the FDA concerns about heterogeneity in the patient population in Malawi.

We have not generated any revenue to date and through September 30, 2024, we had an accumulated deficit of approximately $59.6 million. To date, we have financed our operations through capital contributions from our prior members when we were a limited liability company, proceeds from our initial public offering, the issuance of convertible notes, our entry into a Simple Agreement for Future Equity ("SAFE") with an investor, the issuance of Series X preferred stock, par value $0.0001 per share ("Series X preferred stock"), the sale of shares of common stock to LPC (as defined herein) pursuant to the Purchase Agreement, our secondary public offering in November 2023, and a warrant inducement in September 2024, which is described in Note 7 to the financial statements attached hereto. We expect our expenses to increase significantly in connection with our ongoing activities to develop, seek regulatory approval and commercialization of KV-101 and our other product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will likely need substantial additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure 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 will need to generate significant revenues to achieve profitability, and we may never do so. Accordingly, there are material risks and uncertainties that raise substantial doubt about our ability to continue as a going concern.

Financial Operations Overview

Revenue

To date, we have not generated any product revenue. Our ability to generate product revenue will depend on the successful development and eventual commercialization of our current, and any potential future, product candidates.

Research and Development Expenses

Research and development expenses consist of costs incurred for the development of KV-101 and our other product candidates, which include:

	●	the cost of acquiring, developing and manufacturing pre-clinical trial materials;
	●	costs for consultants and contractors associated with developing our product candidates in accordance with CMC guidelines, pre-clinical and clinical activities and regulatory operations;
	●	expenses incurred under agreements with contract research organizations, or CROs, that conduct our pre-clinical studies and clinical trials; and
	●	employee-related expenses, including salaries for those employees involved in the research and development process.

Research and development costs are expensed as incurred. Costs for certain activities, such as preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

General and Administrative Expense

Our general and administrative expenses include costs associated with our executive, accounting, information technology and human resources functions. These expenses consist principally of payroll, employee benefits, travel, stock-based compensation and professional services fees such as consulting, audit, tax and legal fees, and general corporate costs. We expense all general and administrative expenses as incurred.

We expect our general and administrative expenses to increase primarily as a result of costs related to us operating as a public company, such as additional legal, accounting, corporate governance, and investor relations expenses, and directors' and officers' insurance premiums.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023

		Three months ended September 30,
		2024				2023
Operating expenses
General and administrative		$	771,005			$	2,425,849
Research and development			116,933				1,938,672
Total operating expenses			887,937				4,364,521
Loss from operations			(887,937	)			(4,364,521	)
Other income (expense), net			11,295				(684,697	)
Net loss		$	(876,642	)		$	(5,049,218	)

Operating expenses

General and administrative

General and administrative expenses were approximately $0.7 million and $2.4 million for the three months ended September 30, 2024 and 2023, respectively. The decrease in general and administrative expenses was primarily due to a decrease in stock compensation of approximately $1.1 million, decrease in salary and benefits of approximately $0.2 million, and a decrease in professional fees of approximately $0.4 million.

Research and Development

Research and development expenses were approximately $0.1 million for the three months ended September 30, 2024 and approximately $1.9 million for the three months ended September 30, 2023. The $1.8 million decrease in research and development expenses was primarily attributable to completion of work with our development activities, including CMC and clinical work.

Of the $0.1 million in research and development expenses incurred during the three months ended September 30, 2024, approximately $0.1 million was associated with activities related to the HAT indication, and less than $0.1 million was associated with activities related to the ASD indication. These activities included, but were not limited to, payments in connection with the recently completed CMC processes and preclinical work.

Of the approximately $1.9 million in research and development expenses incurred during the three months ended September 30, 2023, approximately $1.2 million was associated with activities related to the HAT indication, and approximately $0.7 million was associated with activities related to the ASD indication. These activities included, but were not limited to, payments in connection with the recently completed CMC processes and preclinical work.

The estimated remaining aggregate costs expected to be incurred for the research and development and regulatory filing activities relating to the filing of an NDA for HAT is approximately $2.6 million.

Other Income (expense)

Other income (expense) was less than $0.1 million for the three months ended September 30, 2024, compared with other income (expense) of $(0.7) million for the three months ended September 30, 2023. The decrease in expense was primarily attributable to a reduction on the loss on debt of approximately $0.4 million and the valuation of the 2023 notes of approximately $0.3 million.

Comparison of the Nine months Ended September 30, 2024 to the Nine months Ended September 30, 2023

		Nine months ended September 30,
		2024				2023
Operating expenses
General and administrative		$	5,557,381			$	8,960,254
Research and development			2,019,226				2,750,192
Total operating expenses			7,576,607				11,710,446
Loss from operations			(7,576,607	)			(11,710,446	)
Other income (expense), net			9,001				(658,806	)
Net loss		$	(7,567,606	)		$	(12,369,252	)

Operating expenses

General and administrative

General and administrative expenses were approximately $5.6 million and $9.0 million for the nine months ended September 30, 2024 and 2023, respectively. There was a decrease in general and administrative expenses was primarily due to a decrease in stock compensation of approximately $3.0 million and a decrease in legal and professional fees, and a decrease salaries and benefits of approximately $0.4 million.

Research and Development

Research and development expenses were approximately $2.0 million for the nine months ended September 30, 2024 and approximately $2.8 million for the nine months ended September 30, 2023. The $0.8 million decrease in research and development expenses was primarily attributable to the completion of work in connection with our development activities, including CMC.

Of the $2.0 million in research and development expenses incurred during the nine months ended September 30, 2024, approximately $1.3 million was associated with activities related to the HAT indication, and approximately $0.7 million was associated with activities related to the ASD indication. These activities included, but were not limited to, payments in connection with the recently completed CMC processes and preclinical work.

Of the approximately $2.8 million in research and development expenses incurred during the nine months ended September 30, 2023, approximately $1.8 million was associated with activities related to the HAT indication, and approximately $1.0 million was associated with activities related to the ASD indication. These activities included, but were not limited to, payments in connection with the recently completed CMC processes and preclinical work.

The estimated remaining aggregate costs expected to be incurred for the research and development and regulatory filing activities relating to the filing of an NDA for HAT is approximately $2.3 million.

Other Income (expense)

Other income (expense) was less than $0.1 million for the nine months ended September 30, 2024, compared with other income (expense) of $(0.7) million for the nine months ended September 30, 2023. The decrease in expense was primarily attributable to a reduction on the loss on debt of approximately $0.4 million, the valuation of the 2023 notes of approximately $0.1 million, and the reduction of other expenses of approximately $0.1 million.

Liquidity and Capital Resources

We were formed as a Delaware limited liability company on April 5, 2018 and converted into a Delaware corporation on April 15, 2020. As of September 30, 2024, we had an accumulated deficit since inception of approximately $59.6 million. Since inception, we have not generated revenue from product sales and have incurred net losses and negative cash flows from our operations. From inception through September 30, 2024, we have funded our operations in large part through contributions from an affiliated company, TardiMed Sciences, LLC ("TardiMed"), the issuance of senior secured convertible promissory notes totaling approximately $7.0 million, proceeds from the initial public common stock offering, net of fees, of approximately $6.0 million, our SAFE for $5.0 million, the issuance of shares of our common stock in connection with our Purchase Agreement (as defined herein) of $5.6 million, the proceeds from our secondary public offering, net of fees, of approximately $6.1 million, and the proceeds from a warrant inducement we completed in September 2024, of approximately $0.8 million, net of fees.

Given our projected operating requirements and existing cash, there is substantial doubt about our ability to continue as a going concern through one year following the date that the condensed financial statements herein are issued (see Note 1).

Equity Purchase Agreement with Lincoln Park Capital

On November 17, 2022, the Company entered into the Purchase Agreement with LPC which provided that, upon the terms and subject to the conditions and limitations set forth therein, the Company could sell to LPC, at its discretion, up to $20.0 million of shares of its common stock over the 30-month term of the Purchase Agreement (see Note 7). During the nine months ended September 30, 2024, there were no shares of common stock issued in connection with the Purchase Agreement. During the nine months ended September 30, 2023, the Company received approximately $5.4 million from the issuance of approximately 0.2 million shares of common stock. As a result of our suspension from trading on the Nasdaq Capital Market, we were no longer permitted to sell shares of the Company's common stock under the Purchase Agreement. The Purchase Agreement has lapsed as the Maturity Date was reached on June 1, 2025.

Convertible Notes

In February 2023, the 2023 Note with a principal balance of $3.7 million was issued to Lind Global Fund II LP. In connection with the issuance, the Company received proceeds of approximately $3.2 million, net of a $0.5 million discount, incurred fees of approximately $0.5 million and used $0.2 million of proceeds to pay down the remaining balance of already outstanding secured convertible promissory notes.

On November 29, 2023, the Company satisfied in full its obligations under this note.

Vox Nova Exclusive Pharmacy Distribution Agreement

On June 30, 2023, the Company entered into an exclusive specialty benefit manager agreement with Vox Nova, Vox Nova pursuant to which Vox Nova will act as the exclusive United States distributor for the Company's lead pipeline asset, KV-101 intravenous suramin. Vox Nova will provide certain distribution management, pharmacy benefit management, sales and supply monitoring services to the Company with respect to KV-101, in the event KV-101 receives FDA approval. The distribution agreement also provides for an exclusivity fee payable to the Company of up to $2.0 million, payable in installments based on various time and regulatory approval parameters. Vox Nova paid $0.5 million of the exclusivity fee upfront in connection with the signing of the distribution agreement when the distribution right was transferred to Vox Nova. The remaining $1.5 million is due in four equal installments over a one-year period after KV-101 is approved by the FDA and made available for distribution.

Secondary Public Offering

On November 20, 2023, the Company entered into an underwriting agreement relating to the secondary public offering of its common stock, par value $0.0001 per share. The Company agreed to sell 5,384,615 shares of its common stock with the offering price to the public of $1.30 per share, pursuant to the Company's registration statement on Form S-1 (File No. 333-275416), as amended, under the Securities Act of 1933, that was filed by the Company under Rule 462(b) under the Securities Act. On November 22, 2023, the Company received net proceeds from its public offering of approximately $6.1 million, net of underwriter fees and commissions of approximately $0.6 million, and offering costs of approximately $0.3 million. In connection with its public offering the Company issued 5,384,615 warrants to purchase shares of the Company's common stock with an exercise price of $1.30 per share and issued 215,385 warrants to purchase shares of the Company's common stock with an exercise price of $1.625.

The 2023 Note and Warrant contained a price adjustment clause where the exercise and conversion price of the 2023 Note and Warrant is adjusted to the selling price of an offering if the Company's common stock is sold at a price below the conversion or exercise price, respectively. In November 2023, the Company entered into the secondary public offering described herein in which shares of its common stock were sold at $1.30 per share. As the price of the common stock sold as part of the public offering was below the exercise and conversion price of the 2023 Note and Warrant, the terms of the conversion and exercise price were reset to $1.30, as further described below.

Warrant Inducement and Issuance

On September 3, 2024, the Company entered into warrant inducement offers with the holders of approximately 4.4 million existing warrants of the Company. The inducement offers provided for the reduction of the exercise price of the warrants from $1.30 to $0.20. The holders immediately exercised those warrants for proceeds of approximately $0.8 million, net of fees. In conjunction with the financing the Company also issued 176,923 warrants, with an exercise price of $0.25, to the underwriter. During the three and nine months ended September 30, 2024, the Company issued 3,099,310 shares of common stock as a result of the warrant exercise.

Pursuant to the terms of the warrant inducement offers, in the event that the exercise of the existing warrants would cause a holder to exceed the beneficial ownership limitations included therein, the Company would issue the number of shares of common stock that would not cause a holder to exceed such beneficial ownership limitations and hold the remaining balance of shares of common stock in abeyance. Accordingly, as of September 30, 2024, the Company held an aggregate of 1,323,770 Abeyance Shares. The Abeyance Shares are evidenced through the holder's existing warrants, which are deemed to be prepaid. The Abeyance Shares will be held by the Company until the holder sends notice that the remaining balance of shares of common stock may be issued without surpassing the beneficial ownership limitations. Until such time, the Abeyance Shares are evidenced through the holder's existing warrants and are included in the Company's outstanding warrants. In October 2024, another 433,000 shares of common stock were issued from the Abeyance Shares.

Operating activities

During the nine months ended September 30, 2024, net cash used in operating activities was $5.0 million, which primarily included our net loss of approximately $7.6 million, adjusted for non-cash stock-based compensation expense of approximately $1.5 million. The net change in operating assets and liabilities was approximately $1.1 million, and was primarily due to decreases in prepaid expenses and other current assets of $0.6 million as well as increases in accounts payable of approximately $1.3 million, partially offset by a decrease in accrued expenses of approximately $0.9 million.

During the nine months ended September 30, 2023, net cash used in operating activities was $8.2 million, which primarily included our net loss of approximately $12.4 million, adjusted for non-cash expenses of approximately $5.6 million including stock-based compensation of approximately $4.5 million and $0.5 million in deferred revenue related to the Vox Nova agreement, offset by the change in fair value of our convertible notes of $0.1 million and the loss on the extinguishment of debt of approximately $0.4 million. The net change in operating assets and liabilities was approximately $1.4 million and was primarily due to decreases in accounts payable and accrued expenses of $1.0 million, and decreases in prepaid and other current assets of $0.5 million.

Investing Activities

There were no investing activities during the nine months ended September 30, 2024 and 2023.

Financing activities

During the nine months ended September 30, 2024, net cash provided by financing activities was approximately $0.7 million, consisting of net proceeds of approximately $0.8 million our September 2024 warrant inducement, offset by cash used for by financing activities of less than $0.1 million for the settlement of shares withheld for payment of employee taxes on vested Restricted Stock Units.

During the nine months ended September 30, 2023, net cash used in operating activities was $8.2 million, which primarily included our net loss of approximately $12.4 million, adjusted for non-cash expenses of approximately $5.6 million including stock-based compensation of approximately $4.5 million, $0.1 million of other expense and $0.5 million in deferred revenue related to the Vox Nova distribution agreement, change in fair value of our convertible notes of $0.1 million, and loss on extinguishment of debt of $0.4 million. The net change in operating assets and liabilities was approximately $1.4 million and was primarily due to decreases in accounts payable and accrued expenses of $1.0 million and decreases in prepaid and other current assets of $0.5 million.

Funding requirements

As of September 30, 2024, we had a cash balance of approximately $0.4 million. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

We anticipate incurring additional losses for the foreseeable future and may never become profitable. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of product candidates. Furthermore, we expect to continue to incur additional costs as a public company. Accordingly, we will likely need to obtain substantial additional funding. If we are unable to raise capital or otherwise obtain funding when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. These factors raise substantial doubt about our ability to continue as a going concern. The Company's future liquidity and capital funding requirements will depend on numerous factors, including:

	●	the outcome, costs and timing of clinical trial results for the Company's current or future product candidates;
	●	the emergence and effect of competing or complementary products;
	●	its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; and
	●	its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel.

We will seek to obtain additional capital through the sale of debt or equity financings or other arrangements such as collaborations, strategic alliances and licensing arrangements to fund operations; however, there can be no assurance that we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity or equity-linked securities may dilute existing stockholders and may contain senior rights and preferences compared to currently outstanding shares of common and preferred stock. Debt securities issued or other debt financing incurred may contain covenants and limit our ability to pay dividends or make other distributions to stockholders. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued.

Contractual obligations and commitments

During the next twelve months we have commitments to pay $2.3 million to settle our September 30, 2024 accounts payable, accrued expenses, and other current liabilities.

After the next twelve months, we have a commitment of $0.5 million to provide Vox Nova with exclusive pharmacy distribution rights over KV-101 for up to seven years once approved by the FDA.

Off-balance sheet arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.

Recent accounting pronouncements

See Note 2 to our financial statements included in this Quarterly Report for a description of recent accounting pronouncements applicable to our financial statements.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act ("JOBS Act"), and we may remain an emerging growth company for up to five years following the completion of our initial public offering. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved and an exemption from compliance with the requirements regarding the communication of critical audit matters in the auditor's report on financial statements.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to those of companies that are not emerging growth companies.