# Nkarta, Inc. (NKTX) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Nkarta, Inc.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1787400/000095017024034735/nktx-20231231.htm
Accession: 0000950170-24-034735
Filing date: 2024-03-21
Report date: 2023-12-31
Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub.
Confidence: high

Company profile: /company/NKTX/
All MD&A years: /company/NKTX/mda/
Previous year: /company/NKTX/mda/fy2022/ (FY 2022)
Next year: /company/NKTX/mda/fy2024/ (FY 2024)

Overview

We are a clinical-stage biopharmaceutical company pioneering the development of allogeneic, off-the-shelf engineered NK cell therapies for the treatment of patients with autoimmune diseases or hematologic malignancies. We are currently developing NKX019, a CAR NK cell product candidate targeting the CD19 antigen, as our lead product candidate. We have also been developing NKX101, a CAR NK cell product candidate targeting cells that display NKG2D ligands. Both product candidates enable an on-demand, off-the-shelf approach involving scaled manufacturing to broaden patient access. NKX019 and NKX101 incorporate proprietary technologies that enable us to generate an abundant supply of NK cells, increase NK cell recognition of target antigens, enhance NK cell fitness and freeze, store, and thaw our engineered NK cells for off-the-shelf administration. Our product candidates are allogeneic, which means they are produced using cells from a different person than the patient(s) being treated, and they are produced in quantity, then frozen and therefore available for treating patients without delay, unlike autologous cell therapies, which are derived from a patient’s own cells and must be manufactured as needed for each patient. We believe that engineered NK cells have the potential to be effective and accessible therapies for autoimmune diseases and cancer, be well tolerated, and avoid some of the toxicities observed with other cell therapies. NKX019 is currently being studied in an ongoing Phase 1 clinical trial for certain B-cell malignancies, and preparations for a planned Phase 1 clinical trial of NKX019 for LN are underway. NKX101 has been studied in a Phase 1 clinical trial for certain hematologic malignancies, although we have closed patient enrollment and deprioritized the program as part of a pipeline realignment to direct primary resources to our lead pipeline program, NKX019, for the treatment of autoimmune disease.

Our modular engineering platform builds on the distinctive biology of NK cells and their role in eradicating aberrant and pathologically transformed cells. Our process starts with differentiated, mature NK cells derived from healthy donors. We build on the intrinsic ability of these immune cells to identify and kill transformed cells with cell engineering to further enhance their activity. This engineering involves a chimeric antigen receptor ("CAR") on the surface of an NK cell to enable the cell to recognize specific proteins or antigens that are present on the surface of tumor cells. Our engineered CAR NK cells generally consist of an NK cell engineered with a targeting receptor, OX40 costimulatory domain, CD3ζ(zeta) signaling moiety, and a membrane-bound form of the cytokine IL(interleukin)-15 ("mbIL-15").

In October 2023, we announced that we had received clearance of an IND application by the United States FDA to evaluate NKX019 for the treatment of LN. The planned multi-center, open label, dose escalation Phase 1 clinical trial will evaluate the safety and clinical activity of NKX019 in patients with refractory LN. We are on track to dose the first patient in the first half of 2024. We also plan to evaluate additional autoimmune diseases for potential clinical investigation with NKX019.

NKX019 is currently being studied in a multi-center Phase 1 clinical trial for the treatment of a variety of B-cell malignancies. This ongoing first-in-human study evaluates the safety, pharmacology, and preliminary anti-tumor activity of NKX019, at multiple centers in the United States and Australia.

NKX101 has been evaluated in a multi-center Phase 1 clinical trial in the U.S. for the treatment of r/r AML and MDS. This first-in-human study evaluates the safety, pharmacology, and preliminary anti-tumor activity of NKX101. We have deprioritized the development of NKX101 as part of a realignment of our pipeline to direct primary resources to our lead pipeline program, NKX019, for the treatment of autoimmune disease.

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Under the CRISPR Agreement entered into in May 2021, we agreed with CRISPR to collaboratively design and advance (a) up to two allogeneic, gene-edited NK cell therapies, one of which is the engineered CAR NK product candidate targeting the CD70 tumor antigen, and (b) one allogeneic, gene-edited NK+T cell therapy.

In October 2023 we announced cost containment measures designed to create a more streamlined organization to support our operations through multiple clinical data updates during 2024 and extend our projected cash runway into 2026. These cost containment measures included a reduction in and re-allocation of headcount combined with a cap on future headcount growth, as well as planned centralization of operations to a single location. We plan to continue to carefully manage our discretionary expenses and headcount growth in the near term to ensure we have sufficient capital to achieve these milestones. We have prioritized the development of NKX019, including hiring personnel with the requisite education and experience, to support our expansion into autoimmune disease.

Since the commencement of our operations in 2015, we have devoted substantially all of our resources in support of our product development efforts, hiring personnel, raising capital to support and expand such activities and providing general and administrative support for these operations. We have incurred net operating losses since inception and have not generated any revenue from product sales. In the future, we expect that our operating expenses will significantly increase as we continue to develop and seek regulatory approvals for our product candidates, continue to engage in other research and development activities to expand our pipeline of product candidates, maintain and expand our intellectual property portfolio, maintain and expand our product manufacturing capabilities, and ultimately establish a commercial organization. We have funded our operations primarily through the issuance of Company stock and intend to raise additional capital to fund operations until such time that we are able to generate sufficient revenues to cover our operating expenses. We may seek additional funding through the issuance of common stock, including through our ATM Offering Program, other equity or debt financing or collaborations or partnerships with other companies. The amount and timing of our future funding requirements will depend on many factors, including, among other things, the pace and results of our clinical development efforts for our product candidates. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital as and when needed would compromise our ability to execute our business plan and may cause us to undertake further cost containment measures and/or significantly delay, scale back or discontinue the development of some of our programs. We have also incurred increased operating expenses since becoming a public company, which we expect will further increase when we are no longer able to rely on certain “emerging growth company” exemptions we are afforded under the Jumpstart Our Business Startups Act (the "JOBS Act") as further described under “—JOBS Act” below. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

Financial Operations Overview

Operating Expenses

Research and Development

Research and development costs consist primarily of costs incurred for the discovery and clinical development of our drug candidates, which include:

•
employee-related expenses, including salaries, related benefits, travel and share-based compensation expenses for employees engaged in research and development functions;

•
expenses incurred in connection with research, laboratory consumables, sponsored research, and preclinical studies;

•
expenses incurred in connection with conducting clinical trials including investigator grants, site payments for time and pass-through expenses and expenses incurred under agreements with CROs, other vendors, central laboratories and service providers engaged to conduct our trials;

•
the cost of consultants engaged in research and development related services;

•
the cost to manufacture drug product candidates for use in our preclinical studies and clinical trials;

•
facilities, depreciation and other expenses, which include allocated expenses for rent and maintenance of facilities, insurance and supplies;

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•
costs related to regulatory compliance; and

•
the cost of annual license fees under our third-party licensing agreements.

We typically have various early-stage research and drug discovery projects as well as various product candidates undergoing clinical trials. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery project and are typically deployed across multiple projects. As such, we do not maintain information regarding the costs incurred for these early-stage research and drug discovery programs on a project-specific basis. As part of our October 2023 announcement of cost containment measures, early discovery and preclinical programs have been deprioritized with less personnel and funding allocated to advancing these programs.

We expense research and development costs as they are incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

The following table summarizes our research and development expenses for the years ended December 31, 2023 and 2022. The direct external development program expenses reflect external costs attributable to our clinical development candidates and preclinical candidates selected for further development. Such expenses include third-party contract costs relating to manufacturing, clinical trial activities, translational medicine and toxicology activities. The unallocated internal research and development costs include personnel, facility costs, laboratory consumables and discovery and research related activities associated with our pipeline. The partner cost sharing represents reimbursable research and development expenses from the CRISPR Agreement.

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[[/GREPCENT_TABLE]]

Research and development activities are central to our business model. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. In addition, future regulatory factors beyond our control may impact our clinical development programs. Drug 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. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our drug candidates. However, we expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities in the future, including as a result of our planned clinical trial of NKX019 for the treatment of LN.

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The successful development of our drug candidates is highly uncertain. A change in the outcome of any of a number of variables with respect to the development of our drug candidates may significantly impact the costs and timing associated with the development of our drug candidates. A discussion of the risks and uncertainties that we face in the development and commercialization of our drug candidates can be found under Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. We may never succeed in obtaining regulatory approval for any of our drug candidates.

General and Administrative

General and administrative expenses consist primarily of salaries and employee-related costs, including share-based compensation, for personnel in executive, finance, human resources, and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services and facility-related costs.

While we continue to pursue cost containment measures, we still expect our general and administrative expenses will increase in the future in support of any increased research and development activities and to reflect increased costs associated with operating as a public company. These increased costs will include increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, insurance premiums and investor relations costs.

Other Income (Expense), net

Interest Income

Interest income consists of interest earned on our cash, cash equivalents and short-term and long-term investments and adjustments related to amortization of purchase premiums and accretion of discounts of short-term and long-term investments.

Income Taxes

We are subject to corporate U.S. federal and state income taxation. We estimate our income tax provision, including deferred tax assets and liabilities, based on management’s judgment. We record a valuation allowance to reduce our deferred tax assets to the amounts that are more likely than not to be realized. We consider future taxable income, ongoing tax planning strategies and our historical financial performance in assessing the need for a valuation allowance. If we expect to realize deferred tax assets for which we have previously recorded a valuation allowance, we will reduce the valuation allowance in the period in which such determination is first made.

We record liabilities related to uncertain tax positions in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

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Results of Operations

The following table summarizes our results of operations for the periods indicated (in thousands):

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[[/GREPCENT_TABLE]]

Research and development expenses

Research and development expenses were $96.8 million and $90.9 million for the years ended December 31, 2023 and 2022, respectively. The increase of $5.9 million was attributable primarily to the following:

•
a $5.4 million increase in personnel related expense, including a $0.7 million increase in share-based compensation expense;

•
a $2.5 million increase in other internal research costs, primarily consisting of research and laboratory supplies and facilities expenses;

•
a $2.6 million decrease in partner cost sharing reimbursable expenses related to activities performed under our collaboration with CRISPR; and

•
a $4.7 million decrease in external program expenses primarily related to a $4.5 million decrease in manufacturing expense and a $1.0 million decrease in preclinical program expense, which was offset by a $0.8 million increase in clinical trial related expense.

General and administrative expenses

General and administrative expenses were $34.9 million and $28.1 million for the years ended December 31, 2023 and 2022, respectively. The increase of $6.8 million was primarily due to the following:

•
a $0.6 million increase in personnel related expense, including a $0.4 million decrease in share-based compensation expense;

•
a $1.2 million increase due to severance and other termination expenses related to the reduction in force completed in October 2023;

•
a $4.1 million increase due to an impairment of right-of-use assets;

•
a $1.3 million increase in insurance, rent, depreciation and other facilities expense; and

•
a $0.4 million decrease in professional services related to accounting services, corporate legal fees, other consulting and patent legal fees.

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Interest income

Interest income was $14.1 million and $5.6 million for the years ended December 31, 2023 and 2022, respectively. Interest income consisted of interest earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums) and increased primarily due to increases in market interest rates.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2023, we had cash, cash equivalents, restricted cash and short-term investments of $250.9 million. As of December 31, 2023, we estimate that we have used all of the $265.1 million net proceeds received from our IPO.

Our Registration Statement on Form S-3, which became effective in September 2021 (the "2021 Shelf Registration Statement") included a prospectus covering the offer and sale from time to time of up to $150.0 million of our common stock through an “at-the-market” equity offering program with Cowen and Company, LLC, as sales agent (the "ATM Offering Program"). In 2022, we issued and sold 113,213 shares of our common stock pursuant to the ATM Offering Program, resulting in net proceeds of approximately $1.6 million, after deducting offering expenses. In 2023, we did not sell any shares under the ATM Offering Program.

On April 28, 2022, we issued and sold 15,333,334 shares of our common stock in an underwritten public offering, including 2,000,000 shares associated with the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $15.00 per share. The total net proceeds from the offering were approximately $215.3 million, after deducting underwriting discounts, commissions and offering expenses. See Note 10 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional detail.

We have incurred net losses and negative cash flows from operations since our inception. As of December 31, 2023, we had an accumulated deficit of $435.4 million and anticipate that we will continue to incur net losses for the foreseeable future. We expect to incur substantial expenditures as we develop our product pipeline and advance our drug candidates through clinical development, undergo the regulatory approval process and, if approved, launch commercial activities. Specifically, in the near term we expect to incur substantial expenses relating to initiating and completing our clinical trials, the development and validation of our manufacturing processes, and other development activities.

We will need substantial additional funding to support our continuing operations and pursue our long-term development strategy, including the potential initiation of a pivotal stage clinical trial for any or all of our current development programs. Until such time as we can generate significant revenue from sales of our drug candidates, if ever, we may seek additional funding through the issuance of our common stock, including through our ATM Offering Program, other equity or debt financing or collaborations or partnerships with other companies. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts for our product candidates and other research, development and manufacturing activities, market conditions, and the success of our planned cost-containment measures. We may not be able to raise additional capital on terms acceptable to us, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of our drug candidates or delay our efforts to expand our product pipeline. We may also be required to sell or license to other parties’ rights to develop or commercialize our drug candidates that we would prefer to retain.

In May 2023, our Registration Statement on Form S-3 became effective (the "2023 Shelf Registration Statement"), covering the offer and sale from time to time of up to $350.0 million in aggregate offering price of securities, including shares of our common stock, shares of our preferred stock, debt securities, warrants, rights and/or units (including up to $120.0 million in securities registered on the 2021 Shelf Registration Statement). The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

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We believe that our current cash, cash equivalents, restricted cash and short-term investments as of December 31, 2023 will be sufficient to meet our cash needs for at least 12 months following the issuance date of this Annual Report on Form 10-K.

Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated (in thousands):

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[[/GREPCENT_TABLE]]

Operating Activities

Cash used in operating activities for the year ended December 31, 2023 of $86.2 million was primarily due to our net loss of $117.5 million, adjusted for net non-cash charges of $20.4 million and a change in operating assets and liabilities of $10.9 million. The net non-cash charges of $20.4 million consisted primarily of share-based compensation of $17.2 million, depreciation and amortization of $5.9 million, impairment of right-of-use assets of $4.1 million, and non-cash lease expense of $2.2 million, offset by investment accretion and amortization of $8.9 million. The net change in operating assets and liabilities of $10.9 million was related to the decrease in prepaid and other current assets of $1.7 million, an increase in accounts payable and accrued and other liabilities of $4.2 million as we continued to increase our research and development related activities and an increase in operating lease liabilities of $5.0 million.

Cash used in operating activities for the year ended December 31, 2022 of $57.0 million was primarily due to our net loss of $113.8 million, adjusted for net non-cash charges of $23.1 million and a change in operating assets and liabilities of $33.7 million. The net non-cash charges of $23.1 million consisted primarily of share-based compensation of $16.9 million, depreciation and amortization of $2.6 million, investment accretion and amortization of $0.8 million and non-cash lease expense of $3.9 million. The net change in operating assets and liabilities of $33.7 million was related to the increase in prepaid and other current assets of $1.5 million, offset by an increase in accounts payable and accrued and other liabilities of $2.8 million as we continued to increase our research and development related activities and an increase in operating lease liabilities of $32.5 million.

Investing Activities

Cash provided by investing activities was $79.0 million for the year ended December 31, 2023 comprised of proceeds from sales and maturities of investments of $367.4 million, offset by purchases of investments of $260.2 million and purchases of property and equipment of $28.1 million, primarily related to the construction of our manufacturing facility.

Cash used in investing activities was $184.7 million for the year ended December 31, 2022 comprised of purchases of property and equipment of $47.1 million primarily related to the construction of our manufacturing facility and purchases of investments of $385.9 million, partially offset by proceeds from sales and maturities of investments of $248.3 million.

Financing Activities

Cash provided by financing activities of $0.7 million for the year ended December 31, 2023 was mainly due to the proceeds from ESPP purchases of $0.5 million and exercise of stock options of $0.2 million.

Cash provided by financing activities of $219.0 million for the year ended December 31, 2022 was mainly due to the net proceeds of $215.6 million from the secondary offering, after deducting underwriting discounts and

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commissions and other offering costs, net proceeds of $1.6 million from the ATM Offering Program after deducting issuance costs, proceeds from ESPP purchases of $0.4 million, and proceeds of $1.4 million from the exercise of stock options.

Funding Requirements

Based upon our current operating plans, we believe that our existing cash, cash equivalents, restricted cash and investments will be sufficient to fund our operations for at least the next 12 months from the date of issuing this Annual Report on Form 10-K. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing therapeutic product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Our future capital requirements will depend on many factors, including:

•
the type, number, scope, progress, expansions, results, costs and timing of, our clinical trials and preclinical studies for our product candidates or other potential product candidates or indications which we are pursuing or may choose to pursue in the future;

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

•
the costs and timing of manufacturing for our product candidates, including commercial manufacturing;

•
our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

•
the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;

•
the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;

•
our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;

•
patients’ willingness or ability to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors;

•
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements, including payments required for meeting regulatory and commercial milestones or sales based royalties;

•
the costs of obtaining, maintaining and enforcing our patent and other intellectual property rights;

•
costs associated with any product candidates, products or technologies that we may in-license or acquire; and

•
our ability to implement cost containment measures, including subleasing portions of our leased corporate office space in South San Francisco.

Until such time as we can generate significant revenue from sales of our therapeutic product candidates, if ever, we expect to finance our cash needs through public or private equity, including pursuant to the ATM Offering Program, or debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. We may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. There may also be instances where our ability to access a portion of our existing cash, cash equivalents and investments may be threatened due to financial conditions affecting the banking system and financial markets. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to

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relinquish valuable rights to our product candidates, future revenue streams or research programs or may have to grant licenses on terms that may not be favorable to us and may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to undertake additional cost-containment measures and/or delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Contractual Obligations and Commitments

We lease certain office, laboratory and manufacturing space under non-cancelable operating leases. In addition to rent, our leases are subject to additional variable charges for common area maintenance, property taxes, property insurance and other variable costs. See Note 6 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional detail.

Total undiscounted aggregate future operating lease obligations under all of our operating leases as of December 31, 2023 are $140.5 million.

We enter into contracts in the normal course of business for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore we believe that non-cancelable obligations under these agreements are not material.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of assets and liabilities in our financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates and judgments, including those related to preclinical studies and clinical trial accruals, share-based compensation, impairment of long-live assets. We base our estimates and assumptions on historical experience, known trends and events, and various other factors that are believed to be reasonable and appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. See Note 2 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.

Recently Issued Accounting Pronouncements

See Recent Accounting Pronouncements in Note 2 to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Indemnification

As permitted under Delaware law and in accordance with our bylaws, we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. We are also a party to indemnification agreements with our officers and directors. We believe the fair value of the indemnification rights and agreements is minimal. Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of December 31, 2023 and 2022.

Segment Information

We have one business activity and operate in one reportable segment.

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JOBS Act

We are an “emerging growth company” as described under the JOBS Act, and we could have taken advantage of an extended transition period for complying with new or revised accounting standards. This would have allowed us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have chosen irrevocably to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act").

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company or a non-accelerated filer, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our prospectuses and in our periodic reports and proxy statements.