Emerging Growth Company in the United States

The “emerging growth company” status is defined under the JOBS Act. For so long as companies are “emerging growth companies” they may take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Corporations could be an “emerging growth company” for up to five years, although they may lose such status earlier, depending on the occurrence of certain events. They will remain an “emerging growth company” until the earliest to occur of (i) the last day of the year (a) following the fifth anniversary of the offering, (b) in which they have total annual gross revenue of at least $1.0 billion or (c) in which they are deemed to be a “large accelerated filer” under the Exchange Act, which means that the market value of their common stock that is held by non-affiliates exceeds $700 million as of the prior June 30, and (ii) the date on which they have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

It is difficult to predict if investors will find “emerging growth companies” common stock less attractive or less comparable to certain other public companies because they rely on these exemptions.

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.