Rallybio Corp

Previous wording

We are a clinical-stage biotechnology company comprised of experienced biopharma industry leaders with extensive research, development, and rare disease expertise with a mission to develop and commercialize life-transforming therapies for patients with severe and rare diseases. Since our launch in January 2018, we have built a broad pipeline of promising product candidates aimed at addressing diseases with unmet medical need in the areas of maternal fetal health, complement dysregulation, hematology, and metabolic disorders. Our two most advanced programs are in clinical development: RLYB212, an anti-HPA-1a antibody for the prevention of fetal and neonatal alloimmune thrombocytopenia ("FNAIT") and RLYB116, an inhibitor of complement component 5 (“C5"), with the potential to treat several diseases of complement dysregulation. Both programs have completed Phase 1 clinical studies, and we currently plan to initiate a Phase 2 clinical trial of RLYB212 in the second half of 2024.

Current wording

We are a clinical-stage biotechnology company comprised of experienced biopharma industry leaders with extensive research, development, and rare disease expertise with a mission to develop and commercialize life-transforming therapies for patients with severe and rare diseases. Since our launch in January 2018, we have built a broad pipeline of promising product candidates aimed at addressing diseases with unmet medical need in the areas of maternal fetal health, complement dysregulation, hematology, and metabolic disorders. Our two most advanced programs are in clinical development: RLYB212, an anti-HPA-1a antibody for the prevention of fetal and neonatal alloimmune thrombocytopenia ("FNAIT") and RLYB116, an inhibitor of complement component 5 (“C5"), with the potential to treat several diseases of complement dysregulation. Both programs have completed Phase 1 clinical studies, and we currently plan to initiate a Phase 2 clinical trial of RLYB212 in the fourth quarter of 2024.

Previous wording

Both the FDA and EMA have designated RLYB212 as an orphan drug. Orphan drug designations offer certain incentives including tax credits, marketing exclusivity upon any approval, fee waivers, and the ability to interact with both agencies to receive specialized regulatory advice and assistance. We engaged with the EMA in such a process in advance of our planned Phase 2 clinical trial. We received feedback from the EMA and are now moving forward with our Clinical Trial Application to support conduct of the Phase 2 trial in Europe.

Current wording

Both the U.S. Food and Drug Administration (the "FDA") and European Medicines Agency (the "EMA") have designated RLYB212 as an orphan drug. Orphan drug designations offer certain incentives including tax credits, marketing exclusivity upon any approval, fee waivers, and the ability to interact with both agencies to receive specialized regulatory advice and assistance. We engaged with the EMA in such a process in advance of our planned Phase 2 clinical trial. We received feedback from the EMA and are now moving forward with our Clinical Trial Application ("CTA") to support conduct of the Phase 2 trial in Europe.

Previous wording

Based on the data from the clinical and preclinical programs and following planned discussions with regulatory authorities, we expect to initiate a Phase 2 dose confirmation trial for RLYB212 in the second half of 2024. This trial is designed to confirm the RLYB212 dose regimen in pregnant women at higher risk of alloimmunization and FNAIT. Following completion of the Phase 2 dose confirmation trial and consultation with regulatory authorities, we expect to initiate a Phase 3 registrational trial.

Current wording

Based on the data from the clinical and preclinical programs and following planned discussions with regulatory authorities, we expect to initiate a Phase 2 dose confirmation trial for RLYB212 in the fourth quarter of 2024. This trial is designed to confirm the RLYB212 dose regimen in pregnant women at higher risk of alloimmunization and FNAIT. Following completion of the Phase 2 dose confirmation trial and consultation with regulatory authorities, we expect to initiate a Phase 3 registrational trial.

Previous wording

We are also conducting a prospective, non-interventional, multinational FNAIT natural history study. This study is designed to screen up to 30,000 pregnant women presenting at the Gestational Week 10 to 14 prenatal visit to determine the frequency of women at higher FNAIT risk among pregnant women of different racial and ethnic characteristics, as well as the frequency of HPA-1a alloimmunization and pregnancy outcomes among these women. Subject to discussion with regulatory authorities, we expect that data from this study will contribute to a control dataset for a future single-arm Phase 3 registrational trial for RLYB212. The FNAIT natural history study will also operationalizede novo the laboratory test paradigm for FNAIT risk and generate FNAIT laboratory test performance data that we plan to use for future regulatory discussions. As of May 1, 2024, Rallybio has screened approximately 10,000 pregnant women. The Company expects screening for the natural history study to continue simultaneously with execution of the Phase 2 trial.

Current wording

We are also conducting a prospective, non-interventional, multinational FNAIT natural history study. This study is designed to screen up to 30,000 pregnant women presenting at the Gestational Week 10 to 14 prenatal visit to determine the frequency of women at higher FNAIT risk among pregnant women of different racial and ethnic characteristics, as well as the frequency of HPA-1a alloimmunization and pregnancy outcomes among these women. Subject to discussion with regulatory authorities, we expect that data from this study will contribute to a control dataset for a future single-arm Phase 3 registrational trial for RLYB212. The FNAIT natural history study will also operationalizede novo the laboratory test paradigm for FNAIT risk and generate FNAIT laboratory test performance data that we plan to use for future regulatory discussions.

Previous wording

On April 9, 2024, we entered into a collaboration agreement (the “Collaboration Agreement”) with Johnson & Johnson, through its wholly-owned subsidiary, Momenta Pharmaceuticals, Inc. (“J&J”), pursuant to which we and J&J will support the development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. Under the Collaboration Agreement, we will share certain aggregated, anonymized data with J&J, collected from the FNAIT natural history study and our planned RLYB212 Phase 2 clinical trial that will be restricted to collection of certain natural history data in support of the natural history study. We also agreed to disseminate information to our FNAIT study sites related to J&J’s and its affiliates’ research and development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. As part of the Collaboration Agreement, J&J provided us with an upfront payment $0.5 million and we are eligible to receive additional payments of up to an aggregate of $3.7 million, based upon certain triggers related to the FNAIT studies and our activities under the Collaboration Agreement. In addition, we received an equity investment of $6.6 million from Johnson & Johnson Innovation – JJDC, Inc. ("JJDC"). See "Liquidity and Capital Resources - Sources of Liquidity" below.

Current wording

In April 2024, we entered into a collaboration agreement (the “Collaboration Agreement”) with Johnson & Johnson, through its wholly-owned subsidiary, Momenta Pharmaceuticals, Inc. (“J&J”), pursuant to which we and J&J will support the development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. Under the Collaboration Agreement, we will share certain aggregated, anonymized data with J&J, collected from the FNAIT natural history study and our planned RLYB212 Phase 2 clinical trial that will be restricted to collection of certain natural history data in support of the natural history study. We also agreed to disseminate information to our FNAIT study sites related to J&J’s and its affiliates’ research and development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. Pursuant to the agreement, we received an upfront payment of $0.5 million from J&J. In addition, we are eligible for payments upon the achievement of certain enrollment-related events, totaling up to $0.7 million. We are also eligible to receive additional payments upon certain triggers related to the companies' FNAIT studies. In addition, we received an equity investment of $6.6 million from Johnson & Johnson Innovation – JJDC, Inc. ("JJDC"). See "Liquidity and Capital Resources - Sources of Liquidity" below. In connection with the registration requirements and the restrictions on the sale or transfer of the common stock sold, we expect to recognize up to an additional $1.2 million of revenue.

Previous wording

In May 2022, we obtained worldwide exclusive rights to RLYB331, a preclinical, monoclonal antibody that is designed to inhibit Matriptase-2 ("MTP-2"). The inhibition of MTP-2 significantly increases levels of hepcidin, decreases iron load and treats ineffective erythropoiesis. In the first quarter of 2024, we completed nonclinical studies that demonstrated favorable tolerability, dose-dependent PK and sustained PD effects with RLYB332, a long-acting version of the RLYB331 anti-Matriptase-2 antibody. These findings support the continued development of RLYB332 as a potentially best-in-class therapeutic for treating diseases of iron overload. We anticipate presentation of this data in the second half of 2024. We continue to evaluate non-dilutive options to further advance this program, including potential partnerships.

Current wording

In May 2022, we obtained worldwide exclusive rights to RLYB331, a preclinical, monoclonal antibody that is designed to inhibit Matriptase-2 ("MTP-2"). The inhibition of MTP-2 significantly increases levels of hepcidin, decreases iron load and treats ineffective erythropoiesis. In the first quarter of 2024, we completed nonclinical studies that demonstrated favorable tolerability, dose-dependent PK and sustained PD effects with RLYB332, a long-acting version of the RLYB331 anti-Matriptase-2 antibody. These findings support the continued development of RLYB332 as a potentially best-in-class therapeutic for treating diseases of iron overload. We anticipate presentation of this data in the fourth quarter of 2024. We continue to evaluate non-dilutive options to further advance this program, including potential partnerships.

Previous wording

In collaboration with Exscientia Limited ("Exscientia"), we continue to work toward the selection of a small molecule development candidate to advance into the clinic targeting Ectonucleotide Pyrophosphatase/ Phosphodiesterase 1 ("ENPP1") for the treatment of patients with hypophosphatasia ("HPP"). Proof of mechanism studies are in progress with a leading global HPP expert. We plan to provide an update on the progress of the program in the second half of 2024.

Current wording

In collaboration with Exscientia Limited ("Exscientia"), we continue to work toward the selection of a small molecule development candidate to advance into the clinic targeting Ectonucleotide Pyrophosphatase/ Phosphodiesterase 1 ("ENPP1") for the treatment of patients with hypophosphatasia ("HPP"). Proof of mechanism studies are in progress with a leading global HPP expert. We expect to achieve development candidate nomination of a small molecule inhibitor of ENPP1 for the treatment of patients with HPP in the fourth quarter of 2024. In addition, data from an early lead compound in a nonclinical model of HPP will be presented at the American Society for Bone and Mineral Research ("ASBMR") meeting which is being held from September 27 – 30, 2024 in Toronto, ON, Canada.

Previous wording

On April 10, 2024, we entered into a Securities Purchase Agreement with JJDC, pursuant to which we sold to JJDC in an unregistered offering, 3,636,363 shares of our common stock at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting our estimated offering expenses. We agreed, among other things, to file with the SEC a registration statement covering the resale of the shares within 120 days following the closing of the offering.

Current wording

In April 2024, we entered into a Securities Purchase Agreement with JJDC pursuant to which we sold to JJDC, in an unregistered offering, 3,636,363 shares of our common stock at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting offering expenses. We agreed, among other things, to file with the Securities and Exchange Commission (the "SEC") a registration statement covering the resale of the shares (the "Resale Registration Statement") within 120 days following the closing of the offering. We filed the Resale Registration Statement on May 10, 2024.

Previous wording

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $94.2 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the middle of 2026. This estimate and our expectation to advance the preclinical and clinical development of RLYB212, RLYB116, and any other product candidates are based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect, or our clinical trials may be more expensive, time consuming or difficult to design or implement than we currently anticipate. See “—Liquidity and Capital Resources.”

Current wording

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $88.6 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the middle of 2026. This estimate and our expectation to advance the preclinical and clinical development of RLYB212, RLYB116, and any other product candidates are based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect, or our clinical trials may be more expensive, time consuming or difficult to design or implement than we currently anticipate. See “—Liquidity and Capital Resources.”

Previous wording

We have incurred significant operating losses since inception, including net losses of $19.0 million and $17.3 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $254.3 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We have not commercialized any products and have never generated revenue from the commercialization of any product. We expect to incur significant additional operating losses in the foreseeable future as we advance our programs through preclinical and clinical development, expand our research and development activities, acquire and develop new product candidates, complete preclinical studies and clinical trials, finance our business development strategy, seek regulatory approval for the commercialization of our product candidates and commercialize our products, if approved. Our expenses will increase substantially over time if and as we:

Current wording

We have incurred significant operating losses since inception, including net losses of $16.2 million and $35.3 million for the three and six months ended June 30, 2024, respectively, and $18.6 million and $35.9 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $270.5 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We have not commercialized any products and have never generated revenue from the commercialization of any product. We expect to incur significant additional operating losses in the foreseeable future as we advance our programs through preclinical and clinical development, expand our research and development activities, acquire and develop new product candidates, complete preclinical studies and clinical trials, finance our business development strategy, seek regulatory approval for the commercialization of our product candidates and commercialize our products, if approved. Our expenses will increase substantially over time if and as we:

Previous wording

The successful development of our product candidates is highly uncertain. We plan to continue investing in our research and development activities for the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our clinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments, our ongoing assessments as to each product candidate’s commercial potential and the availability of capital. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as our programs advance to later stages of development. We anticipate that our expenses may fluctuate from quarter to quarter, particularly due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

Current wording

The successful development of our product candidates is highly uncertain. We plan to continue investing in our research and development activities for the foreseeable future as we continue the development of our product candidates and the related manufacturing processes and conduct discovery and research activities for our clinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments, our ongoing assessments as to each product candidate’s commercial potential and the availability of capital. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as our programs advance to later stages of development. We anticipate that our expenses may fluctuate from quarter to quarter, particularly due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

Previous wording

Research and development expenses were $12.9 million for the three months ended March 31, 2024, compared to $11.2 million for the three months ended March 31, 2023. The increase of $1.7 million in 2024 as compared to 2023 was primarily due to:

Current wording

Research and development expenses were $12.9 million for the three months ended June 30, 2024, compared to $13.1 million for the three months ended June 30, 2023. The decrease of $0.2 million in 2024 as compared to 2023 was primarily due to:

Previous wording

▪a $0.1 million decrease in costs related to the development of RLYB212, primarily related to a decrease in manufacturing and other research and development costs, which was largely offset by an increase in clinical development costs.

Current wording

▪a $0.7 million increase in costs related to the development of RLYB212, primarily related to an increase in clinical development costs, which was largely offset by a decrease in manufacturing and other research and development costs; and

Previous wording

General and administrative expenses were $6.9 million and $7.2 million for the three months ended March 31, 2024 and 2023, respectively. The decrease of $0.3 million in 2024 as compared to 2023 was primarily due to:

Current wording

General and administrative expenses were $4.4 million and $7.0 million for the three months ended June 30, 2024 and 2023, respectively. The decrease of $2.6 million in 2024 as compared to 2023 was primarily due to:

Previous wording

▪a $0.7 million increase in payroll and personnel-related costs, primarily related to severance costs incurred in connection with the workforce reduction, effective March 6, 2024; offset by decreases in payroll and personnel-related costs, primarily related to lower ongoing headcount in 2024 as compared to 2023.

Current wording

▪a $1.4 million decrease in payroll and personnel-related costs, primarily related to the workforce reduction, effective March 6, 2024, in addition to lower ongoing headcount in 2024 as compared to 2023; and

Previous wording

Total other income, net, for the three months ended March 31, 2024 was income of $1.4 million compared to income of $1.6 million for the three months ended March 31, 2023. The change was primarily related to a decrease in interest income from marketable securities.

Current wording

Total other income, net, for the three months ended June 30, 2024 was $1.3 million compared to $1.7 million for the three months ended June 30, 2023. The change was primarily related to a decrease in interest income from marketable securities.

Previous wording

Loss on investment in joint venture for the three months ended March 31, 2024 was $0.7 million compared to $0.6 million for the three months ended March 31, 2023.

Current wording

Loss on investment in joint venture for the three months ended June 30, 2024 was $0.5 million compared to $0.2 million for the three months ended June 30, 2023.

Previous wording

▪a $1.0 million decrease in other general and administrative related expenses and a reduction in our director and officer insurance premiums.

Current wording

▪a $2.3 million decrease that included a reduction in our consulting fees, director and officer insurance premiums, professional fees and other related general and administrative expenses; and

Previous wording

In August 2022, we filed a Registration Statement on Form S-3 (the “Shelf”) with the SEC in relation to the registration and potential future issuance of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $300.0 million. The Shelf was declared effective on August 15, 2022. The Company also simultaneously entered into a Sales Agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen"). In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time at prices through Cowen acting as our agent. Pursuant to the Sales Agreement, sales of our common stock, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Under the Sales Agreement, Cowen will be entitled to compensation equal to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. As of March 31, 2024, the Company had not sold any shares of common stock pursuant to the Sales Agreement.

Current wording

In August 2022, we filed a Registration Statement on Form S-3 (the “Shelf”) with the SEC in relation to the registration and potential future issuance of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $300.0 million. The Shelf was declared effective on August 15, 2022. The Company also simultaneously entered into a Sales Agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen"). In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time at prices through Cowen acting as our agent. Pursuant to the Sales Agreement, sales of our common stock, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Under the Sales Agreement, Cowen will be entitled to compensation equal to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. As of June 30, 2024, we had not sold any shares of common stock pursuant to the Sales Agreement.

Previous wording

On April 10, 2024, we entered into a Securities Purchase Agreement with JJDC pursuant to which we sold to JJDC, in an unregistered offering, 3,636,363 shares of our common stock at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting our estimated offering expenses. We agreed, among other things, to file with the SEC a registration statement covering the resale of the shares within 120 days following the closing of the offering.

Current wording

In April 2024, we entered into a Securities Purchase Agreement with JJDC, pursuant to which we sold to JJDC in an unregistered offering, 3,636,363 shares of our common stock at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting offering expenses. We agreed, among other things, to file with the SEC a registration statement covering the resale of the shares within 120 days following the closing of the offering. We filed this registration statement on May 10, 2024.

Previous wording

As of March 31, 2024, we had $94.2 million of cash, cash equivalents and marketable securities.

Current wording

As of June 30, 2024, we had $88.6 million of cash, cash equivalents and marketable securities.

Previous wording

During the three months ended March 31, 2024, net cash used in operating activities was $15.5 million as compared to $18.8 million for the three months ended March 31, 2023. The decrease in net cash used in operating activities for the three months ended March 31, 2024 was primarily related to a decrease of $1.0 million in share-based compensation related to the workforce reduction, effective March 6, 2024 and lower ongoing headcount in 2024 as compared to 2023 and changes in working capital, primarily related to changes in accrued expenses.

Current wording

During the six months ended June 30, 2024, net cash used in operating activities was $25.9 million as compared to $32.1 million for the six months ended June 30, 2023. The decrease in net cash used in operating activities for the six months ended June 30, 2024 was primarily related to changes in working capital.

Previous wording

Net cash provided by investing activities was $10.3 million for the three months ended March 31, 2024 as compared to $1.5 million of net cash provided by investing activities for the three months ended March 31, 2023. The increase of $8.8 million in net cash provided by investing activities was primarily related to proceeds of $21.8 million from maturities of highly-rated debt securities, partially offset by purchases of highly-rated debt securities of $10.7 million during the three months ended March 31, 2024, as compared to proceeds from maturities of highly-rated debt securities of $31.5 million, partially offset by purchases of highly-rated debt securities of $29.3 million during the three months ended March 31, 2023.

Current wording

Net cash provided by investing activities was $12.9 million for the six months ended June 30, 2024 as compared to $7.7 million of net cash provided by investing activities for the six months ended June 30, 2023. The increase of $5.2 million in net cash provided by investing activities was primarily related to proceeds of $44.3 million from maturities of highly-rated debt securities, partially offset by purchases of highly-rated debt securities of $29.9 million during the six months ended June 30, 2024, as compared to proceeds from maturities of highly-rated debt securities of $70.0 million, partially offset by purchases of highly-rated debt securities of $61.6 million during the six months ended June 30, 2023.

Previous wording

There were no financing-related activities during the three months ended March 31, 2024. Net cash used in financing activities for the three months ended March 31, 2023 was $0.1 million, representing offering cost payments made related to our November 2022 follow-on offering.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2024 was $5.2 million, representing proceeds from the issuance of common stock pursuant to the Securities Purchase Agreement with JJDC, after deducting offering costs and accounting for the total consideration allocation related to the Collaboration Agreement of $1.2 million. Net cash provided by financing activities during the six months ended June 30, 2023 was $0.1 million, representing proceeds from the issuance of common stock under the Rallybio Corporation 2021 Employee Stock Purchase Plan, partially offset by offering cost payments made related to our November 2022 follow-on offering.

Previous wording

There have been no other material changes in our contractual obligations and commitments during the three months ended March 31, 2024 from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report.

Current wording

There have been no other material changes in our contractual obligations and commitments during the six months ended June 30, 2024 from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report.

Previous wording

Report on Form 10-Q and Note 2 to our Annual Report. We believe that the following accounting policy is the most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements.

Current wording

For a complete discussion of our significant accounting policies and recent accounting pronouncements, see Note 2 to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and Note 2 to our Annual Report. We believe that the following accounting policy is the most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements.