RECURSION PHARMACEUTICALS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following is a discussion and analysis of the financial condition of Recursion Pharmaceuticals, Inc. (Recursion, the Company, we, us or our) and the results of operations. This commentary should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and accompanying notes appearing in Item 1, “Financial Statements” and the Company’s audited consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report on Form 10-K for the year ended December 31, 2022. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Note About Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in the Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law. Investors and others should note that we announce material financial and other information to our investors using our investor relations website (https://ir.recursion.com/), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media and blogs to communicate with our stakeholders and the public about our company, our services and other issues. It is possible that the information we post on social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on the social media channels and blogs listed on our investor relations website. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report. Overview Recursion is a clinical stage TechBio company leading this burgeoning space by decoding biology and chemistry to industrialize drug discovery. Central to our mission is the Recursion Operating System (OS), a platform built across diverse technologies that enables us to map and navigate trillions of biological and chemical relationships within the Recursion Data Universe, one of the world’s largest proprietary biological and chemical datasets. We frame this integration of the physical and digital components as iterative loops of atoms and bits. Scaled ‘wet-lab’ biology and chemistry data built in-house (atoms) are organized into virtuous cycles with ‘dry-lab’ computational tools (bits) to rapidly translate in silico hypotheses into validated insights and novel chemistry. Our focus on mapping and navigating the complexities of biology and chemistry beyond the published literature and in a target-agnostic way differentiates us from other companies in our space and leads us to confront a fundamental cause of failure for the majority of clinical-stage programs - the wrong target is chosen due to an incomplete and reductionist view of biology. Our balanced team of life scientists and computational and technical experts creates an environment where empirical data, statistical rigor and creative thinking are brought to bear on our decisions. We leverage our Recursion OS to enable three key value drivers: 1. An expansive pipeline of internally-developed clinical and preclinical programs focused on genetically-driven rare diseases and oncology with significant unmet need and market opportunities in some cases potentially in excess of $1 billion in annual sales 2. Transformational partnerships with leading biopharma companies to map and navigate intractable areas of biology, identify novel targets and develop potential new medicines that are further developed in resource-heavy clinical trials overseen by our partners 3. Development of one of the largest fit-for-purpose proprietary biological and chemical datasets in the world at a time when advances in AI paired with the right training data are creating disruptive value. 23 Table of Contents Recursion has a portfolio of clinical-stage, preclinical and discovery programs and continues scaling its Recursion OS with more than 200 million total phenomics experiments, the initiation of multi-timepoint live-cell microscopy, transcriptomics, proteomics, inVivomics, data related to multi-target compound interactions and physicochemical properties, as well as large language model derived disease relevance and target-compound relationships. The total size of the proprietary Recursion Data Universe is over 25 petabytes and the number of predicted biological and chemical relationships is approximately 4 trillion. Data have been generated by the Recursion OS across 50 human cell types, an in-house chemical library of approximately 1.7 million compounds, and an in silico library of over 1 trillion small molecules, by a team of over 550 Recursionauts that is balanced between life scientists and computational and technical experts. Summary of Business Highlights Pipeline • Cerebral Cavernous Malformation (CCM) (REC-994): Our Phase 2 SYCAMORE clinical trial is a double-blind, placebo-controlled safety, tolerability and exploratory efficacy study of this drug candidate in participants with CCM. This study was fully enrolled as of June 2023 with 62 participants and all participants 24 Table of Contents who have thus far finished their first year of treatment have enrolled in the long-term extension study. We expect to share Phase 2 proof-of-concept data in H2 2024. • Neurofibromatosis Type 2 (NF2) (REC-2282): Our Phase 2/3 POPLAR clinical trial is a two part study of REC-2282 in participants with progressive NF2-mutated meningiomas. Part A of the study is ongoing and is exploring two doses of REC-2282 in approximately 23 adults and 9 adolescents. We expect to share Phase 2 safety, tolerability, pharmacokinetics and preliminary efficacy in H2 2024. • Familial Adenomatous Polyposis (FAP) (REC-4881): We have enrolled multiple participants in our TUPELO clinical trial which evaluates REC-4881 in patients with FAP. We are now providing guidance on a data readout and expect to share Phase 2 safety, tolerability, pharmacokinetics and preliminary efficacy in H1 2025. • AXIN1 or APC Mutant Cancers (REC-4881): We will evaluate REC-4881 in a Phase 2 biomarker enriched study in patients with unresectable, locally advanced or metastatic cancer with AXIN1 or APC mutations. The IND was accepted by the FDA and we expect to initiate this Phase 2 study in Q4 2023. • Clostridioides difficile Infection (REC-3964): Our Phase 1 clinical trial is a first-in-human protocol evaluating single and multiple doses of REC-3964 in healthy volunteers and will assess the safety, tolerability and pharmacokinetic profile of REC-3964. Single ascending dose and multiple ascending dose studies are now complete. REC-3964 has been well tolerated and no safety issues have been identified to date. We expect to share Phase 1 safety and pharmacokinetics data in Q3 2023 . • RBM39 HR-Proficient Ovarian Cancer: RBM39 (previously identified as Target Gamma) is a novel CDK12-adjacent target identified by the Recursion OS. We believe we can modulate this target to produce a therapeutic effect in HR-proficient ovarian cancer and potentially in other tumor types. This program is in the preclinical stage and IND-enabling studies are progressing. Partnerships • NVIDIA: In July 2023, we announced a $50 million investment and collaboration with NVIDIA. We will continue to build our own foundation models for biology and chemistry and NVIDIA will assist in optimizing these models, provide priority access to computational resources on NVIDIA’s cloud service DGX Cloud, and potentially host commercially-licensable machine learning and foundation models developed by Recursion on BioNeMo, NVIDIA’s marketplace for generative AI in drug discovery. In this partnership, we will maintain control of our proprietary data and models as well as how and where we could host our technology tools as we expand our business strategy of data as a value driver. Since the announcement in July, we have already deployed our digital chemistry technology together with NVIDIA’s computational resources to predict the ligand-protein interactions for approximately 36 billion compounds in the Enamine REAL Space, reported to be the world’s largest searchable chemical library, where we evaluated 2.8 quadrillion target-compound pairs. • Roche-Genentech and Bayer: We continue to advance our collaborations to discover potential new therapeutics with our strategic partners Roche-Genentech and Bayer. In the near-term, there is the potential for option exercises associated with partnership programs or option exercises associated with map building initiatives or data sharing. Platform • Digital Chemistry and Generative AI Capabilities: In May 2023, we acquired Cyclica and Valence Discovery to bolster our digital chemistry and generative AI capabilities and drive value across our pipeline, partnerships and platform. Shortly after closing these acquisitions, we used Cyclica’s digital chemistry tools to predict the protein-ligand interactions for the over 1 million compounds in our internal, non-partnered chemical library. Now, less than one quarter after the closing of these acquisitions, we worked with our partners at NVIDIA to predict the protein-ligand interactions of approximately 36 billion compounds in the Enamine REAL Space, reported to be the world’s largest searchable chemical library. As part of the Cyclica acquisition, Recursion acquired four platform patent families, which includes four pending U.S. patent applications directed to our platform with expiration, upon issuance, expected to be no earlier than 2035. 25 Table of Contents This brings the total number of patent families related to the Recursion Platform to at least 25, and includes patents that, upon issuance, are expected to expire as late as 2042. • Accelerating Pipeline and Partnership Value: For our internal pipeline, we have used our digital chemistry tools to deconvolve proteome-wide biological targets to confirm that certain compounds operate through a novel mechanism of action which was previously predicted by our functional phenomics maps. Such proteomic mapping capabilities provide an additional data layer to efficiently identify the most promising novel chemical series. • Foundation Model Construction: We continue to use our supercomputer, BioHive-1, to train a proprietary phenomics foundation model. As we have trained on larger quantities of our proprietary data, emergent properties have arisen out of the models and we have seen significant improvements over previous deep learning production models. We are also in the early stages of exploring more powerful and broadly useful foundation models based on our large-scale proprietary multi-omics data, which includes phenomics across 50 human cell types and approximately 1.7 million compounds, multi-timepoint live-cell microscopy, transcriptomics, proteomics, inVivomics, multi-target compound interactions, physicochemical properties, as well as predicted protein-ligand relationships. We may explore commercial licensing of some of our models in collaboration with NVIDIA and their BioNeMo platform in the coming year, though our state-of-the-art models will only be available to our team and close partners. • Large Language Models: One year ago, more than 40 employees were dedicated to exploring our maps of biology and chemistry to initiate programs at Recursion. Today, those same employees have been redeployed and our newest internal programs are being initiated autonomously. This efficiency and scale is through the deployment of large language models to map scientific literature in conjunction with our internally derived proprietary maps to identify opportunities for scientific arbitrage in areas of unmet need. These opportunities are then automatically prioritized for confirmation and validation in our highly-automated wetlabs. This is a significant step towards our vision of autonomous drug discovery and biological exploration. • Valence Labs - Powered by Recursion: In July 2023 at the International Conference for Machine Learning, we launched Valence Labs, Recursion’s cutting-edge machine learning research center for biology and chemistry in Montréal that aims to promote open-science and academic research. Recursion’s commitment to open-science helps us recruit and retain the best talent in the field of generative AI, allows us to design and set the standards by which ML and AI are deployed in drug discovery, and may drive additional biopharma companies to consider partnering with Recursion to get access to our proprietary state-of-the-art tools, technology, datasets and programs. Additional Corporate Updates • Chief Medical Officer: In May 2023, David Mauro, M.D., Ph.D. joined Recursion as its Chief Medical Officer. Dr. Mauro has over 20 years experience in oncology drug development and has guided more than 25 Investigational New Drug candidates through the translational, preliminary and later stages of development at various companies. • Chief Legal Officer: In July 2023, Recursion named Nathan Hatfield, J.D., M.B.A. as Chief Legal Officer. Mr. Hatfield has worked at Recursion for over 6 years, previously serving as SVP and Head of Legal. Prior to Recursion, Mr. Hatfield was a securities attorney at the law firm Wilson Sonsini Goodrich & Rosati. • Toronto Office: In June 2023, we celebrated the opening of our Canadian Headquarters in Toronto with government officials as well as members of the technology and biotechnology communities. • ESG Reporting: In June 2023, Recursion received a favorable ESG Risk Rating from Morningstar Sustainalytics which ranked Recursion as the #1 biotechnology company out of approximately 400 companies and the #14 pharmaceuticals company out of approximately 900 companies. Financing and Operations We were incorporated in November 2013. On April 20, 2021, we closed our Initial Public Offering (IPO) and issued 27,878,787 shares of Class A common stock at a price of $18.00 per share, raising net proceeds of $462.4 million. Prior to our IPO, we had raised approximately $448.9 million in equity financing from investors in addition to $30.0 million in an upfront payment from our collaboration with Bayer AG (Bayer). In January 2022 , we received an upfront payment of $150.0 million from our collaboration with Roche. See Note 9, “Collaborative Development Contracts” to the Condensed Consolidated Financial Statements for additional information on the collaborations. In October 2022, we issued 15,336,734 shares of our Class A common stock at a purchase price of $9.80 per share in the 2022 Private Placement to qualified institutional buyers and institutional accredited investors (the Purchasers) for net 26 Table of Contents proceeds of $143.7 million, after deducting fees and offering costs of $6.6 million. On July 11, 2023, we issued an aggregate of 7,706,363 shares of the Company’s Class A common stock at a purchase price of $6.49 per share for gross proceeds of approximately $50.0 million, before deducting expenses in the 2023 Private Placement with NVIDIA Corporation. See Note 14, “Subsequent Events” to the Condensed Consolidated Financial Statements for additional information on the 2023 Private Placement. We use the capital we have raised to fund operations and investing activities across platform research operations, drug discovery, clinical development, digital and other infrastructure, creation of our portfolio of intellectual property and administrative support. We do not have any products approved for commercial sale and have not generated any revenues from product sales. We had cash and cash equivalents of $405.9 million as of June 30, 2023. Based on our current operating plan, we believe that our cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months. Since inception, we have incurred significant operating losses. Our net losses were $76.7 million and $142.1 million during the three and six months ended June 30, 2023 , respectively. Our net losses were $65.6 million and $121.5 million during the three and six months ended June 30, 2022 , respectively. As of June 30, 2023, our accumulated deficit was $781.6 million. We anticipate that we will need to raise additional financing in the future to fund our operations, including the potential commercialization of any approved product candidates. Until such time, if ever, as we can generate significant product revenue, we expect to finance our operations with our existing cash and cash equivalents, any future equity or debt financings and upfront, milestone and royalty payments, if any, received under current or future license or collaboration agreements. We may not be able to raise additional capital on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition may be adversely affected. Components of Operating Results Revenue Operating revenue is generated through research and development agreements derived from strategic alliances. We are entitled to receive variable consideration as certain milestones are achieved. The timing of revenue recognition is not directly correlated to the timing of cash receipts. Cost of Revenue Cost of revenue consists of the Company’s costs to provide services for drug discovery required under performance obligations with partnership customers. These primarily include materials costs, service hours performed by our employees and depreciation of property and equipment. Research and Development Research and development expenses account for a significant portion of our operating expenses. We recognize research and development expenses as they are incurred. Research and development expenses consist of costs incurred in performing activities including: • costs to develop and operate our platform; • costs of discovery efforts which may lead to development candidates, including research materials and external research; • costs for clinical development of our investigational products; • costs for materials and supplies associated with the manufacture of active pharmaceutical ingredients, investigational products for preclinical testing and clinical trials; • personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation for employees engaged in research and development functions; • costs associated with operating our digital infrastructure; and • other direct and allocated expenses incurred as a result of research and development activities, including those for facilities, depreciation, amortization and insurance. 27 Table of Contents We recognize expenses associated with third-party contracted services as they are incurred. Upon termination of contracts with third parties, our financial obligations are generally limited to costs incurred or committed to date. Any advance payments for goods or services to be used or rendered in future research and product development activities pursuant to a contractual arrangement are classified as prepaid expenses until such goods or services are rendered. General and Administrative We expense general and administrative costs as incurred. General and administrative expenses consist primarily of salaries; including employee benefits and stock-based compensation. General and administrative expenses also include facilities, depreciation, information technology, professional fees for auditing and tax, legal fees for corporate and patent matters and insurance costs. Other Income, Net Other income, net consists primarily of interest earned on cash and cash equivalents. Results of Operations The following table summarizes our results of operations: (in thousands, except percentages) Three months ended June 30, Change Six months ended June 30, Change 2023 2022 $ % 2023 2022 $ % Revenue Operating revenue $ 11,016 $ 7,653 $ 3,364 44 % $ 23,150 $ 12,952 $ 10,198 79 % Grant revenue 1 21 (20) (96) % 1 55 (55) (98) % Total revenue 11,017 7,674 3,344 44 % 23,151 13,007 10,143 78 % Operating costs and expenses Cost of revenue 9,382 14,227 (4,845) (34) % 21,829 22,026 (196) (1) % Research and development 55,060 38,439 16,621 43 % 101,737 70,880 30,858 44 % General and administrative 28,290 21,199 7,091 33 % 51,165 42,273 8,892 21 % Total operating costs and expenses 92,732 73,865 18,867 26 % 174,731 135,179 39,554 29 % Loss from operations (81,715) (66,191) (15,523) (23) % (151,580) (122,172) (29,411) (24) % Other income, net 4,989 631 4,358 >100% 9,527 633 8,893 >100% Net loss $ (76,726) $ (65,560) $ (11,165) (17) % $ (142,053) $ (121,539) $ (20,518) (17) % Summary Our financial performance during the three and six months ended June 30, 2023 compared to the prior periods included; (i) an increase in research and development costs due to increased platform costs as we have expanded and upgraded our capabilities, additionally for the three and six months ended June 30, 2022 platform costs decreased due to a reallocation of spending to cost of revenue for our strategic partnerships and (ii) an increase in revenue recognized due to progression on our strategic partnership with Roche. 28 Table of Contents Revenue The following table summarizes our components of revenue: Three months ended June 30, Change Six months ended June 30, Change (in thousands, except percentages) 2023 2022 $ % 2023 2022 $ % Revenue Operating revenue $ 11,016 $ 7,653 $ 3,364 44 % $ 23,150 $ 12,952 $ 10,198 79 % Grant revenue 1 21 (20) (96) % 1 55 (55) (98) % Total revenue $ 11,017 $ 7,674 $ 3,344 44 % $ 23,151 $ 13,007 $ 10,143 78 % For the three and six months ended June 30, 2023 , the increase in revenue compared to prior period was due to revenue recognized from our strategic partnership with Roche, which has progressed from primarily cell type evaluation work to inference based Phenomap building and additional cell type evaluation work. Cost of Revenue The following table summarizes our cost of revenue: (in thousands, except percentages) Three months ended June 30, Change Six months ended June 30, Change 2023 2022 $ % 2023 2022 $ % Total cost of revenue $ 9,382 $ 14,227 $ (4,845) (34) % $ 21,829 $ 22,026 $ (197) (1) % For the three months ended June 30, 2023, the decrease in cost of revenue compared to prior period was due to our strategic partnership with Bayer, for which less brute-force work was required. Research and Development The following table summarizes our components of research and development expense: (in thousands, except percentages) Three months ended June 30, Change Six months ended June 30, Change 2023 2022 $ % 2023 2022 $ % Research and development expense Platform $ 21,514 $ 10,686 $ 10,828 >100% $ 40,006 $ 16,000 $ 24,006 >100% Discovery 16,449 12,398 4,051 33 % 29,954 24,759 5,195 21 % Clinical 12,479 12,551 (72) (1) % 24,001 23,663 338 1 % Stock based compensation 4,483 2,165 2,318 >100% 7,315 3,929 3,386 86 % Other 135 639 (504) (79) % 461 2,529 (2,068) (82) % Total research and development expense $ 55,060 $ 38,439 $ 16,621 43 % $ 101,737 $ 70,880 $ 30,857 44 % Significant components of research and development expense include the following allocated by development phase: Platform, which refers primarily to expenses related to screening of product candidates through hit identification; Discovery, which refers primarily to expenses related to hit identification through development of candidates; and Clinical, which refers primarily to expenses related to development of candidates and beyond. For the three and six months ended June 30, 2023 , the increase in research and development expenses compared to the prior period was due to increased platform costs as we have expanded and upgraded our capabilities in platform including our chemical technology, machine learning and transcriptomics platform. Additionally, for the three and six months ended June 30, 2022 platform costs decreased due to a reallocation of spending to cost of revenue for our strategic partnerships. 29 Table of Contents General and Administrative Expense The following table summarizes our general and administrative expense: (in thousands, except percentages) Three months ended June 30, Change Six months ended June 30, Change 2023 2022 $ % 2023 2022 $ % Total general and administrative expense $ 28,290 $ 21,199 $ 7,091 33 % $ 51,165 $ 42,273 $ 8,892 21 % For the three and six months ended June 30, 2023 , the increase in general and administrative expense compared to prior period was primarily driven by an increase in salaries and wages of $3.0 million and $4.3 million, respectively, and increases in software and depreciation expense. Other Income, Net The following table summarizes our components of other income, net: (in thousands, except percentages) Three months ended June 30, Change Six months ended June 30, Change 2023 2022 $ % 2023 2022 $ % Interest income 4,957 652 4,306 >100% 9,617 739 8,879 >100% Interest expense (26) (14) (12) 91.1 % (45) (28) (17) 60.8 % Other 57 (7) 64 >100% (45) (78) 33 (41.8) % Other income, net $ 4,988 $ 631 $ 4,358 >100% $ 9,527 $ 633 $ 8,895 >100% For the three and six months ended June 30, 2023 , the increase in interest income related to earnings on cash and cash equivalents in money market funds. Liquidity and Capital Resources Sources of Liquidity We have not yet commercialized any products and do not expect to generate revenue from the sales of any product candidates for at least several years. Cash and cash equivalents totaled $405.9 million and $549.9 million as of June 30, 2023 and December 31, 2022, respectively. We have incurred operating losses and experienced negative operating cash flows and we anticipate that the Company will continue to incur losses for at least the foreseeable future. Our net loss was $76.7 million and $142.1 million during the three and six months ended June 30, 2023, respectively. Our net loss was $65.6 million and $121.5 million during the three and six months ended June 30, 2022, respectively. As of June 30, 2023 and December 31, 2022, we had an accumulated deficit of $781.6 million and $639.6 million, respectively. We have financed our operations through the private placements of preferred stock and Class A common stock issuances. As of June 30, 2023, we have received net proceeds of $448.9 million from the sale of preferred stock and $606.1 million from Class A common stock issuances. See Note 8, “Common Stock” to the Condensed Consolidated Financial Statements for additional details on Class A common stock issuances. Additionally, as of June 30, 2023, we have received proceeds of $180.0 million from our strategic partnerships. See Note 9, “Collaborative Development Contracts” to the Condensed Consolidated Financial Statements for additional details on the collaborations. Subsequent to June 30, 2023, Recursion entered into the 2023 Private Placement with NVIDIA Corporation, see Note 14, “Subsequent Events” to the Condensed Consolidated Financial Statements for additional details. 30 Table of Contents Cash Flows The following table is a summary of the Condensed Consolidated Statements of Cash Flows for each of the periods presented below: Six months ended June 30, (in thousands) 2023 2022 Cash provided by (used in) operating activities $ (140,783) $ 15,765 Cash provided by (used in) investing activities (7,393) 148,244 Cash provided by financing activities 5,709 4,752 Operating Activities Cash used by operating activities increased during the six months ended June 30, 2023 as a result of an upfront payment of $150.0 million from our strategic partnership with Roche received during the six months ended June 30, 2022. Cash provided by operating activities during the six months ended June 30, 2022 included an upfront payment of $150.0 million from our strategic partnership with Roche . Investing Activities Cash used by investing activities during the six months ended June 30, 2023 consisted primarily of purchases of property and equipment of $9.1 million, which included $1.7 million for a project to upgrade the BioHive supercomputer and lab equipment purchases. The cash used was partially offset by $1.9 million of n et cash acquired in the acquisition of a business. Cash provided by investing activities during the six months ended June 30, 2022 was driven by sales and maturities of investments of $169.1 million, partially offset by purchases of property and equipment of $20.8 million. Financing Activities Cash provided by financing activities during the six months ended June 30, 2023 and 2022 primarily included proceeds from equity incentive plans of $5.8 million and $4.8 million, respectively. Critical Accounting Estimates and Policies A summary of the Company’s significant accounting estimates and policies is included in Note 2, “Summary of Significant Accounting Policies” in our 2022 Annual Report. Except as noted below, there were no significant changes in the Company’s application of its critical accounting policies during the six months ended June 30, 2023. Business Combinations Results of operations of acquired companies are included in the Recursion results of operations as of the respective acquisition dates. The purchase price of each acquisition is allocated to the net assets acquired based on estimates of their fair values at the date of acquisition. Any purchase price in excess of these net assets is recorded as goodwill. The allocation of purchase price in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other business acquisition costs are expensed when incurred. Amounts allocated to assets and liabilities are based upon fair value estimates. These fair value estimates could require us to make significant estimates and assumptions, especially with respect to intangible assets. We make estimates of fair value based upon assumptions believed to be reasonable and that of a market participant. These estimates are based on available historical information as well as future expectations and the estimates are inherently uncertain. The use of alternative estimates and assumptions could increase or decrease the estimated fair values, the amounts allocated to identifiable intangible assets acquired, future amortization expense and the value of goodwill. 31 Table of Contents Recently Issued and Adopted Accounting Pronouncements See Note 2, “Basis of Presentation ” in Item 1 of this Quarterly Report on Form 10-Q for information regarding recently issued and adopted accounting pronouncements.