Skye Bioscience, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2023 and 2022 together with notes thereto. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Unless otherwise provided in this Annual Report, references to “we,” “us,” “our” and “Skye Bioscience” in this discussion and analysis refer to Skye Bioscience, Inc., a Nevada corporation , together with its wholly owned subsidiaries, Nemus, a California corporation, SKYE Bioscience Pty Ltd ("SKYE Bioscience Australia"), an Australian proprietary limited company, Emerald Health Therapeutics, Inc. (EHT) a corporation governed by the Business Corporations Act (British Columbia), Birdrock Bio Sub, Inc. ("BRB"), a Delaware corporation, Ruiyi Acquisition Corp, a Delaware corporation and Avalite Sciences, Inc. (AVI) a corporation governed by the Business Corporations Act (British Columbia). Overview We are a clinical stage biopharmaceutical company with a mission to pioneer and lead the development of new pharmaceutical products that unlock the potential of the ECS. Our strategy and clinical assets focus, initially, on the modulation of the CB1 axis to advance the standard of care and provide novel alternative therapies to treat diseases with neuropathic, inflammatory, and metabolic conditions. Our lead clinical program's product candidate nimacimab, is a peripherally-restricted negative allosteric modulating antibody specific for the human CB1 receptor, administered as a subcutaneous injectable for the treatment of metabolic disorders, including obesity. We plan to launch a Phase 2 clinical trial of nimacimab, which will include a combination study with a GLP-1 agonist, to treat obesity by mid-year 2024, with final data in late 2025. 56 In August of 2023, we acquired nimacimab from the acquisition of BRB as a Phase 2 ready asset. Nimacimab's Phase 1 trial was designed to test the safety and tolerability in a single ascending dose (SAD) in health volunteers and a multiple ascending dose (MAD) in patients with NAFLD. The Phase 1 study, indicated a strong safety profile and provided important indications of effectiveness in reducing cholesterol levels in the NAFLD population. Based on the results of this study, we further evaluated other potential use cases for nimacimab in metabolic, inflammatory and fibrotic processes. Based on our comprehensive review of the overall market, clinical pipeline of competition and potential target product profile (TPP) of nimacimab, in December 2023, we filed an IND to treat patients with obesity in a Phase 2 study. Our other product candidate, SBI-100 OE, is a Phase 2-stage CB1 agonist (activator) delivered topically into the eye for the treatment of glaucoma and ocular hypertension. Our proprietary eye drop is a nano emulsion formulation that has been developed in a way that provides enhanced bio-availability and permeability, while also extending the duration of activity. In February 2024, we announced the completion of patient enrollment in our Phase 2a placebo controlled study designed to treat glaucoma and ocular hypertension and are expecting to report data in Q2 2024. We commenced dosing of our Phase 1 clinical study for SBI-100 OE in December 2022 and in November 2023 we reported data demonstrating that SBI-100 OE was safe and well-tolerated. Importantly, we determined that there was minimal systemic exposure of the active metabolite of SBI-100 OE, THC, thus resulting in little to no side effects related to THC intoxication. Moreover, it was determined that after multiple days of dosing we saw minimal hyperaemia (i.e. redness of the eyes) following administration of SBI-100 OE. In preclinical experiments using SBI-100 OE we have demonstrated statistically superior IOP lowering compared to the prostaglandin-based therapy, latanoprost, the current standard-of-care for treating glaucoma. Statistical significance was reached across multiple time points during a seven-day course of dosing using a validated rabbit normotensive ocular model and SBI-100 exerted pharmacologic activity consistent with once-daily to twice-daily dosing. We believe that both of our drug candidates are differentiated in their respective markets and target indications with a large unmet need. Because the modulation of the ECS through CB1 has been shown to play a role in both glaucoma and obesity, we believe that both our products are strong candidates for marketing authorization as either first or second-line therapies. In January 2024 and March 2024, we completed two private placement equity transactions with institutional investors, in which we raised combined net aggregate proceeds of approximately $83,500,000. The capital from the January and March PIPE financings will allow us to fund both of our planned clinical trials for glaucoma and obesity through top line Phase 2 data. On September 6, 2023, we filed a Certificate of Change and Certificate of Correction with the Secretary of State of the State of Nevada, which effected a reverse stock split, at a ratio of one-for-250, of the Company’s issued and outstanding shares of common ctock (the "Reverse Split"). The Reverse Split was effective on September 8, 2023. As a result of the Reverse Split, each two-hundred fifty (250) shares of common stock was combined into one (1) share of common stock and the total number of shares of common stock authorized was reduced from 5,000,000,000 to 20,000,000 and the number of shares of common stock issued and outstanding was reduced from 3,078,137,871 shares of common stock to 12,312,551 shares of common stock. Subsequently, on November 6, 2023, we increased our authorized shares of common stock to 100,000,000. On August 18, 2023, we completed a strategic transaction to acquire a clinical asset pursuant to an Agreement and Plan of Merger and Reorganization, dated as of August 15, 2023, by and among the Company, Bird Rock Bio, Inc. and Aquila Merger Sub, Inc., pursuant to which Aquila Merger Sub, Inc. merged with and into Bird Rock Bio, Inc. with Bird Rock Bio, Inc. surviving as a wholly owned subsidiary of the Company (the “BRB Acquisition”). The purpose of the BRB Acquisition was to acquire BRB's clinical asset, nimacimab, an antibody targeting the CB1 receptor, for development to treat metabolic, inflammatory, and fibrotic conditions. We were incorporated under the laws of the State of Nevada on March 16, 2011 and are based in San Diego, CA. Since our incorporation, we have devoted substantially all of our efforts to building our product portfolio through the acquisition of clinical assets and licensing agreements, carrying out research and development, building infrastructure and raising capital. Financial Overview Revenues To date, we have not generated any revenue. We do not expect to receive any revenue from any drug candidates that we develop unless and until we obtain regulatory approval for, and commercialize, our drug candidates or generate revenue from collaborative agreements with third parties. 57 Research and Development Expenses During the year ended December 31, 2023, we incurred $5,819,461 in research and development expenses primarily related to our efforts in conducting the Phase 1 and Phase 2a SBI-100 OE clinical trials. During the year ended December 31, 2022, we incurred $6,011,805 in research and development expense primarily related to our efforts in conducting the Phase 1 SBI-100 clinical trial and the manufacturing of the API required for the Phase 1 and Phase 2a SBI-100 clinical studies. We expect that our ongoing research and development expenses will consist of costs incurred for the development of our drug candidates, including, but not limited to: • license fees; • employee-related expenses, which include salaries, benefits and stock-based compensation; • payments to third party contract research organizations and investigative sites; and • payments to third party manufacturing organizations and consultants. We expect to incur future research and development expenditures to support our nonclinical and clinical studies. Nonclinical activities include, laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess safety and efficacy. Subject to the submission and approval by the FDA of our IND, clinical trials may commence and will involve the administration of the investigational new drug candidate to human subjects. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming and the successful development of our drug candidates is highly uncertain. Our future research and development expenses will depend on the clinical success of each of our drug candidates, as well as ongoing assessments of the commercial potential of such drug candidates. In addition, we cannot forecast with any degree of certainty which drug candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect to incur increased research and development expenses in the future as we continue our efforts towards advancing our lead program for nimacimab. Cost to acquire IPR&D Asset During the year ended December 31, 2023, we incurred a one-time non-cash charge of $21,215,214 related to the acquisition of our lead clinical asset, nimacimab. This in-process R&D was expensed when purchased in exchange for shares of our common stock, as its only future use was determined to be for drug development. General and Administrative Expenses Our general and administrative expenses have fluctuated year-over-year as we have entered into various strategic acquisitions to restructure and re-position our company. Additionally, as a business in the early stages of drug development we are in the process of scaling our operations by hiring additional employees, and building the infrastructure necessary to increase efficiencies. These initiatives have resulted in additional costs related to the implementation of certain systems, insurance, legal and accounting related to operating as a public company. To incentivize our employees and be competitive to retain strong talent we issued additional equity awards in 2023, which have resulted in increased stock-based compensation expense. We expect that our general and administrative expenses will continue to increase in the future in order to support our expected increase in research and development activities, including increased salaries and other related costs, stock-based compensation and consulting fees for executive, finance, accounting and business development functions. We also expect general and administrative expenses to increase as a result of additional costs associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC, additional insurance expenses, investor relations activities and other administration and professional services. Other significant costs are expected to include legal fees relating to patent and corporate matters, facility costs and fees for accounting and other consulting services. Estimated legal contingency The estimated legal contingency relates to a wrongful termination suit brought against the former management team that is currently being appealed. As of December 31, 2023, the maximum amount of the liability is known and we have posted an appellate bond that is collateralized by an irrevocable letter of credit equal to, $9,080,202, approximately 150% of the liability recorded on our balance sheet. Other Expense Other expense primarily includes interest expense incurred from our short term convertible debt, a loss related to the divestiture of an asset from our 2022 acquisition and an inducement charge from the conversion of debt. In both 2023 and 2022 we also reported wind-down costs from our 2022 acquisition of EHT which we do not expect to incur in future periods. These expenses are offset by interest income earned on our cash balances. 58 Critical Accounting Estimates Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to accrued expenses, the percentage of completion as it relates to our clinical accruals, financing operations, contingencies, the fair value of assets acquired in the acquisitions, and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting estimates are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this Annual Report on Form 10-K. We believe that the following accounting estimates are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements. Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing contracts and vendor agreements, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. We make estimates of our accrued and prepaid clinical expenses on a quarterly basis in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to contract research organizations (CROs), investigative sites in connection with clinical studies and to vendors related to product manufacturing and development of clinical supplies. We base our expenses related to clinical study and trial costs on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition. Payments under some of these contracts depend on factors out of our control, such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. There have been no material changes in estimates for the periods presented. Stock-Based Compensation Expense We have stock-based compensation programs, which include restricted stock units (RSUs); stock options and an employee stock purchase plan. We account for stock-based compensation expense, including the expense for grants of stock options and RSUs that may be settled in shares of our common stock, based on the fair values of the equity instruments issued. The fair value is determined on the measurement date, which is generally the date of grant. The fair value of our RSUs is generally measured at the market price of our common stock on the measurement date. Additionally, we use the Monte Carlo Simulation model to evaluate the derived service period and fair value of awards with market conditions, including assumptions of historical volatility, time to the next capital raise and risk-free interest rate commensurate with the vesting term. The fair value for our stock option awards is determined at the grant date using the Black-Scholes valuation model. Assumptions for the Black-Scholes valuation model used for employee stock awards include: • Volatility - Stock price volatility is estimated over the expected term based on a blended daily rate of industry peers stock volatility. • Expected term - The expected term is based on a simplified method which defines the life as the weighted average of the contractual term of the options and the vesting period for each award. • Risk-free rate - The risk-free interest rate for the expected term of the option is based on the average market rate on U.S. Treasury securities in effect during the period in which the awards were granted. 59 • Dividends - The dividend yield assumption is based on our history and expectation of paying no dividends in the foreseeable future. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material or the stock-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the stock-based compensation. Recently Issued and Adopted Accounting Pronouncements See Note 2 to the accompanying consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for information on recently issued accounting pronouncements and recently adopted accounting pronouncements. While we expect certain recently adopted accounting pronouncements to impact our estimates in future periods, the impact upon adoption was not significant to our current estimates and operations. Results of Operations Comparison of the years ended December 31, 2023 and 2022 Research and Development Expenses Below is a summary of our research and development expenses during the years ended December 31, 2023 and 2022 : Year Ended December 31, 2023 2022 $ Change 2023 vs. 2022 % Change 2023 vs. 2022 Research and development expenses $ 5,819,461 $ 6,011,805 $ (192,344) (3) % Research and development expenses for the year ended December 31, 2023 decreased by $192,344 when compared to the year ended December 31, 2022. The decrease in research and development expenses was primarily due to a slight delay starting our Phase 2a glaucoma study that we experienced during the second half of 2023. In addition, the decrease in contract manufacturing costs during 2023 was due to the efficient management of sufficient reserves of clinical trial material from our Phase 1 trial to administer the Phase 2a clinical study for glaucoma. The overall decline included a decrease of $422,939 and $210,270 in clinical contract costs and consulting, respectively. Additionally, license fees decreased by $105,356 as the Company achieved a one time milestone payment under our UM 5050 license agreement which was offset by the cancellation of UM 5070. The decreases were offset by increases of $481,411 and $65,296 in research and development salaries and benefits and general business expenses, respectively, due to the expansion of our clinical and R&D team during 2023. Cost to acquire IPR&D asset Below is a summary of our cost to acquire the IPR&D asset during the December 31, 2023 and 2022: Year Ended December 31, 2023 2022 $ Change 2023 vs. 2022 % Change 2023 vs. 2022 Cost to acquire IPR&D asset $ 21,215,214 $ — $ 21,215,214 100 % Cost to acquire the IPR&D asset for the December 31, 2023, increased by $21,215,214 as compared to the year ended December 31, 2022. The increase is due to the cost to acquire nimacimab in the BRB Acquisition. General and Administrative Expenses Below is a summary of general and administrative expenses during the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 $ Change 2023 vs. 2022 % Change 2023 vs. 2022 General and administrative expenses $ 7,852,340 $ 6,094,617 $ 1,757,723 29 % 60 General and administrative expenses for the year ended December 31, 2023 increased by $1,757,723 as compared to the year ended December 31, 2022. The increase in general and administrative expenses was primarily due to an increase in employee wages and board fees of $516,854 related to the addition of three board members and board incentive compensation. Additionally, there were increases in professional and legal fees of $942,336 related primarily to transaction costs associated with the BRB Acquisition, additional regulatory filings, the reverse stock split and ongoing litigation. There was also an increase of $282,447 in general business expenditures due to higher investor relations and travel expenses related to the publicity of our repositioning in 2023 to highlight nimacimab as our lead asset for obesity. Estimated legal contingency Below is a summary of the estimated legal contingency during the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 $ Change 2023 vs. 2022 % Change 2023 vs. 2022 Estimated legal contingency $ (151,842) $ 6,205,310 $ (6,357,152) N/A Estimated legal contingency for the year ended December 31, 2023 decreased by $6,357,152 as compared to the year ended December 31, 2022 . The adjustment to the estimated legal contingency of $151,842 in 2023 was due to the court's determination to decrease the aggregate legal fees owed to the plaintiff in the Cunning Lawsuit . Other Expense Below is a summary of other expense during the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 $ Change 2023 vs. 2022 % Change 2023 vs. 2022 Change in fair value of derivative liability $ (3) $ (59,729) $ 59,726 (100) % Interest expense 906,270 665,133 241,137 36 % Interest income (99,974) (19,011) (80,963) 426 % Finance charge — 120,228 (120,228) (100) % Loss from asset sale 307,086 — 307,086 N/A Debt conversion inducement expense 1,383,285 — 1,383,285 N/A Wind-down costs 409,347 456,508 (47,161) (10) % Total other expense, net $ 2,906,011 $ 1,163,129 $ 1,742,882 150 % For the year ended December 31, 2023, we had net other expense of $2,906,011 primarily related to interest expense of $906,270 (including cash and non-cash interest), a non-cash charge of $1,383,285 related to the induced conversion of our Amended Credit Facility, $409,347 in wind down costs associated with the EHT Acquisition and a $307,086 loss from the divestiture of VDL. The increase was offset by interest income of $99,974. For the year ended December 31, 2022, we had net other expense of $1,163,129 primarily related to interest expense of $665,133 related to the Amended Credit Agreement and wind down costs of $456,508 associated with the EHT Acquisition. In addition, we recognized a finance charge of $120,228 from the repricing of warrants. Liquidity, Going Concern and Capital Resources The Company has incurred operating losses and negative cash flows from operations since inception and as of December 31, 2023, had a working capital deficit of $2,250,156 and an accumulated deficit of $104,382,549. As of December 31, 2023, the Company had unrestricted cash in the amount of $1,256,453. For the years ended December 31, 2023 and 2022, the Company incurred losses from operations of $34,735,173 and $18,311,732, respectively. For the years ended December 31, 2023 and 2022, the Company incurred net losses of $37,644,784 and $19,481,602, respectively. The Company expects to continue to incur significant losses and negative cash flows from operations through 2024 and expects to incur significant losses and negative cash flows from operations in the future. 61 Historically, the Company has funded its operations through convertible debt, public equity financings, asset acquisitions and private investments in public equity. On August 18, 2023, the Company entered into the Convertible Note Financing, the August PIPE Financing and BRB Acquisition which provided the Company with the necessary funds to continue operations, post an appeal bond to stay the execution of the judgment in the Cunning Lawsuit and reposition the Company to focus on nimacimab as its lead clinical asset for obesity. Following the August 2023 transactions, the Company executed a 1:250 reverse stock split and increased its authorized shares outstanding. In January 2024 and March 2024, we completed two private placement equity transactions with institutional investors, in which we raised combined net aggregate proceeds of approximately $83,500,000. The capital from the January and March PIPE financings will allow us to fund both of our planned clinical trials for glaucoma and obesity through top line Phase 2 data. The Company’s consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Based on its current operational requirements, the Company believes that its current cash will be sufficient to fund its projected operations for at least 12 months from the date of the issuance of these consolidated financial statements. Cash Flows The follo wing is a summary of our cash flows for the periods indicated and has been derived from our consolidated financial statements which are included elsewhere in this Form 10-K: Year Ended December 31, 2023 2022 Net cash and restricted cash provided by (used in): Operating activities $ (13,952,178) $ (12,744,072) Investing activities 6,596,456 5,214,395 Financing activities 16,443,270 (208,794) Net increase (decrease) in cash and restricted cash $ 9,087,548 $ (7,738,471) Cash Flows from Operating Activities The primary use of cash for our operating activities during these periods was to fund research and development activities for our clinical product candidates, nimacimab and SBI-100 OE, along with general and administrative activities. Our cash used in operating activities also reflected changes in our working capital, net of adjustments for non-cash charges, such as , stock-based compensation expense, non-cash interest expense related to the amortization of debt discounts on our convertible debt instruments, a charge to induce the conversion of the Amended Credit Agreement during February 2023 and the expense related to the acquisition of our lead asset for obesity, nimacimab. Cash used in operating activities of $13,952,178 during the year ended December 31, 2023, reflected a net loss of $37,644,784, the loss was adjusted by aggregate non-cash charges of $24,161,912 and included a $469,306 decrease in our operating assets and liabilities. Non-cash charges included $124,251 of depreciation and amortization, $987,510 for stock-based compensation expense, $329,890 in non-cash interest expense from the amortization of the debt discount on our convertible debt, a gain of $151,843 from the courts decision to reduce the legal fees due to the plaintiff in the Cunning Lawsuit, $307,086 for a non-cash loss on the divestiture of VDL, a debt conversion inducement charge of $1,383,285 related to the conversion of the multi-draw credit agreement and in-process research and development expenses of $21,215,214 related to the acquisition of our lead asset, nimacimab. The net change in our operating assets and liabilities included a $306,442 increase in our prepaid expense and other current assets, a decrease in accounts payable of $701,285, and a $74,463 decrease in our accrued expense and other current liabilities. Cash used in operating activities of $12,744,072 during the year ended December 31, 2022, reflected a net loss of $19,481,602, partially offset by aggregate non-cash charges of $7,499,434 and included a $761,904 net change in our operating assets and liabilities. Non-cash charges included $629,032 for stock-based compensation expense, $489,595 non-cash interest expense from the amortization of the debt discount on the Amended Credit Agreement, a $59,729 gain from the decrease in fair value of our warrant liability, depreciation and amortization of $114,998, a finance charge of $120,228 due to Sciences warrant repricing, and a loss of $6,205,310 due to the estimated legal contingency associated with the Cunning Lawsuit. The net change in our operating assets and liabilities included a $109,943 increase in our prepaid expense and other current assets, an increase in accounts payable of $799,740, and a $1,671,587 decrease in our accrued expense and other current liabilities. 62 Cash Flows from Investing Activities Cash provided from investing activities of $6,596,456 during the year ended December 31, 2023 consisted of our capital expenditures in relation to the purchase of property plant and equipment of $12,550, cash divested net of proceeds received from the sale of VDL of $5,532,266 and cash proceeds received from the BRB Acquisition of $1,076,740. During the year ended December 31, 2022, the Company purchased $28,060 of machinery and office equipment, cash divested net of proceeds received from the sale of an asset of $66,458 and cash proceeds received from the EHT Acquisition of $5,308,913. Cash Flows from Financing Activities During the year ended December 31, 2023, cash provided by financing activities included $11,734,947 in net proceeds received from the August 2023 PIPE Financing, $4,973,684 in net proceeds from the issuance of a convertible note, offset by $259,335 in repayments on our insurance premium financing. During the year ended December 31, 2022 cash used in financing activities included $1,967 in proceeds received in connection with pre-funded warrants and $680,901 in proceeds from the EHT bridge financing, offset by $275,537 in repayments on our insurance premium financing, and $616,125 in prepayments on the Amended Credit Agreement. Off-Balance Sheet Arrangements There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. Our consolidated financial statements and the report of our independent registered public accounting firm are included in this report on pages F-1 through F- 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . Not applicable.