NHT Global(NHTC) - 2023 Q3 - Quarterly Report

Forward-Looking Statements This section highlights various risks that could materially affect the company's future results, including significant reliance on Hong Kong/China operations, geopolitical and economic instability, and regulatory compliance challenges Summary of Risks The company faces material risks from reliance on Hong Kong/China, geopolitical instability, negative cash flows, competition, and regulatory compliance - Substantial portion of overall business derived from Hong Kong operations, with sales primarily to members in China, making the company highly susceptible to adverse changes in these regions[10] - Experienced negative operating cash flows in 2022 and modest positive flows in 2020-2021, indicating a need for improved operating cash flows to avoid material adverse effects on business and stock price[10] - The business is subject to various laws and regulations, especially direct-selling laws in China, and faces risks from political and social developments in Hong Kong, epidemics (like COVID-19), and potential challenges to business legality[10][11] PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements, including balance sheets, income, equity, and cash flows, with detailed accounting notes Consolidated Balance Sheets | Metric | Sep 30, 2023 (Unaudited) (in Thousands) | Dec 31, 2022 (in Thousands) | | :-------------------------------- | :------------------------------------- | :-------------------------- | | ASSETS | | | | Cash and cash equivalents | $58,412 | $69,667 | | Total current assets | $66,969 | $77,551 | | Total assets | $71,821 | $82,817 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $20,778 | $20,438 | | Total liabilities | $28,511 | $32,666 | | Total stockholders' equity | $43,310 | $50,151 | | Total liabilities and stockholders' equity | $71,821 | $82,817 | - Total assets decreased by $11.0 million from December 31, 2022, to September 30, 2023, primarily driven by a decrease in cash and cash equivalents[17] - Total stockholders' equity decreased by $6.8 million, mainly due to accumulated deficit and accumulated other comprehensive loss[17] Consolidated Statements of Operations | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :--------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Net sales | $10,615 | $11,716 | $32,987 | $36,622 | | Gross profit | $7,926 | $8,618 | $24,601 | $27,224 | | Loss from operations | $(292) | $(145) | $(1,429) | $(313) | | Other income, net | $585 | $187 | $1,708 | $472 | | Income before income taxes | $293 | $42 | $279 | $159 | | Net income | $172 | $47 | $210 | $125 | | Basic Net income per common share | $0.02 | $0.00 | $0.02 | $0.01 | | Diluted Net income per common share | $0.02 | $0.00 | $0.02 | $0.01 | - Net sales decreased by 9% for the three months ended September 30, 2023, and by 10% for the nine months ended September 30, 2023, compared to the prior year periods[19] - Net income significantly increased for both the three-month period (from $47 thousand to $172 thousand) and the nine-month period (from $125 thousand to $210 thousand) year-over-year, despite a loss from operations, primarily due to higher other income[19] Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :------------------------------------------ | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Net income | $172 | $47 | $210 | $125 | | Foreign currency translation adjustment | $(23) | $(367) | $(272) | $(828) | | Unrealized gains (losses) on available-for-sale securities | $1 | $(34) | $9 | $(21) | | Comprehensive income (loss) | $150 | $(354) | $(53) | $(724) | - Comprehensive income improved significantly from a loss of $354 thousand in Q3 2022 to an income of $150 thousand in Q3 2023, largely due to a reduced negative impact from foreign currency translation adjustments[21] Consolidated Statements of Stockholders' Equity | Metric | Dec 31, 2022 (in Thousands) | Sep 30, 2023 (in Thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | $50,151 | $43,310 | | Accumulated Deficit | $(9,056) | $(15,757) | | Accumulated Other Comprehensive Loss | $(1,004) | $(1,267) | | Treasury Stock (shares) | (1,556,875) | (1,462,641) | | Treasury Stock (amount) | $(25,904) | $(24,336) | - Total stockholders' equity decreased by $6.8 million from December 31, 2022, to September 30, 2023, primarily due to net income being offset by dividends declared and an increase in accumulated deficit[23] - The company reissued 97,900 treasury shares, reducing the treasury stock balance by $1.6 million, while also recognizing share-based compensation[23] Consolidated Statements of Cash Flows | Metric | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :-------------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash used in operating activities | $(4,209) | $(5,790) | | Net cash used in investing activities | $(32) | $(130) | | Net cash used in financing activities | $(6,911) | $(6,855) | | Effect of exchange rates on cash | $(145) | $(858) | | Net decrease in cash, cash equivalents and restricted cash | $(11,297) | $(13,633) | | Cash, cash equivalents and restricted cash, end of period | $58,449 | $70,732 | - Net cash used in operating activities improved from $5.8 million in 2022 to $4.2 million in 2023, driven by increased interest earned and more orders[26][122] - Cash, cash equivalents, and restricted cash decreased by $11.3 million during the first nine months of 2023, primarily due to operating activities and dividend payments[26][120] Notes to Consolidated Financial Statements 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Details the company's direct-selling and e-commerce operations under "NHT Global," global market, and key accounting policies - The Company operates as an international direct-selling and e-commerce entity, marketing personal care, wellness, and 'quality of life' products under the 'NHT Global' brand[28] - The Company maintains cash balances in the United States, Hong Kong, and China, with $3.6 million in China subject to foreign currency controls as of September 30, 2023[32] - The adoption of ASU 2016-13 and ASU 2019-11 (Credit Losses) effective after December 15, 2022, did not have a material impact on the Company's financial statements[36] 2. REVENUE Outlines revenue recognition policies, including product sales, returns, shipping, deferred revenue, and sales concentration in Hong Kong/China - Revenue is recognized when performance obligations are satisfied, primarily from product sales upon shipment and title transfer to independent members[38] | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Product sales | $10,303 | $10,534 | $31,505 | $32,889 | | Administrative fees, freight and other | $373 | $1,235 | $1,628 | $3,865 | | Less: sales returns | $(61) | $(53) | $(146) | $(132) | | Total net sales | $10,615 | $11,716 | $32,987 | $36,622 | - Deferred revenue, primarily from unshipped product orders and unredeemed product vouchers, totaled $4.5 million as of September 30, 2023, up from $3.8 million at December 31, 2022[42][49] 3. BALANCE SHEET COMPONENTS Provides a detailed breakdown of balance sheet accounts, including cash, inventories, accrued expenses, and deferred revenue | Component | Sep 30, 2023 (in Thousands) | Dec 31, 2022 (in Thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Cash, cash equivalents and restricted cash | $58,449 | $69,746 | | Inventories | $4,882 | $4,525 | | Other accrued expenses | $1,100 | $1,181 | | Deferred revenue | $6,248 | $5,597 | - Cash and cash equivalents decreased by $11.3 million from December 31, 2022, to September 30, 2023[49] - Deferred revenue increased by $651 thousand, primarily due to an increase in unshipped product and unredeemed product vouchers[49] 4. FAIR VALUE MEASUREMENTS Details fair value measurements for financial instruments, including money market, government, and corporate debt securities, categorized by fair value hierarchy levels | Investment Category | Sep 30, 2023 Fair Value (in Thousands) | Dec 31, 2022 Fair Value (in Thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Money market funds (Level 1) | $19,102 | $2,143 | | Government and municipal debt securities (Level 2) | $5,625 | $6,759 | | Corporate debt securities (Level 2) | $24,137 | $47,931 | | Total investments | $48,864 | $56,833 | - Total investments classified as cash equivalents decreased by $8.0 million from December 31, 2022, to September 30, 2023[54] - Unrealized losses on available-for-sale securities were primarily driven by market risk, not credit risk, and no allowance for credit losses was deemed necessary[56] 5. LEASES Details operating lease commitments for global office and retail spaces, including lease costs, terms, and discount rates - The company leases office and retail spaces in multiple countries, including significant operations in Hong Kong and China, with terms extending up to September 2030[57][58] | Lease Cost Component | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Operating leases | $320 | $292 | $971 | $954 | | Short-term leases | $38 | $36 | $114 | $124 | | Total lease cost | $358 | $328 | $1,085 | $1,078 | | Metric | As of Sep 30, 2023 | | :--------------------------------- | :----------------- | | Weighted-average remaining lease term | 4.3 years | | Weighted-average discount rate | 4.5% | | Present value of lease liabilities | $3,721 thousand | 6. INCOME TAXES Discusses income tax provisions, effective tax rate, deferred tax assets/liabilities, valuation allowances, and the impact of U.S. tax legislation - The company has a valuation allowance against deferred tax assets in certain foreign jurisdictions with an overall net operating loss, but not against U.S. deferred tax assets[62][134] - Income taxes payable for the repatriation tax on deemed repatriation of deferred foreign income totaled $9.0 million as of September 30, 2023, with $5.1 million classified as a noncurrent liability[64] - The company intends to reinvest all undistributed earnings in excess of 50% of current earnings annually indefinitely, and has not recorded a state deferred tax liability for future repatriations as all earnings no longer deemed indefinitely reinvested have already been repatriated[65][135] 7. COMMITMENTS AND CONTINGENCIES Discloses commitments and contingencies, particularly employment agreements with management regarding change in control or termination - The company has employment agreements with management that include provisions for payments upon a change in control or termination without cause[67] 8. STOCK-BASED INCENTIVE PLANS Details stock-based incentive plans, including restricted stock and phantom equity, with information on grants, vesting, and compensation expense - Under the 2016 Equity Incentive Plan, 97,900 shares of restricted common stock were granted in February 2023, with 70,115 nonvested shares remaining at September 30, 2023[70][71] | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | | :------------------------------------ | :------------------------------------- | :------------------------------------ | | Share-based compensation expense (Restricted Stock) | $38 | $123 | | Share-based compensation expense (Phantom Equity) | $144 | $404 | - Phantom shares, accounted for as liabilities, resulted in compensation expense of $144 thousand for the three months and $404 thousand for the nine months ended September 30, 2023, related to cash settlement[76][77] 9. STOCKHOLDERS' EQUITY Details changes in stockholders' equity, including dividends, stock repurchases, and components of accumulated other comprehensive loss - The company declared and paid quarterly cash dividends of $0.20 per common share, totaling $6.9 million for each of the nine-month periods ended September 30, 2023 and 2022[79] - As of September 30, 2023, $21.9 million remained available under the $70.0 million stock repurchase program[80] | Component of Accumulated Other Comprehensive Loss | Dec 31, 2022 (in Thousands) | Sep 30, 2023 (in Thousands) | | :------------------------------------------------ | :-------------------------- | :-------------------------- | | Foreign Currency Translation Adjustments | $(988) | $(1,260) | | Unrealized Gains (Losses) on Available-For-Sale Investments | $(16) | $(7) | | Total Accumulated Other Comprehensive Loss | $(1,004) | $(1,267) | 10. RELATED PARTY TRANSACTIONS Discloses a related party royalty agreement with Broady Health Sciences, L.L.C. for ReStor™, involving a former director's family - The company has a Royalty Agreement with Broady Health Sciences, L.L.C. (BHS) for the product ReStor™, where BHS is indirectly owned by a former director and managed by his daughter[82] | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :--------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Royalties paid | $11 | $13 | $33 | $39 | 11. SEGMENT INFORMATION Provides disaggregated financial information by operating segment, including net sales and operating income for Primary Reporting, China, and Russia/Kazakhstan - The company operates in three reportable segments: Primary Reporting Segment (including Hong Kong), China, and Russia/Kazakhstan[84] | Segment | Three Months Ended Sep 30, 2023 Net Sales (in Thousands) | Three Months Ended Sep 30, 2022 Net Sales (in Thousands) | Nine Months Ended Sep 30, 2023 Net Sales (in Thousands) | Nine Months Ended Sep 30, 2022 Net Sales (in Thousands) | | :---------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Primary Reporting Segment | $10,249 | $11,241 | $31,719 | $34,888 | | China | $254 | $346 | $917 | $1,313 | | Russia and Kazakhstan | $112 | $129 | $351 | $421 | | Total net sales | $10,615 | $11,716 | $32,987 | $36,622 | - Hong Kong, part of the Primary Reporting Segment, accounted for $8.4 million (79.2%) of total net sales for the three months ended September 30, 2023, with substantially all revenues derived from sales to members in China[86] 12. SUBSEQUENT EVENT Reports a subsequent event: the Board declared a quarterly cash dividend of $0.20 per common share on October 30, 2023 - On October 30, 2023, the Board of Directors declared a quarterly cash dividend of $0.20 per common share, payable on November 24, 2023[87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, condition, operations, revenue, expenses, and liquidity, emphasizing Greater China's impact and regulatory challenges Business Overview Overview of the "NHT Global" direct-selling business, highlighting challenges in Greater China from declining members, currency, and regulatory issues - The company is an international direct-selling and e-commerce company selling personal care, wellness, and 'quality of life' products under the 'NHT Global' brand[88] | Metric | Sep 30, 2023 | Dec 31, 2022 | Sep 30, 2022 | | :------------- | :----------- | :----------- | :----------- | | Active members | 34,660 | 38,660 | 41,170 | - Approximately 92% of net sales are generated from subsidiaries outside the Americas, with Hong Kong subsidiary sales (primarily to members in China) representing 79% of net sales in the latest fiscal quarter[90] - The company does not hold a direct selling license in China and has faced significant adverse impacts from Chinese government campaigns (e.g., 100-day campaign) and COVID-19 control measures, which disrupted operations and member activities[91][93][95] Statement of Operations Presentation Explains revenue recognition, cost of sales, member commissions, SG&A expenses, and foreign currency impact on financial results - Revenue is primarily derived from product sales to independent members, recognized upon shipment and title transfer, with shipping charges included in net sales[100] - Member commissions are the most significant expense, paid weekly based on personal and group bonus volume points from product purchases by down-line networks[102] - Sales and net earnings are affected by changes in currency exchange rates, generally increasing with a weakening U.S. dollar and decreasing with a strengthening U.S. dollar[107] Results of Operations Analyzes financial performance for Q3 and YTD 2023, detailing changes in net sales, gross profit, expenses, and other income, noting decreased sales but increased net income | Metric (% of Net Sales) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | 100.0% | 100.0% | 100.0% | 100.0% | | Gross profit | 74.7% | 73.6% | 74.6% | 74.3% | | Commissions expense | 41.1% | 41.5% | 42.0% | 42.0% | | Selling, general and administrative expenses | 36.3% | 33.3% | 36.9% | 33.2% | | Loss from operations | (2.7)% | (1.2)% | (4.3)% | (0.9)% | | Other income, net | 5.5% | 1.6% | 5.2% | 1.3% | | Net income | 1.6% | 0.4% | 0.7% | 0.3% | Net Sales Net sales decreased by 9% (Q3) and 10% (YTD) due to lower Hong Kong sales, deferred revenue changes, and reduced administrative fees | Market | Three Months Ended Sep 30, 2023 Net Sales (in Thousands) | Three Months Ended Sep 30, 2022 Net Sales (in Thousands) | Nine Months Ended Sep 30, 2023 Net Sales (in Thousands) | Nine Months Ended Sep 30, 2022 Net Sales (in Thousands) | | :-------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Total Net Sales | $10,615 | $11,716 | $32,987 | $36,622 | | Hong Kong Net Sales | $8,412 | $9,424 | $26,391 | $28,916 | | China Net Sales | $254 | $346 | $917 | $1,313 | - Net sales decreased by $1.1 million (9%) for the three months and $3.6 million (10%) for the nine months ended September 30, 2023, year-over-year[112][113] - Hong Kong net sales, primarily from products shipped to members in China, decreased by $1.0 million (11%) for the three months and $2.5 million (9%) for the nine months, mainly due to changes in deferred revenue and lower administrative fees[112][113] Gross Profit Gross profit margin slightly improved to 74.7% (Q3) and 74.6% (YTD), mainly due to lower logistics costs | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Gross profit | 74.7% | 73.6% | 74.6% | 74.3% | - The slight improvement in gross profit margin for the three-month period was primarily attributable to lower logistics costs, excluding the impact of decreased administrative fee revenue[114] Commissions Expense Commissions expense as a percentage of net sales slightly decreased to 41.1% (Q3) and remained 42.0% (YTD) due to lower incentives | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Commissions expense | 41.1% | 41.5% | 42.0% | 42.0% | - Commissions as a percentage of net sales decreased slightly due to lower supplemental incentive costs[115][116] Selling, General and Administrative Expenses SG&A expenses remained stable in absolute terms but increased as a percentage of net sales due to decreased sales | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :------------------------------------------ | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Selling, general and administrative expenses | $3,857 | $3,900 | $12,169 | $12,167 | - SG&A expenses as a percentage of net sales increased in the current year periods due to decreased net sales and the inelastic nature of these expenses[117] Other Income, Net Other income, net, significantly increased to $585 thousand (Q3) and $1.7 million (YTD), primarily from higher interest on cash equivalents | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :---------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Other income, net | $585 | $187 | $1,708 | $472 | - The increase in other income is primarily due to greater interest earned on cash equivalents[118] Income Taxes Income tax provision of $121 thousand (Q3) and $69 thousand (YTD) resulted from foreign income inclusions and tax benefits | Metric | Three Months Ended Sep 30, 2023 (in Thousands) | Three Months Ended Sep 30, 2022 (in Thousands) | Nine Months Ended Sep 30, 2023 (in Thousands) | Nine Months Ended Sep 30, 2022 (in Thousands) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Income tax provision (benefit) | $121 | $(5) | $69 | $34 | - The tax provision primarily resulted from foreign income inclusions (GILTI and Subpart F income) and tax benefits in foreign jurisdictions[119] Liquidity and Capital Resources Cash and equivalents decreased to $58.4 million, primarily due to operations and dividends, yet liquidity remains adequate with a 3.2:1 current ratio | Metric | Sep 30, 2023 (in Thousands) | Dec 31, 2022 (in Thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $58,412 | $69,667 | | Working capital | $46,191 | $57,113 | | Current assets to current liabilities ratio | 3.2 to 1.0 | 3.8 to 1.0 | - Cash and cash equivalents decreased by $11.3 million from December 31, 2022, to September 30, 2023, primarily due to cash used in operating activities and dividends paid[120] - Cash used in operations improved to $4.2 million for the first nine months of 2023, from $5.8 million in 2022, mainly due to increased interest earned and more orders[122] - The company expects to continue paying a quarterly cash dividend of $0.20 per common share and has $21.9 million remaining in its stock repurchase program[124][125] Critical Accounting Policies and Estimates Outlines critical accounting policies and estimates, including revenue recognition, commissions expense, and income taxes, requiring significant management judgment - Critical accounting policies include revenue recognition, commissions expense, and income taxes, requiring significant management judgment and estimates[129] Revenue Recognition Revenue is recognized upon product shipment, with deferred revenue from unshipped orders, vouchers, and auto ship advances totaling $4.5 million - Revenue is recognized when performance obligations are satisfied, primarily from product sales upon shipment and title transfer to independent members[130] | Deferred Revenue Component | Sep 30, 2023 (in Thousands) | Dec 31, 2022 (in Thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Unshipped product and unredeemed product vouchers | $4,492 | $3,822 | | Auto ship advances | $1,756 | $1,775 | | Total Deferred Revenue | $6,248 | $5,597 | Commissions Expense Commissions are accrued when earned and recognized with revenue, with estimates for incentives and promotions regularly reviewed - Independent members earn commissions based on total personal and group bonus volume points, accrued when earned and recognized with related revenue[132] - Accrued commissions, including estimated costs for international recognition and other supplemental programs, totaled $2.6 million at September 30, 2023[133] Income Taxes Deferred income taxes are recognized for temporary differences, with valuation allowances and assessments of tax benefits and foreign earnings repatriation - Deferred income taxes are recognized for temporary differences, with a valuation allowance against deferred tax assets in certain foreign jurisdictions but not in the U.S[134] - The company periodically reassesses its indefinite reinvestment assertion for foreign earnings, expecting minimal federal tax impact on repatriation due to the Tax Act, but potential state income tax provisions[135] - The effective tax rate is estimated quarterly based on anticipated annual pre-tax income, with adjustments for business variations, corporate structure changes, and geographic income mix[137] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing quantitative and qualitative market risk disclosures as a smaller reporting company - The company is not required to provide quantitative and qualitative disclosures about market risk under smaller reporting company disclosure rules[138] Item 4. Controls and Procedures Management confirmed effective disclosure controls and procedures as of September 30, 2023, with no material changes in internal control - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[139] - There were no material changes in internal control over financial reporting during the fiscal quarter ended September 30, 2023[140] PART II - OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings to report - No legal proceedings to report[143] Item 1A. Risk Factors No material changes to risk factors since the Annual Report on Form 10-K for December 31, 2022 - No material changes to the risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2022[144] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report[145] Item 3. Defaults Upon Senior Securities No defaults upon senior securities to report - No defaults upon senior securities to report[146] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[147] Item 5. Other Information No other information to report - No other information to report[148] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including officer certifications and Inline XBRL taxonomy files - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer, as well as Inline XBRL taxonomy extension files[149] Signatures Exhibit Index