Crown(CRKN) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, detailing the company's financial position and performance Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :--------------- | :------------------ | | Total Assets | $17,968 | $6,590 | | Total Liabilities | $10,224 | $6,060 | | Total Stockholders' Equity | $7,744 | $530 | | Cash | $2,138 | $821 | | Deferred debt issuance costs | $8,261 | $150 | | Warrant liability | $2,332 | $972 | | Notes payable at fair value | $3,191 | $1,654 | | Common stock outstanding | 43,686,523 | 20,243,509 | - Total assets increased significantly from $6.59 million to $17.97 million, driven by increases in property and equipment, intangible assets, and deferred debt issuance costs[11] - Total liabilities more than doubled from $6.06 million to $10.22 million, primarily due to increases in warrant liability and notes payable at fair value[11] - Total stockholders' equity saw a substantial increase from $0.53 million to $7.74 million[11] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $22 | $- | | Cost of revenue | $31 | $- | | Gross loss | $(9) | $- | | Research and development | $541 | $1,096 | | Selling, general and administrative | $3,576 | $3,471 | | Loss from operations | $(4,126) | $(4,567) | | Total other income (expense) | $1,826 | $(3) | | Net loss | $(2,300) | $(4,570) | | Net loss per share attributable to common stockholders | $(0.08) | $(0.29) | | Weighted average shares outstanding | 29,695,083 | 15,856,316 | - The company reported minimal revenue of $22k in Q1 2023, up from $0 in Q1 2022, resulting in a gross loss of $(9)k[13] - Net loss significantly decreased to $(2.3) million in Q1 2023 from $(4.57) million in Q1 2022, primarily due to a substantial increase in other income, driven by a $5.6 million gain from the change in fair value of warrants[13] - Research and development expenses decreased by $0.555 million (50.6%) year-over-year, while selling, general and administrative expenses slightly increased by $0.105 million (3.0%)[13] Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Item | Three Months Ended March 31, 2023 | | :------------------------------------------------- | :-------------------------------- | | Balance as of December 31, 2022 | $530 | | Exercise of common stock warrants | $2,062 | | Issuance of common stock in connection with conversion of notes | $516 | | Issuance of common stock/At-the-market offering, net | $2,107 | | Issuance of Series E preferred stock in connection with LOC | $4,350 | | Commitment to issue shares of common stock in connection with March waiver agreement | $298 | | Stock-based compensation | $181 | | Net loss | $(2,300) | | Balance as of March 31, 2023 | $7,744 | - Total stockholders' equity increased from $530k at December 31, 2022, to $7,744k at March 31, 2023, primarily driven by significant capital raising activities[16] - Key contributions to equity increase include $2.06 million from warrant exercises, $2.11 million from ATM offerings, and $4.35 million from the issuance of Series E preferred stock related to a Line of Credit[16] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(4,728) | $(3,552) | | Net cash used in investing activities | $(1,080) | $(65) | | Net cash provided by financing activities | $7,125 | $- | | Net increase / decrease in cash | $1,317 | $(3,617) | | Cash — end of period | $2,138 | $2,513 | - Net cash used in operating activities increased to $4.73 million in Q1 2023 from $3.55 million in Q1 2022[20] - Net cash used in investing activities significantly increased to $1.08 million in Q1 2023, primarily due to the acquisition of Amerigen 7 ($0.65 million) and equipment purchases ($0.44 million)[20] - Financing activities provided $7.13 million in cash in Q1 2023, a substantial increase from no financing activities in Q1 2022, driven by warrant exercises, ATM offerings, and proceeds from notes related to a Line of Credit[20] Notes to the Condensed Consolidated Financial Statements Note 1 - Organization and Description of Business Operations - Crown Electrokinetics Corp (CRKN) was incorporated on April 20, 2015, and its common stock began trading on Nasdaq on January 26, 2021[22] - The company commercializes electrokinetic smart/dynamic glass technology, originally developed by HP Inc[23] - On January 3, 2023, the company acquired assets related to 5G fiber optics infrastructure from Amerigen 7, LLC for approximately $0.65 million, establishing Crown Fiber Optics Corp as a wholly-owned subsidiary[24][27] - The conversion price of Series D preferred stock was modified from $1.30 to $0.50 per share, and 77,000 shares of Series E preferred stock were authorized, convertible into 1,000 common shares each[25][26] - Stockholders approved a reverse stock split of common stock at a ratio of not more than 1-for-15 on December 22, 2022[28] Note 2 - Liquidity and Financial Condition - The company has an accumulated deficit of approximately $90.3 million and negative working capital of $6.15 million as of March 31, 2023, with a net loss of $2.3 million and $4.6 million net cash used in operating activities for the three months ended March 31, 2023[29] - Management believes there is substantial doubt about the company's ability to continue as a going concern for the next twelve months due to uncertainty in raising additional capital[32] - The company is seeking additional capital through debt or equity financings, including an existing At-The-Market (ATM) offering, a $10 million Standing Letter of Credit (SLOC), and a $100 million Line of Credit[32] - During Q1 2023, the company received $2.1 million net proceeds from ATM sales of 12.7 million common shares, $1.0 million net proceeds from senior secured notes, and drew down $2.0 million from the Line of Credit[35][36][37] Note 3 - Significant Accounting Policies - The condensed consolidated financial statements are prepared in conformity with GAAP and are unaudited, with significant estimates made for business combinations, convertible notes, warrants, and equity awards[44][45] - Revenue is recognized under ASC 606 upon completion of short-term fiber splicing services, with immaterial revenue generated by Crown Fiber Optics Corporation in Q1 2023[48][50][52][56] - Business combinations are accounted for using the acquisition method (ASC 805), recognizing identifiable assets and liabilities at fair value, and goodwill as the excess consideration[57] - The company elected the fair value option for convertible notes (ASC 825), recognizing changes in fair value in the statements of operations, and accounts for certain common stock warrants as a liability at fair value, re-measured each period using Black Scholes[62][64] - As an 'emerging growth company,' the company has elected to use the extended transition period for complying with new or revised accounting standards[71] Note 4 – Acquisitions - On January 3, 2023, the company acquired certain assets from Amerigen 7 for approximately $0.65 million cash, including 12 employees, customer contracts, and operating liabilities[72] Amerigen 7 Acquisition Purchase Price Allocation (in thousands) | Item | Amount | | :--------------------------------- | :----- | | Property and equipment | $656 | | Intangible assets | $200 | | Security deposits | $5 | | Accrued expenses | $(529) | | Notes payable | $(338) | | Total identifiable assets and liabilities acquired | $(7) | | Goodwill | $652 | | Total purchase consideration | $645 | - An independent valuation specialist used the Income Approach (Multi-Period Excess Earnings Method) to value the acquired customer relationships[73] Note 5 - Prepaid and Other Current Assets Prepaid and Other Current Assets (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :----------------------- | :--------------- | :---------------- | | License fees | $256 | $300 | | Notes receivable | $120 | $- | | Professional fees | $99 | $- | | Insurance | $66 | $142 | | Hudson warrant | $85 | $85 | | Other | $97 | $63 | | Total | $723 | $590 | - Prepaid and other current assets increased by $133k from $590k at December 31, 2022, to $723k at March 31, 2023, primarily due to new notes receivable and professional fees[74] Note 6 - Property & Equipment, Net Property and Equipment, Net (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :--------------- | :---------------- | | Equipment | $2,533 | $1,457 | | Leasehold improvements | $362 | $362 | | Vehicles | $159 | $- | | Computers | $55 | $52 | | Other | $9 | $- | | Total | $3,118 | $1,871 | | Less accumulated depreciation and amortization | $(590) | $(462) | | Property and equipment, net | $2,528 | $1,409 | - Property and equipment, net, increased by $1.12 million from $1.41 million at December 31, 2022, to $2.53 million at March 31, 2023, largely due to the Amerigen 7 acquisition, which added $0.5 million in equipment and $0.2 million in vehicles[75] - Depreciation expense for Q1 2023 was $128k, up from $54k in Q1 2022[76] Note 7 - Intangible Assets, Net Intangible Assets, Net (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :----------------------- | :--------------- | :---------------- | | Patents | $1,800 | $1,800 | | Research license | $375 | $375 | | Customer relationships | $200 | $- | | Total | $2,375 | $2,175 | | Accumulated amortization | $(631) | $(577) | | Intangible assets, net | $1,744 | $1,598 | - Intangible assets, net, increased by $146k from $1.60 million at December 31, 2022, to $1.74 million at March 31, 2023, primarily due to the acquisition of $0.2 million in customer relationships from Amerigen 7[77] - Amortization expense for Q1 2023 was $54k, consistent with $53k in Q1 2022[78] Estimated Amortization of Intangible Assets (in thousands) | Period | Estimated Amortization Expense | | :--------------------------------- | :----------------------------- | | Nine months ended December 31, 2023 | $177 | | Year ended December 31, 2024 | $235 | | Year ended December 31, 2025 | $234 | | Year ended December 31, 2026 | $197 | | Year ended December 31, 2027 and thereafter | $901 | | Total | $1,744 | Note 8 – Deferred Debt Issuance Costs Deferred Debt Issuance Costs (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :--------------- | :---------------- | | SLOC | $223 | $223 | | Line of Credit | $9,943 | $- | | Total | $10,166 | $223 | | Accumulated amortization | $(1,905) | $(73) | | Deferred debt issuance costs, net | $8,261 | $150 | - Deferred debt issuance costs, net, increased significantly by $8.11 million from $150k at December 31, 2022, to $8.26 million at March 31, 2023, primarily due to $9.9 million recorded for the new Line of Credit[79][80] - During Q1 2023, $1.6 million of amortization expense related to the Line of Credit was recognized as interest expense, and $0.2 million as other expense[80] Note 9 - Fair Value Measurements Fair Value of Liabilities (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :---------------- | :--------------- | :---------------- | | Convertible notes | $3,191 | $1,654 | | Warrant liability | $2,332 | $972 | - Total Level 3 liabilities measured at fair value increased by approximately $5.5 million during Q1 2023[83] - The fair value of convertible notes and warrants is estimated using Monte Carlo simulation and Black Scholes Methodology, respectively, with significant unobservable inputs including common stock price, volatility, and risk-free interest rates[87][100] - Key changes in Q1 2023 include the issuance of a $2.0 million convertible note for the Line of Credit, $5.6 million in warrants issued for the Line of Credit, and a $0.5 million loss on extinguishment of warrant liability due to an inducement and exercise agreement[86][93][95][97] Note 10 - Accrued Expenses Accrued Expenses (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :----------------------- | :--------------- | :---------------- | | Payroll and related expenses | $155 | $- | | Bonus | $- | $510 | | Taxes | $25 | $- | | Insurance | $15 | $104 | | Other expenses | $35 | $7 | | Total | $230 | $621 | - Accrued expenses decreased by $391k from $621k at December 31, 2022, to $230k at March 31, 2023, primarily due to the absence of bonus accruals[101] Note 11 - Notes Payable - The 2022 Notes (issued Oct 2022, $5.4M principal) had their maturity extended to April 18, 2024, in exchange for 5,813,414 warrants, and a March 2023 waiver agreement eliminated a minimum pricing covenant, leading to a $0.15 million increase in principal for some holders[102][104][105] - Two noteholders converted a portion of their 2022 Notes into 1,887,919 common shares (fair value $0.5 million) during Q1 2023[106] - The 2023 Note ($2.0 million) was issued on February 3, 2023, upon drawing down on the Line of Credit, convertible at $0.50/share, and its maturity was extended to May 31, 2023, in exchange for 4k Series E preferred stock and 2M common shares (pending approval)[107] - Senior Secured Notes ($1.2 million principal, issued Jan 2023) had their maturity extended to May 23, 2023, in return for the issuance of 4,710,000 common shares (pending approval)[109] Note 12 - Stockholders' Equity - The conversion price of Series D preferred stock was modified from $1.30 to $0.50 per share in Q1 2023, resulting in a $6k deemed dividend[123] - 77,000 shares of Series E preferred stock were authorized on February 1, 2023, each convertible into 1,000 common shares; 5,000 shares were issued as a commitment fee for the Line of Credit (fair value $1.45 million), with an additional 10,000 shares committed for future anniversaries (fair value $2.9 million)[125][127] - Authorized common stock increased from 200 million to 800 million shares on December 22, 2022, and a reverse stock split (not more than 1-for-15) was approved[129][130] - Common stock issuances in Q1 2023 included 6.56 million shares from warrant exercises ($2.06 million net proceeds), 1.89 million shares from note conversions ($0.5 million fair value), 12.7 million shares from ATM offerings ($2.1 million net proceeds), 1.8 million shares for consulting services ($0.6 million fair value), and 0.5 million shares from vested restricted stock units[131][132][134][135][136] Note 13 - Stock-Based Compensation, Stock Options, Restricted Stock Units and Warrants - The company operates under the 2022, 2020, and 2016 Long-Term Incentive Plans, with 4.2 million shares available under the 2022 Plan and 5.33 million under the 2020 Plan, both subject to automatic annual increases[139][140][142] Total Stock-Based Compensation Expense (in thousands) | Expense Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $59 | $55 | | Selling, general and administrative | $122 | $1,028 | | Total | $181 | $1,083 | - Stock options outstanding at March 31, 2023, totaled 9.42 million shares with a weighted average exercise price of $2.63; unvested restricted stock units were 497,913 shares[147][148] - Warrants outstanding (excluding penny warrants) at March 31, 2023, totaled 36.02 million shares with a weighted average exercise price of $0.65[149] - New liability-classified warrants issued in Q1 2023 include 2.5 million for senior secured notes, 45,000 Series E preferred stock warrants for the Line of Credit, and 6.41 million new common stock warrants in an inducement agreement, plus 5.81 million for a waiver agreement[150][151][153][154] - Equity-classified warrants include 300,000 shares issued to Hudson Pacific Properties, L.P. for Smart Window Inserts POs (recorded as a prepaid asset of $85,450) and 200,000 shares related to the SLOC (recorded as deferred debt issuance costs of $223k)[157][159][160] Note 14 - Commitments and Contingencies - The company has various operating lease agreements for office, lab, and warehouse space, with operating lease liabilities of approximately $1.8 million and right-of-use assets of $1.7 million as of March 31, 2023[170] - Operating lease expense for Q1 2023 was $248k, compared to $209k in Q1 2022[171] - The Pacific NW lease was terminated on April 27, 2023, with the company paying $115,394 in re-tenanting costs in addition to forfeiting a $150,000 security deposit[172][176] - The company is involved in various legal claims and actions, which are not expected to have a material adverse effect on its financial position, but litigation outcomes are uncertain[172][173] Note 15 - Subsequent Events - The Pacific NW lease was terminated on April 27, 2023, with the company paying $115,394 in re-tenanting costs and forfeiting a $150,000 security deposit[176] - In May 2023, the company repriced October Notes, reducing conversion prices and increasing the number of common shares convertible by 8,345,457 shares[177][178] - The Line of Credit Promissory Note and January Senior Secured Notes were extended in May 2023, in exchange for the issuance of 4,000 Series E Preferred Stock (convertible to 4 million common shares) and 4 million common shares, respectively, both subject to stockholder approval[179][180] - Between May 17-18, 2023, the company issued $429,877 in secured demand promissory notes and agreed to issue 8,597,539 common shares (subject to stockholder approval)[181] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and liquidity, highlighting strategic shifts and capital raising efforts - The company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised accounting standards, which may affect comparability[184] - The company is commercializing smart glass technology and, in January 2023, acquired Amerigen 7 for 5G fiber optics infrastructure, establishing Crown Fiber Optics Corp[186][188] - Significant capital raising activities include preferred stock issuances (Series D conversion price change, Series E authorization and issuance for LOC), common stock issuances (warrant exercises, ATM offering), and debt financing (Line of Credit, Senior Secured Convertible Notes, Senior Secured Notes)[189][192][196][200][201][202][207] - The company has acquired a Master Supply Agreement (MSA) with Charter Spectrum for fiber optics and entered into three further MSAs covering the Northwest and Southwest United States; it also holds MSAs for Smart Window Inserts with Brandywine and Hudson Pacific Properties[214][215][217] Management's plans and basis of presentation - Crown Electrokinetics Corp was incorporated on April 20, 2015, and its common stock began trading on Nasdaq on January 26, 2021[185] - The company is commercializing electrokinetic smart/dynamic glass technology and acquired Amerigen 7, LLC assets for 5G fiber optics infrastructure on January 3, 2023[186][188] - The conversion price of Series D preferred stock was modified from $1.30 to $0.50 per share, and 77,000 shares of Series E preferred stock were authorized, with 5,000 shares issued as a commitment fee for the Line of Credit[189][191][192] - Authorized common stock increased to 800 million shares, and a reverse stock split (not more than 1-for-15) was approved on December 22, 2022[194][195] - During Q1 2023, the company issued 6.41 million common shares from warrant exercises ($2.06 million net proceeds) and 12.7 million common shares from ATM offerings ($2.1 million net proceeds)[196][200] - A $100 million Line of Credit was secured on February 2, 2023, with an initial $2.0 million draw down via a convertible promissory note; senior secured convertible notes ($5.4 million principal) were issued in October 2022, and senior secured notes ($1.2 million principal) were issued in January 2023[201][202][207] - The company has Master Supply Agreements for fiber optics with Charter Spectrum and other providers, and for Smart Window Inserts with Brandywine and Hudson Pacific Properties, with initial purchase orders from Hudson totaling $85,450[214][215][217][219] Results of Operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 Results of Operations Highlights (in thousands) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $22 | $- | | Cost of revenue | $31 | $- | | Gross loss | $(9) | $- | | Research and development | $541 | $1,096 | | Selling, general and administrative | $3,576 | $3,471 | | Other (income) expense | $(1,826) | $3 | | Net loss | $(2,300) | $(4,570) | - Revenue was $22k in Q1 2023 (from Crown Fiber Optics Corp), up from $0 in Q1 2022, resulting in a gross loss of $(9)k[222][223] - Research and development expenses decreased by $0.6 million to $0.5 million in Q1 2023, primarily due to lower salaries, benefits, and lab supplies[225] - Selling, general and administrative expenses increased by $0.1 million to $3.6 million in Q1 2023, driven by higher salaries, benefits, and professional fees, partially offset by a $0.9 million decrease in stock-based compensation[226] - Other income was $1.8 million in Q1 2023 (vs $(3)k expense in Q1 2022), primarily due to a $5.6 million gain from the change in fair value of warrants, offset by $2.0 million interest expense, $0.5 million loss on warrant extinguishment, and $1.3 million other expenses[227] - Net loss decreased to $(2.3) million in Q1 2023 from $(4.6) million in Q1 2022[221] Liquidity and Going Concern - The company had an accumulated deficit of approximately $90.3 million, a net loss of $2.3 million, and used $4.7 million in net cash from operating activities for Q1 2023[228] - Management believes there is substantial doubt about the company's ability to continue as a going concern for the next twelve months due to uncertainty in raising additional capital[231] - Financing activities in Q1 2023 included $2.1 million net proceeds from ATM sales, $1.0 million from senior secured notes, $2.0 million from the Line of Credit, and $2.06 million from warrant exercises[229][230] Cash Flows - Net cash used in operating activities was $4.7 million in Q1 2023, primarily from the net loss adjusted for non-cash items like a $5.6 million gain on warrant fair value and $1.6 million amortization of deferred debt issuance costs[232] - Net cash used in investing activities was $1.1 million in Q1 2023, mainly for the Amerigen 7 acquisition ($0.6 million) and equipment purchases ($0.5 million)[234] - Net cash provided by financing activities was $7.1 million in Q1 2023, from ATM proceeds ($2.1 million), warrant exercises ($2.1 million), Line of Credit notes ($2.0 million), and senior secured notes ($0.9 million)[235] Off-balance sheet arrangements - The company did not have any off-balance sheet arrangements during the periods presented[237] Revenue Recognition - The company adopted ASC 606 on March 31, 2019, recognizing revenue upon completion of short-term fiber splicing services[238][240][241] - Revenue generated by Crown Fiber Optics Corporation in Q1 2023 was immaterial[242] Segment and Reporting Unit Information - The Chief Executive Officer is the Chief Operating Decision Maker (CODM)[243] - The company is assessing its segment structure following the January 3, 2023, acquisition and integration of Crown Fiber Optics, Corp[243] Business Combinations - Business combinations are accounted for using the acquisition method under ASC 805, recognizing identifiable assets and liabilities at their acquisition date fair values[244] - Significant estimates and assumptions are required, particularly for valuing intangible assets like future expected cash flows from customer contracts[245] - Acquisition-related expenses are recognized separately and expensed as incurred[247] Deferred Debt Issuance Costs - Debt issuance costs related to the Line of Credit are accounted for as a deferred asset and amortized over the life of the Line of Credit[248] - Upon a draw down, a portion of the deferred asset balance is amortized to other expense[248] Goodwill - The company performs an annual goodwill impairment analysis on October 1, starting with a qualitative evaluation[249] Convertible Notes - The company elected the fair value option for its convertible notes under ASC 825, recognizing them at fair value with changes in fair value recognized in the statements of operations[250] Warrants - Certain common stock warrants are accounted for as a liability at fair value, re-measured at each balance sheet date, with changes recognized in the statements of operations using the Black Scholes Methodology[251] Fair Value of Common Stock - Prior to becoming public, the fair value of common stock for equity awards was estimated by the board of directors, considering contemporaneous third-party valuations and various objective and subjective factors[252][253] Critical accounting policies and significant judgments and estimates - The condensed consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates, assumptions, and judgments that affect reported amounts[254] Recent accounting pronouncements - Refer to Note 3 for a description of recent accounting pronouncements applicable to the financial statements[255] JOBS Act Transition Period - As an 'emerging growth company,' the company has elected to use the extended transition period for complying with new or revised accounting standards, which may result in financial statements not being comparable to other public companies[256] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a Smaller Reporting Company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide disclosures about market risk as it is a Smaller Reporting Company[257] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes - The company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023[260] - No changes in internal control over financial reporting occurred during Q1 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[262] - Management acknowledges that a control system, no matter how well conceived, can provide only reasonable, not absolute, assurance that objectives are met[261] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal actions not expected to have a material adverse effect on its financial position - The company is involved in various claims and legal actions that arise in the ordinary course of business[264] - The ultimate resolution of these actions is not expected to have a material adverse effect on the company's financial position, results of operations, liquidity, or capital resources[264] - Litigation outcomes are uncertain and can have an adverse impact due to defense and settlement costs, and diversion of management resources[265] Item 1A. Risk Factors As a smaller reporting company, the registrant is not required to provide the information required under this item - The company is not required to provide risk factor disclosures as it is a smaller reporting company[266] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period other than those previously disclosed in Form 8-K filings - No unregistered sales of equity securities occurred during the reporting period, beyond those previously disclosed[267] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[268] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[269] Item 5. Other Information There is no other information to disclose under this item - No other information to disclose[269] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including officer certifications and Inline XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[269] Signatures The Quarterly Report on Form 10-Q is duly signed on behalf of the company by its Chief Executive and Financial Officers - The report was signed by Doug Croxall, Chief Executive Officer, and Joel Krutz, Chief Financial Officer, on May 22, 2023[272]