FreightCar America, Inc.: Form 10-Q for the period ended Sep 30, 2023

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements including, in particular, statements about our plans, strategies and prospects. We have used the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “likely,” “unlikely,” “intend” and similar expressions in this report to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. However, forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties relate to, among other things, the cyclical nature of our business, the competitive nature of our industry, our reliance upon a small number of customers that represent a large percentage of our sales, the variable purchase patterns of our customers and the timing of completion, delivery and customer acceptance of orders, fluctuating costs of raw materials, including steel and aluminum, delays in the delivery of raw materials, the risk of lack of acceptance of our new railcar offerings, and other competitive factors. The factors listed above are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors that could materially and adversely affect our business, financial condition and results of operations. New factors emerge from time to time and it is not possible for management to predict the impact of all of these factors on our business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws.

OVERVIEW

You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”

We are a diversified manufacturer of railcars and railcar components. We design and manufacture a broad variety of railcar types for transportation of bulk commodities and containerized freight products primarily in North America. We rebuild and convert railcars and sell forged, cast and fabricated parts for all of the railcars we produce, as well as those manufactured by others. We also lease freight cars. Our primary customers are financial institutions, railroads and shippers.

Total new orders received for railcars for the nine months ended September 30, 2023 were 3,356 units, consisting of 3,166 new railcars and 190 rebuilt railcars, compared to orders for 2,240 units, consisting of 1,817 new railcars and 423 rebuilt railcars for the nine months ended September 30, 2022. Total backlog of unfilled orders was 3,800 units at September 30, 2023, compared to 2,445 railcars as of December 31, 2022. The estimated sales value of the backlog was $452 million and $288 million as of September 30, 2023 and December 31, 2022, respectively. The increase in the number of orders for new railcars for the nine months ended September 30, 2023 compared to the prior year period is a reflection of improvement in the railcar equipment market.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Revenues

Our consolidated revenues for the three months ended September 30, 2023 were $61.9 million compared to $85.7 million for the three months ended September 30, 2022. Manufacturing segment revenues for the three months ended September 30, 2023 were $58.6 million compared to $82.8 million for the corresponding prior year period. The $24.2 million decrease in Manufacturing segment revenues was driven by a decrease in the volume of railcar units delivered. Railcar deliveries in the three months ended September 30, 2023 totaled 503 units, consisting of 382 new railcars and 121 rebuilt railcars, compared to 783 units in the same period of 2022, consisting of 483 new railcars and 300 rebuilt railcars. Corporate and Other revenues were $3.3 million for the three months ended September 30, 2023 compared to $2.9 million for the three months ended September 30, 2022.

Gross Profit

Our consolidated gross profit was $9.2 million for the three months ended September 30, 2023 compared to $4.6 million for the three months ended September 30, 2022. Manufacturing segment gross profit was $7.9 million for the three months ended September 30, 2023 compared to $3.8 million for the three months ended September 30, 2022. The $4.6 million increase in consolidated gross profit and $4.1 million increase in Manufacturing segment gross profit reflect a favorable price mix variance.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses for the three months ended September 30, 2023 were $7.5 million compared to $7.1 million for the three months ended September 30, 2022. The $0.4 million increase in consolidated selling, general and administrative expenses for the three months ended September 30, 2023 was primarily due to an increase in recruiting and employee benefit expenses. Manufacturing segment selling, general and administrative expenses were $0.6 million for the three months ended September 30, 2023 and $0.7 million for the three months ended September 30, 2022. Manufacturing segment selling, general and administrative expenses for the three months ended September 30, 2023 were 1.0% of revenue, compared to 0.8% of revenue for the three months ended September 30, 2022. Corporate and Other selling, general and administrative expenses were $6.9 million for the three months ended September 30, 2023 compared to $6.4 million for the three months ended September 30, 2022. The $0.5 million increase in Corporate and Other selling, general and administrative expenses is primarily a result of the previously mentioned increase in employee procurement and benefit expenses in the current year.

Loss on Pension Settlement

Loss on pension settlement for the three months ended September 30, 2023 was $0.3 million related to a one-time, lump sum pay-out. Loss on pension settlement for the three months ended September 30, 2022 was $8.1 million related to an annuity purchase agreement.

Operating Income (Loss)

Our consolidated operating income for the three months ended September 30, 2023 was $1.4 million compared to a $10.7 million operating loss for the three months ended September 30, 2022 driven primarily by the previously mentioned favorable price mix variance, decrease in pension settlement loss, partially offset by an increase in selling, general and administrative expenses. Operating income for the Manufacturing segment was $7.4 million for the three months ended September 30, 2023 compared to an operating income of $3.1 million for the three months ended September 30, 2022, also reflecting the favorable price mix variance during the three months ended September 30, 2023 compared to the 2022 period. Corporate and Other operating loss was $6.0 million for the three months ended September 30, 2023 compared to $13.7 million for the three months ended September 30, 2022. The $7.7 million decrease in operating loss is primarily a result of the previously mentioned decrease in pension settlement loss, partially offset by the increase in selling, general and administrative expenses.

Income Taxes

Our income tax provision was $0.2 million for the three months ended September 30, 2023 compared to $0.0 million for the three months ended September 30, 2022.

Net Income (Loss)

As a result of the changes and results discussed above, net income was $3.2 million for the three months ended September 30, 2023 compared to net loss of $17.8 million for the three months ended September 30, 2022. For the three months ended September 30, 2023, basic and diluted net loss per share was $0.03 compared to net loss per share of $0.69 for the three months ended September 30, 2022.

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Revenues

Our consolidated revenues for the nine months ended September 30, 2023 were $231.5 million compared to $235.8 million for the nine months ended September 30, 2022. Manufacturing segment revenues for the nine months ended September 30, 2023 were $221.9 million compared to $226.5 million for the corresponding prior year period. The $4.6 million decrease in Manufacturing segment revenues was driven by a decrease in the volume of railcar units delivered. Railcar deliveries in the nine months ended September 30, 2023 totaled 2,001 units, consisting of 1,686 new railcars and 315 rebuilt railcars, compared to 2,034 units in the same period of 2022, consisting of 1,331 new railcars and 703 rebuilt railcars. Corporate and Other revenues were $9.6 million for the nine months ended September 30, 2023 and $9.2 for the nine months ended September 30, 2022.

Gross Profit

Our consolidated gross profit was $29.7 million for the nine months ended September 30, 2023 compared to $21.2 million for the nine months ended September 30, 2022. Manufacturing segment gross profit was $26.0 million for the nine months ended September 30, 2023 compared to $18.6 million for the nine months ended September 30, 2022. The $8.5 million increase in consolidated gross profit and $7.4 million increase in Manufacturing segment gross profit reflect a favorable price mix variance.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses for the nine months ended September 30, 2023 were $19.8 million compared to $21.9 million for the nine months ended September 30, 2022. The $2.2 million decrease in consolidated selling, general and administrative expenses for the nine months ended September 30, 2023 was primarily due to $1.8 million decrease in stock-based compensation expenses and $1.4 million decrease in legal expenses, partially offset by $0.7 million increase in consulting expenses and $0.2 million increase in Corporate related payroll expenses. Manufacturing segment selling, general and administrative expenses were $1.9 million for the nine months ended September 30, 2023 and $2.1 million the nine months ended September 30, 2022. Manufacturing segment selling, general and administrative expenses were 0.9% of revenue for each of the nine months ended September 30, 2023 and 2022. Corporate and Other selling, general and administrative expenses were $17.9 million for the nine months ended September 30, 2023 compared to $19.8 million for the nine months ended September 30, 2022. The $1.9 million decrease in Corporate and Other selling, general and administrative expenses is primarily a result of the previously mentioned decreases in stock-based compensation expenses and legal expenses, offset by increases in consulting and Corporate payroll expenses.

Gain on Sale of Railcars Available for Lease

Gain on sale of railcars available for lease for the nine months ended September 30, 2023 was $0.6 million and represented the gain on sale of 424 leased railcars with a net book value of $7.7 million. We did not sell any railcars available for lease during the nine months ended September 30, 2022.

Loss on Pension Settlement

Loss on pension settlement for the nine months ended September 30, 2023 was $0.3 million related to a one-time, lump sum pay-out. Loss on pension settlement for the nine months ended September 30, 2022 was $8.1 million related to an annuity purchase agreement.

Operating Income (Loss)

Our consolidated operating income for the nine months ended September 30, 2023 was $10.2 million compared to $8.8 million operating loss for the nine months ended September 30, 2022 driven primarily by the previously mentioned decrease in pension settlement loss and favorable price mix variance, as well as the decrease in selling, general and administrative expenses. Operating income for the Manufacturing segment was $24.8 million for the nine months ended September 30, 2023 compared to an operating income of $16.5 million for the nine months ended September 30, 2022, reflecting the favorable price mix variance and decrease in selling, general and administrative expenses during the nine months ended September 30, 2023 compared to the 2022 period. Corporate and Other operating loss was $14.6 million for the nine months ended September 30, 2023 compared to $25.3 million for the nine months ended September 30, 2022. The $10.7 million decrease in operating loss is primarily a result of the previously mentioned decreases in pension settlement loss and selling, general and administrative expenses.

Loss on Extinguishment of Debt

Loss on extinguishment of debt for the nine months ended September 30, 2023 was $14.9 million due to the settlement of the Term Loan Credit Agreement through the issuance of Series C Preferred Stock and the termination of the M&T Credit Agreement and Forbearance Agreement. There was no loss on extinguishment of debt for the nine months ended September 30, 2022.

Income Taxes

Our income tax provision was $0.9 million for the nine months ended September 30, 2023 compared to $1.9 million for the nine months ended September 30, 2022.

Net Loss

As a result of the changes and results discussed above, net loss was $20.7 million for the nine months ended September 30, 2023 compared to $29.1 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, basic and diluted net loss per share was $0.94 compared to $1.19 for the nine months ended September 30, 2022.

LIQUIDITY AND CAPITAL RESOURCES

(In thousands, except for share and per share data and unless otherwise noted)

Our primary sources of liquidity are our cash and cash equivalent balances on hand and our credit and debt facilities outlined below. See Note 8 - Debt Financing and Revolving Credit Facilities for defined terms.

Preferred Share Issuance

In March 2023 prior to the Delayed Draw Extension Deadline, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and among the Company and OC III LFE II LP (the “Purchaser”) pursuant to which the Company issued 85,412 shares upon Closing of new non-convertible Series C Preferred Stock of the Company, par value $0.01 (the “Series C Preferred Stock”) at an initial stated value of $1,000 per share. Upon closing of the transactions contemplated by the Purchase Agreement on May 22, 2023 (the “Closing”), the Purchaser received a detached warrant to purchase 1,636,313 shares of Common Stock of the Company, for an exercise price equal to $3.57 (the “2023 Warrant”). See Note 9 - Mezzanine Equity and 2023 Warrant.

Upon the Closing, the Company settled $60,178 in-full all of the principal amount of the outstanding Term Loan Credit Agreement, together with all $1,727 accrued unpaid interest, fees, penalties, and other obligations under the Term Loan Credit Agreement through the issuance of the Series C Preferred Stock, resulting in a loss on extinguishment of $17,772. Any excess proceeds are to be used for general corporate purposes.

Reimbursement Agreement

The Company shall pay to the Agent, for the account of the Lender or a designee thereof a cash fee (the “Cash Fee”) which shall be due and payable in cash quarterly beginning on the date that the Maximum Equity has been issued and thereafter on the business day immediately succeeding the last business day of the applicable Measurement Period. The Cash Fee shall be equal to $1,000, provided that, in the quarter in which the Maximum Equity is issued, such fee shall be equitably reduced by the value of any Equity Fee issued by the Company that quarter. In connection with the Closing, the Purchaser has agreed to reduce the Cash Fee paid by the Company to $375 per quarter.

Warrants

In connection with the Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “2020 Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020, by and between the Company and the Lender, to purchase a number of shares of Common Stock equal to 23% of the outstanding Common Stock on a fully-diluted basis at the time the 2020 Warrant is exercised (after giving effect to such issuance). The 2020 Warrant was issued on November 24, 2020 and is exercisable for a term of ten (10) years from the date of the issuance of the 2020 Warrant. As of September 30, 2023 and December 31, 2022, the 2020 Warrant was exercisable for an aggregate of 8,712,618 and 6,799,139 shares, respectively, of Common Stock with a per share exercise price of $0.01. The Company determined that the 2020 Warrant should be accounted for as a derivative instrument and classified as a liability on its Consolidated Balance Sheets primarily due to the instrument obligating the Company to settle the 2020 Warrant in a variable number of shares of Common Stock. The 2020 Warrant was recorded at fair value and is treated as a discount on the term loan. The discount on the associated debt is amortized over the life of the Credit Agreement and included in interest expense.

Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021, the Company issued to the Lender a warrant (the “2021 Warrant”) to purchase a number of shares of Common Stock equal to 5% of the outstanding Common Stock on a fully-diluted basis at the time the 2021 Warrant is exercised. The 2021 Warrant has an exercise price of $0.01 and a term of ten years. As of September 30, 2023 and December 31, 2022, the 2021 Warrant was exercisable for an aggregate of 1,894,047 and 1,473,726 shares of Common Stock, respectively with a per share exercise price of $0.01.

The 2020 Warrant, 2021 Warrant, 2022 Warrant, and 2023 Warrant collectively are referred to herein as the “Warrant”. The following schedule shows the change in fair value of the Warrant as of September 30, 2023.

The change in fair value of the Warrant is reported on a separate line in the condensed consolidated statement of operations.

Siena Loan and Security Agreement

In October 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Revolving Loan Parties”), and Siena Lending Group LLC, as lender (“Revolving Loan Lender”). Pursuant to the Siena Loan Agreement, the Revolving Loan Lender provided an asset backed credit facility, in the maximum aggregate principal amount of up to $20,000 (the “Maximum Revolving Facility Amount”) consisting of revolving loans (the “Revolving Loans”), subject to certain borrowing base requirements set forth in the Siena Loan Agreement.

In July 2021, the Revolving Loan Parties and the Revolving Loan Lender entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan and Security Agreement”), which amended and restated the terms and conditions of the Siena Loan Agreement, including, among other things, an increase of $25,000 to the Maximum Revolving Facility Amount.

The Amended and Restated Loan and Security Agreement has a term ending on October 8, 2023. Revolving Loans outstanding under the Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the Amended and Restated Loan and Security Agreement, at an interest rate of 2% per annum in excess of the Base Rate (as defined in the Siena Loan Agreement).

In February 2022, the Revolving Loan Parties and the Revolving Loan Lender entered into a First Amendment to Amended and Restated Loan and Security Agreement (the “First Amendment to Amended and Restated Loan and Security Agreement”), pursuant to which, among other things, the Maximum Revolving Facility Amount was increased to $35,000.

Revolving Loans outstanding under the First Amendment to Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of 2% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). Notwithstanding the foregoing, Revolving Loans made in respect of Excess Availability (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) arising from clause (b) of the definition of “Borrowing Base” (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of 1.5% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement).

In September 2023, the Revolving Loan Parties entered into a Third Amendment to Amended and Restated Loan and Security Agreement, which amends the Amended and Restated Loan and Security Agreement, dated July 30, 2021, as amended by the First Amendment to Amended and Restated Loan and Security Agreement, dated February 23, 2022, and by the Second Amendment to Amended and Restated Loan and Security Agreement, dated May 22, 2023, by and among the Revolving Loan Parties.

The Third Amendment to Amended and Restated Loan and Security Agreement, among other things, (i) extended the scheduled maturity date of the Siena Loan Agreement from October 8, 2023 to October 31, 2024, and (ii) increased the Maximum Revolving Facility Amount by $10.0 million to a total of $45.0 million, provided, however, that after giving effect to each Revolving Loan and each letter of credit made available to the Loan Parties, (A) the outstanding balance of all Revolving Loans and the Letter of Credit Balance (which is defined in the Siena Loan Agreement as the sum of (a) the aggregate undrawn face amount of all outstanding Letters of Credit and (b) all interest, fees and costs due or, in Lender’s estimation, likely to become due in connection therewith) will not exceed the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base (as defined in the Siena Loan Agreement, as amended by the Third Amendment to Amended and Restated Loan and Security Agreement), and (B) none of the other Loan Limits (as defined in the Siena Loan Agreement) for Revolving Loans will be exceeded.

The outstanding debt under the Third Amendment to Amended and Restated Loan and Security Agreement bears the same interest under the First Amendment to Amended and Restated Loan and Security Agreement as described above. As of September 30, 2023, the interest rate on outstanding debt under the Amended and Restated Loan and Security Agreement was 10% and under the First Amendment to Amended and Restated Loan and Security Agreement was 10.5%.

As of September 30, 2023, the Company had $31,062 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $1,467. As of December 31, 2022, the Company had $33,825 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of zero. The Company incurred $1,101 in deferred financing costs related to the Siena Loan Agreement during the fourth quarter of 2020, $1,037 in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement during the third quarter of 2021, and $352 in additional deferred financing costs related to the Third Amendment to the Amended and Restated Loan and Security Agreement. The deferred financing costs are presented as an asset and amortized to interest expense on a straight-line basis over the term of the Siena Loan Agreement.

Additional Liquidity Factors

Our restricted cash, restricted cash equivalents and restricted certificates of deposit balances were $5.1 million and $4.1 million as of September 30, 2023 and December 31, 2022, respectively. Restricted deposits of $0.3 million as of each of September 30, 2023 and December 31, 2022 relate to a customer deposit for the purchase of railcars. Restricted deposits of $3.6 million as of each of September 30, 2023 and December 31, 2022 are used to collateralize standby letters of credit with respect to performance guarantees. The standby letters of credit outstanding as of September 30, 2023 are a requirement as long as the performance guarantees are in place. Restricted deposits of $1.2 million as of September 30, 2023 and $0.2 million as of December 31, 2022 relate to an employee savings fund paid biannually in Mexico.

Based on our current level of operations and known changes in planned volume based on our backlog, we believe that our cash balances will be sufficient to meet our expected liquidity needs for at least the next twelve months. Our long-term liquidity is contingent upon future operating performance and our ability to continue to meet financial covenants under our revolving credit facilities, our Credit Agreement and any other indebtedness and the availability of additional financing if needed. We may also require additional capital in the future to fund working capital as demand for railcars increases, payments for contractual obligations, organic growth opportunities, including new plant and equipment and development of railcars, joint ventures, international expansion and acquisitions, and these capital requirements could be substantial.

Based upon our operating performance and capital requirements, we may, from time to time, be required to raise additional funds through additional offerings of our equity or debt and through long-term borrowings. There can be no assurance that such offerings or long-term debt, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital if and when needed could have a material adverse effect on our results of operations and financial condition.

Cash Flows

The following table summarizes our cash flow activities for the nine months ended September 30, 2023 and 2022:

(In thousands)

Operating Activities. Our net cash used in operating activities reflects net loss adjusted for non-cash charges and changes in operating assets and liabilities. Cash flows from operating activities are affected by several factors, including fluctuations in business volume, contract terms for billings and collections, the timing of collections on our contract receivables, processing of payroll and associated taxes, payments to our suppliers and other operating activities. As some of our customers accept delivery of new railcars in train-set quantities, variations in our sales lead to significant fluctuations in our operating profits and cash from operating activities.

Our net cash used in operating activities for the nine months ended September 30, 2023 was $26.4 million compared to net cash used in operating activities of $13.6 million for the nine months ended September 30, 2022. Our net cash used in operating activities for the nine months ended September 30, 2023 reflects changes in working capital, primarily an increase in inventory of $57.2 million related to inventory to be used in production of railcars to be delivered during the fourth quarter of 2023, offset by an increase of $19.6 million customer deposits during the nine months ended September 30, 2023. Our net cash used in operating activities for the nine months ended September 30, 2022 reflects changes in working capital, including an increase in accounts payable of $4.4 million and a decrease in VAT receivable of $24.6 million, all of which were partially offset by increases in both accounts receivable of $2.6 million and inventory of $30.1 million.

Investing Activities. Net cash used in investing activities for the nine months ended September 30, 2023 was $0.6 million and consisted of $8.4 million proceeds from the sale of railcars available for lease, net of selling costs, offset by capital expenditures of $9.0 million related to the expansion of the Castaños Facility. Net cash used in investing activities for the nine months ended September 30, 2022 was $3.4 million and consisted of capital expenditures related to the expansion of the Castaños Facility.

Financing Activities. Net cash provided by financing activities for the nine months ended September 30, 2023 was $4.5 million which primarily included $13.3 million proceeds from the issuance of Series C Preferred Stock, net of issuance costs, partially offset by net repayments on revolving line of credit of $7.9 million. Net cash provided by financing activities for the nine months ended September 30, 2022 was $9.1 million which consisted of $84.4 million of borrowings on our revolving line of credit, offset by $75.2 million of repayments on our revolving line of credit.

Capital Expenditures

Our capital expenditures were $9.0 million in the nine months ended September 30, 2023, compared to $3.4 million in the nine months ended September 30, 2022. We anticipate capital expenditures during 2023 to be in the range of $12.0 million to $13.0 million, primarily related to the expansion of the Castaños Facility.

Management’s Report on Internal Control over Financial Reporting

The Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2023. Based on their evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.