FutureFuel Corp.: Form 10-Q for the period ended Jun 30, 2024

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of FutureFuel Corp. (“FutureFuel”, “the Company”, “we”, or “our”) should be read together with our consolidated financial statements, including the notes thereto, set forth herein. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements. See “Forward-Looking Information” below for additional discussion regarding risks associated with forward-looking statements.

Unless otherwise stated, all dollar amounts are in thousands.

Overview

Our Company is managed and reported in two reporting segments: chemicals and biofuels. Within the chemical segment are two product groupings: custom chemicals and performance chemicals. The custom product group is composed of specialty chemicals manufactured for a single customer whereas the performance product group is composed of chemicals manufactured for multiple customers. The biofuel segment is composed of one product group. Management believes that the diversity of each segment strengthens the company in the ability to utilize resources and is committed to growing each segment.

Within the United States Environmental Protection Agency (“EPA”) Renewable Fuel Standard (“RFS”), we generate 1.5 Renewable Identification Numbers (“RINs”) for each gallon of biodiesel sold in the United States with a classification of a D4 or D6 RIN. RINs are used to monitor the level of renewable fuel traded in a given year in accordance with RFS 2 within the EPA moderated transaction system. We do not assign cost of goods sold to the generation of RINs as the physical fuel generates the full cost. As of June 30, 2024, we held 2.1 million D4 and D6 RINs with a fair market value of $1,055. Comparatively, as of June 30, 2023, FutureFuel held 11.8 million RINs with a fair market value of $19,461, and at December 31, 2023 4.3 million RINs were held with a fair market value of $6,567.

Summary of Financial Results

Set forth below is a summary of certain consolidated financial information for the periods indicated.

We use adjusted EBITDA as a key operating metric to measure both performance and liquidity. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities (each as determined in accordance with GAAP) as a measure of performance or liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization expenses, excluding, when applicable, non-cash stock-based compensation expenses, public offering expenses, acquisition-related transaction costs, purchase accounting adjustments, losses on disposal of property and equipment, non-cash gains or losses on derivative instruments, and other non-operating income or expenses. Information relating to adjusted EBITDA is provided so that investors have the same data that we employ in assessing the overall operation and liquidity of our business. Our calculation of adjusted EBITDA may be different from similarly titled measures used by other companies; therefore, the results of our calculation are not necessarily comparable to the results of other companies.

Adjusted EBITDA allows our chief operating decision makers to assess the performance and liquidity of our business on a consolidated basis to assess the ability of our operating segments to produce operating cash flow to fund working capital needs, to fund capital expenditures, and to pay dividends. In particular, our management believes that adjusted EBITDA permits a comparative assessment of our operating performance and liquidity, relative to a performance and liquidity based on GAAP results. This measure isolates the effects of certain items, including depreciation and amortization (which may vary among our operating segments without any correlation to their underlying operating performance), non-cash stock-based compensation expense (which is a non-cash expense that varies widely among similar companies), and non-cash gains and losses on derivative instruments (which can cause net income to appear volatile from period to period relative to the sale of the underlying physical product).

We utilize commodity derivative instruments primarily to attempt to mitigate the effect of commodity price volatility and to provide greater certainty of cash flows associated with sales of our commodities. We utilize mark-to-market accounting to account for these instruments. Thus, our results in any given period can be impacted, and sometimes significantly, by changes in market prices relative to our contract price along with the timing of the valuation change in the derivative instruments relative to the sale of biofuel. We include the mark-to-market or non-cash portion of this item as an adjustment to adjusted EBITDA as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

Additionally, we held marketable securities of certain debt securities (trust preferred stock) and in preferred stock and other equity instruments during the six months ended June 30, 2023, but sold all marketable security investments during the three months ended June 30, 2023. The realized and unrealized gains and losses on these marketable securities fluctuated from period to period. We included this item as an adjustment to adjusted EBITDA in the prior year period as we believed it provided a relevant indicator of the underlying performance of our business.

The following table reconciles net income, the most directly comparable GAAP performance financial measure, with adjusted EBITDA.

The following table reconciles cash flows from operations, the most directly comparable GAAP liquidity financial measure, with adjusted EBITDA.

17

Results of Operations

Consolidated

Consolidated revenue in the three months ended June 30, 2024 decreased $12,899 compared to the three months ended June 30, 2023. This decline was driven mostly by lower sales volumes in the biofuel segment of $7,439. Production issues, primarily stemming from extreme winter weather experienced during the three-month period ended March 31, 2024, prevented us from building the biodiesel inventories we would typically have available to sell in the three months ended June 30, 2024. Also reducing sales revenue in the three-month period, was lower prices in the biofuel segment of $5,940 due to a decline in RIN prices with market supply in excess of the EPA RIN mandate. In our chemical segment, sales revenue increased $1,980 for the three months ended June 30, 2024, compared to the prior-year period, due primarily to stronger sales volumes in the agricultural market, but was mostly offset by reduced sales prices in chemicals sold into the agricultural and energy markets and from product mix ($1,500).

Consolidated revenue in the six months ended June 30, 2024 decreased $28,799 compared to the six months ended June 30, 2023. This decline was driven mostly by lower prices in the biofuel segment of $17,882 due to a decline in RIN prices with market supply in excess of the EPA RIN mandate. As noted above, production issues in the first three months of 2024, prevented us from building the biodiesel inventories we would typically have available to sell in the six months ended June 30, 2024. In our chemical segment, sales revenue declined a net $3,342 ($4,006 on reduced prices on chemicals sold into the agricultural and energy markets partially offset by increased volume, $664), compared to the prior-year period.

Gross profit in the three months ended June 30, 2024 increased $17,249 as compared to the same period of 2023, due primarily to: (i) the benefit of not holding significant inventory of RINs at the end of the current three-month period ($1,055 as compared to $19,461 at June 30, 2023); separated RINs are recognized when transferred; (ii) the change in the mark-to-market derivative position which was an unrealized gain of $578 as compared to an unrealized loss of $1,643 in the three months ended June 30, 2024 and 2023, respectively; and (iii) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $1,313 in the three months ended June 30, 2024 and decreased gross profit $288 in the same period of the prior year. Partially offsetting these benefits were: (i) the narrowing of the spread in biofuel price and feedstock price (inclusive of the effect of the RIN price decline); and (ii) the change in the activity in derivative instruments with a realized gain of $835 in the current three-month period as compared to a realized gain of $6,032 in the prior year period. The contrasting results in the offsetting items (i) and (ii) reflect the impact of price movements in the biodiesel market during the course of each year compared to when we committed to our feedstock acquisition.

Gross profit in the six months ended June 30, 2024 increased $633 as compared to the same period of 2023, primarily due to: (i) the benefit of not holding significant inventory of RINs at the end of the current six-month period as noted above and (ii) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $4,341 in the six months ended June 30, 2024 as compared to an increase of $3,495 in the same period of 2023. These improvements were mostly offset by the change in the activity of derivative instruments with a realized loss of $354 and unrealized loss of $1,696 in the six months ended June 30, 2024 as compared to a realized gain of $9,437 and unrealized gain of $3,259 in the same period of 2023. Gross profit was also negatively impacted in the six-month period ended June 30, 2024 by higher costs resulting from the impact of extreme winter weather.

Operating expenses

Operating expenses increased $215 in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was from increased compensation and administrative expenses. Operating expenses decreased $348 in the six months ended June 30, 2024 as compared to the same period of 2023. The decrease was from lower research and development and compensation expenses.

Other income (expense), net

Other income (expense) increased income a net $2,387 and $2,314 in the three and six months ended June 30, 2024, as compared to the same periods of 2023. The increase was from the receipt of a legal settlement of $2,750 in the current three-month period. Partially offsetting this increase in the current three-month period was lower interest income of $1,521 as compared to dividend and interest income of $1,732 and a gain of $42 on marketable securities in the same period of 2023. For the six-month period, interest income was $4,321 as compared to dividend and interest income of $4,068 and a gain of $575 on marketable securities in the same period of 2023.

Income tax provision

The Company’s income tax provision for the three and six months ended June 30, 2024 comprises primarily an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items. No deferred tax benefits on ongoing tax losses or other deferred tax assets have been recognized, reflecting management’s determination that none of the net deferred tax assets are more likely than not to be realized. The three-month period in 2023 similarly reflected immaterial state taxes and miscellaneous items.

The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.

Chemical Segment

Chemical revenue in the three months ended June 30, 2024 increased 2.6% or $480 compared to the three months ended June 30, 2023. Revenue from custom chemicals for the three months ended June 30, 2024 totaled $15,583, a net increase of $7 from the same period in 2023, from reduced prices $532, which were offset by increased sales volumes $539. Performance chemicals revenue was $3,653, an increase of $473 from the three months ended June 30, 2023. This improvement was from $1,441 higher sales volumes of polymer modifier chemicals and chemicals sold into the agricultural market partially offset by price reductions of $968 from chemicals in the agricultural and energy markets.

Chemical revenue in the six months ended June 30, 2024 decreased 8.2% or $3,342 compared to the six months ended June 30, 2023. Revenue from custom chemicals for the six months ended June 30, 2024 totaled $31,010, a decrease of $1,186 from the same period in 2023. The sales revenue decline was from reduced sales prices of chemicals sold into the agricultural and energy markets. Partially offsetting these reductions were sales from increased volumes of chemicals sold into the automotive coatings market as well as sales of one new product into the coatings market. Performance chemicals revenue was $6,285, a decrease of $2,156 from the six months ended June 30, 2023. The decrease was mostly from lower sales volumes and price of glycerin from reduced production.

Gross profit for the chemical segment for the three and six months ended June 30, 2024, decreased $1,739 and $6,341 when compared to the same periods of 2023. This decrease was primarily from reduced sales prices as noted above, and partially offset by increased sales volumes from the automotive and coatings markets.

Biofuel Segment

Biofuels revenue in the three months ended June 30, 2024 decreased $13,379 as compared to the same period of 2023. This decrease resulted from an 11% or $7,439 reduction in sales volume and a 9% or $5,940 reduction in the average price of fuel sold. The lower prices were driven in part by the reduction in D4 RIN prices as a result of the excess of the EPA's mandated volumes.

Biofuels revenue in the six months ended June 30, 2024 decreased $25,457 as compared to the same period of 2023. The decrease was primarily from a 15% or $17,882 reduction in the average price of fuel sold and a 6% or $7,575 reduction in sales volume. Additionally, production and sales volumes for the six months ended June 30, 2024, were impacted by the extreme winter weather experienced in the first quarter of 2024.

A significant portion of our biodiesel sold was to three major refiners/blenders in the three and six months ended June 30, 2024 and 2023. No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize. We do not believe that the loss of these customers would have a material adverse effect on our biofuels segment or on us as a whole because: (i) we believe that we could readily sell our biodiesel to other customers on equivalent terms as potential demand from other customers for biodiesel exceeds our production capacity; (ii) our sales to these customers are not under fixed terms and the customers have no fixed obligation to purchase any minimum quantities except as stipulated by short-term purchase orders; and (iii) the prices we receive from these customers are based upon then-market rates, as would be the case with sales of this commodity to other customers.

Biofuels gross profit was $3,980 in the three months ended June 30, 2024, an increase of $18,988 from the comparative period in 2023. This increase primarily resulted from: (i) the change in the number of separated RINs held in inventory at June 30, 2024 with a fair market value of $1,055 as compared to $19,461 at June 30, 2023; (ii) the change in the activity of derivative instruments with an unrealized gain of $578 as compared to an unrealized loss of $1,643; and (iii) reduced sales volumes. Partially reducing gross profit was the change in the activity of derivative instruments with a realized gain of $835 in the current three-month period as compared to a realized gain of $6,032 in the same period of the prior year.

Biofuel gross profit was $4,966 in the six months ended June 30, 2024, an increase of $6,974 from the comparative period of 2023. This increase resulted from the change in the number of separated RINs held in inventory at June 30 for each year as noted above. Partially reducing gross profit was the change in the activity of derivative instruments with a realized loss of $354 and an unrealized loss of $1,696 in the current six-month period as compared to a realized gain of $9,437 and an unrealized gain of $3,259 in the same six months of the prior year. In addition, gross profit was negatively impacted by lower RIN prices and in the six-month period ended June 30, 2024, from higher costs resulting from extreme winter weather in the first quarter of 2024.

For our derivative activity, we recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets. The realized and unrealized derivative gains and losses are recorded as cost of goods sold. Our derivative instruments do not qualify for hedge accounting under the specific guidelines of ASC Topic 815, Derivatives and Hedging. None of the derivative instruments are designated and accounted for as hedges primarily due to the extensive record keeping requirements.

The volumes and carrying values of our derivative instruments included in other current assets were as follows:

*All derivative instruments are entered into with the standard contract terms and conditions in accordance with major trading authorities of the New York Mercantile Exchange.

Critical Accounting Estimates

Revenue Recognition

The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers. Certain long-term contracts had upfront non-cancellable payments considered material rights. The Company applied the renewal option approach in allocating the transaction price to the material rights. For each of these contracts, the Company estimated the expected contractual volumes to be sold at the most likely expected sales price as a basis for allocating the transaction price to the material right. Estimated amortization is updated quarterly on a prospective basis. These custom chemical contracts have payment terms of 30 days. See Note 3 to our consolidated financial statements.

For most product sales, revenue is recognized when product is shipped from our facilities and risk of loss and title have passed to the customer, which is in accordance with our customer contracts and the stated shipping terms. Nearly all custom manufactured products are manufactured under written master service agreements. Performance chemicals and biodiesel are generally sold pursuant to the terms of written purchase orders. In general, customers do not have any rights of return, except for quality disputes. All of our products are tested for quality before shipment, and historically returns have been inconsequential and we typically do not offer rebates.

Biodiesel selling prices can at times fluctuate based on the timing of unsold, internally generated RINs. From time to time, sales of biodiesel are on a “RINs-free” basis. Such method of selling results in applicable RINs being held. The value of the RINs is not reflected in revenue until such time as the RIN sale has been completed.

Revenue from bill-and-hold transactions in which a performance obligation exists is recognized when the total performance obligation has been met and control of the product has transferred. Bill-and-hold transactions for the three and six months ended June 30, 2024 and 2023 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer. These sales were subject to written monthly purchase orders. The product was custom manufactured and stored at the customer’s request and could not be sold to another buyer. Credit and payment terms for bill-and-hold customers are similar to other custom chemicals customers. Revenues under bill-and-hold arrangements were $11,020 and $22,664 for the three and six months ended June 30, 2024, respectively. As of June 30, 2024 and December 31, 2023, $3,651 and $4,317 of bill-and-hold revenue had not shipped, respectively.

Liquidity and Capital Resources

Our net cash from operating activities, investing activities, and financing activities for the six months ended June 30, 2024 and 2023 are set forth in the following table.

We believe that existing cash balances and cash flow to be generated from operating activities and borrowing capacity under the amended and restated credit agreement will be sufficient to fund operations, product development, cash dividends, and capital requirements for the foreseeable future.

Operating Activities

Cash provided by operating activities was $15,588 in the six months ended June 30, 2024 as compared to cash used in operating activities of $40,665 in the same period of 2023. This increase in cash was primarily attributable to a $40,601 build of inventory in the prior year, primarily biodiesel and related feedstock, whereas this build of inventory did not occur in the current period. Also contributing to the current period increase in cash was the change in accrued expenses and other current liabilities of $6,389, the change in other assets of $5,057, the change in the fair value of derivative instruments of $4,955, and the change in net income of $2,679. Partially offsetting these cash inflows was the change in accounts payable, including accounts payable - related parties, demonstrating a cash outflow of $5,404, primarily from the timing of vendor payments, and the change in accounts receivable, including accounts receivable - related parties, of $2,617.

Investing Activities

Cash used in investing activities was $5,312 in the six months ended June 30, 2024 as compared to cash provided by investing activities of $36,980 in the six months ended June 30, 2023. This $42,292 decrease in cash was primarily due to the change in proceeds from the sale of marketable securities of $37,701, and an increase in the collateralization of derivative instruments of $3,196.

Financing Activities

Cash used in financing activities was $114,660 and $5,265 in the six months ended June 30, 2024 and 2023, respectively, primarily for payments of dividends on our common stock inclusive of a special dividend of $109,408 paid in the current three-month period.

Credit Facility

We have a credit agreement, as amended on March 30, 2020, with a syndicated group of commercial banks for $100,000. The loan is a revolving facility, the proceeds of which may be used for our working capital, capital expenditures, and general corporate purposes. The facility terminates on March 30, 2025. See Note 8 to our consolidated financial statements for additional information regarding our credit agreement.

We intend to fund future capital requirements for our businesses from cash flow as well as from existing cash, cash investments, and, if the need should arise, borrowings under our credit facility. We do not believe there will be a need to issue any securities to fund such capital requirements.

Dividends

On April 9, 2024, we paid a special dividend of $2.50 per share on our common stock which amounted to $109,408. The declaration of this special dividend was made in the first quarter of 2024. In the first two quarters of 2024 and 2023, we paid a regular quarterly cash dividend of $0.06 per share on our common stock. The regular cash dividend amounted to $2,626 in each of the quarters of 2024 and 2023. The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2023 and December 31, 2022, respectively.

Capital Management

As a result of our initial equity offering, our subsequent positive operating results, the exercise of warrants, and the issuance of shares in our at-the-market offering, we accumulated excess working capital. Some of this excess working capital has been paid out as special and regular cash dividends. Additionally, regular dividends will be paid in 2024, as previously reported. Third parties have not placed significant restrictions on our working capital management decisions.

A significant portion of these funds was held in cash or cash equivalents at multiple financial institutions such as depositary accounts, money market accounts, and other similar accounts at selected financial institutions.

Off- Balance Sheet Arrangements

We engage in two types of transactions to mitigate the impacts of changes in prices for both commodity sales and purchases. First, for our biofuel sales, we enter into the purchase and sale of futures contracts and options on futures contracts of energy commodities. This activity was captured in our consolidated balance sheets at June 30, 2024 and December 31, 2023 as derivative instruments recorded in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). Second, for our biofuel feedstocks, we execute purchase contracts and supply agreements with certain vendors that may meet the normal purchase and normal sales exception of ASC 815. These transactions are recognized in earnings and were not recorded in our consolidated balance sheets at June 30, 2024 or December 31, 2023 to the extent that we are able to apply the normal purchase and normal sales exception of ASC 815. The purchase of biofuels feedstock generally involves two risk components: basis and price. Basis covers any refining or processing required as well as transportation. Price covers the purchases of the actual agricultural commodity. Both basis and price fluctuate over time. A supply agreement with a vendor constitutes a hedge when we have committed to a certain volume of feedstock in a future period and have fixed the basis for that volume.

All dollar amounts expressed as numbers in these Market Risk Disclosures are in thousands (except per share amounts).

In recent years, general economic inflation has not had a material adverse impact on our profit, and as described elsewhere herein, we have passed some price increases along to our customers. However, we are subject to certain market risks as described below.

Market risk represents the potential loss arising from adverse changes in market rates and prices. Commodity price risk is inherent in the chemicals and biofuels business both with respect to inputs (electricity, coal, raw materials, biofuel feedstock, etc.) and outputs (manufactured chemicals and biofuels).

We seek to mitigate our market risks associated with the manufacturing and sale of chemicals by entering into long-term sales contracts that include contractual market price adjustment protections to allow changes in market prices of key raw materials to be passed on to the customer. Such price protections are not always obtained, however, and some raw material price risk remains significant.

In order to manage price risk caused by market fluctuations in biofuel prices, we may enter into exchange-traded commodity futures and options contracts. We account for these derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging. Under this standard, the accounting for changes in the fair value of a derivative instrument depends upon whether it has been designated as an accounting hedging relationship and, further, on the type of hedging relationship. To qualify for designation as an accounting hedging relationship, specific criteria must be met and appropriate documentation maintained. We had no derivative instruments that qualified under these rules as designated accounting hedges in the first six months of 2024 or 2023. Changes in the fair value of our derivative instruments are recognized at the end of each accounting period and recorded in the consolidated statement of operations as a component of cost of goods sold within the biodiesel segment.

Our immediate recognition of derivative instrument gains and losses can cause net income to be volatile from period to period due to the timing of the change in value of the derivative instruments relative to the volume of biofuel being sold. At June 30, 2024 and December 31, 2023, the fair value of our derivative instruments was a net asset of $40 and $1,736, respectively.

Our gross profit will be impacted by the prices we pay for raw materials and conversion costs (costs incurred in the production of chemicals and biofuels) for which we do not possess contractual market price adjustment protection. These items are principally composed of yellow grease, used cooking oil, and cottonseed oil. The availability and price of these items are subject to fluctuations due to unpredictable factors such as weather conditions, overall economic conditions, governmental policies, commodity markets, and global supply and demand.

We prepared a sensitivity analysis of our exposure to market risk with respect to key raw materials and conversion costs for which we do not possess contractual market price adjustment protections, based on average prices for the first six months of 2024. We included only those raw materials and conversion costs for which a hypothetical adverse change in price would result in a 1% or greater decrease in gross profit. Assuming that the prices of the associated finished goods could not be increased and assuming no change in quantities sold, a hypothetical 10% change in the average price of the commodity listed below would result in the following change in gross profit.

(Volume and dollars in thousands)

(a) Volume requirements and average price information are based upon volumes used and prices obtained for the six months ended June 30, 2024. Volume requirements may differ materially from these quantities in future years as our business evolves.

We had no borrowings at June 30, 2024 or December 31, 2023, and as such, we were not exposed to interest rate risk for those periods. Due to the relative insignificance of transactions denominated in foreign currency, we consider our foreign currency risk to be immaterial.

Management’s Evaluation of our Disclosure Controls and Procedures

Under the supervision and with the participation of our chief executive officer and our principal financial officer and other senior management personnel, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report.

In the course of preparing the Company’s financial statement for the three months ended March 31, 2024, our management concluded and reported that the following was a material weakness in internal control over financial reporting.

Management determined that the Company's statement of cash flows for the six months ended June 30, 2023, nine months ended September 30, 2023, and twelve months ended December 31, 2023, included an error in the collateralization of derivative instruments due to a deficiency in our review control in accordance with applicable accounting guidance over cash flows. The control did not operate at a level precise enough to detect material errors in calculations and formulas and as a result did not detect material differences between the operating and investing sections of the statement of cash flows. To remediate this deficiency, the Company's management, under the oversight from the Audit Committee, implemented additional review procedures to enhance our internal control over financial reporting with respect to the statement of cash flows. These review procedures include the development of a review checklist to ensure that we apply the applicable accounting guidance under ASC 230, Statement of Cash Flows.

Following the implementation of these review procedures, management assessed and evaluated the effectiveness of our internal control over financial reporting as of June 30, 2024. Based on that evaluation, our chief executive officer and our principal financial officer have concluded that these disclosure controls and procedures, at June 30, 2024, were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported accurately and within the time periods specified in the SEC's rules and forms. Management believes that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our consolidated financial position, results of operations and cash flows for the period presented.

Changes in Internal Control over Financial Reporting

Other than as noted above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors we previously disclosed in Item 1A of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2023.