Beeline Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2022

Forward-Looking Statements

This section of the Quarterly Report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events about the company or our outlook and involve uncertainties that could significantly impact results. You can identify forward-looking statements by the fact they do not relate to historical or current facts and by the use of words indicating anticipation or speculation such as “believe,” “expect,” “estimate,” “anticipate,” “will be,” “should,” “plan,” “project,” “intend,” “could” and similar words or expressions.

You should not place undue certainty on these forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that could cause our expectations to be unfulfilled include those discussed in Item 1A of Part I of our annual report on Form 10-K for the year ended December 31, 2021 entitled “Risk Factors” as well as factors we have not yet anticipated.

Overview

Eastside Distilling, Inc. (the “Company,” “Eastside Distilling,” “we,” “us,” or “our,” below) was incorporated under the laws of Nevada in 2004 under the name of Eurocan Holdings, Ltd. In December 2014, we changed our corporate name to Eastside Distilling, Inc. to reflect our acquisition of Eastside Distilling, LLC. We operate in two segments. Our Spirits segment manufactures, blends, bottles, markets and sells a wide variety of alcoholic beverages under recognized brands in 34 U.S. states. Our Craft Canning + Printing (“Craft C+P”) segment provides digital can printing and canning services to the craft beer and cider industries in Washington, Oregon and Colorado. We now offer co-packing services in Portland, Oregon through our recent asset acquisition, allowing us to offer end-to-end production capabilities. We employ 69 people in the United States.

Mission-What We Do

Our mission is to source, make and deliver the best in class, end-to-end craft spirits brands and product portfolio. In addition, we contract pack and decorate cans and bottles with distinct capability and craftsmanship, as well as now offer advanced digital can printing with custom graphics and co-packing services.

Strategy

Our spirits brands span several alcoholic beverage categories, including whiskey, vodka, rum and tequila. We sell our products on a wholesale basis to distributors in open states, and brokers in control states. Craft C+P primarily services the craft beer, cider and kombucha business. Craft C+P operates 14 mobile lines in Seattle and Spokane, Washington; Portland, Oregon; and Denver, Colorado, as well as now offers digital can printing to customers and co-packing services.

Eastside Distilling is unique in several specific areas: (1) to our knowledge, we are the only craft spirits company listed on Nasdaq, (2) we do not function as a traditional craft distillery with store fronts relying on local sales, (3) our contract manufacturing division is diversified, and (4) we have a diversified portfolio of spirits brands. We are similar to other craft distillers in that (1) we have concentrated local volume, (2) we produce small batches and remain within the volume definition of “Craft”, and (3) our brands achieve success through differentiation, discovery and distribution.

The U.S. spirits market is occupied by large multi-national conglomerates with substantially more resources than Eastside Distilling. However, we can use our small size to be fast, focused, and flexible in our strategy. If we attempt to grow too quickly, we may lack the underlying strength required to build scale with loyalty via strong unaided awareness and powerfully derived attributes. Moreover, attempting to focus our “frame-of-reference” to compete with the biggest brands in the most expensive venues, is likely to fail unless we first establish underlying brand equity.

Our strategy is to utilize our public company stature to our advantage and position to expand our two distinct businesses – Spirits and Craft C+P. Our spirits portfolio is to be positioned as a leading regional craft spirits provider that develops brands, expands geographic presence and positions for either a sale to a tier 1 supplier or continued ownership with growth in revenue and cash flow. We look to grow and vertically integrate our Craft C+P business to expand our product offerings and improve our competitive position. These two segments are detailed below.

Segments

Spirits

Over the years, we have developed, matured, perfected, or acquired then launched many award-winning spirits while evolving to meet the growing demand for quality products and services associated with the burgeoning craft and premium beverage trade. Our portfolio includes originals like the Quercus garryana barrel-finished Burnside Whiskey family, Portland Potato Vodka, Hue-Hue Coffee Rum, and Azuñia Tequilas.

• Burnside Whiskey Family – Our Burnside Whiskey Family celebrates the unique attributes of the native Oregon Oak tree (Quercus garryana). The unique complexity of each distinct whiskey comes from blending Oregon Oak barrels of differing sizes, char levels, and ages. After an initial experiment in 2012, we made it our mission to turn the Burnside program into a one-of-a-kind oak study.
• Portland Potato Vodka – Our award-winning premium craft vodka is distilled four times to ensure a smooth finish. While most vodka is made from grain, we source award winning premium potato ethanol and blend it with pristine water sourced from Oregon.
• Hue-Hue (pronounced “way-way”) Coffee Rum – Premium silver rum is blended with concentrated cold-brewed coffee and a small amount of Demerara sugar. We source fair-trade, single-origin Arabica coffee beans from the Finca El Paternal Estate in Huehuetenango, Guatemala that are lightly roasted for us by Portland Coffee Roasters.
• Azuñia Tequilas – Smooth, clean, tequilas crafted by Rancho Miravalle, a second generation, family-owned-and-operated estate, bursting with authentic flavor from the local terroir of Tequila Valley, Mexico. 100% pure Weber Blue Agave is harvested by hand, roasted in traditional clay hornos, and finished with a natural, open-air fermentation process. It is bottled on-site in small batches using a consistent process to deliver consistent field-to-bottle quality and exclusively exported by Agaveros Unidos de Amatitán.

24

• Eastside Brands – We make the unique by blending together the unusual, craft inspired, experiential brands and high-quality artisan, in-and-out, seasonal and ongoing limited-edition products. Each Eastside-branded product is rare and hard-to-get with a peculiar balance of age and innovation, craftsmanship and curiosity, creativity and restraint.

Craft Canning + Printing

With 10 years of experience in the mobile canning business, we’ve become the West’s most trusted and premier mobile packaging provider. We serve locations in Oregon, Washington and Colorado. Our team of professionals have packaged hundreds of award-winning products across both established and innovative beverage segments - beer, wine, cider, RTD cocktails, kombucha, seltzer, and many more. We use extensive proprietary and data-driven quality control measures and a robust clean-in-place procedure in order to provide the best packaging service for our customers. We take great pride in helping local beverage producers expand their distribution reach by using our service to offer industry-top quality and branding. Our greatest asset is the unmatched expertise of our talented group of packaging professionals who show up every day to go above and beyond to get the job done.

Digital Can Printing

We now operate an innovative digital can printer that will revolutionize the growing custom canning operation. Our new printer, the German-made Hinterkopf D240.2, is the only one of its kind on the West Coast and one of ten in the world. The new acquisition gives Craft C+P the ability to offer unparalleled customization and flexibility to craft beverage producers seeking direct printing for canning projects of all sizes while having a production capacity of over 28 million cans. The new printer began operations in April 2022.

We print 12-ounce or 16-ounce cans in any quantity with any image. This flexibility allows for custom graphics of limited releases, vintages, partnerships, and special events.

In connection with the can printer, we partnered with a leading can provider to provide quality canning services from end to end. The new partnership guarantees a current and future supply of domestically manufactured Crown cans, cost-effective solutions for our customers, and improved logistics for beverage producers.

Co-packing Facility

We now offer co-packing services in Portland, Oregon through our recent asset acquisition, allowing us to offer end-to-end production capabilities. We currently are the exclusive provider of can printing and co-packing services for a CBD and wellness water maker.

Mobile Canning

Our Craft mobile team offers a variety of services and products, including:

• High Mobile Canning Capacity – We operate 14 Wild Goose MC-250 machines, with the capacity to can over 150,000 barrels per year. In addition to the canning lines, we use custom in-house designed fully automated depalletizers and twist rinses.

25

• Large Craft Volumes – With capabilities of around 600-800 cases per shift, we can manage any volume. Averaging 40 cans per minute, each machine can do 100 cases per hour.
• Dedicated Team – All of our employees are carefully and rigorously trained. A fully insured workforce is ready to take on any and all of the customer’s packaging needs. We believe in continuous improvement, and we understand the value of our clients’ products and dedicate ourselves to making every run a successful run.
• Quality Control – Hach Orbispheres measure our dissolved oxygen (“DO”) during packaging to ensure the lowest Total Packaged Oxygen for the customer’s can. We use luminometers and ATP swabs to ensure sanitation of our equipment. We can provide Zahm & Nagel volume meters to measure carbon dioxide (“CO2”) volumes in carbonated products before packaging. As masters of the “double seam” we frequently take on-site measurements with micrometers. We also offer CMC Kuhnke technology to generate even more accurate measurements in the form of visual seam reports.
• Velcorin and Nitrogen Dosing – We have both velcorin and nitrogen dosing capabilities that supports microbial control and allows packaging of still products in addition to carbonated and nitrogenated beverages.
• Pre-printing and Outfeed Labeling – Bringing on advanced digital can printing technology from Hinterkopf in Q2 2022 allows us to offer customers both world-class aesthetics and full sustainability in an end-to-end branding and packaging solution, accessible from our smallest to our largest customers. We also provide outfeed labeling and the ability to package customer-provided branded cans of all varieties.
• Location Flexibility – We allow our customers to choose the location of canning. We bring our mobile equipment to their facility, or our customers can bring their product to us for co-packing.

26

Recent Developments

During the second quarter of 2022, we began operating our new digital can printer providing our customers with photo-realistic graphics and the ability to make label changes at the last minute, as well as a sustainable product that is 100% recyclable, unlike the traditional craft label and shrink sleeve. These capabilities are game changers in the craft beverage space, offered to all makers of beverages not only brewers. During the quarter, we printed almost 750,000 cans with orders of almost 750,000 for the next one and half months. In July 2022, we printed nearly 650,000 cans.

In addition, we purchased the assets of a maker of wellness beverages during the second quarter and we are contracted to be its exclusive provider of can printing and co-packing services. This asset purchase allows us to offer end-to-end production capabilities to customers across all canning needs whether it is water, craft brews, wine, kombucha or any other liquid.

However, we faced a number of challenges in both business segments in 2021 that have continued into 2022. The COVID-19 pandemic presented significant operational challenges for both the mobile canning operation as well as spirits division. Increased competition, supply change issues and restructuring activities added to performance challenges in 2021 that have continued into 2022.

Our spirits volume was soft in the first half of 2022, primarily due to terminating deep discounting of Azuñia tequila in chains in 2021. In addition, we faced challenges with distribution partners that resulted in out of stocks at retail and missed programming windows. These issues are behind us as we head into the second half. Finally, we saw cost increases across much of our direct and indirect costs. While a substantial amount of our raw materials is owned, such as our whisky, and not susceptible to price inflation, imported tequila and other materials such as glass increased through the year. These challenges are expected to continue in the second half. The decline in distributed sales was offset by a direct sale of nearly 800 barrels of rye whiskey sold for $1.5 million during the first quarter and an additional direct sale of 651 barrels for $2.6 million during the second quarter.

Craft C+P also continues to face unique challenges and opportunities. In the beginning of the second quarter, we started a new business activity decorating craft beverage cans. The first half of 2022 involved substantial investment and planning to launch the technology in a new Portland, Oregon based printing facility. This new initiative has helped us improve our competitive position and deal with a number of industry challenges. Beginning mid-year 2020 and throughout 2021, the craft beverage industry faced a shortage of aluminum cans. Domestic aluminum can manufacturers continue to make adjustments to manage a supply demand imbalance into 2022. As a result, buyers of aluminum cans continue to face uncertainties. We believe we have sourced an adequate supply of cans to supply our current business plan. In addition, suppliers have successfully passed through price increases, which we did not immediately pass through to our customers. Moreover, this period of rapidly escalating prices left us at a competitive disadvantage to others that had a superior source of cans. Digital printing has allowed us to improve our ability to pass through aluminum can inflation. In addition, we have faced workforce challenges related to retention and hiring.

Results of Operations

Overview

Three and Six Months Ended June 30, 2022 Compared to the Three and Six Months Ended June 30, 2021

(Dollars in thousands)

27

Segment information was as follows for the three and six months ended June 30, 2022 and 2021:

(Dollars in thousands)

Sales

Sales were $8.9 million and $6.9 million for the six months ended June 30, 2022 and 2021, respectively, and $5.1 million and $3.6 million for the three months ended June 30, 2022 and 2021, respectively.

Sales of spirits increased due to the sale of 651 barrels of Tennessee whiskey and Indiana bourbon for gross proceeds of $2.6 million during the three months ended June 30, 2022 and a prior sale of nearly 800 barrels of rye whiskey for $1.5 million during the first quarter, for a total of $4.1 million for the six months ended June 30, 2022, partially offset by weaker Azuñia volume due to a reduction in discounting. The following table presents volumes by nine-liter cases for the three and six months ended June 30, 2022 and 2021:

Craft C+P sales decreased for both the three and six months ended June 30, 2022 due to a combination of factors including cycling the end of the pandemic where on-premise consumption had yet to open up in 2021, a trend to insource can purchasing and filling by larger customers, increased competition and starting our new digital can printing business.

Customer programs and excise taxes

Customer programs and excise taxes were $0.3 million for both the six months ended June 30, 2022 and 2021, and $0.3 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively. Spirits discounts were $0.2 million lower than the prior year due to a reduction in Azuñia Tequila discounting. During the second quarter of 2022, as part of our asset acquisition, we offered a discount of $0.1 million to the beverage maker for our printing and canning services.

Cost of Sales

Cost of sales consists of all direct costs related to both spirits and canning for service, labor, overhead, packaging, and in-bound freight charges.

Cost of sales were $6.2 million and $5.1 million for the six months ended June 30, 2022 and 2021, respectively, and $3.4 million and $2.5 million for the three months ended June 30, 2022 and 2021, respectively. Spirit’s cost of sales increased for both the three and six months ended June 30, 2022 due to bulk sales partially offset by savings from lower Azuñia Tequila sales volume. Craft C+P cost of sales decreased for both the three and six months ended June 30, 2022 due to lower sales and lower compensation costs.

Gross Profit

Gross profit is calculated by subtracting the cost of products sold from net sales. Gross profit was $2.4 million and $1.5 million for the six months ended June 30, 2022 and 2021, respectively, and $1.5 million and $0.9 million for the three months ended June 30, 2022 and 2021, respectively.

Gross margin is gross profit stated as a percentage of net sales. Our gross margin was 28% and 22% for the six months ended June 30, 2022 and 2021, respectively, 30% and 26% for the three months ended June 30, 2022 and 2021, respectively. Spirits gross margin increased for both the three and six months ended June 30, 2022 primarily due to the carryforward of fall 2021 price increases and excess bulk spirits sales. Craft C+P’s gross margin decreased for both the three and six months ended June 30, 2022 primarily due to lower sales of services, a change in product and service mix, and higher raw material costs. In addition, Craft C+P launched its digital can printing business at the end of April 2022. While printing revenues have increased through the quarter, low print volumes during the initial startup period has contributed to negative margins.

Sales and Marketing Expenses

Sales and marketing expenses were $1.4 million and $1.6 million for the six months ended June 30, 2022 and 2021, respectively, and $0.7 million for both the three months ended June 30, 2022 and 2021. The decrease for the six months ended June 30, 2022 was primarily due to a decrease in compensation related to lower headcount in our spirits segment as we continue to focus our sales efforts in key markets of Oregon, California, Arizona, Colorado, Texas, Florida, and Washington.

General and Administrative Expenses

General and administrative expenses were $3.7 million and $3.5 million for the six months ended June 30, 2022 and 2021, respectively, and $1.7 million and $1.6 million for the three months ended June 30, 2022 and 2021, respectively, primarily due to increased rent as we entered into new leases, offset by compensation as our overall headcount decreased.

Other Income

Other income was $0.1 million for both the three and six months ended June 30, 2022 and was attributable to our co-packing asset acquisition. Other income was $2.2 million for the six months ended June 30, 2021 and was attributable to the forgiveness of our loans under the U.S. government Paycheck Protection Program (“PPP Loans”) and the remeasurement of deferred consideration for the final Azuñia earn-out.

Net Income (Loss)

Net loss was $(3.8) million and net income of $1.9 million for the six months ended June 30, 2022 and 2021, respectively, and $(1.8) million for both the three months ended June 30, 2022 and 2021.

Preferred Stock Dividends

Preferred stock dividends were $37,500 and $75,000 for the three and six months ended June 30, 2022, respectively, and related to the Series B preferred stock dividend of 6% per annum.

Liquidity and Capital Resources

Our primary capital requirements are for cash used in operating activities and the repayment of debt. Funds for our cash and liquidity needs have historically not been generated from operations but rather from short-term credit in the form of extended payment terms from suppliers as well as proceeds from the sale of convertible debt and equity financings. We have been dependent on raising capital from debt and equity financings to meet our operating needs.

During 2021, our working capital position improved by $22.0 million, primarily due to the conversion of a large portion of debt into equity related to our acquisition of the Azuñia brand. In addition, during 2021, the Small Business Administration (“SBA”) notified us that it approved our request for full forgiveness of the PPP Loans that we took in 2020 in the principal amount of $1.4 million.

We had an accumulated deficit of $62.5 million as of June 30, 2022, having incurred a net loss of $3.8 million during the six months ended June 30, 2022. The net loss, combined with a reclassification from current assets to equipment of $4.3 million in prepayments related to the digital can printer, resulted in a $6.3 million reduction in working capital. As of June 30, 2022, we had $1.0 million of cash on hand with negative working capital of $1.7 million.

During the six months ended June 30, 2022, we raised $3.0 million in additional capital through debt financing to invest in our three year growth plan. Our ability to meet our ongoing operating cash needs over the next 12 months depends on growing revenues and gross margins, and generating positive operating cash flow, primarily through increased sales, profitable operations, and controlling expenses. If we are unable to obtain additional financing, or additional financing is not available on acceptable terms, we may seek to sell assets, reduce operating expenses, reduce or eliminate marketing initiatives.

We continue to make substantial investments in Craft C+P, which we believe will deliver improved results during 2022, in part due to our acquisition of a state-of-the-art digital can printer that will add incremental services and revenue.

Our cash flow results for the six months ended June 30, 2022 and 2021 were as follows:

(Dollars in thousands)

30

Operating Activities

Total cash provided by operating activities was $0.3 million during the six months ended June 30, 2022 compared to cash used of $0.2 million during the six months ended June 30, 2021. The increase in cash was primarily attributable to a decrease in inventory as a result of our bulk spirits sales, offset by increases in accounts payable and accrued liabilities.

Investing Activities

Total cash used in investing activities was $2.5 million during the six months ended June 30, 2022 representing our investment in digital can printing equipment, compared to cash provided of $3.3 million during the six months ended June 30, 2021, which consisted of $3.4 million received for the Termination Agreement with RSG.

Financing Activities

Total cash used in financing activities was $0.1 million during the six months ended June 30, 2022 compared to $2.9 million during the six months ended June 30, 2021. Net cash flows used in financing activities during the six months ended June 30, 2022 consisted of the proceeds from a note payable with a related party of $3.0 million; offset by $2.9 million of principal payments of our secured credit facilities and $0.3 million of payments on principal of notes payable. Net cash flows used in financing activities during the six months ended June 30, 2021 consisted of $3.6 million of payments reducing the balance of our secured trade credit facility and $2.6 million of payments reducing the principal balance of notes payable; offset by proceeds from secured credit facilities of $3.3 million.

Lines of Credit

From 2019 until December 2021, we utilized an existing accounts receivable factoring line of credit with ENGS that provided for a minimum of $0.5 million purchased accounts receivable and a maximum of $1.0 million of purchased accounts receivable. The advance rate was 85%, and interest was charged against the greater of $0.5 million or the total funds advanced at a rate of 5% plus the prime rate published in the Wall Street Journal. The Company factored $2.4 million of invoices during the year ended December 31, 2021. In December 2021, our agreement with ENGS expired and we are no longer factoring Craft C+P receivables.

Since 2019, we utilized an existing accounts receivable factoring line of credit with Park Street Financial Services, LLC. The advance rate is 75%, and interest is charged at a rate of 2.4% for the first 30 days plus 1.44% for each additional ten-day period. The Company factored $0.3 million of invoices during the year ended December 31, 2021. As of June 30, 2022, the Company had no factored invoices outstanding.

Inventory Line

In January 2020, we and our subsidiaries entered into a loan agreement with Live Oak Banking Company (“Live Oak”) for a loan in an aggregate principal amount not to exceed the lesser of (i) $8.0 million and (ii) a borrowing base of up to 85% of the appraised value of the borrowers’ eligible inventory of whisky in barrels or totes less an amount equal to all service fees or rental payments owed by borrowers during the 90 day period immediately succeeding the date of determination to any warehouses or bailees holding eligible inventory (the “Live Oak Loan”). The Live Oak Loan was secured by all assets of the Company excluding accounts receivable and certain other specified excluded property. The Live Oak Loan bore interest at a variable rate of interest equal to (i) two and 49/100ths percent (2.49%) per annum plus (ii) the Prime Rate as published in The Wall Street Journal, adjusted on a calendar quarterly basis. Interest was payable monthly. Additionally, we issued to Live Oak 100,000 warrants to purchase common stock at an exercise price of $3.94 per share. The proceeds of the Live Oak Loan were used to pay off all principal and accrued interest under the TQLA Note of $0.9 million and all principal and interest under loan issued pursuant to that Credit and Security Agreement, by and between the Company and The KFK Children’s Trust, Jeffrey Anderson – Trustee of $3.0 million. The loan matured on November 11, 2021. On February 4, 2022, we paid $0.9 million of the loan. On February 28, 2022, Live Oak and the Company entered into a forbearance agreement while the parties finalized a further extension of the maturity date. In June 2022, we paid the remaining balance of $1.9 million.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations is based upon its consolidated financial statements, which have been prepared in accordance with United States. generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

In connection with the preparation of our financial statements for the six months ended June 30, 2022, there was one accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results, as follows:

Intangible Assets

On September 12, 2019, we purchased the Azuñia brand, the direct sales team, existing product inventory, supply chain relationships and contractual agreements from Intersect Beverage, LLC, an importer and distributor of tequila and related products. The Azuñia brand has been determined to have an indefinite life and will not be amortized. We do, however, on an annual basis, test the indefinite life for impairment. If the indefinite life is found to be impaired, then we will estimate the useful life of the brand and amortize the asset over the remainder of its useful life.

We estimate the brand’s fair value using market information to estimate future cash flows and will impair it when its carrying amount exceeds its estimated fair value, in which case we will write it down to its estimated fair value. We consider market values for similar assets when available. Considerable management judgment is necessary to estimate fair value, including making assumptions about future cash flows, net sales and discount rates.

We have the option, before quantifying the fair value, to evaluate qualitative factors to assess whether it is more likely than not that our brand is impaired. If we determine that is not the case, then we are not required to quantify the fair value. That assessment also takes considerable management judgment.

Based on our assumptions, we believe that, as of June 30, 2022, the Azuñia brand was not impaired.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) that are designed to provide reasonable assurances that the information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

We conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act)), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that these disclosure controls and procedures were effective as of June 30, 2022.

There were no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in our risk factors from those previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021.