BNB Standard Corp: Form 10-Q for the period ended Mar 31, 2024

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, which include additional information about our accounting policies, practices, and the transactions underlying our financial results, as well as with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Cautionary Statements” appearing elsewhere herein and the risks and uncertainties described or identified in “Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as updated from time to time in the Company’s filings with the SEC, and Part II, Item 1A of this Quarterly Report entitled “Risk Factors.”

Non-GAAP Financial Measures

To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings, backlog, as well as adjusted net income (loss) which reflects adjustments for certain non-cash expenses such as stock-based compensation, certain debt-related items and depreciation expense. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. For purposes of this Quarterly Report, (i) “adjusted net income (loss)” and “adjusted operating income (loss)” mean GAAP net income (loss) and operating income (loss), respectively, after adjustment for non-cash equity compensation expense, debt-related items and depreciation expense, and (ii) “net bookings” means new sales contracts executed during the quarter for which we received an initial deposit, net of any adjustments including cancellations and change orders during the quarter.

Our backlog, remaining performance obligations and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog or remaining performance obligations will actually generate revenues or when the actual revenues will be generated.

Overview

CEA Industries, through our subsidiary, Surna Cultivation Technologies LLC, is focused on selling environmental control and other technologies and services to the Controlled Environment Agriculture (“CEA”) industry. The CEA industry aims to optimize the use of horticultural resources such as water, energy, space, capital, and labor, to create an agriculture business that is more efficient and more productive than those that use traditional farming methods. Typically, the CEA industry is focused on indoor agriculture and vertical farming.

Headquartered in Colorado, we aim to provide customers with a variety of value-added technology solutions that help improve their overall crop quality and yield, optimize energy and water efficiency, and satisfy the evolving state and local codes, permitting and regulatory requirements. We do this by offering our customers a variety of service and product offerings that include: (i) air handling equipment and systems, (ii) air sanitation products, (iii) LED lighting, and (iv) benching and racking solutions for indoor cultivation.

CEA growers currently face a challenging business environment that includes high energy costs, water usage and conservation issues, continuously evolving waste removal regulations, inflationary pressures, and labor shortages. In addition to these issues, our cannabis growing customers face increasingly rigorous quality standards and declining cannabis prices in a growing industry whose standards are constantly evolving. The part of the CEA industry focused on food related crops is also facing disruption from evolving market demand, competition, and reorganization, including the lack of growth capital and several noteworthy bankruptcies.

NASDAQ Continued Listing - Delisting Notice

As stated in Note 12 (Subsequent Events) above, on April 10, 2023 the Company received notice from The Nasdaq Stock Market LLC (“Nasdaq”) that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business day period between February 24, 2023, through April 6, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The notice indicated that the Company may submit an update to its existing plan to regain compliance with the Listing Rule no later than October 9, 2023, and, following receipt of the update, Nasdaq would consider granting an extension of 180 calendar days to regain compliance. On October 11, 2023, Nasdaq formally determined to grant the Company a second 180-day compliance period, which allowed the Company until April 7, 2024, to satisfy the Listing Rule 5550(a)(2) deficiency. During that time, the Company was unable to satisfy the Listing Rule 5550(a)(2) deficiency.

On April 9, 2024, the Company received a second notice from Nasdaq indicating that the Listings Qualifications Staff would be delisting the shares of common stock and common stock warrants from Nasdaq at the opening of business on April 18, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission, which would remove the Company’s securities from listing and registration on The Nasdaq Stock Market.

On April 16, 2024, the Company filed an appeal with Nasdaq’s Listing Committee, which temporarily stays the delisting of the Company’s securities and the filing of the Form 25-NSE, pending the decision of the Nasdaq’s Listing Committee. As part of this process the Company will be provided a hearing, at which it will be asked to provide a plan to regain compliance and a commitment to effect a reverse stock split, if necessary.

As a result, until further notice, the Company’s shares and common stock warrants continue to trade on the Nasdaq under the tickers “CEA” and “CEADW”.

Impact of the COVID-19 Pandemic on Our Business

The impact of the government and the business economic response to the COVID-19 pandemic affected demand across the majority of our markets and disrupted workflow and completion schedules on projects. We believe we continue to have adverse effects on our sales, project implementation, supply chain infrastructure, operating margins, costs, and working capital, as a result of the pandemic. Due to this uncertainty, we continue to monitor costs and continue to take actions to reduce costs in order to mitigate the long-term impact of the COVID-19 pandemic to the best of our ability. However, these actions may not be sufficient in the long run to avoid reduced sales, increased losses, and reduced operating cash flows in our business. During the years ended December 31, 2023 and December 31, 2022, and continuing since then, the Company experienced delays in the receipt of equipment it had ordered to meet its customer orders due to disruption and delays in its supply chain. Consequently, our revenue recognition of some customer sales has been delayed until future periods when the shipment of orders can be completed.

Impact of Ukrainian and Israeli Conflicts

We believe that the conflicts involving Ukraine and Israel do not have any direct impact on our operations, financial condition, or financial reporting. We believe the conflicts will have only a general impact on our operations in the same manner as it is having a general impact on all businesses that have their operations limited to North America resulting from international sanction and embargo regulations, possible shortages of goods and goods incorporating parts that may be supplied from countries involved in the conflicts, supply chain challenges, and the international and US domestic inflation resulting from the conflict and government spending in relation to the conflicts. As our operations are related only to the North American controlled agricultural industry, largely within the cannabis space, we do not believe we will be targeted for cyber-attacks related to the conflicts. We have no operations in the countries directly involved in the conflict or are specifically impacted by any of the sanctions and embargoes, as we principally operate in the United States and Canada. We do not believe that the conflicts will have any impact on our internal control over financial reporting. Other than general securities market trends, we do not have reason to believe that investors will evaluate the company as having special risks or exposures related to the conflicts.

Our Bookings, Backlog and Revenue

During the three months ended March 31, 2024, we executed new sales contracts with a total contract value of $223,000. During this same period, we had positive change orders of $80,000. Consequently, our net bookings in the three months ended March 31, 2024 were $303,000, representing an increase of $165,000 (or 119%) from net bookings of $138,000 in the fourth quarter of 2023.

Our backlog at March 31, 2024 was $535,000, an increase of $100,000, or 23%, from our backlog of $435,000 at December 31, 2023. The increase in backlog is the result of higher bookings and slightly lower revenue in the first quarter of 2024. Subsequent to March 31, 2024, a portion of one contract was cancelled. The amount cancelled was $170,000. While we expect to recognize all revenue from the remaining backlog in 2024, there is significant uncertainty regarding the timing of the Company’s recognition of revenue on its remaining performance obligations, and there is no certainty that these will result in actual revenues. Therefore, investors should not view backlog as earned revenue.

Our backlog has significantly declined since the beginning of 2023. The primary reason for the decline has been fewer new order bookings and contract cancellations.

The following table sets forth: (i) our beginning backlog (the remaining contract value of outstanding sales contracts for which we have received an initial deposit as of the previous period), (ii) our net bookings for the period (new sales contracts executed during the period for which we received an initial deposit, net of any adjustments including cancellations and change orders during the period), (iii) our recognized revenue for the period, and (iv) our ending backlog for the period (the sum of the beginning backlog and net bookings, less recognized revenue). Based on the current economic climate and our cost cutting measures, there is no assurance that we will be able to continue to obtain the level of bookings that we have had in the past and or fulfill our current backlog, and we may experience contract cancellations, project scope reductions and project delays.

Our recognized revenue for the quarters ended March 31, 2023, June 30, 2023, September 30, 2023, December 31, 2023, and March 31, 2024, in the table below, excludes $149,000, $56,000, $29,000, $0, and $31,000, respectively, in revenue arising from the forfeiture of non-refundable deposits from former customers on previously cancelled contracts. The contracts were removed from the backlog at the time of cancellation. Subsequent to March 31, 2024, a portion of one contract was cancelled. The amount cancelled was $170,000.

The completion of a customer’s new build facility project is dependent upon the customer’s ability to secure funding and real estate, obtain a license and then build their cultivation facility so they can take possession of the equipment. Accordingly, the time it takes for these customers to complete a new build project, which corresponds to when we are able to recognize revenue, is driven by numerous factors including: (i) the large number of first-time participants interested in the indoor cannabis cultivation business; (ii) the complexities and uncertainties involved in obtaining state and local licensure and permitting; (iii) local and state government delays in approving licenses and permits due to lack of staff or the large number of pending applications, especially in states where there is no cap on the number of cultivators; (iv) the customer’s need to obtain cultivation facility financing; (v) the time needed, and coordination required, for our customers to acquire real estate and properly design and build the facility (to the stage when climate control systems can be installed); (vi) the large price tag and technical complexities of the climate control and air sanitation systems; (vii) the availability of power; and (viii) delays that are typical in completing any construction project.

As has historically been the case for the Company at each quarter-end, there remains significant uncertainty regarding the timing of revenue recognition of our backlog as of March 31, 2024.

We have provided an estimate in our condensed consolidated financial statements for when we expect to recognize revenue on our remaining performance obligations (i.e., our Q1 2024 backlog), using separate time bands, with respect to engineering only paid contracts and partial equipment paid contracts. There continues to be significant uncertainty regarding the timing of our recognition of revenue on our Q1 2024 backlog. Refer to the Revenue Recognition section of Note 1 in our condensed consolidated financial statements, included as part of this Quarterly Report for additional information on our estimate of future revenue recognition on our remaining performance obligations.

Our backlog, remaining performance obligations, and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in backlog or remaining performance obligations will generate revenues or when the revenues will be generated. Net bookings and backlog are considered non-GAAP financial measures, and therefore, they should be considered in addition to, rather than as a substitute for, our GAAP measures for recognized revenue, deferred revenue, and remaining performance obligations. Further, we can provide no assurance as to the profitability of our contracts reflected in remaining performance obligations, backlog and net bookings.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and March 31, 2023

Revenues and Cost of Goods Sold

Revenue for the three months ended March 31, 2024 was $235,000, compared to $4,683,000 for the three months ended March 31, 2023, representing a decrease of $4,448,000, or 95%. The decrease was primarily due to a decrease in bookings in the last 18 months. We believe the lower bookings are due to the suppression of capital expenditures in the cannabis market environment as a result of the prolonged effects of pricing and inflationary pressure, in addition to a reduced sales effort by the Company.

Cost of revenue decreased by $3,440,000 or 90%, from $3,829,000 for the three months ended March 31, 2023 to $389,000 for the three months ended March 31, 2024. The decrease was primarily due to a decrease in revenue, along with a decrease in fixed and variable costs, as discussed below.

During the three months ended March 31, 2024 we recognized a gross loss of $154,000 compared to a gross profit of $853,000 for the three months ended March 31, 2023, a loss increase of 118%. Our gross profit margin decreased by 84 percentage points from a gross profit margin of 18% for the three months ended March 31, 2023 to a gross loss margin of 66% for the three months ended March 31, 2024 primarily due to lower revenue and an increase in fixed costs as a percentage of revenue, as described below. Additionally, total revenue in the three months ended March 31, 2024 and March 31, 2023 included $31,000 and $149,000, respectively, from forfeited, non-refundable deposits from former customers on previously cancelled contracts.

Our fixed costs (which include engineering, service, manufacturing and project management salaries and benefits and manufacturing overhead) totaled $254,000, or 108% of total revenue, for the three months ended March 31, 2024 as compared to $391,000, or 8% of total revenue, for the three months ended March 31, 2023. The decrease of $137,000 was primarily due to a decrease in salaries and benefits (including stock-based compensation) of $123,000 and a decrease in fixed overhead of $14,000.

Our variable costs (which include the cost of equipment, outside engineering costs, shipping and handling, travel and warranty costs) totaled $135,000, or 58% of total revenue, during the three months ended March 31, 2024, as compared to $3,439,000, or 73% of total revenue, in the three months ended March 31, 2023. The decrease in variable costs was primarily due to: (i) a decrease in equipment costs of $3,170,000 driven by lower revenue, partially offset by lower equipment margins, (ii) a decrease in warranty of $119,000 due to a reduction in the warranty accrual as a result of lower revenue during the past 18 months, (iii) a decrease in travel of $6,000, (iv) a decrease in shipping and handling expense of $5,000, and (v) a reduction in other expenses of $4,000.

Operating Expenses

Operating expenses decreased to $769,000 for the three months ended March 31, 2024, from $1,299,000 for the three months ended March 31, 2023, a decrease of $530,000, or 41%. The operating expense decrease consisted of: (i) a decrease in selling, general and administrative expenses (“SG&A expenses”) of $261,000, (ii) a decrease in advertising and marketing expenses of $193,000, and (iii) a decrease in product development of $76,000. These decreases are the result of our cost-cutting measures.

Our decrease in SG&A expenses for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, was primarily due to: (i) a decrease of $195,000 in salaries and benefits (including stock-based compensation) and other employee related costs, (ii) a decrease in bad debt expense of $33,000, (iii) a decrease in commissions of $30,000, (iv) a decrease of $20,000 for facilities expenses and office supplies, (v) a decrease in travel of $10,000, (vi) a decrease in insurance of $6,000, (vii) a decrease of $5,000 for business taxes and licenses, (viii) a reduction in investor relations expense of $4,000, offset by, (ix) an increase in accounting and other professional fees of $30,000, and (x) an increase of $12,000 for loss on asset disposals.

The decrease in advertising and marketing expenses was primarily due to (i) a decrease in salaries and benefits (including stock compensation of $130,000), (ii) a decrease in advertising and promotion of $48,000, (iii) a decrease in outside services and other marketing expenses of $10,000, and (iv) a reduction in trade show related costs of $5,000.

The decrease in product development costs was due to (i) a decrease in salaries and benefits (including stock-based compensation) of $70,000, (ii) a decrease of $4,000 for materials and other R&D costs, and (iii) a decrease in travel of $2,000.

Operating Loss

We recognized an operating loss of $924,000 for the three months ended March 31, 2024, as compared to an operating loss of $446,000 for the three months ended March 31, 2023, an increase of $478,000 or 107%. The operating loss for the three months ended March 31, 2024 included $77,000 of non-cash, stock-based compensation, and $6,000 of depreciation expense, compared to $147,000 of non-cash, stock-based compensation, and $6,000 of depreciation expense for the three months ended March 31, 2023. Excluding these non-cash items, our operating loss increased by $548,000.

Other Income (Expense)

We recognized other income (net) of $7,000 for the three months ended March 31, 2024, compared to other income (net) of $15,000 for the three months ended March 31, 2023. Other income for the three months ended March 31, 2024 consisted of interest income on our money market account. Other income for three months ended March 31, 2023 primarily consisted of interest income on a money market account of $10,000 and an adjustment to our ERC credit of $5,000.

Net Loss

Overall, we recognized a net loss of $917,000 for the three months ended March 31, 2024, as compared to a net loss of $431,000 for the three months ended March 31, 2023, an increase of $485,000 or 113%. The net loss for the three months ended March 31, 2024 included $77,000 of non-cash, stock-based compensation, and $6,000 of depreciation expense, compared to $147,000 of non-cash, stock-based compensation, $6,000 of depreciation expense for the three months ended March 31, 2023. Excluding these non-cash items, our net loss increased by $555,000.

Financial Condition, Liquidity and Capital Resources

Cash, Cash Equivalents

As of March 31, 2024, we had cash and cash equivalents of $11,599,000, compared to cash and cash equivalents of $12,508,000 as of December 31, 2023. The $909,000 decrease in cash and cash equivalents during the three months ended March 31, 2024, was the result of cash used in operations. Our cash is held in bank depository accounts in a financial institution. During the three months ended March 31, 2024, we held deposits in this financial institution that exceeded the federally insured amount.

As of March 31, 2024, we had accounts receivable (net of allowance for doubtful accounts) of $20,000, contract assets (net of allowance for doubtful accounts) of $224,000, inventory (net of excess and obsolete allowance) of $246,000, and prepaid expenses and other assets of $228,000 (including $13,000 in advance payments on inventory purchases). While we typically require advance payment before we commence engineering services or ship equipment to our customers, we have made exceptions requiring us to record accounts receivable, which carry a risk of non-collectability especially since most of our customers are funded on an as-needed basis to complete facility construction.

As of March 31, 2024, we had total accounts payable and accrued expenses of $362,000, deferred revenue of $540,000, and the current portion of operating lease liability of $129,000. As of March 31, 2024, we had working capital of $11,286,000, compared to working capital of $12,110,000 as of December 31, 2023. The decrease in our working capital was primarily related to (i) a decrease in cash of $909,000, (ii) a decrease in prepaid and other expenses of $86,000, (iii) a decrease in inventory (net) of $51,000, (iv) a decrease in accounts payable and accrued liabilities of $263,000, offset by, (v) an increase in deferred revenue of $40,000.

We currently intend to retain all available funds and any future earnings for use in the operation of our business. We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future.

Because of the challenges to the CEA industry economy and the specific challenges of our business, we cannot predict the continuing level of working capital that we will have in the future. As mentioned elsewhere, we have taken steps to conserve our cash resources by reducing staff and taking other cost-cutting measures and we will continue to evaluate further such measures in the future.

Summary of Cash Flows

The following summarizes our approximate cash flows for the three months ended March 31, 2024 and March 31, 2023:

Operating Activities

We incurred a net loss for the three months ended March 31, 2024 of $917,000 and have an accumulated deficit of $38,107,000 as of March 31, 2024.

Cash used in operations for the three months ended March 31, 2024 was $909,000 compared to cash used in operating activities of $2,689,000 for the three months ended March 31, 2023, a decrease of $1,780,000.

The decrease in cash used in operating activities during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, was primarily attributable to: (i) a decrease in cash used to fund working capital of $2,350,000, (ii) an increase in net loss of $485,000, and (iii) a decrease in non-cash operating charges of $85,000.

The decrease in our working capital was primarily related to (i) a decrease in cash of $909,000, (ii) a decrease in prepaid and other expenses of $86,000, (iii) a decrease in inventory (net) of $51,000, (iv) a decrease in accounts payable and accrued liabilities of $263,000, offset by, (v) an increase in deferred revenue of $40,000.

The decrease in non-cash operating charges was primarily due to (i) a decrease of $70,000 for share-based compensation, (ii) a decrease in the provision for doubtful accounts of $33,000, and (iii) an increase in loss on asset disposal of $12,000.

Investing Activities

There were no cash flows from investing activities during the three months ended March 31, 2024. Cash provided by investing activities during the three months ended March 31, 2023 was less than $1,000.

Financing Activities

There were no cash flows from financing activities during the three months ended March 31, 2024 and March 31, 2023.

Inflation

Our operations are being influenced by the inflation existent in the larger economy and in the industries related to building renovations, retrofitting and new build CEA facilities in which we operate. We believe that we will continue to face inflationary increases in the cost of products and our operations, which will adversely affect our margins and financial results and the pricing of our service and product supply contracts. Inflation is reflected in higher wages, increased pricing of equipment, delivery and transportation costs, and general operational expenses. As we move forward, we plan to continuously monitor our various contract terms and may decide to add clauses that will permit us to adjust pricing if inflation and price increase pressures on us will impact our ability to perform our contracts and maintain our margins.

Contractual Payment Obligations

As of March 31, 2024, our contractual payment obligations consisted of a building lease. Refer to Note 2 – Leases of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of our building lease.

Commitments and Contingencies

Refer to Note 6 – Commitments and Contingencies of the notes to the condensed consolidated financial statements, included as part of this Quarterly Report for a discussion of commitments and contingencies.

Off-Balance Sheet Arrangements

We are required to disclose any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. As of March 31, 2024, we had no off-balance sheet arrangements. During the three months ended March 31, 2024, we did not engage in any off-balance sheet financing activities other than those included in the “Contractual Payment Obligations” discussed above and those reflected in Note 6 of our condensed consolidated financial statements.

Critical Accounting Estimates

This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers, and information available from other outside sources, as appropriate. Actual results could materially differ from those estimates. Key estimates include: allocation of transaction prices to performance obligations under contracts with customers, standalone selling prices, timing of expected revenue recognition on remaining performance obligations under contracts with customers, valuation of intangible assets, valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, accounts receivable and inventory allowances, and legal contingencies.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, therefore are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Principal Financial and Accounting Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that as a result of material weaknesses in our internal control over financial reporting as described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC, our disclosure controls and procedures were not effective as of March 31, 2024.

We did not maintain effective controls over certain aspects of the financial reporting process because: (i) we lack a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements, (ii) there is inadequate segregation of duties due to our limited number of accounting personnel, and (iii) we have insufficient controls and processes in place to adequately verify the accuracy and completeness of spreadsheets that we use for a variety of purposes including revenue, taxes, stock-based compensation and other areas, and place significant reliance on, for our financial reporting.

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We are committed to continuing to improve our financial organization including, without limitation, expanding our accounting staff and improving our systems and controls to reduce our reliance on the manual nature of our existing systems. However, due to our size and our financial resources, remediating the several identified weaknesses has not been possible and may not be economically feasible now or in the future.

Changes in Internal Control over Financial Reporting

There were no changes identified in connection with our internal control over financial reporting during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the information set forth in this Form 10-Q, you should also carefully review and consider the risk factors contained in our other reports and periodic filings with the SEC, including, without limitation, the risk factors and uncertainties contained under the caption “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, that could materially and adversely affect our business, financial condition, and results of operations. The risk factors discussed in that Form 10-K do not identify all risks that we face because our business operations could also be affected by additional factors that are not known to us or that we currently consider to be immaterial to our operations.