Creatd, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth in “Part I – Item 1A. Risk Factors.” This Form 10-K and other reports filed by Creatd, Inc., formerly Jerrick Media Holdings, Inc. (the “Company”), from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Form 10-K. We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. 28 Overview The creator economy is well established and thriving, consisting of over 50 million content creators and a valuation of over $100 billion, and growing. Creatd plays a crucial role within this ecosystem, with a range of businesses established to help creators realize their potential both creatively and monetarily, partnering with peers in their community and brands when the opportunity arises. Specifically, our role within the creator economy and ecosystem is to provide creators with economic opportunities. We accomplish this through four main business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios. Together, Creatd's pillars work together to create multiple flywheel effects and growth drivers, supporting our core vision of creating a viable ecosystem for all stakeholders in the creator economy. 2021 was a positioning year for Creatd, during which the Company established a solid business foundation, fortified its infrastructure, rationalized costs to accelerate cashflow breakeven, and effectively eliminated impediments to rapid growth which we believe will continue to drive revenues. Results of Operations Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at December 31, 2021 compared to December 31, 2020: December 31, 2021 December 31, 2020 Increase / (Decrease) Current Assets $ 4,475,242 $ 8,020,993 $ (3,545,751 ) Current Liabilities $ 5,421,015 $ 4,968,427 $ 452,588 Working Capital (Deficit) $ (945,773 ) $ 3,052,566 $ (3,998,339 ) At December 31, 2021, we had a working capital (deficit) of $(945,773) as compared to a working capital of $3,052,566 at December 31, 2020, a decrease in working capital of $3,998,339. The decrease is primarily attributable to a reduction in cash and an increase in deferred revenue, accounts payable, and accrued liabilities. This was offset by an increase in prepaid expense, accounts receivable, and a decrease in debt obligations. Net Cash Net cash used in operating activities for the year ended December 31, 2021, and 2020, was $20,518,807 and $7,340,487, respectively. The net loss for the year ended December 31, 2021, and 2020 was $37,379,153 and $24,162,783, respectively. This change is primarily attributable to the net loss for the current period offset by share-based payments in the amount of $9,661,174 to employees and consultants for services rendered, accretion of debt discount and debt issuance costs of $3,612,669 due to incentives given with debentures, and a change in fair value of derivative liability of $1,096,287, as well as a change in accounts payable and accrued expenses of $1,714,902. The increased net cash used in 2021 reflected an extraordinary cash outlay for marketing, which went toward generating a lower creator acquisition cost for paid Vocal subscribers, and an increase in general and administrative expenses. Net cash used in investing activities for the year ended December 31, 2021, was $1,168,123. This is primarily attributable to the purchase of Plant Camp, WHE Agency, Dune Inc., property and equipment, and cash paid for the purchase of investments. Net cash provided by financing activities for the year ended December 31, 2021, and 2020 was $17,615,915 and $15,814,083, respectively. During the year ended December 31, 2021, the Company’s operations were predominantly financed by net proceeds of $9,487,223 from the exercise of warrants, the proceeds from sale of common stock and warrants of $5,666,951, the proceeds from loans and notes of $4,358,428, and proceeds from the issuance of stock and warrants, which were partially offset by the repayment of notes and loans of $1,398,113. Similarly, the Company’s financing activity for the year ended December 31, 2020, generated $5,745,485 from loans and note issuances, the proceeds of which were partially offset by repayment of notes of $3,224,418. Summary of Statements of Operations for the Year Ended December 31, 2021, and 2020: Year Ended December 30, 2021 2020 Revenue $ 4,299,717 $ 1,212,870 Cost of revenue $ 5,300,037 $ 1,495,042 Operating expenses $ (32,368,400 ) $ (16,001,163 ) Loss from operations $ (33,368,720 ) $ (16,283,335 ) Other expenses $ (4,010,433 ) $ (7,929,448 ) Net loss $ (37,379,153 ) $ (24,212,783 ) Loss per common share – basic and diluted $ (2.98 ) $ (5.68 ) 29 Revenue Revenue was $4,299,717 for the year ended December 31, 2021, as compared to $1,212,870 for the comparable year ended December 31, 2020, an increase of $3,086,847. The year-over-year increase in revenue is primarily attributable to year-over-year growth in Vocal+ memberships as well as consistent growth in the Company’s agency businesses, which was further accelerated by the immediate and growing impact of the acquisition of the WHE Agency, which was successfully integrated during third quarter into Creatd Partners’ growing business lines, as well as the start of material contributions from Creatd Ventures following the launches of Camp and Dune. Cost of Revenue Cost of revenue for the year ended December 31, 2021, were $5,300,037 as compared to $1,495,042 for the year ended December 31, 2020. The increase of $3,804,995 in cost of revenue is mainly related to an increase personnel costs and creator costs around the moderation and content development associated with increasing Vocal+ memberships, as well as the acquisition of WHE, the growth of which requires additional sales and talent management personnel to sustain. Operating Expenses Operating expenses for the year ended December 31, 2021, were $32,368,400 as compared to $16,001,163 for the year ended December 31, 2020. The increase of $16,367,237 in operating expenses is mainly related to a $6.8 million increase in marketing expenditure, a $1.0 million increase from the impairment of goodwill, a $5.0 million increase in general and administrative expenses resulting from a near-doubling in headcount and related personnel expenses, and a $2.8 million increase in non-cash charges relating to the issuance of equity to management and employees. Much of the increase in marketing expenditure occurred during the company’s second quarter 2021 as it focused significant resources on tactical experimentation utilizing our internal data to generate a lower creator acquisition cost, resulting in significant Vocal+ membership growth, with the Company ending the second quarter 2021 having achieved a new milestone of over 30,000 Vocal+ members. The Company went on to significantly reduce marketing spend in third quarter, 2021 and then further reduce marketing for fourth quarter 2021 and expects future quarterly spend to reflect levels consistent with fourth quarter going forward. During 2021, the company’s non-cash charges totaled $9.7 million, representing past performance-based stock option grants to senior management and board members, which vest over multiple years, year-end employee performance based-stock grants, as well as extraordinary and non-recurring cash charges totaling approximately $2.5 million related to the acquisition audit mainly from WHE, legal expenses, consulting, banking and recruiting fees. Loss from Operations Loss from operations for the year ended December 31, 2021, was $33,368,720 as compared to $16,283,335 for the year ended December 31, 2020. The operating loss increase primarily reflects added marketing expenses during the first half of 2021 as the company launched a comprehensive marketing campaign to support Vocal+ membership growth. Additionally, the Company nearly doubled its headcount during the year to support growth in numerous of its business lines, including the launch of two Creatd Ventures e-commerce brands. During this transition period, the Company experienced the need for duplicate expenditures to maintain operations while training its new hires, though their addition will ultimately reduce the need for outsourced third-party service providers. Going forward, the Company expects the loss from operations to decrease as revenues continue to increase and expenses remain relatively constant. Other Income and Expenses Other expenses for the year ended December 31, 2021, were $4,010,433 as compared to $7,929,448 for the year ended December 31, 2020. The decrease in other expenses was predominantly due to the change in gain vs. loss of extinguishment of debt and a reduction in interest expense. This was offset by an increase in derivative expense, change in fair value of derivative liability, and the impairment of investments. Net Loss Net loss attributable to common shareholders for the year ended December 31, 2021, was $37,703,652, or loss per share of $2.98, as compared to a net loss attributable to common shareholders of $27,348,485, or loss per share of $5.68, for the year ended December 31, 2020. Off-Balance Sheet Arrangements As of December 31, 2021, we had no off-balance sheet arrangements. Significant Accounting Policies We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” 30 Use of Estimates and Critical Accounting Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, and impairment of intellectual property. Actual results could differ from those estimates. Fair Value of Financial Instruments The fair value measurement disclosures are grouped into three levels based on valuation factors: ● Level 1 – quoted prices in active markets for identical investments ● Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) ● Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments) The Company’s Level 1 assets/liabilities include cash, accounts receivable, marketable trading securities, accounts payable, prepaid and other current assets, line of credit and due to related parties. Management believes the estimated fair value of these accounts at December 31, 2021 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments. The Company’s Level 2 assets/liabilities include certain of the Company’s notes payable and capital lease obligations. Their carrying value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace. The Company’s Level 3 assets/liabilities include goodwill, intangible assets, marketable debt securities, equity investments at cost, and derivative liabilities. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities. Long-lived Assets Including Goodwill and Other Acquired Intangible Assets We evaluate the recoverability of property and equipment and acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. During the year ended December 31, 2021 the Company recorded an impairment charge of $688,127 for intangible assets. 31 Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life. During the year ended December 31, 2021, the Company completed its annual impairment test of goodwill. The Company performed the qualitative assessment as permitted by ASC 350-20 and determined that the fair value of the Seller's Choice reporting unit was more likely than not less than the carrying value, including Goodwill. Based on completion of this annual impairment test, the Company recorded an impairment charge of $ 1,035,795 for goodwill. Investments Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt securities not classified as held-to-maturity or as trading are classified as available-for-sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in stockholders’ equity. The Company accounts for its investments in available-for-sale debt securities, in accordance with sub-topic 320-10 of the FASB ASC (“Sub-Topic 320-10”). Accrued interest on these securities is included in fair value and amortized cost. Pursuant to Paragraph 320-10-35, investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized. The Company follows FASB ASC 320-10-35 to assess whether an investment in debt securities is impaired in each reporting period. An investment in debt securities is impaired if the fair value of the investment is less than its amortized cost. If the Company intends to sell the debt security (that is, it has decided to sell the security), an other-than-temporary impairment shall be considered to have occurred. If the Company more likely than not will be required to sell the security before recovery of its amortized cost basis or it otherwise does not expect to recover the entire amortized cost basis of the security, an other-than-temporary impairment shall be considered to have occurred. The Company considers the expected cash flows from the investment based on reasonable and supportable forecasts as well as several other factors to estimate whether a credit loss exists. If the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. During the year ended December 31, 2021, the Company recorded an impairment charge of $102,096 for investments. Equity Method Investments Investments in unconsolidated entities over which we have significant influence are accounted for under the equity method of accounting. Under the equity method of accounting, the Company does not consolidate the investment’s financial statements within its consolidated financial statements. Equity method investments are initially recorded at cost, then our proportional share of the underlying net income or loss is recorded as equity in net loss from equity method investments in our statement of operations, with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce our carrying value of the investment and are recorded in the consolidated statements of cash flows using the cumulative earnings approach. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. There were indicators of impairment related to our equity method investments for the year ended December 31, 2021. During the year ended December 31, 2021, the Company recorded an impairment charge of $487,365 for investments. Derivative Liability The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 32 The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date. The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The Company utilizes a Monte Carlo simulation model for the make whole feature (see note 10) and a binomial option model for convertible notes that have an option to convert at a variable number of shares to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The inputs utilized in the application of the Monte Carlo model included a starting stock price, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, drift, and a risk-free rate. The inputs utilized in the application of the Binomial model included a stock price on valuation date, an expected term of each debenture remaining from the valuation date to maturity, an estimated volatility, and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations. Revenue Recognition Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following steps: ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price. The transaction price for any given subscriber could decrease based on any payments made to that subscriber. A subscriber may be eligible for payment through one or more of the monetization features offered to Vocal creators, including earnings through reads (on a cost per mille basis) and cash prizes offered to Challenge winners; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, we satisfy a performance obligation. Deferred Revenue Deferred revenue consists of billings and payments from clients in advance of revenue recognition. As of December 31, 2021, and December 31, 2020, the Company had deferred revenue of $234,159 and $88,637, respectively. Stock-Based Compensation The Company recognizes compensation expense for all equity–based payments granted in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation over the requisite service period of the award. The company has a relatively low forfeiture rate of stock based compensation and forfeitures are recognized as they occur. Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods. The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is derived from the Company’s historical data over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. Forfeitures are recognized as they occur. 33 Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. The Company issues awards of equity instruments, such as stock options and restricted stock units, to employees and certain non-employee directors. Compensation expense related to these awards is based on the fair value of the underlying stock on the award date and is amortized over the service period, defined as the vesting period. The vesting period is generally one to three years. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock units. Compensation expense is reduced for actual forfeitures as they occur. Recently Adopted Accounting Guidance In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. The updated guidance, which became effective for fiscal years beginning after December 15, 2020, did not have a material impact on the Company’s consolidated financial statements. Recent Accounting Guidance Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2021, and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements. In May 2021, the FASB issued authoritative guidance intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. (ASU 2021-04), “Derivatives and Hedging Contracts in Entity’s Own Equity (Topic 815). This guidance amendments provide measurement, recognition, and disclosure guidance for an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. This guidance is effective for annual periods after December 15, 2021, including interim periods within those annual periods. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805), Which aims to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in recognition and payment terms that effect subsequent revenue recognition. ASU 2021-08 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 34