Creatd, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Form 10-Q and other reports filed by Creatd, 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-Q. 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. This discussion should be read in conjunction with our financial statements and accompanying notes for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on April 6, 2022. Overview Creatd, Inc. (“CRTD,” “the Company,” or “Creatd”) is a company whose mission is to provide economic opportunities to creators and brands by multiplying the impact of platforms, people, and technology. We operate four main business segments, or ‘pillars’: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios. Together, Creatd’s pillars work together to create a flywheel effect, supporting our core vision of creating a viable ecosystem for all stakeholders in the creator economy. Creator-Centric Strategy Our purpose is to empower creators to prosper through exceptional tools, built-in communities, and opportunities for monetization and audience expansion. This creator-first approach is the foundation of our culture and mission, and how we choose to allocate our resources. It governs our business model and shapes the value we provide for each of our stakeholders across Creatd’s four pillars. Creatd Labs Creatd Labs is dedicated to the development of technology products that support the creator economy. This pillar houses Creatd’s proprietary technology platforms, including Creatd’s flagship product, Vocal. This pillar is operated through our wholly-owned subsidiary, Abacus Tech Pty Ltd. 32 Vocal Vocal was designed to serve as a home base for digital creators of all shapes and sizes, from bloggers to podcasters, makers, musicians, photographers, and more. Vocal’s robust, proprietary technology platform provides these creators with best-in-class tools, niche (topic-specific) communities, and monetization opportunities. Vocal facilitates creators’ monetization in numerous different ways, including i) by rewarding creators for each ‘read’ their story receives; ii) via Vocal Challenges, through which creators can win cash and other rewards; iii) by awarding Bonuses; iv) by connecting creators with brands for opportunities to collaborate on Vocal for Brands branded content campaigns; v) through ‘Subscribe,’ which enables creators to receive payment directly from their audience via monthly subscriptions and one-off microtransactions; vi) via Vocal’s Ambassador Program, which enables creators to receive additional rewards whenever they refer a new Vocal+ member. Vocal+ Vocal+ is Vocal’s premium membership program. Subscribers pay a membership fee to access additional premium features on the platform, including: a higher rate of earnings per read, Vocal+ Challenge eligibility, use of a ‘Quick Edit’ feature for published stories, ability to receive monthly pledges from their fans, and more. The current cost of a Vocal+ membership is either $9.99 per month or $99 annually. From time to time, the Company offers Vocal+ subscriptions at a discount for a predetermined number of months as a promotion for new subscribers. Moderation and Compliance One of the key differentiating factors between Vocal and most other user-generated content platforms is the fact that each story submitted to Vocal is run through the Company’s proprietary moderation process before it goes live on the platform. The decision to implement moderation into the submission process was in direct response to the rise of misinformation and bad actors on many social platforms. In response to these inherent pitfalls within the content landscape, Vocal’s proprietary moderation system combines the algorithmic detection of copyrighted material, hate speech, graphic violence, and nudity with human-led curation to ensure the quality and safety of each story published on Vocal, thus fostering a safe and trustworthy environment for creators, audiences, and brands. Trust and safety are paramount to the Vocal ecosystem. We follow best practices when handling personally identifiable information, with guidance from the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and the Digital Millennium Copyright Act (DMCA). Platform Compliance Policies include: ● Human-led, technology-assisted moderation of every story submitted; ● Algorithmic detection of hate speech, nudity, and copyright infringement; ● Brand, creator, and audience safety enforced through community watch; and ● The rejection of what we consider toxic content, with the understanding that diverse opinions are encouraged. Technology Development Vocal’s proprietary technology is built on Keystone, the same underlying open-source framework used by industry leaders such as Atlassian, a $43-billion Australian technology company. Some of the key differentiating elements of Vocal’s technology are speed, sustainability, and scalability. The Company continues to invest heavily in research and development to continuously improve and innovate its platform, with the goal of optimizing the user experience for creators. 33 Additionally, the Vocal platform and its underlying technology allows us to maintain an advantageous capital-light infrastructure. By using cloud service providers, we are able to focus on platform and revenue growth rather than building and maintaining the costly internal infrastructures that have materially affected so many legacy media platforms. Vocal’s technology has been specifically designed and built to scale without a material corresponding increase in operational costs. While our users can embed rich media, such as video, audio, and product links, into their Vocal stories, the rich media content is hosted elsewhere (such as YouTube, Instagram, Vimeo, Shopify, Spotify, etc.). Thus, our platform can accommodate rich media content of all kinds without bearing the financial or operational costs associated with hosting the rich media itself. In addition to the benefits this framework affords to the Company, it provides the additional benefit to our content creators, in that a creator can increase their monetization; for example, a creator can embed their YouTube video into a Vocal story and thus derive earnings from both platforms when their video is viewed. Creatd Partners Creatd Partners houses the Company’s agency businesses, with the goal of fostering partnerships between creators and brands. Creatd Partners’ offerings include: Vocal for Brands (content marketing), WHE Agency (influencer marketing), and Seller’s Choice (performance marketing). Creatd Partners leverages its network of brands and influencers, along with resources from across Creatd, to help direct-to-consumer brands achieve conversions and reach their target audiences, while driving success for all of Creatd’s stakeholders. Vocal for Brands All brands have a story to tell, and we leverage Vocal’s creator community to help them tell it. Vocal for Brands, Creatd’s content marketing studio, specializes in pairing leading brands with Vocal creators and influencers to produce marketing campaigns that are non-interruptive, engaging, and direct-response driven. Further, Vocal for Brands campaigns leverage Vocal’s first-party data and technology, which enables the creation of highly targeted and segmented audiences and optimized campaign results. In addition to branded story campaigns Additionally, brands can opt to collaborate with Vocal on a sponsored Challenge, prompting the creation of high-quality stories that are centered around the brand’s mission and further disseminated through creators’ respective social channels and promotional outlets. WHE Agency The WHE Agency (“WHE”), acquired by Creatd in 2021, was founded by Tracy Willis with the goal of supporting top creators and influencers, by connecting them with leading family and lifestyle brands and global audiences. Today, WHE represents a roster of over 100 creators across numerous verticals, including family and lifestyle, music, entertainment, and celebrity categories. Since acquiring WHE, the Company has facilitated partnerships on influencers’ behalf with leading brands including CBS, Amazon, Target, Disney, Warby Parker, CVS, Kay Jewelers, Walmart, Gerber, Masterclass, Procter & Gamble, Nike, and NFL, among others. Seller’s Choice Seller’s Choice is Creatd Partners’ performance marketing agency specializing in DTC (direct-to-consumer) and e-commerce clientele. Seller’s Choice provides direct-to-consumer brands with design, development, strategy, and sales optimization services. Creatd Ventures Creatd Ventures houses Creatd’s portfolio of DTC e-commerce businesses. The Company supports founders by providing capital, as well as a host of services including design and development, marketing and distribution, and go-to-market strategy. Currently, the Creatd Ventures portfolio includes: ● Camp , previously Plant Camp, a DTC food brand which creates healthy upgrades to classic comfort food favorites. Each of Camp’s products are created with hidden servings of vegetables and contain Vitamins A, C, D, E, B1 + B6. In the fourth quarter of 2021, Camp added two new products to its expanding line of healthy, veggie-based, family-friendly foods. Currently, Camp has four flavors available for purchase: Classic Cheddar Mac ‘N’ Cheese, White Cheddar Mac ‘N’ Cheese, Vegan Cheezy Mac, and Twist Veggie Pasta. Camp, which first launched in 2020, represents the first investment within the Creatd Ventures portfolio. 34 ● Dune Glow Remedy (“Dune”), which the Company purchased and brought to market in 2021. Dune is a beverage brand focused on promoting wellness and beauty from within. Each beverage in Dune’s product line is meticulously crafted with functional ingredients that nourish skin from the inside out and enhance one’s natural glow. ● Basis , which was acquired by the Company in March of 2022. Basis is a hydrating electrolyte drink mix formulated using rehydration therapies developed by the World Health Organization. Historically, Basis has shown strong sales volume both on the brand’s website as well as through third-party channels such as Amazon, while continuing to expand distribution to retailers like Urban Outfitters and Erewhon Market. Creatd Studios The goal of Creatd Studios is to elevate creators’ stories to TV, film, books, podcasts, video, and more. ● Transmedia Assets : With millions of compelling stories in its midst, Creatd’s technology surfaces the best candidates for transmedia adaptations, through community and creator data insights. Then, Creatd Studios helps creators tell their existing stories in new ways, by partnering them with entertainment and publishing studios to create unique content experiences that accelerate earnings, discoverability, and open doors. In 2022, Creatd Studios announced numerous upcoming production projects, including the upcoming publication of a print book featuring the winning stories from Vocal’s ‘Vocal+ Fiction Awards’ Challenge, and the launch of a new podcast, with two miniseries currently in production. ● OG Gallery : The OG Collection is an extensive library of original artwork and imagery from the archives of some of the most iconic magazines of the 20th century. OG Gallery is an exploratory initiative aimed at identifying opportunities to propel the OG Collection into a new technological sphere: the NFT marketplace. Application of First-Party Data Creatd’s business intelligence and marketing teams identify and target individual creators, communities, and brands, utilizing empirical data harnessed from the Vocal platform. The team’s ability to apply its proprietary first-party data works to reduce acquisition costs for new creators and to help provide brands with conversions and an ideal targeted audience. In this way, our ability to apply first-party data is one of the value-drivers for the Company across its four business pillars. Importantly, we do not sell the collected data, that being a common monetization opportunity for many other businesses. Instead, we use our collected first-party data for the purposes of bettering the platform. Specifically, our data helps us understand the behaviors and attributes that are common among the creators, brands, and audiences within our ecosystem. We then pair our first-party Vocal data with third-party data from distribution platforms such as Facebook and Snapchat to provide a more granular profile of our creators, brands, and audiences. It is through generating this valuable first-party data that we can continually enrich and refine our targeting capabilities for branded content promotion and creator acquisition, and specifically, to reduce our creator acquisition costs (CAC) and subscriber acquisition costs (SAC). 35 Competition The idea for Vocal came as a response to what Creatd’s founders recognized as systemic flaws inherent to the digital media industry and its operational infrastructures. The depreciating value of digital media business models built on legacy technology platforms created a unique opportunity for the development of a creator-centric platform that could appeal to a global community and, at the same time, be capable of acquiring undervalued complimentary technology assets. Creatd’s founders built the Vocal platform upon the general thesis that a closed and safe ecosystem utilizing first-party data to increase efficiencies could create a sustainable and defensible business model. Vocal was strategically developed to provide value for content creators, readers, and brands, and to serve as a home for the ever-increasing amount of digital content being produced and the libraries of digital assets lying dormant. Vocal is most commonly discussed as a combination of: ● Medium, a platform for writers built by former Twitter founder Ev Williams; ● Reddit, a social news aggregation, web content rating, and discussion website; and ● Patreon, a membership platform that provides business tools for content creators to run a subscription service. Creatd does not view Vocal as a substitute or competitor to segment-specific content platforms, such as Vimeo, YouTube, Instagram, or SoundCloud. We don’t want to replace anyone; we built Vocal to be accretive to the entire digital ecosystem. In fact, one of the most powerful components of our technology is the fact that Vocal makes it easy for creators to embed their existing published content, including videos, songs, podcasts, photographs, and more, directly into Vocal. We see this as a growth opportunity by building partnerships with the world’s greatest technology companies and to further spread our roots deeper into the digital landscape. Acquisition Strategy Creatd’s hybrid finance and design culture is key to its acquisition strategy. Acquisition targets are companies that meet a set of opportunistic or financial standards or that are part of specific digital environments that are accretive and can seamlessly integrate into Creatd’s existing revenue lines. Creatd will continue to make strategic acquisitions when presented with opportunities that are in the interest of shareholder value. 36 Recent Developments Nasdaq Notice of Delisting; Continued Listing On March 1, 2022, the Company received a letterfrom the staff of The Nasdaq Capital Market (the “Exchange”) notifying the Company that the Exchange has determined to delist the Company’s common stock from the Exchange based on the Company’s Market Value of Listed Securities for the 30-consecutive day period between January 15, 2022 and February 25, 2022 falling short of the requirements under Listing Rule 5550(b)(2) (the “Rule”). Although a 180-day period is typically allowed for an issuer to regain compliance, the Company was not eligible to use such compliance period, as the Exchange had instituted a Panel Monitor through March 9, 2022. The Company pursued an appeal to the Nasdaq Hearings Panel (the “Panel”) of such determination, in accordance with the Exchange’s rules and, pursuant to such request by the Company to appeal, the delisting of the Company’s securities and the Form 25 Notification of Delisting filing was stayed pending the Panel’s decision. On April 22, 2022, the Exchange notified the Company that the Panel has determined to continue the listing of the Company on the Exchange, subject to the following conditions: (i) on or before May 16, 2022, the Company will file its Quarterly Report on Form 10-Q for the period ended March 31, 2022 demonstrating compliance with Nasdaq Listing Rule 550(b)(1) requiring shareholders’ equity of $2.5 million and (ii) on or before August 29, 2022, the Company will file a Form 8-K documenting the successful completion of any fund-raising activity that has taken place since April 14, 2022 and the Company’s long-term compliance with the continued listing requirements of the Nasdaq Capital Market. The Panel has advised that August 29, 2022 represents the full extent of the Panel’s discretion to grant continued listing during the time the Company is non-compliant and should the Company fail to demonstrate compliance by such date, the Panel will issue a final delist determination and the Company will be suspended from trading on the Exchange. Registered Direct Offering On March 7, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with thirteen accredited investors resulting in the raise of $2,659,750 in gross proceeds to the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering an aggregate of 1,519,857 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) together with warrants to purchase an aggregate of 1,519,857 shares of Common Stock (the “Warrants”) at an exercise price of $1.75 per share (collectively, the “Registered Direct Offering”). The warrants are immediately exercisable and will expire on March 9, 2027. The Registered Direct Offering closed on March 9, 2022. Gross proceeds to the Company from the Registered Director Offering were $2,659,750, before deducting offering expenses, which will be used for general corporate purposes, including working capital. The shares of Common Stock were offered and sold by the Company pursuant to a prospectus supplement filed with the Securities and Exchange Commission (the “SEC”), in connection with a takedown from the Company’s effective shelf registration statement on Form S-3, which was filed with the SEC on November 25, 2020 and subsequently declared effective on April 23, 2021 (File No. 333-250982). 37 Private Placement Financing On March 1, 2022, the Company entered into securities purchase agreements with twenty-eight (28) accredited investors whereby, at the closing, such investors purchased from the Company an aggregate of (i) 1,401,457 shares of the Company’s common stock, par value $0.001 per share and (ii) 1,401,457 warrants to purchase shares of common stock, for an aggregate purchase price of $2,452,550 (the “Private Placement Financing”). Such warrants are exercisable for a term of five-years from the date of issuance, at an exercise price of $1.75 per share, and provide for cashless exercise to the extent that there is no registration statement available for the underlying shares of common stock. The Benchmark Company, LLC acted as exclusive financial advisor for the Company in connection with the Private Placement Financing and is entitled to receive 125,000 shares of common stock as compensation for its services. The closing of the Private Placement Financing occurred on March 1, 2022. Results of Operations Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at March 31, 2022 compared to December 31, 2021: March 31, 2022 December 31, 2021 Increase / (Decrease) Current Assets $ 4,332,053 $ 4,475,242 $ (143,189 ) Current Liabilities $ 6,194,866 $ 5,421,015 $ 773,851 Working Capital (Deficit) $ (1,862,813 ) $ (945,773 ) $ (917,040 ) At March 31, 2022, we had a working capital deficit of $1,862,813 as compared to a working capital deficit of $945,773 at December 31, 2021, an increase in working capital deficit of $917,040. The increase is primarily attributable to a reduction in cash and an increase in accounts payable due in part to marketing-related payables as well as payables for legal and accounting fees addressing one-time corporate matters. This was offset by a decrease in notes payable. 38 Net Cash Net cash used in operating activities for the three months ended March 31, 2022, and 2021, was $5,037,179 and $5,296,638, respectively. The net loss for the three months ended March 31, 2022, and 2021 was $6,881,048 and $6,643,237, respectively. The decrease in net cash used in first quarter 2022 reflects a decrease in research and development expenses, offset by an increase in general and administrative costs including consulting, legal, and accounting fees. Going forward, as the Company plans to simultaneously grow revenue while improving operational efficiency, it is anticipated that the Company’s net cash used in operating activities will consistently decrease throughout 2022. Net cash used in investing activities for the three months ended March 31, 2022, was $50,950. This is primarily attributable to the purchase of digital assets within the Company’s NFT infrastructure, as well as the purchase of property and equipment. Net cash provided by financing activities for the three months ended March 31, 2022, and 2021 was $4,527,972 and $412,576, respectively. During the three months ended March 31, 2022, the Company’s operations were predominantly financed by net proceeds of $4,997,301 from the sale of common stock and warrants, which were partially offset by the repayments of notes payable. Similarly, the Company’s financing activity for the three months ended March 31, 2021, generated $1,312,672 from the exercises of warrants, the proceeds of which were partially offset by repayment of notes of $985,596. Summary of Statements of Operations for the Three Months Ended March 31, 2022, and 2021: Three Months Ended March 31, 2022 2021 Revenue $ 1,348,738 $ 743,913 Cost of revenue $ 1,572,170 $ 867,150 Operating expenses $ (6,785,852 ) $ (5,822,760 ) Loss from operations $ (7,009,284 ) $ (5,945,997 ) Other income (expenses) $ 128,236 $ (697,240 ) Net loss $ (6,881,048 ) $ (6,643,237 ) Loss per common share – basic and diluted $ (0.36 ) $ (0.68 ) Revenue Revenue totaled $1,348,738 for the three months ended March 31, 2022, as compared to $743,913 for the comparable three months ended March 31, 2021, an increase of $604,825. The 81% year-over-year increase in quarterly revenue is attributable to the steady growth of both Creatd Partners (influencer and content marketing) which increased 36% year-over-year, as well as Created Labs (Vocal and technology development) which experienced a 66% increase in revenue generated as compared to the prior first quarter 2021. In addition, Creatd Ventures (e-Commerce) generated sales totaling $254,724, indicating continued revenue momentum within this segment following its initial launch with the acquisition of Plant Camp in mid-2021. Going forward, the Company anticipates continued momentum as Creatd Partners expands its influencer marketing capabilities and methodically increases its average revenue per brand campaign; as Creatd Labs increases conversion from freemium to Vocal+ subscriptions with advancements in its technology development and offerings; as Creatd Ventures expands the marketing visibility of its March 2022 acquisition of its latest direct-to-consumer brand acquisition, Basis, and establishes new and expanded distribution of Dune and Camp. In addition, during 2022, Creatd anticipates its first material revenue contribution from its fourth business segment Creatd Studios (Transmedia production). 39 Cost of Revenue Cost of revenue for the three months ended March 31, 2022, were $1,572,170 as compared to $867,150 for the three months ended March 31, 2021. The increase of $705,020 in cost of revenue is related to the establishment and operational launch of Creatd Ventures, which recently began contributing material revenues. Additionally, the increase is attributable to expansion of the Company’s moderation and content development teams, a byproduct of increased Vocal+ membership volume combined with the additional sales and talent management personnel associated with Creatd Partners. The Company expects the gross margin to improve over time as it continues to grow and improve upon a self-sustaining, organically driven revenue model across its business segments. Operating Expenses Operating expenses for the three months ended March 31, 2022, were $6,785,852 as compared to $5,822,760 for the three months ended March 31, 2021. The increase of $963,092 in operating expenses is mainly related to general and administrative (“G&A”) cost increases, predominantly due to an increase in headcount and related personnel expenses as well as costs related to the Company’s expanded presence in key markets, which contributed to an increase in office rent and related moving expenses. G&A was further impacted by a non-recurring increase in consulting expenses, site development, and recruiting fees. The year-over-year increase in first quarter G&A was offset in part by a decrease in research and development expenditure and stock based compensation. During the first quarter 2022, the company’s non-cash charges totaled $1,080,792, a $489,447 decrease from first quarter 2021. This amount represents stock based compensation expenses related to the vesting of past stock option grants to senior management and board members, which vest over multiple years, and stock-based fees to service providers that opted for stock in lieu of cash. The Company expects expenditures to decrease over coming quarters as the Company normalizes its marketing costs and scrutinizes many of the contributing expenses within G&A. Loss from Operations Loss from operations for the three months ended March 31, 2022, was $7,009,284 as compared to $5,945,997 for the three months ended March 31, 2021. The $1,063,287 increase in the loss from operations this quarter primarily reflects the nearly doubling year over year of Company personnel to 60 professionals. In addition, short-term consulting and other services that were required during the quarter to address one-time needs heightened expenses. Going forward, the Company expects the loss from operations to decrease as revenues continue to increase and expenses achieve normalcy levels. Other Income and (Expenses) Other income (expenses) for the three months ended March 31, 2022, were $128,236 as compared to $(697,240) for the three months ended March 31, 2021. The increase in first quarter 2022 other income was predominantly due to a decrease in an accretion of debt discount and issuance cost, an elimination of derivative expense, and a decrease in interest expense. Net Loss Net loss for the three months ended March 31, 2022, was $6,881,048, as compared to a net loss of $6,643,237 for the three months ended March 31, 2021. Net loss attributable to common shareholders for the three months ended March 31, 2022, was $6,334,890, or loss per share of $0.36, as compared to a net loss attributable to common shareholders of $6,643,237, or loss per share of $0.68, for the three months ended March 31, 2021. Off-Balance Sheet Arrangements As of March 31, 2022, we had no off-balance sheet arrangements. 40 Significant Accounting Policies Our significant accounting policies are described in Note 2 of the Financial Statements. If we complete an acquisition, we will be required to make estimates and assumptions typical of other companies. For example, we will be required to make critical accounting estimates related to valuation and accounting for business combinations. The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period. Changes in estimates used in these and other items could have a material impact on our financial statements in the future. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates. For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk. There have been no material changes in our exposures to market risk since December 31, 2021. For details on the Company’s interest rate, foreign currency exchange, and credit risks, see “Item 7A. Quantitative and Qualitative Information About Market Risks” in our 2021 Annual Report.