FOSTER L B CO 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands, except share data) Forward-Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”). Forward-looking statements provide management’s current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Sentences containing words such as “believe,” “intend,” “plan,” “may,” “expect,” “should,” “could,” “anticipate,” “estimate,” “predict,” “project,” or their negatives, or other similar expressions of a future or forward-looking nature generally should be considered forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are based on management’s current expectations and assumptions about future events that involve inherent risks and uncertainties and may concern, among other things, the Company’s expectations relating to our strategy, goals, projections, and plans regarding our financial position, liquidity, capital resources, and results of operations and decisions regarding our strategic growth initiatives, market position, and product development. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control. The Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: the COVID-19 pandemic, and any future global health crises, and the related social, regulatory, and economic impacts and the response thereto by the Company, our employees, our customers, and national, state, or local governments; volatility in the prices of oil and natural gas and the related impact on the midstream energy markets, which could result in cost mitigation actions, including shutdowns or furlough periods; a continuation or worsening of the adverse economic conditions in the markets we serve, including recession, whether as a result of the current COVID-19 pandemic or otherwise, including its impact on labor markets, supply chains, and other inflationary costs, travel and demand for oil and gas, the continued volatility in the prices for oil and gas, governmental travel restrictions, project delays, and budget shortfalls, or otherwise; volatility in the global capital markets, including interest rate fluctuations, which could adversely affect our ability to access the capital markets on terms that are favorable to us; restrictions on our ability to draw on our credit agreement, including as a result of any future inability to comply with restrictive covenants contained therein; a continuing decrease in freight or transit rail traffic, including as a result of the ongoing COVID-19 pandemic, strikes, or labor stoppages; environmental matters, including any costs associated with any remediation and monitoring of such matters; the risk of doing business in international markets, including compliance with anti-corruption and bribery laws, foreign currency fluctuations and inflation, and trade restrictions or embargoes; our ability to effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, such as the recent dispositions of the Piling, Track Components, and Chemtec businesses, and acquisitions of the Skratch Enterprises Ltd., Intelligent Video Ltd., and VanHooseCo Precast LLC businesses and to realize anticipated benefits; costs of and impacts associated with shareholder activism; continued customer restrictions regarding the on-site presence of third party providers due to the COVID-19 pandemic; the timeliness and availability of materials from our major suppliers, including any continuation or worsening of the disruptions in the supply chain experienced as a result of the COVID-19 pandemic, as well as the impact on our access to supplies of customer preferences as to the origin of such supplies, such as customers’ concerns about conflict minerals; labor disputes; cyber-security risks such as data security breaches, malware, ransomware, “hacking,” and identity theft, which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses, or an adverse effect to our reputation; the continuing effectiveness of our ongoing implementation of an enterprise resource planning system; changes in current accounting estimates and their ultimate outcomes; the adequacy of internal and external sources of funds to meet financing needs, including our ability to negotiate any additional necessary amendments to our credit agreement or the terms of any new credit agreement, and reforms regarding the use of SOFR as a benchmark for establishing applicable interest rates; the Company’s ability to manage its working capital requirements and indebtedness; domestic and international taxes, including estimates that may impact taxes; domestic and foreign government regulations, including tariffs; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union; geopolitical conditions, including the conflict in Ukraine; a lack of state or federal funding for new infrastructure projects; an increase in manufacturing or material costs; the loss of future revenues from current customers; and risks inherent in litigation and the outcome of litigation and product warranty claims. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. Significant risks and uncertainties that may affect the operations, performance, and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2022, or as updated and/or amended by our other current or periodic filings with the Securities and Exchange Commission. The forward-looking statements in this report are made as of the date of this report and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by the federal securities laws. 17 Table of Contents General Overview and Business Update Results of the Quarter Three Months Ended March 31, Percent Change Percent of Total Net Sales Three Months Ended March 31, 2023 2022 2023 vs. 2022 2023 2022 Net sales $ 115,488 $ 98,794 16.9 % 100.0 % 100.0 % Gross profit 23,291 16,447 41.6 20.2 16.6 Expenses: Selling and administrative expenses 21,423 17,298 23.8 18.5 17.5 Amortization expense 1,365 1,436 (4.9) 1.2 1.5 Operating profit (loss) 503 (2,287) 122.0 0.4 (2.3) Interest expense - net 1,388 370 ** 1.2 0.4 Other expense (income) - net 1,827 (563) ** 1.6 (0.6) Loss before income taxes (2,712) (2,094) (29.5) (2.3) (2.1) Income tax benefit (541) (508) (6.5) (0.5) (0.5) Net loss (2,171) (1,586) (36.9) (1.9) (1.6) Net loss attributable to noncontrolling interest (19) (20) 5.0 (0.0) (0.0) Net loss attributable to L.B. Foster Company $ (2,152) $ (1,566) (37.4 %) (1.9 %) (1.6 %) Diluted loss per common share $ (0.20) $ (0.15) ** Results of the calculation are not considered meaningful for presentation purposes. L.B. Foster Company is a global technology solutions provider of engineered, manufactured products and services that builds and supports infrastructure. The Company’s innovative engineering and product development solutions address the safety, reliability, and performance needs of its customers’ most challenging requirements. The Company maintains locations in North America, South America, Europe, and Asia. The Company is organized and operates in three reporting segments: Rail, Technologies, and Services, Precast Concrete Products, and Steel Products and Measurement. Acquisition and Divestiture Summary On August 12, 2022, the Company acquired the operating assets of VanHooseCo Precast, LLC (“VanHooseCo”), a business specializing in precast concrete walls, water management products, and forms for the commercial and residential infrastructure markets for $52,146 net of cash acquired. VanHooseCo has been included in the Company’s Precast Concrete Products segment. On June 21, 2022, the Company acquired the stock of Skratch Enterprises Ltd. (“Skratch”) for $7,402, which is inclusive of deferred payments withheld by the Company of $1,228, to be paid over the next four years or utilized to satisfy post-closing working capital adjustments or indemnity claims under the purchase agreement. Skratch is an industry leader in digital system integration with expertise in advanced digital display technologies and capabilities currently serving retail markets in the U.K. Skratch is reported within the Technology Services and Solutions business unit in the Rail, Technologies, and Services segment. On August 1, 2022, the Company divested the assets of its Track Components business. Cash proceeds from the transaction were $7,795, subject to indemnification obligations and working capital adjustments and a loss on sale of $467 was recorded in “Other expense (income) - net.” The Track Components business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment. On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec Energy Services LLC (“Chemtec”) business for $5,344 in proceeds, subject to final working capital adjustments, generating a $2,033 loss on sale, recorded in “Other expense (income) - net.” The Chemtec business was reported in the Coatings and Measurement business unit within the Steel Products and Measurement segment. Results Summary Net sales of $115,488 for the three months ended March 31, 2023 increased by $16,694, or 16.9%, over the prior year quarter. The change in sales is due in part to the acquisitions of Skratch and VanHooseCo offset by the divestiture of the Track Components business. Organic growth and acquisitions drove a 11.5% and 9.3% increase in sales over the prior year quarter, respectively, with an offsetting 3.9% decline from divestitures. 18 Table of Contents Gross profit for the three months ended March 31, 2023 was $23,291, an increase of $6,844 over the prior year quarter, or 41.6%, and gross profit margins expanded by 360 basis points to 20.2%. The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation plan along with improved product mix and pricing. Selling and administrative expenses for the three months ended March 31, 2023 increased by $4,125, or 23.8%, from the prior year quarter, due in part to the acquisition of VanHooseCo and Skratch, as well as higher personnel expenses. Selling and administrative expenses as a percent of net sales were 18.5% versus 17.5% in the prior year quarter, a 100 basis point increase. The recent acquisitions have a higher margin portfolio and higher selling and administrative costs. Other expense - net for the three months ended March 31, 2023 was $1,827 while other income - net was $563 in the prior year quarter. Other expense - net for the three months ended March 31, 2023 was due to the $2,033 loss on the sale of Chemtec during the quarter. The Company’s effective income tax rate for the three months ended March 31, 2023 was 19.9%, compared to 24.3% in the prior year quarter. Due to the full valuation allowance on domestic deferred tax assets, the Company’s tax provision for the three months ended March 31, 2023 does not reflect any tax benefit for domestic pre-tax losses, and is primarily comprised of taxes related to our Canadian and United Kingdom operations. Net loss for the three months ended March 31, 2023 attributable to the Company was $2,152, or $0.20 per diluted share, unfavorable by $586, or $0.05 per diluted share, from the prior year quarter. The loss was primarily driven by the $2,033 loss on the sale of Chemtec during the three months ended March 31, 2023, which offset stronger comparable operating profit stemming from margin expansion. The Company continues to execute its strategic transformation into a technology-focused, high growth infrastructure solutions provider, as evidenced by the number of recent portfolio actions taken, including the sale of Chemtec, which minimizes the Company's exposure to the energy market and allows for additional capacity to focus on its core growth platforms in Rail Technologies and Precast Concrete, and an increased focus on organic growth initiatives and debt reduction going into 2023. Proceeds from the Chemtec sale have contributed to the pay down of debt during the quarter and increased capacity under the credit agreement to further support its strategic initiatives. Results of Operations - Segment Analysis First Quarter 2023 Compared to First Quarter 2022 Rail, Technologies, and Services Three Months Ended March 31, Change Percent Change 2023 2022 2023 vs. 2022 2023 vs. 2022 Net sales $ 64,384 $ 63,710 $ 674 1.1 % Gross profit $ 14,284 $ 12,528 $ 1,756 14.0 % Gross profit percentage 22.2 % 19.7 % 2.5 % 12.8 % Segment operating profit $ 2,388 $ 1,039 $ 1,349 129.8 % Segment operating profit percentage 3.7 % 1.6 % 2.1 % 131.3 % The Rail, Technologies, and Services segment sales for the three months ended March 31, 2023 increased by $674, or 1.1%, compared to the prior year quarter. Net sales increased by 5.8% organically and by 1.3% from the acquisition of Skratch, offset by a 6.1% decrease from the divestiture of Track Components. T he Global Friction Management business unit increase in sales was offset by sales decreases in the Technology Services and Solutions business unit. The Friction Management sales increase was driven by strength in domestic markets served. The sales decrease in the Technology Services and Solutions business unit was driven by the completion of the multi-year Crossrail project in late 2022. The Rail, Technologies, and Services segment gross profit increased by $1,756, or 14.0% over the prior year quarter, and gross profit margins expanded 250 basis points to 22.2%. Gross profit increases in Rail Products and Global Friction Management were commensurate with higher sales levels, while weaker sale in Technology Services and Solutions drove a partially offsetting gross profit decline. The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation along with increased sales in the higher margin Global Friction Management business along with improved pricing. Operating profit was $2,388, a $1,349 increase over the prior year quarter, due primarily to higher gross profit levels. 19 Table of Contents During the current quarter, the Rail, Technologies, and Services segment had a decrease in new orders of $17,664, or 19.3%, compared to the prior year period. The decrease is due primarily to differences in customer order timing in the Rail Distribution business, as well as an unfavorable impact of $4,805 due to the Track Components divestiture. Backlog as of March 31, 2023 was $113,593, a decrease of $9,325, or 7.6%, versus the prior year quarter, $2,531 of which is related to the divested Track Components division. Precast Concrete Products Three Months Ended March 31, Change Percent Change 2023 2022 2023 vs. 2022 2023 vs. 2022 Net sales $ 24,288 $ 15,010 $ 9,278 61.8 % Gross profit $ 5,521 $ 2,445 $ 3,076 125.8 % Gross profit percentage 22.7 % 16.3 % 6.4 % 39.5 % Segment operating loss $ (348) $ (791) $ 443 56.0 % Segment operating loss percentage (1.4) % (5.3 %) 3.9 % 73.6 % The Precast Concrete Products segment sales for the three months ended March 31, 2023 increased by $9,278, or 61.8%, compared to the prior year quarter. The VanHooseCo acquisition contributed $8,299, or 55.3%, of the increase in sales over the prior year quarter. Organic sales increased by $979, or 6.5%, which is a continued reflection of the strong demand environment in the southern and northeastern United States markets. The Precast Concrete Products segment's gross profit for the three months ended March 31, 2023 increased by $3,076, and gross profit margins expanded by 640 basis points to 22.7%. The improvement in gross profit is due to the VanHooseCo acquisition as well as overall sales volumes and stronger margins from the legacy precast business, including the impact of improved pricing. Operating loss for the first quarter of 2023 was $348, a $443 improvement over the prior year quarter, due to higher gross profit levels, which was partially offset by an increase in selling and administrative expenses from the VanHooseCo acquisition, as well as increased personnel expenses. During the quarter, the Precast Concrete Products segment had an increase in new orders and backlog of 89.2% and 21.2%, respectively, compared to the prior year quarter. The increase in new orders and backlog is due to the VanHooseCo acquisition and strong demand in the legacy business. Steel Products and Measurement Three Months Ended March 31, Change Percent Change 2023 2022 2023 vs. 2022 2023 vs. 2022 Net sales $ 26,816 $ 20,074 $ 6,742 33.6 % Gross profit $ 3,486 $ 1,474 $ 2,012 136.5 % Gross profit percentage 13.0 % 7.3 % 5.7 % 77.0 % Segment operating loss $ (8) $ (2,148) $ 2,140 99.6 % Segment operating loss percentage 0.0 % (10.7) % 10.7 % 100.0 % The Steel Products and Measurement segment sales for the three months ended March 31, 2023 increased by $6,742, or 33.6%, compared to the prior year quarter. The increase in sales for the first quarter of 2023 was attributable to the $8,819 increase in Coatings and Measurement sales over the prior year quarter, due to increased activity in both traditional and adjacent market applications. This increase was partially offset by a decrease in Fabricated Steel Products business unit sales of $2,087. Steel Products and Measurement gross profit for the three months ended March 31, 2023 increased by $2,012, and gross profit margins increased 570 basis points to 13.0%. The increase in gross profit is primarily due to stronger margins in the Protective Coatings division attributable to higher volumes. The segment operating loss was reduced $2,140 from the prior year quarter, due to higher gross profit levels. During the quarter, the Steel Products and Measurement segment had an increase in new orders and backlog of $4,697, or 18.9%, and $9,220, or 18.7%, respectively, compared to the prior year quarter. The increase is a result of improved order levels in the Fabricated Steel Products business unit and the Protective Coatings division due to strong demand in both traditional and adjacent market applications. The backlog increase was partially offset by a $5,657 decrease due to the Chemtec divestiture. 20 Table of Contents Liquidity and Capital Resources The Company’s principal sources of liquidity are its existing cash and cash equivalents, cash generated by operations, and the available capacity under the revolving credit facility, which provides for a total commitment of up to $130,000, of which $49,091 was available for borrowing as of March 31, 2023, subject to covenant restrictions. The Company’s primary needs for liquidity relate to working capital requirements for operations, capital expenditures, debt service obligations, payments related to the Union Pacific Railroad Settlement, and acquisitions. The Company’s total debt, including finance leases, was $80,096 and $91,879 as of March 31, 2023 and December 31, 2022, respectively, and was primarily comprised of borrowings under its revolving credit facility. The following table reflects available funding capacity, subject to covenant restrictions, as of March 31, 2023: March 31, 2023 Cash and cash equivalents $ 2,639 Credit agreement: Total availability under the credit agreement 130,000 Outstanding borrowings on revolving credit facility (79,825) Letters of credit outstanding (1,084) Net availability under the revolving credit facility 49,091 Total available funding capacity $ 51,730 The Company’s cash flows are impacted from period to period by fluctuations in working capital, as well as its overall profitability. While the Company places an emphasis on working capital management in its operations, factors such as its contract mix, commercial terms, days sales outstanding (“DSO”), and market conditions as well as seasonality may impact its working capital. The Company regularly assesses its receivables and contract assets for collectability and realization, and provides allowances for credit losses where appropriate. The Company believes that its reserves for credit losses are appropriate as of March 31, 2023, but adverse changes in the economic environment and adverse financial conditions of its customers may impact certain of its customers’ ability to access capital and pay the Company for its products and services, as well as impact demand for its products and services. The changes in cash and cash equivalents for the three months ended March 31, 2023 and 2022 were as follows: Three Months Ended March 31, 2023 2022 Net cash provided by (used in) operating activities $ 6,932 $ (7,636) Net cash provided by (used in) investing activities 4,661 (539) Net cash (used in) provided by financing activities (12,022) 4,012 Effect of exchange rate changes on cash and cash equivalents 186 30 Net decrease in cash and cash equivalents $ (243) $ (4,133) Cash Flow from Operating Activities During the three months ended March 31, 2023, net cash provided by operating activities was $6,932, compared to cash used in operating activities of $7,636 during the prior year period. For the three months ended March 31, 2023, net loss and adjustments to reconcile net loss from operating activities provided $3,352, compared to $1,408 in the prior year period. Working capital and other assets and liabilities provided $3,580 in the current period, compared to using $9,044 in the prior year period. The Company received $2,967 during the three months ended March 31, 2023 associated with its federal income tax refund claims, which have now been collected in full. Cash Flow from Investing Activities Capital expenditures for the three months ended March 31, 2023 and 2022 were $699 and $1,764, respectively. The current period expenditures primarily relate to general plant and operational improvements throughout the Company, including corporate system and facility improvements. Expenditures for the three months ended March 31, 2022 primarily related to the implementation of the enterprise resource planning system at additional Company divisions and general plant and operational improvements throughout the Company. On March 30, 2023, the Company divested the assets of its Chemtec business, generating a cash inflow of $5,344 during the three months ended March 31, 2023. Cash Flow from Financing Activities 21 Table of Contents During the three months ended March 31, 2023 and 2022, the Company had a decrease in outstanding debt of $12,047 and an increase of $4,409, respectively. The decrease in debt for the three months ended March 31, 2023 was due to both stronger operating cash flows as well as proceeds received from the Chemtec divestiture during the quarter. The increase in debt for the 2022 period was the result of funding working capital and other assets and liabilities. Treasury stock acquisitions of $309 and $397 for the three months ended March 31, 2023 and 2022, respectively, represent stock repurchases from employees to satisfy their income tax withholdings in connection with the vesting of stock awards. During the first quarter of 2023, the Company’s Board of Directors authorized the repurchase of up to $15,000 of the Company’s common stock in open market transactions through February 2026. Repurchases are limited to up to $5,000 in any trailing 12-month period, with unused amounts carrying forward to future periods through the end of the authorization. Any repurchases will be subject to the Company’s liquidity, including availability of borrowings and covenant compliance under its revolving credit facility, and other capital needs of the business. No shares were repurchased in the first quarter of 2023 as part of the stock repurchase program. Repurchases of shares of the Company’s common stock may be made from time to time in the open market or in such other manner as determined by the Company. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the Company’s shares, general market and economic conditions, and other factors. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock and may be suspended or discontinued at any time. Financial Condition As of March 31, 2023, the Company had $2,639 in cash and cash equivalents. The Company’s cash management priority continues to be short-term maturities and the preservation of its principal balances. As of March 31, 2023, approximately $2,136 of the Company’s cash and cash equivalents were held in non-domestic bank accounts. The Company principally maintains its cash and cash equivalents in accounts held by major banks and financial institutions. The Company’s principal uses of cash have been to fund its operations, including capital expenditures, acquisitions, and to service its indebtedness. The Company views its liquidity as being dependent on its results of operations, changes in working capital needs, and its borrowing capacity. As of March 31, 2023, the Company's revolving credit facility had $49,091 of net availability, while the Company had $80,096 in total debt. On August 13, 2021, the Company entered into the Credit Agreement, which increased the total commitments under the revolving credit facility to $130,000 from $115,000, extended the maturity date from April 30, 2024 to August 13, 2026, and provided more favorable covenant terms. Borrowings under the Credit Agreement bear interest rates based upon either the base rate or SOFR rate plus applicable margins. The Company believes that the combination of its cash and cash equivalents, cash generated from operations, and the capacity under its revolving credit facility should provide the Company with sufficient liquidity to provide the flexibility to operate the business in a prudent manner and enable the Company to continue to service its outstanding debt. On August 12, 2022, the Company amended its Credit Agreement to obtain approval for the VanHooseCo acquisition and temporarily modify certain financial covenants to accommodate the transaction. The Second Amendment permitted the Company to acquire the operating assets of VanHooseCo and modified the maximum Gross Leverage Ratio covenant to 3.75 through June 30, 2023 to accommodate the transaction. The Second Amendment also added an additional tier to the pricing grid and provided for the conversion from LIBOR-based to SOFR-based borrowings. For a discussion of the terms and availability of the credit facilities, please refer to Note 7 of the Notes to Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company amended and entered into SOFR-based interest rate swaps with notional values totaling $20,000 and $20,000, effective August 12, 2022 and August 31, 2022, respectively, at which point the agreements effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. 22 Table of Contents Segment Backlog Total Company backlog is summarized by business segment in the following table for the periods indicated: Backlog March 31, 2023 December 31, 2022 March 31, 2022 Rail, Technologies, and Services $ 113,593 $ 105,241 $ 122,918 Precast Concrete Products 87,737 80,501 72,369 Steel Products and Measurement 58,551 86,509 49,331 Total backlog $ 259,881 $ 272,251 $ 244,618 The Company’s backlog represents the sales price of received customer purchase orders and any contracts for which the performance obligations have not been met, and therefore are precluded from revenue recognition. Although the Company believes that the orders included in backlog are firm, customers may cancel or change their orders with limited advance notice; however, these instances have been rare. Backlog should not be considered a reliable indicator of the Company’s ability to achieve any particular level of revenue or financial performance. While a considerable portion of the Company’s business is backlog-driven, certain product lines within the Company are not driven by backlog as the orders are fulfilled shortly after they are received. The Company defines new orders as a contractual agreement between the Company and a third-party in which the Company will, or has the ability to, satisfy the performance obligations of the promised products or services under the terms of the agreement. Critical Accounting Estimates The Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or method of its application, is generally accepted, management selects the principle or method that, in its opinion, is appropriate in the Company’s specific circumstances. Application of these accounting principles requires management to reach opinions regarding estimates about the future resolution of existing uncertainties. As a result, actual results could differ from these estimates. In preparing these financial statements, management has reached its opinions regarding the best estimates and judgments of the amounts and disclosures included in the financial statements giving due regard to materiality. A summary of the Company’s critical accounting policies and estimates is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to a smaller reporting company.