FLOTEK INDUSTRIES INC/CN/ 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Flotek,” the "Company," "we," "us" and "our" refer to Flotek Industries, Inc. and its wholly-owned subsidiaries. The following discussion should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“Annual Report” or “2022 Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) and the unaudited consolidated financial statements and accompanying notes included herein. Comparative segment revenues and related financial information are discussed herein and are presented in Note 17 to our unaudited consolidated financial statements. See “Forward Looking Statements” in this report and “Risk Factors” included in our filings with the SEC, including our Quarterly Reports on Form 10-Q and our 2022 Annual Report, for a description of important factors that could cause actual results to differ from expected results. Our historical financial information may not be indicative of our future performance. Executive Summary Flotek creates unique solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, specialty green chemistry and data technology company, Flotek helps customers across industrial and commercial markets improve their environmental performance. The Company serves specialty chemistry needs for both domestic and international energy markets. The Company has two operating segments, Chemistry Technologies (“CT”) and Data Analytics (“DA”), which are both supported by the Company’s continuing Research and Innovation (“R&I”) advanced laboratory capabilities. Company Overview Chemistry Technologies We believe that the Company’s CT segment provides sustainable, optimized chemistry solutions that maximize our customers’ value by elevating their environmental, social and governance (“ESG”) performance, lowering operational costs, and delivering improved return on invested capital. The Company’s proprietary green chemistries, specialty chemistries, logistics, and technology services enable its customers to pursue improved efficiencies and performance throughout the life cycle of its desired chemical applications program. The Company designs, develops, manufactures, packages, distributes and markets optimized chemistry solutions that accelerate existing sustainability practices to reduce the environmental impact of energy on the air, water, land and people. Customers of the CT segment include those of energy related markets, such as our related party ProFrac Services, LLC, as well as consumer and industrial applications. Major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, national and state-owned oil companies, geothermal energy companies, solar energy companies and advanced alternative energy companies benefit from our best-in-class technology, field operations, and continuous improvement exercises that go beyond existing sustainability practices. Data Analytics The DA segment delivers real-time information and insights to our customers to enable optimization of operations and reduction of emissions and their carbon intensity. Real-time composition and physical properties are delivered simultaneously on their refined fuels, natural gas liquids (“NGLs”), natural gas, crude oil, and condensates using the industry’s only field-deployable, in-line optical near-infra-red spectrometer that generates no emissions. The instrument's response is processed with advanced chemometrics modeling, artificial intelligence, and machine learning algorithms to deliver these valuable insights every 15 seconds. We believe customers using this technology have obtained significant benefits, including additional profits, by enhancing operations in crude/condensates stabilization, blending operations, reduction of transmix, increasing efficiencies and optimization of gas plants, and ensuring product quality while reducing giveaways, i.e., providing higher value products at the lower value products prices. More efficient operations have the benefit of reducing their carbon footprint, e.g., less flaring and reduction in energy expenditure for compression and re-processing. Our customers in North America include the supermajors, some of the largest midstream companies and large gas processing plants. We have developed a line of Verax™ analyzers for deployment internationally which was certified for compliance in hazardous locations and harsh weather conditions. 34 Research & Innovation R&I supports the acceleration of ESG solutions for both segments through green chemistry formulation, specialty chemical formulations, EPA regulatory guidance, technical support, basin and reservoir studies, data analytics and new technology projects. The purpose of R&I is to supply the Company’s segments with enhanced products and services that generate current and future revenues, while advising Company management on opportunities concerning technology, environmental and industry trends. The R&I facilities support advances in chemistry performance, detection, optimization and manufacturing. Outlook Our business is subject to numerous variables which impact our outlook and expectations given the shifting conditions of the industry and weather volatility. We have based our outlook on the market conditions we perceive today. Changes often occur. Energy We believe that we are in the early years of a tight supply cycle for oil and gas triggered by an extended period of underinvestment in energy development, infrastructure and new sources of oil and gas production. While the demand for oil and gas could fluctuate depending on macroeconomic conditions, we believe that this tight supply cycle could persist and could provide support to high oil prices for multiple years. We expect that the strongest potential growth throughout 2023 will likely come from independent, rather than large major exploration and production companies. Independent exploration and production companies operate the majority of U.S. land rigs and react quickly to changing commodity prices. In the current commodity price environment, we expect these companies to increase activity and the larger companies to have modest spending increases in the year ahead. Digital Analytics The use of data and digital analytics is a growing trend in all industries where technology is leveraged to analyze large datasets of operational information to improve performance, as well as for predictive maintenance, advanced safety measures and reduced environmental impact of operations. We believe Verax™ analyzers have gained a foothold in North American markets for critical applications where compositional information is needed in real-time. The technology delivers insight on valuable operations data like vapor pressure, boiling point, flash point, octane level, API (American Petroleum Institute) gravity, viscosity, BTU (British Thermal Unit) and more, simultaneously. We continue to collaborate with our customers to identify further facilities and applications where our technology has the highest value. To drive recurring revenue, we continue to build on the modular nature of our sensor and analysis packages with new data processing techniques that enhance the value of our installations. AIDA (Automated Interface Detection Algorithm) provides real-time detection of interfaces in a liquids pipeline without the need for additional sampling or chemometric modeling. The application can identify products such as refined fuels, crude and NGLs with its advanced machine learning algorithms and detect interfaces real-time versus traditional lab analysis. We believe this allows customers to cut batches quickly and accurately, reduce transmix and minimize off-spec product that requires downgrades. We are also gaining traction leveraging the Verax™ in applications where operators and service companies are using field gas as a substitute for diesel in dual fuel engines as the market moves to Tier 4 equipment and eFleets. Analyzing this in real-time allows companies to maximize the substitution rate while lowering emissions, reducing fuel consumption/costs, and protecting the equipment from damage. ESG ESG-focused solutions continue to be an emphasis for the Company as the energy, industrial and consumer markets are seeking to accelerate their focus on sustainability and minimized impact on the environment. We anticipate the Company’s products and services could offer a significant benefit to businesses seeking to improve their ESG performance, including improving safety, reliability and efficiency of their operations. The Company offers sustainable chemistry solutions, tailoring product selection to enable operational efficiencies, improve water management and reduce greenhouse gas emissions for its customers in the exploration and production sector of the oil and gas industry. Further, the Company’s patented line of Complex nano-Fluid® (also known as CnF®) products are formulated with highly effective, plant-based solvents offering safer, renewable and sustainable alternatives to toxic BTEX-based (benzene, toluene, ethylbenzene and xylene) chemicals. Additionally, we believe the Company’s real-time sensor technology helps to enable process and operational efficiencies, minimize waste and processing and reduce emissions. 35 We believe the industry focus on maintaining a “social license to operate” provides the platform to accelerate the sale of our products and services that we believe can help the customer achieve a greener goal. We believe the performance driven ESG focus of the Company assists in reducing environmental liabilities and improving returns for our customers. Supply Chain The principal supply issues facing our industry for the next twelve months will include: • Fluctuating freight costs for shipping to our customers; • Availability of raw materials; • Delays due to port congestion; • Labor shortages; and • Demand forecasting. All bidding will require the risk of shipping costs and delays to be factored into proposals. Trucking availability and pricing will impact North American opportunities while sea-freight costs will impact sales of North American manufactured goods being delivered internationally for the foreseeable future. The import of raw materials from China will also incur price increases. Accelerating tensions between China and the U.S. could also result in supply disruption. New York Stock Exchange (“NYSE”) Continued Listing Requirements The Company’s common stock is currently listed on the NYSE. On April 12, 2023, the Company received written notice from the NYSE that the average closing price of the Company’s shares of common stock was below $1.00 per share over a period of 30 consecutive days, which is below the requirement for continued listing on the NYSE. In accordance with applicable NYSE procedures, the Company has notified the NYSE that it intends to cure the $1.00 per share deficiency. Based on the applicable NYSE procedures, the Company has six months following the receipt of the NYSE’s notice to cure the deficiency and regain compliance. The NYSE’s notice has no immediate impact on the listing of the Company’s common stock, which will continue to trade on the NYSE subject to the Company’s continued compliance with the other listing requirements of the NYSE. The common stock of the Company will continue to trade under the symbol “FTK” but will have an added designation of “.BC” to indicate that the status of the common stock is “below compliance” with the NYSE continued listing standards. The “.BC” indicator will be removed at such time as the Company is deemed to be in compliance. The Company is evaluating available options to regain compliance, which may include, if necessary, effectuating a reverse stock split. 36 Consolidated Results of Operations (in thousands) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Revenue Revenue from external customers $ 17,820 $ 12,824 $ 29,472 $ 23,206 Revenue from related party 32,774 16,549 69,130 19,046 Total revenues 50,594 29,373 98,602 42,252 Cost of sales 46,690 31,678 92,817 45,036 Cost of sales % 92.3 % 107.8 % 94.1 % 106.6 % Gross profit (loss) 3,904 (2,305) 5,785 (2,784) Gross profit (loss) % 7.72 % (7.8) % 5.9 % (6.6) % Selling general and administrative 8,351 6,821 14,803 11,707 Selling general and administrative % 16.5 % 23.2 % 15.0 % 27.7 % Depreciation 174 182 349 377 Research and development 860 1,115 1,474 2,530 Severance costs (2,279) 610 (56) 603 Gain on sale of property and equipment — (1,914) — (1,906) Gain on lease termination — — — (584) Gain in fair value of Contract Consideration Convertible Notes Payable (3,874) (17,158) (29,969) (13,266) Income (loss) from operations 672 8,039 19,184 (2,245) Operating margin % 1.3 % 27.4 % 19.5 % (5.3) % Interest and other income (expense), net (686) (1,701) 2,154 (2,145) Income (loss) before income taxes (14) 6,338 21,338 (4,390) Income tax (expense) benefit (7) (98) (16) (94) Net income (loss) $ (21) $ 6,240 $ 21,322 $ (4,484) Net income (loss) % — % 21.2 % 21.6 % (10.6) % Consolidated revenue for the three months ended June 30, 2023 increased $21.2 million, or 72%, versus the same period of 2022, primarily driven by related party activity under the ProFrac Agreement which commenced in the second quarter of 2022 and by continued increased activity across our customer base, particularly in the CT segment. Related party revenues in the CT segment are net of $1.1 million and $0.7 million of contract assets amortization for the three months ended June 30, 2023 and 2022, respectively. Consolidated revenue for the six months ended June 30, 2023 increased $56.4 million, or 133%, versus the same period of 2022, primarily driven by related party activity under the ProFrac Agreement which commenced in the second quarter of 2022 and continued increased activity across our customer base, particularly in the CT segment. Related party revenues in the CT segment are net of $2.4 million and $0.7 million of contract assets amortization for the six months ended June 30, 2023 and 2022, respectively. Consolidated cost of sales for the three and six months ended June 30, 2023 increased $15.0 million, or 47%, and increased $47.8 million, or 106%, respectively, versus the same period of 2022, primarily attributable to the increase in revenue. Cost of sales for the three months ended June 30, 2022 included temporarily high freight and equipment rental costs incurred at the commencement of the ProFrac Agreement. Consolidated cost of sales percentage improved 15.6% and 12.5% in the three and six months ended June 30, 2023 as a result of our higher revenue volumes and cost management. SG&A expenses for the three months ended June 30, 2023 increased $1.5 million, or 22%, versus the same period of 2022. The increase relates mainly to personnel costs and professional fees, driven by higher legal and CEO transition costs, partially offset by a decrease in capital transaction related costs. SG&A expenses for the six months ended June 30, 2023 increased $3.1 million, or 26%, versus the same period of 2022. The increase relates mainly to personnel costs and professional fees, driven by higher legal fees and CEO transition costs, partially offset by a decrease in capital transaction related costs. Professional fees are expected to decline going forward. 37 Research and development (“R&D”) costs for the three and six months ended June 30, 2023 decreased $0.3 million, or 23%, and decreased $1.1 million, or 42%, respectively, versus the same periods of 2022 due to a reduction in sample testing in 2023 and lower personnel cost driven by headcount optimization. Severance costs decreased $2.9 million, or 474% for the three months ended June 30, 2023 versus the same period of 2022, driven by the reversal of $2.3 million of severance costs in the three months ended June 30, 2023 previously accrued with respect to a lawsuit filed against our former CEO, John Chisholm, upon the resolution of all legal claims on this matter (see Note 12, “Commitments and Contingencies”). Severance costs decreased $0.7 million, or 109%, for the six months ended June 30, 2023, versus the same period of 2022, driven by the reversal of severance costs with respect to a lawsuit filed against our former CEO, John Chisholm, partially offset by costs attributable to changes in senior management. Income from operations decreased $7.4 million, or 92%, for the three months ended June 30, 2023, versus the same period in 2022. The decrease is primarily driven by a decrease in the gain in fair value of the Contract Consideration Convertible Notes Payable of $13.3 million compared to the same period of 2022, a gain on sale of assets for the three months ended June 30, 2022 of $1.9 million and increased SG&A costs for the three months ended June 30, 2023 of $1.5 million. The decrease is partially offset by an increase in gross profit of $6.2 million relating to increased activity and a reversal of severance costs in the three months ended June 30, 2023 of $2.3 million. Income from operations increased $21.4 million, or 954%, for the six months ended June 30, 2023, versus the same period of 2022. The improvement is primarily driven by an increase in the gain in fair value of the Contract Consideration Convertible Notes Payable of $16.7 million compared to the same period of 2022 and an increase in gross profit of $8.6 million driven by activity. The improvement is partially offset by an increase in SG&A costs of $3.1 million and gains on the sale of assets and lease termination of $1.9 million and $0.6 million, respectively, reported in the six months ended June 30, 2022. Interest and other expense for the three months ended June 30, 2023 decreased $1.0 million, or 60%, driven by a reduction in interest expense as a result of the Convertible Notes Payable and the Initial ProFrac Agreement Contract Consideration Convertible Notes Payable maturing in the three months ended March 31, 2023 and the Amended ProFrac Agreement Contract Consideration Convertible Notes Payable maturing in the three months ended June 30, 2023 (see Note 9, “Debt and Convertible Notes Payable”). Interest and other income for the six months ended June 30, 2023 increased $4.3 million, or 200%, driven primarily by a $4.5 million gain for the forgiveness of the Flotek PPP loan (see Note 9, “Debt and Convertible Notes Payable”). The Company’s income tax (expense) benefit for the three and six months ended June 30, 2023 and 2022 was minimal. Results by Segment (in thousands): Chemistry Technologies Results of Operations: Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Revenue from external customers $ 15,469 $ 12,111 $ 24,693 $ 21,422 Revenue from related party 32,617 16,549 68,883 19,046 Income from operations 3,795 14,944 27,174 8,887 CT revenue from external customers for the three months ended June 30, 2023 increased $3.4 million, or 28%, compared to the same period of 2022 driven mainly by expansion of customer base. Revenue from related parties increased $16.1 million, or 97%, compared to the same period of 2022. The increased revenue in 2023 is driven by the ProFrac Agreement which commenced in the second quarter of 2022. CT revenue from external customers for the six months ended June 30, 2023 increased $3.3 million, or 15% , compared to the same period of 2022 driven mainly by activity with four new customers partially offset by a decrease in activity with other customers. Revenue from related parties increased $49.8 million, or 262%, compared to the same period of 2022. The increased revenue in 2023 is driven by the ProFrac Agreement, which commenced in the second quarter of 2022. Income from operations for the CT segment for the three months ended June 30, 2023 decreased $11.1 million, or 75%, compared to the same period of 2022. The decline is primarily attributable to a decrease in the gain in fair value of the Contract Consideration Convertible Notes Payable of $13.3 million for the three months ended June 30, 2023 compared to the same 38 period of 2022 and a gain on sale of assets of $1.9 million reported in the three months ended June 30, 2022. The decline is partially offset by increased gross profit of $4.2 million attributable to increased activity. Income from operations for the CT segment for the six months ended June 30, 2023 increased $18.3 million, or 206%, compared to the same period of 2022. The improvement is primarily attributable to the gain in fair value of the Contract Consideration Convertible Notes Payable of $30.0 million for the six months ended June 30, 2023 compared to $13.3 million for the same period of 2022 and an increase in gross profit of $5.3 million attributable to increased activity. During the six months ended June 30, 2022, the income from operations included gains on sale of assets and lease termination of $1.9 million and $0.6 million, respectively. Data Analytics Results of Operations: Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Revenue from external customers $ 2,351 $ 713 $ 4,779 $ 1,784 Revenue from related party 157 — 247 — Income (loss) from operations 129 (1,198) 587 (2,006) DA revenue from external customers for the three months ended June 30, 2023 increased $1.6 million, or 230%, compared to the same period of 2022 driven by revenue increases with various customers. Revenue from related party customers for the three months ended June 30, 2023 was $0.1 million relating to services provided to ProFrac Services, LLC. DA revenue from external customers for the six months ended June 30, 2023 increased $3.0 million, or 168%, compared to the same period of 2022 primarily due to significant products revenues from three customers. Revenue from related party customers for the six months ended June 30, 2023 was $0.2 million relating to services provided to ProFrac Services, LLC. Income from operations for the DA segment for the three months ended June 30, 2023 increased $1.3 million, or 111%, compared to the same period for 2022 driven primarily by increased activity and partially offset by higher personnel costs and R&D expense. Income from operations for the DA segment for the six months ended June 30, 2023 increased $2.6 million, or 129%, compared to the same period for 2022 primarily driven by increased activity and decreased R&D expense, and partially offset by increased personnel costs. Corporate and Other Results of Operations: Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Income (loss) from operations $ (3,252) $ (5,707) $ (8,577) $ (9,126) Loss from operations for the three months ended June 30, 2023 decreased $2.5 million, or 43%, compared to the same period of 2022 attributable to a $2.3 million reversal of severance costs reported in the three months ended June 30, 2023. Loss from operations for the six months ended June 30, 2023 decreased $0.5 million, or 6%, compared to the same period of 2022 attributable to lower stock compensation costs, partially offset by increased professional fees driven by higher legal fees. Capital Resources and Liquidity Overview The Company’s ongoing capital requirements relate to the acquisition and maintenance of equipment and funding working capital requirements. During the six months ended June 30, 2023, the Company funded working capital requirements with cash on hand. As of June 30, 2023, the Company had unrestricted cash and cash equivalents of $8.8 million compared to $12.3 million on December 31, 2022. During the six months ended June 30, 2023, the Company had operating income of $19.2 million, $2.2 million of cash used by operating activiti es, $0.3 million of cash used in investing activities and $0.9 million o f cash used in financing activities. 39 The Company has received credit approval from a prospective lender with respect to a proposed asset-based loan (“ABL”). The proposed ABL would provide credit availability based upon eligible accounts receivable, eligible inventory and real estate values. The Company expects to provide an update on this process before the end of August 2023, and can provide no assurance that it will be able to successfully close the ABL. Going Concern These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern does exist. The Company currently funds its operations from cash on hand and other current assets. The Company has a history of losses and negative cash flows from operations and expects to utilize a significant amount of cash within one year after the date of filing the unaudited condensed consolidated financial statements. The availability of capital is dependent on the Company’s operating cash flow currently expected to be principally derived from the ProFrac Agreement (see Note 9, “Debt and Convertible Notes Payable” and Note 16, “Related Party Transactions”). It is not certain that the Company’s cash and other current assets and the Company’s forecasted operating cash flows currently expected to be generated from the ongoing execution of the ProFrac Agreement will provide the Company with sufficient financial resources to fund operations and meet the Company’s capital requirements and anticipated obligations as they become due in the next twelve months. The Company may require additional liquidity to continue its operations over the next twelve months to sufficiently alleviate or mitigate the conditions and events noted above, which results in substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are filed. The Company is evaluating strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt or entering into other financing arrangements, such as the ABL discussed above, obtaining higher prices for its products and services, increasing the percentage of its sales from higher margin products, monetizing non-core assets, and reducing expenses. However, the Company may be unable to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. The unaudited condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. Cash Flows Consolidated cash flows by type of activity are noted below (in thousands): Six months ended June 30, 2023 2022 Net cash used in operating activities $ (2,234) $ (23,915) Net cash (used in) provided by investing activities (292) 4,189 Net cash (used in) provided by financing activities (888) 39,431 Effect of changes in exchange rates on cash and cash equivalents (34) 95 Net change in cash and cash equivalents and restricted cash $ (3,448) $ 19,800 Operating Activities Net cash used in operating activities was $2.2 million during the six months ended June 30, 2023 compared to $23.9 million for the same period of 2022. Consolidated net income for the six months ended June 30, 2023 was $21.3 million compared to a net loss of $4.5 million for the six months ended June 30, 2022. During the six months ended June 30, 2023, non-cash adjustments to net income (loss) totaled $28.4 million as compared to $10.0 million for the same period of 2022. • For the six months ended June 30, 2023 non-cash adjustments included $30.0 million for the change in fair value of Contract Consideration Convertible Notes Payable and $4.5 million for PPP loan forgiveness. These were offset by 40 non-cash positive adjustments of $2.3 million paid-in-kind interest expense, $2.4 million amortization of contract assets and $1.6 million non-cash lease expense. • For the six months ended June 30, 2022 non-cash adjustments included $13.3 million for the change in fair value of Contract Consideration Convertible Notes Payable, $1.9 million gain on sale of property and equipment and $0.6 million gain on lease termination. These were offset by $1.8 million paid-in-kind interest expense and $1.6 million stock compensation expense. During the six months ended June 30, 2023, changes in working capital provided $4.8 million of cash as compared to using $9.4 million for the same period of 2022. • For the six months ended June 30, 2023 changes in working capital resulted primarily from an increase in accounts payable of $11.6 million and a decrease in third party accounts receivable of $2.2 million, partially offset by an increase in inventory of $3.2 million along with decreased accrued liabilities and operating lease liabilities of $3.5 million and $1.9 million, respectively. • For the six months ended June 30, 2023 changes in working capital resulted primarily from an increase in accounts receivable and inventories of $10.1 million and $4.5 million, respectively, due to increased revenue, change in contract asset of $3.6 million attributable to fees associated with the Contract Consideration Convertible Notes Payable, and decreased accrued liabilities partially due to payment of a legal settlement accrued in 2021. This is partially offset by an increase in accounts payable of $12.2 million relating mainly to purchases made to support activity under the ProFrac Agreement. Investing Activities Net cash used in investing activities for the six months ended June 30, 2023 was $0.3 million driven by capital expenditures. Net cash provided by investing activities for the six months ended June 30, 2022 was $4.2 million from the sale of the manufacturing facility in Waller, Texas, which closed in April 2022. Financing Activities Net cash used in financing activities for the six months ended June 30, 2023 was $0.9 million and relates primarily to payments for forfeited stock options and to tax authorities for shares withheld from employees. Net cash provided by financing activities was $39.4 million for the six months ended June 30, 2022, and relates primarily to the proceeds from the issuance of convertible notes and warrants partially offset by issuance costs relating to the convertible notes. Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported. Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s 2022 Annual Report describes the critical accounting policies and estimates used in the preparation of the Company’s condensed consolidated financial statements. Note 2, “Summary of Significant Accounting Policies”, of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2022 Annual Report describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements.