INTELLIGENT BIO SOLUTIONS INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included in the 2022 Form 10-K and our unaudited condensed consolidated financial statements for the fiscal quarter ended September 30, 2022 included elsewhere in this Quarterly Report on Form 10-Q. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Quarterly Report on Form 10-Q. See Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and Part I, Item 1A. “Risk Factors” of the 2022 Form 10-K. Forward-Looking Information All statements other than statements of historical fact or relating to present facts or current conditions included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and the negative of such words and other words and terms of similar meaning, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A — Risk Factors” of this Quarterly Report on Form 10-Q and in our 2022 Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by the federal securities laws, we are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations. Overview Intelligent Bio Solutions Inc. (formerly, GBS Inc.) (“INBS”) and its wholly owned subsidiary, GBS Operations Inc. were each formed on December 5, 2016, under the laws of the state of Delaware. Glucose Biosensor Systems (Greater China) Pty Ltd was formed on August 4, 2016, under the laws of New South Wales, Australia and was renamed to GBS (APAC) Pty Ltd on October 14, 2020. Glucose Biosensor Systems (Japan) Pty Ltd and Glucose Biosensor Systems (APAC) Pty Ltd were formed under the laws of New South Wales, Australia on February 22, 2017 and February 23, 2017 respectively. On October 26, 2022, the Company changed its corporate name (the “Name Change”) from “GBS Inc.” to “Intelligent Bio Solutions Inc.” For purpose of the Quarterly Report on Form 10-Q, the terms “Company”, “we,” “us” and “our” refer to INBS and its consolidated subsidiaries unless context indicates otherwise. We are a medical technology company operating across the Asia-Pacific region (the “APAC Region”) with an objective to introduce and deliver intelligent pain free diagnostic tests. We also have an interest in the North America region. Our goal is to expand the global footprint of our drug screening tests following our recent acquisition of Intelligent Fingerprinting Limited, while continuing to develop our Biosensor Platform that we license from Life Science Biosensor Diagnostics Pty Ltd (“LSBD” or the “Licensor”). This will be followed by developing both of our platforms to their full capacity across multiple diagnostic modalities of immunology, hormones, chemistry, tumor markers and nucleic acid tests. Highlights of Achievements during the Quarter Highlights of our major achievements for the quarter ended September 30, 2022 are: ● During the quarter ended September 30, 2022 the Company negotiated the acquisition of Intelligent Fingerprinting Limited (“IFP”), a company registered in England and Wales and on October 4, 2022 the Company closed on the acquisition of IFP (the “Acquisition”). In connection with the Acquisition, on October 4, 2022, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with IFP, the holders of all of the issued shares in the capital of IFP (collectively, the “Sellers”) and the “Sellers’ Representatives” named therein (the “Sellers’ Representatives”). 17 Pursuant to the Share Exchange Agreement, among other things, the Company acquired from the Sellers all of the issued shares in the capital of IFP, and as consideration therefor the Company issued and sold to the Sellers upon the closing of the Acquisition (the “Closing”) an aggregate number of (i) 2,963,091 shares of the Company’s common stock, and (ii) 2,363,003 shares of the Company’s series C convertible preferred stock, par value $0.01 per share (the “Preferred Stock”). Up to an additional 1,649,273 shares of Preferred Stock have been reserved for potential future issuance by the Company, consisting of (i) 500,000 shares of Preferred Stock, representing approximately 10% of the total Acquisition consideration, that are being held back from the Sellers for one year after the Closing to secure potential indemnification claims by the Company against the Sellers and (ii) 1,149,273 shares of Preferred Stock to certain lenders to IFP (the “Lenders”) who may, at each such Lender’s respective option, convert such Lender’s respective loans to IFP into shares of Preferred Stock, contingent upon approval of the Company’s stockholders of the conversion of Preferred Stock into Common Stock, as described below (the “Lender Preferred Shares”). Each Preferred Share would be convertible into three shares of Common Stock, contingent upon approval by the Company’s stockholders.   Also pursuant to the Share Exchange Agreement, the Company has an obligation to provide IFP with cash in an amount such that IFP is able to pay cash payments to certain current and former United Kingdom and United States-based employees and directors (the “IFP Bonus Recipients”), in aggregate amounts of £239,707 and $83,043, respectively (the “Cash Bonuses”), plus any applicable employer’s National Insurance contributions. The Cash Bonuses are being paid to the IFP Bonus Recipients in two equal instalments, with the first payment made immediately following the Closing and the second payment to be made on the six-month anniversary of such date. Also pursuant to the Share Exchange Agreement, the Company has agreed to make available to the employees of IFP (the “IFP Employees”) a Company stock option plan in form and substance satisfactory to the Company in relation to up to 1,000,000 shares Common Stock following the Closing on the basis that an equal number of Company stock options will be granted to the IFP Employees and Company employees up to an aggregate amount of 2,000,000 Company stock options.   Each of the Company, IFP and the Sellers made certain customary representations and warranties and agreed to certain covenants in the Share Exchange Agreement. ● On July 13, 2022, INBS completed Institutional Review Board (IRB) approved clinical studies at the Diabetes Research Institute of Sutter Health’s Mills-Peninsula Medical Center (MPMC) in San Mateo, California. The study design was intended to support the clinical development of its next-generation Saliva Glucose Biosensor. A total of 40 adult subjects with type 2 diabetes were recruited for the study. Nearly 1,400 samples of blood and oral fluids were collected and analyzed. The subsequent statistical analysis of the correlation of glucose levels among these sample types will act as foundation for building a robust portfolio of prospective clinical evidence, forming the backbone for future regulatory submissions. The Company anticipates further clinical studies in the fourth quarter of this calendar year and will utilize Saliva Glucose Biosensors fabricated at the Centre for Organic Electronics in New South Wales, Australia ● We are continuing to develop our R&D and manufacturing facility at University of Newcastle, Australia. During the quarter, we commenced the design of the facility and constructions of the facility is expected to start in second quarter of calendar year 2023. ● During the quarter, we received and commenced installation of new lab equipment including the Mass Spectrometer and GPC systems, which allows to improve the specificity, sensitivity, and reproducibility of our Biosensor technology. 18 The Saliva Glucose Biosensor The APAC Region includes over 164 million people living with diabetes, which accounts for approximately 38% of the world’s diabetic population. Rapid urbanization, unhealthy diets and increasingly sedentary lifestyles have resulted in ever increasing rates of obesity and diabetes across the region. Self-testing blood glucose monitors were introduced to the market in the 1970s and, since then, the method of glucose self-monitoring has not meaningfully changed. The industry remains dominated by invasive methods that ultimately use blood or interstitial fluid to measure glucose. We believe the methodology of the Company’s Saliva Glucose Biosensor (“SGB” and, together with the software app that interfaces the SGB with the Company’s digital information system, the “SGT”) represents a breakthrough in glucose monitoring as it represents the only non-invasive, painless, and cost-effective saliva-based method of measuring glucose levels. The biosensor technology has been developed over several decades of university-based scientific research and has been extensively referenced in scientific literature. The SGB is an organic, thin-film transistor, which in its structure embeds the glucose oxidase enzyme (referred to as “ GOX ”). When the single-use SGB interacts with saliva it initiates a sequence of enzymatic and electrochemical reactions, producing an electrical signal directly correlated to the amount of glucose present in the saliva. This measurement is then converted into a real-time saliva glucose reading, through the biosensor app installed on a smart device or a dedicated reader. The reading may then be stored in a cloud-based digital information system. The patent protected SGB is able to detect glucose in saliva at concentrations between 8 and 200 µM and exhibits linear glucose sensing characteristics at these concentrations, sensing glucose at levels 100 times lower than blood. In our development of the SGT, we aim to go beyond the innovation of changing the sampling medium from blood to saliva, and further create value for the patient and the payers by decreasing the cost of managing diabetes, improving the outcomes of the disease and providing convenience in testing methodology. This will be achieved by directly transferring the SGB reading from the smart device or dedicated reader to a cloud-based digital information system to enable all patients the option to create their own medical records where the SGB results will be uploaded. Our digital information system is intended to be interfaced to an artificial intelligence system and will be able to, at the patient’s or authorized care giver’s direction, disseminate patient data to a remote caregiver, a service for consultation or to any other individual with whom the patient chooses to share his or her glucose level measurements. We believe patients and payers will be able to leverage our digital information system to decrease cost and improve outcomes and convenience. With the SGB we aim to drive economic value beyond the revenue stemming from the sale of the SGB units – it also allows for monetization and the creation of separate revenue streams from the patient network and other data that resides within our digital information system, by way of the following: ● Data usage. The usage of the data, and the analysis and interpretation of the data, to improve patients’ conditions and leveraging this insight to improve patient care. ● Safe data sharing. The provision of data sharing services between users/patients, authorized care givers and authorized medical practitioners. ● Data collection. The collection of anonymized data, its aggregation with other data from multiple sources and multiple health devices and its combination with non-health data. We plan to leverage this usage, safe sharing and collection of data in the following four revenue-generating channels: Direct Monetization Channel . This channel focuses on the development of revenue based on commercial relationships for the use of anonymized and compliant information derived from data generation. These services may include, but will not be limited to: ● Fee for service, per performed action by pharma, or other commercial partners. ● Subscription, regular recurring payments for continued access to service. ● Prescription, value acknowledged by payer reimbursement per active user. ● Third party coverage, other industry/retail players pay fee for their own customers. ● Risk sharing/profit sharing, success-based payment models. ● Advertising, third party ads tailored to demographic data leveraging characteristics unique to channel. ● Added value of INBS brand loyalty. 19 Commercial Adjacencies Channel . This channel focuses on the development of revenue from data generated through patient engagement and market insights from a clinical and medical perspective. These services may include, but will not limited to: ● Medical – Generation of Patient Reported Outcomes, or “PROs”. ● Data – Market insights, clinical trial recruitment for third parties, e.g., pharmaceutical companies or clinical research organizations. ● Consumer – e-commerce platform, third party customer care, advertising. Product and Service Bundles Channel . This channel focuses on ancillary revenue generated through bespoke service opportunities across the industry, for example, by working with insurers to develop products that integrate the usage of testing as part of their service offering. These services may include, but will not be limited to: ●   Over-the-counter model. ● Bundle payment model with insurance subsidy. ● Pay for outcomes model. Core Operations Synergy Channel . Through combining the data generation with the use of artificial intelligence, we expect to have a deep insight into our customer base, providing an elevated level of customer insight. It is expected that this insight will drive high customer retention levels and generate a considerable number of broader revenue opportunities through direct and specific interaction with our customer base. These opportunities may include, but will not be limited to: ● Direct access to customers for better experience in customer care. ● Peer learning and support to decrease customer care resource commitment. ● Direct market and customer insights (including better understanding of customer journey). ● More customer data for targeted marketing & marketing impact monitoring. ● New cost effective, digital marketing channel enabling agile marketing approach. ● PRO data to support unique marketing claims. ● Higher engagement, customer loyalty and customer lifetime value. ● Consumer driven innovation and customer involvement in development. ● Involvement in testing & refining to develop demand-oriented products rapidly. ● Easy and fast clinical evaluation recruitment. ● PRO to support regulatory approval / market access for platform tests under development. The SGB has been under continuous development for over seven years, first by the University of Newcastle, Australia, then by the Licensor and us. The SGB development program is currently at the design and manufacturing process development stage, which includes the testing needed to verify and validate the final product. This stage involves implementation of the clinical evidence module, which incorporates the commercial production of the investigative biosensor devices to commence the clinical evaluation of analytical performance of the device and generate the clinical evidence necessary to gain regulatory approval. On May 1, 2020, the Licensor filed a submission with the FDA for the Saliva Glucose Biosensor Diagnostic Test, currently in development as a point-of-care test intended to replace blood glucose testing for diabetes management. Following the 513(g) submission to the FDA (Submitted May 1, 2020), it was determined that the Company could seek the De Novo application pathway for the Saliva Glucose Biosensor Diagnostic Test, we were appointed an expert contact person, Acting Branch Chief from the Diabetes Diagnostic Devices Branch. We have further commenced planning discussions with the FDA Office of In Vitro Diagnostics and Radiological Health and the Office of Product Evaluation and Quality pertaining to the clinical development and study plan of the Saliva Glucose Biosensor. We expect to leverage synergies from the planned approval process with the FDA within the Asia Pacific region, We will first seek regulatory approval with the Therapeutic Goods Administration (TGA) in Australia. However, we intend to apply for regulatory approval in each jurisdiction across the APAC Region. 20 The SGB is manufactured using modified reel-to-reel printing technology that was developed at the Australian National Fabrication Facility. This technology allows mass volume printing at a low cost. Previous research published in the journal Solar Energy Materials and Solar Cells has shown that the cost of manufacture of printed organic electronic devices (like the SGB) using mass volume printing is $7.85 per square meter, with an uncertainty of 30%. The size of the printed biosensors is approximately one square centimeter, resulting in a manufacturing cost per biosensor of approximately $0.01. We anticipate that the non-invasive nature of saliva-based glucose testing will make patients more amenable to glucose monitoring, with the expected result of increasing the number of times a patient tests per day. The data generated by the SGB, combined with the interface of the smart device or dedicated reader with our digital information system and the artificial intelligence feedback, will allow the patient to achieve better glucose control through a practical understanding of lifestyle factors that affect glucose levels, thereby helping prevent or delay diabetes complications and ultimately personalizing diabetes management. Initial public offering & share structure   On December 28, 2020, the Company closed its initial public offering (“IPO”) and sold 1,270,589 units, consisting of (a) one share of the Company’s common stock (or, at the purchaser’s election, one share of Series B Convertible Preferred Stock), (b) one Series A warrant (the “Series A Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $8.50 per share, exercisable until the fifth anniversary of the issuance date, and (c) one Series B warrant (the “Series B Warrants”) to purchase one share of the Company’s common stock at an exercise price equal to $17.00 per share, exercisable until the fifth anniversary of the issuance date and subject to certain adjustment and cashless exercise provisions. The public offering price of the shares sold in the IPO was $17.00 per unit. In aggregate, the units issued in the offering generated $17,732,448 in net proceeds, which amount is net of $1,714,001 in underwriters’ discount and commissions, and $2,153,564 in offering costs. The Company also issued to the underwriter an option, exercisable one or more times in whole or in part, to purchase up to 190,588 additional shares of common stock and/or Series A Warrants to purchase up to an aggregate of 190,588 shares of common stock and/or Series B Warrants to purchase up to an aggregate of 190,588 shares of common stock, in any combinations thereof, from us at the public offering price per security, less the underwriting discounts and commissions, for 45 days after the date of the IPO to cover over-allotments, if any (the “Over-Allotment Option”).   Upon the closing of the IPO, all shares of preferred stock then outstanding were automatically converted into 2,810,190 shares of common stock, and all convertible notes then outstanding were automatically converted into 710,548 shares of common stock.   Certain preferred shareholders were issued warrants that, following the Company’s completed IPO, allow the holder to acquire 2,736,675 shares of common stock at the IPO price during years two through three following the IPO. At the exercise date, the shareholder must hold for each warrant to be exercised, one underlying common share to exercise the option. The warrants are not transferable and apply to the number of shares that were subscribed for. The share structure as of November 10, 2022 was as follows: ● 18,352,995 of Issued Common Stock ● 1,401,377 of Series A warrants exercisable at $8.50 ● 59,782 of Series B warrants exercisable at $0 (subject to a cashless exercise provision) ● 2,363,003 of Series C Convertible Preferred Stock ● 63,529 of Warrants issued to the underwriter exercisable at $18.70 ● 2,736,675 of the Pre-IPO Warrants exercisable at $8.50 (during year two through year three after the IPO) ● 3,000,000 Warrants issued to LSBD exercisable at $17.00 Nasdaq Minimum Bid Price Requirement On March 17, 2022, the Company received a letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that the minimum closing bid price per share for its common stock was below $1.00 for 30 consecutive business days preceding the date of the Notice, and that the Company did not meet the $1.00 per share minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1). The Notice has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company had a compliance period of 180 calendar days, or until September 13, 2022 (the “Compliance Period”), to regain compliance with Nasdaq’s minimum bid price requirement. If at any time during the Compliance Period, the closing bid price per share of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days, Nasdaq will provide the Company a written confirmation of compliance and the matter will be closed. On September 8, 2022, the Company filed a request for a second 180-day period within which to evidence compliance with the $1.00 bid price requirement following the expiration of the current compliance period on September 13, 2022. No further communication has been received from by Nasdaq as at the date of this Quarterly Report on Form 10-Q. As part of its review process, Nasdaq will make a determination of whether it believes the Company will be able to cure the deficiency. If Nasdaq concludes that the Company will not be able to cure the deficiency, or if the Company determine not to submit a transfer application or make the required representation, Nasdaq will provide notice that the Company’s securities will be subject to delisting. If the Company chooses to implement a reverse stock split, it must complete the split no later than ten business days prior to the expiration of the second compliance period. Results of Operations: Comparison of the Three Months Ended September 30, 2022 and 2021 Revenue Government support income Government support income increased from $0 to $311,320 for the quarter ended September 30, 2022, compared to same period in 2021. The income is comprised of $250,907 as R&D tax refund and $60,413 as unwinding of deferred grant income for which the grant is intended to compensate. This increase was primarily attributable to INBS’s subsidiary companies recognizing $250,907 as R&D tax refund on qualifying research and development expenditures during the three months ended September 30, 2022 as the Company believes that it is probable that the certain amount will be recovered in full through a future claim (see the R&D tax refund section of Note 3 to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q and incorporated herein by reference). 21 Operating expenses General and administrative expenses General and administrative expenses increased by $117,898 to $1,450,418 from $1,332,520 for the quarter year ended September 30, 2022, compared to the same period in 2021. This increase was primarily driven by an increase in operational activities following completion of the IPO in December 2020. As the Company’s operating activities increase, we expect its general and administrative costs will include additional costs in overhead contribution, consultancy, as well as an increase in employee related costs associated with a higher headcount. Development and regulatory expenses Development and regulatory expenses decreased by $27,525 to $79,274 from $106,799 for the quarter September 30, 2022, compared to the same period in 2021. This decrease is primarily driven by timing of invoicing for milestones/ research and development activities carried on at the University of Newcastle and other research partners. As the Company’s operating activities increase, we expect its development and regulatory expenses to increase in future periods. Other income and expenses Interest expense Interest expense increased from $0 to $1,065 for the quarter ended September 30, 2022, as compared to the same period in 2021. This increase was attributable to the payment arrangement for directors and officers insurance policy. Realized foreign exchange loss Realized foreign exchange loss decreased by $871 to $2,247 from $3,118 for the quarter ended September 30, 2022, compared to the same period in 2021. This decrease in loss was largely attributable to the favorable exchange rates while settling transactions in currencies other than its functional currencies. Income tax (expense) benefit There was no income tax expense for the three months period ended September 30, 2022, and 2021, respectively, as the Company has established a full valuation allowance for all its deferred tax assets. Other comprehensive income Foreign currency translation gain/(loss) Unrealized foreign currency translation loss increased by $68,077 to a loss of $135,559 from a loss of $67,482 for the quarter ended September 30, 2022, compared to the same period in 2021. It is calculated based on the Company’s unsettled transactions in currencies other than its functional currency. Net loss Net loss attributable to INBS decreased by $224,359 to $1,208,293 from $1,432,652 for the quarter ended September 30, 2022, compared to the same period in 2021. This decrease in loss is primarily due to recognition of government support income in the current quarter due to expenditure incurred on qualifying research and development activities. Liquidity and Capital Resources We use working capital and cash measures to evaluate the performance of our operations and our ability to meet our financial obligations. We define Working Capital as current assets less current liabilities. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP. This information is intended to provide investors with information about our liquidity. Other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure. Since our inception, our operations have primarily been financed through the issuance of our common stock, redeemable convertible preferred stock and the incurrence of debt. As of September 30, 2022, we had $5,742,626 in cash and cash equivalents and $5,850,203 in working capital. See “Initial public offering & share structure” herein for details about our IPO. 22 The Company expects that its cash and cash equivalents as of September 30, 2022, may be insufficient to allow the Company to fund its current operating plan through at least the next twelve months from the issuance of these financial statements, taking into account the acquisition of Intelligent Fingerprinting Limited. Should revenue not be generated during this period to cover expenses, then these conditions may raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date these financial statements are issued. It appears that the Company will be required to raise additional funds during the next 12 months. The Company is currently evaluating potential raising additional funds through private placements and or public equity financing. However, there can be no assurance that, in the event that the Company requires additional financing, such financing will be available on terms which are favorable to us, or at all. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern. We do not anticipate generating any revenue in the near future, until such time, if at all, the Company completes the development process of its products, including regulatory approvals, and thereafter, begins to commercialize and achieve substantial acceptance in the marketplace for the first of a series of products in its medical device portfolio. In addition, available resources may be consumed more rapidly than currently anticipated, and there can be no assurance that we will be successful in developing the SGT and generating sufficient revenue in the timeframe set forth above, or at all. We may be unable to meet our targets for regulatory approval and market launch, or we may be unable to generate anticipated amounts of revenue from sales of the system. We may also need additional funding for developing new products and services and for additional sales, marketing and promotional activities. Should this occur, we may need to seek additional capital earlier than anticipated. In the event we require additional capital, there can be no assurances that we will be able to raise such capital on acceptable terms, or at all. Failure to generate sufficient revenues or raise additional capital through debt or equity financings, or through collaboration agreements, strategic alliances or marketing and distribution arrangements, could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business plan. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to a reduction in our operations or the failure of our company. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern. Extended Transition Period for “Emerging Growth Companies” We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock. Critical Accounting Estimates The preparation of our consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that impact the amounts reported in our consolidated financial statements and accompanying notes that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. Our critical accounting policies are described in our Annual Report on Form 10-K filed with the SEC on September 22, 2022, and the notes to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q. During the three months ended September 30, 2022, there were no material changes to our critical accounting policies from those in our June 30, 2022, Annual Report on Form 10-K filed with the SEC on September 22, 2022. Recently issued Accounting Pronouncements For the impact of recently issued accounting pronouncements on the Company’s consolidated financial statements, see Note 3 to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q and incorporated herein by reference. 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.