What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-09 · 230 added, 208 removed, 95 unchanged (82% of the section changed)

2 unchanged sentences

Forward-Looking Statements

This Quarterly Report

on Form 10-Q contains statements that relate to future events and expectations and, as such, constitute forward-looking statements, within

the meaning of the Private Securities Litigation Reform Act of 1995.

Certain statements, other than purely historical information, including

estimates, projections, statements relating to our strategies, outlook, business and financial prospects, business plans, objectives,

and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.”

These forward-looking statements generally are identified by the words “believes,” “project,” “expects,”

“anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,”

“will,” “would,” “will be,” “will continue,” “will likely result,” and similar

This Quarterly Report on Form 10-Q contains statements

that relate to future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private Securities

Litigation Reform Act of 1995.

Certain statements, other than purely historical information, including estimates, projections, statements

relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating results, and

the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements

generally are identified by the words “believes,” “project,” “expects,” “anticipates,”

“estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,”

“will be,” “will continue,” “will likely result,” and similar expressions.

Forward-looking statements are based on current

expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the

forward-looking statements.

are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ

materially from the forward-looking statements.

Forward-looking statements are not guarantees of future performance.

Although OptimizeRx

believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may

not be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements

due to a variety of risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.

Forward-looking

statements are subject to risks and uncertainties.

Actual results could differ materially from those expressed in or implied by such forward-looking

statements due to a variety of factors, including:

Although OptimizeRx believes that the

expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained and

it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of

risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.

Forward-looking statements are subject to risks

and uncertainties.

Actual results could differ materially from those expressed in or implied by such forward-looking statements due to

a variety of factors, including:

disruptions to our business or the business of our customers due to the global pandemic;

the inability to support our technology and scale our operations successfully, developing and implementing new and updated applications,

features and services for our portals may be more difficult and expensive and take longer than expected;

dependence on a concentrated

group of customers;

inability to maintain contracts with electronic prescription platforms, agreements with electronic prescription

platforms and electronic health record systems being subject to audit;

the inability

to support our technology and scale our operations successfully, developing and implementing new and updated applications, features and

services for our portals may be more difficult and expensive and take longer than expected;

dependence on a concentrated group of customers;

inability to maintain contracts with electronic prescription platforms, agreements with electronic prescription platforms and electronic

health record systems being subject to audit;

inability to attract and retain customers;

inability to comply

with laws and regulations that affect the healthcare industry;

inability to comply with laws and regulations

that affect the healthcare industry;

developments in the healthcare industry;

inability to manage

inability to identify suitable acquisition candidates, complete acquisitions or integrate

acquisitions successfully;

inability to manage growth;

inability to identify

suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully;

inability to attract and retain key employees;

economic, political, regulatory and other risks arising from

our international operations;

economic, political, regulatory and other risks arising from our international operations;

inability to protect our intellectual property;

cybersecurity incidents;

in the performance, reliability and availability of our network infrastructure;

lack of a consistent active trading market for our common

and v olatility in the market price of our common stock.

The risks and uncertainties included here

are not exhaustive.

Further information concerning our business, including additional factors that could materially affect our financial

results, is included herein and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended December

reduction in the performance, reliability and availability of our network infrastructure;

lack of a consistent

active trading market for our common stock;

and volatility in the market price of our common stock.

The risks and uncertainties included here are

not exhaustive.

Further information concerning our business, including additional factors that could materially affect our financial results,

is included herein and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2021.

Moreover, we operate in a rapidly changing and competitive environment.

New risk factors emerge from time to time, and it is

not possible for management to predict all such risk factors.

Further, it is not possible

to assess the effect of all risk factors on our businesses 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.

Given these risks and uncertainties, investors should

not place undue reliance on forward-looking statements as a prediction of actual results.

In addition, we disclaim any obligation to update

any forward-looking statements to reflect events or circumstances that occur after the date of this report.

Corporation is a digital health technology company incorporated in the State of Nevada.

We enable care-focused engagement between life

sciences organizations, healthcare providers, and patients at critical junctures throughout the patient care journey.

Connecting over

healthcare providers and millions of their patients through an intelligent technology platform embedded within a proprietary

point-of-care network, OptimizeRx helps patients start and stay on their medications.

pandemic has continued to create unprecedented challenges in the healthcare industry which has increased the demand for unique solutions

ranging from access to accurate and timely information to increasing the accessibility of medications and care management.

pandemic did not have a material net impact on our financial statements during the first quarter of 2022.

continue to monitor the impact of COVID-19 on our operations and key stakeholders.

The Company cannot reasonably predict the ultimate

impact of the COVID-19 pandemic, including the extent of any impact on our business, results of operations and financial condition, which

will depend on, among other things, the duration and spread of the pandemic, the impact of governmental regulations that have been, and

may continue to be, imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the outbreak, the acceptance,

safety and efficacy of vaccines, and global economic conditions.

Company Highlights through April 2022

Generated sales of $13.7 million for the first three months of 2022, a 22% increase over the same period in 2021.

Achieved positive cash flow from operations of $4.1 million.

Announced a definitive agreement to acquire the EvinceMed platform and related assets and closed on the transaction.

Introduced new key performance indicators to increase transparency and provide investors additional ways to chart our ability to execute against our “land and expand” strategy.

Published Company’s first Environmental, Social and Governance (ESG) Report

New risk factors emerge from time to time, and it is not possible

for management to predict all such risk factors.

Further, it is not possible to assess the effect

of all risk factors on our businesses 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.

Given these risks and uncertainties, investors should not place undue

reliance on forward-looking statements as a prediction of actual results.

In addition, we disclaim any obligation to update any forward-looking

statements to reflect events or circumstances that occur after the date of this report.

OptimizeRx Corporation is a digital health technology

company incorporated in the State of Nevada.

We enable care-focused engagement between life sciences organizations, healthcare providers,

and patients at critical junctures throughout the patient care journey.

Connecting over 60% of U.S.

healthcare providers and millions

of their patients through an intelligent technology platform embedded within a proprietary point-of-care network, OptimizeRx helps patients

start and stay on their medications.

The COVID-19 pandemic has continued to create unprecedented challenges

in the healthcare industry which has increased the demand for unique solutions ranging from access to accurate and timely information

to increasing the accessibility of medications and care management.

The COVID-19 pandemic did not have a material net impact on our financial

statements during the first and second quarters of 2022.

We continue to monitor the impact of COVID-19 on our operations and key stakeholders.

The Company cannot reasonably predict the ultimate impact of the COVID-19 pandemic, including the extent of any impact on our business,

results of operations and financial condition, which will depend on, among other things, the duration and spread of the pandemic, the

impact of governmental regulations that have been, and may continue to be, imposed in response to the pandemic, the effectiveness of actions

taken to contain or mitigate the outbreak, the acceptance, safety and efficacy of vaccines, and global economic conditions.

Company Highlights through July 2022

Generated sales of $14.0 million for the quarter ended June 30,

2022, a 2.59% increase over the same period in 2021.

Generated sales of $27.7 million for the six months ended June 30,

2022, a 11.49% increase over the same period in 2021.

Achieved positive cash flow from operations of $4.4 million for the

six months ended June 30, 2022.

Acquired the EvinceMed platform and related assets.

Introduced new key performance indicators to increase transparency

and provide investors additional ways to chart our ability to execute against our “land and expand” strategy.

Published Company’s first Environmental, Social and Governance

(ESG) Report.

Key Performance Indicators

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Average revenue per top 20 pharmaceutical manufacturer.

Average revenue per top 20 pharmaceutical manufacturer is calculated by taking the total revenue the company recognized through pharmaceutical

manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2020 revenue” over the last twelve months, divided

by the total number of the aforementioned pharmaceutical manufacturers that our solutions helped support over that time period.

uses this metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical

and believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment.

increase in the average in twelve months ended March 31, 2022 as compared to the twelve months ended March 31, 2021 is primarily the result

of our focus on signing larger and more comprehensive deals and through supporting additional brands.

Rolling Twelve Months

Ended March 31

Average revenue per top 20 pharmaceutical manufacturer is calculated

by taking the total revenue the Company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top

20 pharma companies by 2020 revenue” over the last twelve months, divided by the total number of the aforementioned pharmaceutical

manufacturers that our solutions helped support over that time period.

The Company uses this metric to monitor its progress in “landing

and expanding” with key customers within its largest customer vertical and believes it also provides investors with a transparent

way to chart our progress in penetrating this important customer segment.

Twelve Months Ended

Average revenue per top 20 pharmaceutical manufacturer

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vertical and believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment.

The increase from twelve months ended March 31, 2021

to the twelve months ended March 31, 2022 reflects continued penetration into this core customer

base and reflects two new top 20 pharma customers in the twelve months ended March 31, 2022.

Rolling Twelve Months

Ended March 31

The increase from twelve months ended June 30, 2021 to the twelve months ended June 30, 2022 reflects continued penetration

into this core customer base and reflects two new top 20 pharma customers in the twelve months ended June 30, 2022.

Twelve Months Ended

Percent of top 20 pharmaceutical manufacturers that are customers

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20 pharmaceutical manufacturers.

Percent of total revenue attributable to top 20 pharmaceutical manufacturers is calculated by taking

the total revenue the company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma

companies by 2020 revenue” over the last twelve months, divided by our consolidated revenue over the same period.

The Company uses

this metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical and

believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment.

from this core group of customers grew slightly slower than our overall revenue, enabling us to maintain a similar percentage of revenues

from this group.

Rolling Twelve Months

Ended March 31

Percent of total revenue attributable to top 20 pharmaceutical manufacturers

is calculated by taking the total revenue the Company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s

“The top 20 pharma companies by 2020 revenue” over the last twelve months, divided by our consolidated revenue over the same

The Company uses this metric to monitor its progress in “landing and expanding” with key customers within its largest

customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating this important customer

Twelve Months Ended

Percent of total revenue attributable to top 20 pharmaceutical manufacturers

Net revenue retention.

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a metric to chart our ability to increase our year-over-year penetration and revenue with existing customers.

retention rate in the twelve months ended March 31, 2021 was higher as a result of unplanned disruption to the industry caused by the

Covid-19 pandemic.

Our customers shifted funds previously designated for in-person events to digital marketing throughout the initial

quarters of the pandemic.

By the middle of 2021, while the pandemic continued, there was less disruption and customers shift towards digitals

solutions became more normalized.

Rolling Twelve Months

Ended March 31

The retention rate in the

twelve months ended June 30, 2021 was higher as a result of unplanned disruption to the industry caused by the Covid-19 pandemic.

Our customers shifted funds previously designated for in-person events to digital marketing throughout the initial quarters of the pandemic.

By the middle of 2021, while the pandemic continued, there was less disruption and customers shift towards digital solutions became more

Twelve Months Ended

Net revenue retention

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to scale efficiently over time and believes the metric provides investors with a way to chart our productivity and scalability.

rate grew more quickly than our increase in the number of employees, allowing us to achieve more productivity.

We were able to do this

by taking advantage of the expandable technology infrastructure that we have built over the years.

Rolling Twelve Months

Ended March 31

rate per employee has remained consistently strong in comparing year over year data.

Twelve Months Ended

Revenue per average full-time employee

Results of Operations for the Three Months Ended March 31, 2022

Our total revenue reported for the three months

ended March 31, 2022 was approximately $13.7 million, an increase of 22% over the approximately $11.2 million from the same period in

The increased revenue resulted from increases in sales in our messaging and access solutions.

We expect that our revenues will continue to grow

for the balance of 2022 as a result of the new clients we secured in the first quarter of the year as well as those we expect to pick

up for the remainder of the year.

In addition, we believe that the foundations we laid in 2020 and 2021, including increased pharmaceutical

brands, an increased distribution network, and strong growth in our messaging solutions will result in steady growth throughout the year.

Results of Operations for the Three and Six Months Ended June 30,

2022 and 2021

Our total revenue for the three months

ended June 30, 2022 was approximately $14.0 million, an increase of 2.6% over the approximately $13.6 million from the same period in

Our total revenue for the six months ended June 30, 2022 was approximately $27.7 million, an increase of 11.5% over the approximately

$24.9 million from the same period in 2021.

The increased revenue resulted from increases in sales of our access solutions.

We expect that our revenues will grow for the

balance of 2022 as a result of the new clients we secured in the first half of the year as well as those we expect to pick up for the

remainder of the year.

In addition, we believe that the foundations we laid in the first half of the year, will result in steady growth

for the second half of the year.

Cost of Revenues

The cost of revenue increased from $5.1 million

to $5.6 million primarily as a result of the increase in revenue.

Our cost of revenues as a percentage of revenues decreased for the quarter

ended March 31, 2021.

This improvement was a result of solution mix, both as it relates to solutions and the partners through which the

messages are delivered and increases in the type of services we provide that are not subject to revenue share.

Additional discussion is

included in the gross margin section below.

Three Months Ended

The cost of revenue decreased from $5.6 million

to $5.0 million primarily as a result of the solution and channel mix, in the quarter ended June 30, 2022, as compared to the same

period in 2021.

The cost of revenue for the six month period ended June 30, 2022 decreased from $10.7 million to $10.6 million, as

compared to the same period in 2021.

This improvement was a result of solution mix, both as it relates to solutions and the partners through

which the messages are delivered and increases in the type of services we provide that are not subject to revenue share.

Additional discussion

is included in the gross margin section below.

For the Three Months Ended

For the Six Months Ended

Cost of Revenues %

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As reflected in the table above, our gross margin,

which is the difference between our revenues and our cost of revenues, increased for the three months ended March 31, 2022, as a result

of solution mix.

In general, there has been an increase in the percentage of activity flowing through our lower cost channels compared

with a year ago.

Additionally, revenue increases in our access solutions and RWE includes a much higher percentage of program design,

which carries a higher margin than the delivery of the actual messages.

We expect our gross margin to remain relatively constant for the

balance of the year.

which is the difference between our revenues and our cost of revenues, increased for the quarter ended June 30, 2022, compared with

the prior year, as a result of solution mix.

In general, there has been an increase in the percentage of activity flowing through our

lower cost channels compared with a year ago.

Additionally, revenue increases in our access solutions includes a much higher percentage

of program design, which carries a higher margin than the delivery of the actual messages.

We expect our gross margin to remain relatively

constant for the balance of the year.

Operating Expenses

Operating expenses increased from approximately

$6.8 million for the three months ended March 31, 2021 to approximately $11.8 million for the same period in 2022, an increase of approximately

This increase in expense is due to investment in, and expansion of, our workforce to enable future growth.

Stock based compensation,

a noncash expense, had the greatest increase over prior year and is discussed in greater detail below.

Operating expenses increased from approximately $7.7 million for the

three months ended June 30, 2021 to approximately $12.9 million for the same period in 2022, an increase of approximately 67%.

expenses increased from approximately $14.5 million for the six months ended June 30, 2021 to approximately $24.8 million for the same

period in 2022, an increase of approximately 71%.

This increase in expense is due to investment in, and expansion of, our workforce to

enable future growth.

Stock based compensation, a noncash expense, had the greatest increase over prior year and is discussed in greater

detail below.

The detail of expenditures by major category is reflected in the table

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Salaries, Wages, & Benefits

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Total Operating Expense

The increase in operating expense related to salaries,

wages, and benefits and other human resource related costs is due to the expansion of our team to support additional growth.

our compensation expense to continue to increase on a quarter over quarter basis, although at a lower rate, due to the full impact of

new hires during the first quarter as well as new hires in the pipeline.

Since March 31, 2021, we have added to our staff in several key

areas, including product development, sales, and IT, and the addition of our Chief Financial Officer/Chief Operations Officer.

the past 12 months we hired 20 net additional employees.

The increase in operating expense related to salaries, wages, and benefits

and other human resource related costs is due to the expansion of our team to support additional growth.

We expect our compensation expense

for the remaining two quarters of 2022 to only be marginally higher to the expenses recognized for the period ended June 30, 2022.

Since June 30, 2021, we have added to our staff in several key areas, including product development, sales, and IT, and the addition

of our Chief Financial Officer/Chief Operations Officer.

During the past 12 months we hired 26 net additional employees.

Stock-based compensation increased by $3.1 million

from $0.7 million for the three months ended March 31, 2021 to $3.2 million for the same period in 2022.

Stock based compensation is awarded

to all full-time employees upon their start date as well as to certain key employees to encourage high performance.

In the fourth quarter

of 2021, we issued a significant market-based grant with a requisite service period of less than 3 years.

The expense for the market-based

award is amortized over the expected service period.

The impact on first quarter expense is $1.5 million.

Contractors and consultants increased 43% as we

have incurred consulting costs associated with building a scalable infrastructure.

from $0.9 million for the three months ended June 30, 2021 to $4.0 million for the same period in 2022 and by $5.6 million from $1.6 million

for the six months ended June 30, 2021 to $7.2 million for the same period in 2022.

Stock based compensation is awarded to all full-time

employees upon their start date as well as to certain key employees to encourage high performance.

In the fourth quarter of 2021, we issued

a significant market-based grant with a requisite service period of less than 3 years.

The expense for the market-based award is amortized

over the expected service period.

The impact on year to date expense is $3.0 million.

Contractors and consultants increased compared

to the same period in prior year as we have incurred consulting costs associated with building a scalable infrastructure and increased

development work for customers and channels.

Travel expenses increased significantly as a result

of relaxed travel restrictions related to the Covid-19 pandemic.

Professional fees increased 52% over prior year

primarily as a result of fees related to management’s assessment of internal controls and external audit fees due to Sarbanes-Oxley.

Professional fees increased 20% for the six month period over prior

year primarily as a result of fees related to management’s assessment of internal controls and external audit fees due to Sarbanes-Oxley.

Previously we were exempt from the Sarbanes-Oxley Act Section 404B requirement.

Our advertising and promotion increased over the

same period prior year as we continue to invest in growth initiatives.

For the three month period ended June 30, 2022, professional

fees were consistent with the same period in 2021.

Our advertising and promotion increased over the same period prior

year as we continue to invest in growth initiatives.

The increase is also partially attributed to attendance at and sponsorships of in-person

conferences in the first half of 2022 compared to virtual conferences from the first half of 2021 when travel and in-person events were

still restricted.

Technology infrastructure costs increased due

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These expenses are an important part of our ability to expand our network.

Data costs decreased 38% over the same period

in the prior year as we have continued to evaluate our data vendors and partner with the most effective and valuable providers.

Data costs decreased from the same period in the prior year as we have

continued to evaluate our data vendors and partner with the most effective and relevant providers.

All other variances in the table above are the

result of normal fluctuations in activity.

We expect our overall operating expenses to increase

in the second quarter of 2022 as we further implement our business plan and expand our operations.

However, we expect operating expense

to increase at a slower rate throughout the balance of the year.

We expect our operating expenses in the second half of 2022 to be marginally

higher than that of the six month period ending June 30, 2022.

Net Income (Loss)

We had a net loss of approximately $3.9 million

for the three months ended March 31, 2022, as compared to a net loss of approximately $0.6 million during the same period in 2021.

reasons and specific components associated with the change are discussed above.

Overall, the increase in net loss resulted from significant

investments made in our people and technology infrastructure.

for the three months ended June 30, 2022, as compared to net income of approximately $0.4 million during the same period in 2021.

We had a net loss of approximately $7.6 million for the six months ended June 30, 2022, as compared to a net loss of approximately

$0.3 million during the same period in 2021.

The reasons and specific components associated with the change are discussed above.

the net loss resulted from significant investments made in our people and technology infrastructure.

The net loss reflected in the 2022

periods were effected by significant noncash expenses of $4.7 million and $8.3 million for the three and six month periods, respectively.

Liquidity and Capital Resources

As of March 31, 2022, we had total current assets

of approximately $112.7 million, compared with current liabilities of approximately $6.9 million, resulting in working capital of approximately

$105.8 million and a current ratio of approximately 16 to 1.

This represents an increase from our working capital of approximately $105.7

million and current ratio of 12 to 1 at December 31, 2021.

operating activities provided $4.1 million during the three months ended March 31, 2022, compared with $1.7 million in the same period

We had a net loss of $3.8 million for the period 2022, but noncash expenses of $3.6 million and working capital generated by

the collection of receivables offset the loss.

We had proceeds from financing activities of approximately

$0.3 million related to the exercise of stock options during the three months ended March 31, 2022.

For the same period in 2021, we raised

$70.7 million in a public offering of our common stock as well as generated $1.1 million from the issuance of shares related to the exercise

of stock options.

These proceeds in 2021 were partially offset by the payment of $1.6 million in earnout payments from a previous acquisition.

As of June 30, 2022, we had total current

assets of approximately $110.4 million, compared with current liabilities of approximately $6.4 million, resulting in working capital

of approximately $104.0 million and a current ratio of approximately 17.1 to 1.

This represents an increase from our working capital of

approximately $105.7 million and current ratio of 12.3 to 1 at December 31, 2021.

Our operating activities provided $4.4 million

during the six months ended June 30, 2022, compared with $1.9 million in the same period in 2021.

We had a net loss of $7.6 million

for the six month period ended June 30, 2022, but non-cash expenses of $8.3 million and working capital generated by the collection

of receivables offset the loss.

The cash provided in the 2021 period was the result of our net loss increased by non-cash expenses, partially

offset by working capital used in the reduction of liabilities.

We had proceeds from financing activities of approximately $0.5 million

during the six months ended June 30, 2022.

We collected $0.8 million related to the exercise of stock options during the period, partially

offset by $0.3 million used to repurchase 12,868 shares of common stock.

For the same period in 2021, we raised $70.7 million in a public

offering of our common stock as well as generated $2.7 million from the issuance of shares related to the exercise of stock options.

proceeds in 2021 were partially offset by the payment of $1.6 million in earnout payments from a previous acquisition.

We believe that funds generated from operations,

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and satisfy working capital needs.

We currently have an effective shelf registration statement,

which allows us to issue, in unlimited amounts, securities, including common stock, preferred stock, debt securities, warrants, and units.

We currently have an effective shelf registration statement, which allows us to issue, in unlimited amounts, securities, including

common stock, preferred stock, debt securities, warrants, and units.

Critical Accounting Policies

our consolidated financial statements in conformity with accounting principles generally accepted in the United States.

The preparation

of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and

liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented.

results could differ from those estimates and assumptions.

Our significant accounting policies are described in Note 2 to the Consolidated

Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report on Form 10-K).

The accounting

policies we used in preparing these financial statements are substantially consistent with those we applied in our 2021 Annual Report

on Form 10-K.

Our critical accounting policies are described in Management’s Discussion and Analysis included in the 2021 Annual

Report on Form 10-K.

We prepare our consolidated financial statements

in conformity with accounting principles generally accepted in the United States.

The preparation of these financial statements requires

the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial

statements and reported amounts of revenues and expenses during the periods presented.

Actual results could differ from those estimates

and assumptions.

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements in the Annual Report

on Form 10-K for the year ended December 31, 2021 (2021 Annual Report on Form 10-K).

The accounting policies we used in preparing

these financial statements are substantially consistent with those we applied in our 2021 Annual Report on Form 10-K.

Our critical accounting

policies are described in Management’s Discussion and Analysis included in the 2021 Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

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Simplifying the Accounting for Income Taxes .

ASU 2019-12 is intended to improve consistent application and simplify

the accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends

existing guidance.

ASU 2019-12 was effective for annual and interim reporting periods beginning after December 15, 2020, with early adoption

The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows.

ASU 2019-12 is intended to improve consistent application

and simplify the accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies

and amends existing guidance.

ASU 2019-12 was effective for annual and interim reporting periods beginning after December 15, 2020, with

early adoption permitted.

The adoption of this standard did not have a material effect on our financial position, results of operations,

or cash flows.

Not Yet Adopted

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ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts.

The standard is effective for the Company’s fiscal

year beginning January 1, 2023, with early adoption permitted.

The Company is currently evaluating the effect of this pronouncement on

its Consolidated Financial Statements, but it is not expected to have a material impact.

The standard is effective for the Company’s

fiscal year beginning January 1, 2023, with early adoption permitted.

The Company is currently evaluating the effect of this pronouncement

on its Consolidated Financial Statements, but it is not expected to have a material impact.

Off Balance Sheet Arrangements

As of March 31, 2022, there were no off-balance sheet arrangements.

As of June 30, 2022, there were no off-balance sheet arrangements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis