UPEXI, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The last day of our fiscal year is June 30. Our fiscal quarters end on September 30, December 31, March 31 and June 30. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report on Form 10-K. See also “Cautionary Note Regarding Forward-Looking Statements” above. 25 Table of Contents Overview The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date. For the year ended June 30, 2022, the consolidated financial statements of Upexi, Inc. include the accounts of the Company and its wholly-owned subsidiaries; Trunano Labs, Inc.; a Nevada corporation, Steam Distribution, LLC, a California limited liability company; MW Products Inc. a Nevada corporation, One Hit Wonder, Inc., a California corporation; One Hit Wonder Holdings, LLC a California corporation; SWCH LLC, a Delaware limited liability company; Cresco Management LLC, a California limited liability company; VitaMedica d/b/a/ Grove Acquisition Subsidiary, Inc. a Nevada corporation as of August 1, 2021; and 55% Cygnet Online, LLC a Delaware limited liability corporation, as of April 1, 2022. For the year ended June 30, 2023, the consolidated financial statements of Upexi, Inc. include all of the subsidiary accounts included in the consolidated financial statements for the year ended June 30, 2022, and include the subsidiaries in which the Company holds a controlling financial interest as of June 30, 2023, which include E-Core Technology, Inc. d/b/a New England Technology, Inc. as of October 21, 2022. Infusionz LLC, a Colorado limited liability company, along with select CBD asset; and Interactive Offers, LLC a Delaware limited liability corporation have been classified as discontinued operations for the years ended June 30, 2023 and 2022, respectively and the assets and liabilities have been classified as current assets and liabilities of discontinued operations and assets held for sale on the balance sheets for June 30, 2023 and 2022. All intercompany accounts and transactions have been eliminated as a result of the consolidation. Key Factors Affecting Operating Results Cyclicality and Seasonality Our business can be affected by seasonality, which historically has resulted in higher sales volume during our second quarter, which ends December 31. Operating Segments The Company’s financial reporting is organized into two segments: Branded Products and Recommerce. Other sources of revenue and related costs are aggregated and viewed by management as immaterial or have similar economic characteristics, products, production, distribution processes and regulatory environment as the other product sales. Results of Operations Year Ended June 30, 2023, as compared to June 30, 2022: The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the years ended June 30, 2023, and 2022, which are included herein. 26 Table of Contents June , 2023 2022 Change Revenue $ 80,676,509 $ 23,065,344 $ 57,611,165 Cost of revenue $ 47,118,189 $ 8,195,734 $ 38,922,455 Sales and marketing expenses $ 10,376,003 $ 5,116,868 $ 5,259,135 Distribution costs $ 12,369,903 $ 2,214,322 $ 10,155,581 General and administrative expenses $ 9,546,188 $ 9,141,667 $ 404,521 Other operating expenses $ 8,818,233 $ 4,885,883 $ 3,932,350 Other (expense) income $ (10,919,488 ) $ 101,082 $ (11,020,570 ) Net (loss) income attributable to non-controlling interest $ 559,967 $ (54,820 ) $ 614,787 Discontinued operations $ (2,068,054 ) $ 3,823,621 $ (5,891,675 ) Net loss attributable to Upexi, Inc. $ (16,930,289 ) $ (2,100,850 ) $ (14,182,442 ) Revenues increased by $57,611,165 or 250% for the fiscal year ended June 30, 2023, compared with the fiscal year ended June 30, 2022. $41,041,341 or 71% of the increase was related to the acquisitions of the LuckyTail brand and E-Core Technology, Inc. (“2023 acquisitions”) during 2023 and $18,848,230 or 33% was related to the acquisitions of Cygnet Online, LLC and VitaMedica, Inc. (“2022 acquisitions”) compared to the prior year period. This was offset by a decline in other businesses of $2,278,475 or 4%. Our primary brands of VitaMedica, LuckyTail and newly acquired Tytan Tiles all had significant growth year over year and management will continue to focus on these high margin and growth potential business in 2024 and beyond. The recommerce businesses, E-Core Technology, Inc. and Cygnet Online, LLC, continue to represent a significant portion of the overall revenue of the Company, although we did see lower than expected sales volume from our Amazon sales channels. Management expects revenue to continue to increase in the 2024 fiscal year with a primary focus on growing our branded products. Cost of revenue increased by $38,922,455 or 475% compared with the fiscal year ended June 30, 2022. $31,144,149 or 80% of the increase was related to the 2023 acquisitions and $8,640,033 or 22% was related to the 2022 acquisitions. The gross profit increased by $18,688,710. The gross profit margin declined by 22% to 42% compared to 64% in the prior year. The decline in gross profit margin was primarily related to the sales from the recommerce business versus the sales of our branded products. Management expects the gross margin to improve as the branded products segment continues to grow as a percentage of the overall sales and as we continue to gain economies of scale in our purchasing of products. Sales and marketing expenses increased by $5,259,135 or 103% compared with the same period last year. $2,396,876 or 46% of the increase was related to the 2023 acquisitions and $1,373,733 or 26% was related to the 2022 acquisitions. There was an increase of $1,488,526 or 28% related to the other business. The increase in sales and marketing expenses was primarily related to the acquisitions and increased expenditures for brand and company awareness, however management has aligned the marketing expenditures with the expected growth strategy to decrease the overall percentage of sales and marketing costs to sales. We anticipate our advertising expenses will continue to fluctuate in the following quarters as we fully implement our overall brand marketing strategy. Distribution costs increased $10,155,581 or 459% compared with the same period last year. $1,850,306 or 18% of the increase was related to the 2023 acquisitions and $7,306,309 or 72% of the increase was related to the 2022 acquisitions and the rest of the business. There continue to be increases in transportation costs and third-party provider rates. Management has implemented a strategy to change promotions, increase prices and adjust packaging to decrease the overall percentage of distribution costs to sales and is in process of consolidating its distribution centers, including closing the California facility as of July 1, 2023. General and administrative expenses increased by $404,521 or 4% compared with the same period last year. General and administrative expenses increased by $2,332,690 from 2023 acquisitions with the remainder of the business had a decrease in general and administrative expenses of $1,928,169. Management has actively been reducing general and administrative costs by consolidation of administrative functions and capitalizing on the overall size of the Company. Management will continue to implement strategies to decrease the percentage of general and administrative costs when compared to total sales. Other operating expenses increased by $3,932,350 or 80% compared with the same period last year. These expenses are primarily non-cash and increase based on the intangible assets created with acquisitions and the continued amortization of stock compensation. $1,612,815 or 41% was related to the 2023 acquisitions amortization of acquired intangible assets and $1,616,188 or 41% of the increase was related to the 2022 acquisitions amortization of acquired intangible assets. The remaining increase of $703,347 was related to increases in stock-based compensation and depreciation. 27 Table of Contents Other expenses increased by $11,020,570, which was primarily the loss recognized on the sale of Infusionz and select CBD assets, the reserves against amounts owed to the Company by the buyers of that business, the impairment of Interactive Offers intangible assets and an increase of interest expense from both acquisition debt and the termination of a $15,000,000 senior secured debt facility on October 1, 2022. Management estimates based on the current and expected debt balances in fiscal year 2024 that interest expense will be less than $2,800,000 and cash paid for interest expense to be less than $1,400,000. The Company had a net loss of $16,930,289 compared to a net loss of $2,100,850 in the prior year. The decrease in the net losses primarily related to the above-mentioned changes, which was offset by the net loss attributable to non-controlling interest of our consolidated subsidiary. Operating Segments The Company’s financial reporting is organized into two segments: Our Branded Product segment and our Recommerce segment. Our Branded Product segment is focused on the development, growth and distribution of the branded products that we own. Our Recommerce segment is focused on the purchase and sale of new and used products through channels such as Amazon and wholesale distributors. Other sources of revenue and related costs are aggregated and viewed by management as immaterial or have similar economic characteristics, products, production, distribution processes and regulatory environment as the other product sales. Segment Information The Company provides the following segments: (a) branded product segment and (b) product distribution segment. For the year ended June 30, 2023: Branded Products Recommerce Total Revenue $ 26,526,385 $ 54,150,124 $ 80,676,509 Loss from operations $ (6,945,411 ) $ (606,596 ) $ (7,552,007 ) Other (expense) $ (10,378,183 ) $ (541,305 ) $ (10,919,488 ) Depreciation expense $ 944,704 $ - $ 944,704 Income tax benefit $ 3,049,293 $ - $ 3,049,293 Segment assets: Additions to property, plant, and equipment $ 1,078,264 $ - $ 1,078,264 Total assets $ 28,588,365 $ 35,264,702 $ 63,853,067 Liquidity and Capital Resources Working Capital As of June 30, 2023 As of June 30, 2022 Current assets $ 25,455,714 $ 17,061,622 Current liabilities $ 19,606,010 $ 10,127,748 Working capital $ 5,849,291 $ 6,933,874 28 Table of Contents Cash Flows Years Ended June 30, 2023 2022 Cash flows provided by operating activities – continuing operations $ 517,697 $ 715,150 Cash flows used in investing activities – continuing operations (2,574,858 ) (10,903,318 ) Cash flows used in financing activities – continuing operations (285,333 ) 3,699,744 Cash flows used by operating activities – discontinued operations (315,021 ) (895,981 ) Cash flows provided by (used by) investing activities – discontinued operations - - Cash flows provided by (used by) financing activities – discontinued operations - - Net decrease in cash during the period $ (2,657,515 ) $ (7,384,405 ) On June 30, 2023, the Company had cash of $4,492,291 or a decrease of $2,657,515 from June 30, 2022. The decrease in cash was primarily used for investing in the acquisition of new entities and the purchase of property and equipment. The Company financed some of the investment through financing activities. The net cash provided by operating activities was $517,697 and offset by cash used in discontinued operations of $315,021. The loss of $16,284,292 was offset by the non-cash expenses of $5,153,695 depreciation and amortization, impairment of goodwill and identifiable intangible assets, $3,664,538 amortization of stock compensation, $2,212,542 of non-cash loses for the sale of Infusionz $969,098 amortization of consideration discount offset by $3,785,224 changes in deferred tax asset. The losses were also offset by an increase in liabilities of $3,312,604 and a decrease of $1,905,234 in current assets. Net cash used in investing activities for the years ended June 30, 2023, and 2022 was $2,574,858 and $10,903,318, respectively. For the year ended June 30, 2023, cash of $7,129,826 was used for two new acquisitions and payment related to prior year acquisitions and $937,564 for the acquisition of property and equipment and improvements to the building purchased in 2022. This was partially paid for with the $5,492,532, net cash received for the sale of Infusionz and select CBD assets. For the year ended June 30, 2022, the use of cash was primarily related to the investment of $5,457,545 in three acquisitions, $4,515,735 for the purchase of a building in Clearwater Florida and the related remodel of the acquired building and $936,038 for the acquisition of equipment. Net cash flows used in financing activities for the year ended June 30, 2023, was $285,333 compared to $3,699,744 provided in the year ended June 30, 2022. The Company had net proceeds of $6,127,893 from the issuance of stock and $7,120,000 in proceeds from the issuance of notes payable, including $1,470,000 of proceeds from a related party note payable, $3,000,000 of proceeds related to a note payable with a security interest in our building in Clearwater and $2,650,000 of unsecured debt. The newly issued debt was primarily used to repay the senior convertible note payable and the line of credit. On April 15, 2022, the Company entered into a non-negotiable convertible promissory note in the original principal amount of $1,050,000, as adjusted, (“Cygnet Note”) which can be converted into common stock of the Company at a price of $6.00 per share and is payable in full, to the extent not previously converted, on April 15, 2023. This note was fully repaid in April of 2023. In June 2022, the Company entered into a securities purchase agreement with two accredited investors pursuant to which the Company could receive up to $15,000,000 during the following twelve months of the agreement. The Company received $6,678,506 for Convertible Notes in the original principal amount of $7,500,000 (the “Convertible Notes”), representing the original purchase amount, less fees, costs and a $500,000 holdback by the investors. In addition to the Convertible Notes, the investors received Common Stock Purchase Warrants (the “Warrants”) to acquire an aggregate of 56,250 shares of common stock. The Warrants are exercisable for five years at an exercise price of $4.44 per share, provide customary anti-dilution protection, and an investor put right to require the Company to redeem the Warrants for a total of $250,000. There was a loss of $3,540 for the change in the derivative liability for the period ended December 31, 2022. On October 31, 2022, the Company entered into a letter agreement with the accredited investors in which all amounts owed were paid in full and the related convertible notes and all security interests were cancelled. Additionally, the Company terminated the related Form S-3 registration statement. 29 Table of Contents On October 19, 2022, the Company and its indirect wholly owned subsidiary, Upexi 17129 Florida, LLC entered into a loan agreement with Professional Bank, A Florida state-chartered bank, providing for a mortgage on the Company’s principal office in N. Clearwater, Florida. The company received $3,000,000 in connection with the transaction. The principal is to be paid back to Professional Bank over a term of ten years. The proceeds of the loan were utilized by the Company to pay down its loan facility with Acorn Capital, LLC in the amount of $2,780,200, net of fees and other expenses. The remainder of the loan facility with Acorn Capital, LLC was fully repaid in October of 2022 when the Company received proceeds from the sale of Infusionz, including $613,466 in accrued interest, $250,000 for settlement of a Put Option and $7,900 in miscellaneous fees for a total of $5,146,437 to the holders of the $15 million senior secured convertible notes entered into on June 28, 2022. The payment terminates the agreement with the noteholders. The Company also terminated the registration statement covering the senior secured notes payable. In June 2022, the Company executed a promissory note with Allan Marshall, the Company’s Chief Executive Officer, in the original principal amount of $1,500,000 (“Marshall Loan”). The promissory note has a 2-year term and bears cash interest at the rate of 8.5% per annum with an additional PIK of 3.5% per annum. The promissory note provides for monthly payments of principal, on an even line 36-month basis, plus cash interest, with a balloon payment of all outstanding principal, cash interest, and PIK interest at maturity. The Company received and deposited the principal amount on July 31, 2022. Interest only has been paid related to this loan and $625,000 of principal payments were due at June 30, 2023 and are classified as current portion of notes payable in addition to the principal payments owed during fiscal year 2024. On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $2,150,000 together with the issuance of 134,000 restricted shares (“the PIK shares”) of the Company’s common stock at a price of $4.53 per share. The promissory note has a 21-month term and bears interest at 18.11% payable with the PIK shares. The promissory note provides for 12 monthly payments of principal beginning on December 22, 2023, and PIK interest of restricted shares on the Effective Date of the promissory note. The Company shall have the right at any time to convert all or any part of the outstanding and unpaid principal into fully paid and non-assessable shares of common stock, or any shares of capital stock or other securities, together with the PIK shares at a price per conversion share equal to $5.00. On February 22, 2023, the Company executed a promissory note with an investor, in the original principal amount of $560,000. The promissory note has a 21-month term and bears cash interest at the rate of 10% per annum. The promissory note provides for monthly payments of interest beginning on March 22, 2023, and 12 monthly payments of principal beginning on December 22, 2023. We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these condensed consolidated financial statements and meet all our debt obligations. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, intangible assets, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. 30 Table of Contents We have identified below the accounting policies, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the Company’s reported financial position and results of operations include the allowance for doubtful accounts, useful lives of property and equipment, impairment of long-lived assets, inventory valuation, fair value of stock-based compensation and valuation allowance on deferred tax assets. Business Combinations - The Company accounts for its business combinations using the acquisition method of accounting. The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities assumed by the Company to the seller’s cash consideration and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. The excess of (i) the total costs of acquisition over (ii) the fair value of the identifiable net assets of the acquiree is recorded as identifiable intangible assets and goodwill. Goodwill - The Company evaluates its goodwill for possible impairment, simplifying the test for goodwill Impairment at least annually and when one or more triggering events or circumstances indicate that the goodwill might be impaired. Under this guidance, annual or interim goodwill impairment testing is performed by comparing the estimated fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying value of goodwill. The Company performed its annual test as of June 30, 2023. No impairment charge was identified in connection with the annual goodwill impairment test Revenue Recognition - The Company analyzes its contracts and purchase orders to assess that revenue is properly recognized. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions. Generally, the Company recognizes revenue for its products when ownership is transferred to the customer, provided no significant obligations remain and collection is probable. Product Revenue - Most of the Company’s revenue contracts are from domestic sales and represent a single performance obligation related to the fulfillment of customer orders for the purchase of its products. Net sales reflect the transaction prices for these contracts based on the Company’s selling list price, which is then reduced by estimated costs for trade promotional programs, consumer incentives, and allowances and discounts used to incentivize sales growth and build brand awareness. The Company recognizes revenue at the point in time that control of the ordered product is transferred to the customer, which is upon shipment to the customer or other customer-designated delivery point. Taxes collected from customers that are remitted to governmental agencies are accounted for on a net basis and not included as revenue. 31 Table of Contents The Company does not accept sales returns from wholesale customers, as the products are pre-approved prior to production and shipment. E-Commerce product returns must be completed within 45 days of the date of purchase. The Company does not accrue for estimated sales returns as historical sales returns have been minimal. The Company records deferred revenues when cash payments are received or due in advance of performance, including amounts which are refundable. Substantially all the deferred revenue as of June 30, 2022 was recognized as revenue in the year ended June 30, 2023. Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with freight are generally included in cost of revenue. Impairment of Long-lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. The Company did not recognize impairment on its long-lived assets during the years ended June 30, 2023, or 2022. Stock Based Compensation - The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period) or immediately if the share-based payments vest immediately. Inventory - The Company reviews the inventory level of all products and raw materials quarterly. For most products that have been in the market for one year or greater, we consider inventory levels of greater than one year’s sales to be excess or other items that show slower than projected sales. Due to limited market penetration for our products, we have decided to write down 50% of the cost against certain raw materials and finished products. Products that are no longer part of the current product offering are considered obsolete. The potential for re-sale of slow-moving and obsolete inventories is based upon our assumptions about future demand and market conditions. The recorded cost of obsolete inventories is then reduced to zero and the slow-moving and obsolete inventory is written off and are recorded as charges to cost of goods sold. All adjustments for obsolete inventory establish a new cost basis for that inventory as we believe such reductions are permanent declines in the market price of our products. Generally, obsolete inventory is sold to companies that specialize in the liquidation, while we continue to market slow-moving inventories until they are sold or become obsolete. As obsolete or slow-moving inventory is sold or disposed of, we write it off. Non-GAAP Measures (unaudited) Reconciliation of Non-GAAP Adjusted EBITDA to GAAP Net Income (Net Loss) Year Ended June 30, 2023 2022 Net income (Net loss) GAAP $ (16,930,289 ) $ (2,100,850 ) Income tax (3,049,293 ) (518,398 ) Interest expense, net 4,761,903 202,120 Depreciation and amortization 5,153,695 1,554,297 Stock compensation 3,664,538 3,331,586 Loss on the sale of Infusionz and select assets 2,212,542 - Change in derivative liability (1,770 ) 3,293 Loss (gain) on discontinued operations 2,068,054 (3,823,621 ) Gain on SBA PPP loan forgiveness - (300,995 ) (Loss) income attributable to non-controlling interest (559,967 ) 54,820 Lease impairment, California facility 200,512 - Gain on sale of asset - (5,500 ) Impairment of Intangible assets 3,746,301 - Non-GAAP adjusted EBITDA $ 1,266,226 $ (1,603,248 ) 32 Table of Contents Use of Non-GAAP Financial Measures The Company discloses and uses the above-mentioned non-GAAP financial measures internally as a supplement to GAAP financial information to evaluate its operating performance, for financial planning purposes, to establish operational goals, for compensation plans, to measure debt service capability, for capital expenditure planning and to determine working capital needs and believes that these are useful financial measures also used by investors. Non-GAAP adjusted EBITDA is defined as GAAP net income or net loss before interest, taxes, depreciation and amortization (EBITDA) adjusted for the non-cash stock compensation and stock option expense, acquisition, integration & restructuring expenses, charges and gains or losses from extinguishment of debt and other non-cash items. Non-GAAP EBITDA and non-GAAP adjusted EBITDA are not terms defined by GAAP and, as a result, the Company’s measure of non-GAAP EBITDA and non-GAAP adjusted EBITDA might not be comparable to similarly titled measures used by other companies. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flow that either excludes or includes amounts that are not normally included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures discussed above, however, should be considered in addition to, and not as a substitute for, or superior to net income or net loss as reported for GAAP on the Consolidated Statements of Operations, cash and cash flows on the Consolidated Statement of Cash Flows or other measures of financial performance prepared in accordance with GAAP, and as reflected on the Company’s financial statements prepared in accordance with GAAP. These non-GAAP financial measures are not a substitute for or presented in lieu of financial measures provided by GAAP and all measures and disclosures of financial information pursuant to GAAP should be read to obtain a comprehensive and thorough understanding of the Company’s financial results. The reconciliations of non-GAAP EBITDA and non-GAAP adjusted EBITDA to GAAP operating income (loss) and/or GAAP net income (net loss) referred to in the highlights or elsewhere are provided in the schedules that are a part of this document. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. As a “smaller reporting company”, the Company is not required to provide the information required by this Item. 33 Table of Contents