Expion360 Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related condensed notes thereto, which are included in Part I of this report and the consolidated financial statements of the Company and notes thereto for the years ended December 31, 2020 and 2021, included in the Company’s prospectus, dated March 31, 2022, filed with the SEC in accordance with Rule 424(b) of the Securities Act on April 4, 2022 (the “Prospectus”) in connection with the Company’s initial public offering. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties that may adversely impact our operations and financial results. These risks and uncertainties are discussed in the Prospectus. OVERVIEW The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto, which are included in Part I of this report. We focus on the design, assembly, manufacturing, and sales of lithium iron phosphate (LiFePO4) batteries and supporting accessories for recreational vehicles (“RVs”) and marine applications with plans to expand into home energy storage products and industrial applications. We design, manufacture, and distribute high-powered, lithium battery solutions using ground-breaking concepts with a creative sales and marketing approach. Our product offerings include some of the most dense and minimal-footprint batteries in the RV & Marine industry. We are developing the e360 Home Energy Storage: a system that we expect to significantly change the industry in barrier price, flexibility, and integration. We are deploying multiple IP strategies with cutting-edge research, manufacturing processes, and unique products to sustain and scale the business. We currently have customers consisting of dealers, wholesalers, and original equipment manufacturers who are driving revenue and brand awareness nationally. 29 Our corporate headquarters are based in Redmond, Oregon, with assembly in the United States and suppliers based in Asia. We are currently in the process of building out manufacturing capacity at our corporate headquarters. Our long-term target is to onshore the manufacturing of most of our components and assemblies, including cell manufacturing, to the United States. Our main target markets are the RV & Marine industry. We believe that we are currently well positioned to capitalize on the rapid market conversion from lead-acid to lithium batteries as the primary method of power sourcing in these industries. Additional focus markets include home energy storage, where we aim to provide a cost-effective, low barrier of entry, and a do-it-yourself (“DIY”) flexible system for those looking to power their homes via solar energy, wind, or grid back-up. Along with RV/Marine and home energy storage markets, we aim to provide additional capacities to the ever-expanding electric forklift and industrial material handling markets. Expion360’s VPR 4EVER product line, which is manufactured for the RV/Marine industry, was launched in December 2020. The VPR 4EVER product line, through its rapid sales growth, has shown to be a preferred conversion solution for lead-acid batteries. We believe that our e360 Home Energy Storage system has strong revenue potential with recurring income opportunities for us and our associated sales partners. Our products provide numerous advantages for various industries that are looking to migrate to lithium-based energy storage. They incorporate, detailed-oriented design, engineering, and manufacturing, and strong case materials and internal and structural layouts, and are backed by responsive customer service. COMPETITIVE STRENGTHS We believe the following strengths differentiate Expion360 and create long-term sustainable competitive advantages. Superior Capacity to Lead Acid Competitors Lead-acid batteries have always been the standard in RV and marine transportation vehicles. Our lithium-ion batteries offer superior capacity to our lead-acid competitors. Our batteries utilize lithium iron phosphate, and therefore, are expected to have a lifespan of approximately 12 years — three to four times that of certain lead-acid batteries and with ten times the number of charging cycles. Furthermore, our typical battery provides three times the power of the typical, lead-acid battery despite being half the weight (comparing, for example, a typical lead-acid battery like Renogy Deep Cycle AGM, which is rated at 100Ah, to our own LFP 100Ah battery and assuming slow discharge at a .1C rate). Battery Pack Flexibility Our battery packs are also highly flexible, designed to be moved and used in various applications seamlessly. We plan to onshore our semi-automated pack assembly in Redmond, Oregon beginning in the fourth quarter of 2022. This should allow us to use a more flexible approach to forming and creating new battery packs. By onshoring, we expect to be able to react to market demands at a much quicker pace and increase profit levels over our competition. Strong National Retail Customers We have a national presence with several large retail customers, such as Camping World. Long-time RV and Marine Industry Experience and Relationship John Yozamp, Founder of Expion360, pioneered multiple new recreational concepts in the RV industry. As the founder and previous owner of Zamp Solar, he has extensive relationships in the RV OEM industry. 30 Strong Insider Ownership Expion360 is managed by a team with a strong track record in the RV and clean energy spaces. In addition, our company insiders own significant equity in the company, signaling a strong commitment and personal investment. Expansion into New Markets While RV and marine applications currently drive revenue, Expion360 has plans to expand into the home energy market in the coming years. Our e360 Home Energy Storage system is planned to target entry level customers with its modular design that will allow for DIY expansion. We see the vision of stored energy as a portable, moving concept, where stored energy can be transported from the home to other devices outside of it. Furthermore, Expion360 plans to file for IP protection for Expion360’s “Smart Talk” upon completion of development. “Smart Talk” is designed to allow multiple batteries in a bank to communicate as one and be linked to a network. Strong Distribution Channels Expion360 has sales relationships with many major RV and marine retailers and plans to use what we believe is a strong reputation in the lithium battery space to create an even stronger distribution channel. John Yozamp has used his decades of experience in the energy and RV industries to cultivate relationships with numerous retailers in the space. Expion360 has already established a sales relationship with Camping World, the largest RV retailer with sales representing around 25% of all new RVs sold nationwide, as well as Electric World, and NTP-STAG, a leading distributor of aftermarket RV parts. RECENT DEVELOPMENTS AND TRENDS In addition to the recent developments identified in in the Company’s prospectus, dated March 31, 2022, filed with the SEC in accordance with Rule 424(b) of the Securities Act on April 4, 2022 (the “Prospectus”) in connection with the Company’s initial public offering, our business in 2022 has been impacted, and we believe will continue to be impacted by the following recent events and trends: On April 1, 2022, the Company completed an initial public offering. A total of 2,466,750 shares of common stock were sold at $7.00 per share in the IPO, for total gross proceeds of $17,267,250, or net proceeds of $14,772,487 after issuance costs of $2,494,763, which has substantially improved our working capital position. The Company also issued 35,714 shares and 148,005 warrants to outside third parties and underwriters in connection with the IPO. The total estimated fair value of the shares and warrants were $249,998 and $916,238, respectively. IPO-related costs incurred reduced additional paid-in capital and therefore, the issuance of these shares and warrants resulted in no impact to the financial statements. From the IPO proceeds, in April 2022 the Company paid off working capital loans totaling $550,000 (see Note 6 – Line of Credit and Short-Term Revolving Loans) and notes payable of $1.7 million, plus related interest totaling $213,895. We experienced overall improvements in sales trends in the three and six month periods ended June 30, 2022. Our new leased distribution center in Elkhart, Indiana became operational in the first quarter of 2022 and our new leased facility in Redmond, Oregon is under development with roughly $950,000 of proceeds from the IPO earmarked for the construction of a new assembly line and associated equipment for quality testing and material handling. Total capital expenditures related to the new assembly line and associated equipment for the three and six months ended June 30, 2022 was approximately $460,000. The Company’s 2021 Incentive Award Plan and 2021 Employee Stock Purchase Plan both became effective upon the initial public offering. The stock option plans are described in detail in Note 12 – Stockholders’ Equity of the financial statements. In May 2022, 829,500 shares were granted under the 2021 Incentive Award Plan which resulted in a fair value stock-based compensation expense of $2,114,529, which is included in selling, general, and administrative expenses on the accompanying financial statements. 31 KEY LINE ITEMS Revenue Recognition The Company’s revenue is generated from the sale of products consisting primarily of batteries and accessories. The Company recognizes revenue when control of goods or services is transferred to its customers in an amount that reflects the consideration it is expected to be entitled to in exchange for those goods or services. Materially, all of our sales are within the United States. Cost of Sales Our primary cost of sales is related to our direct product and landing costs. Direct labor costs consist of payroll costs (including taxes and benefits) of employees directly engaged in assembly activities. Overhead consists primarily of warehouse rent and utilities. The costs can increase or decrease based on costs of product and assembly parts, purchased at market pricing, customer supply requirements, and the amount of labor required to assemble a product, along with the allocation of fixed overhead. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries, benefits, and sales and marketing costs. Other costs include facility and related costs, professional fees and other legal expenses, consulting, tax and accounting services, sales and marketing expenses. Interest and Other Income, net Interest expense consists of interest costs on loans with interest rates ranging from 3.75% to 11.21% and amortization of debt issuance costs. As of June 30, 2022, all debt issuance costs have been fully amortized. Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements. RESULTS OF OPERATIONS The following table sets forth certain operational data as a percentage of sales. Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 67.9 62.1 64.0 65.3 Gross profit 32.1 37.9 36.0 34.7 Selling, general, and administrative expenses 164.4 42.0 110.6 39.1 Loss from operations (132.4 ) (4.1 ) (74.6 ) (4.4 ) Other expense — net 53.4 9.0 35.3 15.7 Loss before income taxes (185.7 ) (13.1 ) (109.9 ) (20.1 ) Net loss (185.7 ) (13.1 ) (109.9 ) (20.1 ) Sales Sales for the three months ended June 30, 2022 increased by 121.7%, or approximately $1.21 million, compared to the corresponding period in 2021. Sales for the six months ended June 30, 2022 increased by 132.0%, or approximately $2.48 million, compared to the corresponding period in 2021. The increases were primarily attributable to increases in our overall sales volumes as a result of our expanded product offerings and distribution network. 32 Cost of Sales Total cost of sales for the three months ended June 30, 2022 increased by 142.3%, or approximately $879,000, compared to the corresponding period in 2021, and increased as a percentage of sales by 5.8%. Total cost of sales for the six months ended June 30, 2022 increased by 127.3%, or approximately $1.56 million, compared to the corresponding period in 2021, but decreased as a percentage of sales by 1.3%. The increase in the cost of sales during the three months ended June 30, 2022 over the corresponding period in 2021 was primarily related to increases in landing costs, which the Company is currently monitoring. The reduction in cost of sales as a percentage of sales for the six months ended June 30, 2022 compared to the corresponding period in 2021 is primarily attributable to improved efficiencies due to the increase in our overall sales volume. Gross Profit Our gross profit as a percentage of sales decreased to 32.1% for the three months ended June 30, 2022, compared to 37.9% for the three months ended June 30, 2021. Our gross profit as a percentage of sales increased to 36.0% for the six months ended June 30, 2022, compared to 34.7% for the six months ended June 30, 2021. The increase in gross profit for the six month period was primarily attributable to our expanded product line of six new batteries that was launched in late 2020, which gained continuous momentum and increased demand throughout 2021 and into second quarter of 2022. Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended June 30, 2022 increased by 767.6%, or approximately $3.2 million, compared to the corresponding period in 2021. Selling, general and administrative expenses for the six months ended June 30, 2022 increased by 555.6%, or approximately $4.08 million, compared to the corresponding period in 2021 due to increased costs to support our growth in sales and business development efforts along with various expenses that were incurred due to planning and preparing for our initial public offering. The most substantial increases were in salaries and benefits, of which $2,114,529 was a non-cash expense attributable to stock-based compensation, legal and professional services incurred in anticipation of our initial public offering, sales and marketing, and rents and utilities. Presented in the table below is the composition of selling, general and administrative expenses: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Salaries and benefits $ 2,804,205 $ 188,080 $ 3,430,567 $ 320,818 Sales and marketing 151,701 88,210 311,738 144,696 Rents, maintenance, utilities 177,794 41,630 310,797 89,092 Legal and professional 155,964 16,549 262,532 23,699 Software, fees, tech support 37,138 18,344 76,061 34,824 Travel expenses 36,506 6,018 73,154 15,753 Supplies, office 56,077 22,787 86,968 41,255 Depreciation 35,459 10,182 62,893 19,284 Insurance 19,813 2,775 39,401 7,360 Research and development 107,058 4,953 112,375 12,212 Other 39,857 17,898 51,462 25,848 Total $ 3,621,572 $ 417,426 $ 4,817,948 $ 734,841 Other Expense Our other expense for the three months ended June 30, 2022 and 2021 was approximately $1.18 million and $89,000, respectively. Our other expense for the six months ended June 30, 2022 and 2021 was approximately $1.54 million and $294,000, respectively. Other expense for the three and six months ended June 30, 2022 was made up almost entirely of interest expense. For the three months ended June 30, 2022 and 2021, interest expense attributable to non-cash amortization of debt discount totaled $982,317 and $4,721, respectively. However, during the three months ended June 30, 2021, non-cash interest expense of $112,133 was also recognized in connection with an induced conversion that occurred on January 1, 2021. During the six months ended June 30, 2022 and 2021, non-cash amortization of debt discount totaled $1,196,843 and $4,721, respectively. Interest expense attributable to debt obligations totaled $193,402 and $84,569 during the three months ended June 30, 2022 and 2021, respectively, and $340,990 and $177,383 during the six months ended June 30, 2022 and 2021, respectively. These increases are primarily related to higher average debt balances during the three and six months ended June 30, 2022 compared to the corresponding period in 2021. However, in April 2022, with the use of proceeds from the IPO, the Company paid off approximately $2.46 million in debt with interest rates ranging from 10 to 15%. 33 Net Loss Our net loss for the three months ended June 30, 2022 and 2021 was $4.09 million and $130,000, respectively. Our net loss for the six months ended June 30, 2022 and 2021 was $4.79 million and $378,000, respectively. The increase in net loss was primarily the result of increased selling, general, and administrative expenses as we invested in human resources, facilities, and business development in preparation of our expanded growth objectives along with an increase in legal and professional costs in anticipation of our initial public offering. Additionally, for the three and six months ended June 30, 2022, the Company recognized approximately $2.1 million in non-cash expenses related to stock-based compensation, which was non-existent in the corresponding periods in 2021. Further, and as noted above, for the three and six months ended June 30, 2022, the company recognized non-cash interest expense of approximately $1.2 million. Therefore, of the $4.79 million net loss for the three and six months ended June 30, 2022, a total of $3.3 million was non-cash expenses. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2022 and December 31, 2021, our current assets exceeded current liabilities by approximately $14.2 million and $3.2 million respectively, and we had cash and cash equivalents of approximately $10.39 million and $773,000, respectively. On April 1, 2022, we closed our initial public offering which resulted in approximately $14.7 million of net proceeds. Short-term liquidity requirements We generally consider our short-term liquidity requirements to consist of those items that are expected to be incurred within the next twelve months and believe those requirements to consist primarily of funds necessary to pay operating expenses, interest and principal payments on our debt, and capital expenditures related to assembly line expansion. As of June 30, 2022, we expect our short-term liquidity requirements to include (a) approximately $390,000 of capital additions; (b) principal debt payments totaling approximately $78,000; and (c) lease obligation payments of approximately $740,000, including imputed interest. Long-term liquidity requirements We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next twelve months and believe these requirements consist primarily of funds necessary for eighteen months. Based on our current business plan, we believe that cash flows from operations, together with the proceeds from the initial public offering will be sufficient to meet our anticipated cash needs for working capital, capital expenditures, and debt service for at least the next fifteen months. Our ability to make scheduled principal and interest payments, or to refinance our indebtedness, or to fund planned capital expenditures, will depend on future performance, which is subject to general economic conditions, the competitive environment, and other factors, including those outlined in the “Risk Factors” section of this prospectus. If our estimates of revenues, expenses, capital, or liquidity requirements change or are inadequate to support our growth or if cash generated from operations is insufficient to satisfy our liquidity requirements, we may seek to sell additional equity and/or arrange additional debt financing. We may also seek to raise additional equity and/or arrange debt financing to give us the financial flexibility to pursue attractive opportunities that may arise in the future. 34 Cash flows used in operating activities We generated negative cash flows from operating activities of approximately $2.73 million for the six months ended June 30, 2022, compared to negative cash flows of approximately $917,000 for the corresponding period in 2021. Significant factors affecting operating cash flows during the periods included: For the six months ended June 30, 2022, our loss of $4,787,889 was adjusted and reduced by non-cash transactions including stock-based compensation of approximately of $2.1 million, amortization of debt discount on convertible notes of approximately $1.2 million and depreciation of approximately $67,000. For the six months ended June 30, 2021, our loss of $377,628 was adjusted and reduced by non-cash transactions including amortization of debt discount on convertible notes of approximately $5,000, a debt conversion expense on induced conversion of approximately $112,000 and depreciation of approximately $22,000. ● Cash used for accounts receivable was approximately ($45,000) and ($95,000), representing an increase in accounts receivable for the six months ended June 30, 2022 and 2021, respectively. These increases correspond with increases in sales. ● Accounts payable and accrued expenses increased by approximately $94,000 during the six months ended June 30, 2022 compared to approximately $43,000 for the corresponding period in 2021. This is primarily attributed to increased costs and expenses. ● Other significant changes include a decrease in customer deposits of approximately $187,000 during the six months ended June 30, 2022, representing a use of cash that did not exist in the corresponding period in 2021. Additionally, long-term deposits increased by approximately $161,000 during the six months ended June 30, 2022 compared to $18,000 for the corresponding period in 2021, primarily due to new leases and deposits on capital purchases. ● Cash used for inventory and prepaid inventories was approximately $992,000 and $643,000 for the six months ended June 30, 2022 and 2021, respectively. These increases are primarily due to significant purchases and prepayments of inventory to Chinese suppliers that were made in the 2nd quarter of 2022 in order to have sufficient inventory for projected sales in 2022. Turnaround time for receiving inventory from foreign sources can take up to 120 days, with prepayments required. Sales for the six months ended June 30, 2022 increased over sales for the six months ended June 30, 2021 by approximately $2.48 million. Cash flows used in investing activities We used cash in investing activities of approximately $139,000 and $68,000 for the six months ended June 30, 2022 and 2021, respectively. Cash used in investing activities was entirely used for capital purchases of property and equipment related to expanding and improving our facilities and infrastructure. We anticipate that we will spend between $450,000 and $950,000 in 2022 as we expand our production facilities and build new assembly lines. Cash flows provided by financing activities Cash provided by financing activities was approximately $12,483,840 and $1,414,103 for the six months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 we paid down debt principal of approximately $2.29 million compared to $250,000 for the six months ended June 30, 2021. During the six months ended June 30, 2022, the Company issued no new debt resulting in cash proceeds, whereas during the six months ended June 30, 2021, we obtained working capital financing of $125,000 and received proceeds from the issuance of convertible notes of $1,017,000 . During the six months ended June 30, 2022, we received net cash proceeds of $14,772,487 from the sale of common stock compared to $522,000 during the six months ended June 30, 2021. Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements. 35 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our financial results are affected by the selection and application of accounting policies and methods. Critical accounting policies are those that we consider to be the most important in portraying our financial condition and results of operations and require the greatest number of judgments by management. Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. In the six months ended June 30, 2022, there were no changes to the application of critical accounting policies previously disclosed in the Company’s prospectus, dated March 31, 2022, filed with the SEC in accordance with Rule 424(b) of the Securities Act on April 4, 2022 (the “Prospectus”) in connection with the Company’s initial public offering, other than the following: The Company accounts for stock-based compensation in accordance with ASXC 718, “Compensation – Stock Compensation,” which requires compensation costs to be recognized at grant fair date value over the requisite service period of each of the awards. The Company recognizes forfeitures of awards as they occur. The fair value of stock options is determined using the Black-Scholes-Merton option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the mode3l, including risk-free interest rate, volatility, expected dividend yield, and expected life. Changes to assumptions could cause significant adjustments to the valuation. CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this report, other than statements of historical fact, are “forward-looking statements” for purposes of these provisions, including, without limitation, any projections of earnings, revenues or other financial items, any statements of the plans and objectives of our management for future operations, any statements concerning proposed new products or services, any statements regarding the integration, development, or commercialization of the business or any assets acquired from other parties, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “should,” “anticipates,” “intends,” “seeks,” “believes,” “estimates,” “potential,” “forecasts,” “continue,” or other forms of these words or similar words or expressions, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct. Actual results will likely differ, and could differ materially, from those projected or assumed in the forward-looking statements. Prospective investors are cautioned not to unduly rely on any such forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: ● We operate in an extremely competitive industry and are subject to pricing pressures. ● We have a history of losses. As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability. ● Our results of operation may be negatively impacted by public health epidemics or outbreaks, including the novel coronavirus (“COVID-19”). ● If we fail to expand our sales and distribution channels, our business could suffer. ● Our ability to expend into international markets is uncertain. 36 ● Nearly all of our raw materials enter the United States through a limited number of ports, and we rely on third parties to store and ship some of our inventory; labor unrest at these ports or other product delivery difficulties could interfere with our distribution plans and reduce our revenue. ● The uncertainty in global economic conditions could negatively affect the Company’s operating results. ● Government reviews, inquiries, investigations, and actions could harm our business or reputation. ● Our operating results could be adversely affected by changes in the cost and availability of raw materials. ● Increases in costs, disruption of supply, or shortage of any of our battery components, such as electronic and mechanical parts, or raw materials used in the production of such parts could harm our business. ● We could face potential product liability claims relating to products we assemble, manufacture, or distribute, which could result in significant costs and liabilities, which would reduce our profitability. ● Our operations expose us to litigation, tax, environmental, and other legal compliance risks. ● Our failure to introduce new products and product enhancements and broad market acceptance of new technologies introduced by our competitors could adversely affect our business. ● Quality problems with our products could harm our reputation and erode our competitive position. ● We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning could adversely affect our business. ● Sales of substantial amounts of our securities in the public markets, or the perception that such sales might occur, could reduce the price of our securities and may dilute your voting power and your ownership interest in us. ● Our management team has limited experience managing a public company. ● We are an “emerging growth company” and elect to comply with certain reduced reporting requirements applicable to emerging growth companies, which could make our securities less attractive to investors. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Our actual results will likely differ, and may differ materially, from anticipated results. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and we assume no obligation to update or disclose revisions to those estimates. If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections. NOTICE REGARDING TRADEMARKS This report includes trademarks, tradenames, and service marks that are our property or the property of others. Solely for convenience, such trademarks and tradenames sometimes appear without any “™” or “®” symbol. However, failure to include such symbols is not intended to suggest, in any way, that we will not assert our rights or the rights of any applicable licensor, to these trademarks and tradenames.