CRYM CryoMass Technologies Inc (QB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-56155

CRYOMASS TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

303-416-7208

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

As of August 16, 2023, the registrant had 206,218,637 shares of its common stock, par value $0.001 per share, outstanding.

Securities registered pursuant to Section 12(b) of the Act:

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology.

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

Factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance. A more detailed description of risk factors that may affect our operating results can be found in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 24, 2023, and our other filings with the SEC. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

TABLE OF CONTENTS

CRYOMASS TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

CRYOMASS TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CRYOMASS TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CRYOMASS TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

In this quarterly report, unless otherwise specified, our financial statements are expressed in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles. All references to “common shares” refer to the common shares in our capital stock.

Unless expressly indicated or the context requires otherwise, the terms “Cryomass Technologies,” the “Company,” “we,” “us,” and “our” refer to Cryomass Technologies Inc., a Nevada corporation, and, where appropriate, its wholly owned subsidiaries.

General Overview

History

Cryomass Technologies Inc (“Cryomass Technologies” or the “Company”) began as Auto Tool Technologies Inc., which was incorporated under the laws of the State of Nevada on May 10, 2011. The Company’s name was changed to AFC Building Technologies Inc. effective January 10, 2014. Effective April 26, 2018, the Company changed its name to First Colombia Development Corp. On May 10, 2018, the Company began to establish various business ventures in Colombia through its Colombian subsidiary, First Colombia Devco S.A.S (“Devco”). On July 1, 2019, the Company acquired 100% of the membership interests in General Extract, LLC, a Colorado limited liability company, in exchange for the shares of Devco. The name of this subsidiary was subsequently changed to Cryomass LLC. On July 15, 2019, the Company entered into a Membership Interest Purchase Agreement to acquire cannabis-related intellectual property and certain other assets, but not cannabis licenses, of Critical Mass Industries LLC (“CMI”), a Colorado limited liability company. Effective October 14, 2019, the Company changed its name to Redwood Green Corp. In August 2020, the Company established a wholly owned Colombian subsidiary, Andina Gold Colombia SAS for this purpose acquiring gold properties in Colombia. Effective September 1, 2020, the Company changed its name to Andina Gold Corp. However, due to the untimely death of our top geologist, the Company determined that pursuit of gold exploration in Colombia was no longer a practical alternative. In Q1 2022 the respective subsidiary was closed.

On July 15, 2021, the Company changed its name to Cryomass Technologies Inc and subsequently changed its trading symbol to CRYM. Effective December 31, 2021, the Company disposed of all CMI-related assets and extinguished any and all related obligations.

The Company’s principal office is located at 1001 Bannock St., Suite 612, Denver, CO 80204, and its telephone number is 303-416-7208. The Company’s website is www.cryomass.com. Information appearing on the website is not incorporated by reference into this report.

On June 22, 2021, the Company entered into an Asset Purchase Agreement with Cryocann USA Corp, a California corporation (“Cryocann”), pursuant to which Company acquired substantially all the assets of Cryocann.

The patented technology acquired from CryoCann (including US patent #10,864,525) harnesses liquid nitrogen to reduce biomass and then efficiently isolate, collect and preserve delicate resin glands (trichomes) containing prized compounds like cannabinoids and terpenes. Building on this technology, CryoMass has engineered its premier Trichome Separation unit (CryoSift Separator™), optimized via patented cryogenic processes to rapidly capture intact, high-value cannabis and hemp trichomes (CryoSift™). Much like sugar and flour refinements, the resulting CryoSift™ concentrate is a superior product compared to unprocessed biomass. For cultivators, reducing biomass into CryoSift™ slashes volume up to 80%, dramatically lowering storage, handling, and transportation costs. Properly stored, CryoSift™ prevents potency and terpene degradation, preserving value. For processors, the minimized input volume also enables considerable cost savings and logistics advantages. Extracting from CryoSift™ using solvents and manufacturing solventless products unlocks industrial scale yields unattainable otherwise. CryoMass anticipates its efficiencies will catalyze industry-wide shifts in cannabis and hemp post-harvest methods. Additionally, the technology shows promise for diverse trichome-rich plants.

Through an independent engineering and manufacturing firm we refined the design of the CryoSift Separator™ for the handling of harvested hemp, cannabis and other premium crops. Our first CryoSift Separator™ unit has been fully developed and delivered to a licensee in California as described in the following section of this report. The engineering and manufacturing firm has indicated that it has the capacity to manufacture sufficient units to meet our needs for the foreseeable future.

Canadian Patent no. 3 064 896 “Cryogenic Separation of Plant Material” was filed on May 25, 2018 by two assignors, who assigned it, among other, various other intellectual property rights, to a wholly owned subsidiary of the Company as part of the Cryocann June 22, 2021 transaction. The respective Canadian patent was granted on April 19, 2022. Provided that all patent maintenance fees are paid, the Canadian patent no. 3 064 896 will expire on May 25, 2038.

In September 2021, we were granted an additional patent for our process from the Chinese Intellectual Property Office. We currently are taking steps to gain further protection for our intellectual property through the European Union Intellectual Property Office and several other international jurisdictions.

Management believes the CryoSift Sepatator™ system will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for largescale cultivators and processors of hemp and cannabis. 

Because the trichomes collected with CryoMass technology represent only 10% to 20% of a plant’s volume, they are cheaper to ship and store than gross plant material. For the same reason and because trichomes are free of the waxes and other unwanted materials found in the rest of the plant, processing trichomes into oils and extracts can be far quicker, cheaper and easier than processing gross plant material. Even trichomes captured from dried or frozen plant parts deliver this cost-saving advantage to processors of oils and extracts. The three-dimensional advantage achievable with the CryoSift Separator™ – first-stage cost savings, product enhancement and downstream cost savings – can significantly increase a crop’s wholesale value.

Production and processing of hemp and cannabis is a huge, worldwide industry. In the U.S., for example, the wholesale value of the cannabis crop from just the 11 states permitting adult-use and medical cannabis exceeds $6 billion annually. Growth in the U.S. and in the worldwide market is likely fed in part by the growing acceptance of medicinal cannabis products and anticipated legislative changes in various jurisdictions worldwide.

Several other high-value plants, including species that are important for health and wellness products, wrap their valuable elements in trichomes. The technology we are developing for hemp and cannabis may have profitable application to those other species as well.

Our Current Business

Our business portfolio includes the accounts of Cryomass LLC, Cryomass California LLC and 1304740 BC ULC dba Cryomass Canada, which are 100% owned by Cryomass Technologies Inc.

CryoMass Technologies Inc. develops and licenses cutting-edge equipment and processes to refine harvested cannabis, hemp, and other premium crops. The company’s patented technology harnesses liquid nitrogen to reduce biomass and then efficiently isolate, collect and preserve delicate resin glands (trichomes) containing prized compounds like cannabinoids and terpenes. Building on this technology, CryoMass has engineered its premier Trichome Separation unit (CryoSift Separator™), optimized via patented cryogenic processes to rapidly capture intact, high-value cannabis and hemp trichomes (CryoSift™). Much like sugar and flour refinements, the resulting CryoSift™ concentrate is a superior product compared to unprocessed biomass. For cultivators, reducing biomass into CryoSift™ slashes volume up to 80%, dramatically lowering storage, handling, and transportation costs. Properly stored, CryoSift™ prevents potency and terpene degradation, preserving value. For processors, the minimized input volume also enables considerable cost savings and logistics advantages. Extracting from CryoSift™ using solvents and manufacturing solventless products unlocks industrial scale yields unattainable otherwise. CryoMass anticipates its efficiencies will catalyze industry-wide shifts in cannabis and hemp post-harvest methods. Additionally, the technology shows promise for diverse trichome-rich plants.

In January 2023, we signed a license and lease arrangement with RedTape Core Partners LLC (“RedTape”) to deploy multiple CryoMass trichome separation units at the prospective partner’s facility in California and other locations. The five states covered by the agreement are California, New York, New Jersey, Florida and Pennsylvania. To date, one CryoSift Separator™ unit has been delivered however, no funds have been paid by RedTape to CryoMass pursuant to the lease and license agreement.

On August 16, 2023, the Company agreed to amend the Patent License and Equipment Rental Agreement with RedTape Core Partners LLC in order to remove the state of California from the five states included in the Agreement, along with concomitant reductions in license fees and an amendment to the license fee payment schedule.

We believe that our technologies will deliver a compelling combination of cost and time savings while enhancing product quality and quantity for largescale cultivators and processors of hemp and cannabis. To that end, Cryomass is working with an extensive pipeline of cultivators and processors in various markets, including Canada.

Results of Operations for the Three Months Ended June 30, 2023 and 2022

Our operating results for the three months ended June 30, 2023 and 2022 are summarized as follows:

Net Sales and Cost of Goods Sold

There were no net sales or cost of goods sold for the three months ended June 30, 2023 and 2022.

Operating Expenses

Operating expenses encompass personnel costs, research and development, general and administrative expenses, depreciation and amortization expenses, loss on impairment of goodwill, and legal and professional fees. Total operating expenses were $6,274,718 for the three months ended June 30, 2023 as compared to $1,416,244 for the three months ended June 30, 2022. The net increase of $4,858,474 or 343%, was primarily attributable to the following changes in operating expenses of:

The increase of $207,717, or 82%, in General and administrative fees is primarily due to the fact that the Company incurred significant costs related to stock compensation expense during the three months ending June 30, 2023. The increase of $257,033 or 37%, in personnel costs is primarily due to the fact that the Company hired multiple new employees through out the second half of 2022 and first half of 2023. The decrease in legal and professional fees of $583,697, or 33%, is primarily due to large invoices in the first half of 2022 for investor relations services. Additionally, the Company fully impaired goodwill and identifiable intangible assets due to delays in implementing our business model, resulting in a $4,843,043 impairment charge for the three months ended June 30, 2023.

Other Expense

Other expense for the three months ending June 30, 2023 consisted of $82,602 interest expense – net and $4,486 loss on foreign exchange. Other expense for the three months ending June 30, 2022 consisted of $35,235 interest expense and $21,061 gain on foreign exchange. The increase in interest expense was a result of the Company issuing promissory notes to investors during the second quarter of 2023. The loss on foreign exchange predominantly relates to a payable agreement with Cryomass LLC’s supplier.

Net Loss 

For the foregoing reasons, we had a net loss of $6,361,806 for the three months ending June 30, 2023, or $0.03 net loss per common share – basic and diluted, compared to a net loss of $1,430,418 for the three months ending June 30, 2022, or $0.01 net loss per common share – basic and diluted.

Results of Operations for the Six Months Ended June 30, 2023 and 2022

Our operating results for the six months ended June 30, 2023 and 2022 are summarized as follows:

Net Sales and Cost of Goods Sold

There were no net sales or cost of goods sold for the six months ended June 30, 2023 and 2022.

Operating Expenses

Operating expenses encompass personnel costs, research and development, general and administrative expenses, depreciation and amortization expenses, loss on impairment of goodwill, and legal and professional fees. Total operating expenses were $4,153,230 for the six months ended June 30, 2023 as compared to $3,544,034 for the six months ended June 30, 2022. The net increase of $609,196 or 17%, was primarily attributable to the following changes in operating expenses of:

The increase of $690,068, or 86%, in personnel costs is primarily due to the fact that the Company hired multiple new employees through out the second half of 2022 and first half of 2023. The increase in general and administrative of $252,264, or 47%, is primarily due to the fact that the Company incurred significant costs related to stock compensation expense and a new health benefits program put in place during the second quarter of 2023. The decrease of $1,743,212, or 81% in legal and professional fees is primarily due to large invoices in the first half of 2022 for investor relations services. Additionally, the Company fully impaired goodwill and identifiable intangible assets due to delays in implementing our business model, resulting in a $4,843,043 impairment charge for the six months ended June 30, 2023.

Other Expense

Other expense for the six months ending June 30, 2023 consisted of $136,263 interest expense – net and $17,796 loss on foreign exchange. Other expense for the six months ending June 30, 2022 consisted of $71,258 interest expense and $32,569 gain on foreign exchange. The increase in interest expense was a result of the Company entering into new promissory note agreements during the second quarter of 2023. The loss on foreign exchange predominantly relates to a payable agreement with Cryomass LLC’s supplier.

Net Loss 

For the foregoing reasons, we had a net loss of $7,960,332 for the six months ending June 30, 2023, or $0.04 net loss per common share – basic and diluted, compared to a net loss of $3,582,723 for the six months ending June 30, 2022, or $0.02 net loss per common share – basic and diluted.

Liquidity, Capital Resources and Cash Flows

The Company believes that its available cash balance as of the date of this filing will not be sufficient to fund its anticipated level of operations for at least the next twelve months. The Company believes that, at the present time, its ability to continue operations depends on cash expected to be available from lease payments and royalty payments in connection with future revenue generation, as well as possible debt and equity investment sources, to fund its anticipated level of operations for at least the next twelve months. As of June 30, 2023, the Company had a working deficit of $1,335,230 and cash balance of $316,267. The Company estimates that it needs approximately $4,200,000 to cover overhead costs and capital expenditure requirements ranging from zero to $6,600,000 depending on how many trichome separation units are ordered over the next twelve months. The Company believes that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results of operations and, depending on the results of operations, the Company will need additional equity or debt financing until the Company can achieve profitability and positive cash flows from operating activities. However, there can be no assurance that the Company will receive sufficient cash flow from operations or otherwise that we will be able to attract the necessary financing.

Going Concern

The Company believes that there is substantial doubt about the Company’s ability to continue as a going concern. Our financial statements for the six months ended June 30, 2023 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

Capital Resources 

The following table summarizes total current assets, liabilities and working (deficit) capital for the periods indicated: 

As of June 30, 2023 and December 31, 2022, we had a cash balance of $316,267 and $2,016,057, respectively.

Summary of Cash Flows

Net cash used in operating activities

Net cash used in operating activities was $2,337,450 during the six months ended June 30, 2023. This included a net loss of $7,960,332, a non-cash charge related to depreciation and amortization of debt discount of $13,036, a non-cash charge related to depreciation and amortization expense of $268,866, a non-cash charge from a loss on foreign exchange related to notes payable, a non-cash charge related to loss on impairment of goodwill and intangible assets of $4,843,043, a non-cash charge related to common stock issued for vested RSUs for current period services of $129,920, a non-cash charge related to stock-based compensation for common stock issued for current period services of $236,603, a non-cash charge related to common stock issued for current period services of $85,738. This was in addition to net changes in prepaid expenses and accounts payable and accrued expenses of $44,264.

Net cash used in operating activities was $2,968,424 during the six months ended June 30, 2022. This included a net loss of $3,582,723, a non-cash charge related to amortization of debt discount of $62,500, a non-cash charge related to depreciation and amortization expense of $43,663, a non-cash charge related to share issuances in exchange for services of $401,044, and a non-cash charge related to stock-based compensation of $209,910. This was partially offset by net changes in prepaid expenses, security deposits, and accounts payable and accrued expenses of $102,818.

Net cash used in investing activities

Net cash used in investing activities was $49,236 during the six months ended June 30, 2023, due to the purchase of intangible assets.

Net cash used in investing activities was $762,742 during the six months ended June 30, 2022, due to the issuance of loans receivable, purchase of property and equipment, and purchase of intangible assets.

Net cash provided by financing activities

Net cash provided by financing activities for the six months ended June 30, 2023 was $686,896, from the Company issuing promissory notes to investors as part of a capital raising effort.

Net cash provided by financing activities for the six months ended June 30, 2022 was $146,359, from proceeds from issuance of common stock. 

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to intangibles, accounting for acquisitions, warrants, income taxes, useful life and recoverability of long-lived assets and deferred income tax asset valuations. 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 assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

Item 4. Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosures. Based upon that evaluation, our Company’s CEO and CFO concluded that our Company’s disclosure controls and procedures were not effective as of June 30, 2023.

Management has not formally documented its procedures and controls and as such does not have a sufficient basis to assess its internal controls over financial reporting. Management identified that it did not maintain adequately designed internal control over the preparation and oversight of:

Management’s Report on Internal Control Over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023, the end of the annual period covered by this report and according to the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on that evaluation, management has concluded that the Company did not maintain effective internal control over financial reporting as of the quarter ended June 30, 2023 due to the existence of material weakness and significant deficiencies in the internal control over financial reporting described below.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that we did not maintain effective internal controls over financial reporting as of the quarter ended June 30, 2023 due to the existence of the following material weakness identified by management:

Management has determined that we did not maintain effective internal controls over financial reporting as of the quarter ended June 30, 2023 due to the existence of the following significant deficiencies identified by management:

We intend to continue to evaluate and strengthen our internal control over financial reporting. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our SEC reporting obligations.

Management has engaged the services of an experienced expert in internal controls who has been evaluating our current system and implement a more effective system to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop or improve procedures to address the current material weakness and significant deficiencies to the extent possible by the end of fiscal year 2023.

Management utilizes external experts to assist the Company with technical accounting expertise needs as deemed necessary and has engaged a consultant to perform a formal assessment and remediation of its internal control’s framework. However, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.  

Attestation report of Registered Public Accounting Firm

This Quarterly Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting because we are not an “accelerated filer” or a “large accelerated filer”. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.

Management’s Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (who is also the Company’s principal executive officer), and our chief financial officer (who is also the Company’s principal financial and accounting officer) to allow for timely decisions regarding required disclosure. Thus, in accordance with Rules 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2023, which is the end of the period covered by this Form 10-Q. Based on the evaluation of these disclosure controls and procedures, and in light of the material weakness and significant deficiencies found in our internal controls over financial reporting, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to a material weakness and significant deficiencies identified in our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2023. We have not been able to remediate the significant deficiency described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and 2021. Our remediation efforts will continue to be implemented throughout our 2023 fiscal year. We believe that the controls that we will be implementing will improve the effectiveness of our internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the material weakness and significant deficiencies or determine to supplement or modify certain of the remediation measures described above.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent quarterly reports on Form 10-Q, which could materially affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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