BROWNIE'S MARINE GROUP, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Quarterly Report. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law. The management's discussion and analysis of our financial condition and results of operations are based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). Overview
The Company owns and operates a portfolio of companies with a concentration in the industrial and recreational diving industry. The Company, through its subsidiaries, designs, tests, manufactures, and distributes recreational hookah diving, yacht-based scuba air compressors and nitrox generation systems and scuba and water safety products inthe United States and internationally.
The Company has five subsidiaries focused on various sub-sectors:
? Brownie's Third Lung -Surface Supplied Air ("SSA") ?BLU3, Inc. - Ultra-Portable Tankless Dive Systems ? LW Americas - High Pressure Gas Systems ?Submersible Systems, Inc. - Redundant Air Tank Systems ?Live Blue, Inc. - Guided Tours and Retail
Our wholly owned subsidiaries do business under their respective trade names on
both a wholesale and retail basis from our headquarters and manufacturing
facility in
The Company, through its wholly owned subsidiaries, designs, tests, and
manufactures tankless dive systems, rescue air systems and yacht-based
self-contained underwater breathing apparatus ("SCUBA") air compressor and
nitrox generation fill systems and acts as the exclusive distributor for North
and South America for Lenhardt & Wagner GmbH ("L&W") compressors in the
high-pressure breathing air and industrial gas markets. The Company is also
building a guided tour operation that also include dive retail. Lastly, The
Company is the exclusive United States and Caribbean distributor for Chrysalis
Trading CC, a South African manufacturer of fitness and dive equipment, doing
business as Bright Weights ("Bright Weights"), of a dive ballast system produced
in South Africa .
Impact of COVID-19 Pandemic
The Company has previously been affected by temporary manufacturing closures and
employment and compensation adjustments. The market continues to suffer from the
impacts of the pandemic via supply chain shortages and freight delays. The
continued freight delays have and will likely continue to result in additional
expenses to expedite delivery of critical parts. Additionally, increased demand
for personal electronics has created a shortfall of microchip supply which are
used in our battery powered products, and it is yet unknown how we may be
impacted.
We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.
Results of Operations
Net Revenues, Costs of Net Revenues and Gross Profit
Three Months Ended
Net revenues increased 37.2% for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 as a result of a 67.4% increase in revenue forBLU3, Inc. from the continued expansion of its customer base as well as the addition of NOMAD to its product line, an increase in LWA's revenues of 30.2% as a result of the expansion of its customer base and the addition of both SSI and LBI revenue which did not exist in 2021. For the three months endedJune 30, 2022 , cost of net revenues was 64.1% as compared with the cost of revenues of 65.1% for the three months endedJune 30, 2021 . Included in cost of net revenues are royalty expenses paid toRobert Carmichael which decreased 36.4%% for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . Gross profit margin was 35.9% for the three months endedJune 30, 2022 as compared to gross profit margin of 34.9% for the three months endedJune 30, 2021 . The slight improvement in gross margin, of 1.0% as it relates to revenue is a result of the production of more finished products, reducing direct labor cost per unit, primarily in LWA and the addition of LBI with margins of 71.9% for the three months endedJune 30, 2022 . 27
Six Months Ended
Net revenues increased 64.3% for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . This increase is a result of a 94.5% increase in revenue forBLU3, Inc. from the continued expansion of its customer base as well as the addition of NOMAD to its product line, an increase in LWA's revenues of 52.9% as a result of the expansion of its customer base and the addition of SSI and LBI revenue which did not exist in 2021. These revenue increases were countered by a decrease of 4.5% in revenue for BTL. For the six months endedJune 30, 2022 , cost of net revenues was 64.8% as compared with the cost of revenues of 65.9% for the six months endedJune 30, 2021 . Included in cost of net revenues are royalty expenses paid to a third party which increased 71.6% for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . Gross profit margin was 35.2% for the six months endedJune 30, 2022 as compared to gross profit margin of 34.1% for the six months endedJune 30, 2021 . The slight improvement in gross margin, of 1.1% revenue is a result of a 1.8% margin increase in theBLU3 product line and the addition of LBI with margins of 71.9% for the six months endedJune 30, 2022 .
The following tables provides net revenues, total costs of net revenues and gross profit margins for our segments for the periods presented.
Net Revenues
Three Months Ended Six Months Ended
June 30, % of June 30, % of
2022 2021 Change 2022 2021 Change
(unaudited) (unaudited)
Legacy SSA Products $ 797,022 $ 976,973 (18.4 )%
270,193 207,565 30.2 % 547,010 357,693 52.9 % Ultra-Portable Tankless Dive Systems 884,271 528,380 67.4 % 1,678,858 862,978 94.5 % Redundant Air Tank Systems
399,479 - 100.0 % 721,935 - 100.0 %
Guided Tour Retail 50,274 - 100.0 % 50,274 - 100.0 %
Total net revenues $ 2,401,238 $ 1,712,918 37.2 % $ 4,376,207 $ 1,955,317 64.3 %
Cost of revenues as a percentage of net revenues
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(unaudited) (unaudited)
Legacy SSA Products 70.1 % 68.4 % 74.0 % 71.9 %
High Pressure Gas Systems 51.9 % 54.7 % 55.0 % 54.4 %
Ultra-Portable Tankless Dive Systems 64.5 % 63.2 % 58.8 % 60.6 %
Redundant Air Tank Systems 64.0 % - 71.4 % -
Guided Tour Rental 28.1 % - 28.1 % -
Gross profit (loss) margins
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(unaudited) (unaudited)
Legacy SSA Products 31.6 % 31.6 % 26.0 % 28.1 %
High Pressure Gas Systems 45.3 % 45.3 % 45.0 % 45.6 %
Ultra-Portable Tankless Dive Systems 36.8 % 36.8 % 41.2 % 39.4 %
Redundant Air Tank Systems 36.0 % - 28.7 % -
Guided Tour Rental 71.9 % - 71.9 % -
28
SSA Products segment
Net revenue in this segment decreased 4.1% for the six months ended June 30,
2022 as compared to the six months ended June 30, 2021 . The decrease can be
primarily attributed to a 5.4% decrease in the dealer segment for the six months
ended June 30, 2022 as compared to the same period in 2021. The decrease in
dealer orders can be attributed to the 23.2% drop for the three months ended
June 30, 2022 as compared the same period in 2021. Many dealers increased
purchases to prepare for the summer season during the first quarter of 2022, and
held back with restocking orders as we believe there may be some trepidation
regarding the economy. Affiliate sales, while down for the three months ending
June 30, 2022 as compared to the three months ended June 30, 2021 remain 32.2%
over the six month results at June 30, 2022 . Direct to consumer sales have also
decreased for the six months ending June 30, 2022 as compared to the same period
in 2021 we believe due to concerns over the economy.
Our costs of revenues as a percentage of net revenues in this segment increased
from 71.9% to 74.0% for the six months ended June 30, 2022 compared to the six
months ended June 30, 2021 due to the negative margin for the affiliate sales
channel.
A breakdown of the revenue channels for this segment are below. Direct to
Consumer represent items sold via our website, trade shows and walk-ins to our
factory store. Dealer revenue represents sales to customers that we have dealer
agreements that typically operate with the lowers margin. Affiliates are
resellers of our products that are not in a formal dealer arrangement.
Cost of Sales as a % of
Net Revenue Net Revenue Margin
Three Three Three Three Three Three
Months Months Months Months Months Months
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30, June 30,
2022 2021 % change 2022 2021 2022 2021
Dealers $ 510,902 $ 664,928 (23.2 )% 73.4 % 77.7 % 26.6 % 22.3 %
Direct to Consumer
(website included) 258,899 273,430 (5.3 )% 57.7 % 45.1 % 42.3 % 54.9 % Affiliates 27,221 38,615 (29.5 )% 156.9 % 74.3 % (56.9 )% 25.7 % Total$ 797,022 $ 976,973 (18.4 )% 71.1 % 68.4 % 28.9 % 31.6 % Cost of Sales as a % of Net Revenue Net Revenue Margin Six Six Six months Six months months Six months months Six months ended ended ended ended ended ended June 30, June 30, June 30, June 30, June 30, June 30, 2022 2021 % change 2022 2021 2022 2021 Dealers$ 868,755 $ 918,467 (5.4 )% 78.2 % 78.7 % 21.8 % 21.3 % Direct to Consumer (website included) 461,534 484,102 (4.7 )%
63.3 % 58.9 % 36.7 % 41.1 % Affiliates 47,842 40,447 18.3 % 120.8 % 74.5 % (20.8 )% 25.5 % Total$ 1,378,131 $ 1,443,016 (4.5 )% 74.0 % 71.9 % 26.0 % 28.1 % 29
High Pressure Gas Systems segment
Sales of high-pressure breathing air compressors increased 52.9% in the six months endedJune 30, 2022 compared with the six months endedJune 30, 2021 as LWA was able to continue to supply its customers with their needs despite industry supply chain issues. The reseller segment while decreasing 9.4% for the three months endedJune 30, 2022 as compared to the same period in the prior year, showed an overall increase of 25.9% for the six months endedJune 30, 2022 with increased orders through distribution customers in the US,South America , and theCaribbean . The Original Equipment Manufacturer segment continued to show growth with an increase of 205% for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 due to several orders shipped internationally to boat manufacturers. The direct to consumer segment, which includes yacht owners and direct to dive stores, increased 199.0% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 and increased 49.2% for the six months endedJune 30, 2022 as compared to June
30, 2021.
Costs of revenues as a percentage of net revenues in this segment showed a slight increase to 55.0% for the six months endedJune 30, 2022 as compared to 54.4% for the six months endedJune 30, 2021 . This increase can be attributed to increased cost of transportation from suppliers and to customers during the six months endedJune 30, 2022 . Cost of Sales as a % of Net Revenue Net Revenue Margin Three Three Three Three Three Three months months months months months months ended ended ended ended ended ended June 30, June 30, June 30, June 30, June 30, June 30, 2022 2021 % change 2022 2021 2022 2021 Resellers$ 109,767 $ 121,118 (9.4 )% 48.6 % 53.0 % 51.4 % 47.0 % Direct to Consumers 130,816 43,749 199.0 % 57.7 % 68.2 % 42.3 % 31.8 % Original Equipment Manufacturers 29,610 42,698 30.7 % 38.8 % 45.6 % 61.2 % 54.4 % Total$ 270,193 $ 207,565 30.2 % 51.9 % 54.7 % 48.1 % 45.3 % Cost of Sales as a % of Net Revenue Net Revenue Margin Six months Six months Six months Six months Six months Six months ended ended ended ended ended ended June 30, June 30, June 30, June 30, June 30, June 30, 2022 2021 % change 2022 2021 2022 2021
Resellers$ 239,540 $ 190,191 25.9 % 51.7 % 57.3 % 48.3 % 42.7 % Direct to Consumers 195,245 130,819 49.2 % 58.4 % 51.7 % 41.6 % 48.3 % Original Equipment Manufacturers 112,225 36,683 205.9 % 57.1 % 46.1 % 42.9 % 53.9 % Total$ 547,010 $ 357,693 52.9 % 55.0 % 54.4 % 45.0 % 45.6 % 30
Ultra Portable Tankless Dive Systems
Net revenue for the six months endedJune 30, 2022 in the Ultra Portable Tankless Dive System segment showed growth of 94.5% as compared to the six months endedJune 30, 2021 . The growth in all segments for the three and six months endedJune 30, 2022 can be attributed to the addition of the Nomad product line into those sales channels. The growth of 162.2% in the Dealer channel represents the continued expansion of the international dealer base. The growth in this segment of 156.8% for the three months endedJune 30, 2022 represents sales to new dealers and seasonal buy-in as dealers prepared for
the summer season.
Cost of revenues from this segment as a percentage of net revenues for the three and six months endedJune 30, 2022 showed improvement over both the three and six months endedJune 30, 2021 , primarily due to the impact of the cost and production efficiencies of the Nomad dive system and the resulting increase in margin as a percentage of revenue for the same periods in 2022 as compared to 2021. Cost of Sales as a % of Net Revenue Net Revenue Margin Three Three Three Three Three Three months months months months months months ended ended ended ended ended ended June 30, June 30, June 30, June 30, June 30, June 30, 2022 2021 % change 2022 2021 2022 2021 Direct to Consumer 220,950 188,466 17.2 % 67.9 % 53.9 % 32.1 % 46.1 % Amazon 274,444 188,467 45.6 % 53.0 % 61.90 47.0 % 38.1 % Dealers 388,877 151,447 156.8 % 70.6 % 76.4 % 29.4 % 23.6 % Total$ 884,271 $ 528,380 67.4 % 52.5 % 63.2 % 47.5 % 36.8 % Cost of Sales as a % of Net Revenue Net Revenue Margin Six months Six months Six months Six months Six months Six months ended ended ended ended ended ended June 30, June 30, June 30, June 30, June 30, June 30, 2022 2021 % change 2022 2021 2022 2021 Direct to Consumer$ 539,955 $ 340,665 58.5 % 55.2 % 52.2 % 44.8 % 47.8 % Amazon 449,120 259,265 73.2 % 54.5 % 61.8 % 45.5 % 38.2 % Dealers 689,783 263,048 162.2 % 64.4 % 70.1 % 35.6 % 29.9 % Total$ 1,678,858 $ 862,978 94.5 % 58.8 % 60.6 % 41.2 % 39.4 % 31 Redundant Air Tank Systems Net revenue for the six months endedJune 30, 2022 in the Redundant Air Tank Systems System segment was$721,935 and$399,479 for the three months endedJune 30, 2022 . The margins for the three months endedJune 30 ,2022 showed improvement at 36.0% as compared to 28.7% for the six months endedJune 30, 2022 as the margin for dealer sales improved during the three months endedJune 30, 2022 to 31.2% as compared to 22% for the six months endedJune 30, 2022 . Outside of the margin for repairs, dealer margins continue to be the lowest margin segment as SSI must price goods in order for dealers to also generate profits. SSI has a worldwide customer base that includes (1) commercial accounts with aircraft requiring redundant air systems for their pilots and passengers, such as helicopters flying to oil rigs located in bodies of water (2) government accounts that are typically domestic and international military customers with egress systems (3) dealer accounts that are resellers including, international distributors to the military, commercial account or dive shops, and domestic and international dive shops that carry a spare air product (4) direct to consumer sales which are online sales and sales via trade shows direct to consumer and (5) Company provided repairs and warranty repairs to all segments. Cost of Sales as a % of Net Revenue Net Revenue Margin
Three Three Three
months Three months months Three months months Three months
ended ended ended ended ended ended
June 30, June 30, June 30, June 30, June 30, June 30,
2022 2021 % change 2022 2021 2022 2021
Commercial $ 46,550 - N/A 43.8 % - 56.2 % -
Dealers 250,223 - N/A 68.8 % - 31.2 % -
Government 38,711 - N/A 37.5 % - 62.5 % -
Repairs 11,047 - N/A 221.6 % - (121.6 )%
Direct to
Consumers
(Website) 52,948 - N/A 45.8 % - 54.2 % -
Total $ 399,479 - N/A 64.0 % - 36.0 % -
Cost of Sales as a % of
Net Revenue Net Revenue Margin
Six months Six months Six months
ended Six months ended ended Six months ended ended Six months ended
June 30, June 30, June 30, June 30, June 30, June 30,
2022 2021 % change 2022 2021 2022 2021
Commercial $ 103,156 - N/A 43.6 % - 56.4 % -
Dealers 462,342 - N/A 78.0 % - 22.0 % -
Government 52,712 - N/A 36.8 % - 63.2 % -
Repairs 18,858 - N/A 236.1 % -(136.1 )%
Direct to
Consumers
(Website) 84,867 - N/A 53.9 % - 46.1 % -
Total $ 721,935 - N/A 71.3 % - 28.7 % -
32
Guided Tours and Retail
The guided tour and retail segment is a new segment and is derived from LBI.
Revenue in this segment currently primarily includes retail sales, and tours and
lessons. Retail sales represent the sales of product at the retail facility,
while tours and lessons represent revenue derived from diving excursions and
lessons.
Cost of Sales as a % of
Net Revenue Net Revenue Margin
Three Three Three Three
months Three months months months months Three months
ended ended ended ended ended ended
June 30, June 30, June 30, June 30, June 30, June 30,
2022 2021 % change 2022 2021 2022 2021Retail Sales$ 34,549 - N/A 8.9 % - 91.1 % - Tours and Lessons 15,725 - N/A 70.4 % - 29.6 % - Total$ 50,274 - N/A 28.1 % - 71.9 % - Cost of Sales as a % of Net Revenue Net Revenue Margin Six Six months Six months months Six months ended Six months ended ended ended ended Six months ended June 30, June 30, June 30, June 30, June 30, June 30, 2022 2021 % change 2022 2021 2022 2021 Retail Sales$ 34,549 - N/A 8.9 % - 91.1 % -
Tours and Lessons 15,725 - N/A
70.4 % - 29.6 % - Total$ 50,274 - N/A 28.1 % - 71.9 % - 33 Operating Expenses Operating expenses, consist of selling, general and administrative ("SG&A") expenses and research and development costs and are reported on a consolidated basis for our operating segments. Operating expenses increased 38.3% for the three months endedJune 30, 2022 and 42.1% for the six months endedJune 30, 2022 as compared to the same periods in the prior year.
Selling, General & Administrative Expenses (SG&A Expenses)
SG&A increased by 41.4% for the three months endedJune 30, 2022 and 45.5% for the six months endingJune 30, 2022 as compared to the same periods in the prior year. SG&A expenses were comprised of the following: Three Months Three Months Six Months Six Months Ended June 30, Ended June Ended June Ended June Expense Item 2022 30, 2021
% Change 30, 2022 30, 2021 % Change
Payroll, Selling & Administrative
130.7 %
9.1 % 520,740 498,875 4.4 %
Professional Fees 98,619 116,576 (15.4 )% 225,031 178,015 26.4 %
Advertising 101,129 47,615 112.4 % 257,573 113,841 126.3 %
All Others 142,438 156,984 (9.3 )% 339,511 308,382 10.1 %
Total SG&A $ 1,177,601 $ 823,607 43.0 % $ 2,283,340 $ 1,560,642 46.3 %
Payroll increases for the three months ended March 31, 2022 can be attributed
primarily to the addition of SSI payroll which accounted for 51% of the increase
with the remaining 49% attributable to increases in personnel at BLU3 to manage
increasing revenue and production, as well as slight increases in wages and
staffing in the other divisions.
Non-Cash Stock compensation expenses increased 4.4% for the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021 . The increase
can be attributed to options granted to employees under the Company's Equity
Incentive Plan, and the vesting of the Company's Chief Executive Officer's
incentive option. The increase of 9.1% for the three months ended June 30, 2022
as compared to the three months ended June 30, 2021 is related to the sameoption vesting. 34 Professional fees, including legal and other professional fees which the Company has paid with a combination of cash and common stock increased 26.4% in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase can be attributed to an increase in accounting fees related to the year-end audit. For the three months endedJune 30, 2022 professional fees decreased 15.4% as compared to the prior year, as a consultant was added to payroll in 2022. The increase in advertising expense for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 is attributable toBLU3's focus on social media, Amazon and trade show advertising.
Research & Development Expenses (R&D Expenses)
R&D expenses for the three months endedJune 30, 2022 decreased 79.5% and 80.5% for the six months endedJune 30, 2022 as compared to the same periods in the prior year. The decrease can be primarily attributed to the completion of the R&D forBLU3's NOMAD, as it moved into production in the third quarter of 2021. Other Income/Expense For the six months endedJune 30, 2022 , other expenses totaled approximately$19,700 of interest expense as compared to other income of approximately$164,000 for the six months endedJune 30, 2021 . Other income for the six months endedJune 30, 2021 consisted of a gain due to the settlement of debt of$10,000 , the forgiveness of a PPP loan less interest expense of approximately$5,600 . The increase in interest expense can be attributed to the Navitas loan that was funded in the second quarter of 2021, and the interest on the debt related to the acquisition of SSI.
Liquidity and Capital Resources
We had cash of
June 30, December 31, %
2022 2021 change
(unaudited)
Total current assets $ 3,783,509 $ 2,966,432 11.2 %
Total current liabilities $ 1,991,200 $ 1,396,197 14.2 %
Working capital $ 1,792,309 $ 1,570,235 8.4 %
The increase in our current assets atJune 30, 2022 fromDecember 31, 2021 primarily reflects an increase from the assets of SSI as well as the increases in inventory purchases reflected by an increase in inventory and prepaid assets which includes prepayments of inventory, as the Company has experienced revenue growth and ramped up purchasing and production for the summer season. The increase in total current liabilities primarily reflects the additional SSI liabilities as well as a significant increase in customer deposits, particularly customer deposits with LWA. Summary Cash Flows Six Months EndedJune 30, 2022 2021 (unaudited)
Net cash used by operating activities
Net cash used in operating activities for the six months endedJune 30, 2022 was due to the net loss of approximately$772,754 which is primarily attributable to non-cash stock compensation expenses of approximately$579,300 . The non-cash stock compensation expense for the six months endedJune 30, 2022 is attributable to stock options and grants issued to our executive officers and various employees as well as common stock issued to consultants and professionals for services. Net cash used in operating activities is also the result of increases in current assets, including, accounts receivable, inventory, net, and prepaid expenses that utilized approximately$797,000 , offset by increases in current liabilities including accounts payable, other liabilities, and customer deposits, which totaled approximately$501,700 . 35 Net cash used in investing activities for the six months endedJune 30, 2022 of approximately$31,946 consists of$30,000 used in an asset acquisition and a small fixed asset purchase of approximately$1,900 . Net cash provided by financing activities for the six months endedJune 30, 2022 reflects proceeds from the exercise of warrants of approximately$265,000 less the repayment of debt of approximately$26,400 . Going Concern
Our unaudited consolidated financial statements included in this Quarterly Report were prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these consolidated financial statements. The report of our independent registered public accounting firm on our audited consolidated financial statements for the year endedDecember 31, 2021 includes an explanatory paragraph stating the Company has net losses and an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. We have a history of losses, and an accumulated deficit of$15,317,359 as ofJune 30, 2022 . Despite a working capital surplus of$1,792,309 atJune 30, 2022 , the continued losses and cash used in operations raise substantial doubt as to the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon the Company's ability to continue to increase revenues, control expenses, raise capital, and continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. We are continuing to engage in discussions with potential sources for additional capital, however, our ability to raise capital is somewhat limited based upon our revenue levels, net losses and limited market for our common stock. If we fail to raise additional funds when needed, or if we do not have sufficient cash flows from operations, we may be required to scale back or
cease certain of our operations. Critical Accounting Policies The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, valuation of inventory, allowance for doubtful accounts, and equity-based transactions. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited consolidated financial statements contained in this Quarterly Report.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position or cash flows.
These recent accounting pronouncements are described in Note 2 to our unaudited consolidated financial statements contained in this Quarterly Report.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
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