Net Cash Provided by Financing Activities Cash provided by financing activities totaled $38.9 million during the year ended December 31, 2022, as compared to $61.2 million during the same period last year. This decrease was primarily due to cash received from our IPO during the previous year, offset in part, due to increases in borrowings from our revolving credit line. Off-Balance Sheet Arrangements As of December 31, 2022, we do not have any off-balance sheet arrangements. New Accounting Standards For discussion of new accounting standards, see Note 2 to the consolidated financial statements, “Summary of Significant Accounting Policies and New Accounting Standards.” Critical Accounting Policies and Estimates Critical accounting policies are those that require application of management’s most difficult, subjective and/or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all accounting policies require management to make difficult, subjective or complex judgments or estimates. In presenting our financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, cost of sales and expenses, in addition to the required disclosures. Actual results that differ from our estimates and assumptions could have an unfavorable effect on our financial position and results of operations. The financial information discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon or derived from our audited financial statements. We base the estimates, assumptions and judgments involved in the accounting policies described below on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our audited financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain. Therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Actual results may differ materially from these estimates. These estimates and assumptions include, but are not limited to, bad debt reserve, inventory costing including reserves, and net sales recognition including variable consideration for estimated reserves for discounts, incentives, and other allowances. For additional information, refer to Note 2 to our audited consolidated financial statements within this Form 10-K. Net Sales Recognition Our net sales are principally derived from selling our products to our customers. While our net sales recognition does not involve significant judgment, it represents an important accounting policy. Net sales are recognized upon transfer of title and risk of inventory loss to our customers. The customer can direct the use and obtain substantially all of the remaining benefits from the asset at this point in time. Net sales are recognized in an amount that reflects the consideration we expect to ultimately receive in exchange for those promised products, net of expected discounts for sales promotions and customary allowances. 46
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