ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of operations together with our consolidated
financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information
contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans
and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should
review the “Risk Factors” section of this Annual Report, and elsewhere in this report, for a discussion of important factors
that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained
in the following discussion and analysis. Our fiscal year ends on April 30. References to fiscal 2021 are to the fiscal year ended April
30, 2021.
Business
Overview
We
are a marine power, data solutions and service provider. We control the design, manufacture, sales, installation, operations and maintenance
of our solutions and services while working closely with commercial, technical, and other development partners that provide software,
controls, mechatronics, sensors, integration services, and marine installation services. We believe our renewable autonomous ocean solutions
deliver power and data collection, analysis and communication in remote ocean environments, allowing users to connect with their ocean
environment. Our mission and purpose are to provide intelligent maritime solutions and services that enable safer and more productive
ocean operations for the defense and security, offshore oil and gas, science and research, and offshore wind markets. We achieve this
through our proprietary, state-of-the-art technologies that are at the core of our clean and renewable energy platforms upon which we
develop and deploy our solutions and services.
Business
Update Regarding COVID-19
The
COVID-19 pandemic presented substantial health and economic risks, uncertainties and challenges to our business, the global economy and
financial markets. In March 2020, one of the Company’s customers cancelled a portion of their contract due to the outbreak of COVID-19
and instead extended an existing lease. In April 2020, the Company declared force majeure on a contract with a different customer and
delayed the deployment of its PB3 PowerBouy® in Chile. For additional information on various uncertainties and risks posed by the
COVID-19 pandemic, see Part I, Item 1A “Risk Factors” of this report.
On
March 27, 2020, the U.S. Government passed into law the Coronavirus Aid, Relief and Economic Security Act, or the (“CARES Act”).
On May 3, 2020, the Company signed a Paycheck Protection Program (“PPP”) loan with Santander Bank, N.A. (“Santander”)
as the lender for $890,347 in support through the Small Business Association (“SBA”) under the PPP loan. The PPP loan is
unsecured and evidenced by a note in favor of Santander as the lender and governed by a Loan Agreement with Santander. The interest rate
is 1% and the loan is repayable over two years. The loan contains customary events of defaults relating to, among other things, payment
defaults or breaches of the terms of the loan. Upon the occurrence of an event of default, the lender may require immediate repayment
of all outstanding amounts under the loan. Interest and principal payments are deferred for the first 6 months from the date of the loan.
Principal and interest are payable monthly commencing 6 months after the disbursement date and may be repaid by the Company at any time
prior to maturity with no prepayment penalties. The Company received the proceeds on May 5, 2020.
The
Company filed its loan forgiveness application at the end of February 2021 asking for 100% forgiveness of the loan. In June 2021, the
Company was informed that its application was approved, and the loan is now fully forgiven.
Capital
Raises
At
the Market Offering Agreements
On
January 7, 2019, the Company entered into an At the Market Offering Agreement (“2019 ATM Facility”) with AGP, under which
the Company may issue and sell to or through AGP, acting as agent and/or principal, shares of the Company’s common stock having
an aggregate offering price of up to $25.0 million. From inception of the program through its termination on December 8, 2020, under
the 2019 ATM Facility, the Company sold and issued an aggregate of 17,595,472 shares of its common stock with an aggregate market value
of $23.4 million at an average price of $1.33 per share and paid AGP a sales commission of approximately $0.8 million related to those
shares. The agreement was fully utilized and terminated on December 8, 2020.
On
November 20, 2020, the Company entered into an At the Market Offering Agreement with AGP (the “2020 ATM Facility”). The Company
on December 4, 2020 filed a prospectus with the Securities and Exchange Commission whereby, the Company could issue and sell to or through
AGP, acting as agent and/or principal, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million.
From inception of the 2020 ATM Facility through April 30, 2021, the Company sold and issued an aggregate of 17,179,883 shares of its
common stock with an aggregate market value of $50.0 million at an average price of $2.91 per share and paid AGP a sales commission of
approximately $1.6 million related to those shares. A prospectus supplement would need to be filed for the Company to sell additional
amounts under the 2020 ATM Facility.
Equity
Line Common Stock Purchase Agreements
On
October 24, 2019, the Company entered into a common stock purchase agreement with Aspire Capital which provided that, subject to certain
terms, conditions and limitations, Aspire Capital was committed to purchase up to an aggregate of $10.0 million shares of the Company’s
common stock over a 30-month period. Through September 18, 2020, the Company had sold an aggregate of 6,424,205 shares of common stock
with an aggregate market value of $4.0 million at an average price of $0.63 per share pursuant to this common stock purchase agreement.
The agreement was fully utilized and terminated on September 18, 2020.
On
September 18, 2020, the Company entered into a new common stock purchase agreement with Aspire Capital which provided that, subject to
certain terms, conditions and limitations, Aspire Capital was committed to purchase up to an aggregate of $12.5 million shares of the
Company’s common stock over a 30-month period subject to a limit of 19.99% of the outstanding common stock on the date of the agreement
if the price did not exceed a specified price in the agreement. The number of shares the Company could issue within the 19.99% limit
was 3,722,251 shares without shareholder approval. Shareholder approval was received at the Company’s annual meeting of stockholders
on December 23, 2020 for the sale of 9,864,706 additional shares of common stock which exceeds the 19.99% limit of outstanding common
stock on the date of the agreement. Through April 30, 2021, the Company had sold an aggregate of 3,722,251 shares of common stock with
an aggregate market value of $11.8 million at an average price of $3.17 per share pursuant to this common stock purchase agreement.
The
sale of additional equity or convertible securities could result in dilution to our stockholders. If additional funds are raised through
the issuance of debt securities or preferred stock, these securities could have rights senior to those associated with our common stock
and could contain covenants that would restrict our operations. The Company currently has committed sources of equity financing through
its At the Market Offering Agreement with A.G.P/Alliance Global Partners (“AGP”) and the Aspire Capital financing (see Note
11), but the Company cannot be sure that additional equity and/or debt financing will be available to the Company as needed on acceptable
terms, or at all.. If we are unable to obtain required financing when needed, we may be required to reduce the scope of our operations,
including our planned product development and marketing efforts, which could materially and adversely affect our financial condition
and operating results. If we are unable to secure additional financing, we may be forced to cease our operations.
Backlog
As
of April 30, 2021, our negotiated backlog was $0.2 million. As of April 30, 2020, our negotiated backlog was $1.0 million. Our backlog
can include unfilled firm orders for our products and services from commercial and governmental customers. If any of our contracts were
to be terminated, our backlog would be reduced by the expected value of the remaining terms of such contract.
The
amount of contract backlog is not necessarily indicative of future revenue because modifications to, or terminations of present contracts
and production delays can provide additional revenue or reduce anticipated revenue. A substantial portion of our revenue has been for
the support of our product development efforts. These revenues are recognized using the percentage-of-completion method, and changes
in estimates from time to time may have a significant effect on revenue and backlog. Our backlog is also typically subject to large variations
from time to time due to the timing of new awards.
Critical
Accounting Policies and Estimates
To
understand our financial statements, it is important to understand our critical accounting policies and estimates. We prepare our financial
statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of financial statements
also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related
disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the
circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences
between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and
cash flows will be affected. We believe that the accounting policies are critical to understanding our historical and future performance,
as these policies relate to the more significant areas involving management’s judgments and estimates.
We
believe the following accounting policies require significant judgment and estimates by us in the preparation of our consolidated financial
statements.
Revenue
recognition
A
performance obligation is the unit of account for revenue recognition. The Company assesses the goods or services promised in a contract
with a customer and identifies as a performance obligation either: a) a good or service (or a bundle of goods or services) that is distinct;
or b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
A contract may contain a single or multiple performance obligations. For contracts with multiple performance obligations, the Company
allocates the contracted transaction price to each performance obligation based upon the relative standalone selling price, which represents
the price the Company would sell a promised good or service separately to a customer. The Company determines the standalone selling price
based upon the facts and circumstances of each obligated good or service. The majority of the Company’s contracts have no observable
standalone selling price since the associated products and services are customized to customer specifications. As such, the standalone
selling price generally reflects the Company’s forecast of the total cost to satisfy the performance obligation plus an appropriate
profit margin.
The
nature of the Company’s contracts may give rise to several types of variable considerations, including unpriced change orders and
liquidated damages and penalties. Variable consideration can also arise from modifications to the scope of services. Variable consideration
is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not
occur once the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination
of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, performance
and any other information (historical, current, and forecasted) that is reasonably available to us. There was no variable consideration
as of April 30, 2021 and 2020.
The
Company recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to a customer, either (1)
at a point in time or (2) over time. A good or service is transferred when or as the customer obtains control of it. The evaluation of
whether control of each performance obligation is transferred at a point in time or over time is made at contract inception. Input measures
such as costs incurred or time elapsed are utilized to assess progress against specific contractual performance obligations for the Company’s
services. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services
to be provided. For the Company, the input method using costs incurred or time elapsed best represents the measure of progress against
the performance obligations incorporated within the contractual agreements. When the Company’s estimate of total costs to be incurred
to satisfy the performance obligations exceed revenue, the Company recognizes the loss immediately.
Financial
Operations Overview
The
following table provides information regarding the breakdown of our revenues by customer for fiscal years 2021 and 2020:
|
|
Twelve months ended April 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(in thousands)
|
|
Eni S.p.A.
|
|
$
|
271
|
|
|
$
|
173
|
|
Premier Oil UK Limited
|
|
|
27
|
|
|
|
148
|
|
EGP
|
|
|
740
|
|
|
|
1,211
|
|
ACET
|
|
|
53
|
|
|
|
-
|
|
Deepstar
|
|
|
80
|
|
|
|
-
|
|
Other
|
|
|
35
|
|
|
|
150
|
|
|
|
$
|
1,206
|
|
|
$
|
1,682
|
|
We
currently focus our sales and marketing efforts globally. The following table shows the percentage of our revenues by geographical location
of our customers for fiscal 2021 and 2020:
|
|
Twelve months ended April 30,
|
|
Customer Location
|
|
2021
|
|
|
2020
|
|
Europe
|
|
|
25
|
%
|
|
|
22
|
%
|
South America
|
|
|
61
|
%
|
|
|
72
|
%
|
North America
|
|
|
14
|
%
|
|
|
6
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Foreign
exchange loss
We
transact business in various countries and have exposure to fluctuations in foreign currency exchange rates. Foreign exchange gains and
losses arise in the translation of foreign-denominated assets and liabilities, which may result in realized and unrealized gains or losses
from exchange rate fluctuations. Since we conduct our business in US dollars and our functional currency is the US dollar, our main foreign
exchange exposure, if any, results from changes in the exchange rate between the US dollar and other foreign currencies.
We
maintain cash accounts that are denominated in British pounds sterling, Euros and Australian dollars. These foreign denominated accounts
had a balance of $0.3 million as of April 30, 2021 and $0.3 million as of April 30, 2020, compared to our total cash, cash equivalents,
and restricted cash balances of $83.6 million as of April 30, 2021 and $10.9 million as of April 30, 2020. These foreign currency balances
are translated at each month end the US dollar, and any resulting gain or loss is recognized in our results of operations.
In
addition, a portion of our operations is conducted through our subsidiaries in countries other than the U.S., specifically Ocean Power
Technologies Ltd. in the United Kingdom, the functional currency of which is the British pound sterling, and Ocean Power Technologies
(Australasia) Pty Ltd. in Australia, the functional currency of which is the Australian dollar. Both of these subsidiaries have foreign
exchange exposure that results from changes in the exchange rate between their functional currency and other foreign currencies in which
they conduct business.
We
currently do not hedge our exchange rate exposure. However, we assess the anticipated foreign currency working capital requirements and
capital asset acquisitions of our foreign operations and attempt to maintain a portion of our cash and cash equivalents denominated in
foreign currencies sufficient to satisfy these anticipated requirements. We also assess the need and cost to utilize financial instruments
to hedge currency exposures on an ongoing basis and may hedge against exchange rate exposure in the future.
Results
of Operations
This
section should be read in conjunction with the discussion below under “- Liquidity and Capital Resources.”
Fiscal
Years Ended April 30, 2021 and 2020
The
following table contains selected statement of operations information, which serves as the basis of the discussion of our results of
operations for the years ended April 30, 2021 and 2020:
|
|
Twelve months ended April 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,206
|
|
|
$
|
1,682
|
|
Cost of revenues
|
|
|
2,279
|
|
|
|
1,787
|
|
Gross loss
|
|
|
(1,073
|
)
|
|
|
(105
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Engineering and product development costs
|
|
|
4,747
|
|
|
|
4,344
|
|
Selling, general and administrative costs
|
|
|
7,772
|
|
|
|
6,916
|
|
Total operating expenses
|
|
|
12,519
|
|
|
|
11,260
|
|
Operating loss
|
|
|
(13,592
|
)
|
|
|
(11,365
|
)
|
Gain due to the change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
6
|
|
Litigation settlement
|
|
|
(1,224
|
)
|
|
|
-
|
|
Interest income, net
|
|
|
124
|
|
|
|
124
|
|
Other expense, net
|
|
|
(83
|
)
|
|
|
-
|
|
Foreign exchange gain/(loss)
|
|
|
15
|
|
|
|
(12
|
)
|
Loss before income taxes
|
|
|
(14,760
|
)
|
|
|
(11,247
|
)
|
Income tax benefit
|
|
|
-
|
|
|
|
895
|
|
Net loss
|
|
$
|
(14,760
|
)
|
|
$
|
(10,352
|
)
|
Revenues
Revenues
for the fiscal years ended April 30, 2021 and 2020 were approximately $1.2 million and $1.7 million, respectively, representing a decrease
of approximately $0.5 million, or 28%, from 2020. The decline in revenue for the full year was mainly attributable to COVID-19 pandemic-related
project delays.
Cost
of revenues
Our
cost of revenues consists primarily of subcontracts, incurred material, labor and manufacturing overhead expenses, such as engineering
expense, equipment depreciation and maintenance and facility related expenses, and includes the cost of equipment to customize the PowerBuoy®
supplied by third-party suppliers. Cost of revenues also includes PowerBuoy® system delivery and deployment expenses and may include
anticipated losses at completion on certain contracts.
Cost
of revenues for the fiscal years ended April 30, 2021 and 2020 were approximately $2.2 million and $1.8 million, respectively. The increase
of approximately $0.4 million, or 26%, over 2020 was mostly due to higher deployment and material costs incurred on the EGP contract
in 2021 as compared to the same period in fiscal 2020.
Engineering
and product development costs
Our
engineering and product development costs consist of salaries and other personnel-related costs and the costs of products, materials
and outside services used in our product development and unfunded research activities. Our product development costs relate primarily
to our efforts to increase the power output and reliability of our PowerBuoy® system, and to the development of new products, product
applications and complementary technologies. We expense all of our engineering and product development costs as incurred.
Engineering
and product development costs during the fiscal year ended April 30, 2021 were $4.6 million as compared to $4.3 million for fiscal year
2020. The increase of $0.3 million, or 5%, is due to higher spending on product development compared to the same period in fiscal 2020.
Selling,
general and administrative costs
Our
selling, general and administrative costs consist primarily of professional fees, salaries and other personnel-related costs for employees
and consultants engaged in sales and marketing and support of our PowerBuoy® systems and costs for executive, accounting and administrative
personnel, and other general corporate expenses.
Selling,
general and administrative costs during the fiscal year months ended April 30, 2021 were $7.8 million as compared to $6.9 million for
fiscal year 2020. The increase of $0.9 million, or 12%, is primarily attributable to higher employee related costs of $0.6 million, higher
insurance premiums of $0.2 million and an additional $0.2 million penalty assessed by the Spanish tax authority related to a tax audit.
Gain
due to the change in fair value of warrant liabilities
The
fair value of our financial instruments reflects the amounts that would be paid to transfer a liability in an orderly transaction between
market participants at the measurement date (exit price). The fair value of our warrant liabilities is subject to remeasurement each
financial statement reporting period, as such, changes in this fair value are reflected in the statement of operations.
There
was no unrealized gain or loss related to a change in fair value of warrant liabilities during the fiscal year ended April 30, 2021 compared
to an unrealized gain of $6,000 for the fiscal year ended April 30, 2020. The change between periods is mainly due to a shorter maturity
to expiration of the warrants and lower stock price for the twelve months ended April 30, 2021.
Litigation
settlement
On
May 19, 2021, the Company entered into a Stipulation with Charles F. Dunleavy, former Chief Executive Officer (refer to Item 3. Legal
Proceedings above for a description of the case). The Stipulation recounts that the panel of arbitrators in the Action issued two interim
awards total $1.2 million. The Company recorded the settlement cost as Litigation Settlement in the Consolidated Statement of Operations
as of April 30, 2021.
Interest
income, net
Interest
income, net consists of interest received on cash and cash equivalents, investments in money market accounts and interest expense paid
on certain obligations to third parties. Total cash, cash equivalents, and restricted cash was $83.6 million as of April 30, 2021, compared
to $10.9 million as of April 30, 2020.
Interest
income, net was approximately $124,000 for both fiscal 2021 and 2020. The change was flat year over year due to a lower interest rate
on investments even though the Company had a higher cash balance throughout fiscal year 2021.
Foreign
exchange gain/(loss)
Foreign
exchange gain was approximately $15,000 for fiscal year 2021 as compared to a foreign exchange loss of $12,000 for fiscal year 2020.
The difference was attributable primarily to the relative change in value of the British pound sterling, Euro and Australian dollar compared
to the U.S. dollar.
Income
tax benefit
During
the fiscal years ended April 30, 2021 and 2020, the Company sold New Jersey State net operating losses and research and development credits
resulting in the recognition of income tax benefits of $0.9 million in fiscal year 2020. The Company received the fiscal year 2021 payment
of $1.0 million in May, 2021. The Company has a full valuation allowance against its deferred tax assets.
Net
cash used in operating activities
During
the twelve months ended April 30, 2021, net cash flows used in operating activities was $11.7 million, an increase of $1.1 million compared
to net cash used in operating activities during the twelve months ended April 30, 2020. This increase is mainly driven by the receipt
of proceeds on the sale of net operating losses occurring after fiscal 2021 whereas in prior year proceeds on sale of net operating losses
occurred during fiscal 2020.
Net
cash used in investing activities
Net
cash provided in investing activities during the twelve months ended April 30, 2021 was approximately $74,000 for fiscal year 2021 versus
net cash used by investing activities of approximately $65,000 for fiscal year 2020. The change was primarily the result of the Company
acquiring $100,000 in cash as part of the 3Dent acquisition and decreased spending on equipment of $42,000.
Net
cash provided by financing activities
Net
cash provided by financing activities during the twelve months ended April 30, 2021 was approximately $84.2 million compared to net cash
provided by financing activities during the twelve months ended April 30, 2020 of $4.4 million. The increase in net cash provided by
financing activities during the twelve months ended April 30, 2021 is due to increased proceeds from At the Market capital raises of
$62.7 million through AGP, increased proceeds from ELOC capital raises of $13.4 million with Aspire, $2.8 million from proceeds associated
with warrant exercises, $0.2 million proceeds associated with stock option exercises and $0.9 million received from the PPP loan.
Effect
of exchange rates on cash and cash equivalents
The
effect of exchange rates on cash and cash equivalents was an increase of approximately $134,000 in fiscal year 2021, an increase of $166,000
from fiscal year 2020, respectively. The effect of exchange rates on cash and cash equivalents results primarily from gains or losses
on consolidation of foreign subsidiaries and foreign denominated cash and cash equivalents.
Liquidity
Outlook
Since
our inception, the cash flows from customer revenues have not been sufficient to fund our operations and provide the capital resources
for our business. For the two years ended April 30, 2021 and 2020, our aggregate revenues were $2.9 million, our aggregate net losses
were $25.1million and our aggregate net cash used in operating activities was $22.3 million.
We
expect to devote substantial resources to continue our development efforts for our products and to expand our sales, marketing and manufacturing
programs associated with the continued commercialization of our products. Our future capital requirements will depend on a number of
factors, including but not limited to:
●
|
our
ability to commercialize our products, and achieve and sustain profitability;
|
|
|
●
|
our
continued development of our proprietary technologies, and expected continued use of cash from operating activities unless or until
we achieve positive cash flow from the commercialization of our products and services;
|
|
|
●
|
our
ability to obtain additional funding, as and if needed which will be subject to a number of factors, including market conditions,
and our operating performance;
|
|
|
●
|
the
impact of COVID-19 pandemic on our business, operations, customers, suppliers and manufacturers;
|
|
|
●
|
our
estimates regarding expenses, future revenues and capital requirements;
|
|
|
●
|
the
adequacy of our cash balances and our need for additional financings;
|
|
|
●
|
our
ability to develop and manufacture commercially viable products;
|
|
|
●
|
our
ability to successfully develop and market new products;
|
|
|
●
|
that
we will be successful in our efforts to commercialize our products or the timetable upon which commercialization can be achieved,
if at all;
|
|
|
●
|
our
ability to identify and penetrate markets for our products and our wave energy technology;
|
|
|
|
our
ability to implement our commercialization strategy as planned, or at all;
|
|
|
●
|
our
relationships with our strategic partners may not be successful and we may not be successful in establishing additional relationships;
|
|
|
●
|
our
ability to maintain the listing of our common stock on the NYSE American;
|
|
|
●
|
the
reliability of our technology and our products;
|
|
|
●
|
our
ability to improve the power output, survivability and reliability of our products;
|
|
|
●
|
the
impact of pending and threatened litigation on our business, financial condition and liquidity;
|
|
|
●
|
changes
in current legislation, regulations and economic conditions that affect the demand for renewable energy;
|
|
|
●
|
our
ability to compete effectively in our target markets;
|
|
|
●
|
our
limited operating history and history of operating losses;
|
|
|
●
|
our
sales and marketing capabilities and strategy in the United States and internationally; and
|
|
|
●
|
our
ability to protect our intellectual property portfolio.
|
Our
business is capital intensive, and up through fiscal 2021, we have been funding our business principally through sales of our securities.
As of April 30, 2021, cash and cash equivalents was $83.4 million and we expect to fund our business with this amount and, to a limited
extent, with our revenues until, we generate sufficient cash flow to internally fund our business. Management believes the Company’s
current cash and cash equivalent is sufficient to fund its planned expenditures through at least July 31, 2022.
Off-Balance
Sheet Arrangements
Since
inception, we have not engaged in any off-balance sheet financing activities.
Recent
Accounting Pronouncements
In
August 2018, the FASB issued ASU No. 2018-15, “Intangibles — Goodwill and Other — Internal-Use Software
(Subtopic 350-40).” The ASU provides for the recognition of an intangible asset for the costs of internal-use software licenses
included in a cloud computing arrangement. Costs of arrangements that do not include a software license should be accounted for as a
service contract and expensed as incurred. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption
permitted. The ASU permits two methods of adoption: prospectively to all implementation costs incurred after the date of adoption, or
retrospectively to each prior reporting period presented. The Company adopted this guidance on a prospective basis effective May 1, 2020.
The adoption of the guidance did not have a material effect on its Consolidated Financial Statements.
In
August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” The ASU modifies, removes, and
adds several disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective
for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on
changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair
value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent
interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to
all periods presented upon their effective date. Early adoption is permitted upon issuance of ASU 2018-13. An entity is permitted to
early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their
effective date. The Company adopted this guidance effective May 1, 2020. The adoption of the guidance did not have a material effect
on its Consolidated Financial Statements.
In
June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit
Losses on Financial Instruments.” The amendment in this update replaces the incurred loss impairment methodology in current
GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update
is intended to provide financial statement users with more decision-useful information about the expected credit losses. This ASU is
effective for annual periods and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact the
adoption of ASU 2016-13 will have on its consolidated financial statements.