Item 7. Management’s Discussion and Analysis
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent liabilities. On an on-going basis, management evaluates past estimates and judgments, including those related to bad debts, inventories, accrued liabilities, derivative liabilities, and contingencies. Management bases its 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.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Revenue Recognition
The Company recognizes revenue based on the five-step model for revenue recognition as prescribed by ASC 606, Revenue from Contracts with Customers, as follows: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the prices to the performance obligations; and (5) recognize revenue. The Company has some agreements that contain general commercial terms and product prices but do not contain an obligation to provide goods to the customer. Our performance obligation, which is established when the customer submits a purchase order and the Company accepts the order, is to deliver the product based on the purchase order received. The Company typically recognizes revenue at the time of shipment, at which time the title passes to the customer, and there are no further performance obligations.
Stock-Based Compensation
The Company measures and recognizes expense for all share-based payments at fair value. The Company uses the Black-Scholes option valuation model to estimate fair value for all stock options on the date of grant. For stock options that vest over time, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award.
Research and Development Costs
Research and development costs, including salaries, benefits, and share-based compensation, research materials, facility overhead, lab supplies, depreciation, administrative expenses and contractor fees, are charged to operations as incurred.
Legal Contingencies
The Company may, in the ordinary course of business, be involved in legal proceedings involving securities, contractual and employment relationships, product liability claims, patent rights, environmental matters, and a variety of other matters, the outcomes of which are not within the Company’s complete control and may not be known for extended periods of time. Legal costs associated with defending these matters are expensed as incurred.
The Company records a liability in its consolidated financial statements for damages and/or costs related to claims, settlements, and judgments where the Company has assessed that the loss is probable and an amount can be reasonably estimated.
44
Table of Contents
Results of Operations
Financial presentation
The following sets forth a discussion and analysis of the Company’s financial condition and results of operations for the fiscal years 2020, 2019, and 2018. This discussion and analysis should be read in conjunction with our consolidated financial statements appearing elsewhere in this Report. The following discussion contains forward-looking statements. Our actual results may differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Item 1A — Risk Factors,” beginning on page 25 of this Report. (In thousands)
For the years ended June 30,
2020
2019
2020 - 2019
2018
2019 - 2018
Amount
% (a)
Amount
% (a)
% Change
Amount
% (a)
% Change
Sales, net
$
9,680
100
$
7,314
100
32
$
5,923
100
23
Cost of sales
4,556
47
4,267
58
7
4,081
69
5
Gross profit (loss)
5,124
53
3,047
42
68
1,842
31
65
Operating expenses:
Proprietary research and development
1,126
12
1,429
20
(21
)
1,351
23
6
Collaboration arrangement, net of reimbursement
-
-
45
1
(100
)
395
7
(89
)
Sales and marketing
2,976
31
2,679
37
11
2,660
45
1
General and administrative
4,571
47
4,172
57
10
4,165
70
-
Change in estimate of asset retirement obligation
(73
)
(1
)
-
-
(100
)
-
-
Gain on equipment disposal
-
-
(24
)
-
100
-
-
Total operating expenses
8,600
89
8,301
113
4
8,571
145
(3
)
Operating loss
(3,476
)
(36
)
(5,254
)
(72
)
(34
)
(6,729
)
(114
)
(22
)
(a) Expressed as a percentage of sales, net
Sales
Fiscal 2020 sales, net increased 32% compared to fiscal 2019. The Company’s sales personnel continued to bring on new accounts while also working with existing customers to increase their order volumes. GammaTile™ and the Blu Build™ loader, while in a limited market release during part of the fiscal year, also helped to increase revenues during fiscal 2020. In addition, part of the sales growth was due to moderate price increases that were implemented during the middle of fiscal year 2020.
Fiscal 2019 sales, net increased 23% compared to fiscal 2018. The Company’s sales personnel continued to bring on new accounts while also working with existing customers to increase their order volumes. The Blu Build™ loader, while in a limited market release, also helped to increase revenues during fiscal 2019.
For the years ended June 30,
2020
2019
2020 - 2019
2018
2019 - 2018
Treatment
Amount
%(a)
Amount
% (a)
% Change
Amount
% (a)
% Change
Prostate Brachytherapy
$
8,356
86
$
6,488
89
29
$
5,097
86
27
Other sales
1,324
14
826
11
60
826
14
-
Sales, net
$
9,680
$
7,314
32
$
5,923
23
(a) Expressed as a percentage of sales, net
Prostate Brachytherapy.
Prostate sales growth of approximately 29% in fiscal 2020 was mainly achieved due to increased sales volumes due to sales and marketing’s sustained focus on acquiring new accounts through physician training programs and marketing campaigns along with continued support of existing customers to help them grow their business. The moderate price increase that occurred in the middle of fiscal year 2020 also contributed to a small part of the increase. While in a limited market release for most of the fiscal year, the Blu Build™ loader also contributed to prostate revenue growth as it was sold to new customers that desired the intraoperative loader system. The Company continues to update its website and other marketing collateral as well as attending tradeshows to acquire new leads for our sales personnel. Also, the website along with some social media campaigns have been used to educate patients about the availability of Cesium-131 as a treatment option.
Management believes continued growth in prostate brachytherapy revenues will be the result of physicians, payors, and patients increasingly considering overall treatment advantages including costs compared with non-brachytherapy treatments, better treatment outcomes and improvement in the quality of life for patients but there is no assurance as to the timing in a resurgence of use of brachytherapy as a whole.
45
Table of Contents
Management believes increased pressure to deliver effective healthcare in both terms of outcome and cost drove treatment options in fiscal 2020 with prostate brachytherapy receiving more consideration than in previous years.
Other Sales .
Other sales include but is not limited to brain, lung, head/neck, gynecological, pelvic treatments, and services. Other sales grew by approximately 60% in fiscal 2020. The main driver of this growth was increased treatments for brain cancer including GammaTile™. Initial applications for these other brachytherapy treatments are primarily used in recurrent cancer treatments or salvage cases that are generally difficult to treat aggressive cancers where other treatment options are either ineffective or unavailable.
Other brachytherapy treatments are subject to the influence of a small pool of innovative physicians who are the early adopters of the technology who also tend to be faculty at teaching hospitals training the next generation of physicians. This causes the revenue created by these types of treatment applications to be more volatile and varies significantly from year to year. Additionally, with other brachytherapy surgical procedures there remains inconsistency and uncertainty regarding reimbursement for the procedures. This unreliable reimbursement for these new procedures will remain until specific coding and coverage policies are established, which could take years. Individual centers weigh the value of the procedure with their other treatment priorities on a patient by patient basis. Isoray believes that additional clinical data will begin to build a compelling argument to support reimbursement and increased adoption of the procedures; however, any growth will be inconsistent in the near term.
GammaTile™.
For several years the Company has focused on many different applications of its Cesium-131 brachytherapy seeds in the cranial cavity to target many forms of brain cancer. Most recently, the Company has focused on using braided strand configurations and on a collaboration with GammaTile, LLC, now known as GT Medical Technologies, Inc. (GT Med Tech), which has a technology which use biodegradable “tiles” to deliver the Cesium-131 brachytherapy seeds into contact with cancerous tumors in the brain.
GammaTile™ Therapy was in a limited market release beginning in January 2019 and in a full market release beginning in January 2020. Total revenues from sales to GT Med Tech have been less than ten percent of total revenues. While GT Med Tech continues to assure Isoray that its sales and marketing efforts will show steady improvements in sales there is no assurance this will occur.
46
Table of Contents
Cost of sales
Cost of sales consisted primarily of the costs of manufacturing and distributing the Company’s products. The fiscal 2020 increase was primarily due to higher sales volumes that led to increased labor expenses and non-isotope materials costs offset by decreased isotope costs. Labor expenses increased by $168,000 as the Company had more production volume due to higher sales. Non-isotope materials costs also increased by $270,000 due to increased sales volume and an increase in the ratio of preloaded seeds (stranded, Blu Build™, etc.) compared to loose seeds sold. Beginning in the first fiscal quarter of 2019, the Company reduced the amount of Cesium-131 provided by the MURR reactor by approximately thirty-five percent. After a thorough review of the capacity and quality of production at the MURR facility, the Company determined to terminate its supply agreement with MURR and the last shipment of isotope from MURR was received in January 2019. These changes led to a $165,000 decrease in isotope cost during fiscal 2020 compared to fiscal 2019 despite increased sales volumes.
The fiscal 2019 increase was primarily due to higher sales volumes that led to increased labor expenses and non-isotope materials costs offset by decreased isotope costs. Labor expenses increased by $103,000 as the Company had more production volume due to higher sales. Non-isotope materials also increased by $141,000 due to increased sales volume and an increase in the ratio of preloaded seeds (stranded, Blu Build™, etc.) compared to loose seeds sold. The reduction of the amount of Cesium-131 provided by the MURR reactor referred to above in January 2019 led to a $98,000 decrease in isotope cost during fiscal 2019 compared to fiscal 2018 despite increased sales volumes. In addition, depreciation increased by $48,000 due to completed automation projects placed into service at the end of fiscal 2018 and for which depreciation expense was recognized throughout fiscal 2019.
During both fiscal 2019 and 2020, the Company purchased isotope in excess of known customer orders to provide enough isotope to fill anticipated orders which may or may not materialize. The excess isotope is utilized in the production of upcoming orders where possible considering the decay rates of Cesuim-131. Any loss of isotope to decay is also included as a cost of production during the current period.
Research and development expenses
Research and development consisted primarily of the costs related to employee and third-party research and development activities. The decrease in fiscal 2020 compared to fiscal 2019 was mainly due to reduced expenses related to developmental costs for the Blu Build™ loader and decrease in protocol expenses as existing protocols were completed and new ones had not yet started. These factors led to a decrease of $415,000 in fiscal 2020. This decrease was offset by an increase in payroll costs as the company shifted some internal resources to spend more time on research and development activities.
The decrease in fiscal 2019 compared to fiscal 2018 was mainly due to reduced expenses related to the Collaborative Development Agreement with GT Med Tech offset by increased spending on the Blu Build™ loader development. Beginning in April 2018, costs were no longer shared equally as had been done historically and GT Med Tech was responsible for more than 50% of the costs. The Company stopped sharing costs with GT Med Tech related to the development of GammaTile™ in December 2018 when the product entered a limited market release. These factors led to a decrease of $350,000 in fiscal 2019. Costs related to the development of the Blu Build™ loader and associated equipment increased by $106,000 during fiscal 2019 as the development continued throughout the limited market release of the product.
Contributing to the fiscal 2018 increase were re-allocating resources from cost of sales to assist with research and development projects, payroll, benefits, and share-based compensation expense, costs associated with the development of Blu-Build™ delivery system for real-time prostate brachytherapy, protocol expense, as well as an increase related to the collaborative agreement with GT Med Tech.
Sales and marketing expenses
Sales and marketing expenses consist primarily of the costs related to the internal and external activities of the Company’s sales, marketing and customer service division. The fiscal 2020 increase was due to increased payroll of $423,000 due to incentive compensation related to the increase in sales. This increase was offset by a reduction of $130,000 in travel due to reduced travel as a result of the COVID-19 global health pandemic.
The fiscal 2019 increase is primarily due to increased payroll, benefits, and share-based compensation and travel for sales activities.
47
Table of Contents
General and administrative expenses
General and administrative expenses consist primarily of the costs related to the executive, quality assurance and regulatory affairs (QA/RA), finance, human resources and information technology functions of the Company. The increase in fiscal 2020 is primarily the result of higher payroll of $458,000 due to incentive compensation and promotions, increased insurance premiums of $68,000 primarily relating to D&O insurance (which increased industry-wide), other expense of $50,000 primarily related to employee relations and hiring expense, and public company expense of $50,000 mostly relating to the at the market offering, and overhead recovery of $38,000 due to no shared costs with GT Medical Technologies. These were partially offset by decreased legal fees of $107,000, materials of $92,000, and travel of $64,000.
During fiscal 2019 general and administrative expenses increased only slightly over fiscal 2018. Items that increased included QA/RA materials and supplies expense by about $93,000 mainly due to increased production volumes, legal fees by approximately $30,000 primarily related to review of Company agreements, commercial insurance expense by about $38,000 primarily related to increased D&O insurance premiums, other taxes by almost $80,000 from an accrual relating to an audit of the State of Washington Hazardous Substance Tax, other expenses by about $50,000 relating to an accrual based on negotiations with a former consultant, and proxy solicitation fees of about $80,000 associated with redomiciling the Company to Delaware. These increases were offset by decreases in public company expenses of approximately $274,000 (of which $204,000 was non-cash warrant expense) as a result of changing some investor and media relation vendors which lead to significant savings and lower board fees of almost $24,000 due to fewer meetings.
Impact of COVID-19
From the onset of the COVID-19 global health pandemic we have been proactive in implementing plans to ensure the health and well-being of our employees, while remaining focused on providing uninterrupted product flow to the physicians and patients who count on us. We seamlessly transitioned many employees to work from home and made other adjustments to ensure the continuity of our business through this time. At the beginning of the pandemic, we moved quickly to ensure that our inventory of non-isotope supplies were appropriate in case our supply chain was disrupted. In addition, we set in motion our strategy to maintain a continuous and uninterrupted supply of isotope from our suppliers in Russia including the review of alternative freight services due to the cancellation of many international flights.
As COVID-19 began to spread, many states implemented new guidelines in an attempt to mitigate the spread of the virus and to conserve certain medical supplies. Those guidelines led to the cancellation or postponement of elective and non-emergency surgical procedures, including prostate brachytherapy procedures. Consequently, at the very end of March, we saw some procedures begin to be postponed in many markets we serve. This resulted in a drop in revenue for the month of April as preliminary revenue declined about 20% compared to April of 2019. As some markets began to open back up slowly beginning in May 2020, revenues in May and June increased above the revenues of May and June 2019, but they were still below the average monthly revenues attained in our third quarter of fiscal 2020.
As more states gradually lift restrictions on non-essential surgeries and other activities we have received customer feedback of anticipated increases in implant volumes as patients begin returning from quarantines for office visits and consultations but there is no assurance this will occur or be sustained. In the meantime, we continue to tightly manage our expenses and make fluid adjustments to isotope orders to meet potential increased treatment demands.
Liquidity and capital resources
The Company assesses its liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. The Company has historically financed its operations through selling equity to investors. During fiscal 2020, the Company raised approximately $880,000 from an at the market offering. These funds were not used in fiscal 2020. Funds raised in July 2018 by selling equity to investors as well as existing cash reserves from prior capital raises were used to fund the Company's operations and capital expenditures during fiscal 2020 and 2019 respectively.
Our cash flows for fiscal 2020, 2019, and 2018 respectively, are summarized as follows (in thousands):
For the years ended June 30,
2020
2019
2018
Net cash used by operating activities
$
(3,641
)
$
(5,049
)
$
(5,712
)
Net cash provided by (used in) by investing activities
(287
)
401
1,859
Net cash provided by financing activities
994
7,374
521
Net increase (decreases) in cash and cash equivalents
$
(2,934
)
$
2,726
$
(3,332
)
As of June 30,
2020
2019
2018
Working Capital
$
3,932
$
6,194
$
3,611
Current Ratio
3.50
6.53
2.97
Cash flows from operating activities
Net cash used by operating activities in fiscal 2020 was primarily due to a net loss of $3.45 million net of approximately $640,000 in adjustments for non-cash activity such as depreciation and amortization expense, the accretion of asset retirement obligation, and share-based compensation. Changes in operating assets and liabilities contributed approximately $835,000 to the cash used by operating activities.
Net cash used by operating activities in fiscal 2019 was primarily due to a net loss of $5.14 million net of approximately $613,000 in adjustments for non-cash activity such as depreciation and amortization expense, the accretion of asset retirement obligation, and share-based compensation. Changes in operating assets and liabilities contributed approximately $518,000 to the cash used by operating activities.
Net cash used by operating activities in fiscal 2018 was primarily due to a net loss of $6.7 million net of approximately $767,000 in adjustments for non-cash activity such as depreciation and amortization expense, the accretion of asset retirement obligation, and share-based compensation. Changes in operating assets and liabilities contributed approximately $221,000 in the cash used by operating activities.
48
Table of Contents
Cash flows from investing activities
Investing activities for all years are presented by primary transaction category. Investing activities consisted of transactions related to the purchase of fixed assets as well as the purchase and subsequent maturity of certificates of deposit or US Treasury Bills. Management will continue to invest in technology and machinery that improves and streamlines production processes and to invest and reinvest maturing certificates of deposit and US Treasury Bills in low-risk investment opportunities that safeguard assets and provide greater assurance those resources will be liquid and available for business needs as they arise.
Cash flows from financing activities
Financing activities for all years are presented by primary transaction category. Financing activities in fiscal 2020, 2019, and 2018 were primarily due to sales of common stock through a registered direct offering, net, at the market offerings, net, and warrant and option exercises net of preferred dividends paid. Financing activities were significantly increased in fiscal 2019 compared to 2020 and 2018 due to the registered direct offering, net.
Projected FY 2021 L iquidity and C apital R esources
Operating activities
Management forecasts that fiscal 2021 cash requirements will be similar to previous years and that current cash and cash equivalents will be sufficient to meet projected operating cash needs for the next nine to twelve months . While monthly operating expenses are budgeted to increase for sales and marketing, research and development and general and administrative expenses, management believes the total monthly expense amount will not substantially change. Assuming no extraordinary expenses occur (whether operating or capital), if management is successful at implementing its strategy to focus on renewed emphasis to drive the consumer to the prostate market and meets or exceeds its growth targets of twenty-five percent increase in revenue in fiscal 2021 and this annual growth continues, the Company anticipates reaching cashflow break-even in three to four years. These assumptions do assume that GammaTile™ will contribute to total revenue but do not incorporate any significant growth in the other non-prostate applications as they generate nominal revenues today but if they show significant improvement, cashflow break-even could occur sooner. There is no assurance that the targeted sales growth will materialize but management is encouraged by the depth and experience of its sales team and its track record of growth during the last three fiscal years.
Capital expenditures
Management has completed the design of a future production and administration facility. If financing is obtained and the facility constructed, it is believed that the new facility will have non-cash depreciation cost equal to or greater than the monthly rental cost of the current facility.
Management is reviewing all aspects of production operations (including process automation), research and development, sales and marketing, and general and administrative functions to evaluate the most efficient deployment of capital to ensure that the appropriate materials, systems, and personnel are available to support and drive sales.
During fiscal 2020, the Company invested approximately $221,000 in the automation of production processes. Beginning in fiscal 2017 and continuing through fiscal 2020, the Company has invested approximately $1,061,000 in the automation of five production processes, four of which have been placed in service as of the end of fiscal 2020. Management expects to invest approximately $10,000 more over the next three months on the remaining automation projects, but there is no assurance that this amount will not be revised. This investment is designed to allow the Company to significantly increase the output of Cesium-131 brachytherapy seeds, while allowing the Company to decrease the labor costs related to seed production and also improving the overall safety of our operations.
Financing activities
There was no material change in the use of proceeds from our public offering as described in our final prospectus supplement filed with the SEC pursuant to Rule 424(b) on March 24, 2014. Through June 30, 2020, the Company had used the net proceeds raised through the March 2014 offering as described in the public offering. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.
49
Table of Contents
On May 8, 2018, the Company entered into a Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”). The common stock sold in the Sales Agreement was distributed at the market prices prevailing at the time of sale. As of June 30, 2018, the Company had sold an aggregate of 980,918 shares under the Sales Agreement at an average price of approximately $0.515 per common share for gross proceeds of approximately $505,000, pursuant to the registration statement on Form S-3 that became effective on November 23, 2015. Net proceeds from this raise totaled approximately $478,000. No additional sales were made in July 2018 and this offering was suspended on July 9, 2018.
On July 11, 2018, the Company sold 11,000,000 shares of its common stock at a price of $0.75 per share, for aggregate gross proceeds of $8.25 million, pursuant to the registration statement on Form S-3 that became effective on November 23, 2015. There was no material change in the use of proceeds from our public offering as described in our prospectus supplement filed with the SEC pursuant to Rule 424(b) on July 11, 2018. Through June 30, 2020, the Company had used the net proceeds raised through the July 11 th offering as described in the prospectus supplement. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.
Additionally, the Company issued to the purchasers unregistered warrants to purchase up to 5,500,000 shares of common stock. The warrants have an exercise price of $0.75 per share common stock, are exercisable commencing six months following the issuance date, and expire five and one-half years from the issuance date. If exercised for cash, future exercises of these warrants will provide additional capital to the Company.
On October 19, 2018, the Company filed a Form S-1 registration statement for the registration of 5,830,000 shares of common stock to be received by the investors and representatives of Wainwright on exercise of warrants issued in connection with the registered direct offering completed on July 11, 2018. The Company may receive up to $4,434,375 in gross proceeds solely to the extent the warrants are exercised for cash. The Form S-1 registration statement became effective on December 14, 2018.
On March 31, 2020, the Company entered into an Equity Distribution Agreement (the "Agreement") with Oppenheimer & Co., Inc. (“Oppenheimer”). The common stock sold pursuant to the Agreement will be distributed at the market prices prevailing at the time of sale. The Agreement provides that Oppenheimer will be entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold plus reimbursement of certain expenses. Net proceeds from the sale of the shares will be used for general corporate purposes. As of June 30, 2020, the Company had sold an aggregate of 1,247,232 shares under the distribution agreement at an average price of approximately $0.738 per common share for gross proceeds of approximately $920,000 and net proceeds of approximately $874,000, pursuant to the registration statement on Form S-3 that became effective on January 23, 2020.
When it does require capital in the future, the Company expects to finance its cash needs through sales of equity, possible strategic collaborations, debt financing or through other sources that may be dilutive to existing stockholders, Management anticipates that if it raises additional financing that it will be at a discount to the market price and it will be dilutive to stockholders.
Other Commitments and Contingencies
The Company’s purchase commitments and obligations include all open purchase orders and contractual obligations entered into in the ordinary course of business, including commitments with contract manufacturers and suppliers, for which we have not received the goods or services and acquisition and licensing of intellectual property. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, and/or adjust our requirements based on our business needs prior to the delivery of goods or performance of services. Non-cancellable purchase commitments and obligations that will exist beyond fiscal 2020 and that are not separately presented as a liability on the balance sheet are listed below (in thousands):
Less than
1 – 3
3 – 5
More than 5
Contractual obligations
Total
1 year
years
years
years
Seed core purchase obligation
1,080
216
432
432
-
Total
$
1,080
$
216
$
432
$
432
$
-
50
Table of Contents
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Impact of Inflation
Inflation had minimal impact on our net sales and revenues or on loss from continuing operations.
New Accoun ting Standards
In February 2016, the FASB issued ASU 2016-02 Leases (Subtopic 842), which will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by most leases. The update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The modified retrospective transition approach is required. The Company adopted the new standard in the first quarter of fiscal year 2020 and the most significant effects of this ASU relate to the recognition of a new right-of-use asset and corresponding lease liability.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which, among other things, provides guidance on how to assess whether certain collaborative arrangement transactions should be accounted for under Topic 606. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is in the process of evaluating the impact the standard will have on its financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
51
Table of Contents
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide Item 7A disclosure in this Annual Report.