Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors, including those set forth under the headings “Forward-Looking Statements” and “Risk Factors” elsewhere in this Annual Report on Form 10-K.
Business Overview
We are a technology company focused on leveraging the power of information technology to help solve our nation’s most pressing national security challenges. We provide clients in the United States government (“USG”), financial services, healthcare, and other users of large data applications with services which include intelligence analysis, software development, software engineering, program management, strategic and mission planning, information assurance, cybersecurity and policy support, data analytics, and MBSE. In addition to constantly innovating and enhancing our organic capabilities, Castellum is executing strategic acquisitions of technology companies in the areas of cybersecurity, information technology (“IT”), electronic warfare, information warfare, and information operations with businesses in the defense, federal, civilian, and commercial markets that share our passionate commitment to U.S. national security and have a history of bringing exceptional value to their clients.
Recent Developments
On October 17, 2022, the Company closed its public offering of 1,500,000 shares of common stock consisting of 1,350,000 shares sold by the Company and 150,000 shares sold by certain selling stockholders, at a public offering price of $2.00 per share. The Company’s registration statement on Form S-1, as amended (File No. 333-267249) relating to the offering was declared effective by the U.S. Securities and Exchange Commission on October 12, 2022.
On December 1, 2023, the Company filed a universal shelf registration statement on Form S-3 (File No. 333-275840) which was declared effective by the U.S. Securities and Exchange Commission on December 12, 2023.
Key Components of Our Results of Operations
Revenues
Our revenues are primarily derived from services provided to the U.S. federal, state and local governments. We currently generate our revenue from three different types of contractual arrangements: Cost Plus Fixed Fee (“CPFF”), Fixed Firm Price (“FFP”) and Time and Materials (“T&M”) contracts. For CPFF contracts, we use input progress measures to derive revenue based on hours worked on contract performance as follows: direct costs plus Defense Contract Audit Agency (“DCAA”)-approved provisional burdens plus fee. The provisional indirect rates are adjusted and billed at actual at year end. Revenue from FFP contracts is generally recognized ratably over the contract term, using a time-based measure of progress, even if billing is based on other metrics or milestones, including specific deliverables. For T&M contracts, we use input progress measures to estimate revenue earned based on hours worked on contract performance at negotiated billing rates, plus direct costs and indirect cost burdens associated with materials and the direct expenses incurred in performance of the contract.
Cost of Revenues
Cost of Revenues include direct costs incurred to provide goods and services related to contracts, specifically labor, contracted labor, materials, and other direct costs, which includes rent, insurance, and software licenses. Cost of Revenues related to contracts is recognized as expense when incurred or at the time a performance obligation is satisfied.
Gross Profit and Gross Profit Margin
Our gross profit comprises our revenues less our cost of revenues. Gross profit margin is our gross profit divided by our revenues.
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Operating Expenses
Our operating expenses include indirect costs, overhead, and general and administrative expenses.
• Indirect costs consist of expenses generally associated with bonuses and fringe benefits, including employee health and medical insurance, 401k matching contributions, and payroll taxes.
• Overhead consists of expenses associated with the support of operations or production, including labor for management of contracts, operations, training, supplies, and certain facilities to perform customer work.
• General and administrative expenses consist primarily of corporate and administrative labor expenses, administrative bonuses, legal expenses, IT expenses, and insurance expenses.
Interest Expense, Net of Interest Income
Interest expense consists of interest paid to service our convertible promissory notes which include the Amended BCR Trust Note, the Term Loan Promissory Note payable and revolving line of credit to Live Oak Banking Company, two promissory notes payable to Robert Eisiminger, the note payable to Emil Kaunitz, and the note payable to Crom Cortana Fund LLC net of interest earned from investments.
Income Tax (Provision) Benefit
Income taxes are accounted for under the asset and liability method. The current charge for income tax expense is calculated in accordance with the relevant tax regulations applicable to the entity. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
We follow ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on a quarterly basis.
Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. When necessary, a valuation allowance is provided to reduce deferred tax assets to an amount that is more likely than not to be realized.
We file income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. We have filed our 2021 and 2022 federal and state tax returns.
Results of Operations
The year to year comparisons of our results of operations have been prepared using the historical periods included in our audited consolidated financial statements. The following discussion should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this document.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
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Year Ended December 31, Amount of Increase (Decrease) % Change
2023 2022
Revenues $ 45,243,812 $ 42,190,643 $ 3,053,169 7.2 %
Cost of revenues 26,568,485 24,593,326 1,975,159 8.0 %
Gross profit 18,675,327 17,597,317 1,078,010 6.1 %
Operating expenses:
Indirect costs 8,935,113 11,859,401 (2,924,288) (24.7) %
Overhead 1,884,059 1,560,252 323,807 20.8 %
General and administrative expenses 17,697,886 13,586,600 4,111,286 30.3 %
Goodwill impairment loss 6,919,094 — 6,919,094 100.0 %
(Gain) Loss from change in fair value of contingent earnout (92,000) 555,000 (647,000) (116.6) %
Total operating expenses 35,344,152 27,561,253 7,782,899 28.2 %
Loss from operations (16,668,825) (9,963,936) (6,704,889) 67.3 %
Other income (expense) (2,388,470) (4,124,506) 1,736,036 (42.1) %
Loss before income taxes and preferred stock dividends (19,057,295) (14,088,442) (4,968,853) 35.3 %
Income tax benefit (expense) 1,257,117 (819,596) 2,076,713 (253.4) %
Net loss (17,800,178) (14,908,038) (2,892,140) 19.4 %
Preferred stock dividend 118,152 100,516 17,636 17.5 %
Net loss to common shareholders $ (17,918,330) $ (15,008,554) $ (2,909,776) 19.4 %
Revenue
Total revenues increased by $3,053,169 or 7.2% to $45,243,812 for the year ended December 31, 2023 from $42,190,643 for the year ended December 31, 2022. This increase in revenue was due to the acquisition of GTMR (“GTMR Acquisition”), partially offset by lost positions on ongoing contracts principally at SSI and Corvus reducing revenue.
Cost of revenues
Total cost of revenues increased by $1,975,159 or 8.0% to $26,568,485 for the year ended December 31, 2023 from $24,593,326 for the year ended December 31, 2022. This increase was driven primarily by the net increased level of effort on contracts proportionate to the changes in revenue noted above.
Gross Profit
Total gross profit increased by $1,078,010 or 6.1% to $18,675,327 for the year ended December 31, 2023 from $17,597,317 for the year ended December 31, 2022. This increase was driven by changes in revenue noted above.
Operating expenses
Total operating expenses increased by $7,782,899 or 28.2% to $35,344,152 for the year ended December 31, 2023 from $27,561,253 for the year ended December 31, 2022. The decrease in indirect cost of $(2,924,288) was driven primarily by a reduction in acquisition based bonuses to certain executives from 2022, as well as cost savings implemented in 2023. The increase in overhead costs of $323,807 is related to increases in lease expense due to the GTMR Acquisition. The increase in general and administrative costs of $4,111,286 consist of increases in non cash stock based compensation granted to certain employees, as well as increases in general and administrative salary expense as we in-sourced certain functions such as accounting and business development. The recognition of goodwill impairment resulted from a loss recorded during the
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third quarter of 2023. The decrease in the loss from change in fair value of contingent earnout is due to adjustments as we finalized the amount after the earnout period ended in late 2023.
Other income (expense)
Other income (expense) decreased by $1,736,036 or (42.1)% to $(2,388,470) for the year ended December 31, 2023 from $(4,124,506) for the year ended December 31, 2022. This decrease was primarily driven by decreases in the fair value of the derivative liability offset by an increase in interest expense due to rate increases during 2023 on our variable rate debt under our agreement with Live Oak Bank.
Income tax benefit (expense)
Income tax benefit (expense) increased by $2,076,713 or (253.4)% to $1,257,117 for the year ended December 31, 2023 from $(819,596) for the year ended December 31, 2022. This increase was primarily driven by the increase in deferred tax liabilities from the acquisition of GTMR and subsequent release of valuation allowance.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Year Ended December 31, Amount of Increase (Decrease) % Change
2022 2021
Revenues $ 42,190,643 $ 25,067,450 $ 17,123,193 68.3 %
Cost of revenues 24,593,326 13,992,898 10,600,428 75.8 %
Gross profit 17,597,317 11,074,552 6,522,765 58.9 %
Operating expenses:
Indirect costs 11,859,401 3,409,649 8,449,752 247.8 %
Overhead 1,560,252 850,999 709,253 83.3 %
General and administrative expenses 13,586,600 14,539,053 (952,453) (6.6) %
Loss from change in fair value of contingent earnout 555,000 — 555,000 100.0 %
Total operating expenses 27,561,253 18,799,701 8,761,552 46.6 %
Loss from operations (9,963,936) (7,725,149) (2,238,787) 29.0 %
Other income (expense) (4,124,506) (2,477,924) (1,646,582) 66.5 %
Loss before income taxes and preferred stock dividends (14,088,442) (10,203,073) (3,885,369) 38.1 %
Income tax benefit (expense) (819,596) 2,656,643 (3,476,239) (130.9) %
Net loss (14,908,038) (7,546,430) (7,361,608) 97.6 %
Preferred stock dividend 100,516 12,290 88,226 717.9 %
Net loss to common shareholders $ (15,008,554) $ (7,558,720) $ (7,449,834) 98.6 %
Revenues
Total revenues increased by $17,123,193 or 68.3% to $42,190,643 for the year ended December 31, 2022 from $25,067,450 for the year ended December 31, 2021. This increase was driven largely by the contributions from the acquisitions of SSI and Merrison during the third quarter of 2021 as well as the contributions from LSG acquired during the second quarter of 2022.
Cost of revenues
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Total cost of revenues increased by $10,600,428 or 75.8% to $24,593,326 for the year ended December 31, 2022 from $13,992,898 for the year ended December 31, 2021. This increase was driven primarily by the increased level of effort on contracts proportionate to the growth of revenues due to the acquisition activity noted above.
Gross Profit
Total gross profit increased by $6,522,765 or 58.9% to $17,597,317 for the year ended December 31, 2022 from $11,074,552 for the year ended December 31, 2021. This increase was driven primarily by the growth in revenues due to contributions from SSI, Merrison and LSG, offset by costs of revenues as noted above.
Operating expenses
Total operating expenses increased by $8,761,552 or 46.6% to $27,561,253 for the year ended December 31, 2022 from $18,799,701 for the year ended December 31, 2021. This fluctuation was primarily driven by an increase of $8,449,752 in indirect costs during the year ended December 31, 2022, largely attributable to the increase in benefits expense related to the Company’s growth in headcount year over year. In addition, this increase was also driven by increases in non-cash stock based compensation related to executive bonuses. This increase was offset by a decrease in general and administrative expenses of $952,453, or 6.6%, which was primarily due to a decrease in acquisition fees from the prior year as well as less acquisition-based stock based compensation in 2022 paid to executives due to less acquisition activity in 2022. The increase of $709,253 in overhead was primarily driven by an increase in overhead salaries related to our growth in headcount compared to 2021.
Other income (expense)
Other income (expense) increased by $(1,646,582) or 66.5% to $(4,124,506) for the year ended December 31, 2022 from $(2,477,924) for the year ended December 31, 2021. This increase was primarily driven by the increase in the amount of debt outstanding during 2022 as well as rate increases during 2022 on its variable rate debt under its agreement with Live Oak Bank.
Income tax (expense) benefit
Income tax (expense) benefit increased by $(3,476,239) or (130.9)% to $(819,596) for the year ended December 31, 2022 from $2,656,643 for the year ended December 31, 2021. This increase was primarily due to the Company establishing a full valuation allowance against its deferred tax assets.
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Contract Backlog
We define backlog to include the following three components:
• Funded Backlog . Funded backlog represents the revenue value of orders for services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts.
• Unfunded Backlog . Unfunded backlog represents the revenue value of orders (including optional orders) for services under existing contracts for which funding has not been appropriated or otherwise authorized.
• Priced Options . Priced contract options represent 100% of the potential revenue value of all scheduled and unscheduled future contract option periods or orders under existing contracts that may be exercised at our clients’ option and for which funding has not been appropriated or otherwise authorized.
Our backlog does not include contracts that have been awarded but are currently under protest and also does not include any task orders under IDIQ contracts, except to the extent that task orders have been awarded to us under those contracts.
The following table summarizes the value of our contract backlog as of December 31, 2023:
Backlog
Funded $ 17,423,419
Unfunded $ 15,558,445
Priced Options $ 75,032,776
Total Backlog $ 108,014,640
Our total backlog consists of remaining performance obligations, certain orders under contracts for which the original period of performance has expired, unexercised option periods and other unexercised or unscheduled optional orders. Excluding unscheduled options orders, as of December 31, 2023, the Company had $108,014,640 of funded, unfunded and scheduled priced options. We expect to recognize approximately 34% of the remaining performance obligations over the next 12 months, and approximately 57% over the next 24 months. Including priced options that have been awarded but not yet scheduled of $46,431,225, our grand total backlog is $154,445,865. The remainder is expected to be recognized thereafter. As with all government contracts there is no guarantee the customer will have future funding or exercise their contract option in the out-years. Other budget risks are discussed in the Budget Environment. Our backlog includes orders under contracts that in some cases extend for several years. Congress generally appropriates funds for our clients on a yearly basis, even though their contracts with us may call for performance that is expected to take a number of years to complete. As a result, contracts typically are only partially funded at any point during their term and all or some of the work to be performed under the contracts may remain unfunded unless and until the U.S. Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.
Liquidity and Capital Resources
Sources
We have historically sourced our liquidity requirements with cash flows from operations, borrowings under our current credit facilities, and in October 2022, with an equity issuance through the listing of our common stock on the NYSE American. As of December 31, 2023, we had $1,830,841 of cash and cash equivalents on hand and unused borrowing capacity of $324,975 from our revolving line of credit. In January and February of 2024, we undertook the following significant equity and debt transactions that enhance our liquidity and sources of funds:
• In January 2024, after filing a universal shelf registration statement on Form S-3 with the SEC in December of 2023 allowing us to issue additional equity (“Security Offering”), we raised net proceeds of approximately $2,200,000.
• In February 2024, we used the proceeds from the Security Offering to pay the outstanding principal and accrued interest owed on a Note Payable to Crom in the amount of $847,000.
• In February 2024, we agreed with Emil Kaunitz to extend the maturity date of a $400,000 note payable from December 31, 2024, to August 1, 2025, after which we will make monthly principal payments of $50,000 per month for eight months.
• In February 2024, we entered into a new $4,000,000 revolving credit facility with Live Oak Banking Company which matures on February 22, 2025 (the “New Live Oak Revolver”). The New Live Oak Revolver replaces the $950,000 revolving credit facility noted above (“Old Live Oak Revolver”), and we rolled over the $625,025 outstanding principal balance outstanding on the Old Live Oak Revolver. We also made payments of $1,209,617
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to the holders of two notes payable noted below. We have unused borrowing capacity of approximately $2,165,383 under the New Live Oak Revolver.
• In February 2024, we agreed with Robert Eisiminger to extend the maturity dates of two notes payable totaling $6,000,000 from September 30, 2024, to August 31, 2026. We also accessed the New Live Oak Revolver to pay off a third note totaling $400,000.
• In February 2024, we agreed with the Buckhout Charitable Remainder Trust to pay down and amend a convertible promissory note payable totaling $3,209,617. We accessed the New Live Oak Revolver to pay down principal of $809,617. We simultaneously agreed to enter into a new note payable in the principal amount of $2,400,000 which matures on August 31, 2026, and may not be converted into common stock. Commencing in September 2024, we will monthly principal payments of $100,000 for 24 months.
For more information related to these transactions, refer to Note 16 under Part II, Item 8, of this Annual Report on Form 10-K.
We believe our existing cash and cash equivalents provided by our ongoing operations, together with funds available through the transactions noted above, will be sufficient to meet our working capital, capital expenditures, and cash needs for the next 12 months and beyond.
Uses
Our material cash requirements from known contractual and other obligations primarily relate to payments on our credit facilities. For information related to these cash requirements, refer to Note 6 , Note 7 , Note 8 , Note 9 , and Note 16 under Part II, Item 8, of this Annual Report on Form 10-K.
Information about our cash flows is presented in our statements of cash flows and is summarized in the following table:
Twelve Months Ended December 31,
2023 2022 2021
Net cash (used in) provided by:
Operating activities
$ (2,264,447) $ 990,163 $ (1,350,136)
Investing activities
(440,985) (339,282) 808,834
Financing activities
$ (104,623) $ 1,972,100 $ 146,835
Comparison of the Years Ended December 31, 2023 and 2022
Operating activities
We used $(2,264,447) in operating activities for the year ended December 31, 2023, compared to $990,163 provided by operating activities for the year ended December 31, 2022. This decrease in net cash from operating activities was primarily driven by an increase in net loss, increases in accounts receivables (due to timing of collections), as well as noncash adjustments related to changes in the fair value of derivative liabilities and contingent earnout during the year ended December 31, 2023.
Investing activities
Net cash used in investing activities increased to $(440,985), for the year ended December 31, 2023, from $(339,282), for the year ended December 31, 2022. The increase in net cash used in investing activities was primarily due to the cash paid in the acquisition of GTMR during 2023.
Financing activities
During the year ended December 31, 2023, we used $(104,623) in financing activities, primarily due to reduction in proceeds from issuance of preferred and common stock, the reduction in proceeds from notes payable, and an increase in payments on notes payable, compared to net cash provided by financing activities of $1,972,100, for the year ended December 31, 2022.
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Critical Accounting Policies and Estimates
The following is not intended to be a comprehensive list of our accounting policies or estimates. Our significant accounting policies are more fully described in Note 2 — Summary of Significant Accounting Policies to our annual audited consolidated financial statements, included elsewhere in the document. In preparing our financial statements and accounting for the underlying transactions and balances, we apply our accounting policies and estimates as disclosed in the Notes. We consider the policies and estimates discussed below as critical to an understanding of our financial statements because their application places the most significant demands on our judgment, with financial reporting results dependent on estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Specific risks for these critical accounting estimates are described in the following paragraphs. Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.
Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue, and expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, including for estimates that we do not deem “critical.”
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers . (Topic 606). Topic 606 requires entities to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The principles in the standard are applied in five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
Our revenue recognition policies are consistent with this five-step framework. Understanding the complex terms of agreements and determining the appropriate time, amount, and method to recognize revenue for each transaction requires judgment. These significant judgments include: (1) determining what point in time or what measure of progress depicts the transfer of control to the customer; (2) estimating contract revenue and costs and assumptions for schedule and technical issues; (3) selecting the appropriate method to measure progress; and (4) estimating how and when contingencies, or other forms of variable consideration, will impact the timing and amount of recognition of revenue. The timing and revenue recognition in a period could vary if different judgments were made.
Goodwill and Intangible Assets
We account for goodwill and intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other (ASC 350). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Our acquisitions require the application of purchase accounting, which results in tangible and identifiable intangible assets and liabilities of the acquired entity being recorded at fair value. The difference between the purchase price and the fair value of net assets acquired is recorded as goodwill. We are responsible for determining the valuation of assets and liabilities and for the allocation of purchase price to assets acquired and liabilities assumed.
Assumptions must be made in determining fair values, particularly where observable market values do not exist. Assumptions may include discount rates, growth rates, cost of capital, tax rates, and remaining useful lives. These assumptions can have a significant impact on the value of identifiable assets and accordingly can impact the value of goodwill recorded. Different assumptions could result in different values being attributed to assets and liabilities. Since these values impact the amount of annual depreciation and amortization expense, different assumptions could also impact our statement of operations and could impact the results of future asset impairment reviews. Due to the many variables inherent in the estimation of a business’s fair value and the relative size of our goodwill, if different assumptions and estimates were used, it could have an adverse effect on our impairment analysis.
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During the third quarter of 2023, due to decline in stock price, Management determined that a triggering event occurred representing an indicator of goodwill impairment, resulting in a non-cash charge of $6,919,094.
Income Taxes and Uncertain Tax Positions
Income taxes and uncertain tax positions are accounted for in accordance with ASC 740, Income Taxes (ASC 740). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Management determines recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. This approach to estimate the potential outcome of any uncertain tax issue is subject to its assessment of relevant risks, facts, and circumstances existing at that time. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. When necessary, a valuation allowance is provided to reduce deferred tax assets to an amount that is more likely than not to be realized.
Share-Based Compensation
We account for share-based compensation in accordance with ASC 718 Compensation – Stock Compensation . We calculate compensation expense for all awards granted, but not yet vested, based on the grant-date fair values. The Company recognizes these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each award for service-based grants, and as the criteria is achieved for performance-based grants.
In determining the grant date fair value of share-based awards, we must estimate the expected volatility, forfeitures, and performance attributes. Since share-based compensation expense can be material to our financial condition, different assumptions and estimates could have a material adverse effect on our financial statements.
Principles of Consolidation
Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for a discussion of principles of consolidation.
Recently Issued Accounting Standards
Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for our assessment of recently issued and adopted accounting standards.