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Results of Operations
−Removed: The following table summarizes certain financial information for the three and nine month periods ended December 31, 2020 (fiscal 2021) and December 31, 2019 (fiscal 2020) (in thousands):
−Removed: Three Months Ended
−Removed: Nine Months Ended
+Added: The following table summarizes certain financial information for the three month period ended June 30, 2021 (fiscal 2022) and June 30, 2020 (fiscal 2021) (in thousands):
+Added: Three Months Ended June 30,
Net product sales
4 unchanged sentences
Interest income, net
−Removed: Income from governmental assistance programs
Loss before income taxes
Provision for income taxes
−Removed: Net product sales — Net product sales for the third quarter of fiscal 2021 were $2.3 million as compared to $2.0 million for the third quarter of fiscal 2020, an increase of $0.3 million, or 11.5%.
−Removed: The Company’s core customers benefitted from reduced competition during the period as many retailers were forced to close, either temporarily or permanently, or otherwise operate with reduced hours and restrictions on foot traffic and maximum capacities under COVID-19 restrictions.
−Removed: The improvement in net product sales during the third quarter of fiscal 2021 came from increased consumer demand for certain of the Company’s products offered by these customers, in particular clock radios as consumers spent more time at home and shopped online, and the Company’s ability to continue to sell products under difficult economic conditions.
−Removed: The Company’s sales during the third quarters of fiscal 2021 and fiscal 2020 were highly concentrated among the Company’s three largest customers – Wal-Mart, Amazon and Fred Meyer – where net product sales comprised approximately 90% and 90%, respectively, of the Company’s total net product sales.
−Removed: Net product sales for the nine month period of fiscal 2021 were $5.7 million as compared to $5.0 million for the nine month period of fiscal 2020, an increase of $0.7 million, or 14.9%.
−Removed: The Company’s sales during the nine month periods of fiscal 2021 and
−Removed: fiscal 2020 were highly concentrated among the Company’s three largest customers – Wal-Mart, Amazon and Fred Meyer – where net product sales comprised approximately 83% and 83%, respectively, of the Company’s total net product sales.
+Added: Net product sales — Net product sales for the first quarter of fiscal 2022 were $2.0 million as compared to $1.2 million for the first quarter of fiscal 2021, an increase of $0.8 million, or 61.0%.
+Added: The improvement in net product sales during the first quarter of fiscal 2022 came from increased consumer demand for certain of the Company’s products, in particular clock radios and microwave ovens as consumers spent more time at home and shopped online, and the Company’s ability to continue to sell products under difficult economic conditions.
+Added: The Company’s sales during the first quarter of fiscal 2022 were highly concentrated among the Company’s three largest customers – Wal-Mart, Amazon and Fred Meyer – where net product sales comprised approximately 84% of the Company’s total net product sales .
+Added: The Company’s sales during the first quarter of fiscal 2021 were highly concentrated among the Company’s three largest customers – Wal-Mart, Amazon and Kroger – where net product sales comprised approximately 80% of the Company’s total net product sales .
Net product sales may be periodically impacted by adjustments made to the Company’s sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period.
−Removed: In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approximately $4,000 and nil for the third quarters of fiscal 2021 and fiscal 2020, respectively, and approximately $46,000 and nil for the nine month periods of fiscal 2021 and fiscal 2020, respectively.
+Added: In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approximately nil and $4,000 for
+Added: the first quarters of fiscal 2022 and fiscal 2021, respectively.
Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson ® brand name.
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Houseware products:
−Removed: Net sales were essentially flat in the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2020.
−Removed: For the nine month period of fiscal 2021, houseware net product sales were $2.1 million, an increase of $0.2 million, or 10.2%, from $1.9 million for the nine month period of fiscal 2020, as the Company and its core customers were able to benefit from reduced competition.
+Added: Net sales increased $0.3 million, or 54.5%, to $0.8 million in the first quarter of fiscal 2022 as compared to $0.5 million in the first quarter of fiscal 2021, driven by an increase in year-over-year sales of microwave ovens.
Audio products:
−Removed: Net sales were $1.7 million in the third quarter of fiscal 2021 as compared to $1.4 million in the third quarter of fiscal 2020, an increase of $0.3 million, or 22.2%, resulting from increased net sales of clock radios.
−Removed: The Company benefitted from limited competition during the early stages of the pandemic.
−Removed: For the nine month period of fiscal 2021, audio product net sales were $3.6 million, an increase of $0.6 million or 18.2%, from $3.0 million in the nine month period of fiscal 2020 resulting from increased net sales of clock radios, as t he Company and its core customers benefitted from reduced competition during the early stages of the pandemic.
+Added: Net sales increased $0.5 million, or 65.6%, to $1.2 million in the first quarter of fiscal 2022 as compared to $0.7 million in the first quarter of fiscal 2021, resulting from increased net sales of clock radios.
Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S.
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The Company also is continuing its efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships.
−Removed: The Company has engaged Leveraged Marketing Corporation of America (“LMCA”) as an agent to assist in identifying and procuring potential licensees.
+Added: The Company has engaged LMCA as an agent to assist in identifying and procuring potential licensees.
Emerson’s success is dependent on its ability to anticipate and respond to changing consumer demands and trends in a timely manner, as well as expanding into new markets and sourcing new products that are profitable to the Company.
Geo-political factors may also affect the Company’s operations and demand for the Company’s products, which are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements and bilateral actions.
−Removed: The Company expects that recently imposed and proposed U.S.
−Removed: tariffs on categories of products that the Company imports from China, and China’s retaliatory tariffs on certain goods imported from the United States, as well as modifications to international trade policy, will affect its product costs going forward.
+Added: The Company expects that current and proposed U.S.
+Added: tariffs on categories of products that the Company imports from China, and China’s retaliatory tariffs on certain goods imported from the United States, as well as modifications to international trade policy, will continue to affect its product costs going forward.
If no mitigation steps are taken, or the mitigation is unsuccessful, the combination of tariffs will result in significantly increased annualized costs to the Company as all of the Company’s products are currently manufactured by suppliers in China.
−Removed: Although the Company is monitoring the trade and political environment and working to mitigate the possible effect of tariffs with its suppliers as well as its customers through pricing and sourcing strategies, including drawing down inventory built up in advance of the recent tariff increases, the Company cannot be certain how its customers and competitors will react to the actions taken.
+Added: Although the Company is monitoring the trade and political environment and working to mitigate the possible effect of tariffs with its suppliers as well as its customers through pricing and sourcing strategies, the Company cannot be certain how its customers and competitors will react to the actions taken.
In addition, heightened tensions between the United States and China over Hong Kong and any resulting retaliatory policies may affect our operations in Hong Kong.
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However, if the Company is unable to successfully pass through the additional costs or otherwise mitigate the effects of these tariffs, or if the higher prices reduce demand for the Company’s products, it will have a negative effect on the Company’s product sales and gross margins.
−Removed: Starting in the fourth quarter of fiscal 2020, the global COVID-19 pandemic has presented significant challenges and adversely affected the Company’s business and operating results, and the operations and production capabilities of the Company’s suppliers in China and the distribution capabilities of the Company’s third party logistics provider, including as a result of quarantine or closure.
−Removed: The pandemic directly and indirectly disrupted certain sales and supply chain activities and affected the Company’s ability to address those challenges during the first quarter of fiscal 2021, which contributed to a decline in net product sales in the first quarter of fiscal 2021.
−Removed: Although the Company has since experienced increased demand in certain of its product categories, it expects that the pandemic will continue to have an adverse effect over the coming quarters, including on the magnitude and timing of orders by retailers, resellers, distributors and consumers.
−Removed: Additionally, surges in demand and shifts in shopping patterns related to COVID-19 have strained the U.S.
−Removed: freight network and the global availability of shipping containers, which has at times resulted in carrier delays and increased shipping costs.
−Removed: In light of the adverse effects of the COVID-19 pandemic on macroeconomic conditions domestically and internationally, along with the uncertainty associated with a potential recovery, the Company has implemented certain cost-reduction actions intended to reduce expenditures in line with the lower demand for the Company’s products in light of the effects of the COVID-19 pandemic to the business.
+Added: Starting in the fourth quarter of fiscal 2020, the global COVID-19 pandemic has presented significant challenges and impacted the Company’s business and operating results, and the operations and production capabilities of the Company’s suppliers in China and the distribution capabilities of the Company’s third party logistics provider, including as a result of quarantine or closure.
+Added: The pandemic has directly and indirectly disrupted certain sales and supply chain activities and affected the Company’s ability to address those challenges.
+Added: Although the Company has since experienced increased demand in certain of its product categories and favorable impacts on its online channels as a result of the COVID-19 pandemic, the Company expects that the pandemic will continue to impact its business and operations over the coming quarters, including with respect to the magnitude and timing of orders by retailers, resellers, distributors and consumers.
+Added: Additionally, surges in demand and shifts in shopping patterns related to the COVID-19 pandemic have strained the global freight network and availability of shipping containers, which has been further exacerbated by COVID-19 outbreaks and protocols at many port locations, resulting in carrier-imposed capacity restrictions, carrier delays and longer lead times, including shipment receiving and unloading backlogs at many U.S.
+Added: As a result, the Company’s shipping costs have recently increased by several multiples compared to fiscal 2021 averages.
+Added: Global component shortages, in particular semiconductor chips, arising from these changes in consumer demand and reduced manufacturing capacity related to the COVID-19 pandemic have also caused and are likely to continue to result in significant price fluctuations and long lead times in the supply of these components.
+Added: Although the Company is seeking alternate suppliers for these components, developing alternate sources of supply will be time consuming, difficult and costly, and may require the re-tooling of products to accommodate components from different suppliers.
+Added: In addition to increasing cost trends, the Company’s suppliers are not equipped to hold meaningful amounts of inventory and if shipping container capacity remains limited or unavailable, they could pause manufacturing, which could ultimately impact the Company’s ability to fulfill customer orders on a timely basis.
+Added: These impacts on the Company’s supply chain have and may continue to impact the Company’s ability to meet product demand, which could result in additional costs, customer dissatisfaction in the event of inventory shortages or may otherwise adversely impact the Company’s business and results of operations.
+Added: In light of the adverse effects of the COVID-19 pandemic on macroeconomic conditions domestically and internationally, along with the uncertainty associated with a potential recovery, the Company has implemented certain cost-reduction actions intended to reduce expenditures in light of the effects of the COVID-19 pandemic to the business.
However, the environment remains highly uncertain and demand for the Company’s products remains difficult to assess due to many factors including the pace of economic recovery around the world, the status of various government stimulus programs, competitive intensity and retailer actions to continue carefully managing inventory.
−Removed: As a result, the Company is unable at this time to predict the full impact of the COVID-19 pandemic on its operations and financial results, and,
−Removed: depending on the magnitude and duration of the pandemic, including the further spread and severity of COVID-19 cases in areas in which the Company operates and the availability and distribution of effective vaccines, such impact may be material.
+Added: As a result, the Company is unable at this time to predict the full impact of the COVID-19 pandemic on its operations and financial results, and, depending on the magnitude and duration of the pandemic, including the further spread and
+Added: severity of COVID-19 cases in areas in which the Company operates and the availability and distribution of effective vaccines, such impact may be material.
Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends
−Removed: For more information on risks associated with the Company’s operations, including tariffs, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the year ended March 31, 2020, as updated in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.
−Removed: Licensing revenue — Licensing revenue in the third quarter of fiscal 2021 was $60,000 as compared to $56,000 in the third quarter of fiscal 2020, an increase of $4,000, or 7.1%.
−Removed: The year-over-year increase can be attributed to the escalation in the annual minimum royalty earned by the Company from its licensee.
−Removed: Licensing revenue for the nine month period of fiscal 2021 was $180,000 as compared to $167,000 for the nine month period of fiscal 2020, an increase of $13,000, or 7.8%.
+Added: For more information on risks associated with the Company’s operations, including tariffs, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the year ended March 31, 2021.
+Added: Licensing revenue — Licensing revenue in the first quarter of fiscal 2022 was $65,000 as compared to $60,000 in the first quarter of fiscal 2021, an increase of $5,000, or 8.3%.
The year-over-year increase can be attributed to the escalation in the annual minimum royalty earned by the Company from its licensee.
−Removed: Net revenues — As a result of the foregoing factors, the Company’s net revenues were $2.3 million in the third quarter of fiscal 2021 as compared to $2.1 million in the third quarter of fiscal 2020, an increase of $0.2 million, or 11.4%, and $5.9 million for the nine month period of fiscal 2021 as compared to $5.1 million for the nine month period of fiscal 2020, an increase of $0.8 million, or 14.7%.
−Removed: Cost of sales — In absolute terms, cost of sales increased $0.1 million, or 6.1%, to $1.8 million in the third quarter of fiscal 2021 as compared to $1.7 million in the third quarter of fiscal 2020.
−Removed: The increase in absolute terms for the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2020 was primarily related to increased net product sales partially offset by lower year-over-year gross cost of sales as a percentage of gross sales.
−Removed: The amounts presented are based on the change in methodology regarding the Company’s definition of Cost of Sales.
−Removed: See “Note 1 – Background and Basis of Presentation”.
−Removed: In absolute terms, cost of sales increased $0.3 million, or 8.1%, to $4.5 million for the nine month period of fiscal 2021 as compared to $4.2 million for the nine month period of fiscal 2020.
−Removed: The increase in absolute terms for the nine month period of fiscal 2021 as compared to the nine month period of fiscal 2020 was primarily related to increased net product sales partially offset by lower year-over-year gross cost of sales as a percentage of gross sales.
−Removed: The amounts presented are based on the change in methodology regarding the Company’s definition of Cost of Sales.
−Removed: See “Note 1 – Background and Basis of Presentation”.
+Added: Net revenues — As a result of the foregoing factors, the Company’s net revenues were $2.1 million in the first quarter of fiscal 2022 as compared to $1.3 million in the first quarter of fiscal 2021, an increase of $0.8 million, or 58.6%,
+Added: Cost of sales — In absolute terms, cost of sales increased $0.6 million, or 58.1%, to $1.6 million in the first quarter of fiscal 2022 as compared to $1.0 million in the first quarter of fiscal 2021.
+Added: The increase in absolute terms for the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021 was primarily related to increased net product sales and higher year-over-year gross cost of sales as a percentage of gross sales.
The Company purchases the products it sells from a limited number of factory suppliers.
−Removed: For the third quarter of fiscal 2021 and fiscal 2020, the Company purchased 95% and 90%, respectively, from its two largest suppliers.
−Removed: For the nine month period of fiscal 2021 and fiscal 2020, the Company purchased 98% and 86%, respectively, from its two largest suppliers.
−Removed: Selling, general and administrative expenses (“S,G&A”) — S,G&A, in absolute terms, was $1.6 million in both of the third quarters of fiscal 2021 and fiscal 2020.
−Removed: S,G&A, as a percentage of net revenues, was 66.9% in the third quarter of fiscal 2021 as compared to 76.6% in the third quarter of fiscal 2020.
−Removed: The slight increase in S,G&A was primarily attributed to an increase in legal fees of approximately $46,000.
−Removed: Legal fees for the third quarter of fiscal 2021 were $490,000 as compared to $444,000 for the third quarter of fiscal 2020.
−Removed: The majority of the increase in legal fees concerned the protection of the Emerson® trademark.
−Removed: The amounts presented are based on the change in methodology regarding the Company’s definition of Cost of Sales.
−Removed: See “Note 1 – Background and Basis of Presentation”.
−Removed: S,G&A, in absolute terms, was $4.6 million for the nine month period of fiscal 2021 as compared to $4.4 million for the nine month period of fiscal 2020, an increase of $0.2 million, or 3.8%.
−Removed: S,G&A, as a percentage of net revenues, was 78.0% for the nine month period of fiscal 2021 as compared to 86.2% for the nine month period of fiscal 2020.
−Removed: The increase in S,G&A was primarily attributed to an increase in legal fees of approximately $430,000.
−Removed: Legal fees for the nine month period of fiscal 2021 were $1,345,000 as compared to $915,000 for the nine month period of fiscal 2020 .
−Removed: The majority of the increase in legal fees concerned the protection of the Emerson® trademark.
−Removed: This was partially offset by a decrease in advertising expenses of $101,000, a decrease in compensation costs of $79,000 and a decrease in consulting fees of $21,000.
−Removed: The amounts presented are based on the change in methodology regarding the Company’s definition of Cost of Sales.
−Removed: See “Note 1 – Background and Basis of Presentation”.
−Removed: Interest income, net — Interest income, net, was $18,000 in the third quarter of fiscal 2021 as compared to $179,000 in the third quarter of fiscal 2020, a decrease of $161,000.
−Removed: The decrease was primarily due to lower average interest rates earned on the Company’s short term investments.
−Removed: Interest income, net, was $128,000 for the nine month period of fiscal 2021 as compared to $638,000 for the nine month period of fiscal 2020, a decrease of $510,000.
+Added: For both first quarters of fiscal 2022 and fiscal 2021, the Company purchased 100% of its goods from its two largest suppliers.
+Added: Selling, general and administrative expenses (“S,G&A”) — S,G&A, in absolute terms, was $1.4 million in the first quarter of fiscal 2022 as compared to $1.5 million in fiscal 2021, a decrease of $0.1 million or 7.7%.
+Added: S,G&A, as a percentage of net revenues, was 66.7% in the first quarter of fiscal 2022 as compared to 114.1% in the first quarter of fiscal 2021.
+Added: The decrease in S,G&A was primarily attributed to a decrease in legal fees of approximately $130,000.
+Added: Legal fees for the first quarter of fiscal 2022 were $273,000 as compared to $403,000 for the first quarter of fiscal 2021.
+Added: The majority of the decrease in legal fees concerned the protection of the Emerson® trademark.
+Added: Interest income, net — Interest income, net, was $17,000 in the first quarter of fiscal 2022 as compared to $82,000 in the first quarter of fiscal 2021, a decrease of $65,000.
The decrease was primarily due to lower average interest rates earned on the Company’s short term investments.
−Removed: Income from governmental assistance programs — During the third quarter and nine month period of fiscal 2021, the Company recorded income of approximately $28,000 and $83,000, respectively, related to assistance received from the Hong Kong government under the ESS program.
−Removed: See “Note 10 - Paycheck Protection Program and Employment Support Scheme”.
−Removed: Provision for income taxes — In the third quarter of fiscal 2021, the Company recorded income tax expense of $9,900 as compared to income tax expense of $4,800 in the third quarter of fiscal 2020.
+Added: Provision for income taxes — In the first quarter of fiscal 2022, the Company recorded income tax expense of $11,000 as compared to income tax expense of $6,300 in the first quarter of fiscal 2021.
See “Note 5 – Income Taxes”.
−Removed: For the nine month period of fiscal 2021, the Company recorded income tax expense of $15,200 as compared to income tax expense of $19,400 for the nine month period of fiscal 2020.
Although the Company generated net losses during fiscal 2022 and fiscal 2021, it was unable to realize an income tax benefit due to valuation allowances recorded against its deferred tax assets.
−Removed: Net (loss) — As a result of the foregoing factors, the Company realized a net loss of $945,000 in the third quarter of fiscal 2021 as compared to a net loss of $988,000 in the third quarter of fiscal 2020.
−Removed: For the nine month period of fiscal 2021, the Company realized a net loss of $3,026,000 as compared to a net loss of $2,851,000 for the nine month period of fiscal 2020.
+Added: Net (loss) — As a result of the foregoing factors, the Company realized a net loss of $915,000 in the first quarter of fiscal 2022 as compared to a net loss of $1,125,000 in the first quarter of fiscal 2021.
Liquidity and Capital Resources
−Removed: As of December 31, 2020, the Company had cash and cash equivalents of approximately $30.5 million as compared to approximately $6.3 million at March 31, 2020.
−Removed: Working capital decreased to $33.0 million at December 31, 2020 as compared to $36.1 million at March 31, 2020.
−Removed: The increase in cash and cash equivalents of approximately $24.2 million was due to a decrease in short term investments of $28.1 million, an increase in accounts payable and other current liabilities of $0.3 million and an increase in short term loan payable of $0.2 million and an increase in deferred revenue of $0.1 million partially offset by the net loss generated during the period of $3.0 million, an increase in accounts receivable of $1.0 million, an increase in prepaid purchases of $0.3 million, a decrease in federal taxes payable of $0.2 million.
−Removed: Net cash used by operating activities was approximately $4.1 million for the nine months ended December 31, 2020, resulting from a $3.0 million net loss generated during the period, an increase in accounts receivable of $1.0 million, an increase in prepaid purchases of $0.3 million, a decrease in federal taxes payable of $0.2 million partially offset by an increase in accounts payable and other liabilities of $0.3 million and an increase in deferred revenue of $0.1 million.
−Removed: Net cash provided by investing activities was approximately $28.1 million for the nine months ended December 31, 2020 due to a decrease in short term certificates of deposit.
−Removed: Net cash provided by financing activities was $0.2 million for the nine months ended December 31, 2020 due to proceeds received from the Paycheck Protection Program (“PPP”), established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
+Added: As of June 30, 2021, the Company had cash and cash equivalents of approximately $4.4 million as compared to approximately $5.2 million at March 31, 2021.
+Added: Working capital decreased to $31.2 million at June 30, 2021 as compared to $32.1 million at March 31, 2021.
+Added: The decrease in cash and cash equivalents of approximately $0.8 million was due to the net loss generated during the period of $0.9 million, an increase in accounts receivable of $0.4 million, an increase in prepaid purchases of $0.4 million and a decrease in deferred revenue of $0.1 million partially offset by a decrease in short term investments of $1.0 million.
+Added: Net cash used by operating activities was approximately $1.8 million for the three months ended June 30, 2021, resulting from a $0.9 million net loss generated during the period, an increase in accounts receivable of $0.4 million, an increase in prepaid purchases of $0.4 million and a decrease in deferred revenue of $0.1 million
+Added: Net cash provided by investing activities was approximately $1.0 million for the three months ended June 30, 2021 due to a decrease in short term deposits.
+Added: Net cash provided by financing activities was nil for the three months ended June 30, 2021.
Sources and Uses of Funds
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The PPP loan accrues interest at 1% and matures two years from the date of issuance, with a deferral of payments for the first six months.
−Removed: The Company used all of the PPP loan proceeds for qualifying expenses in accordance with terms of the CARES Act and intends to apply for forgiveness of the loan to the extent applicable.
−Removed: However, no assurance can be provided that forgiveness of any portion of the PPP loan will be obtained.
+Added: The Company used all of the PPP loan proceeds for qualifying expenses in accordance with terms of the CARES Act and applied for forgiveness of the loan to the extent applicable.
See Note 10 of the Notes to the Interim Consolidated Financial Statements.
Off-Balance Sheet Arrangements
−Removed: As of December 31, 2020, the Company did not have any off-balance sheet arrangements as defined under the rules of the SEC.
+Added: As of June 30, 2021, the Company did not have any off-balance sheet arrangements as defined under the rules of the SEC.
Recently Adopted Accounting Pronouncements
−Removed: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lease assets and liabilities to be recorded on the balance sheet.
−Removed: This update is effective for public entities in fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years, and certain qualitative and quantitative disclosures are also required.
−Removed: Early adoption was permitted.
−Removed: The Company has adopted this ASU and related amendments as of April 1, 2019 on a modified retrospective basis.
−Removed: The Company has applied the modified retrospective approach by recording a cumulative effect adjustment as of the date of adoption, whereby prior comparative periods will not be retrospectively presented in the consolidated financial statements.
−Removed: The Company has also elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases.
−Removed: The Company will be exempting leases with an initial term of twelve months or less from balance sheet recognition and will not separate lease and non-lease components.
−Removed: Upon adoption, the Company recognized total lease liabilities of $695,000, and corresponding right-of-use assets of $650,000, all of which is associated with leased office space.
−Removed: The difference between the right-of-use asset and lease liability is due to the existing deferred balance, resulting from historical straight-lining of operating leases that was reclassified upon adoption to reduce the measurement of the right-of-use assets.
−Removed: The Company’s Consolidated Statements of Income and Consolidated Statements of Cash Flows were not materially impacted.
−Removed: See Note 9, “Leases” for further details.
−Removed: Recently Issued Accounting Pronouncements
−Removed: The following ASUs were issued by the FASB which relate to or could relate to the Company as concerns the Company’s normal ongoing operations or the industry in which the Company operates.
Accounting Standards Update 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” (Issued December 2019)
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This standard is required to take effect in the Company’s first quarter (June 2021) of the Company’s fiscal year ending March 31, 2022.
−Removed: The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.
+Added: The adoption of ASU 2019-12 had no material impact on the Company’s consolidated financial statements and related disclosures.
+Added: Recently Issued Accounting Pronouncements
+Added: The following ASUs were issued by the FASB which relate to or could relate to the Company as concerns the Company’s normal ongoing operations or the industry in which the Company operates.
Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses” (Issued June 2016)
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.