Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) primarily reviews the financial condition and results of operations of the Company for the past two years, although in some circumstances a period longer than two years is covered in order to comply with SEC disclosure requirements or to more fully explain long-term trends. The following discussion and analysis should be read in conjunction with the Selected Consolidated Financial Information beginning on page 31 and the Company’s Consolidated Financial Statements and related notes that appear on pages 73 through 135. All references in the discussion to the financial condition and results of operations refer to the consolidated position and results of the Company and its subsidiaries taken as a whole.
Unless otherwise noted, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS; interest income, net interest income, and net interest margin are presented on a fully tax-equivalent (“FTE”) basis, which is a non-GAAP measure. The term “this year” and equivalent terms refer to results in calendar year 2020, “last year” and equivalent terms refer to calendar year 2019, and all references to income statement results correspond to full-year activity unless otherwise noted.
This MD&A contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are set herein under the caption “Forward-Looking Statements” on page 67.
Critical Accounting Policies
As a result of the complex and dynamic nature of the Company’s business, management must exercise judgment in selecting and applying the most appropriate accounting policies for its various areas of operations. The policy decision process not only ensures compliance with the current accounting principles generally accepted in the United States of America (“GAAP”), but also reflects management’s discretion with regard to choosing the most suitable methodology for reporting the Company’s financial performance. It is management’s opinion that the accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity in the selection process. These estimates affect the reported amounts of assets and liabilities as well as disclosures of revenues and expenses during the reporting period. Actual results could meaningfully differ from these estimates. Management believes that the critical accounting estimates include the allowance for credit losses, actuarial assumptions associated with the pension, post-retirement and other employee benefit plans, the provision for income taxes, investment valuation, the carrying value of goodwill and other intangible assets, and acquired loan valuations. A summary of the accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies”, starting on page 79.
Supplemental Reporting of Non-GAAP Results of Operations
The Company also provides supplemental reporting of its results on an “operating,” “adjusted” or “tangible” basis, from which it excludes the after-tax effect of amortization of core deposit and other intangible assets (and the related goodwill, core deposit intangible and other intangible asset balances, net of applicable deferred tax amounts), accretion on non-impaired purchased loans, expenses associated with acquisitions, acquisition-related provision for credit losses, the unrealized gain (loss) on equity securities, net gain on sale of investments, litigation accrual, the gain (loss) on debt extinguishment a

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, deferred tax. Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation
The following portions of the Proxy Statement are incorporated herein by reference:
•information under the caption “Corporate Governance-Compensation and Benefits Committee-Compensation Committee Interlocks and Insider Participation”;
•information included under the caption “Compensation and Benefits Committee Report”;
•information included under the caption “Compensation Discussion and Analysis”, and
•information included under the caption “Compensation of Directors.”
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 820027_2020.htm (CIK: 820027, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A.
RISK FACTORS
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only risks to the Company. Our business operations or financial condition could be impaired by risks and uncertainties not presently known to the Company, or that the Company's management does not currently consider material. If any of the risks described below were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
The recent COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of operations.
The COVID-19 outbreak, which has been declared a global pandemic, has led to severe disruptions in the market and the global and U.S. economies that may continue for a prolonged duration. In response, various governmental bodies and private enterprises have implemented numerous measures to contain the outbreak, such as travel bans and restrictions, quarantines, shelter-in-place orders, and factory and office shutdowns. These measures and other public and private responses to the outbreak have impacted, and may further impact, our workforce and operations, and those of our customers, partners, vendors and suppliers.
The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the U.S., Singapore, South Korea, and Taiwan. Each of these countries has been affected by the outbreak and has taken measures to try to contain it, and there is considerable uncertainty regarding the impact and duration of such measures and potential future measures. Restrictions on our access to our manufacturing facilities or on our support operations or workforce, similar limitations for our vendors and suppliers, and disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, could limit our capacity to meet customer demand.
Due to the spread of COVID-19, we have modified our business practices, including employee travel restrictions, employee work locations, and cancellation of physical participation in non-critical meetings, events and conferences pursuant to applicable government guidelines. There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19, which could adversely impact our ability to perform critical functions, such as the research and development of new products, the manufacture of product components, the final assembly of our products, and the distribution and sale of our products.
The current outbreak and the efforts to control it have slowed economic activity and may trigger a recession or a period of economic slowdown. Customer demand may be reduced to the extent customers experience shortages of other necessary materials and are forced to slow production of their end products (with a corresponding decline in the rate at which they purchase materials from us), or to the extent our customers experience reduced consumer demand for their end-products as consumers curtail purchases.
The full extent and nature of the impact of the COVID-19 pandemic and related containment measures on our business and financial performance are highly uncertain, as the situation continues to evolve. An extended period of disruption to global supply chain and economic activities due to the pandemic, as well as other factors that are currently unforeseeable, could have a material adverse impact on our ability to access sources of liquidity, as well as our financial condition and results of operations. A prolonged impact of the pandemic also could heighten many of the other risks, such as those relating to disruptions on our operations and our reliance on customers and other third parties, described in this Annual Report on Form 10-K.
Our su

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 743988_2020.htm (CIK: 743988, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk:
Changes in short-term interest rates related to several separate funding sources impact the Company’s earnings. These sources are borrowings under the Accounts Receivable Facility, borrowings under the Senior Credit Facility and short-term bank borrowings by the Company's international subsidiaries. If the market rates for short-term borrowings increased by one-percentage-point around the globe, the impact from our variable rate debt would be an increase in interest expense of $4.6 million annually, with a corresponding decrease in income from continuing operations before income taxes of the same amount. This amount was determined by considering the impact of hypothetical interest rates on the Company’s borrowing cost and year-end debt balances by category.
Foreign Currency Exchange Rate Change Risk:
Fluctuations in the value of the U.S. dollar compared to foreign currencies, including the Euro, also impact the Company’s earnings. The greatest risk relates to products shipped between the Company’s European operations and the United States, as well as intercompany loans between Timken affiliates. Foreign currency forward contracts are used to hedge a portion of these intercompany transactions. Additionally, hedges are used to cover third-party purchases of products and equipment. As of December 31, 2020, there were $173.2 million of hedges in place. A uniform 10% weakening of the U.S. dollar against all currencies would have resulted in a charge of $6.8 million related to these hedges, which would have partially offset the otherwise favorable impact of the underlying currency fluctuation. In addition to the direct impact of the hedged amounts, changes in exchange rates also affect the volume of sales or foreign currency sales price as competitors’ products become more or less attractive.
Commodity Price Risk:
In the ordinary course of business, the Company is exposed to market risk with respect to commodity price fluctuations, primarily related to our purchases of raw materials and energy, principally steel and natural gas. Whenever possible, the Company manages its exposure to commodity risks primarily through the use of supplier pricing agreements that enable the Company to establish the purchase prices for certain inputs that are used in our manufacturing and distribution business.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 98362_2020.htm (CIK: 98362, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate and Market Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had total cash, cash equivalents and short-term investments of $500.7 million. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available-for-sale securities are subject to interest rate risk and will fall in value if market interest rates increase, which could result in a realized loss if we are forced to sell an investment before its scheduled maturity. We currently do not hedge our interest rate risk exposure. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate change in interest rates of 10 basis points would not result in a significant change in the fair market value of our portfolio.
The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term and long-term investments in a variety of securities, including money market funds, U.S. Treasury, government agency and corporate debt obligations, commercial paper and asset-backed securities. These securities are all classified as available-for-sale and consequently are recorded on the balance sheet at fair value, with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss). Our holdings of the securities of any one issuer, except for obligations of the U.S. Treasury, U.S. Treasury-guaranteed securities or money market funds, do not exceed 5% of our portfolio.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1604464_2020.htm (CIK: 1604464, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
The data given below, excluding the store count data, as of and for each of the five years in the period ended January 31, 2020, has been derived from our audited consolidated financial statements. In order to understand the effect of accounting policies and material uncertainties that could affect our presentation of financial information, this data should be read in conjunction with our Consolidated Financial Statements and Notes thereto included under Item 8 to this Form 10-K and in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operation included under Item 7

Explanation: Selected financial data and key metrics. Source: 1409171_2020.htm (CIK: 1409171, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, except share data)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
(a)1,560,000 shares authorized; 768,907 and 767,233 shares issued and outstanding at December 31, 2020 and December 31, 2019.
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF EQUITY
PPL Corporation and Subsidiaries
(Millions of Dollars)
(a)Shares in thousands. Each share entitles the holder to one vote on any question presented at any shareowners' meeting.
(b)Dividends declared per share of common stock at December 31, 2020, 2019 and 2018 were: $1.66, $1.65 and $1.64.
The accompanying Notes to Financial Statements are an integral part of the financial statements.
(THIS PAGE LEFT BLANK INTENTIONALLY.)
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
(a)Net income equals comprehensive income.
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars, shares in thousands)
(a)170,000 shares authorized; 66,368 shares issued and outstanding at December 31, 2020 and December 31, 2019.
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF EQUITY
PPL Electric Utilities Corporation and Subsidiaries
(Millions of Dollars)
(a)Shares in thousands. All common shares of PPL Electric stock are owned by PPL.
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
LG&E and KU Energy LLC and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31,
LG&E and KU Energy LLC and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
LG&E and KU Energy LLC and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Statements are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
LG&E and KU Energy LLC and Subsidiaries
(Millions of Dollars)
The accompanying Notes to Financial Sta

Explanation: Audited financial statements and supplementary data. Source: 60549_2020.htm (CIK: 60549, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in marketable securities. Our marketable securities are subject to interest rate risk and could fall in value if market interest rates increase. However, we believe that our exposure to interest rate risk is not significant as the majority of our investments are short-term in duration and due to the low risk profile of our investments, a 10% change in interest rates would not have a material effect on the total market value of our investment portfolio. We have the ability to hold our marketable securities until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.
As of December 31, 2020, we held $148.1 million in cash, cash equivalents, marketable securities, and restricted cash, all of which was denominated in U.S. dollar assets, and consisting primarily of investments in money market funds, U.S. treasury securities, U.S. government agency securities, and corporate bonds.
We are also exposed to market risk related to changes in foreign currency exchange rates, as a result of entering into transactions denominated in currencies other than U.S. dollars. Due to the uncertain timing of expected payments in foreign currencies, we do not utilize any forward exchange contracts. All foreign transactions settle on the applicable spot exchange basis at the time such payments are made. For the year ended December 31, 2020, a majority of our expenditures were denominated in U.S. dollars. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1636282_2020.htm (CIK: 1636282, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of the Company. You should read this discussion and analysis along with our consolidated financial statements and related notes thereto at April 24, 2020 and April 26, 2019 and for each of the three fiscal years ended April 24, 2020 (fiscal year 2020), April 26, 2019 (fiscal year 2019), and April 27, 2018 (fiscal year 2018), which are presented within "Item 8. Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
Throughout this Management’s Discussion and Analysis, we present certain financial measures that we use to evaluate the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, financial measures presented in accordance with U.S. GAAP. We generally use non-GAAP financial measures to facilitate management's review of the operational performance of the Company and as a basis for strategic planning. We believe that non-GAAP financial measures provide information useful to investors in understanding the Company's underlying operational performance and trends and may facilitate comparisons with the performance of other companies in the medical technologies industry.
As presented in the GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measures exclude the impact of certain charges or benefits that contribute to or reduce earnings and that may affect financial trends, and include certain charges or benefits that result from transactions or events that we believe may or may not recur with similar materiality or impact to our operations in future periods (Non-GAAP Adjustments).
In the event there is a Non-GAAP Adjustment recognized in our operating results, the tax cost or benefit attributable to that item is separately calculated and reported. Because the effective rate can be significantly impacted by the Non-GAAP Adjustments that take place during the period, we often refer to our tax rate using both the effective rate and the non-GAAP nominal tax rate (Non-GAAP Nominal Tax Rate). The Non-GAAP Nominal Tax Rate is calculated as the income tax provision, adjusted for the impact of Non-GAAP Adjustments, as a percentage of income before income taxes, excluding Non-GAAP Adjustments.
Free cash flow is a non-GAAP financial measure calculated by subtracting property, plant, and equipment additions from operating cash flows.
Refer to the “GAAP to Non-GAAP Reconciliations," "Income Taxes," and "Free Cash Flow" sections for reconciliations of the non-GAAP financial measures to their most directly comparable financial measures prepared in accordance with U.S. GAAP.
EXECUTIVE LEVEL OVERVIEW
Medtronic is among the world's largest medical technology, services, and solutions companies - alleviating pain, restoring health, and extending life for millions of people around the world. Our primary products include those for cardiac rhythm disorders, cardiovascular disease, advanced and general surgical care, respiratory and monitoring solutions, renal care, neurological disorders, spinal conditions and musculoskeletal trauma, urological and digestive disorders, and ear, nose, and throat and diabetes conditions.
The global healthcare system is facing an unprecedented challenge as a result of the Covid-19 pandemic ("COVID-19" or the "pandemic"). The Company’s top priority during this pandemic has been to ensure the health and well-being of our more than 90,000 employees and their families around the globe. In addi

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, tax rate, tax provision. Contains regulated financial information subject to SEC disclosure requirements.


Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks, one of the most predominant of which is a change in interest rates. Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable-rate debt. Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced. We attempt to manage interest rate risk by entering into long-term fixed rate debt or by entering into interest rate swaps to convert certain variable-rate debt to a fixed rate. The interest rate swaps have been designated by us as cash flow hedges for accounting purposes and are reported at fair value. We have not entered, and do not intend to enter, into derivative or interest rate transactions for speculative purposes. Further information concerning our interest rate swaps can be found in Note 12 in our Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.
Our fixed-rate debt includes our Senior Notes, mortgages, and variable-rate debt converted to a fixed rate with the use of interest rate swaps. Our fixed-rate debt and outstanding interest rate swaps had carrying values and fair values of approximately $1.4 billion and $1.6 billion, respectively, as of December 31, 2020. Changes in market interest rates impact the fair value of our fixed-rate debt and interest rate swaps, but they have no impact on interest incurred or on cash flows. For instance, if interest rates were to increase 1%, and the fixed-rate debt balance were to remain constant, we would expect the fair value of our debt to decrease, similar to how the price of a bond decreases as interest rates rise. A 1% increase in market interest rates would have resulted in a decrease in the fair value of our fixed-rate debt and interest rate swaps of approximately $79.8 million as of December 31, 2020.
Borrowings pursuant to our Revolving Credit Facility and other variable-rate debt bear interest at rates based on LIBOR plus an applicable margin, and totaled $969.8 million as of December 31, 2020, of which $859.8 million was swapped to a fixed rate by our use of interest rate swaps. Taking into account the effect of our interest rate swaps, a 1% increase or decrease in interest would have a corresponding $1.1 million increase or decrease in interest expense annually.
With the exception of our interest rate swap transactions, we have not engaged in transactions in derivative financial instruments or derivative commodity instruments.
As of December 31, 2020, our financial instruments were not exposed to significant market risk due to foreign currency exchange risk.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1424182_2020.htm (CIK: 1424182, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
We are a Smaller Reporting Company, as defined in Rule 12b-2 of the Exchange Act and, accordingly, have omitted certain information required by Item 11 of this Annual Report as permitted by applicable scaled disclosure rules.
The additional information required by Item 11 of this Annual Report is incorporated herein by reference from our Proxy Statement related to the 2020 Annual Meeting of Stockholders under the headings “EXECUTIVE COMPENSATION - DIRECTOR AND OFFICER COMPENSATION,” “SUMMARY COMPENSATION TABLE,” “DIRECTOR COMPENSATION” and “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END.”
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1644488_2020.htm (CIK: 1644488, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Chipotle Mexican Grill, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Chipotle Mexican Grill, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 9, 2021 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 10 to the consolidated financial statements, the Company changed its method for accounting for leases in 2019.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Valuation and accounting for stock-based compensation
Description of the Matter
The Company incurred $84.5 million in stock-based compensation expense during the year ended December 31, 2020. Approximately 229,000 of the Company’s vested and non-vested stock awards were subject to service and performance

Explanation: Audited financial statements and supplementary data. Source: 1058090_2020.htm (CIK: 1058090, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
This report contains “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are all statements other than statements of historical facts. For additional information, see “Cautionary Statement” in Items 7. And 7A. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk.
We undertake no obligation to update any forward-looking statements. We caution readers that forward-looking statements are not guarantees of future performance and our actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements are described below. Investors should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K. The risks discussed below are not the only risks we face. Other risks or uncertainties not presently known to us, or that we currently believe are immaterial, may materially affect our business if they occur. Moreover, new risks emerge from time to time. Further, our business may also be affected by additional factors that generally apply to all companies operating in the U.S. and globally, which have not been included.
Risks Relating to the COVID-19 Pandemic
The COVID-19 pandemic has had a significant adverse impact on our business, which is likely to continue with unknown severity and for an unknown period of time.
The COVID-19 pandemic has had a significant adverse impact on our business, financial condition, results of operations, liquidity and stock price. The COVID-19 pandemic is complex and continuously evolving, with federal, state and local governments, and other organizations imposing or recommending, and businesses and individuals implementing, a variety of restrictions on activities in order to combat its spread. These restrictions have included stay-at-home orders, bans on travel, limitations on the size of gatherings, limitations on the operations of businesses, closures of work facilities, schools, public buildings and businesses, cancellation of events, quarantines and social distancing measures. State and local governments have implemented phased reopening processes, often with reduced capacity and social distancing restrictions. During 2020, there were declines followed by resurgences of COVID-19 cases throughout the U.S., and cases generally rose during the fourth quarter. Authorities have reacted to these resurgences by deferring the phasing out of restrictions and, in some instances, re-imposing restrictions. In December 2020, the first COVID-19 vaccines were approved for use in the U.S., and the early stages of distribution of the vaccine are in process as of the date of this report. Recently, variants of the virus that causes COVID-19 have been identified in the U.S. and elsewhere, and information about them is rapidly emerging, including how easily they might spread, whether they could cause more severe illness, and whether currently authorized vaccines will protect against them. Even if there is ultimately widespread distribution and acceptance of these vaccines, their long-term efficacy is unknown.
The pandemic has caused a sharp global slowdown of economic activity resulting in a recession in the U.S., a steep increase in unemployment in the U.S. and significant volatility and disruption of financial markets. The pandemic had a significant adverse impact on our company during 2020, particularly in our hotel and entertainment businesses, and is expected to continue to adversely impact our company in 2021. Because the pandemic is unprecedented in recent history, we cannot predict its future impact on our company with any certainty. In addition to the pandemic-related risks discussed below, we

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 885508_2020.htm (CIK: 885508, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors.
Risk Factor Summary
We are providing the following summary of the risk factors contained in our Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage our stockholders to carefully review the full risk factors contained in this Form 10-K in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from recent results or from our anticipated future results.
Risks related to our business and operations
•
We may not be successful in our efforts to grow;
•
Our newly opened stores may negatively impact our financial results in the short-term, and may not achieve sales and operating levels consistent with our more mature stores on a timely basis or at all;
•
If we are unable to successfully identify market trends and react to changing consumer preferences in a timely manner, our sales may decrease;
•
Our store sales growth and quarterly financial performance may fluctuate for a variety of reasons;
•
Adverse economic conditions and political instability could adversely affect our business, results of operations and financial condition and could negatively impact our ability to execute our growth strategy;
•
The ongoing COVID-19 pandemic has impacted our operations and this or other future pandemics could materially impact our business, results of operations and financial condition;
•
We may be unable to compete effectively in our markets, which are highly competitive;
•
An inability to maintain or increase our operating margins could adversely affect our results of operations;
•
A reduction in traffic to anchor stores in the shopping areas in close proximity to our stores could significantly reduce our sales and leave us with unsold inventory, which could have a material adverse effect on our business, financial condition and results of operations;
•
We may experience product recalls, withdrawals or seizures which could reduce our sales and adversely affect our results of operations;
•
Our future business, results of operations and financial condition may be adversely affected by reduced availability of certified organic products or products that meet our other internal standards;
•
Disruptions affecting our significant suppliers, or our relationships with such suppliers, could negatively affect our business;
•
Adverse weather conditions, natural disasters and the effects of climate change could disrupt our supply chain and adversely impact our sales and financial performance;
•
Acts of violence at or threatened against our stores or the shopping centers in which they are located, including active shooter situations and terrorist acts, could adversely impact our sales, which could materially adversely affect our financial performance;
•
The current geographic concentration of our stores creates exposure to local economies, regional downturns, severe weather and other catastrophic occurrences;
•
If we fail to maintain our reputation and the value of our brand, our sales may decline;
•
Perishable food product losses could materially impact our results of operations;
•
The decision by certain of our suppliers to distribute their specialty products through other retail distribution channels could negatively impact our revenue from the sale of such products;
•
Our ability to operate our business effectively could be impaired if we fail to retain or attract key personnel or are unable to attract, train and retain qualified employees;
•
Any significant interruption in the operations of our bulk food repackaging facility and distribution center or our supply chain network could disrupt our ability to deliver our merchandise in a timely manner;
•
Higher wage and benefit costs could adversely affect our business;
•
Union activity at third-party transportation companies or labor organizing activities among our Crew members could disrupt our operations and harm our business;
•
Future events could result

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1547459_2020.htm (CIK: 1547459, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and schedules that constitute Item 8 are attached at the end of this report. An index to the Consolidated Financial Statements and supplemental schedules are also included on page of this report.
ITEM 9A.

Explanation: Audited financial statements and supplementary data. Source: 1092662_2020.htm (CIK: 1092662, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to our consolidated financial statements beginning on page of this report.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1161582_2020.htm (CIK: 1161582, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Our business is subject to numerous risks. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s discussion and analysis of financial condition and results of operations,” and in our other filings with the Securities and Exchange Commission. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks related to our financial condition and capital requirements
We have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.
We are a clinical-stage biopharmaceutical company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception in 2013. For the years ended December 31, 2020 and 2019, we reported net losses of $167.7 million and $163.5 million, respectively. As of December 31, 2020, we had an accumulated deficit of $480.5 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates. We anticipate that our expenses will increase substantially if, and as, we:
●conduct clinical trials for our product candidates and if we experience any delays, setbacks or disruptions to our preclinical studies, clinical trials or our clinical supply due to the COVID-19 pandemic;
●further develop our RED PLATFORM;
●continue to discover and develop additional product candidates;
●maintain, expand and protect our intellectual property portfolio;
●hire additional clinical, scientific, manufacturing and commercial personnel;
●expand in-house manufacturing capabilities, including through the renovation, customization and operation of our manufacturing facility purchased in 2018;
●establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;
●acquire or in-license other product candidates and technologies;
●seek regulatory approvals for any product candidates that successfully complete clinical trials;
●establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and
●add operational, regulatory, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as any additional infrastructure necessary to function as a public company.
To become and remain profitable, we or any potential future collaborator must develop and eventually commercialize products with significant market potential at an adequate profit margin after cost of goods sold and other expenses. This will require us to be successful in a range of challenging activities, including completing preclinical stu

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1709401_2020.htm (CIK: 1709401, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A.RISK FACTORS
Below are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties summarized and described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to our business, operating results, prospects, and financial condition. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.
Risk Factors Summary
Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to:
Risks related to our business and properties
•Our inability to find suitable investments or achieve our investment objectives;
•The impact of the COVID-19 pandemic on our business;
•The impact of economic and political conditions on the creditworthiness of our tenants, and occupancy and market rental rates;
•Changes in general economic conditions and regulatory matters germane to the real estate industry, which may cause our operating results to suffer and property values to decline;
•Risks associated with property development or redevelopment;
•Our dependence on the economic environment of our primary markets;
•The negative effect of lease defaults or terminations, particularly by a significant tenant, on our financial condition and results of operations;
•The failure of future acquisitions to perform in accordance with our expectations and exposure to unknown liabilities as a result;
•The physical effects of climate change;
•Risks associated with uninsured real property losses or excessively expensive insurance premiums and potential defaults of our insurance providers;
•Actual or threatened terrorist attacks, armed hostilities, or contagious disease epidemics;
•Our inability to fund the future capital needs of our properties;
•Our inability to protect our systems and data from cyber incidents or a deficiency in our cybersecurity;
•The financial impact of compliance costs relating to various governmental laws and regulations;
•The possible discovery of previously undetected environmentally hazardous conditions;
•Risks associated with property ownership through joint ventures;
•Our ability to recruit, retain, and develop qualified personnel and dependence on our executive officers;
•The possibility of impairment of a real estate assets;
•The risks associated with our investment advisory business;
Risks related to our indebtedness
•The effects of our significant indebtedness, which may increase our business risks;
•The possibility of interest rate increases;
•Risks associated with the phasing out of LIBOR and changes in the methods in which LIBOR rates are determined;
•The possibility of a downgrade in the credit rating of our debt;
Federal income tax risks
•The impact of our failure to qualify as a REIT;
•The failure of Columbia OP to be treated as a disregarded entity or a partnership;
•The effect of legislation that modifies partnership tax audit rules on our business;
•The possibility of being forced to borrow funds or dispose of assets during unfavorable conditions to make distributions to our stockholders and maintain our REIT status;
•The possibility of being forced to forego otherwise attractive opportunities to maintain our REIT status;
•The impact of adverse state or local tax audits and changes in state and local tax laws on our financial condition;
General risks
•Our inability to pay or maintain cash distributions or increase distributions over time;
•The impact of volatility or decline of our stock price;
•The potentially dilutive effects of further issuances of equity securities;
•Provisions in our organizational documents limiting the number of shares a person may own or discouraging a takeover of us;
•Certain protections by Maryland General Corporation Law relating to deterring or defending hostile takeovers;

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, tax law. Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11 - EXECUTIVE COMPENSATION
The particulars of compensation paid to the following persons:
(a)all individuals serving as our principal executive officer during the year ended December 31, 2020;
(b)each of our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2020 who had total compensation exceeding $100,000; and
(c)up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at December 31, 2020,
who we will collectively refer to as the named executive officers, for the years ended December 31, 2020, 2019 and 2018, are set out in the following summary compensation table:
Summary Compensation
The following table provides a summary of the compensation received by the persons set out therein for each of our last three fiscal years:
(1)Mr. Martin was appointed President, Chief Executive Officer, and Chief Financial Officer on September 30, 2014.
(2)All $96,000 owed to Mr. Martin was accrued in 2020.
(3)Ms. Breen was appointed Secretary and Treasurer on September 30, 2014.
(4)Ms. Breen was paid $24,000 in 2020 with the remaining $54,000 accrued.
Employment Contracts
In 2014 and 2016 we entered into employment agreements with Glenn E. Martin, our Chief Executive Officer and Chief Financial Officer, Nicole Breen, our Secretary and Treasurer and Ryan Breen, our Vice President and Social Media Officer.
Under the terms of our agreement with Mr. Martin dated October 1, 2016, he serves as our President and Chief Executive Officer. The agreement was for a two-year term and Mr. Martin received Seven Million (7,000,000) shares of our common stock, restricted in accordance with Rule 144, and was to receive Seven Million (7,000,000) additional shares as his annual salary for agreeing to serve as our President and Chief Executive Officer. Additionally, Mr. Martin was entitled to One Million (1,000,000) shares of a yet-to-be-created class of Series B Preferred Stock if we regained “fully-reporting” status with the Securities and Exchange Commission. We are obligated to maintain and pay the premiums for “key man” life insurance in the amount of $1,000,000. Our agreement with Mr. Martin also contained various provisions related to his termination without cause and in the event we undergo a change of control transaction. To date, no “key man” insurance has been obtained.
On January 23, 2018, our Board of Directors agreed to enter into an Amended and Restated Employment Agreement with Glenn E. Martin. Under the new agreement, Mr. Martin will serve as our President and Chief Executive Officer for a five (5) year term in exchange for a base salary of $1,500 per week, which will be increased to $120,000 annually in the event we raise an aggregate of $2,000,000 during the term of the agreement. The agreement went effective beginning February 1, 2018. Additionally, we agreed to grant Mr. Martin One Million (1,000,000) shares of our restricted common stock on February 1, 2018 pursuant to the terms of a Restricted Stock Agreement, with the shares subject to certain restrictions on transfer which expire on 33% of the shares on February 1, 2019, 66% of the shares on February 1, 2020 and 100% of the shares on February 1, 2021. We also agreed to issue Mr. Martin a Non-Qualified Stock Option on February 1, 2018 to purchase up to Four Million (4,000,000) shares of our common stock at $10.55 per share, with the options vesting 33 1/3% on August 1, 2018, 33 1/3% on February 1, 2019 and 33 1/3rd % on February 1, 2020. The options expire ten years from the date of grant. As a result of the Amended and Restated Employment Agreement with Mr. Martin, he is no longer entitled to the Seven Million (7,000,000) shares of our common stock as annual salary, or the One Million (1,000,000) shares of a yet-to-be-created class of Series B Preferred Stock if we become fully-re

Explanation: Executive compensation disclosures with financial details. Source: 1393772_2020.htm (CIK: 1393772, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
PAGE
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders’ Equity
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Luminex Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Luminex Corporation (the Company) as of December 31, 2020 and 2019, the related consolidated statement of comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenues with variable considerations
Description of the matterAs described in Note 1 to the consolidated financial statements, revenues from product sales typica

Explanation: Audited financial statements and supplementary data. Source: 1033905_2020.htm (CIK: 1033905, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data

(1) The 52 weeks ended August 29, 2020 was negatively impacted by the charges for additional Emergency-Time Off ("ETO") benefit enhancement for eligible part-time and full-time hourly employees and other expenses in response to COVID-19 of $83.9 million (pre-tax), recognized in the third and fourth quarters.
(2) The fiscal year ended August 31, 2019 consisted of 53 weeks.
(3) Fiscal 2018 was negatively impacted by pension termination charges of $130.3 million (pre-tax) recognized in the fourth quarter and asset impairments of $193.2 million (pre-tax) recognized in the second quarter of fiscal 2018. See “Note L - Pension and Savings Plans” and “Note M - Sale of Assets” of the Notes to Consolidated Financial Statements for more information. Fiscal 2018 also includes a benefit to net income related to the Tax Cuts and Jobs Act (“Tax Reform”). See “Note D - Income Taxes” of the Notes to Consolidated Financial Statements for more information.
(4) Fiscal 2020, 2019, 2018 and 2017 include excess tax benefits from stock option exercises of $20.9 million, $46.0 million, $31.3 million and $31.2 million, respectively, related to the adoption of Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The Company adopted ASU 2016-09 effective August 28, 2016 and applied the recognition of excess tax deficiencies and tax benefits in the income statement on a prospective basis. Income tax expense, net income and diluted earnings per share amounts presented for prior periods were not restated. The Company applied ASU 2016-09 relating to the presentation of the excess tax benefits on the Consolidated Statements of Cash Flows retrospectively. Prior period amounts for net cash provided by operating activities for all years presented above were restated to conform to the current period presentation.
(5) The domestic comparable sales increases are based on sales for all AutoZone domestic stores open at least one year. Same store sales are computed on a 52-week basis. Relocated stores are included in the same store sales computation based on the year the original store was opened. Closed store sales are included in the same store sales computation up to the week it closes, and excluded from the computation for all periods subsequent to closing. All sales through our www.autozone.com website, including consumer direct ship-to-home sales, are also included in the computation.
(6) The Company adopted ASU 2016-02, Leases (Topic 842), beginning with its first quarter ended November 23, 2019 which resulted in the Company recognizing a right-of-use asset (“ROU asset”) and a corresponding lease liability on the balance sheet. See “Note A - Significant Accounting Policies”.
(7) 26 IMC branches were sold on April 4, 2018. See “Note M - Sale of Assets” of the Notes to Consolidated Financial Statements for more information.
(8) Inventory turnover is calculated as cost of sales divided by the average merchandise inventory balance over the trailing 5 quarters.
(9) After-tax return on invested capital is defined as after-tax operating profit (excluding rent charges) divided by invested capital (which includes a factor to capitalize leases). For fiscal 2020, average debt is presented net of excess cash of $374.2 million. For fiscal 2019, after-tax operating profit was adjusted for the impact of the average revaluation of deferred tax liabilities, net of repatriation tax. For fiscal 2018, after-tax operating profit was adjusted for impairment charges, pension termination charges and the impact of the revaluation of deferred tax liabilities, net of repatriation tax. See Reconciliation of Non-GAAP Financial Measures in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(10) Adjusted debt to EBITDAR is defined as the sum of total debt, finance lease obligations and annual rents times six; divided by net incom

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, tax expense, deferred tax, tax benefit. Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is based on, and should be read in conjunction with, the consolidated financial statements and the related notes thereto of the City Office REIT, Inc. for the years ended December 31, 2020 and December 31, 2019.
As used in this section, unless the context otherwise requires, references to “we,” “our,” “us,” and “our company” refer to City Office REIT, Inc., a Maryland corporation, together with our consolidated subsidiaries, including City Office REIT Operating Partnership L.P., a Maryland limited partnership of which we are the sole general partner and which we refer to in this section as our Operating Partnership, except where it is clear from the context that the term only means City Office REIT, Inc.
This management’s discussion and analysis of financial condition and results of operations (this “MD&A”) contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with those statements. Our actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including, but not limited to, those in “Risk Factors” and included in other portions of this document.
You should read the following MD&A in conjunction with the historical consolidated financial statements, and notes thereto, included elsewhere in this Report. We have omitted from this MD&A a detailed discussion of the year-over-year changes from the Company’s fiscal year 2018 as compared to fiscal year 2019, which can be found in the MD&A section in the Company’s annual report on Form 10-K
for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission on February 26, 2020.
Overview
Company
We were formed as a Maryland corporation on November 26, 2013. On April 21, 2014, we completed our initial public offering (“IPO”) of shares of common stock. We contributed the net proceeds of the IPO to our Operating Partnership in exchange for common units in our Operating Partnership. Both we and our Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions.
The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of common units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the Operating Partnership’s partnership agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners.
The Company has elected to be taxed and will continue to operate in a manner that will allow it to qualify as a REIT under the Code. Subject to qualification as a REIT, the Company will be permitted to deduct dividend distributions paid to its stockholders, eliminating the U.S. federal taxation of income represented by such distributions at the Company level. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal and state income tax on its taxable income at regular corporate tax rates and any applicable alternative minimum tax.
During the year ended December 31, 2020, the Company completed the repurchase of 11,363,851 shares of its common stock for approximately $100.0 million.
On July 23, 2020, the Company sold a land parcel at the Circle Point property in Denver, Colorado for $6.5 million, resulting in an aggregate gain of $1.3 million net of disposal-related costs and taxes paid by our taxable REIT subsidiary, which has been classified as net g

Explanation: SEC 10-K filing section containing tax-related disclosures. Tax references found: income tax, tax rate. Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
You should carefully consider the risks described below, together with all of the other information included in this Form 10-K, in considering our business and prospects. Set forth below and elsewhere in this Form 10-K and in other documents we file with the SEC are descriptions of certain risks, uncertainties, and other factors that could cause our actual results to differ materially from those anticipated. If any of the following risks, other unknown risks, or risks that we think are immaterial occur, our business, financial condition, results of operations, cash flows, or growth prospects could be adversely impacted, which could result in a complete loss on your investment.
Risks Relating to Our Financial Position, Our Need for Additional Capital, and Our Business
We anticipate that we will incur losses for the foreseeable future and we may never sustain profitability.
We may not generate the cash that is necessary to finance our operations in the foreseeable future. We incurred net losses of $111.1 million, $77.7 million and $155.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. We expect to continue to incur substantial losses for the foreseeable future as we:
•support the Phase 3 AFFIRM-AL clinical trial for birtamimab expected to commence in 2021, the Phase 2 PASADENA clinical trial for prasinezumab (PRX002/RG7935) being conducted by Roche, the Phase 2b clinical trial for prasinezumab expected to commence in 2021, the Phase 2/3 clinical trial for PRX004 expected to commence in 2021, the Phase 1 clinical trial for PRX005 expected to commence in 2021, the Phase 1 clinical trial for PRX012 expected to commence in 2022, and possibly initiate additional clinical trials for these and other programs;
•develop and possibly commercialize our drug candidates, including birtamimab, prasinezumab, PRX004, PRX005, and PRX012;
•undertake nonclinical development of other drug candidates and initiate clinical trials, if supported by nonclinical data;
•pursue our early stage research and seek to identify additional drug candidates; and
•potentially acquire rights from third parties to drug candidates or technologies through licenses, acquisitions, or other means.
We must generate significant revenue to achieve and maintain profitability. Even if we succeed in discovering, developing, and commercializing one or more drug candidates, we may not be able to generate sufficient revenue and we may never be able to achieve or sustain profitability.
We will require additional capital to fund our operations, and if we are unable to obtain such capital, we will be unable to successfully develop and commercialize drug candidates.
As of December 31, 2020, we had cash and cash equivalents of $295.4 million. Although we believe, based on our current business plans, that our existing cash and cash equivalents will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in order to continue the research and development, and eventual commercialization, of our drug candidates. Our future capital requirements will depend on many factors that are currently unknown to us, including, without limitation:
•the timing of progress, results and costs of our clinical trials, including the Phase 3 clinical trial for birtamimab expected to commence in 2021, the Phase 2 clinical trial for prasinezumab, the Phase 2b clinical trial for prasinezumab expected to commence in 2021, the Phase 2/3 clinical trial for PRX004 expected to commence in 2021, the Phase 1 clinical trial for PRX005 expected to commence in 2021, and the Phase 1 clinical trial for PRX012 expected to commence in 2022;
•the timing, initiation, progress, results, and costs of these and our other research, development, and possible commercialization activities;
•the results of our research and nonclinical and clinical studies;
•the costs of manufacturing our drug candidates for clinica

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1559053_2020.htm (CIK: 1559053, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6.
Selected Financial Data.
Information required by this Item 6. is not included as we are electing to exclude this information pursuant to Regulation S-K Item 301, as amended.
For financial data and discussion of our results of operations and financial position, refer to Part II, Item 7.

Explanation: Selected financial data and key metrics. Source: 1720990_2020.htm (CIK: 1720990, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
Disclosure in response to this item is not required of a smaller reporting company.
ITEM 1B.

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1516805_2020.htm (CIK: 1516805, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks, primarily related to interest rates and foreign currency exchange rates.
Interest Rates - Our financial instruments potentially subject to interest rate risk include commercial paper and floating rate borrowings under our Credit Facilities. Our $1,250 million Credit Facility and $500 million 364-Day Facility were undrawn as of December 31, 2020.
Foreign Currency - We currently have, and in the future may enter into, foreign currency forward contracts to manage foreign currency exchange rate risk related to payments to suppliers denominated in foreign currencies. As of December 31, 2020, the fair values of our outstanding foreign currency forward contracts were not significant.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1501585_2020.htm (CIK: 1501585, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains forward-looking statements, including, without limitation, our expectations and statements regarding our outlook and future revenues, expenses, results of operations, liquidity, plans, strategies and objectives of management and any assumptions underlying any of the foregoing. Our actual results may differ significantly from those projected in the forward-looking statements. Our forward-looking statements and factors that might cause future actual results to differ materially from our recent results or those projected in the forward-looking statements include, but are not limited to, those discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” of this Annual Report on Form 10-K. Except as required by law, we assume no obligation to update the forward-looking statements or our risk factors for any reason.
Management Overview
We have been focused on implementing a multi-pronged platform for growth within the non-discretionary automotive aftermarket for the replacement parts and diagnostic testing industry, through organic growth and acquisitions. Our investments in infrastructure and human resources, including the consolidation of our distribution center in Mexico and the significant expansion of manufacturing capacity, are expected to be transformative and scalable. As a result, gross profit and net income have been impacted, and our future performance and opportunities should be considered with these factors in mind.
New products introduced through our growth strategies noted above include: (i) turbochargers through an acquisition in July 2016; (ii) brake power boosters in August 2016; (iii) the design and manufacture of diagnostics systems for alternators, starters, belt-start generators (stop start and hybrid technology), and electric power trains for electric vehicles through an acquisition in July 2017; (iv) the design and manufacture of advanced power emulators (AC and DC) and custom power electronic products for the automotive and aerospace industries through an acquisition in December 2018; (v) alternators and starters for medium and heavy duty trucks, industrial equipment, farm and agriculture, transit and emergency service vehicles, and marine applications through an acquisition in January 2019; and (vi) the addition of brake calipers in August 2019.
Impact of the Novel Coronavirus (“COVID-19”)
In March 2020, the WHO declared the outbreak of COVID-19 as a pandemic, which has spread globally and created significant volatility, uncertainty and economic disruption in many countries, including the countries in which we operate. National, state and local governments in these countries have implemented a variety of measures in response to the COVID-19 pandemic that have the effect of restricting or limiting, among other activities, the operations of certain businesses.
Our business has continued to operate as we have been declared an essential business. We believe that the effects of the COVID-19 pandemic did not materially impact our financial results for the fourth quarter of fiscal 2020; however, the effects of the pandemic on our financial results for the first quarter of fiscal 2021 and other future periods could be significant and cannot currently be reasonably estimated due to the significant volatility, uncertainty and economic disruption caused by the pandemic. See Item 1A “Risk Factors” of this Form 10-K for further discussion of the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition.
In response to the COVID-19 pandemic, we have established a committee, comprised of our executive officers, to oversee our risk identification, management and mitigation strategies regarding the impact of the pandemic on our business and operations. Among other significant risks that are actively being ma

Explanation: Management Discussion and Analysis section with financial performance data. Source: 918251_2020.htm (CIK: 918251, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations and foreign currency exchange rate fluctuations.
Interest rate sensitivity
We are exposed to market risk related to changes in interest rates as it impacts our interest income.
Cash, cash equivalents and cash reserve account. At March 31, 2020, we had cash and cash equivalents of $120.8 million and we also held $9.0 million of restricted cash. Our exposure to market risk includes interest income sensitivity, which is impacted by changes in the general level of U.S. and European interest rates. Our cash and cash equivalents and the cash reserve account are held in interest-bearing savings accounts and bank accounts. We do not enter into investments for trading or speculative purposes. Due to the current levels of interest rates, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our holdings, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.
Secured Notes. At March 31, 2020, we had term debt of $145.0 million outstanding under the Secured Notes. The Secured Notes are fixed-rate instruments and, as a result, a change in market interest rates has no impact on our interest expense incurred or cash flows.
Foreign currency exchange risk
The main currencies that we use for our trading operations are the U.S. Dollar, the Pound Sterling, the Swiss Franc and to a lesser extent, the Euro. Our meaningful cash balances are held in a mixture of U.S. Dollars, Euros, Pounds Sterling and Swiss Francs. These cash balances may not be the same as the functional currencies of the Quotient entities in which they are held and as a result, exchange rate fluctuations may result in foreign exchange gains and losses on our income statement.
We are subject to market risks arising from changes in foreign currency exchange rates between the U.S. Dollar and the Pound Sterling and the U.S. Dollar and the Swiss Franc. Accordingly, fluctuations in the U.S. Dollar versus Pounds Sterling and the U.S. Dollar versus the Swiss Franc exchange rate give rise to exchange gains and losses. These gains and losses arise from the conversion of U.S. Dollars and Euros to Pounds Sterling and the retranslation of cash, accounts receivable, intercompany indebtedness and other asset and liability balances. Based on our assets and liabilities held in Pounds Sterling at March 31, 2020, we estimate that a 5% strengthening of the Pound Sterling against the U.S. Dollar would give rise to a gain of approximately $0.5 million and a 5% weakening of the Pound Sterling against the U.S. Dollar would give rise to loss of approximately $0.5 million. Based on our assets and liabilities held in Swiss Francs at March 31, 2020, we estimate that a 5% strengthening of the Swiss Franc against the U.S. Dollar would give rise to a gain of approximately $1.3 million and a 5% weakening of the Swiss Franc against the U.S. Dollar would give rise to loss of approximately $1.3 million.
Most of our revenues are earned in U.S. Dollars, but the costs of our conventional reagent manufacturing operations are payable mainly in Pounds Sterling. We therefore closely monitor the results of our UK operations to address this difference. During the year ended March 31, 2020, the net operating expenses arising in Pounds Sterling from our UK conventional reagent manufacturing operations amounted to approximately $36.2 million. This expenditure is offset by revenues arising in U.S. Dollars and other currencies. We have entered into forward contracts to hedge against the effects of fluctuations in the U.S. Dollar versus the Pounds Sterling exchange rate. The principal value of the hedges related to the results of fiscal year 2021 is $6.0 million and,

Explanation: Quantitative and qualitative market risk disclosures. Source: 1596946_2020.htm (CIK: 1596946, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data.
The following table sets forth selected financial data as of and for the years ended December 31, 2020, 2019, 2018, 2017 and 2016. We derived the selected financial data from our consolidated financial statements for those periods included in this annual report on Form 10-K or our prior annual reports on Form 10-K. We have reclassified certain amounts in our historical audited consolidated financial statements, including amounts related to assets and liabilities reclassified as held-for-sale during these periods. These reclassifications had no effect on our reported net income (loss).
You should read the selected financial data in this table together with, and such selected financial data is qualified by reference to, our consolidated financial statements and the notes to those restated consolidated financial statements in Item 8 of this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7

Explanation: Selected financial data and key metrics. Source: 1295401_2020.htm (CIK: 1295401, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Equity Risk
We have exposure to equity risk with respect to the equity investments that we hold in Arcturus and Solid. The carrying value of our equity investment held in Arcturus was $95.4 million and $27.8 million as of December 31, 2020 and 2019, respectively, and the carrying value of our equity investment held in Solid was $59.3 million as of December 31, 2020. If the Arcturus or Solid stock price had been lower at December 31, 2020 compared to December 31, 2019, we would have reported an even greater net loss for the year ended December 31, 2020. A hypothetical 10 percent decrease in the market price for our equity investments as of December 31, 2020 and 2019 would decrease the fair value by $15.5 million and $2.7 million, respectively. Given the historic volatility of the publicly traded stock price of Arcturus and Solid, the fair value of our investments in Arcturus and Solid is subject to wide fluctuations which may have a significant impact on our net income (loss) in future periods.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to interest earned on our cash equivalents and marketable debt securities. The primary objective of our investment activities is to preserve our capital to fund operations. A secondary objective is to maximize income from our investments without assuming significant risk. Our investment policy provides for investments in low-risk, investment-grade debt instruments. As of December 31, 2020 and 2019, we had cash, cash equivalents, and marketable debt securities totaling $1,212.0 million and $760.4 million, respectively, which include bank deposits, money market funds, U.S. government treasury and agency securities, and investment-grade corporate bond securities which are subject to default, changes in credit rating, and changes in market value. The securities in our investment portfolio are classified as available for sale and are subject to interest rate risk and will decrease in value if market interest rates increase. Due to the COVID-19 pandemic and the reduction of rates by the U.S. Federal Reserve, we expect that the interest yield on our investments may continue to decrease. A hypothetical 100 basis point change in interest rates during any of the periods presented would not have had a material impact on the fair market value of our cash equivalents and marketable debt securities as of December 31, 2020 and 2019. To date, we have not experienced a loss of principal on any of our investments and as of December 31, 2020, we did not record any allowance for credit loss from our investments.
Foreign Currency Risk
We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars. Due to the uncertain timing of expected payments in foreign currencies, we do not utilize any forward exchange contracts. All foreign transactions settle on the applicable spot exchange basis at the time such payments are made. Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our revenue and operating income as expressed in U.S. dollars. An adverse movement in foreign exchange rates could have a material effect on payments made to foreign suppliers and for license agreements. For the year ended December 31, 2020, a majority of our revenue and expense activities and capital expenditures were denominated in U.S. dollars. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1515673_2020.htm (CIK: 1515673, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7.
Management
’
s Discussion and Analysis o
f Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part I, Item 1A,
Risk Factors; Part II, Item 6,
Selected Financial Data; and our consolidated financial statements and related notes, each included elsewhere in this Annual Report on Form 10-K.
This section of this Annual Report on Form 10-K
generally discusses 2020 and 2019 items and year-over-year comparisons between 2020 and 2019. Discussions of 2018 items and year-over-year comparisons between 2019 and 2018 that are not included in this Annual Report on Form 10-K
can be found in Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K
for the year ended December 31, 2019, or the 2019 10-K.
Overview
We are a global nutrition company that sells weight management, targeted nutrition, energy, sports, and fitness, and outer nutrition products to and through independent members, or Members. In China, we sell our products to and through independent service providers and sales representatives to customers and preferred customers, as well as through Company-operated retail platforms when necessary. We refer to Members that distribute our products and achieve certain qualification requirements as “sales leaders.”
We provide high-quality, science-backed products to Members and their customers who seek a healthy lifestyle and we also offer a business opportunity to those Members who seek additional income. We believe enhanced consumer awareness and demand for our products due to global trends such as the obesity epidemic, increasing interest in a fit and active lifestyle, living healthier and the rise of entrepreneurship, coupled with the effectiveness of personalized selling through a direct sales channel, have been the primary reasons for our continued success.
Our products are grouped in four principal categories: weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition, along with literature, promotional, and other items. Our products are often sold through a series of related products and literature designed to simplify weight management and nutrition for consumers and maximize our Members’ cross-selling opportunities.
While we continue to monitor the current global financial environment and the impacts of the COVID-19 pandemic, we remain focused on the opportunities and challenges in retailing our products and enhancing the customer experience, sponsoring and retaining Members, improving Member productivity, further penetrating
existing markets, globalizing successful Daily Methods of Operation, or DMOs, such as Nutrition Clubs, Fit Clubs, and Weight Loss Challenges, introducing new products and globalizing existing products, developing niche market segments and further investing in our infrastructure.
We sell our products in six geographic regions:
•
North America;
•
Mexico;
•
South and Central America;
•
EMEA, which consists of Europe, the Middle East, and Africa;
•
Asia Pacific (excluding China); and
•
China.
On July 15, 2016, we reached a settlement with the FTC and entered into the Consent Order, which resolved the FTC’s multi-year investigation of the Company. We continue to monitor the impact of the Consent Order and our board of directors established the Implementation Oversight Committee in connection with the Consent Order, and more recently, our Audit Committee assumed oversight of continued compliance with the Consent Order. The Implementation Oversight Committee had met regularly with management to oversee our compliance with the terms of the Consent Order. While we currently do not expect the settlement to have a long-term and materially adverse impact on our business and our Member base, our business and our Member base, particularly in the U.S., may be negatively impacted. The terms o

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1180262_2020.htm (CIK: 1180262, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
In your evaluation of our company and business, you should carefully consider the risks and uncertainties described below, together with information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties facing us. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed and the price of our stock could decline. Our business is also subject to general risks and uncertainties that affect many other companies, such as our ability to collect receivables, overall U.S. and global economic and industry conditions, geopolitical events, changes in laws or accounting rules, fluctuations in interest and exchange rates, terrorism, international conflicts, major health concerns, climate change or other disruptions of expected economic and business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially harm our business, financial condition or operating results and result in a decline in the price of our stock.
Risks Relating to Our Business
We depend on government agencies as our primary customers and if our reputation or relationships with these agencies were harmed, our future revenues and growth prospects would be adversely affected.
We generated 87%, 85% and 84% of our total revenues during fiscal 2019, 2018 and 2017, respectively, from contracts with the U.S. government (including all branches of the U.S. military), either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government. We generated more than 10% of our total revenues during fiscal 2019, 2018 and 2017 from the U.S. Army. We expect to continue to derive most of our revenues from work performed under U.S. government contracts. Our reputation and relationship with the U.S. government, and in particular with the agencies of the DoD and the U.S. Intelligence Community, are key factors in maintaining and growing our revenues. Negative press reports or publicity, which could pertain to employee or subcontractor misconduct; conflicts of interest; poor contract performance; deficiencies in services, reports, products or other deliverables; information security breaches or other aspects of our business, regardless of accuracy, could harm our reputation, particularly with these agencies. If our reputation is negatively affected, or if we are suspended or debarred from contracting with government agencies for any reason, the amount of business with government and other customers would decrease and our future revenues and growth prospects would be adversely affected.
A decline in the U.S. government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects.
Revenues under contracts with the DoD and U.S. Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 48% of our total revenues for fiscal 2019, 2018 and 2017. Levels of U.S. government and DoD spending are difficult to predict and subject to significant risk. Our operating results could be adversely affected by spending caps or changes in the budgetary priorities of the U.S. government or the DoD, as well as delays in program starts or the award of contracts or task orders under contracts. Current U.S. government spending levels for defense-related or other programs may not be sustained and future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts. Such changes in spending authorizations and budgetary priorities may occur as a result of

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1336920_2020.htm (CIK: 1336920, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation of key executives during the last two complete fiscal years. No other officers or directors received annual compensation in excess of $100,000 during the last two complete fiscal years.
LONG-TERM INCENTIVE PLANS
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
DIRECTORS COMPENSATION
We reimburse our directors for expenses incurred in connection with attending board meetings. We have no present formal plan for compensating our directors for their service in their capacity as directors, although in the future, such directors are expected to receive compensation and options to purchase shares of common stock as awarded by our board of directors or (as to future options) a compensation committee which may be established in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. Other than indicated in this annual report, no director received and/or accrued any compensation for his or her services as a director, including committee participation and/or special assignments.
REPORT ON EXECUTIVE COMPENSATION
Our compensation program for our executive officers is administered and reviewed by our board of directors. Historically, executive compensation consists of a combination of base salary and bonuses. Individual compensation levels are designed to reflect individual responsibilities, performance, and experience, as well as the performance of our company. The determination of discretionary bonuses is based on various factors, including implementation of our business plan, acquisition of assets, development of corporate opportunities and completion of financing.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1165639_2020.htm (CIK: 1165639, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.