ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
CalAmp Corp. (including its subsidiaries unless the context otherwise requires, “CalAmp”, “the Company”, “we”, “our”, or “us”) is a global technology solutions pioneer leading transformation to a mobile connected economy. We help reinvent businesses and improve lives around the globe with technology solutions that streamline complex mobile Internet of Things (“IoT”) deployments through wireless connectivity solutions and derived data intelligence. Our software applications, scalable cloud services, and intelligent devices collect and assess business-critical data anywhere in the world from industrial machines, commercial and passenger vehicles, their drivers and contents. With our global network of LoJack licensees and a strong ecosystem of industry partnerships, we bring intelligence to the edge in the mobile connected economy to help drive business efficiencies.
In February 2019, we acquired Tracker Network (UK) Limited, which brings us strong brand awareness across the United Kingdom and extensive law enforcement relationships with an ability to help drive our expansion in Europe. In March 2019, we acquired Car Track, S.A. de C.V. (“LoJack Mexico”), which will leverage our full stack of telematics and SaaS solutions to expand product offerings to our substantial subscriber base in Mexico. Both Tracker UK and LoJack Mexico were customers in our Telematics Systems segment prior to the acquisition.
In April 2019, we acquired Synovia Solutions (“Synovia”), a North American market leader in fleet safety and management for K-12 school bus and state and local government fleets. Synovia was a customer in our Telematics Systems segment prior to our acquisition. Combined with the recent acquisitions of Tracker Network UK and LoJack Mexico, the Synovia acquisition expands our fleet management and vehicle safety services portfolio while accelerating our transformation to high-value subscription-based services. These acquisitions contributed to a shift in revenues from our Telematics Systems segment to our Software & Subscriptions segment during fiscal 2020.
We operate under two reportable segments: Telematics Systems and Software & Subscription Services.
Telematics Systems
Our Telematics Systems segment offers a series of advanced telematics and stolen vehicle recovery (“SVR”) products for the broader connected vehicle and emerging industrial IoT marketplace, which enable customers to optimize their operations by collecting, monitoring and effectively reporting business-critical information and desired intelligence from high-value remote and mobile assets. Our telematics products include asset tracking units, mobile telematics devices, fixed and mobile wireless gateways, and routers. These wireless networking devices underpin a wide range of solutions, and are ideal for applications demanding secure, reliable and business-critical communications. Products and sales channels include Original Equipment Manufacturers (“OEM”), Mobile Resource Management (“MRM”) and SVR products.
Software & Subscription Services
Our Software & Subscription Services segment offers cloud-based application enablement and telematics service platforms that facilitate integration of our own applications, as well as those of third parties, through open Application Programming Interfaces (“APIs”) to deliver full-featured mobile IoT solutions to a wide range of customers and markets. Our scalable proprietary applications and other subscription services enable rapid and cost-effective development of high-value solutions for customers all around the globe. Services include Fleet Management, Vehicle Finance, Auto Remote Start, Supply Chain Integrity and International Vehicle Location.
Recent Developments
In December 2019, a strain of coronavirus entitled COVID-19 emerged in China and spread to other countries including to the United States. In March 2020, the World He

Explanation: Management Discussion and Analysis section with financial performance data. Source: 730255_2020.htm (CIK: 730255, 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
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes beginning on page in this annual report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Risk Factors” in this annual report on Form 10-K.
Our Company
We were incorporated in Delaware under the Delaware General Corporation Law in March 2009 and are the successor to Apex Silver Mines Limited for purposes of reporting under the Exchange Act. During the year ended December 31, 2020, our only sources of income were revenues from the lease of our Velardeña oxide plant and sales of non-core assets. We incurred net operating losses for the years ended December 31, 2020 and 2019.
We are primarily focused on operations at the Rodeo property as well as further studies of a restart plan for Velardeña, including use of bio-oxidation to improve the payable gold recovery. We are also focused on (i) advancing our El Quevar exploration property in Argentina through the Earn-in Agreement with Barrick and (ii) continuing to evaluate and search for mining opportunities in North America (including Mexico) with near term prospectus of mining, and particularly for properties within reasonable haulage distances of our processing plants at the Velardeña Properties. We are also reviewing strategic opportunities, focusing primarily on development or operating properties in North America, including Mexico.
2020 Highlights
COVID-19 uncertainties
We undertook several initiatives in response to the COVID-19 pandemic and will continue to implement most of these initiatives in 2021 until it is considered safe to alter or remove these practices. We followed, and continue to follow, World Health Organization protocols and local government rules and recommendations at all of our projects and corporate offices. Office employees are working remotely wherever possible. In compliance with a directive of the Mexican Federal Government to suspend all non-essential activities, including mining, in response to the COVID-19 pandemic, we suspended mining activities at our Velardeña Properties (Durango State, Mexico) during portions of April and May 2020. Activities at the Velardeña Properties, including processing of Hecla material at the oxide mill, continued uninterrupted since the temporary shutdown.
To provide greater financial flexibility at the onset of the COVID-19 pandemic, on March 30, 2020, we entered into a short-term loan agreement (the “Loan Agreement”) with Sentient Global Resources Fund IV , L.P., a Cayman Islands exempted limited partnership (“Sentient”), pursuant to which Sentient granted to us an unsecured loan in an amount equal
to $1.0 million (the “Sentient Loan”). Sentient is a private equity fund, and together with certain other Sentient equity funds, Sentient is our largest stockholder, and at the time of the loan held approximately 38% of our outstanding common stock. The Sentient Loan bore interest at a rate of 10% per annum and the loan was due in full, together with accrued interest and any other amount outstanding under the Loan Agreement, on December 31, 2020. On August 12, 2020, we repaid in full all outstanding borrowings under, and terminated, the Loan Agreement, with no prepayment penalty.
In addition to the Sentient Loan, we also reached an agreement in April 2020 with Compañía Minera Autlán S.A.B. de C.V. (“Autlán”) to extend the time to repay the then remaining $0.8 million related to the $1.5 million refundable deposit received for the proposed sale of our Velardeña Properties and other assets in June 2019 through December 2020. The deposit w

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1011509_2020.htm (CIK: 1011509, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation
Compensation Discussion and Analysis
None of our officers have received any cash compensation for services rendered to us. Other than the payment to an affiliate of our sponsor of $10,000 per month for office space, utilities and secretarial and administrative support and reimbursement of expenses, we will not pay compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, to our officers and directors prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. We do not have a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target business. Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials or tender offer documents furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
The compensation committee has reviewed and discussed this Compensation Discussion and Analysis with management and, based upon its review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included

Explanation: Executive compensation disclosures with financial details. Source: 1831937_2020.htm (CIK: 1831937, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. Financial Statements and Supplementary Data
This information appears following Item 16 of this Annual Report on Form 10-K and is included herein by reference.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1759008_2020.htm (CIK: 1759008, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11.
Executive Compensation.
The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1409269_2020.htm (CIK: 1409269, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A - Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to several market risks in its normal business activities. Market risk is the potential loss that may result from market changes associated with the Company's power generation or with an existing or forecasted financial or commodity transaction. The types of market risks the Company is exposed to are commodity price risk, interest rate risk, liquidity risk, and credit risk.
Commodity Price Risk
Commodity price risks result from exposures to changes in spot prices, forward prices, volatilities, and correlations between various commodities, such as electricity, natural gas and emissions credits. The Company manages the commodity price risk of its merchant generation operations by entering into derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted power sales or purchases of fuel. The portion of forecasted transactions hedged may vary based upon management's assessment of market, weather, operation and other factors. See Item 15 - Note 7, Accounting for Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements for more information.
Based on a sensitivity analysis using simplified assumptions, the impact of a $0.50 per MMBtu decrease in natural gas prices across the term of the derivative contracts would cause no change to the net value of natural gas derivatives, and an increase of $0.50 MMBtu in natural gas prices across the term of the derivative contracts would cause an increase of approximately $1 million to the net value of natural gas derivatives as of December 31, 2020. The impact of a $0.50 per MWh increase or decrease in power prices across the term of the derivative contracts would cause a change of approximately $3 million to the net value of power derivatives as of December 31, 2020.
Interest Rate Risk
The Company is exposed to fluctuations in interest rates through its issuance of variable rate debt. Exposures to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations when taking into account the combination of the variable rate debt and the interest rate derivative instrument. See Item 15 - Note 7, Accounting for Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements for more information.
Most of the Company's project subsidiaries enter into interest rate swaps, intended to hedge the risks associated with interest rates on non-recourse project level debt. See Item 15 - Note 10, Long-term Debt, to the Consolidated Financial Statements for more information about interest rate swaps of the Company's project subsidiaries.
If all of the above swaps had been discontinued on December 31, 2020, the Company would have owed the counterparties $134 million. Based on the credit ratings of the counterparties, the Company believes its exposure to credit risk due to nonperformance by counterparties to its hedge contracts to be insignificant.
The Company has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates. As of December 31, 2020, a 1% change in interest rates would result in an approximately $1 million change in interest expense on a rolling twelve-month basis.
As of December 31, 2020, the fair value of the Company's debt was $7,021 million and the carrying value was $7,049 million. The Company estimates that a 1% decrease in market interest rates would have increased the fair value of its long-term debt by $412 million.
Liquidity Risk
Liquidity risk arises from the general funding needs of the Company's activities and in the management of the Company's assets and liabilities.
Counterparty Credit Risk
Credit risk relates to the risk of loss resulting from non-p

Explanation: Quantitative and qualitative market risk disclosures. Source: 1637757_2020.htm (CIK: 1637757, 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
Industry Conditions
Housing market conditions were very strong in 2020, despite a short pause in March and April due to COVID-19 uncertainties, as healthy underlying economic and housing market fundamentals drove demand with historically low interest rates, a limited supply of homes, and an increased desire for healthier, safer homes. Homebuilders with attractive, lower price-point product in desirable locations captured this demand that has been bolstered in part by millennials entering the market in a meaningful way, as well as the baby boomer generation downsizing. We believe the longer-term economic data supports a continuation of a solid homebuilding cycle, although individual market results will vary, responding to each respective market's economic factors.
At Meritage, we continue to focus on enhancing our entry-level and first move-up product through our commitment to simplification and remaining focused on our key financial initiatives of home closing gross margin improvement, selling, general and administrative cost control and long-term community count growth. As of December 31, 2020, 94% of our current communities are targeted to first-time or first move-up buyers and those buyer segments represented approximately 95% of our orders in 2020. We believe our strategy will allow us to achieve higher gross margins and better opportunities to leverage our overhead costs in the years to come.
Summary Company Results
Total home closing revenue increased 23.9% due to higher closing volume, to $4.5 billion for the year ended December 31, 2020 from $3.6 billion in 2019. Home closing gross margin for the year ended December 31, 2020 improved by 310 basis points to 22.0% while gross margin for the year ended December 31, 2019 was 18.9%. The improved margin in 2020 reflects increased pricing power, increased volume and efficiencies in our construction process and effective cost controls, despite increasing lumber prices. We recorded impairment charges of approximately $24.9 million during the year ended December 31, 2020, primarily resulting from the decision to sell land assets that no longer fit our strategy, compared to $7.3 million of similar charges in 2019. Interest expense decreased to $2.2 million for the year ended December 31, 2020 from $8.4 million in 2019, due to the the early redemption of senior notes in the fourth quarter of 2019, partially offset by interest charges from our Credit Facility which had $500.0 million outstanding for several months during the first half of 2020. Pre-tax net earnings of $533.6 million in 2020 increased 76.1% from $302.9 million in 2019. Our effective tax rate in 2020 was 20.6% as compared to a 17.6% effective tax rate in 2019. Net income for the year ended December 31, 2020 was $423.5 million compared to $249.7 million in 2019.
Our results for 2020 reflect strong growth in both closings and orders as buyers took advantage of the historically low interest-rate environment and capitalized on their desire to purchase their first home or move out of their existing home and transition to a larger, healthier home with indoor space to accommodate work and school from home needs and outdoor space to enjoy. We ended 2020 with 11,834 closings, a 27.7% increase over 9,267 closings in 2019. Orders improved by 42.7% in 2020 with 13,724 orders for the year compared to 9,616 in 2019. At December 31, 2020, our backlog of $1.8 billion on 4,672 units increased by 65.1% in value, compared to $1.1 billion on 2,782 units at December 31, 2019. Despite the instability of the market in the early stages of the COVID-19 pandemic, our full year cancellation rate on sales orders as a percentage of gross sales in 2020 decreased to 13.6% as compared to 14.2% for the year ended December 31, 2019.
Company Positioning
We believe that the investments in our new communities designed for the first-time and first move-up homebu

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


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in prevailing market interest rates affecting the return on our investments but do not consider this interest rate market risk exposure to be material to our financial condition or results of operations. We invest primarily in United States Treasury instruments with short-term (less than one year) maturities. The carrying amount of these investments approximates fair value due to the short-term maturities. Under our current policies, we do not use derivative financial instruments, derivative commodity instruments or other financial instruments to manage our exposure to changes in interest rates or commodity prices.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1445109_2020.htm (CIK: 1445109, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended April 30, 2020.

ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 915358_2020.htm (CIK: 915358, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
GILEAD SCIENCES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
_______________________________
(1) See Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7

Explanation: Selected financial data and key metrics. Source: 882095_2020.htm (CIK: 882095, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss to future earnings, values or cash flows that may result from changes in the price of a financial instrument. The fair value of a financial instrument, derivative or non-derivative, might change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We have operations internationally and we are exposed to market risks in the ordinary course of our business. These risks include interest rate and foreign currency exchange rate risks.
Interest Rate Risk
We enter into derivative agreements to fix the interest rates on a portion of our floating-rate debt. We assess and manage the external and internal risk associated with these derivative instruments in accordance with our overall operating goals. External risk is defined as those risks outside of our direct control, including counterparty credit risk, liquidity risk, systemic risk and legal risk. Internal risk relates to those operational risks within the management oversight structure and includes actions taken in contravention of our policies.
The primary external risk of our derivative agreements is counterparty credit exposure, which is defined as the ability of a counterparty to perform its financial obligations under the agreement. All of our derivative agreements are with highly-rated financial institutions. Credit exposures are measured based on the market value of outstanding derivative instruments. Both current and potential exposures are calculated for each derivative agreement to monitor counterparty credit exposure.
As of December 31, 2020, we had derivative agreements in place to fix interest rates on a portion of our borrowings under debt facilities with floating interest rates as summarized below:
(1) The impact of forward starting swaps with total notional amount of $950.0 million will increase the weighted average remaining term to 6.0 years.
Our derivative agreements are designated as cash flow hedges for accounting purposes. Any unrealized gains or losses related to the changes in fair value are recognized in accumulated other comprehensive income and reclassified to interest and debt expense as they are realized. As of December 31, 2020, we do not have any material non-designated derivatives. Previously, a portion of our swap portfolio was not designated and changes in the fair value of non-designated derivative agreements were recognized in the consolidated statements of operations as unrealized (gain) loss on derivative instruments, net and reclassified to realized (gain) loss on derivative instruments, net as they were realized.
Approximately 87% of our debt is either fixed or hedged using derivative instruments which helps mitigate the impact of changes in short-term interest rates. However, a 100 basis point increase in the interest rates on our unhedged debt (primarily LIBOR) would result in an increase of approximately $8.0 million in interest expense over the next 12 months.
Foreign currency exchange rate risk
Although we have significant foreign-based operations, the majority of our revenues and our operating expenses are denominated in U.S. dollars. However, we pay our non-U.S. employees in local currencies and certain operating expenses are denominated in foreign currencies. Net foreign currency exchange gains and losses were immaterial for the years ended December 31, 2020 and, 2019.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1660734_2020.htm (CIK: 1660734, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1061027_2020.htm (CIK: 1061027, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Axonics Modulation Technologies, Inc.
Irvine, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Axonics Modulation Technologies, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, the consolidated statement of mezzanine equity for the year ended December 31, 2018, 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 accounting principles generally accepted in the United States of America.
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 (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Income Taxes
As described in Notes 1 and 8 to the consolidated financial statements, the Company’s accounting for income taxes requires the recognition of deferred tax assets, liabilities, and valuation reserves for the expected future tax consequences of events

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
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended July 31, 2020 and 2019 and 2018.
The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.
* Stock Award was 8,000,000 Series D Preferred Shares
(1) Based on the remaining 6 months of Calendar year 2020
(2) Stock award, grant date of July 1, 2020, of 2,000,000 shares of Series D Preferred Stock is the result of a transfer from Emerging Growth Advisors, Inc., holding of 8,000,000 shares of Series D Preferred Stock.
(3) Initial stock award, grant date of April 29, 2019, was 8,000,000 Series D Preferred Shares in the name of Emerging Growth Advisors, Inc. A total of 2,000,000 shares was transferred to Rob Gietl as part of his agreement to become President/CEO and Chairman of the Company, therefore compensation amount is reduced by $367,485.
(4) The valuation of the stock grant of Series D Preferred Stock is based on an analysis of FASB ASC 718-10 and FASB ASC 505-50 as is more fully described in Footnote 10 to the July 31, 2019 year-end financial states incorporated into this Offering Statement.
Narrative to Summery Compensation Table
On October 1, 2018, we entered into an employment agreement with James W. Zimbler (“Zimbler”) to be our Chief Executive Officer (the “Zimbler Agreement”). Effective with the appointment of Rob Gietl as President/CEO and Chairman of the Board of Directors, the Employment Agreement was superseded by a consulting Agreement dated July 1, 2020 with a term of three years. The Consulting Agreement has the following material terms. A consulting fee of $15,000 is payable per month for the first year increasing by $2,500 per year for the next two years. Consultant is also entitled to an additional payment of up to $1,500 per month to cover the cost of Health Insurance. Consultant is also to be reimbursed for reasonable expenses performed on behalf of the Company.
The following is a summary of the material terms of the Gietl Agreement.
§ The term commences on July 1, 2020 and is for a period of three (3) years, unless terminated earlier as provided therein.
§ Gietl’s initial monthly Base Salary is $15,000, with an increase of $2,500 each year for the term of the Agreement.
§ Gietl is entitled to participate in any Bonus or Executive Compensation Plan established by the Company.
§ Upon termination of Gietl’s employment, he may be entitled to receive certain post-termination severance benefits depending upon whether such termination is by the Company without Cause, in relation to a Change of Control, a resignation by Gietl for Good Reason, or by reason of Gietl’s death or disability (as such terms are defined in the Gietl Agreement).
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1304741_2020.htm (CIK: 1304741, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
II-76
Table of Contents Index to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of The Southern Company and Subsidiary Companies
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The Southern Company and subsidiary companies (Southern Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, 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 "financial statements"). We also have audited Southern Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Southern Company as of 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 accounting principles generally accepted in the United States of America. Also, in our opinion, Southern Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
Basis for Opinions
Southern Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on Southern Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Southern 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Fina

Explanation: Audited financial statements and supplementary data. Source: 41091_2020.htm (CIK: 41091, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
The factors described below represent our principal risks. Other factors may exist that we do not consider to be significant based on information that is currently available or that we are not currently able to anticipate.
Risks Related to Our Corporate Structure
The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders and may hinder a stockholder's ability to dispose of his or her shares.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. In this respect, among other things, unless exempted (prospectively or retroactively) by our board of directors, no person may own (i) more than 9.8% in value of the aggregate of our outstanding shares (of any class or series, including common shares or preferred shares) of stock, or (ii) more than 9.8% (in value or number, whichever is more restrictive) of the aggregate of the outstanding shares of only our common stock. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock, and may make it more difficult for a stockholder to sell or dispose of his or her shares.
Our charter permits our board of directors to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.
Our charter permits our board of directors to issue up to 510,000,000 shares of common stock, of which 185,000,000 are designated as Class A shares, 75,000,000 are designated as Class I shares, 175,000,000 are designated as Class T shares, and 75,000,000 are designated as Class T2 shares, and 100,000,000 shares of preferred stock. In addition, our board of directors, without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to issue. Our board of directors may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of repurchase of any such stock. Thus, if also approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or independent legal counsel, our board of directors could authorize the issuance of additional preferred stock with terms and conditions that could have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock.
Our board of directors may change our investment policies without stockholder approval, which could alter the nature of our stockholders' investments.
Our charter requires that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interest of the stockholders. These policies may change over time. The methods of implementing our investment objectives and strategies also may vary, as new real estate development trends emerge and new investment techniques are developed. Except to the extent that policies and investment limitations a

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1567925_2020.htm (CIK: 1567925, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes our selected historical financial information for each of the last five fiscal years (in thousands except per share amounts). The selected financial information has been derived from our audited Consolidated Financial Statements. Additional data for fiscal years 2020, 2019, and 2018 is included elsewhere in this report.
The following selected financial data should be read in conjunction with the Company’s consolidated financial statements and notes along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.
Non-GAAP Financial Measures
Our reported results are presented in accordance with GAAP. We also disclose Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”), both of which are non-GAAP financial measures. We believe these two non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.
FFO and AFFO do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income as a performance measure or cash flows from operating activities as reported on our statement of cash flows as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.
We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gain or loss from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets and real estate related depreciation and amortization, including the pro rata share of such adjustments of unconsolidated subsidiaries. The Company also excludes the gains or losses from sales of assets incidental to the primary business of the REIT which specifically include the sales of mitigation credits, impact fee credits, subsurface sales, and the land sales gains included in discontinued operations. To derive AFFO, we modify the NAREIT computation of FFO to include other adjustments to GAAP net income related to non-cash revenues and expenses such as straight-line rental revenue, amortization of deferred financing costs, amortization of capitalized lease incentives and above- and below-market lease related intangibles, and non-cash compensation. Such items may cause short-term fluctuations in net income but have no impact on operating cash flows or long-term operating performance. We use AFFO as one measure of our performance when we formulate corporate goals.
FFO is used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other companies.
Reconciliation of Non-GAAP Measures (in thousands):
Other Data (in thousands except per share data):
ITEM 7.

Explanation: Selected financial data and key metrics. Source: 23795_2020.htm (CIK: 23795, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements required by this Item are set forth in Item 15 beginning on page of this Annual Report on Form 10-K.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1410428_2020.htm (CIK: 1410428, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11.Executive Compensation
The information required by this item is hereby incorporated by reference to the material appearing in the Notice and Proxy Statement for the 2021 Annual Meeting of Shareholders, to be filed pursuant to Regulation 14A under the Exchange Act.

ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1393311_2020.htm (CIK: 1393311, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not hold any derivative instruments and do not engage in any hedging activities.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1584693_2020.htm (CIK: 1584693, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the Proxy Statement to be issued in connection with the Annual Meeting of Stockholders of our Company which is expected to be held on July 21, 2020, under those sections of the Proxy Statement to be titled “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Director Compensation.” That Proxy Statement will be filed within 120 days after the end of our fiscal year. Notwithstanding the foregoing, the Compensation Committee Report included within the section of the Proxy Statement to be titled “Executive Compensation” is only being “furnished” hereunder and shall not be deemed “filed” with the Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 16918_2020.htm (CIK: 16918, 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
Current Positioning
The outcome of the ongoing coronavirus situation is uncertain and could have a positive or negative impact on the performance of the Fund. In addition to the tragic human impacts of the virus, the resulting economic fallout appears recessionary. The past two U.S. recessions, in 2000 and 2008, were two of the best performing periods for the Fund. However, the future will not unfold exactly like the past and the Fund’s performance in the future is unknowable.
The Fund’s exposures evolve dynamically based on the tactical opportunities perceived by the underlying systematic trading programs. As macroeconomic trends change course, for example becoming more bearish, we would expect the portfolio’s exposures to adapt accordingly. For example, the Fund’s current positioning has changed substantially from year end.
During January and February 2020, the Fund redeemed its interest in the LoCorr Macro Strategies Fund, removed Mondiale Asset Management Ltd., PGR Capital LLP and Winton Capital Management Ltd. as Trading Advisors and added Graham Capital Management, LP. Additionally, the Fund modified the trading program that Millburn Ridgefield Corporation used for the Fund to a program with higher volatility. In August, the Fund removed Synergie Capital Management, LLC as Trading Advisor.
Results of Operations
The returns for each class of Units for the years ended, or periods ended from inception to, December 31, 2020, 2019 and 2018 were:
† Inception date: November 1, 2018.
†† Inception date: July 1, 2019.
Results from past periods are not necessarily indicative of results that may be expected for any future period. Monthly analysis of the trading gains and losses is provided below.
January
In January, capital markets were impacted by two significant developments. Early in the month, Iranian General Qassem Soleimani was killed in a U.S. airstrike. Iran responded with their own missile attack against a U.S. military base in Iraq, though tensions de-escalated from there. While global equity markets shrugged off these events, they fell later in the month as mounting concerns regarding the coronavirus outbreak fueled a risk-off stance by market participants. Speculation regarding the virus’ future effect on Chinese and global economic growth helped drive rates lower/bond prices higher. Gold also continued to surge as investors sought safe haven assets while oil prices sold-off sharply.
The Fund enjoyed a strong start to the year with the largest gains from long fixed income positions, which were boosted by falling rates. Foreign currency trading was profitable as long U.S. Dollar positions benefitted from the greenback’s strength. Long positions in equities were unprofitable, as stocks were hurt by the coronavirus fears during the second half of January. In commodities, long precious metals exposure was profitable. Energy trading also enjoyed gains as plunging natural gas prices provided a lift to short positions. Trading in agricultural commodities was not a significant factor. The Fund finished with a net gain of 3.19%, 3.31%, 3.30%, 3.34%, 3.43% and 3.36% for Class A, A2, A3, B, I, and R Units, respectively.
February
After the S&P 500 reached a new high in mid-February, intensifying coronavirus fears contributed to a massive sell-off in equities while the U.S. 10-year Treasury yield fell to an all-time low. The rapidity of the correction in the S&P 500 was historic as the Index experienced its fastest ever 10% sell-off. With the outbreak spreading outside of China and cases in Italy, Iran, and South Korea soaring, investors fled risk assets in droves as they grappled with how deeply and for how long quarantines, reduced travel, factories shutting down, school closures, etc. will negatively impact economic growth and corporate profitability. While the severity of the economic toll may be unknowable at this time, some recent datap

Explanation: Management Discussion and Analysis section with financial performance data. Source: 861441_2020.htm (CIK: 861441, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, 2020 and 2019, we had cash, cash equivalents, restricted cash and investments of $140.1 million and $91.6 million, respectively, consisting of non-interest and interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term and the low risk profile of our money market accounts and investments, and our current plan to hold investments to maturity, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents or short-term investments.
In addition, we are subject to currency risk for balances held in Russian rubles in our foreign subsidiary. We hold portions of our funds in both U.S. dollars and Russian rubles. The exchange rate between the U.S. dollar and Russian ruble changes from period to period. As of December 31, 2020, we held cash and cash equivalents totaling $0.3 million in Russian banks to support our Russian subsidiary, all of which were denominated in U.S. dollars. We do not hedge against foreign currency risks. We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1453687_2020.htm (CIK: 1453687, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following risk management discussion and the estimated amounts generated from sensitivity analysis presented are forward-looking statements of market risk assuming certain market conditions occur. Future results may differ materially from these estimated results due to, among other things, actual developments in the global financial markets, changes in the composition of our investment portfolio, or changes in our business strategies. The results of analysis we use to assess and mitigate risk are not projections of future events or losses. See "Cautionary Statement Regarding Forward-Looking Statements" for additional information regarding our forward-looking statements.
We are principally exposed to four types of market risk: interest rate risk; credit risk; equity price risk and foreign currency risk. Our policies to address these risks in 2020 are not materially different than those used in 2019, and, based on our current knowledge and expectations, we do not currently anticipate significant changes in our market risk exposures or in how we will manage those exposures in future reporting periods. However, due to the ongoing uncertainty and volatility in financial markets as a result of the economic conditions caused by the COVID-19 pandemic, we expect interest rates, credit spreads and global equity markets to remain volatile in the near-term. Furthermore, the pandemic has increased the risk of defaults across many industries. As a result, we continue to closely monitor market risk during this time.
Interest Rate and Credit Spread Risk
Interest rate risk is the price sensitivity of a security to changes in interest rates. Credit spread risk is the price sensitivity of a security to changes in credit spreads. Our investment portfolio and funds held - directly managed includes fixed maturity and short-term investments, whose fair values will fluctuate with changes in interest rates and credit spreads. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment of claims and contract liabilities, as well as for settlement of commutation payments. We also monitor the duration and structure of our investment portfolio.
The following table summarizes the aggregate hypothetical change in fair value from an immediate parallel shift in the treasury yield curve, assuming credit spreads remain constant, in our fixed maturity and short-term investments portfolio classified as trading and AFS, our funds held directly managed portfolio, our fixed income funds and our fixed income exchange-traded funds, and excludes investments classified as held-for-sale:
(1) Excludes equity exchange-traded funds of $154.9 million and $0 for the years ended December 31, 2020 and December 31, 2019, respectively, which are included in the Equity Price Risk section below.
Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities, short-term investments, funds held - directly managed and fixed income exchange-traded fund may be materially different from the resulting change in value indicated in the tables above.
The following table summarizes the aggregate hypothetical change in fair value from an immediate parallel shift in credit spreads assuming interest rates remain fixed, in our fixed maturity and short-term investments portfolio classified as trading and AFS, our funds held directly managed portfolio, our fixed income funds and our fixed income exchange-traded funds, and excludes investments classified as held-for-sale:
(1) Excludes equity exchange-traded funds of $154.9 million and $0 for the years ended December 31, 2020 and December 31, 2019, respectively, which are included

Explanation: Quantitative and qualitative market risk disclosures. Source: 1363829_2020.htm (CIK: 1363829, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Currency Risks
Transaction Exposure and Revaluation Effects
Transaction exposure arises because the cost of a product originates in one currency and the product is sold in another currency. Revaluation effects come from valuation of assets denominated in other currencies than the reporting currency of each unit.
The Company’s gross transaction exposure for 2020 was approximately $0.9 billion. A part of the currency flows had counter-flows in the same currency pair, which reduced the net exposure to approximately $0.6 billion. The largest net transaction exposures were the sale of Euro against the U.S. Dollar, the purchase of U.S. Dollar against Korean Won and the sale of Euro against Romanian Leu. The five largest currency pairs accounted for approximately 86% of the Company’s net currency transaction exposure.
Since the Company can only effectively hedge these currency flows in the short term, periodic hedging would only reduce the impact of fluctuations temporarily. Over time, periodic hedging would postpone but not reduce the impact of fluctuations. In addition, the net exposure is limited to approximately one quarter of net sales and is made up of close to 20 different currency pairs with exposures of more than $1 million each. Veoneer generally does not hedge these flows. However, for some purchased components from external suppliers, the Company may enter into hedging from time to time. There were no foreign exchange forward contracts outstanding as of December 31, 2020.
Translation Exposure in the Statement of Operations and Balance Sheet
The Company estimates that a 1% increase in the value of the U.S. dollar versus European currencies would decrease reported U.S. dollar annual net sales in 2020 by approximately $6 million or by -0.4% while it would have a positive impact on the operating loss for 2020 by approximately $1 million, or b 0.2%, assuming reported corporate average margin.
Interest Rate Risk
As of December 31, 2020, we had cash and cash equivalents of $758 million. As of December 31, 2020, the Company estimates that a 1% change of the interest rates would not significantly impact our interest expense or income.
Component Costs
Veoneer procures raw material and components from a variety of suppliers around the world. Generally, we seek to obtain mechanical components and material in the region in which our products are manufactured to limit transportation, currency risks and other costs. The most significant raw materials we use to manufacture our products are various electrical components and material price changes in Veoneer’s supply chain could have a significant impact on products profitability.
The Company’s strategies to offset price increases on cost of materials include working with suppliers to mitigate costs, seeking alternative product designs and material specifications, combining purchase requirements with our customers and/or suppliers, changing suppliers, and other means. However, should these actions not be sufficient to offset component price increases, our earnings could be materially impacted.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1733186_2020.htm (CIK: 1733186, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The primary focus of our executive compensation programs is to improve our performance year over year and over a longer-term period. The compensation programs were designed to provide the tools necessary to hire executives with the skills needed to manage Tandy Leather Factory, Inc. to meet these goals and to retain them over the long-term. In developing the programs, a key consideration was to have plans that were easy to understand and administer, while being competitive with companies of similar size and philosophy. Over the past several years, management and the Compensation Committee have worked to refine the compensation programs used to ensure that they support these goals and our ongoing business objectives. Our philosophy has been to reward team performance, measured by our overall results. Each executive officer’s compensation is linked to their individual contribution toward increases in the size of our operations, our income, and increases in stockholder value. At the 2020 Annual Meeting, stockholders were asked to approve Tandy Leather Factory, Inc.’s 2019 executive compensation programs. Approximately 99% of the shares voted approved the program. In consideration of these results and other factors the Compensation Committee evaluates on a regular basis, the Compensation Committee concluded that Tandy Leather Factory, Inc.’s existing executive compensation programs continue to be appropriate to support Tandy Leather Factory, Inc.’s compensation philosophy and objectives described in this discussion.
Compensation for our executive officers consists of the following components:
•
Base salary;
•
Annual incentive bonus;
•
Restricted stock unit grants;
•
Retirement and other benefits, and
•
Employment Agreements.
Each of these elements of pay is described below.
Company Performance. In 2020, Tandy Leather Factory, Inc.’s sales decreased approximately 15% from 2019, as the Company’s entire fleet of stores was temporarily shut down by the COVID-19 pandemic. Because of the ongoing financial restatement, the Company has not yet announced (as of the date of this information statement) its full-year gross profits or operating expenses for 2020.
Base Salary
Base salaries are intended to reward our executive officers based upon their roles within Tandy Leather Factory, Inc. and for their performance in those roles. Base salaries are established when an executive officer is hired, based on prior experience and compared to salaries for comparable positions in other companies. Base salaries are generally increased annually, if market factors dictate such increases and assuming our financial performance is satisfactory. The Company did not increase, and temporarily lowered because of the COVID-19 pandemic, base salaries for its executive officers during 2020.
Bonuses
We award discretionary bonuses to our executive officers, as determined by the Compensation Committee. We determine these bonuses on a subjective basis, considering business prospects for the upcoming year and the improvement in our net income and financial position for the year in question. These discretionary bonuses are awarded annually and paid in the first quarter of the following year. We did not award any bonuses to our executive officers for 2020.
Restricted Stock Unit Grants
We award restricted stock unit grants to promote long-term retention of executive officers and permit them to accumulate equity ownership in Tandy Leather Factory, Inc., so that the interests of our management team are directly aligned with the interest of our stockholders. We believe it is important to have an element of compensation that is focused directly on retaining talent so that we can minimize potential loss of company and industry knowledge and the disruption inherent in unplanned turnovers. Restricted stock unit grants also align our executive officers with our stockholders by making them stockholders themselv

Explanation: Executive compensation disclosures with financial details. Source: 909724_2020.htm (CIK: 909724, 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.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Annual Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “should,” “would,” “could,” “may” and similar expressions also identify forward-looking statements. The forward-looking statements include, without limitation, statements regarding our future operations, financial condition and prospects, operating results, revenues and earnings liquidity, our estimated income tax rate, unrecognized tax positions, amortization expenses, impact of recent accounting pronouncements, our cost management program, our acquisition strategy and our growth plans, expectations regarding our recent acquisitions, and the reasonableness of the carrying value related to specific financial assets and liabilities.
Our expectations, beliefs, objectives, intentions and strategies regarding future results are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by our forward-looking statements.
We urge you to carefully consider risks and uncertainties and review the additional disclosures we make concerning risks and uncertainties that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Item 1A, “Risk Factors” in this Annual Report on Form 10-K, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Annual Report on Form 10-K.
Overview
We are an arrhythmia management company focused on improving the way cardiac arrhythmias are diagnosed and treated. Despite several decades of effort by the incumbents in this field, the clinical and economic challenges associated with arrhythmia treatment continue to be a huge burden for patients, providers and payors. We are committed to advancing the field of electrophysiology with a unique array of products and technologies which will enable more physicians to treat more patients more effectively and efficiently. Through internal product development, acquisitions and global partnerships, we have established a global sales presence delivering a broad portfolio of highly differentiated electrophysiology products. Our goal is to provide our customers with a complete solution for catheter-based treatment of cardiac arrhythmias in the geographic markets that we serve.
Our product portfolio includes novel access catheters, diagnostic and mapping catheters, ablation catheters, mapping and imaging consoles and accessories, as well as supporting algorithms and software programs. Our foundational and most highly differentiated product is our AcQMap imaging and mapping system. Our paradigm-shifting AcQMap System offers a novel approach to mapping the drivers and maintainers of arrhythmias with unmatched speed and precision. With the ability to rapidly and accurately identify ablation targets and to confirm both ablation success and procedural completion, we believe our AcQMap System addresses the primary unmet need in electrophysiology procedures today.
We were incorporated in the State of Delaware on March 25, 2011 and are headq

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
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related notes, before making a decision to invest in our common stock. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of the risks actually occur, our business, results of operations and financial condition could be adversely affected. In that event, the market price of our common stock could decline, and you could lose all or part of your investment. In addition, the impacts of COVID-19 and any worsening of the economic environment may exacerbate the risks described below, any of which could have a material impact on us. This situation is changing rapidly, and additional impacts may arise that we are not currently aware of.
Summary Risk Factors
The following summarizes the most material risks that make an investment in our securities risky or speculative. If any of the following risks occur or persist, our business, financial condition, results of operations and prospects could be materially harmed and the market price of our common stock could significantly decline:
Business and Operations
•
the effects of the COVID-19 pandemic could materially and adversely affect our business, financial condition and results of operations, including by, among other things, decreasing customer demand for
our products and services or putting at risk our ability to collect from customers amounts due for products and services;
•
our financial results depend on our ability to attract and retain customers, convert unpaid users to customers, and develop and expand relationships with organizational customers;
•
our revenue growth rate has fluctuated in recent periods and may slow in the future;
•
our business depends on a strong and trusted brand, and any failure to maintain, protect and enhance our brand would hurt our ability to retain or expand our customer and user base, our market share and our ability to attract and retain employees;
•
as a substantial portion of our sales efforts are increasingly targeted at winning SurveyMonkey Enterprise customers, we may not succeed in building a significant and effective salesforce or managing our sales channels effectively, our sales cycle may become lengthier and more expensive, we may encounter greater pricing pressure and our customers may be displeased with our support and services;
•
our inability to successfully retain our existing senior management and other key personnel or to attract and retain new qualified personnel could materially and adversely impact our ability to operate or grow our business;
•
general global economic conditions and our inability to compete successfully in our markets may materially and adversely affect demand for our products, services and solutions;
Information Technology and Cybersecurity
•
we have experienced, and may in the future experience, interruptions in the performance of our network infrastructure, websites, other systems and those of third-party service providers, including server failures that temporarily impair or disable the performance of our websites due to a variety of factors, such as infrastructure changes, human or software errors, capacity constraints and denial of service or fraud or security attacks;
•
we are vulnerable to software bugs, computer viruses, break-ins, phishing attacks, employee errors or malfeasance, attempts to overload our servers with denial-of-service or other attacks and similar disruptions from unauthorized use of our computer systems, any of which could lead to interruption

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1739936_2020.htm (CIK: 1739936, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Risks Related to Our Business and Operations
Our revenue may fluctuate from period to period, which could cause our share price to fluctuate.
Our revenue may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following events, as well as other factors described elsewhere in this Annual Report on Form 10-K:
•
a decline or slowdown of the growth in the value of financial market assets or changes in the mix of assets on our platform, which may reduce the value of our platform assets and therefore our revenue and cash flows;
•
a lowering of interest rates, which would directly and proportionately impact our spread-based revenue;
•
significant fluctuations in securities prices affecting the value of assets on our platform, including as a result of public health concerns or epidemics such as the COVID-19 pandemic;
•
negative public perception and reputation of the financial services industry, which would reduce demand for our investment solutions and services;
•
unanticipated acceleration of client investment preferences to lower-fee options;
•
downward pressure on fees we charge our investor clients, which would reduce our revenue;
•
changes in laws or regulations that could impact our ability to offer investment solutions and services;
•
failure to obtain new clients or retain existing clients on our platform, or changes in the mix of clients on our platform;
•
failure by our financial adviser clients to obtain new investor clients or retain their existing investor clients;
•
failure to adequately protect our proprietary technology and intellectual property rights;
•
reduction in the suite of investment solutions and services made available by third-party providers to existing clients;
•
reduction in fee percentage or total fees for future periods, which may have a delayed impact on our results given that our asset-based fees are billed to advisers in advance of each quarter;
•
changes in our pricing policies or the pricing policies of our competitors to which we have to adapt; or
•
general domestic and international economic and political conditions that may decrease investor demand for financial advisers or investment services.
As a result of these and other factors, our results of operations for any quarterly or annual period may differ materially from our results of operations for any prior or future quarterly or annual period and should not be relied upon as indications of our future performance.
We operate in an intensely competitive industry, with many firms competing for business from financial advisers on the basis of the quality and breadth of investment solutions and services, ability to innovate, reputation and the prices of services, among other factors, and this competition could hurt our financial performance.
We compete with many different types of companies that vary in size and scope, including other TAMPs. In addition, some of our adviser clients have developed or may develop the in-house capability to provide the technology or investment advisory services they have retained us to perform. These clients may also offer internally developed services to their financial advisers, obviating the need to hire us, and they may offer these services to third-party financial advisers or financial institutions, thereby competing directly with us for that business.
Some of our competitors have greater name recognition or greater resources than we do, and may offer a broader range of services across more markets. These resources may allow our competitors to respond more quickly to new technologies or changes in demand for investment solutions and services, devote greater resources to developing and promoting their services and make more
attractive offers to potential clients and strategic partners, which could hurt our financial performance. Further, some of

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1591587_2020.htm (CIK: 1591587, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 16 of this Report and is included herein by reference.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1817640_2020.htm (CIK: 1817640, 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 should be read in conjunction with, and is qualified in its entirety by reference to, Item 6, "Selected Financial Data" and our consolidated financial statements and related notes included elsewhere in this annual report. The discussions in this section contain forward-looking statements that involve risks and uncertainties, including, but not limited to, those described in Item 1A, "Risk Factors." Actual results could differ materially from those discussed below. Please refer to the section entitled "Forward-Looking Statements".
Overview
We are one of the largest providers of highly engineered industrial process heating solutions for process industries. For over 65 years, we have served a diverse base of thousands of customers around the world in attractive and growing markets, including oil & gas, chemical processing, power generation, mining and other industrial markets. We are a global leader and one of the few thermal solutions providers with a global footprint. We offer a full suite of products (heating units, heating cables, temporary power solutions and tubing bundles) and services (engineering, installation and maintenance services) and software (design optimization and control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects. We serve our customers through a global network of sales and service professionals and distributors in more than 30 countries and through our ten manufacturing facilities on three continents. These global capabilities and longstanding relationships with some of the largest multinational oil & gas, chemical processing, power and EPC companies in the world have enabled us to diversify our revenue streams and opportunistically access high growth markets worldwide. For fiscal 2020, approximately 59% of our revenues were generated outside of the United States. Since March 2015, we have acquired four companies (THS, Unitemp, Sumac and IPI), that offer complementary products and services to our core thermal
solution offerings. We actively pursue both organic and inorganic growth initiatives that serve to advance our corporate strategy.
Revenue. Our revenues are derived from providing customers with a full suite of innovative and reliable process heating solutions, including electric and steam heat tracing, tubing bundles, control systems, design optimization, engineering services, installation services, portable power solutions and software. Additionally, THS offers a complementary suite of advanced heating and filtration solutions for industrial and hazardous area applications. Historically, our sales are primarily to industrial customers for petroleum and chemical plants, oil and gas production facilities and power generation facilities. Our petroleum customers represent a significant portion of our business. We serve all three major categories of customers in the petroleum industry - upstream exploration/production, midstream transportation and downstream refining. Overall, demand for industrial heat tracing solutions falls into two categories: (i) new facility construction, which we refer to as Greenfield projects, and (ii) recurring maintenance, repair and operations and facility upgrades or expansions, which we refer to as MRO/UE. Greenfield construction projects often require comprehensive heat tracing solutions. We believe that Greenfield revenue consists of sales revenue by customer in excess of $1 million annually (excluding sales to resellers), and typically includes most orders for projects related to facilities that are new or that are built independent of existing facilities. We refer to sales revenue by customer of less than $1 million annually, which we believe are typically derived from MRO/UE, as MRO/UE revenue. Based on our experience, we believe that $1 million in annual sales is an appropriate threshold f

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1489096_2020.htm (CIK: 1489096, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A.Risk Factors
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to:
•adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 cases causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;
•ongoing negotiations with our lenders regarding potential forbearance or the exercise by our lenders of their remedies for default under our loan agreements;
•actions by our lenders to accelerate loan balances and foreclose on the hotel properties that are security for our loans that are in default;
•actions by the lenders of our senior secured credit facility to foreclose on our assets which are pledged as collateral;
•general volatility of the capital markets and the market price of our common stock and preferred stock;
•availability, terms, and deployment of capital;
•unanticipated increases in financing and other costs, including a rise in interest rates;
•actual and potential conflicts of interest with Ashford Inc. and its subsidiaries (including Ashford LLC, Remington Hotels and Premier), Braemar, our executive officers and our non-independent directors;
•the expenditures, disruptions and uncertainties associated with a potential proxy contest;
•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
•changes in governmental regulations, accounting rules, tax rates and similar matters;
•our ability to implement effective internal controls to address the material weakness identified in this Annual Report on Form 10-K;
•the timing or outcome of the SEC investigation;
•legislative and regulatory changes, including changes to the Code, and related rules, regulations and interpretations governing the taxation of real estate investment trusts;
•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and
•future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.
RISKS RELATED TO OUR BUSINESS
A financial crisis, economic slowdown, pandemic or epidemic or other economically disruptive event may harm the operating performance of the hotel industry generally. If such events occur, we may be harmed by declines in occupancy, average daily room rates and/or other operating revenues.
The performance of the lodging industry has been closely linked with the performance of the general economy and, specifically, growth in the U.S. gross domestic product. A majority of our hotels are classified as upscale and upper upscale. In an economic downturn, these types of hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates. This characteristic may result from the fact that upscale and upper upscale hotels generally target business and high-end leisure travelers. In periods of economic difficulties or concerns with respect to communicable disease, business and leisure travelers may seek to reduce travel costs and/or health risks by limiting travel or seeking to reduce costs on their trips. Any economic recession will likely have an adverse effect on us. Our business has been and will continue to be materially adversely affected by the impact of the COVID-19 pandemic, see “The outbreak of COVID19 has and will continue to significantly reduce our occupancy rates and RevPAR.”
The hotel industry is highly competitive and the hotels in whi


Item 6.Selected Financial Data
The following table sets forth selected historical consolidated financial data as of and for the years ended December 31, 2020, 2019, 2018, 2017 and 2016. The selected balance sheet data as of December 31, 2020 and 2019, and the selected statement of income data for the years ended December 31, 2020 and 2019, have been derived from our audited consolidated financial statements included elsewhere in this Report on Form 10-K. The selected balance sheet data as of December 31, 2018, 2017 and 2016 and the selected statement of income data for the years ended December 31, 2018, 2017 and 2016 have been derived from our audited consolidated financial statements that are not included in this Report on Form 10-K. Our historical results are not necessarily indicative of any future performance. The information presented in the following table has been adjusted to give effect to a one-for-five reverse stock split of our common shares completed effective May 4, 2018. The effect of the reverse stock split on outstanding shares and per share figures has been retroactively applied to all periods presented. This data should be read in conjunction with, and is qualified by reference to, "Item 7

Explanation: Selected financial data and key metrics. Source: 1437958_2020.htm (CIK: 1437958, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' (Deficit) Equity
Notes to the Consolidated Financial Statements
Financial Statement Schedule
Schedule II-Valuation and Qualifying Accounts
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of
CDK Global, Inc.
Hoffman Estates, Illinois
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CDK Global, Inc. and subsidiaries (the "Company") as of June 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders' (deficit) equity, and cash flows, for each of the three years in the period ended June 30, 2020, and the related notes and the schedule listed in the Index at Item 8 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also 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 June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 6, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.
Changes in Accounting Principle
As discussed in Note 14 to the financial statements, effective July 1, 2019, the Company adopted the Financial Accounting Standards Board Accounting Standards Codification 842, Leases, using the modified retrospective approach.
As discussed in Note 2 to the financial statements, effective July 1, 2018, the Company adopted the Financial Accounting Standards Board Accounting Standards Codification 606, Revenue from Contracts with Customers, using the modified retrospective approach.
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 t

Explanation: Audited financial statements and supplementary data. Source: 1609702_2020.htm (CIK: 1609702, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of February 29, 2020, the Company’s investments include cash and cash equivalents of approximately $1.000 billion, short-term investment securities of $385.6 million and long term investments in auction rate securities of approximately $20.3 million at weighted average interest rates of 1.10%, 1.52% and 1.81%, respectively. The book value of these investments is representative of their fair values.
The Company’s senior unsecured notes have fixed interest rates and are not subject to interest rate risk. As of February 29, 2020, the fair value of the senior unsecured notes was $1.126 billion, which is based on quoted prices in active markets for identical instruments compared to the carrying value of approximately $1.495 billion.
ITEM 8

Explanation: Quantitative and qualitative market risk disclosures. Source: 886158_2020.htm (CIK: 886158, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data.
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1659352_2020.htm (CIK: 1659352, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.