ITEM 1A. Risk Factors
Investors should consider carefully the following risk factors in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K that we believe are applicable to our businesses and the industries in which we operate. While we believe we have identified the key risk factors affecting our businesses, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our results of operations.
A significant portion of our cash, cash equivalents and investments are held by our foreign subsidiaries and could affect future liquidity needs.
As of May 30, 2020, $16.2 million, or approximately 35% of our cash, cash equivalents and investments was held by our foreign subsidiaries. While we intend to use some of the cash held outside the United States to fund our international operations and growth, when we encounter a significant need for liquidity domestically or at a particular location that we cannot fulfill through other internal or external sources, our liquidity requirements could necessitate transfers of existing cash balances between our subsidiaries or to the United States. Some of these subsidiaries are located in jurisdictions that require foreign government approval before a cash repatriation can occur.
We may not achieve our plan for sales growth and margin targets.
We have established both margin and expense targets to grow our sales with new and existing customers. If we do not achieve our growth objectives, the complexity of our global infrastructure makes it difficult to leverage our fixed cost structure to align with the size of our operations. Factors that could have a significant effect on our ability to achieve these goals include the following:
•
Failure to achieve our sales and margin growth objectives in our product lines and business units;
•
Failure to identify, consummate and successfully integrate acquisitions;
•
Declining gross margin reflecting competitive pricing pressures or product mix; and
•
Limitations on our ability to leverage our support-function cost structure while maintaining an adequate structure to achieve our growth objectives.
We have historically incurred significant charges for inventory obsolescence, and may incur similar charges in the future.
We maintain significant inventories in an effort to ensure that customers have a reliable source of supply. Our products generally support industrial machinery powered by tube technology. As technology evolves and companies replace this capital equipment, the market for our products potentially declines. In addition, the market for many of our other products changes rapidly resulting from the development of new technologies, evolving industry standards, frequent new product introductions by some of our suppliers and changing end-user demand, which can contribute to the decline in value or obsolescence of our inventory. We do not have many long-term supply contracts with our customers. If we fail to anticipate the changing needs of our customers or we do not accurately forecast customer demand, our customers may not place orders with us, and we may accumulate significant inventories of products that we may be unable to sell or return to our vendors. This may result in a decline in the value of our inventory.
We face competitive pressures that could have a material adverse effect on our business.
Our overall competitive position depends on a number of factors including price, engineering capability, vendor representation, product diversity, lead times and the level of customer service. There are very few vacuum tube competitors in the markets we serve. There are also a limited number of Chinese manufacturers whose ability to produce vacuum tubes has progressed over the past several years. The most significant competitive risk comes from technical obsolescence. Canvys faces many competitors in the

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 355948_2020.htm (CIK: 355948, 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
ITEM 7A.

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1787304_2020.htm (CIK: 1787304, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities that we hold. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. In a prolonged low interest rate environment, including a reduction of LIBOR to zero, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net interest income and potentially adversely affecting our operating results. During the fiscal year ended December 31, 2020, certain of the investments in our comprehensive investment portfolio had floating interest rates. These floating rate investments were primarily based on floating LIBOR and typically have durations of one to three months after which they reset to current market interest rates. Additionally, some of these investments have LIBOR floors. The Company also has revolving credit facilities that are generally based on floating LIBOR. Assuming no changes to our balance sheet as of December 31, 2020 and no new defaults by portfolio companies, a hypothetical one percent decrease in LIBOR on our comprehensive floating rate assets and liabilities would increase our net investment income by approximately one cent per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2020 and no new defaults by portfolio companies, a hypothetical one percent increase in LIBOR on our comprehensive floating rate assets and liabilities would decrease our net investment income by approximately one cent per average share over the next twelve months. However, we may hedge against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures, options, swaps and forward contracts subject to the requirements of the
1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in any benefits of certain changes in interest rates with respect to our portfolio of investments. At December 31, 2020, we have no interest rate hedging instruments outstanding on our balance sheet.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1743415_2020.htm (CIK: 1743415, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risks
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. To reduce these risks, we monitor the financial condition of our customers and limit credit exposure by collecting in advance and setting credit limits as we deem appropriate. In addition, our investment strategy has historically been to invest in financial instruments that are highly liquid and readily convertible into cash and that mature within three months from the date of purchase. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates.
In August 2019, we issued $500.0 million aggregate principal amount of the Notes. The Notes have a fixed annual interest rate of 0.125%; therefore, we do not have economic interest rate exposure with respect to the Notes. However, the fair value of the Notes is exposed to interest rate risk. Generally, the fair market value of the Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the Notes is affected by our common stock price. The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. Additionally, we carry the Notes at face value less unamortized discount and issuance costs on our balance sheet, and we present the fair value for required disclosure purposes only.
We had cash and cash equivalents and marketable securities of $542.6 million at December 31, 2020. Our cash equivalents and marketable securities consist of highly liquid, investment-grade commercial paper, corporate bonds, and U.S. treasury bonds. The carrying amount of our cash equivalents and marketable securities reasonably approximates fair value due to the highly liquid nature of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, however, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We therefore do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
We do not believe our cash equivalents and marketable securities have significant risk of default or illiquidity. While we believe our cash equivalents and marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In
addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. We cannot be assured that we will not experience losses on these deposits.
Foreign Currency Risk
While we primarily transact with customers in the U.S. Dollar, we also transact in foreign currencies, including the Euro, British Pound, Canadian Dollar, Australian Dollar, Singapore Dollar, Philippine Peso, South African Rand, Malaysian Ringgit, Romanian Leu, Hong Kong Dollar, Japanese Yen, and Polish Zloty, due to foreign o

Explanation: Quantitative and qualitative market risk disclosures. Source: 1666134_2020.htm (CIK: 1666134, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
Index
Page
Management’s Responsibilities for Financial Statements
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Audited Consolidated Financial Statements
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
Select Quarterly Financial Data (Unaudited)
Supplementary Information on Oil and Gas Producing Activities (Unaudited)
Management’s Responsibilities for Financial Statements
To the Stockholders of Marathon Oil Corporation:
The accompanying consolidated financial statements of Marathon Oil Corporation and its consolidated subsidiaries (“Marathon Oil”) are the responsibility of management and have been prepared in conformity with accounting principles generally accepted in the United States. They necessarily include some amounts that are based on best judgments and estimates. The financial information displayed in other sections of this Annual Report on Form 10-K is consistent with these consolidated financial statements.
Marathon Oil seeks to assure the objectivity and integrity of its financial records by careful selection of its managers, by organization arrangements that provide an appropriate division of responsibility and by communications programs aimed at assuring that its policies and methods are understood throughout the organization.
The Board of Directors pursues its oversight role in the area of financial reporting and internal control over financial reporting through its Audit and Finance Committee. This Committee, composed solely of independent directors, regularly meets (jointly and separately) with the independent registered public accounting firm, management and internal auditors to monitor the proper discharge by each of their responsibilities relative to internal accounting controls and the consolidated financial statements.
/s/ Lee M. Tillman/s/ Dane E. Whitehead
Chairman, President and Chief Executive OfficerExecutive Vice President and Chief Financial Officer
Management’s Report on Internal Control over Financial Reporting
To the Stockholders of Marathon Oil Corporation:
Marathon Oil’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13(a) - 15(f) under the Securities Exchange Act of 1934). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
An evaluation of the design and effectiveness of our internal control over financial reporting, based on the 2013 framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on the results of this evaluation, Marathon Oil’s management concluded that its internal control over financial reporting was effective as of December 31, 2020.
The effectiveness of Marathon Oil’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public

Explanation: Audited financial statements and supplementary data. Source: 101778_2020.htm (CIK: 101778, 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
Executive Summary
Set forth below is summary financial information for the years ended December 31, 2020, 2019 and 2018. This information is not necessarily indicative of results of future operations, and should be read in conjunction with Part I, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes thereto included in Part II, Item 8 of this Annual Report to fully understand factors that may affect the comparability of the information presented below.
Key Business Metric - Non-GAAP Financial Measures
Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important measure to the Company is Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”).
EBITDA is a non-GAAP financial measure. We believe EBITDA provides helpful information with respect to our operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of our day-to-day operations. Management uses EBITDA (1) to compare our operating performance on a consistent basis, (2) to calculate incentive compensation for our employees, (3) for planning purposes including the preparation of our internal annual operating budget, (4) to evaluate the performance and effectiveness of our operational strategies, and (5) to assess compliance with various metrics associated with the agreements governing our indebtedness. Accordingly, we believe that EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management. We define EBITDA as net income plus (a) total depreciation and amortization, (b) interest expense, net, and (c) income tax expense.
The following table is a reconciliation of Net income to EBITDA for the years ended December 31,
Use of Non-GAAP Financial Measures
EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP
and should not be considered as alternatives to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP.
EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.
Results of Operations
The following tables summarize revenue results for the years ended December 31, 2020, 2019 and 2018:
Because many of our international customers require us to ship their orders to freight forwarders located in the United States, we cannot be certain about the ultimate destination of the product. The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for years ended December 31, 2020 and 2019:
The following table represents our estimate of sales by geographic regions based on our understanding of ultimate product destination based on customer interactions, customer locations and other factors for the years ended December 31, 2019 and 2018:
Revenue
2020 Compared with 2019
Product Revenue. Product revenue increased 21.4% for the year ended December 31, 2020 an

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


Item 1A.
Risk Factors
We operate in a dynamic and rapidly changing business environment that involves substantial risk and uncertainty, and these risks may change over time. The following discussion addresses some of the risks and uncertainties that could cause, or contribute to causing, actual results to differ materially from expectations. In evaluating our business, you should pay particular attention to the descriptions of risks and uncertainties described below. If any of these risks actually occur, our business, financial condition, or results of operations could be materially and adversely affected.
The COVID-19 pandemic and related global economic impacts have adversely affected our business and are expected to continue to adversely affect our business, financial condition and results of operations. The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020, and has negatively affected the U.S. and global economy. In response to this pandemic, federal, state, county and local governments and public health organizations and authorities around the world have implemented a variety of measures intended to control the spread of the virus including quarantines, “stay-at-home” orders, travel restrictions, school closures, business limitations and closures, social distancing and hygiene requirements. These measures have adversely affected workforces, customers, economies and global supply chains, and resulted in significant travel and transport restrictions - all of which have combined to lead to an economic downturn. It has also disrupted the normal operations of many businesses, including ours.
As a result of the COVID-19 pandemic, state and local governmental mandates required a forced shutdown of our facility which may impact us for an extended period. In response, in April 2020 we furloughed approximately 50% of our employee base at that time, principally within our operations area. While most of our operations employees subsequently have been phased back into employment, these actions materially impacted our productivity. Effective June 1, 2020, we also enacted a significant reduction-in-force, or RIF, that reduced our active workforce by approximately 25% and included the elimination of senior-level sales, marketing, information technology, and operations personnel as well as executive-level sales and marketing positions. Since March 2020, a significant number of our executive and staff employees have been and continue to be working from home. The widespread outbreak of COVID-19 could also adversely affect our workforce in terms of serious health issues and absenteeism, which could further materially impact our productivity. The pandemic has also interfered with general commercial activity related to our supply chain, including our raw material and components sources. We have experienced widespread instances of suppliers temporarily closing their operations, delaying order fulfillment or limiting their production, impacting our ability to produce finished goods and deliver to our customers. In our Traditional segment, our brick-and-mortar customers began closing their stores to foot traffic in March, with tentative plans to re-open on a rolling schedule that may lead into the fall timeframe or later. We have also experienced widespread instances of distributors reducing or closing their operations, impacting our ability to maintain significant levels of sales through our wholesale sales customers. In addition, trade shows, industry events and product demonstrations have been preemptively cancelled for the critical production season leading up to the calendar year-end 2020 holiday season. As a result, our selling activities and our ability to convert those activities into sales have been, and we expect will continue to be, adversely impacted by the pandemic. In our Online Channels segment, our transactional website charlesandcolva

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1015155_2020.htm (CIK: 1015155, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data.
The following selected consolidated financial data should be read in conjunction with Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes included in Part II, Item 8, Financial Statements, of this Annual Report on Form 10-K. The selected consolidated statements of operations data presented below for the years ended April 30, 2020, 2019 and 2018 and the consolidated balance sheet data as of April 30, 2020 and 2019 are derived from our audited consolidated financial statements that are included elsewhere in this Annual Report on Form 10-K. The consolidated balance sheet data as of April 30, 2018 is derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes, and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in Annual Report on Form 10-K. Our historical results are not necessarily indicative of our future results.
Consolidated Statements of Operations:
(1) Includes stock-based compensation expense as follows:
(2) Includes employer payroll taxes on employee stock transactions as follows (information for fiscal year 2018 is not meaningful):
(3) Includes amortization of acquired intangibles as follows:
(4) Includes acquisition-related expenses as follows:
Consolidated Balance Sheet Data:
Item 7.

Explanation: Selected financial data and key metrics. Source: 1707753_2020.htm (CIK: 1707753, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate and Market Risk
The primary objective of our investment activities is to preserve principal while supporting the Company's liquidity requirements. To achieve this objective, we maintain a diversified portfolio of cash equivalents and short- and long-term investments in a variety of high quality securities, including U.S. treasury and U.S. government agency securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S. government agency securities, cash deposits, and money market funds. The securities are classified as available-for-sale and consequently are recorded at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive loss. The weighted average duration of our portfolio as of December 31, 2020, was approximately 0.7 years. If interest rates rise, the market value of our investments may decline, which could result in a realized loss if we are forced to sell an investment before its scheduled maturity. A hypothetical increase in interest rate by 25 basis points would have resulted in a decrease in the fair value of our net investment position of approximately $10.5 million as of December 31, 2020. We do not utilize derivative financial instruments to manage our interest rate risks.
Uncertain financial markets could result in a tightening in the credit markets, a reduced level of liquidity in many financial markets, and extreme volatility in fixed income and credit markets. The credit ratings of the securities we have invested in could deteriorate and may have an adverse impact on the carrying value of these investments.
Foreign Exchange Risk
The majority of our revenue, expense, and capital purchasing activities are transacted in U.S. dollars. However, we generally sell our products and services in local currencies where we have direct distribution channels. We operate in a number of markets on a direct sales basis and incur operating expenses in local currencies. We also purchase certain product components from non-U.S. suppliers in local currency. As a result, because a portion of our operations consist of sales activities outside of the U.S., we have foreign exchange exposures to non-U.S. dollar revenues, operating expenses, accounts receivable, accounts payable, and foreign currency bank balances.
For the year ended December 31, 2020, sales denominated in foreign currencies were approximately 23% of total revenue. The objective of our hedging program is to mitigate the impact of changes in currency exchange rates on our net cash flow from foreign currency denominated sales and expenses. For the year ended December 31, 2020, our revenue would have decreased by approximately $72.6 million if the U.S. dollar exchange rate strengthened by 10%. We also hedge the net recognized non-functional currency balance sheet exposures with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in exchange rates. A 10% strengthening of the U.S. dollar exchange rate against all currencies to which we have exposure, after considering foreign currency hedges and offsetting positions as of December 31, 2020, would have resulted in an approximately $1.7 million increase in the carrying amounts of those net assets. Actual gains and losses in the future may differ materially from the hypothetical gains and losses discussed above based on changes in the timing and amount of foreign currency exchange rate movements and our actual exposure and hedging transactions. Bank counterparties to foreign exchange forward contracts expose us to credit-related losses in the event of their nonperformance. To mitigate that risk, we only contract with counterparties that meet certain minimum requirements under our counterparty risk assessment process. We monitor credit ratings and potential downgrades on at least

Explanation: Quantitative and qualitative market risk disclosures. Source: 1035267_2020.htm (CIK: 1035267, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors.
The following section includes the most significant factors that may adversely affect our business and operations. You should carefully consider the risks and uncertainties described below and all information contained in this Annual Report on Form 10-K before deciding to invest in our common stock. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects would likely be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
Summary of Risk Factors
An investment in us is subject to a number of risks, including risks related to our financial position and capital requirements, risks related to the discovery, development and regulatory approval of our product candidates, risks related to our reliance on third parties, risks related to commercialization of our product candidates, risks related to our business operations and industry, risks related to intellectual property and risks related to making an investment in our securities. The following list summarizes some, but not all, of these risks. Please read the information in the following section entitled in its entirety for a more thorough description of these and other risks.
•
We anticipate that we will continue to incur significant losses for the foreseeable future, and if we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.
•
If we are unable to obtain regulatory approval to market avacopan or other drug products in the United States and foreign jurisdictions, we will not be permitted to commercialize such drug products.
•
Even if we obtain regulatory approval for avacopan in ANCA vasculitis, or for any of our other drug candidates for other indications, we or our collaborative partners will still face extensive regulatory requirements and our drug products may face future development and regulatory difficulties.
•
If any of our drug candidates receives regulatory approval and we or others later identify undesirable side effects caused by the drug candidate, our ability to market and derive revenue from the drugs could be compromised.
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Even if our drug candidates do obtain regulatory approval they may never achieve market acceptance or commercial success.
•
The development of new drugs is a highly risky undertaking which involves a lengthy process, and our drug discovery and development activities therefore may not result in products that are approved for marketing and sale by the applicable regulatory authorities on the time schedule we have planned, or at all, or result in substantial payments to us.
•
If we are required to suspend or discontinue clinical trials due to side effects or other safety risks, or if we are required to conduct studies on the long-term effects associated with the use of our drug candidates, our efforts to commercialize our products could be delayed or halted.
•
Interim, “top-line,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
•
We rely on third parties to conduct all our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our drug candidates.
•
The terms of our credit facility place restrictions on our operating and financial flexibility.
•
Any orphan drug designations we receive may not confer marketing exclusivity or other benefits.
•
We rely on third party contract manufacturing organizations to manufacture and supply our drug candidates for us. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1340652_2020.htm (CIK: 1340652, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR BUSINESS
War, terrorism, other acts of violence or natural or manmade disasters such as a global pandemic may affect the markets in which the Company operates, the Company's customers, the Company's delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial condition.
The Company's business may be adversely affected by instability, disruption or destruction in the geographic regions in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, food, fire, earthquake, storm or pandemic events and spread of disease (including the recent outbreak of the coronavirus commonly referred to as "COVID- 19"). Such events may cause customers to suspend their decisions on using the Company's services and otherwise affect their ability to meet their obligations to us by making payments on our existing equipment leases, make it impossible to contact our customers and potential customers as well as potential sources of future financing, for our customers to visit our physical locations, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with our existing business as well as our planned expansion into the mobility business. These events also pose significant risks to the Company's personnel and to physical facilities and operations, which could materially adversely affect the Company's financial results.
The ongoing circumstances resulting from the COVID-19 virus outbreak magnify the challenges faced from our continuing efforts to introduce and sell our services in a challenging environment and could have an impact on our business and financial results.
We have a history of losses and can provide no assurance of our future operating results.
We have experienced net losses and negative cash flows from operating activities, and we expect such losses and negative cash flows to continue in the foreseeable future. As of December 31, 2020, and 2019, we had working capital deficit of $4,784,105 and $5,935,500, respectively. For the years ended December 31, 2020 and 2019, we incurred net losses of $1,270,650 and $10,123,380, respectively. The opinion of our independent registered public accountants on our audited financial statements as of and for the years ended December 31, 2020 and 2019 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon raising capital from financing transactions and future sales.
We have a limited operating history, which may make it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have a relatively short operating history and have been delivering SWARM solutions, our proprietary audience-driven business intelligence solution, since January 2018, and are now in the process of building SWARM into a SaaS (software-as-a-service) solution. As a result, it may be difficult to evaluate in an investment in our stock. Furthermore, we operate in an industry that is characterized by rapid technological innovation, intense competition, changing customer needs and frequent introduction of new products, technologies and services. We have encountered, and we will continue to encounter, risks and uncertainties frequently experienced by companies in evolving industries. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in the market, or we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.
Our future success will depend in large part on our ability to, among other things:
● market acceptance of

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 743758_2020.htm (CIK: 743758, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8.
Financial Statements and Supplementary Data
Our Financial Statements of are attached as Appendix A (following Exhibits) and included as part of this Form 10-K Report. A list of our Financial Statements is provided in response to Item 15 of this Form 10-K Report.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1766352_2020.htm (CIK: 1766352, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Corporation and ESH REIT may seek to reduce earnings and cash flow volatility associated with changes in interest rates and commodity prices by entering into financial arrangements to provide a hedge against a portion of the risks associated with such volatility, when applicable. We have exposure to such risks to the extent they are not hedged. We may enter into derivative financial arrangements to the extent they meet the foregoing objectives. We do not use derivatives for trading or speculative purposes.
The Corporation
The Corporation currently has limited exposure to market risk from changes in interest rates. As of December 31, 2020, the Corporation's variable rate debt consisted of $49.8 million drawn on its revolving credit facility. If market rates of interest were to fluctuate by 1.0%, interest expense would increase or decrease by $0.5 million annually, assuming that the amount of outstanding Corporation variable rate debt remains at $49.8 million.
ESH REIT
As of December 31, 2020, $623.0 million of ESH REIT’s outstanding gross debt of $2.7 billion had a variable interest rate. ESH REIT is a counterparty to an interest rate swap at a fixed rate of 1.175%. The notional amount of the interest rate swap as of December 31, 2020 was $100.0 million, which is reduced by $50.0 million every six months until the swap matures in September 2021. The remaining $523.0 million of outstanding variable interest rate debt not subject to the interest rate swap remains subject to interest rate risk. If market rates of interest were to fluctuate by 1.0%, interest expense would increase or decrease by $5.2 million annually, assuming that the amount outstanding under ESH REIT’s unhedged variable interest rate debt remains at $523.0 million.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1581164_2020.htm (CIK: 1581164, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
Emerging growth companies are not required to provide the information required by this item.
ITEM 7.

Explanation: Selected financial data and key metrics. Source: 1445831_2020.htm (CIK: 1445831, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
You should carefully consider each of the following risks, which we believe are the principal risks that we face and of which we are currently aware, and all of the other information in this report. The risks described below relate to our business, governmental regulations, financial conditions and markets, the Spin-off, and our securities.
Should any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially and adversely affected, the trading price of our common stock could decline, and you could lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
A significant portion of our revenue is derived from a few large contracts, and the loss or material reduction of any of these contracts could have a material adverse effect on our results of operations and cash flows.
Aggregate revenue from our two largest contracts amounted to approximately $0.7 billion, or 48.3% of our revenue for the year ended December 31, 2020. As of December 31, 2020, our two largest contracts were the K-BOSSS and the OMDAC-SWACA contracts. The K-BOSSS contract is exercised through September 28, 2021. The K-BOSSS contract was re-competed as a CENTCOM task order under the Logistics Civil Augmentation Program Five (LOGCAP V) contract vehicle, which was awarded on April 12, 2019. Each basic IDIQ contract ordering period is an initial five-year ordering period with options for five additional one-year ordering periods. Vectrus is one of the four award recipients of the basic IDIQ contract and received task orders in the INDOPACOM Setting the Theater Task Order and associated Performance Task Order and the CENTCOM Setting the Theater Task Order and associated Performance Task Order (the LOGCAP V Award). The OMDAC-SWACA contract was re-competed in 2020, and on December 29, 2020, the U.S. Army announced that we were re-awarded this contract. Performance on the newly awarded contract began on March 1, 2021. The new award is an approximately $882.5 million cost-plus-fixed-fee contract with an estimated completion date of December 26, 2025.
The K-BOSSS and OMDAC-SWACA contracts each accounted for more than 10% of our revenue for the year ended December 31, 2020 and the transition from K-BOSSS to LOGCAP V, and the re-compete award of the OMDAC-SWACA contract will continue to have a significant impact on our revenue. Our revenue, results of operations and cash flows are highly dependent on these existing contracts and the continued transition to LOGCAP V. The loss or material reduction of any of these contracts could have a material adverse effect on our revenue, results of operations and cash flows. See "Significant Contracts" in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on Form 10-K.
We may not be successful in winning new contracts or recompeting our existing contracts, which could have an adverse impact on our business and prospects.
Our contracts with the federal government are typically awarded through a rigorous competitive bidding process. This competitive bidding process presents a number of risks, including the following:
•We may bid on programs for which the work activities, deliverables, and timelines are vague or for which the solicitation incompletely describes the actual work, which may result in inaccurate pricing assumptions;
•We may incur substantial costs and spend a significant amount of managerial time and effort preparing bids and proposals; and
•We may realize the lost opportunity cost of not bidding on and winning other contracts that we may have pursued otherwise.
If we are unable to win a particular new contract, we may be prevented from providing the customer the services that are purchased under that contract for a number of years.
In addition, we face rigorous competition and pricing pressures for any additional contract awards from the U.S. go

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1601548_2020.htm (CIK: 1601548, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A.Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks related to changes in foreign currency exchange rates and interest rates. We believe our exposure to market risks is immaterial.
Exchange Rate Sensitivity
We are exposed to market risks associated with changes in foreign currency exchange rates because we generate a portion of our revenues and incur a portion of our expenses in currencies other than the U.S. dollar. As of December 31, 2020, we were exposed to changes in exchange rates between the U.S. dollar and the Canadian dollar, Indian rupee, Chinese yuan, British pound, euro, Colombian peso and Serbian dinar. We hedge material foreign currency exchange rate exposures when feasible using forward contracts. These instruments are subject to fluctuations in foreign currency exchange rates and credit risk. Credit risk is managed through careful selection and ongoing evaluation of the financial institutions utilized as counterparties. Refer to Note 14, Derivatives, in the Notes to Consolidated Financial Statements for further discussion.
Interest Rate Sensitivity
As of December 31, 2020, there was no outstanding balance and $124.8 million of available borrowing capacity under our credit facility. To the extent we have outstanding borrowings under the credit facility, our interest expense will fluctuate as the interest rate for the line of credit floats based, at our option, on the prime rate plus a margin or the one-month LIBOR rate plus a margin.
During the third quarter of 2018 and 2020, we issued the 2023 Notes and the 2025 Notes, respectively, which have a fixed interest rate of 2.375% and 1.250%, respectively. The fair value of the Notes may increase or decrease for various reasons, including fluctuations in the market price of our common stock, fluctuations in market interest rates and fluctuations in general economic conditions. Based upon the quoted market price as of December 31, 2020, the fair value of the 2023 Notes and 2025 Notes was approximately $7.1 million and $263.4 million, respectively.
We had unrestricted cash and cash equivalents totaling $83.2 million at December 31, 2020 and $70.7 million at December 31, 2019. The unrestricted cash and cash equivalents are primarily held for working capital purposes and acquisitions. We do not enter into investments for trading or speculative purposes.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1085869_2020.htm (CIK: 1085869, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6.
SELECTED FINANCIAL DATA
Factors affecting the comparability of our Selected Financial Data are as follows:
•
During the year ended February 29, 2020, the provision for income taxes reflected a tax expense of $34.6 million primarily related to a valuation allowance recorded during the year on our domestic net deferred tax assets that the Company believes are more likely than not that they will not be realized. See Note 13 to the accompanying consolidated financial statements for additional information on this matter.
•
During fiscal year ended February 29, 2020, we recorded impairment loss of $19.1 million, which consists of write-offs of intangible assets for tradenames and dealer relationships associated with LoJack products, right-of-use assets for tower infrastructure leases resulting from early terminations and property and equipment associated with the terminated towers.
•
In October and November 2019, we entered into separate, privately negotiated purchase agreements to repurchase approximately $94.9 million in aggregate principal amount of these notes for $94.7 million. The repurchase resulted in $2.4 million of loss on extinguishment of debt See Note 10 to the accompanying consolidated financial statements for additional information on the convertible notes.
•
The new trial for Omega patent infringement claim began on September 23, 2019 in the U.S. District Court for the Middle District of Florida, and on September 30, 2019, the jury determined that the we infringed two of the four patents; however, the jury found that there was no willful infringement. On November 26, 2019 the U.S. District Court for the Middle District of Florida entered judgment, awarding Omega damages of $4.6 million, together with pre-judgment interest in the amount of $0.8 million through September 30, 2019. In connection with this claim, we have accrued our best estimate of the probable liability based on reasonable royalty rates for similar technologies for the fiscal year ended February 29, 2020. See Note 19 to the accompanying consolidated financial statements for additional information on this matter.
•
On April 12, 2019, we acquired Synovia Solutions, a North American market leader in fleet safety and management for K-12 school bus and state and local government fleets, for a total cash purchase of $49.8 million. See Note 2 to the accompanying consolidated financial statements for additional information on this acquisition.
•
On April 8, 2019, the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) vacated all compensatory and enhanced damages and attorney’s fees awarded by the trial court to the plaintiff in the Omega patent infringement lawsuit. The Federal Circuit also set aside the jury’s verdict that our alleged infringement was willful, and remanded the case for a new trial. As a result, we reversed substantially all of the $19.1 million of the previously accrued legal reserve during the fourth quarter of fiscal 2019. The reversal of the loss contingency was recorded in general and administrative expense for the fiscal year ended February 28, 2019. See Note 19 to the accompanying consolidated financial statements for additional information on this matter.
•
On March 19, 2019, we completed the acquisition of LoJack Mexico, the exclusive licensee of LoJack technology for the Mexican market, for a purchase price of $14.3 million. See Note 2 to the accompanying consolidated financial statements for additional information on this acquisition.
•
As of February 28, 2019, we had made loans aggregating £5,700,000, or approximately $7.6 million to Smart Driver Club, an equity method investee, which bear interest at an annual interest rate of 8% with all principal and all unpaid interest due in 2021. Our equity in the net loss of Smart Driver Club amounted $1.8 million, $1.4 million and $1.3 million for the fiscal years ended February 28, 2019, 2018 and 2017. As of February 28, 2019, we determined that this investment i

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


Item 1A. Risk Factors
Factors Affecting Our Business
The following factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could necessitate unforeseen changes to the ways we operate our businesses or could otherwise result in changes that differ materially from our expectations. In addition to the specific factors mentioned in this report, we may also be affected by other factors that affect businesses generally such as global or regional changes in economic, business or political conditions, acts of war, terrorism, pandemics, climate change and natural disasters.
Market and Liquidity Risks
Our business is subject to significant credit risk.
In the normal course of our businesses, we are involved in the execution, settlement and financing of various customer and principal securities and derivative transactions. These activities are transacted on a cash, margin or delivery-versus-payment basis and are subject to the risk of counterparty or customer nonperformance. Even when transactions are collateralized by the underlying security or other securities, we still face the risks associated with changes in the market value of the collateral through settlement date or during the time when margin is extended and collateral has not been secured or the counterparty defaults before collateral or margin can be adjusted. We may also incur credit risk in our derivative transactions to the extent such transactions result in uncollateralized credit exposure to our counterparties.
We seek to control the risk associated with these transactions by establishing and monitoring credit limits and by monitoring collateral and transaction levels daily. We may require counterparties to deposit additional collateral or return collateral pledged. In certain circumstances, we may, under industry regulations, purchase the underlying securities in the market and seek reimbursement for any losses from the counterparty. However, there can be no assurances that our risk controls will be successful.
A credit-rating agency downgrade could significantly impact our business.
Maintaining an investment grade credit rating is important to our business and financial condition. If our credit ratings were downgraded, or if rating agencies indicate that a downgrade may occur, our business, financial position and results of operations could be adversely affected and perceptions of our financial strength could be damaged, which could adversely affect our client relationships. Additionally, we intend to access the capital markets and issue debt securities from time to time, and a decrease in our credit ratings or outlook could adversely affect our liquidity and competitive position, increase our borrowing costs, decrease demand for our debt securities and increase the expense and difficulty of financing our operations. In addition, in connection with certain over-the-counter derivative contract arrangements and certain other trading arrangements, we may be required to provide additional collateral to counterparties, exchanges and clearing organizations in the event of a credit rating downgrade. Such a downgrade could also negatively impact the prices of our debt securities. There can be no assurance that our credit ratings will not be downgraded.
Our principal trading and investments expose us to risk of loss.
A considerable portion of our revenues is derived from trading in which we act as principal. We may incur trading losses relating to the purchase, sale or short sale of fixed income, high yield, international, convertible, and equity securities, loans, derivative contracts and commodities for our own account. In any period, we may experience losses on our inventory positions as a result of the level and volatility of equity, fixed income and commodity prices (including oil prices), lack of trading volume and illiquidity. From time to time, we may engage in a large block trade in a single secur

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1084580_2020.htm (CIK: 1084580, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6 - Selected Financial Data
(1) Amounts presented are used in the two-class earnings per common share calculation. This method was adopted by the Company in second quarter of 2019.
(2) See section entitled "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below for a reconciliation to most comparable GAAP equivalent.
(3) Presented on a tax equivalent basis using a 35% tax rate for the 2016 and 2017 periods and a 21% tax rate for the 2018, 2019, and 2020 periods.
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Some of the financial measures included in this report are not measures of financial condition or performance recognized by GAAP. These non-GAAP financial measures include tangible common shareholders' equity, tangible book value per common share and the ratio of tangible common equity to tangible assets, net income and diluted earnings per common share excluding acquisition and due diligence fees as well as allowance for loan loss as a percentage of total loans excluding PPP loans. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy, as well as better understand and evaluate the Company’s core financial results for the periods in question.
The following presents these non-GAAP financial measures along with their most directly comparable financial measures calculated in accordance with GAAP:
Item 7

Explanation: Selected financial data and key metrics. Source: 1412707_2020.htm (CIK: 1412707, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation

The information required by this Item will be included in the Company’s 2021 Proxy Statement to be filed with the SEC and is incorporated herein by reference.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1692427_2020.htm (CIK: 1692427, 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 management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and notes thereto contained elsewhere in this Report. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements.
Overview
We are a New York-based real estate finance company taxed as a REIT that specializes in originating, servicing and managing a portfolio of first mortgage loans. We offer short-term, secured, non-banking loans (sometimes referred to as “hard money” loans), which we may renew or extend on, before or after their initial term expires, to real estate investors to fund their acquisition, renovation, rehabilitation or development of residential or commercial properties located in the New York metropolitan area, including New Jersey and Connecticut, and in Florida. As a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders on an annual basis.
In order to maintain our qualification for taxation as a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders each year. To the extent we distribute less than 100% of our taxable income to our shareholders (but more than 90%) we will maintain our qualification for taxation as a REIT, but the undistributed portion will be subject to regular corporate income taxes. As a REIT, we may also be subject to federal excise taxes and minimum state taxes. We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act. In addition, in order for us to qualify for taxation as a REIT, not more than 50% in value of our outstanding common shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year, and at least 100 persons must beneficially own our stock during at least 335 days of a taxable year of 12 months, or during a proportionate portion of a shorter taxable year. To help ensure that we meet the tests, our restated certificate of incorporation restricts the acquisition and ownership of our capital stock. The ownership limitation is fixed at 4.0% of our outstanding shares of capital stock, by value or number of shares, whichever is more restrictive.
The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. Each loan is secured by a first mortgage lien on real estate. In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $30,000 to a maximum of $2.5 million. Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $3 million. Our loans typically have a maximum initial term of 12 months bearing interest at a fixed rate of 9% to 14% per year. In addition, we usually receive origination fees or “points” ranging from 0% to 2% of the original principal amount of the loan as well as other fees relating to underwriting and funding the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction co

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


Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Cash and marketable securities are deposited with major banks throughout the world. Such deposits are placed with high quality institutions and the amounts invested in any single institution are limited to the extent possible in order to minimize concentration of counterparty credit risk. Marketable securities may consist of time deposits, registered money market funds, U.S. agency securities, U.S. Treasury securities, commercial paper, non-U.S. government securities and corporate debt securities. We have not incurred any credit risk losses related to deposits in cash or investments in marketable securities.
Certain of our contracts are subject to foreign currency risk. We limit exposure to foreign currency fluctuations in most of our engineering and construction contracts through provisions that require client payments in currencies corresponding to the currency in which cost is incurred. As a result, we generally do not need to hedge foreign currency cash flows for contract work performed. However, in cases where revenue and expenses are not denominated in the same currency, we may hedge our exposure, if material and if an efficient market exists, as discussed below.
We utilize derivative instruments to mitigate certain financial exposures, including currency and oil price risk associated with engineering and construction contracts, currency risk associated with monetary assets and liabilities denominated in nonfunctional currencies and risk associated with interest rate volatility. As of December 31, 2020, we had total gross notional amounts of $977 million of foreign currency contracts (primarily related to the Canadian Dollar, Chinese Yuan, British Pound, Euro, Indian Rupee and Philippine Peso) and $28 million of commodity contracts. The foreign currency and commodity contracts are of varying duration, none of which extend beyond December 2024. Our historical gains and losses associated with foreign currency contracts have typically been immaterial, and have largely mitigated the exposures being hedged. We do not enter into derivative transactions for speculative purposes.
Our results reported by foreign subsidiaries with non-U.S. dollar functional currencies are also affected by foreign currency volatility. When the U.S. dollar appreciates against the non-U.S. dollar functional currencies of these subsidiaries, our reported revenue, cost and earnings, after translation into U.S. dollars, are lower than what they would have been had the U.S. dollar depreciated against the same foreign currencies or if there had been no change in the exchange rates.
Our long-term debt obligations typically carry a fixed-rate coupon, and therefore, our exposure to interest rate risk is not material.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1124198_2020.htm (CIK: 1124198, 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
Our Operations
GLPI is a self-administered and self-managed Pennsylvania REIT. The Company was formed from the 2013 tax-free spin-off of the real estate assets of Penn and was incorporated in Pennsylvania on February 13, 2013, as a wholly-owned subsidiary of Penn. On November 1, 2013, Penn contributed to GLPI, through a series of internal corporate restructurings, substantially all of the assets and liabilities associated with Penn's real property interests and real estate development business, as well as the assets and liabilities of the TRS Properties and then spun-off GLPI to holders of Penn's common and preferred stock in the Spin-Off. The Company elected on its U.S. federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT and the Company, together with an indirect wholly-owned subsidiary of the Company, GLP Holdings, Inc., jointly elected to treat each of GLP Holdings, Inc., Louisiana Casino Cruises, Inc. (d/b/a Hollywood Casino Baton Rouge) and Penn Cecil Maryland, Inc. (d/b/a Hollywood Casino Perryville) as a "taxable REIT subsidiary" effective on the first day of the first taxable year of GLPI as a REIT. In addition, during 2020, the Company and Tropicana LV, LLC, a wholly owned subsidiary of the Company which holds the real estate of Tropicana Las Vegas, elected to treat Tropicana LV, LLC as a “taxable REIT subsidiary”. As a result of the Spin-Off, GLPI owns substantially all of Penn's former real property assets (as of the consummation of the Spin-Off) and leases back most of those assets to Penn for use by its subsidiaries, under the Penn Master Lease and owns and operates the TRS Properties through its indirect wholly-owned subsidiary, GLP Holdings, Inc. The assets and liabilities of GLPI were recorded at their respective historical carrying values at the time of the Spin-Off.
GLPI's primary business consists of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements. As of December 31, 2020, GLPI's portfolio consisted of interests in 48 gaming and related facilities, including the TRS Segment, the real property associated with 33 gaming and related facilities operated by Penn, the real property associated with 7 gaming and related facilities operated by Caesars, the real property associated with 4 gaming and related facilities operated by Boyd and the real property associated with the Casino Queen in East St. Louis, Illinois. These facilities, including our corporate headquarters building, are geographically diversified across 16 states and contain approximately 24.3 million square feet. As of December 31, 2020, our properties were 100% occupied. We expect to continue growing our portfolio by pursuing opportunities to acquire additional gaming facilities to lease to gaming operators under prudent terms.
Amended Pinnacle Master Lease, Boyd Master Lease and Belterra Park Lease
In April 2016, the Company acquired substantially all of the real estate assets of Pinnacle for approximately $4.8 billion. GLPI originally leased these assets back to Pinnacle, under the Pinnacle Master Lease, the term of which expires on April 30, 2031, with no purchase option, followed by four remaining 5-year renewal options (exercisable by the tenant) on the same terms and conditions. On October 15, 2018, the Company completed the previously announced Penn-Pinnacle Merger to accommodate Penn's acquisition of the majority of Pinnacle's operations, pursuant to a definitive agreement and plan of merger between Penn and Pinnacle, dated December 17, 2017. Concurrent with the Penn-Pinnacle Merger, the Company amended the Pinnacle Master Lease to allow for the sale of the operating assets of Ameristar Casino Hotel Kansas City, Ameristar Casino Resort Spa St. Charles and Belterra Casino Resort from Pinnacle to Boyd and entered into the Boyd Master


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.
Overview
Because we changed our fiscal year from the year ended September 30 to the calendar year by filing a transition report on Form 10-K on March 27, 2020, we are presenting information for the years ended December 31, 2020 and 2019, the three months ended December 31, 2019 and 2018.
Since January 30, 2017, following a change of control, we have been engaged in the business of developing and marketing nutritional products that promote wellness and a healthy lifestyle. Our business to date has involved the purchase of products from three suppliers in Taiwan and the sale of these products to four unrelated customers, one of which accounted for all of our sales in the years ended December 31, 2020 and 2019. We did not have any sales during the second, third and fourth quarters of 2020 and the first three quarters of 2019. We sell product in bulk to companies who may use our products as ingredients in their products or sell the products they purchase from us to their own customers.
All of our sales to date have been sales of cordyceps related products and, in the quarter ended June 30, 2018, metallothionein MT-3 elizer. Cordyceps is a fungus that is used in traditional Chinese medicine. Cordyceps sinensis has been described as a medicine in old Chinese medical books and Tibetan medicine. It is a rare combination of a caterpillar and a fungus and found at altitudes above 4500m in Sikkim. The encoded protein in metallothionein MT-3 is a growth inhibitory factor, and reduced levels of the protein are observed in the brains of individuals with some metal-linked neurodegenerative disorders such as Alzheimer’s disease. Our present inventory is for cordyseps products. We have not sold metallothionein MT-3 elizer since the quarter ended June 30, 2018 and we do not have any orders for metallothionein MT-3 elizer. We cannot assure you that we will be able to sell metallothionein MT-3 elizer in the future. We may also seek to market other products which we see as complimentary to our present products; however, we have not entered into negotiations with respect to the distribution of other products, and we cannot assure you that we will be able to market any other products.
All of our revenue for the years ended December 31, 2020 and 2019 represents sales to one customer which were made during the three months ended March 31, 2020 and the three months ended December 31, 2019. We believe that our failure to sell products in the second, third and fourth quarters of 2020 resulted substantially from the COVID - 19 pandemic and actions taken by governments to address the pandemic. We believe our failure to generate sales during the first three quarters of 2019 reflects a downturn in the market in the PRC for cordyseps products as well as the political conditions in Hong Kong, and we cannot assure you that the market will improve. We also cannot assure you the political instability in Hong Kong will not affect our sales, since our customers in 2017 and 2018 were Hong Kong based customers who sold their products in the PRC and none of these customers has made purchases from us since the quarter ended December 31, 2018. We cannot assure you that these factors will not affect our ability to generate revenues in the future and, to the extent that any of these factors affects our ability to generate revenue, we may not be able

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1622996_2020.htm (CIK: 1622996, 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 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to enhance overall financial disclosure with commentary on the operating results, liquidity, capital resources, and financial condition of Raven Industries, Inc. (the Company or Raven). This commentary provides management's analysis of the primary drivers of year-over-year changes in key financial statement elements, business segment results, and the impact of accounting principles on the Company's financial statements. The most significant risks and uncertainties impacting the operating performance and financial condition of the Company are discussed in section Item 1A. "Risk Factors" of this Annual Report on Form 10-K (Form 10-K).
This discussion should be read in conjunction with Raven's Consolidated Financial Statements and notes thereto in Item 8 of this Form 10-K.
The MD&A is organized as follows:
•Executive Summary
•Results of Operations - Segment Analysis
•Liquidity and Capital Resources
•Off-Balance Sheet Arrangements and Contractual Obligations
•Critical Accounting Policies and Estimates
•Accounting Pronouncements
EXECUTIVE SUMMARY
Raven is a diversified technology company providing a variety of products to customers within the industrial, agricultural, geomembrane, construction, aerospace/defense and commercial lighter-than-air markets. The Company is comprised of three unique operating units, classified into reportable business segments: Applied Technology Division (Applied Technology), Engineered Films Division (Engineered Films), and Aerostar Division (Aerostar). Segment information is reported consistent with the Company's management reporting structure.
Management uses a number of measures to assess the Company's performance including:
•Consolidated net sales, gross margin, operating income, operating margin, net income and diluted earnings per share.
•Cash flow from operations and shareholder returns.
•Return on sales, average assets and average equity.
•Segment net sales, gross profit, gross margin, operating margin and operating income. At the segment level, operating income does not include an allocation of general and administrative expenses.
Vision and Strategy
Raven's purpose is to solve great challenges. Great challenges require great solutions. Raven’s three unique divisions share resources, ideas and a passion to create technology that helps the world grow more food, produce more energy, protect the environment and live safely.
The Raven business model is its platform for success. Raven's business model is defensible, sustainable, and gives us a consistent approach in the pursuit of quality financial results. This overall approach to creating value, which is employed across the three business segments, is summarized as follows:
•Intentionally serve market segments with strong growth prospects in both the near and long term.
•Consistently manage a pipeline of growth initiatives within our market segments.
•Aggressively compete on quality, service, innovation, and peak performance.
•Attract and develop exceptional leaders who understand business deeply and can thrive in the Raven Way.
•On a path of continuous improvement, consistently taking actions to streamline processes, improve efficiencies, and increase value delivered to our customers.
•Value our balance sheet as a source of strength and stability.
•Corporate responsibility is a top priority.
The following discussion highlights the consolidated operating results for the years ended January 31, 2020, 2019 and 2018. Segment operating results are more fully explained in the Results of Operations - Segment Analysis section.
Results of Operations - Fiscal 2020 compared to Fiscal 2019
The Company's net sales in fiscal 2020 were $382.5 million, a decrease of $24.1 million, or 5.9%, from the prior year's net sales of $406.7 million. Applied Technology achie

Explanation: Management Discussion and Analysis section with financial performance data. Source: 82166_2020.htm (CIK: 82166, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA.
(1)Operating profit for the years ended December 31, 2020 and 2019 was adversely impacted by impairment charges of $1,550 and $930 to adjust the carrying value of the long-lived assets related to the Company’s natural gas interests.
(2)Income tax expense (benefit) for the year ended December 31, 2017 includes the one-time effect of a $7,447 income tax benefit resulting from reduced federal income tax rates under the Tax Cuts and Jobs Act of 2017.
ITEM 7.

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


Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY LANGUAGE
The following discussion and analysis should be read in conjunction with our selected consolidated historical financial data together with the consolidated pro forma financial data and historical financial statements and related notes thereto included elsewhere in this annual report. We make statements in this section that may be forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this annual report entitled “Statement on Forward-looking Information.”
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements contained elsewhere in this annual report, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). Our notes to the condensed consolidated financial statements contained elsewhere in this annual report describe the significant accounting policies essential to our condensed consolidated financial statements. Preparation of our financial statements requires estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions that we have used are appropriate and correct based on information available at the time they were made. These estimates, judgments and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenues and expenses during the period presented. If there are material differences between these estimates, judgments and assumptions and actual facts, our financial statements may be affected.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. There are areas in which our judgment in selecting among available alternatives would not produce a materially different result, but there are some areas in which our judgment in selecting among available alternatives would produce a materially different result. See the notes to the condensed consolidated financial statements that contain additional information regarding our accounting policies and other disclosures.
Management’s Discussion and Analysis Overview
The Company is a self-administered and self-managed REIT that owns, operates, manages, acquires, develops and redevelops self storage properties (“stores” or “properties”) in the United States. Our stores are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers. As of December 31, 2020, the Company owned and operated, or managed, through its wholly owned subsidiaries, thirteen stores located in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and Oklahoma. The Company was formerly registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, closed end management investment company. The Securities and Exchange Commission’s (“SEC”) order approving the Company’s application to deregister from the 1940 Act was granted on January 19, 2016. On January 19, 2016, the Company changed its name to Global Self Storage, Inc. from Self Storage Group, Inc., changed its SEC registration from an investment company to an operating company reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and listed its common stock on NASDAQ under the symbol “SELF”.
The Company was incorporated on December 12, 1996 under the laws of the state of Maryland. The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). To the extent the Company continues to qualify as a REIT, it will not generally be subject to U.S. federal income tax, with certain limited exceptions, on its taxable incom

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


Item 6. Selected Financial Data
Selected Historical Consolidated and Combined Financial Data
The following tables present certain selected historical consolidated and combined financial information as of and for each of the years in the five-year period ended December 31, 2020. Prior to the Spin-Off on October 1, 2018, our historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 1, 2018, our financial statements are presented on a combined basis and for the periods subsequent to October 1, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Financial Statements”). The selected historical consolidated and combined financial data as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019, and 2018 are derived from the historical audited Consolidated and Combined Financial Statements as included in this Form 10-K. The selected historical combined financial data as of December 31, 2018, 2017 and 2016 and for the years ended December 31, 2017 and 2016 are derived from historical audited combined financial statements not included in this Annual Report on Form 10-K.
The selected historical consolidated and combined financial data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical Consolidated and Combined Financial Statements and the accompanying Notes thereto included elsewhere in this Annual Report on Form 10-K. For each of the periods presented prior to the Spin-Off, our business was wholly owned by Honeywell. The financial information included for these periods may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent, publicly traded company during such periods. In addition, our historical consolidated and combined financial information does not reflect changes that we have experienced or expect to continue to experience in the future as a result of our separation from Honeywell, including changes in the financing, operations, cost structure and personnel needs of our business.
Further, the historical consolidated and combined financial information includes allocations of certain Honeywell corporate expenses, as described in Note 27 Related Party Transactions with Honeywell in our Consolidated and Combined Financial Statements. We believe the assumptions and methodologies underlying the allocation of these expenses are reasonable. However, such expenses may not be indicative of the actual level of expense that we would have incurred if we had operated as an independent, publicly traded company or of the costs expected to be incurred in the future.
(1)
2018 Net income was impacted by an internal restructuring of Garrett’s business resulting in a tax benefit of $907 million.
(2)
2017 Net income was impacted by the U.S. Tax Cuts and Jobs Act (the “Tax Act”) resulting in a tax expense of $1,335 million.
(3)
On October 1, 2018, the date of consummation of the Spin-Off, 74,070,852 shares of the Company’s common stock were distributed to Honeywell stockholders of record as of September 18, 2018. Basic and Diluted EPS for all periods prior to the Spin-Off reflect the number of distributed shares, or 74,070,852 shares. These shares were treated as issued and outstanding from January 1, 2016 for purposes of calculating historical earnings per share.
Non-GAAP Measures
It is management’s intent to provide non-GAAP financial information to supplement the understanding of our business operations and performance, and it should be considered by the reader in addition to, but not instead of, the

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


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 727510_2020.htm (CIK: 727510, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data
The following selected consolidated financial data should be read in conjunction with Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes included in Part II, Item 8, Financial Statements, of this Annual Report on Form 10-K (this “Form 10-K”). The consolidated statements of operations data for the fiscal years ended January 31, 2020, 2019 and 2018, and the consolidated balance sheet data as of January 31, 2020 and 2019 are derived from our audited consolidated financial statements and related notes included elsewhere in this Form 10-K. The consolidated statement of operations data for the fiscal year ended January 31, 2017 and the consolidated balance sheet data as of January 31, 2018 are derived from our audited consolidated financial statements and related notes, which are not included in this Form 10-K. The consolidated statement of operations data for the fiscal year ended January 31, 2016 and the consolidated balance sheet data as of January 31, 2017 and 2016 are derived from consolidated financial statements, which are also not included in this Form 10-K. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this Form 10-K. Our historical results are not necessarily indicative of our results in any future period.
(1)
Includes stock-based compensation expense as follows (in thousands):
* The summary consolidated financial data for the year ended January 31, 2016 does not reflect the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). All periods subsequent reflect the adoption of Topic 606.
** Operating lease right-of-use assets and operating lease liabilities, current and non-current were added during the year ended January 31, 2020 to reflect the adoption of Accounting Standards Update No. 2016-02, codified as Accounting Standards Codification 842, Leases.
Item 7.

Explanation: Selected financial data and key metrics. Source: 1441816_2020.htm (CIK: 1441816, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company’s primary market risk exposure will be interest rate risk with respect to its indebtedness, credit risk and market risk with respect to use of derivative financial instruments for hedging purposes and foreign currency risk relating to investments made outside of the United States. As of December 31, 2020, the Company had no borrowings and has not used any derivative financial instruments.
Interest Rate Risk
As of December 31, 2020, the Company had originated a floating rate commercial mortgage loan, held for investment in the amount of $8,990,000, the East 12th Street Loan, which is exposed to interest rate changes in LIBOR. The loan is subject to an interest rate floor to mitigate some of the negative impact interest rates would have on the Company’s consolidated financial statements. As LIBOR is currently below the interest rate floor associated with the Company’s loan, the changes in LIBOR during the year ended December 31, 2020 have not exposed the Company to any interest rate risk.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1664780_2020.htm (CIK: 1664780, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
Risks Relating to Our Business
The full effect of the COVID-19 pandemic on our business is currently unknown but it may adversely affect our business and operating results.
The full impacts of the global emergence of COVID-19 on our business and financial results remain unknown. We continue to conduct business with modifications to our manufacturing production levels, mill and distribution center housekeeping and cleanliness protocols, employee travel, employee work locations, and virtualization or cancellation of certain sales and marketing events, among other modifications. Companies and various governmental agencies have taken precautionary and preemptive actions to address COVID-19, and further actions may yet be taken that alter our normal business operations as well as those in our industry. The U.S. Department of Homeland Security (DHS) has continued to designate the forest products industry, and thereby wood products manufacturing and building materials distribution, as part of the Essential Critical Infrastructure Workforce. However, state and local agencies are not mandated to follow the DHS designations, and in certain geographies across the U.S., additional restrictions have been imposed that further limit or preclude residential construction activity. Furthermore, a re-acceleration of COVID-19 cases, or delays in vaccine distribution or effectiveness, could prompt state or local officials to reinstitute restrictions that could limit or constrain building activity. All of our manufacturing and distribution facilities are operating, but we have experienced periodic disruptions at many locations due to COVID-19. We may be required to implement temporary curtailments and to operate both manufacturing and distribution facilities at reduced levels, which would result in negative impacts on our business, financial condition, results of operations, and cash flows. In addition, the economic consequences of COVID-19 may adversely affect the pace of household formation rates and residential repair-and-remodeling activity due to high unemployment rates, lower wages, reduced consumer confidence, availability of construction labor, materials, and building lots, homebuyers' access to and cost of financing, and housing affordability, as well as other factors. We continue to actively monitor evolving developments and may take actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our associates, customers, suppliers, and stockholders.
Many of the products we manufacture or purchase and resell are commodities whose price is determined by the market's supply and demand for such products, and the markets in which we operate are cyclical and competitive.
Many of the building products we produce or distribute, including OSB, plywood, and lumber, are commodities that are widely available from other manufacturers or distributors with prices and volumes determined frequently in an auction market based on participants' perceptions of short-term supply and demand factors. At times, the price for any one or more of the products we produce or distribute may fall below our cash production or purchase costs, requiring us to either incur short-term losses on product sales or cease production at one or more of our manufacturing facilities. Therefore, our profitability with respect to these commodity products depends, in significant part, on effective facilities maintenance programs, and on managing our cost structure, particularly raw materials and labor, which represent the largest components of our operating costs. Commodity wood product prices have historically been volatile in response to industry operating rates, net import and export activity, inventory levels in various distribution channels, and seasonal demand patterns. Commodity price volatility also affects our distribution business, with falling price environments gen

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1328581_2020.htm (CIK: 1328581, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. EXECUTIVE COMPENSATION
Information concerning executive compensation required by this item is hereby incorporated by reference to the Company’s definitive proxy statement, which will be filed with the Commission within 120 days after the close of fiscal 2020.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 46619_2020.htm (CIK: 46619, 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 relevant sections in our 2021 Proxy Statement, under the captions entitled Board of Directors and Corporate Governance; Executive Officers; Executive Compensation and Director Compensation or will be provided in an amendment filed on Form 10-K/A.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1045609_2020.htm (CIK: 1045609, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
The information contained in our 2021 Proxy Statement with respect to executive compensation and transactions under the heading “Compensation Discussion and Analysis” is incorporated herein by reference in response to this item.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 216085_2020.htm (CIK: 216085, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our investment portfolio includes cash and cash equivalents. Our main investment objective is the preservation of investment capital. We believe that our investment policy is conservative, both in the duration of our investments and the credit quality of the investments we hold. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions to manage exposure to interest rate changes. As such, we believe that, the securities we hold are subject to market risk, changes in the financial standing of the issuer of such securities and our interest income is sensitive to changes in the general level of U.S. interest rates. Additionally, we are subject to the impact of stock price fluctuations of our common stock in that we have a liability-classified warrant in which 1.0 million shares of SIGA common stock can be purchased at a strike price of $1.50 per share. For every $1 increase in the stock price of SIGA, the intrinsic value of the liability-classified warrant will increase by approximately $1.0 million.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1010086_2020.htm (CIK: 1010086, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.