ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this annual report on Form 10-K.
Overview
We are a company providing technology solutions to improve the clinical effectiveness and efficiency of healthcare providers. Our mission is to develop, manufacture and market innovative proprietary products and services that assist our customers in evaluating and treating chronic diseases. In 2011, we began commercializing our first patented and U.S. Food and Drug Administration, or FDA, cleared product, which measured arterial blood flow in the extremities to aid in the diagnosis of peripheral arterial disease, or PAD. In March 2015, we received FDA 510(k) clearance for the next generation version of our product, QuantaFlo®, which we began commercializing in August 2015. In September 2020, we entered into an agreement with a private company to exclusively market and distribute a new product line in the United States, including Puerto Rico, and, in September and October 2020, in an effort to provide access to potentially complementary product offerings, we made investments in two private companies working in other product areas. We believe our current products and services, and any future products or services that we may offer, position us to provide valuable information to our customer base, which in turn permits them to better guide patient care.
In the year ended December 31, 2020, we had total revenues of $38.6 million and net income of $14.0 million compared to total revenues of $32.8 million and net income of $15.1 million in 2019. We had an income tax expense of $2.5 million in 2020, compared to an income tax benefit of $4.4 million in 2019, primarily due to the release of a tax valuation allowance in the third quarter of 2019. Our pre-tax net income was $16.5 million in 2020 compared to $10.7 million in 2019.
Recent Developments
Late in the first quarter and into the second quarter of 2020, we experienced decreased test volumes due to COVID-19 related “social distancing” and other executive orders mandating “shelter-in-place” or similar restrictions, which limited patient visits by our customers. As such restrictions have been lifted around the country and non-emergency medical services resumed in late 2020, our business has returned to and even exceeded pre-COVID-19 levels. In the third and fourth quarters of 2020, we experienced even higher test volumes as our customers accelerated usage due to a backlog of untested patients. However, as we look forward into 2021, there is uncertainty that the recent roll-back in restrictions will be maintained. New, additional or different restrictions could be imposed, which could impact the usage of our product by our customers. Other customers who have fixed-fee licenses could decide to cancel their licenses if they are not able to use our device as frequently as they had anticipated in light of such restrictions.
In September 2020, we entered into an agreement with a private company to exclusively market and distribute a new product line in the United States, including Puerto Rico, for which we are currently developing a marketing plan. Under this distribution agreement, we agreed to purchase $1.2 million of product inventory. We also agreed to make royalty payments ranging from 0% to 10% of net sales depending on the ave

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


Item 1A. Risk Factors
The following factors, among others, could cause our actual results to differ materially from those expressed or implied in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our management from time to time. These factors may have a material adverse effect on our business, financial condition, liquidity, results of operations, funds from operations, or FFO, and prospects, which we refer to herein as a material adverse effect on us or as materially and adversely affecting us, and you should carefully consider them. Additional risks and uncertainties not presently known to us or which are currently not believed to be material may also affect our actual results. We may update these factors in our future periodic reports.
Summary of Risk Factors
The following summarizes our material risk factors. However, this summary is not intended to be a comprehensive and complete list of all risk factors identified by the Company. Refer to the following pages of this section for additional details regarding these summarized risk factors and other additional risk factors identified by the Company.
●The ongoing novel coronavirus (COVID-19) pandemic and governmental restrictions intended to prevent its spread, as well as other future epidemics, pandemics or public health crises, could have a significant negative impact on our business, financial condition, results of operations, cash flow and liquidity and our ability to access the capital markets, satisfy our debt service obligations and make distributions to our shareholders.
●Conditions that adversely affect the general retail environment could materially and adversely affect us.
●Some of our properties depend on anchor stores or other large nationally recognized tenants to attract shoppers and we could be materially and adversely affected by the loss of one or more of these anchors or tenants.
●We face potential adverse effects from tenant bankruptcies.
●We face a wide range of competition that could affect our ability to operate profitably, including e-commerce.
●Vacant space at our properties could materially and adversely affect us.
●We may not be able to lease newly developed properties to or renew leases and relet space at existing properties with an appropriate mix of tenants, if at all.
●Our international activities may subject us to risks that are different from or greater than those associated with our domestic operations.
●We face risks associated with the acquisition, development, redevelopment and expansion of properties.
●We have a substantial debt burden that could affect our future operations.
●The agreements that govern our indebtedness contain various covenants that impose restrictions on us that might affect our ability to operate freely.
●Disruption in the capital and credit markets may adversely affect our ability to access external financings for our growth and ongoing debt service requirements.
●Adverse changes in our credit ratings could affect our borrowing capacity and borrowing terms.
●Simon and certain subsidiaries of the Operating Partnership have elected to be taxed as REITs in the United States. The failure to maintain Simon’s or the Subsidiary REITs’ qualifications as REITs or changes in applicable tax laws or regulations could result in adverse tax consequences.
●If the Operating Partnership fails to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences.
●Our ownership of TRSs is subject to certain restrictions, and we will be required to pay a 100% penalty tax on certain income or deductions if our transactions with our TRSs are not conducted on arm’s-length terms.
●We have limited control with respect to some properties that are partially owned or managed by third parties, which may adversely affect our ability to sell or refinance them.
●The Operating Partnership guarantees debt or otherwise provides support for a n

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


Item 11. EXECUTIVE COMPENSATION
The information called for by this item will be set forth in our Proxy Statement and is incorporated herein by reference.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1418091_2020.htm (CIK: 1418091, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6.
Selected Financial Data
The following table contains our selected financial data for, or at the end of, each of the five years ended December 31, 2020. You should read this table in conjunction with our consolidated financial statements and related notes contained elsewhere in this Annual Report and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(1)
As discussed in Note 1 “Summary of Significant Accounting Policies-Investments in Limited Liability Companies”, our consolidated financial statements only include the accounts of our consolidated investments.
(2)
Net income and earnings per share during 2020 includes the unfavorable impact of the two hospital facility vacancies that occurred as of June 1, 2019 and September 30, 2019, as discussed herein. Net income and earnings per share during 2019 includes $2.0 million of net gains (net of related transaction costs) related to sales of real estate assets. Net income and earnings per share during 2018 includes (i) $4.5 million of hurricane recovery proceeds in excess of damaged property write-downs; (ii) $1.2 million of hurricane-related business interruption insurance recovery proceeds (approximately $500,000 of which related to 2017), and; (iii) $1.7 million of revenue related to a lease termination agreement. Net income and earnings per share during 2017 includes: (i) $2.0 million of hurricane recovery proceeds received in excess of damaged property write-downs, and; (ii) a $27.2 million net gain (net of related transaction costs) recorded in connection with the Arlington transaction, as previously disclosed.
(3)
In September 2019, as discussed in Note 3 to the consolidated financial statements - New Construction, Acquisitions and Dispositions, we entered into an agreement whereby we own a 95% ownership interest in Grayson Properties II LP, which developed, constructed, owns and operates the Texoma Medical Plaza II. The core and shell of this MOB was substantially completed in December 2020. During 2020, a construction loan was obtained by Grayson Properties II LP which has an outstanding balance of $12.3 million as of December 31, 2020. Also in March, 2017, Arlington Medical Properties, LLC a formerly jointly-owned LLC in which we held an 85% non-controlling ownership interest, sold the real estate assets of St. Mary’s Professional Office Building which generated $57.3 million of net cash proceeds to us. Investments in LLCs at December 31, 2016 includes a member loan issued to St. Mary’s Professional Office Building, amounting to $21.6 million, which was repaid to us in 2017 when the real estate assets were sold.
(4)
Excludes third-party debt that is non-recourse to us, incurred by unconsolidated LLCs in which we hold various non-controlling equity interests as follows: $39.7 million as of December 31, 2020 (including the $12.3 million construction loan obtained by Grayson Properties II LP, as mentioned above), $26.6 million as of December 31, 2019, $27.3 million as of December 31, 2018, $27.8 million as of December 31, 2017 and $28.4 million as of December 31, 2016. (See Note 8 to the consolidated financial statements).
Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO, in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we interpret the definition. FFO adjusts for the effects of gains, such as gains on transactions during the periods presented. To the extent a REIT recognizes a gain or loss with respect to the sale of incidental asse

Explanation: Selected financial data and key metrics. Source: 798783_2020.htm (CIK: 798783, 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 cash balance is $8,000 as of our fiscal year end of September 30, 2020. Our cash balance is not sufficient to fund our limited levels of operations for any period of time.
Our net loss for our fiscal year ended September 30, 2020 was $26,918 and was attributable to general and administrative expenses. Our net loss for the previous fiscal year end was $26,507, which was comprised of general and administrative expenses.
As of September 30, 2020 and 2019, we held $8,000 cash on hand which were comprised the entirety of our cash or cash equivalents.
On May 18, 2016 the Company sold 5,000,000 shares of common stock at a price of $0.005 per share, resulting in $25,000 proceeds to the Company. These shares were sold pursuant to our effective S-1 Registration Statement. The amount of $25,000 has been recorded as subscription receivable.
We have been utilizing and may utilize funds from our Chief Executive Officer, Engchoon Peh, who has informally agreed to advance funds “on a need be basis” to allow us to pay for filing fees, and professional fees that we may incur. Mr. Peh has no formal commitment, arrangement or legal obligation to advance or loan funds to the company, and the advances were not required to be repaid by the Company to Mr. Peh. As a start-up stage company, we have a very limited operating history.
We are a start-up stage company and have generated minimal revenue to date. Long term financing is required to fully implement our business plan. The exact amount of funding will depend on funding required for full implementation of our business plan.
The Company intends to monetize the mobile application ‘Road Marshall’ through third party advertisements during the next fiscal year. These advertisements could include, but not strictly be limited to, their products, services, and or other mobile applications that are not in direct competition to our own (such as mobile application(s) for games for example). We hope to commence monetization efforts in conjunction with growing the user base of the application.
Our marketing efforts to date have been minimal, however we have plans to, in the following fiscal year, advertise through a combination of social media, online advertising and print media. Our marketing efforts remain in the planning stages and we do not have any definitive arrangements at this time.
It should be noted that our plans for monetization and marketing of our application are the same as those expressed at our fiscal year ended September 30, 2018, and September 30, 2019, but as of the fiscal year ended September 30, 2020, these plans have not yet been realized in any capacity.
Item 7A.

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1657249_2020.htm (CIK: 1657249, 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.
This section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.
All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors" and in this Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations".
The forward-looking statements included in this Form 10-K are made only as of the date hereof. We undertake no obligation to publicly update any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
Shake Shack Inc. Form 10-K | 53
OVERVIEW
Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, chicken sandwiches, hot dogs, crinkle cut fries, shakes, frozen custard, beer and wine. Our fine dining heritage and commitment to community building, hospitality and the sourcing of premium ingredients is what we call "fine casual." Fine casual couples the ease, value and convenience of fast casual concepts with the high standards of excellence grounded in our fine dining heritage - thoughtful ingredient sourcing and preparation, hospitality and quality.
Our mission is to Stand For Something Good in all aspects of our business, including the exceptional team we hire and train, the premium ingredients making up our menu, our community engagement and the design of our Shacks. Stand For Something Good is a call to action for all of our stakeholders - our team, guests, communities, suppliers and investors - and we actively invite them all to share in this philosophy with us. This commitment drives our integration into the local communities in which we operate and fosters a deep and lasting connection with our guests.
Recent Development and Trends
We experienced steady recovery in the business during the fourth quarter of 2020, all while continuing to support our Shack teams, our guests and the communities in which we operate during the COVID-19 global pandemic. COVID-19 was officially declared a global pandemic by the World Health Organization in March 2020. The virus has impacted all global economies, and particularly in the United States, it has resulted in varying levels of restrictions and shutdowns implemented by national, state, and local authorities. In response to the outbreak, in March 2020, we closed all dining rooms and temporarily shifted to a “to-go” only operating model in all of our domestic Company-operated Shacks. With a prioritization on health and safety, we h

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1620533_2020.htm (CIK: 1620533, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6.
Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 7.

Explanation: Selected financial data and key metrics. Source: 943861_2020.htm (CIK: 943861, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data
Consistent with the amendments to Regulation S-K, we are not required to disclose information previously required by this item.
Item 7.

Explanation: Selected financial data and key metrics. Source: 1145197_2020.htm (CIK: 1145197, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data
Because we are considered to be a “smaller reporting company” under SEC rules and regulations, we are not required to provide the information required by this item in this report.
Item 7.

Explanation: Selected financial data and key metrics. Source: 1764013_2020.htm (CIK: 1764013, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
PFSweb, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
PFSweb, Inc.
Allen, TX
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of PFSweb, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 31, 2021 expressed an adverse opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition of Service Fees
The Company recorded $256.6 million of service fee revenue for the year ended De

Explanation: Audited financial statements and supplementary data. Source: 1095315_2020.htm (CIK: 1095315, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk. Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified two primary sources of market risk: interest rate risk and price risk.
Interest Rate Risk
Overview. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and LIBOR (basis risk).
Our ALCO committee establishes broad policy limits with respect to interest rate risk. ALCO establishes specific operating guidelines within the parameters of the board of directors’ policies. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Our ALCO meets monthly to monitor the level of interest rate risk sensitivity to ensure compliance with the board of directors’ approved risk limits.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.
Income Simulation and Economic Value Analysis. Interest rate risk measurement is calculated and reported to the board and ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.
We use two approaches to model interest rate risk: Net Interest Income at Risk (NII at Risk), and Economic Value of Equity (EVE). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.
We report NII at Risk to isolate the change in income related solely to interest earning assets and interest-bearing liabilities. The NII at Risk results included in the table above reflect the analysis used quarterly by management. It models gradual −200, −100, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year peri

Explanation: Quantitative and qualitative market risk disclosures. Source: 1499422_2020.htm (CIK: 1499422, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
The following risk factors may be important to understanding any statement in this Annual Report on Form 10-K or elsewhere. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below. Any one or more of such factors could directly or indirectly cause our actual results of operations and financial condition to vary materially from past or anticipated future results of operations and financial condition. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, results of operations and stock price.
Risks Relating to Our Business
General economic factors may materially adversely affect our business, revenue and profitability.
General conditions in the United States and global economy that are beyond our control may materially adversely affect our business and financial performance. As a retailer that is dependent upon consumer discretionary spending for home décor products, our customers may allocate less money for discretionary purchases as a result of increased levels of unemployment, reduced consumer disposable income, higher interest rates, higher fuel and other energy costs, higher tax rates and other changes in tax laws, foreclosures, bankruptcies, falling real estate and asset prices, reduced availability of consumer credit, higher consumer debt levels, a decline in consumer confidence, inflation, deflation, recession, an overall economic slowdown and other factors that influence consumer spending. The COVID-19 pandemic has created uncertainty in the global economy that has resulted in an unprecedented sharp economic downturn, which has adversely affected our business, revenues and profitability in the first quarter of fiscal year 2021. Our actual results for the remainder of fiscal year 2021 remain subject to a high degree of uncertainty due to uncertainty surrounding the continued duration of the COVID-19 crisis and the public policy response. As a result, the full effect that the outbreak of COVID-19 may have on our financial performance cannot be quantified at this time, and discretionary spending on home décor items could contract in the future. Accordingly, our historical financial information may not be indicative of our future performance, financial condition and results of operations.
In addition, our costs and expenses could be materially adversely impacted by general economic factors such as higher interest rates, higher fuel and other energy costs, higher transportation costs, higher commodity costs, higher costs of labor, tariffs, supply chain disruption or other trade restrictions, insurance and healthcare, increased rental expense, inflation in other costs, higher tax rates and other changes in the tax law and changes in other laws and regulations. The economic factors that affect our operations also affect the operations and economic viability of our suppliers from whom we purchase goods, a factor that can result in an increase in the cost to us of merchandise we sell to our customers.
Outbreaks of communicable disease, or other public health emergencies, such as the current global COVID-19 pandemic, has substantially impacted and will continue to negatively affect our business, results of operations, financial condition and cash flows.
The global COVID-19 pandemic has resulted in significant disruptions to the global economy, and has been substantially impacting our business, results of operations and financial condition.
Following government mandates in certain locations as well as increasing advice from the Centers for Disease Control and Prevention for persons in the United States to take extraordinary health precautions, on March 20, 2020 we announced that we would temporarily close all of our stores nationwide for one week, after which we began to reopen stores in regions that were not required to re

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


ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. These risks are primarily related to foreign exchange risk and changes in short-term interest rates. The potential impact of our exposure to these risks is presented below:
Foreign Exchange Risk
We conduct business in many different countries and currencies. Our business often results in billings issued in a country and currency that differs from that where the expenses related to the service are incurred. In the ordinary course of business, we create numerous intercompany transactions and may have receivables, payables and currencies that are not denominated in the local functional currency. This brings foreign exchange risk to our earnings. The principal foreign exchange risks to which Expeditors is exposed include Chinese Yuan, Euro, Mexican Peso, Canadian Dollar and British Pound.
Foreign exchange rate sensitivity analysis can be quantified by estimating the impact on our earnings as a result of hypothetical changes in the value of the U.S. dollar, our functional currency, relative to the other currencies in which we transact business. All other things being equal, an average 10% weakening of the U.S. dollar, throughout the year ended December 31, 2020, would have had the effect of raising operating income by approximately $69 million. An average 10% strengthening of the U.S. dollar, for the same period, would have the effect of reducing operating income by approximately $56 million. This analysis does not take into account changes in shipping patterns based upon this hypothetical currency fluctuation. For example, a weakening in the U.S. dollar would be expected to increase exports from the United States and decrease imports into the United States over some relevant period of time, but the exact effect of this change cannot be quantified without making speculative assumptions.
We currently do not use derivative financial instruments to manage foreign currency risk and only enter into foreign currency hedging transactions in limited locations where regulatory or commercial limitations restrict our ability to move money freely. Any such hedging activity throughout the year ended December 31, 2020, was insignificant. Net foreign currency losses were approximately $25 million, $9 million and $2 million in 2020, 2019 and 2018, respectively. We had no foreign currency derivatives outstanding at December 31, 2020 and 2019. We instead follow a policy of accelerating international currency settlements to manage foreign exchange risk relative to intercompany billings. As of December 31, 2020, we had $117 million of net unsettled intercompany transactions. The majority of intercompany billings are resolved within 30 days.
Interest Rate Risk
At December 31, 2020, we had cash and cash equivalents of $1,528 million, of which $926 million was invested at various short-term market interest rates. We had no long-term debt at December 31, 2020. A hypothetical change in the interest rate of 10 basis points at December 31, 2020 would not have a significant impact on our earnings.
In management’s opinion, there has been no material change in our interest rate risk exposure between 2020 and 2019.
35.
ITEM 8

Explanation: Quantitative and qualitative market risk disclosures. Source: 746515_2020.htm (CIK: 746515, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be set forth in our Proxy Statement and is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days of the fiscal year ended December 31, 2020.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1655210_2020.htm (CIK: 1655210, 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 information required by this item is incorporated by reference from the 2020 Annual Report under the caption "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: 912767_2020.htm (CIK: 912767, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our “Selected Consolidated Financial Data” and consolidated financial statements and notes thereto included elsewhere in this annual report.
Overview
We are a networking systems, services and software company, providing solutions that enable a wide range of network operators to deploy and manage next-generation networks that deliver services to businesses and consumers. We provide hardware, software and services that enable the transport, routing, switching, aggregation, service delivery and management of video, data and voice traffic on communications networks. Our solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, enterprises, research and education institutions and emerging network operators.
Our solutions include Networking Platforms, including our Converged Packet Optical and Packet Networking portfolios, which can be applied from the network core to end-user access points, and which allow network operators to scale capacity, increase transmission speeds, allocate traffic and adapt dynamically to changing end-user service demands. Our Converged Packet Optical portfolio includes products and solutions that support the connection of content to content and users to content, including in long haul and regional, submarine and data center interconnect networks. Our Packet Networking portfolio includes products and solutions that enable next-generation metro, access and aggregation networks, connecting users to content in applications that include 5G, mobile backhaul, virtualization and enterprise services.
To complement these solutions, we offer Platform Software, which provides management, domain control and specialized applications that automate network lifecycle operations, including provisioning equipment and services, network data, analytics and policy-based assurance to achieve closed loop automation across multi-vendor and multi-domain network environments. Through our Blue Planet® Software suite, we enable customers to transform their business and operations support systems (“OSS”) through software-based automation of their network and IT infrastructures. To complement our hardware and software products, we offer a broad range of services that help our customers build, operate and improve their networks and associated operational environments, including network optimization and migration offerings.
We refer to our complete portfolio vision as the Adaptive Network. The Adaptive Network emphasizes a programmable network infrastructure, software control and automation capabilities, network analytics and intelligence, and related advanced services. By transforming network infrastructures into a dynamic, programmable environment driven by automation and analytics, network operators can realize greater business agility, dynamically adapt to changing end-user service demands and rapidly introduce new revenue-generating services. They can also gain valuable real-time network insights, allowing them to optimize network operation and maximize the return on their network infrastructure investment.
Impact of the COVID-19 Pandemic on our Business and Operations
COVID-19 was declared a pandemic in March 2020 and continues to have a significant impact on the global economy, the industries and customers we serve and our operations. In response to the COVID-19 pandemic, we have prioritized the safety of our employees and business partners, while continuing to support the needs of our customers and communities during this unprecedented period. We have also implemented business continuity plans designed to minimize potential business disruption from the COVID-19 pandemic and to protect our supply chain and customer fulfillment and support operations.
Demand for Products & Se

Explanation: Management Discussion and Analysis section with financial performance data. Source: 936395_2020.htm (CIK: 936395, 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
Overview
The discussion and analysis below includes certain forward-looking statements that are subject to risks, uncertainties and other factors, as described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K, that could cause our actual growth, results of operations, performance, financial position and business prospects and opportunities for this fiscal year and the periods that follow to differ materially from those expressed in, or implied by, those forward-looking statements. Readers are cautioned that forward-looking statements contained in this Annual Report on Form 10-K should be read in conjunction with our disclosure under the heading “FORWARD-LOOKING STATEMENTS” on page 1.
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations and our financial condition and should be read in conjunction with the accompanying consolidated financial statements and the notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. The following sections focus on the key indicators reviewed by management in evaluating our financial condition and operating performance, including the following:
•
Revenues generated from providing water and wastewater services;
•
Revenues from water and wastewater tap sales;
•
Revenues from lot sales at Sky Ranch;
•
Expenses associated with developing our water and land assets;
•
Expenses associated with developing lots at Sky Ranch; and
•
Cash available to continue development of our land, water rights and service agreements
Our MD&A section includes the following items:
Executive Summary - a summary of important financial metrics in fiscal 2020;
Our Business - a general description of our business, our services, and our business strategy;
Critical Accounting Policies and Use of Estimates - a discussion of our critical accounting policies that require critical judgments, assumptions, and estimates;
Results of Operations - an analysis of our results of operations for the three fiscal years presented in our accompanying consolidated financial statements; and
Liquidity, Capital Resources and Financial Position - an analysis of our cash position and cash flows, as well as a discussion of our financial obligations.
Executive Summary
Fiscal 2020 was highlighted by the substantial completion of the initial phase of our Sky Ranch property. Other notable items include the following:
•
Total revenue increased to $25.9 million for fiscal 2020 (a $5.5 million or 27% increase compared to fiscal 2019) primarily due to lot sales and water and wastewater tap fees at Sky Ranch
•
Net income increased to $6.8 million for fiscal 2020 (a $1.9 million or 40% increase compared to fiscal 2019), primarily due to lot sales, partial satisfaction of the contingency related to public improvement reimbursables, and water and wastewater tap fees at Sky Ranch
•
Fully diluted earnings per common share for fiscal 2020 was $0.28 versus $0.20 for fiscal 2019
•
Total assets increased to $89.8 million as of August 31, 2020 (a $6.0 million or 7.2% increase compared to 2019), primarily due to increased cash from payments for lots and water, and wastewater taps at Sky Ranch and a $10.5 million expense reimbursement from the Sky Ranch CAB through bond proceeds of which $4.2 million reduced Land development inventories on the consolidated balance sheet and $6.3 million was recognized as Other income - Reimbursement of construction costs - related party on the consolidated statements of operations and comprehensive income and increased Investments in water and wastewater systems on the consolidated balance sheet; and
•
Total equity increased to $82.0 million as of August 31, 2020 (a $7.3 million or 9.8% increase compared to 2019), primarily due to net income for fiscal 2020
In fiscal 2020, total revenues were $25.9 million, primarily consisting of $1

Explanation: Management Discussion and Analysis section with financial performance data. Source: 276720_2020.htm (CIK: 276720, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
RISK FACTORS
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report, including our financial statements and related notes, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, financial condition and operating results. For risk factors related to the Berkshire Grey Business Combination, see the “Risk Factors” section of our preliminary prospectus/proxy statement when it becomes available.
Risks Relating to Our Search for, and Consummation of or Inability to Consummate, a Business Combination
Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial Business Combination even though a majority of our public stockholders do not support such a combination.
We may not hold a stockholder vote to approve our initial business combination unless the business combination would require stockholder approval under applicable law or stock exchange rules or if we decide to hold a stockholder vote for business or other reasons. For instance, Nasdaq listing rules currently allow us to engage in a tender offer in lieu of a stockholder meeting, but would still require us to obtain stockholder approval if we were seeking to issue more than 20% of our issued and outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our issued and outstanding shares, we would seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange rules, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate our initial business combination even if holders of a majority of the issued and outstanding shares of common stock do not approve of the business combination we consummate.
If we seek stockholder approval of our initial business combination, our initial stockholders, directors and officers have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote, and, depending on the number of public stockholders who vote, may have almost enough votes to approve our initial business combination based on the shares held by our initial stockholders.
Unlike some other blank check companies in which the initial stockholders agree to vote their founder shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, our initial stockholders, directors and officers have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any founder shares, alignment shares and public shares held by them in favor of our initial business combination. As a result, in addition to our initial stockholders’ founder shares and alignment shares, we would need 9,583,334, or 33.33% (assuming all issued and outstanding shares ar

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1824734_2020.htm (CIK: 1824734, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6.
Selected Financial Data
GRAHAM CORPORATION - FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
(for fiscal years ended March 31)
(1) Net (loss) income in fiscal 2019 includes a loss from goodwill and other impairments of $5,320, which is net of an income tax benefit of $1,129. Net (loss) income in fiscal 2018 includes a loss from impairment of goodwill and intangible assets of $12,014, which is net of an income tax benefit of $2,802.
Item 7.

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


ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is contained in a separate section of this Annual Report. See “Index of Financial Statements” (page).
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 72162_2020.htm (CIK: 72162, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data.
As a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are not required to include information otherwise required by this item.
Item 7.

Explanation: Selected financial data and key metrics. Source: 720762_2020.htm (CIK: 720762, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11.Executive Compensation
The information required by this Item will be provided in an amendment to this Annual Report on Form 10-K in accordance with General Instruction G(3) to Form 10-K.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1792044_2020.htm (CIK: 1792044, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Financial Statement Schedules on page.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1313536_2020.htm (CIK: 1313536, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 15 of this Report and is incorporated herein by reference.
ITEM 9.

Explanation: Audited financial statements and supplementary data. Source: 1828914_2020.htm (CIK: 1828914, 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.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction with our financial statements included elsewhere in this annual report.
As at August 31, 2020, the Company has a working capital deficit of $1,088,996 and has not yet established a stabilized source of revenue sufficient to cover operating cost for the foreseeable future. These factors, among others, may raise substantial doubt about the Company’s ability to continue as a going concern.
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Comparison of the years ended August 31, 2020 and, 2019
For the year ended August 31, 2020, we had revenue of $65,848 and cost of revenue of $49,511, as compared to $0 and $0 for the same period in 2019. The Company started with trading of raw bird-nest since fiscal year 2020 and it is an initial stage of our operations.
Our general and administrative expenses were $325,399 for the year ended August 31, 2020, with an increase of $53,619 as compared to $271,780 for the same period in 2019. The increase in general and administrative expenses was primarily due to increased management fees and traveling expense.
Liquidity and Capital Resources
Working Capital
The Company’s current assets consists of cash and cash equivalents of $6,665 and prepaid expense and deposit of $7,728 at August 31, 2020, with a decrease of $59,179 as compared to cash and cash equivalents of $54,467 and prepaid expense of $19,105 at August 31, 2019. The decrease was primarily due to the negative cash flow in the year, as discussed in the section for cash flows below.
As at August 31, 2020, current liabilities consisted of accounts payable and accrued liabilities of $30,137 and due to a related party of $1,073,252, as compared to August 31, 2019 current liabilities consisted of accounts payable and accrued liabilities of $27,000 and due to a related party of $824,699. The increase in current liabilities of $251,690 is primarily due to the operating expenses paid by the related party.
Cash Flows
Cash Flow from Operating Activities
Cash flows provided by operations was $8,804 during the year ended August 31, 2020, compared with cash flows used in operations of $2,509 during the same period in 2019. The increase of $11,313 is mainly due to increase in expenses paid by related party.
Cash Flow from Financing Activities
Cash flows used in financing activities was $57,218 during the year ended August 31, 2020. It consists of advances from related party of $309,249, expenses paid on behalf of related party of $362,099 and repayment to related party of $4,368. Cash flows provided by financing activities was $53,220 during the year ended August 31, 2019. It consists of advances from related party of $1,942,650, expenses paid on behalf of related party of $1,006,698 and repayment to related party of $882,732.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through further issuances of our securities and loans from our executive officers and principal shareholders, including Joseph Ho. Our working capital requirements are expected to increase in line with the growth of our business.
Existing working capital, further advances and debt instruments, and anticipated cash flow are not expected to be adequate to fund our operations and potential acquisitions over the next twelve months. We have no lines of credit or other bank financing arrangements. Generall

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1659207_2020.htm (CIK: 1659207, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. Moreover, many risk factors set forth below should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic. These risks are discussed more fully below and include, but are not limited to, risks related to:
•adverse effects of the COVID-19 pandemic, including a significant reduction in business and personal travel and travel restrictions in regions where our hotels are located, and one or more possible recurrences of COVID-19 cases causing a further reduction in business and personal travel and potential reinstatement of travel restrictions by state or local governments;
•our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements;
•actions by our lenders to accelerate loan balances and foreclose on the hotel properties that are security for our loans if we are unable to make debt service payments or satisfy our other obligations under the forbearance agreements;
•general volatility of the capital markets and the market price of our common and preferred stock;
•availability, terms and deployment of capital;
•unanticipated increases in financing and other costs, including a rise in interest rates;
•availability of qualified personnel to our advisor;
•actual and potential conflicts of interest with Ashford Trust, Ashford Inc. and its subsidiaries (including Ashford LLC, Remington Hotels and Premier) and our executive officers and our non-independent director;
•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
•changes in governmental regulations, accounting rules, tax rates and similar matters;
•our ability to implement effective internal controls to address the material weakness identified in this report;
•the timing or outcome of the SEC investigation;
•legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”) and related rules, regulations and interpretations governing the taxation of REITs; and
•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes.
Risks Related to Our Business and Properties
A financial crisis, economic slowdown, pandemic, or epidemic or other economically disruptive event may harm the operating performance of the hotel industry generally. If such events occur, we may be impacted by declines in occupancy, average daily room rates and/or other operating revenues.
The performance of the lodging industry has been closely linked with the performance of the general economy and, specifically, growth in the U.S. GDP. We invest in hotels that are classified as luxury. In an economic downturn, these types of hotels may be more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates. This characteristic may result from the fact that luxury hotels generally target business and high-end leisure travelers. In periods of economic difficulties or concerns with respect to communicable disease, business and leisure travelers may seek to reduce
travel costs and/or health risks by limiting travel or seeking to reduce costs on their trips. Any economic recession will likely have an adverse effect on our business, operating results and prospects. Our business has been and will continue to be materially affected by the impact of the COVID-19 pandemic, see the risk factor “The outbreak of COVID-19 has and will continue to significantly reduce our occupancy rates and RevPAR.”
As a result of the impact of the COVID-19 pandemic, our ability to continue to have the liquidity necessary to service our debt, meet con

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


ITEM 1A. RISK FACTORS
Described below are certain risks that we believe are applicable to our business and the oil and gas industry in which we operate. Investors should read carefully the following factors as well as the cautionary statements referred to in "Forward-Looking Statements" herein. If any of the risks and uncertainties described below or elsewhere in this Annual Report on Form 10-K actually occur, the Company's business, financial condition or results of operations could be materially adversely affected.
Risk Factor Summary
•The prices for oil, gas and NGL are volatile, and declines in such prices could adversely affect QEP's earnings, cash flows, asset values and stock price.
•The outbreak of COVID-19 and recent oil market developments could adversely impact our financial condition and results of operations.
•Lack of availability of refining, gas processing, storage, gathering or transportation capacity will likely impact results of operations.
•Lower oil, gas and NGL prices or negative adjustments to oil, gas and NGL reserves may result in significant impairment charges.
•Oil and gas reserve estimates are imprecise, may prove to be inaccurate, and are subject to revision. Any significant inaccuracies in QEP's reserve estimates or underlying assumptions may negatively affect the quantities and present value of QEP's reserves.
•QEP may be required to write down its proved undeveloped reserve estimates if it is unable to convert those reserves into proved developed reserves within five years.
•Shortages of qualified personnel and/or oilfield equipment and services as well as QEP's inability to retain or motivate key personnel or transfer knowledge from retiring personnel could negatively impact results of operations.
•Multi-well pad drilling may result in volatility in QEP operating results and delay conversion of PUD reserves.
•Certain of QEP's leaseholds are subject to lease and other agreements that will expire over the next several years unless production in paying quantities is established and maintained on the acreage or on units containing the acreage, certain drilling obligations are satisfied, or the leases are otherwise renewed or extended.
•QEP's identified potential well locations are scheduled over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, QEP may not be able to raise the substantial amount of capital that would be necessary to drill its potential well locations.
•Because the exchange ratio is fixed and because the market price of Diamondback common stock will fluctuate, QEP stockholders cannot be certain of the precise value of the Merger Consideration they will receive in the Merger.
•The Merger may not be completed and the Merger Agreement may be terminated in accordance with its terms. Failure to complete the Merger could negatively impact the price of shares of our common stock, as well as our future business and financial results.
•Our stockholders will have a reduced ownership and voting interest in the combined company after the Merger compared to their current ownership in QEP and will exercise less influence over the combined company’s management.
•If the Merger does not qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (Code), our stockholders may be subject to U.S. federal income tax upon the receipt of Diamondback common stock in the Merger.
•We are subject to business uncertainties while the Merger is pending, which could adversely affect our business.
•The Merger Agreement limits our ability to pursue alternatives to the Merger, which may discourage certain other companies from making favorable alternative transaction proposals and, in specified circumstances, could require us to pay Diamondback a termination fee.
•Our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of

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 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this annual report before making an investment decision with regard to our securities. The statements contained in this annual report include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. The risks set forth below are not the only risks facing us. Additional risks and uncertainties may exist that could also adversely affect our business, prospects or operations. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or a significant part of your investment.
Because we are a shell company, you have no basis on which to evaluate our ability to develop or acquire a business.
We are a shell company which has not been successful in its prior business activities. As a result, you have no basis upon which to evaluate our ability to achieve our business objective of completing a business combination or developing any business. If we fail to complete a business combination, we will not generate any operating revenues. We cannot assure you that we can complete an acquisition or develop a business or ever operate profitably.
Our stockholders may not be afforded an opportunity to vote on our proposed acquisition, which means we may complete an acquisition even though a majority of our stockholders do not support such an acquisition.
We may not seek a stockholder vote before we complete an acquisition unless the acquisition would require stockholder approval under applicable law or if we decide to hold a stockholder vote for business or other legal reasons. Accordingly, we may complete an acquisition even if holders of a majority of our shares do not approve of the business we acquire.
Because of our limited resources, it may be difficult for us to complete an acquisition of a profitable business and any acquisition we may complete is likely to be a start-up or early stage company with no history of revenue of earnings.
We encounter intense competition from individuals and entities seeking to acquire a profitable business opportunity. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. Accordingly, because of our lack of financial resources, our history of unprofitable operations, our delinquency in filing our SEC reports, our stock price and the lack of an active market for our common stock, and the fact that our stock, when it trades, is quoted on the OTC Pink market, it is not likely that we will be able to acquire a profitable operating business.
Because of our lack of cash and our working capital deficiency, we will not have resources to fund our search for a target business and complete a business combination and we will need to raise funds for such activities.
At July 31, 2020, we has cash of $1,025 and a working capital deficiency of approximately $853,026, and, because we have no source of revenue, our working capital deficiency has increased since July 31, 2020. If we are unable to obtain funding for these activities we may be unable to complete an acquisition or file our delinquent SEC quarterly reports. If we are unable to complete a business combination because we do not have sufficient funds available to us, we will be forced to ceas

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1556801_2020.htm (CIK: 1556801, 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 is a discussion and analysis of the Company’s financial condition and results of operations for the years ended December 31, 2020 and 2019, including year-to-year comparisons between 2020 and 2019. Year-to-year comparisons between 2019 and 2018 have been omitted from this Form 10-K, but may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
FINANCIAL HIGHLIGHTS
2020 Consolidated Results of Operations
•Net income of $2.70 billion, or $10.56 per share basic and $10.52 per share diluted
•Net earned premiums of $29.04 billion
•Catastrophe losses of $1.61 billion ($1.27 billion after-tax)
•Net favorable prior year reserve development of $351 million ($276 million after-tax)
•Combined ratio of 95.0%
•Net investment income of $2.23 billion ($1.91 billion after-tax)
•Operating cash flows of $6.52 billion
2020 Consolidated Financial Condition
•Total investments of $84.42 billion; fixed maturities and short-term securities comprise 94% of total investments
•Total assets of $116.76 billion
•Total debt of $6.55 billion, resulting in a debt-to-total capital ratio of 18.3% (20.7% excluding net unrealized investment gains, net of tax, included in shareholders' equity)
•Repurchased 5.2 million common shares for total cost of $672 million and paid $861 million of dividends to shareholders
•Shareholders’ equity of $29.20 billion
•Net unrealized investment gains of $5.18 billion ($4.07 billion after-tax)
•Book value per common share of $115.68
•Holding company liquidity of $1.69 billion
CONSOLIDATED OVERVIEW
Consolidated Results of Operations
The following discussions of the Company’s net income and segment income are presented on an after-tax basis. Discussions of the components of net income and segment income are presented on a pre-tax basis, unless otherwise noted. Discussions of earnings per common share are presented on a diluted basis.
Overview
Diluted net income per share of $10.52 in 2020 increased by 6% over diluted net income per share of $9.92 in 2019. Net income of $2.70 billion in 2020 increased by 3% over net income of $2.62 billion in 2019. The higher rate of increase in diluted net income per share reflected the impact of share repurchases in recent periods. The increase in income before income taxes primarily reflected the pre-tax impacts of (i) higher underwriting margins excluding catastrophe losses and prior year reserve development ("underlying underwriting margins") and (ii) net favorable prior year reserve development in 2020, compared to net unfavorable prior year reserve development in 2019, partially offset by (iii) higher catastrophe losses, (iv) lower net investment income and (v) lower net realized investment gains. Catastrophe losses in 2020 and 2019 were $1.61 billion and $886 million, respectively. Net favorable prior year reserve development in 2020 was $351 million, compared to net unfavorable prior year reserve development of $60 million in 2019. The higher underlying underwriting margins in 2020 were driven by Personal Insurance and Business Insurance, partially offset by Bond & Specialty Insurance. Income tax expense in 2020 was higher than in 2019, primarily reflecting the impact of the increase in income before income taxes.
Impact of COVID-19 and Related Economic Conditions
Beginning in March 2020 and continuing through the end of 2020, the global pandemic caused by the novel coronavirus COVID-19 (“COVID-19”) and related economic conditions impacted the Company's results of operations. The Company's underwriting margins were impacted as follows:
•Earned premiums were negatively impacted by premium refunds in Personal Insurance provided to personal automobile customers. In Business Insurance, earned premiums were negatively impacted by a modest reductio

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 8. Financial Statements
DALRADA FINANCIAL CORPORATION
Consolidated Financial Statements
For the Years Ended June 30, 2020 and 2019
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Deficit
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Dalrada Financial Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Dalrada Financial Corporation and subsidiaries (collectively the “Company”) as of June 30, 2020 and 2019, the related consolidated statements of operations, stockholders’ deficit and cash flows, for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has had recurring losses, used cash flows from operating activities and has a significant working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ dbbmckennon
We have served as the Company’s auditor since 2019.
San Diego, California
October 15, 2020
DALRADA FINANCIAL CORPORATION
Consolidated Balance Sheets
(The accompanying notes are an integral part of

Explanation: Audited financial statements and supplementary data. Source: 725394_2020.htm (CIK: 725394, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6.Selected Financial Data
Selected Historical Financial and Operating Data
The following table sets forth our historical selected financial and operating data for the periods indicated. The selected financial and operating data should be read in conjunction with the other information contained in this document, including “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the audited historical Consolidated Financial Statements and the notes thereto included elsewhere in this document, and historical audited Consolidated Financial Statements, which have not been included in this document.
The results of operations data for the years ended December 31, 2020 and December 26, 2019 and the balance sheet data as of December 31, 2020 and December 26, 2019 are derived from the audited Consolidated Financial Statements of NCM, Inc. included elsewhere in this document. The results of operations data for the years ended December 27, 2018, December 28, 2017 and December 29, 2016 and the balance sheet data as of December 27, 2018, December 28, 2017 and December 29, 2016 are derived from the audited Consolidated Financial Statements of NCM, Inc. that are not included in this document.
Notes to the Selected Historical Financial and Operating Data
(1)Includes short-term and long-term marketable securities.
(2)Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States. Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, early lease termination expense, Chief Executive Officer transition costs and impairments of long-lived assets. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, CEO turnover, early lease termination expense, impairments of long-lived assets, interest rates, debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, costs associated with the resignation of the Company’s former Chief Executive Officers, early lease termination expense, or impairments of long-lived assets. Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should they be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP. The Company believes that operating income is the most directly comparable GAAP financial measure to Adjusted OIB

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


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The COVID-19 pandemic has resulted in significant volatility and uncertainty in the markets in which the Company operates. At the time of this report, the COVID-19 pandemic has not had, and the Company does not currently expect to have, a significant impact on its exposure to market risk from commodity prices, foreign currency exchange rates and interest rates, among others. For additional discussion, refer to “Liquidity and Capital Resources” in Item 7, as well as “Cautionary Statement on Forward-Looking Statements” and “Risk Factors” in Part I of this report.
Commodity Price Risk
In the ordinary course of business, the Company is exposed to commodity price risks relating to the purchases of raw materials and fuels. The Company manages the impact of cost increases, wherever possible, on commercially reasonable terms, by locking in prices on the quantities through purchase commitments required to meet production requirements. In addition, the Company may attempt to offset the effect of increased costs by raising prices to customers. However, for competitive reasons, the Company may not be able to pass along the full effect of increases in raw materials and other input costs as they are incurred.
Foreign Currency Risk
Related to Active Nutrition International GmbH whose functional currency is the Euro, the Company is exposed to risks of fluctuations in future cash flows and earnings due to changes in exchange rates.
Interest Rate Risk
Long-term debt
As of September 30, 2020, BellRing LLC had an aggregate principal amount of $673.7 million outstanding on its Term B Facility and an aggregate principal amount of $30.0 million outstanding under its Revolving Credit Facility. Borrowings under the Term B Facility and the Revolving Credit Facility bear interest at variable rates. Including the impact of interest rate swaps, a hypothetical 10% increase in interest rates would have an immaterial impact on both interest expense and interest paid during the year ended September 30, 2020. BellRing LLC had no outstanding debt as of September 30, 2019. For additional information regarding BellRing LLC’s debt, see Note 14 within “Notes to Consolidated Financial Statements.”
Interest rate swaps
As of September 30, 2020, the Company had interest rate swaps with a notional value of $350.0 million. A hypothetical 10% adverse change in interest rates would have an immaterial impact on the fair value of the interest rate swaps as of September 30, 2020. The Company held no interest rate swaps as of September 30, 2019. For additional information regarding the Company’s interest rate swap contracts, see Note 12 within “Notes to Consolidated Financial Statements.”
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1772016_2020.htm (CIK: 1772016, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.
Discussion of our year-to-date comparisons between 2020 and 2019 is presented below. Year-to-date comparisons between 2019 and 2018 can be found in "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
We consider portions of this report to be "forward-looking" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions, or other items relating to the future; forward-looking statements are not guarantees of future performance, results, or events. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein which are not statements of historical fact should be deemed forward-looking statements. Reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.
Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following:
•Volatility in capital and credit markets, or other unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us;
•Short-term leases expose us to the effects of declining market rents;
•Competition could limit our ability to lease apartments or increase or maintain rental income;
•We face risks associated with land holdings and related activities;
•The ongoing COVID-19 pandemic and measures intended to prevent its spread and impact have and continue to have a material adverse effect on our business, results of operations, cash flows, and financial condition;
•Development, redevelopment and construction risks could impact our profitability;
•Investments through joint ventures and investment funds involve risks not present in investments in which we are the sole investor;
•Our acquisition strategy may not produce the cash flows expected;
•Changes in rent control or rent stabilization laws and regulations could adversely affect our operations and property values;
•Failure to qualify as a REIT could have adverse consequences;
•Tax laws may continue to change at any time and any such legislative or other actions could have a negative effect on us;
•A cybersecurity incident and other technology disruptions could negatively impact our business;
•We have significant debt, which could have adverse consequences;
•Insufficient cash flows could limit our ability to make required payments for debt obligations or pay distributions to shareholders;
•Issuances of additional debt may adversely impact our financial condition;
•We may be unable to renew, repay, or refinance our outstanding debt;
•Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our shareholders, and decrease our share price, if investors seek higher yields through other investments;
•Failure to maintain our current credit ratings could adversely affec

Explanation: Management Discussion and Analysis section with financial performance data. Source: 906345_2020.htm (CIK: 906345, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. RISK FACTORS

Risks Related to Regulatory and Legislative Matters

Our business is subject to ongoing complex governmental regulations and legislation that have impacted, and will continue in the future to impact, our business and/or results of operations.

Our business is subject to changes in state and federal laws applicable to us (including PURA, certain provisions of the Federal Power Act, the Public Utility Regulatory Policies Act of 1978, the Energy Policy Act of 2005, and executive orders issued by the President of the United States and the Governor of Texas), changing governmental policy, and regulatory actions by the PUCT and other governmental authorities (including the NERC, the Texas RE, the TCEQ, the
FERC and the EPA), and the rules, guidelines, directives, and protocols of ERCOT with respect to various matters including, but not limited to, market structure and design, construction and operation of transmission and distribution facilities (including actions relating to ERCOT grid integrity and reliability), the acquisition, disposal, depreciation and amortization of regulated assets and facilities, recovery of costs and investments, return on invested capital and environmental matters. We must continually adapt to any new laws, policies, regulations and regulatory actions and any changes in, revisions to, or reinterpretations of existing laws, policies and regulations and other regulatory actions, any of which could have a material and adverse effect on our business, cash flows, liquidity, financial condition and/or results of operations. We could also be exposed to increased costs to comply with any more stringent requirements or new interpretations of existing requirements and to potential liability for customer refunds, penalties or other amounts, which could have an adverse effect on our business, cash flows, liquidity, financial condition and/or results of operations.

In addition, if it is determined that we did not comply with applicable statutes, regulations, rules, tariffs or orders and we are ordered to pay a material amount in penalties, customer refunds, or other amounts, our financial condition, results of operations, cash flows and our reputation could be materially adversely affected. For example, under the Energy Policy Act of 2005, the FERC can impose penalties (up to $1 million per day per violation) for failure to comply with mandatory electric reliability standards, including standards to protect the power system against potential disruptions from cyber and physical security breaches. In addition, the PUCT may impose penalties on us if it finds that we violated PURA or any PUCT rule or order adopted under PURA. The PUCT has the authority to impose penalties of up to $25,000 per day per violation.

The Texas Legislature meets every two years and did not meet in 2020. The Texas Legislature convened its regular session in January 2021, which is scheduled to conclude on May 31, 2021. However, at any time, the governor may convene a special session of the Texas Legislature. During any regular or special session, the Legislature may hold hearings relevant to our business and bills may be introduced that, if adopted, could materially and adversely affect our business and our business prospects. For example, reform of ERCOT is an item in the current legislative session. From February 15 through February 17, 2021, ERCOT required transmission companies, including us, to significantly reduce demand on the grid as electricity generation was insufficient to meet demand caused by extreme winter weather. A significant number of homes and businesses in our service territory and throughout ERCOT experienced power outages over that period, including over one million homes and businesses in our service territory, some for extended periods of time. On February 16, 2021, the Governor of Texas declared reform of ERCOT as an emergency item for the Texas legislative session, and hearings have been sche

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1193311_2020.htm (CIK: 1193311, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes appearing in Part II, Item 8 of this Annual Report on Form 10-K.
Overview: Manitowoc is a leading provider of engineered lifting solutions, including lattice-boom cranes, tower cranes, mobile hydraulic cranes and boom trucks. The Company has three reportable segments, the Americas segment, EURAF segment, and MEAP segment. The segments were identified using the “management approach,” which designates the internal organization that is used by the CEO, who is also the Company’s Chief Operating Decision Maker (“CODM”), for making decisions about the allocation of resources and assessing performance. Further information regarding the Company’s reportable segments can be found in Note 17, “Segments,” to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
In Management’s Discussion and Analysis, unless otherwise indicated, references to “Manitowoc” and the “Company” refer to The Manitowoc Company, Inc. and its consolidated subsidiaries.
All dollar amounts are in millions throughout the tables included in Management’s Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated.
Segment Operating Performance
Americas
Americas net sales decreased 35.4% in 2020 to $626.1 million from $969.7 million in 2019. The decrease was primarily related to lower crane shipments as a result of entering the year with lower backlog coupled with the impacts from the COVID-19 pandemic, which significantly reduced demand in most of the Company’s end markets.
Americas operating income decreased 71.7% in 2020 to $32.1 million from $113.4 million in 2019. This change was mainly due to the decrease in net sales and under absorption of facility costs. This was partially offset by decreases of $4.3 million in engineering, selling and administrative expenses and $1.8 million in restructuring expense. Lower engineering, selling and administrative expenses were driven by lower discretionary spend in response to the COVID-19 pandemic.
Americas net sales increased 9.9% in 2019 to $969.7 million from $882.7 million in 2018. This increase was primarily driven by market expansion in petrochemical and utility segments along with fleet replenishment. Share gains were also realized in several product lines, aided by positive market acceptance of new product introductions.
Americas operating income increased 92.9% in 2019 to $113.4 million from $58.8 million in 2018. This change was primarily due to increased revenues as discussed above, price realization, $8.3 million of lower engineering, selling and administrative costs due primarily to cost reduction actions, $3.3 million of lower restructuring expenses and better utilization of the U.S. manufacturing facilities.
EURAF
EURAF net sales decreased 7.2% in 2020 to $598.7 million from $644.9 million in 2019. The decrease was primarily related to lower crane shipments as a result of the COVID-19 pandemic, which significantly reduced demand in most of the Company’s end markets. This was partially offset by $10.4 million from favorable changes in foreign currency exchange rates.
EURAF operating income increased in 2020 to $12.0 million from $3.8 million in 2019. The increase was primarily related to favorable sales mix, $6.6 million of lower engineering, selling and administrative expenses and $2.6 million of lower restructuring expense. Lower engineering, selling and administrative expenses were driven by lower discretionary spend in response to the COVID-19 pandemic. This was partially offset by the decrease in net sales. In addition, operating income was impacted by $1.4 million from favorable changes in foreign currency exchange rates.
EURAF net sales decreased 5.2% in 2019 to $644.9 million from $680.6 million in

Explanation: Management Discussion and Analysis section with financial performance data. Source: 61986_2020.htm (CIK: 61986, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.