Item 6. Selected Financial Data
FIVE YEAR CONSOLIDATED FINANCIAL SUMMARY
Year Ended December 31,
(a)In 2020, we recorded a goodwill impairment charge for both our Driveline and Metal Forming reporting units totaling $510 million due to the significant reduction in global automotive production volumes as a result of the impact of COVID-19. In 2019, we recorded a goodwill impairment charge of $440 million associated with the annual goodwill impairment test for our Metal Forming reporting unit. In 2018, we recorded a goodwill impairment charge associated with the annual goodwill impairment test for our former Casting and Powertrain reporting units totaling $485.5 million. See Note 3 - Goodwill and Other Intangible Assets in Item 8. Financial Statements and Supplementary Data for further detail on our goodwill impairment charges.
(b)In 2019, we completed the sale of our U.S. Casting operations for $245 million, consisting of $185 million in cash, of which we received net proceeds of $141.2 million subsequent to certain customary closing adjustments, and a $60 million deferred payment obligation. In 2019, we recorded a charge of $225 million to reduce the carrying value of our U.S. Casting operations to fair value less cost to sell upon reclassification of the assets and liabilities to held-for-sale, and a loss of $21.3 million upon deconsolidation at closing. In 2020, we finalized certain customary post-closing adjustments associated with this sale and recorded an additional loss of $1.0 million.
(c)For 2020, these amounts include goodwill impairment charges of $510.0 million for which there was no corresponding tax benefit, and approximately $53.1 million of restructuring and acquisition-related costs, net of tax. For 2019, these amounts include impairment charges of $617.8 million, net of tax, and approximately $45.6 million of restructuring and acquisition-related costs, net of tax. For 2018, these amounts include goodwill impairment charges of $400.3 million, net of tax, and approximately $62.4 million of restructuring and acquisition-related costs, net of tax. For 2017, these amounts include approximately $67.3 million of restructuring and acquisition-related costs, net of tax. For 2016, these amounts include approximately $18.4 million for restructuring and acquisition-related costs, net of tax.
(d)Includes charges of $6.2 million, net of tax, in 2020, $6.6 million, net of tax, in 2019, $15.3 million, net of tax, in 2018, and $2.3 million, net of tax, in 2017 related to debt refinancing and redemption costs.
(e)In 2019, we recognized a gain on bargain purchase of $10.8 million associated with the acquisition of certain operations of Mitec Automotive AG.
(f)In 2019, we offered a voluntary one-time lump sum payment option to certain eligible terminated vested participants in our U.S. pension plans that, if accepted, would settle our pension obligations to them. As a result of this settlement, we remeasured the assets and liabilities of our U.S. pension plans, which resulted in a non-cash charge of approximately $7.7 million, net of tax, related to the accelerated recognition of certain deferred losses.
(g)In 2018, we completed the sale of the aftermarket business associated with our former Powertrain segment for approximately $50 million, of which we received net proceeds of $47.1 million. As a result of the sale, we recorded a $15.5 million gain.
(h)In 2018, we reached a settlement agreement related to a capital lease obligation that we had recognized as a result of the acquisition of Metaldyne Performance Group, Inc. (MPG). This settlement resulted in a gain of $15.6 million, including accrued interest.
(i)In 2017, we completed the acquisitions of MPG and USM Mexico and paid cash of $895.5 million for these acquisitions, net of cash acquired. These acquisitions significantly impacted many of our financial statement line items in 2017 as compared to 2016.
(j)These amounts have been adjusted by $25.8 million, net of tax, relat

Explanation: Selected financial data and key metrics. Source: 1062231_2020.htm (CIK: 1062231, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM
6: SELECTED FINANCIAL DATA
As
a smaller reporting company, we are not required to provide this information.
ITEM
7:

Explanation: Selected financial data and key metrics. Source: 1737372_2020.htm (CIK: 1737372, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of BGSF, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BGSF, Inc. (the “Company”) as of December 27, 2020 and December 29, 2019, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 27, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2020 and December 29, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 27, 2020, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 27, 2020, based on criteria established in 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 11, 2021 expressed an unqualified opinion.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisition of EdgeRock Technologies Holdings, Inc. - Fair Value of Intangible Assets
Description of the Matter
As discussed in Note 3 to the financial statements, the Company acquired 100% of the equity of EdgeRock Technologies Holdings, Inc. (EdgeRock) for a purchase price cash consideration of $21.7 million, which resulted in $10.3 million of intangible assets. The $10.3 million of intangible assets is primarily comprised of a customer relationship intangible asset and a tradename intangible asset. The determination of a f

Explanation: Audited financial statements and supplementary data. Source: 1474903_2020.htm (CIK: 1474903, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. Executive Compensation
The information required by Item 11 is incorporated by reference from our definitive proxy statement for our annual stockholders’ meeting presently scheduled to be held in May 2021.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1482512_2020.htm (CIK: 1482512, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation
The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2021 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1817825_2020.htm (CIK: 1817825, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation
Information concerning executive compensation is incorporated by reference from the text under the captions "The Board of Directors and Corporate Governance-2020 Compensation of Directors," "Compensation of Executive Officers," "Compensation Committee Report," "Compensation Discussion and Analysis," "ON Semiconductor 2020 Pay Ratio
Disclosure" and "Compensation Committee Interlocks and Insider Participation" in our Proxy Statement.
The information incorporated by reference under the caption "Compensation Committee Report" in our Proxy Statement shall be deemed furnished, and not filed, in this Form 10-K and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act as a result of this furnishing, except to the extent that we specifically incorporate it by reference.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1097864_2020.htm (CIK: 1097864, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11.EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the information under the captions “BOARD OF DIRECTORS AND COMPENSATION INFORMATION and “EXECUTIVE COMPENSATION INFORMATION” (excluding the Compensation Committee Report) in the Proxy Statement.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1070412_2020.htm (CIK: 1070412, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Commodity Price Risk
As an independent oil and gas producer, our revenue, cash flows from operations, other income and profitability, reserve values, access to capital and future rate of growth are substantially dependent upon the prevailing prices of oil and gas. Declines in commodity prices will adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower commodity prices may reduce the amount of oil and gas that we can produce economically. Prevailing prices for such commodities are subject to wide fluctuation in response to relatively minor changes in supply and demand and a variety of additional factors beyond our control, such as global, political and economic conditions. Historically, prices received for our oil and gas production have been volatile and unpredictable, and such volatility is expected to continue. Most of our production is sold at market prices. Generally, if the commodity indices fall, the price that we receive for our production will also decline. Therefore, the amount of revenue that we realize is partially determined by factors beyond our control. Assuming the production levels we attained during the year ended December 31, 2020, a 10% decline in oil and gas prices would have reduced our operating revenue and cash flows by approximately $4.3 million for the year. If commodity prices remain at their current levels the impact on operating revenues and cash flows, could be much more significant. However, we do have derivative contracts in place that will mitigate the impact of low commodity prices.
Derivative Instrument Sensitivity
At December 31, 2020, the aggregate fair market value of our commodity derivative contracts was an asset of approximately $19.4 million. The fair market value of our commodity derivative contracts is sensitive to changes in the market price for oil and gas. When our derivative contract prices are higher than prevailing market prices, we recognize gains and conversely, when our derivative contract prices are lower than prevailing market prices, we incur losses.
Interest Rate Risk
We are subject to interest rate risk associated with borrowings under our First Lien Credit Facility and our Second Lien Credit facility. As of December 31, 2020, we had $95.0 million of outstanding indebtedness under our First Lien Credit Facility and $112.7 of outstanding indebtedness under our Second Lien Credit Facility, each with a variable interest rate. At December 31, 2020, the interest rate on the First Lien Credit Facility was approximately 3.6% based on 1-month LIBOR borrowings and level of utilization. An increase in the interest rate of 1% would increase our interest expense by $1.0 million on an annual basis, based on the outstanding balance at December 31, 2020. At December 31, 2020 the interest rate on the Second Lien Credit Facility was 15.8% based on 3-month LIBOR borrowings. An increase of 1% would increase our interest expense by $1.1 million on an annual basis, based on the outstanding balance at December 31, 2020.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 867665_2020.htm (CIK: 867665, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Content
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Cognex Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Cognex Corporation (a Massachusetts corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule included under Item 15(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 11, 2021 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition - Application-Specific Customer Solutions
As described further in Notes 1 and 14 to the consolidated financial statements, the Company recognizes revenue from application-specific customer solutions. For these transactions, revenue is recognized at the point in time when the solution is validated, which is when the Company can objectively determine that th

Explanation: Audited financial statements and supplementary data. Source: 851205_2020.htm (CIK: 851205, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of financial condition and results of operations together with the Consolidated Financial Statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under Item 1A “Risk Factors” and “Forward Looking Statements” immediately preceding Part I of this Annual Report on Form 10-K.
Critical Accounting Policies
The Company follows accounting and reporting policies and procedures that conform, in all material respects, to GAAP and to practices generally applicable to the financial services industry, the most significant of which are described in Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make judgments and accounting estimates that affect the amounts reported for assets, liabilities, revenues and expenses on the Consolidated Financial Statements and accompanying notes, and amounts disclosed as contingent assets and liabilities. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates. Accounting estimates are necessary in the application of certain accounting policies and procedures that are particularly susceptible to significant change. Critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties, and could potentially result in materially different results under different assumptions and conditions
The following is a summary of the more subjective and complex accounting estimates and principles affecting the financial condition and results reported in financial statements. In each area, the Company has identified the variables that management believes to be the most important in the estimation process. The Company uses the best information available to make the estimations necessary to value the related assets and liabilities in each of these areas.
Allowance for Loan Losses
Allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance for loan losses when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses. The Company estimates the allowance for loan losses required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance for loan losses may be made for specific loans, but the entire allowance for loan losses is available for any loan that, in management’s judgment, should be charged-off. Amounts are charged-off when available information confirms that specific loans or portions thereof, are uncollectible. This methodology for determining charge-offs is consistently applied to each segment.
The Company determines a separate allowance for loan losses for each portfolio segment. The allowance for loan losses consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered in determining impairment include payment status, collateral value and

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1423869_2020.htm (CIK: 1423869, 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 table sets forth certain income and expense items as a percentage of net sales:
The following discussion should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements and the related notes contained elsewhere in this report.
Forward-Looking Statements
This annual report contains statements concerning the Company’s expectations, plans, objectives, future financial performance, and other statements that are not historical facts. These statements may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify forward-looking statements by words such as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “would,” “plan,” “may,” “intend,” “estimate,” “prospect,” “goal,” “will,” “predict,” “potential” or other similar words. Forward-looking statements contained in this report, including elsewhere in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are based on current expectations and our actual results may differ materially from those projected in any forward-looking statements. In addition, the Company participates in an industry that is subject to rapidly changing conditions and there are numerous factors that could cause the Company to experience a decline in sales and/or earnings or deterioration in financial condition. Factors that could cause actual results to differ materially from those in forward-looking statements made in this report include but are not limited to:
•
the impact of COVID-19 on our business, the global and U.S. economy and our customers and suppliers;
•
the loss of or a reduction in business from one or more of our key customers;
•
negative developments in the macro-economic factors that impact our performance such as the U.S. housing market, general economy, unemployment rates and consumer sentiment and the impact of such developments on our and our customers’ business, operations and access to financing;
•
competition from other manufacturers and the impact of such competition on pricing and promotional levels;
•
an inability to develop new products or respond to changing consumer preferences and purchasing practices;
•
a failure to effectively manage manufacturing operations, alignment and capacity or an inability to maintain the quality of our products;
•
the impairment of goodwill, other intangible assets or our long-lived assets;
•
an inability to obtain raw materials in a timely manner or fluctuations in raw material and energy costs;
•
information systems interruptions or intrusions or the unauthorized release of confidential information concerning customers, employees or other third parties;
•
the cost of compliance with, or liabilities related to, environmental or other governmental regulations or changes in governmental or industry regulatory standards, especially with respect to health and safety and the environment;
•
a failure to attract and retain certain members of management or other key employees or other negative labor developments, including increases in the cost of labor;
•
risks associated with the implementation of our growth strategy;
•
risks related to sourcing and selling products internationally and doing business globally, including the imposition of tariffs or duties on those products;
•
unexpected costs resulting from a failure to maintain acceptable quality standards;
•
changes in tax laws or the interpretations of existing tax laws;
•
the occurrence of significant natural disasters, including earthquakes, fires, floods, and hurricanes or tropical storms;
•
the unavailability of adequate capital for our business to grow and compete;
•
increased buying power of large customers and the impact on our ability to maintain or raise prices;
•
our ability to succes

Explanation: Management Discussion and Analysis section with financial performance data. Source: 794619_2020.htm (CIK: 794619, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The objective of the Company’s compensation program is to provide an incentive to our chief executive officer and chief financial officer for services rendered. The compensation program for our sole executive officer is comprised of a consulting fee paid to a related party based on services rendered in connection with maintaining our disclosure obligations with the Commission. We utilize this form of compensation as it is adequate to retain and motivate our executive officer at this stage of our development. Nonetheless, when we develop or acquire an existing business opportunity our intention in respect to executive compensation will be to compensate Company executives in accordance with compensatory packages typical of other smaller reporting companies. We do not expect to rely on any specific formula to determine compensation. Future compensation arrangements for Company executives will most likely include salaries, stock awards and stock options.
Executive compensation paid to a company controlled by our current chief executive officer and chief financial officer for the periods ended December 31, 2020, and December 31, 2019, were $15,400 and $8,984 respectively.
During the year ended December 31, 2020, the Company incurred director’s fees of $1,600 (2019 - $1,600).
Table
The following table provides summary information for 2020 and 2019 concerning cash and non-cash compensation paid or accrued by the Company to or on behalf of (i) the chief executive officer and the chief financial officer and (ii) any other employee to receive compensation in excess of $100,000.
Outstanding Equity Awards as of December 31, 2020
There were no outstanding equity awards as of December 31, 2020 for our named executive officer.
No share purchase options were granted to our named executive officer during our fiscal year ended December 31, 2020.
Long-Term Incentive Plans
We do not have any long-term incentive plans, pension plans, or similar compensatory plans for our directors or executive officers.
Change of Control Agreements
We are not party to any change of control agreements with any of our directors or executive officers.
Compensation of Directors
The following table summarizes the compensation of our Company directors for the year ended December 31, 2020:
Employment Agreements
There are no employment agreements with the named executive officer.
ITEM 12.

Explanation: Executive compensation disclosures with financial details. Source: 1113313_2020.htm (CIK: 1113313, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
The following are the material risks that may affect us. Any of the risks discussed herein can materially adversely affect our business, liquidity, operations, industry or financial position or our future financial performance.
SUMMARY
Risks Related to Our Business and Properties
•
Risks related to COVID-19.
•
Risks related to the overall economy and our financial performance.
•
Risks related to the limited number of hotels that we own.
•
Risks related to increased hotel operating expenses and decreased hotel revenues.
•
Risks related to our investment strategy, and the acquisition, renovation, or repositioning of hotels.
•
Risks related to our third-party management companies.
•
Risks related to our ability to make distributions.
•
Risks related to the geographic concentration of our hotels.
•
Risks related to the concentration of our hotel franchise agreements.
•
Risks related to our ground lease for the Hyatt Centric Arlington.
•
Risks related to hedging against interest rate exposure.
•
Risks related to investment opportunities and growth prospects.
•
Risks related to internal controls.
•
Risks related to information technology.
•
Risks related to natural disasters and the physical effects of climate change.
Risks Related to the Lodging Industry
•
Risks related to operating risks, seasonality of the hotel business, investment concentration in particular segments of a single industry, and capital expenditures.
•
Risks related to operating hotels with franchise agreements.
•
Risks related to restrictive covenants in certain of our franchise agreements.
•
Risks related to hotel re-development.
•
Risks related to obtaining financing.
•
Risks related to uninsured and underinsured losses.
•
Risks related to governmental regulations, including regulations covering environmental matters or the Americans with Disabilities Act.
•
Risks related to unknown or contingent liabilities.
•
Risks related to future terrorist activities.
General Risks Related to the Real Estate Industry
•
Risks related to illiquidity of real estate investments.
•
Risks related to future acquisitions.
•
Risks related to property damage including harmful mold.
•
Risks related to increases in property taxes.
Risks Related to Our Debt and Financing
•
Risks related to our financial leverage.
•
Risks related to our forbearance agreements.
•
Risks related to our financial covenants.
•
Risks related to our debt maturities.
•
Risks related to our borrowing costs.
•
Risks related to interest rates.
Risks Related to Our Organization and Structure
•
Risks related to change of control.
•
Risks related to our executive employment agreements.
•
Risks related to ownership limitations on our common stock and preferred stock.
•
Risks related to our preferred stock.
•
Risks related to future indebtedness.
•
Risks related to our REIT status.
•
Risks related to our major corporate policies.
•
Risks related to key personnel.
Risks Related to Conflicts of Interest of Our Officers and Directors
•
Risks related to conflicts of interest of our officers and directors.
Federal Income Tax Risks Related to the Company’s Status as a REIT.
•
Risks related potential failure to qualify as a REIT.
•
Risks related to potential failure to make distributions.
•
Risks related to MHI Holding.
•
Risks related to potential tax liabilities.
•
Risks related to REIT compliance requirements.
•
Risks related to Operating Partnership’s qualification as a partnership for federal income tax purposes.
•
Risks related potential failure to qualify as a REIT.
•
Risks related to the TRS qualification of MHI Holding, and the qualification of our hotel manager as an “eligible independent contractor”.
•
Risks related to our TRS leases.
•
Risks related to the potential tax liability of MHI Holding.
•
Risks related to our net operating loss carryforwards.
•
Risks related to taxation of dividend income.
•
Risks related to Medicare tax.
•
Risks related to U.S. withholding tax under the “Foreign Acc

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


Item 1A. Risk Factors.
You should carefully consider the risks and uncertainties described below, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Results of Operations and Financial Condition.” Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.
Risks Related to COVID-19
There is significant uncertainty around our development of AT-527 as a potential treatment for COVID-19.
Our development of AT-527 for the treatment of COVID-19 is in its early stages, and we may not be successful in our development of AT-527 as a potential treatment for COVID-19. We, together with our collaborator Roche, anticipate initiating a Phase 3 clinical trial in the second quarter of 2021 to study AT-527 in adult patients with mild or moderate COVID-19 in the outpatient setting. Currently, we are evaluating AT-527 for the treatment of patients with mild to moderate COVID-19 in two Phase 2 clinical trials. Additionally, we are conducting a Phase 1 clinical trial in healthy volunteers and have additional Phase I clinical trials planned. We have committed and plan to continue to commit significant financial and personnel resources to the development of AT-527 as a potential treatment for COVID-19. If we are unable to successfully develop AT-527 for the treatment of COVID-19, we will have taken resources away from other development programs and will not be able to recuperate the resources dedicated to developing AT-527 as a potential treatment for COVID-19, which could have a material adverse impact on our business. If the data from our Phase 2 clinical trials are not supportive of further development of AT-527 as a treatment for COVID-19 or the investor community has a negative reaction to the data, the demand for our common stock could decrease significantly, and the price of our common stock could decline substantially, which could result in significant losses for our stockholders.
Further, while there is currently an urgent need for a treatment for COVID-19, the longevity and extent of the ongoing COVID-19 pandemic is uncertain and it is unclear whether SARS-CoV-2 will become an endemic human coronavirus that may circulate in the human population after the current pandemic has subsided. If the pandemic were to dissipate, whether due to a significant decrease in new infections, due to the availability of vaccines, or otherwise, the need for a treatment could decrease significantly. If the need for a treatment decreases before or soon after commercialization of AT-527, if approved, or other treatments for COVID-19 are developed before AT-527, our business could be adversely impacted.
We may expend resources in anticipation of clinical trials and potential commercialization of AT-527, which we may not be able to recover if AT-527 is not approved for the treatment of COVID-19 or we are not successful at commercializing AT-527.
We believe that there is an urgent unmet need for effective orally administered COVID-19 treatments particularly for patients in the outpatient setting. Accordingly, if the data from our ongoing and planned clinical trials of AT-527 in COVID-19 patients are positive, we may pursue certain expedited development, review and approval programs offered by the U.S. Food and Drug Administration (“FDA”) to sponsors of drugs designed to treat serious diseases and conditions. These programs may offer the potential for a more rapid approval and commercialization process than traditional FDA review pathways. In order to prepare for the poss

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1593899_2020.htm (CIK: 1593899, 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.
References to the “Company,” “us,” “our” or “we” refer to KL Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. The only activities through December 31, 2020, were organizational activities, those necessary to prepare for the IPO, described below, and, after our IPO, those related to identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination, at the earliest. We will generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We will incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the period from August 26, 2020 (inception) through December 31, 2020, we had a net loss of $71,932 which consisted of formation costs and franchise tax.
Liquidity and Capital Resources
As of December 31, 2020, we had no cash. Until the consummation of the IPO, our only sources of liquidity were an initial purchase of common stock by the Sponsor and loans from the Sponsor.
Subsequent to December 31, 2020, the registration statement for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on January 7, 2021 (the “Effective Date”). On January 12, 2021, the Company consummated the IPO of 28,750,000 units (the “Units”), including the issuance of 3,750,000 Units as a result of the underwriter’s full exercise of its over-allotment option. Each Unit consists of one Class A common stock, $0.0001 par value, and one-third of one redeemable warrant entitling its holder to purchase one Class A common stock at a price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $287,500,000.
Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of an aggregate of 5,166,667 warrants (“Private Placement Warrants”), each at a price of $1.50 per Sponsor Private Warrant, generating total proceeds of

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1823323_2020.htm (CIK: 1823323, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 11. Executive Compensation
The information contained under the heading "Executive Compensation and Other Information" in the Proxy Statement is incorporated herein by reference.
Item 12.

Explanation: Executive compensation disclosures with financial details. Source: 1099800_2020.htm (CIK: 1099800, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Investing in our Class A common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this Annual Report, including the consolidated financial statements and the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, before making investment decisions related to our Class A common stock. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline and you could lose part or all of your investment.
Risks Related to Our Business and Industry
If we fail to maintain and grow our client base and spend through our platform, our revenue and business may be negatively impacted.
To sustain or increase our revenue, we must regularly add new clients and encourage existing clients to maintain or increase the amount of advertising inventory purchased through our platform and adopt new features and functionalities that we make available. If competitors introduce lower cost or differentiated offerings that compete with or are perceived to compete with ours, our ability to sell our services to new or existing clients could be impaired. We have spent significant effort in cultivating our relationships with advertising agencies, which has resulted in an increase in the budgets allocated to, and the amount of advertising purchased on, our platform. However, it is possible that we may reach a point of saturation at which we cannot continue to grow our revenue from such agencies because of internal limits that advertisers may place on the allocation of their advertising budgets to digital media to a particular provider or otherwise. While we generally have MSAs in place with our clients, such agreements allow our clients to change the amount they spend through our platform or terminate our services with limited notice. We do not typically have exclusive relationships with our clients and there is limited cost to moving their media spend to our competitors. As a result, we have limited visibility to our future advertising revenue streams. We cannot assure you that our clients will continue to use our platform or that we will be able to replace, in a timely or effective manner, departing clients with new clients that generate comparable revenue. If a major client representing a significant portion of our business decides to materially reduce its use of our platform or to cease using our platform altogether, it is possible that our revenue or revenue growth rate could be significantly reduced, and our business negatively impacted.
The loss of advertising agencies as clients could significantly harm our business, financial condition, and results of operations.
Our client base consists primarily of advertising agencies. We do not have exclusive relationships with advertising agencies, and we depend on agencies to work with us to build and maintain advertiser relationships and execute advertising campaigns.
The loss of agencies as clients could significantly harm our business, financial condition and results of operations. If we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the advertisers represented by that agency.
Advertisers may change advertising agencies. If an advertiser switches from an agency that utilizes our platform to one that does not, we will lose revenue from that advertiser. In addition, some advertising agencies have their own relationships with suppliers of advertising inventory and can directly connect advertisers with such suppliers. Our business may suffer to the extent that advertising agencies and inventory suppliers purchase and sell advertising inventory directly from one another or through intermediaries other than us.
W

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1671933_2020.htm (CIK: 1671933, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
Investing in our common stock involves risk. You should carefully consider the risks described below as well as all the other information in this Annual Report on Form 10-K, including the consolidated financial statements and the related notes included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, results of operations and financial condition could suffer. In that event, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic has had, and we expect will continue to have, adverse effects on our business, results of operations, financial condition and cash flows.
The public health crisis caused by the COVID-19 pandemic and the measures being taken by governments, health authorities, businesses, and the public at large to limit the COVID-19 pandemic’s spread have had, and we expect will continue to have, certain negative effects on, and present certain risks to, our business that include the following:
•Governments and private parties have imposed limitations on in-person access to physicians, which have:
◦affected patient access to treatment, given that ILUVIEN is administered only by an injection into the eye, which means telemedicine is not a viable substitute; and
◦made it difficult or impossible for our sales representatives (including those employed by our distributors) to meet with retina specialists and their staff to educate them about the benefits of ILUVIEN and to provide support for insurance pre-certifications.
•Our business is also negatively affected by patient behavior in the current environment. Most of our ILUVIEN sales are driven by the use of ILUVIEN to treat diabetic macular edema, or DME. Given that governmental authorities have cited diabetes as a factor that places a person at higher risk for severe illness from the COVID-19 pandemic, many of those patients are or may be unwilling to visit their physicians in person (even if otherwise permitted) for fear of contracting the COVID-19 coronavirus.
These limitations had an adverse impact on our revenues beginning late in the first quarter and continuing through the date of this report. We expect these factors to continue to adversely impact our revenue, and the extent and duration of that impact is uncertain at this time, particularly in light of the emergence of COVID-19 variants that may increase the transmissibility of the coronavirus or be more deadly, or both. If the COVID-19 pandemic intensifies (as is currently the case in most of the U.S. and Europe and the U.K.), its duration is longer than we expect, or the coronavirus becomes transmissible at a greater rate or becomes more deadly, its negative effect on our sales and thus our liquidity and financial condition could be more prolonged and may be severe. Financial uncertainty associated with the adverse effects of the COVID-19 pandemic, and the duration and severity of those effects, could affect certain estimates we use to prepare our quarterly financial results, including impairment of intangible assets, the income tax provision and recoverability of certain receivables.
Other effects or possible effects of the COVID-19 pandemic on us include:
•Limitations on travel within and between the countries in which we market and sell ILUVIEN, as well as various types of “shelter in place” orders, have curtailed our in-person marketing activities, which have in turn contributed to lower sales of ILUVIEN.
•Cancellation of in-person trade shows, medical con

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


ITEM 1A. RISK FACTORS
An investment in our securities involves an exceptionally high degree of risk and is extremely speculative in nature. The risks described below are the ones we believe are most important for you to consider. These risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the price of our common stock could decline.
WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR AUDITORS AND WE ARE CURRENTLY OPERATING AT A LOSS, WHICH RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
We have received a “Going Concern” opinion from our auditors. As reflected in the accompanying consolidated financial statements, the Company had a shareholders’ deficit at September 30, 2020, and a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is attempting to generate sufficient revenue; however, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
IT IS MOST LIKELY THAT WE WILL NEED TO SEEK ADDITIONAL FINANCING THROUGH SUBSEQUENT FUTURE PRIVATE OFFERING OF OUR SECURITIES.
Because the Company does not currently have any financing arrangements, and may not be able to secure favorable terms for future financing, the Company may need to raise capital through the sale of its common stock. The sale of additional equity securities will result in dilution to our shareholders.
UNFAVORABLE PUBLICITY OR CLIENT REJECTION OF OUR PRODUCTS OR SERVICES GENERALLY COULD REDUCE OUR SALES.
We will be highly dependent upon client acceptance of the safety, efficacy and quality of our products and services, as well as similar products or services offered by other companies. Client acceptance of products or services can be significantly influenced by scientific research or findings, national media attention and other publicity about product use or services. A product or service may be received favorably, resulting in high sales associated with that product or service that may not be sustainable as client preferences change. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and services and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by our consumers as less than favorable or that question earlier favorable research or publicity could have a material adverse effect on our ability to generate revenue. Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate, that associates consumption or use of our products or services, or any other similar products and services, with illness or other adverse effects, or that questions the benefits of our or similar products or services, or claims that they are ineffective, could have a material adverse effect on our business, reputation, financial condition or results of operations.
COMPLYING WITH NEW AND EXISTING GOVERNMENT REGULATION, BOTH IN THE U.S. AND ABROAD, COULD SIGNIFICANTLY INCREASE OUR COSTS AND LIMIT OUR ABILITY TO MARKET OUR PRODUCTS AND SERVICES.
The production, packaging, labeling, advertising, distribution, licensing and/or sale of our products and services may be subject to regulation by several U.S. federal agencies, including the FDA, the Federal Trade Commission, the Consumer Product Safety Commission, and t

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1516887_2020.htm (CIK: 1516887, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Annual Report on Form 10-K.
Recent Developments
As described elsewhere in this Report, the COVID-19 pandemic has recently had far-reaching adverse impacts on many aspects of our operation, directly and indirectly, including our employees, consumer behavior, distribution and logistics, our suppliers, and the market overall. The scope and nature of these impacts continue to evolve each day. In light of the uncertain and rapidly evolving situation relating to the COVID-19 pandemic, we have taken a number of precautionary measures to manage our resources conservatively by reducing and/or deferring capital expenditures, inventory purchases and operating expenses to mitigate the adverse impact of the pandemic, which is intended to help minimize the risk to our Company, employees, customers, and the communities in which we operate. Such steps include the following:
•
On March 17, 2020, we announced the temporary closure of all owned and operated stores in the United States, Canada, the United Kingdom, Denmark and Ireland.
• On March 26, 2020, we announced the temporary closure of our warehouse and e-commerce fulfillment center in Ohio as we reviewed our processes related to workplace safety, including social distancing and sanitation practices recommended by the Centers for Disease Control and Prevention, among others. The Ohio warehouse was reopened on April 1, 2020 following the review and reconfiguration of workflow and workspaces to further promote social distancing and minimize interaction as orders are fulfilled.
• On March 26, 2020, we announced the furlough of over 90% of our workforce, effective March 29, 2020.
• On March 26, 2020, we announced pay reductions of 20% for those employees not placed on temporary leave, and that the salaries of the Company's executive officers and each of its name executive officers would be reduced by 20% effective March 29, 2020.
• On March 26, 2020, we announced that the annual cash retainers for all non-employee directors serving on our Board of Directors will be eliminated for the first fiscal quarter of 2020.
• We are delaying the payment of 100% of the bonus earned by our executive officers for fiscal 2019 performance and 80% of such bonuses earned by our non-executive officer associates.
• In accordance with plan provisions, we are delaying the Company's contribution to its 401(k) plan.
• We are actively working with our landlords to minimize costs associated with closed retail facilities.
In addition to the effects described above, our supply chain has been affected by COVID-19. Vendors in China were temporarily closed as a result of the pandemic. Although their operations ceased in January and February, the vendors resumed production in March and are expected to continue to ramp up unless the pandemic comes back in China, causing our vendors to cease production again. Seasonal merchandise supporting our sales plans for the Easter holiday and spring season, were produced and delivered by our vendors prior to the temporary halt in their operations. As a result, we have sufficient inventory and supplies to support our e-commerce demand and any stores which may reopen in the near future. For our vendors with operations in Vietnam, the pandemic continues to evolve on a daily basis and we are in com

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1113809_2020.htm (CIK: 1113809, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. Before making an investment in the Company, you should carefully consider the following risk factors. The risks and uncertainties set forth below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also impair our business operations. If any of the following risks were to occur, our business or financial condition could be materially adversely affected. In such case, the net asset value of our common stock could decline, and you may lose all or part of your investment.
Risks Related to our Adviser and its Affiliates
We may be obligated to pay our Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
The Investment Advisory Agreement entitles our Adviser to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
We expect that any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. Pursuant to the Investment Advisory Agreement, our Adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the debt instrument that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.
Moreover, to the extent that we are required to recognize in our taxable income such interest income that has been accrued but not yet paid, our payment of incentive fees to the Adviser on such income may make it difficult to meet (or may further amplify existing difficulties in meeting) the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. Federal income tax. For additional discussion regarding the tax implications of a RIC, see “Risk Factors - Federal Income Tax Risks - We may be subject to corporate-level U.S. federal taxes if we fail to maintain our qualification as a RIC.”
The time and resources that individuals and the executive officers of our Adviser devote to us may be diverted, and we may face additional competition due to the fact that neither our Adviser, nor its affiliates, is prohibited from raising money for or managing another entity that makes the same types of investments that we target.
Affiliates and executive officers of the Adviser currently manage other investment entities and are not prohibited from raising money for and managing future investment entities that make the same types of investments as those we target. As a result, the time and resources that the executive officers and individuals employed by the Adviser and its affiliates devote to us may be diverted, and during times of intense activity in other areas of business, they may devote less time and resources to our business than is necessary or appropriate.
There are significant potential conflicts of interest that could impact our investment returns.
We pay management and incentive f

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 1490927_2020.htm (CIK: 1490927, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 7.

Explanation: Selected financial data and key metrics. Source: 1715768_2020.htm (CIK: 1715768, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8. Financial Statements
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
OFS Capital Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities of OFS Capital Corporation and subsidiaries (the Company), including the consolidated schedules of investments, as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations, changes in its net assets and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 audit 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 of December 31, 2020. As part of our audit, 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. Such procedures also included confirmation of investments owned as of December 31, 2020 and 2019, by correspondence with custodians, agents, or portfolio companies, or by other appropriate auditing procedures where replies were not received. 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 a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of the fair value of Portfolio Company Investments using unobs

Explanation: Audited financial statements and supplementary data. Source: 1487918_2020.htm (CIK: 1487918, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
Our financial statements, together with the report of our independent registered public accounting firm, appear in this Annual Report on Form 10-K beginning on page.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1727196_2020.htm (CIK: 1727196, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. 	Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business, including risks relating to changes in interest rates, foreign currency and inflation. The following discussion provides additional information regarding these risks.
Interest Rate Risk
Our primary exposure to market risk relates to changes in interest rates. Borrowings under our Term Loan Facility and Revolving Credit Facility bear interest at variable rates, subject to an interest rate floor. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. A hypothetical 10% relative change in interest rates during the years ended December 31, 2020 or 2019 would not have had a material effect on our financial statements. We do not currently engage in hedging transactions to manage our exposure to interest rate risk.
Credit Risk
As of December 31, 2020, our cash and cash equivalents were maintained with one financial institution in the United States. While our deposit accounts are insured up to the legal limit, the balances we maintain may, at times, exceed this insured limit. We believe this financial institution has sufficient assets and liquidity to conduct its operations in the ordinary course of business with little or no credit risk to us.
Our accounts receivable relate to sales to customers. To minimize credit risk, ongoing credit evaluations of all customers’ financial condition are performed. Two customers represented 10% or more of our accounts receivable as of December 31, 2020.
Foreign Currency Risk
Our business is primarily conducted in U.S. dollars. Any transactions that may be conducted in foreign currencies are not expected to have a material effect on our financial condition, results of operations or cash flows. As we grow our operations, our exposure to foreign currency risk could become more significant.
Impact of Inflation
Inflationary factors, such as increases in our cost of goods sold or other operating expenses, may adversely affect our operating results. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we do not believe inflation had a material effect on our financial condition or results of operations during the years ended December 31, 2020 and 2019. We cannot assure you, however, that we will be able to increase the selling prices of our products or reduce our operating expenses in an amount sufficient to offset the effects future inflationary pressures may have on our gross margin. Accordingly, we cannot assure you that our financial condition and results of operations will not be materially impacted by inflation in the future.
JOBS Act
Section 107 of the JOBS Act permits us, as an “emerging growth company,” to take advantage of an extended transition period for adopting new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, as a result, for so long as we remain an emerging growth company, unless we subsequently choose to affirmatively and irrevocably opt out of the extended transition period, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable.
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more; (ii) the last day of 2025; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the

Explanation: Quantitative and qualitative market risk disclosures. Source: 1708527_2020.htm (CIK: 1708527, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 6. Selected Financial Data.
Financial Highlights (for the years ended December 31, 2020, 2019, 2018, 2017 and 2016)
(Dollar amounts in 000’s except for per share information)
* Adjusted to give effect to the reverse share split of 1-for-4 executed on January 4, 2018.
Item 7.

Explanation: Selected financial data and key metrics. Source: 1376227_2020.htm (CIK: 1376227, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX OF FINANCIAL INFORMATION
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Western Capital Resources, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Western Capital Resources, Inc. ("the Company") as of December 31, 2020 and 2019, the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2020 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the 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 audit to obtain reasonable assurance about whether the 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 financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accounting for Leases
Critical Audit Matter Description
As described further in Note 9 of the financial statements, during the year ended December 31, 2020, the Company recognized a right-of-use asset and lease liability for operating leases (other than leases that meet the definition of a short-term lease) at the commencement date of the respective lease. The Company concluded that the leases were operating leases which requires a lease liability to be recorded

Explanation: Audited financial statements and supplementary data. Source: 1363958_2020.htm (CIK: 1363958, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide the information required by this item.
ITEM 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1797762_2020.htm (CIK: 1797762, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As of December 31, 2020, we were not subject to any market or interest rate risk. Following the consummation of our initial public offering, the net proceeds of our initial public offering, including amounts in the trust account, have been invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1834645_2020.htm (CIK: 1834645, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements and related notes included in this Report. Our consolidated financial statements include our accounts and our wholly-owned subsidiaries. The financial information presented below has been derived from our audited consolidated financial statements, which financial statements have been audited by Ernst & Young LLP, our independent registered public accounting firm. The historical data is not necessarily indicative of results to be expected for any future period. The balance sheet data below reflects the reclassification of deferred financing costs under FASB Accounting Standards Update ("ASU") No. 2015-03, Simplifying the Presentation of Debt Issue Costs, which was adopted on January 1, 2016, retrospectively.
Glossary of Defined Terms
ITEM 7.

Explanation: Selected financial data and key metrics. Source: 1347652_2020.htm (CIK: 1347652, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data required to be submitted in response to this Item 8 are set forth after Part IV, Item 15 of this Annual Report on Form 10-K and are incorporated by reference into this Item 8.
Item 9.

Explanation: Audited financial statements and supplementary data. Source: 1648428_2020.htm (CIK: 1648428, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A.Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our market risk involves forward-looking statements. All statements that do not relate to matters of historical fact should be considered forward-looking statements. Actual results could differ materially from those projected in any forward-looking statements.
Interest Rate Risk. Our exposure to interest rate risk from changes in market interest rates relates primarily to RealNetworks' revolving line of credit. RealNetworks' borrowing arrangement has a floating rate interest payments and thus has a degree of interest rate risk, if interest rates increase. Based on the available total balance of the revolving line of credit, a hypothetical 10% increase/decrease in interest rates would not increase/decrease our annual interest expense or cash flows by more than a nominal amount.
Investment Risk. As of December 31, 2020, we had an equity investment in common shares of a foreign publicly traded technology company. These common shares were acquired as a portion of the proceeds received in the sale of Napster. The equity investment is subject to fluctuation in the market price as well as being exposed to changes in foreign currency exchange rates. A hypothetical 10% increase/decrease in the common share price or foreign currency exchange rate would result in an increase/decrease of the value of the equity investment of approximately $1.0 million.
Foreign Currency Risk. We conduct business internationally in several currencies and thus are exposed to adverse movements in foreign currency exchange rates.
Our exposure to foreign exchange rate fluctuations arise in part from: (1) translation of the financial results of foreign subsidiaries into U.S. dollars in consolidation; (2) the remeasurement of non-functional currency assets, liabilities and intercompany balances into U.S. dollars for financial reporting purposes; and (3) non-U.S. dollar denominated sales to foreign customers.
Our foreign currency risk management program reduces, but does not entirely eliminate, the impact of currency exchange rate movements. For our foreign operations, the majority of our revenues and expenses are denominated in other currencies, such as the euro. We currently do not actively hedge our foreign currency exposures and are therefore subject to the risk of exchange rate fluctuations. We are exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into U.S. dollars in consolidation. Our exposure to foreign exchange rate fluctuations also arises from intercompany payables and receivables to and from our foreign subsidiaries.
A hypothetical 10% increase or decrease in those currencies relative to the U.S. dollar as of December 31, 2020 would not result in a material impact on our financial position, results of operations or cash flows.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1046327_2020.htm (CIK: 1046327, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 1A. Risk Factors
Risks Related to our Mergers and Acquisitions Activities
Combining Legacy Bridge and Legacy Dime may be more difficult, costly or time consuming than expected and the Company may fail to realize the anticipated benefits of the Merger.
The success of the Merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Legacy Bridge and Legacy Dime. To realize the anticipated benefits and cost savings from the Merger, we must successfully integrate and combine the two businesses in a manner that permits those cost savings to be realized. If the Company is not able to successfully achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the Merger could be less than anticipated, and integration may result in additional unforeseen expenses.
It is possible that the integration process could result in the loss of key employees, the disruption of the Company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the Company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the Merger. Integration efforts may also divert management attention and resources. These integration matters could have an adverse effect on the Company for an undetermined period after completion of the Merger.
The combined company may be unable to retain personnel successfully following the Merger.
The success of the Merger will depend in part on the Company’s ability to retain the talents and dedication of key employees of Legacy Bridge and Legacy Dime. It is possible that these employees may decide not to remain with the Company. If the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, if key employees terminate their employment, the Company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating the businesses of Legacy Bridge and Legacy Dime to hiring suitable replacements, all of which may cause the Company’s business to suffer. In addition, the Company may not be able to locate or retain suitable replacements for any key employees who leave.
Acquisitions involve integrations and other risks.
Acquisitions involve a number of risks and challenges including: our ability to integrate the branches and operations acquired, and the associated internal controls and regulatory functions, into our current operations; our ability to limit the outflow of deposits held by our new customers in the acquired branches and to successfully retain and manage the loans acquired; and our ability to attract new deposits and to generate new interest-earning assets in geographic areas not previously served. Additionally, no assurance can be given that the operation of acquired branches would not adversely affect our existing profitability; that we would be able to achieve results in the future similar to those achieved by our existing banking business; that we would be able to compete effectively in the market areas served by acquired branches; or that we would be able to manage any growth resulting from the transaction effectively. We face the additional risk that the anticipated benefits of the acquisition may not be realized fully or at all, or within the time period expected. Finally, acquisitions typically involve the payment of a premium over book and trading values and therefore, may result in dilution of our book and tangible book value per share.
We m

Explanation: SEC filing risk factors section containing investment-relevant disclosures. Source: 846617_2020.htm (CIK: 846617, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in foreign currency exchange rates and interest rates, which could affect our operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities. We address market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain foreign currency transaction exposures from future settlement of non-functional currency monetary assets and liabilities as of the end of a period.
Foreign Currency Exchange Rate Risk and Sensitivity
We are exposed to changes in foreign currency exchange rates which could affect our operating results as well as our financial position and cash flows. The foreign currencies to which we have the most significant exchange rate exposures are the Euro, British Pound and Japanese Yen. The Company manages its foreign currency exposures on a consolidated basis, which allows the Company to analyze exposures globally and take into account offsetting exposures in certain balances. The primary foreign currency denominated transactions include revenue and expenses and the resulting accounts receivable and accounts payable balances reflected on our consolidated balance sheet and with intercompany trading partners that are eliminated in consolidation.
In the ordinary course of business, we enter into foreign currency contracts for periods consistent with our committed exposures to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. We do not enter into or hold foreign currency derivative financial instruments for trading or speculative purposes, nor do we enter into derivative financial instruments to hedge future cash flows or forecasted transactions. The intent of these economic hedges is to offset gains and losses on the underlying exposures from these currencies with gains and losses resulting from the foreign currency contracts that hedge these exposures.
We had foreign currency contracts with notional amounts totaling $28.5 million and a fair value of less than $0.1 million as of December 31, 2020. A hypothetical 10% strengthening of the U.S. dollar against other currencies would result in an approximately $1.6 million increase in the fair value of our foreign currency contracts as of December 31, 2020. By contrast, a hypothetical 10% weakening of the U.S. dollar against other currencies would result in an approximately $1.6 million decrease in the fair value of our foreign currency contracts as of December 31, 2020.
Interest Rates
Our exposure to market risk associated with changes in interest rates relates primarily to our debt obligations. We have $204.8 million of outstanding variable rate debt as of December 31, 2020. A 100 basis point increase in interest rates at December 31, 2020 would increase our annual pre-tax interest expense by approximately $2.0 million.
Item 8.

Explanation: Quantitative and qualitative market risk disclosures. Source: 1076930_2020.htm (CIK: 1076930, 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
Presentation
The following discussion should be read in conjunction with “Selected Financial Data” and the Consolidated Financial Statements included elsewhere in this document. See also “Forward-Looking Statements” on page 2. Discussions of 2019 items and year-to-year comparisons of 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, which Item is incorporated herein by reference.
Overview
Marine Products, through our wholly owned subsidiaries Chaparral and Robalo, is a leading manufacturer of recreational fiberglass powerboats. Our sales and profits are generated by selling the products that we manufacture to a network of independent dealers who in turn sell the products to retail consumers. These dealers are located throughout the continental United States and in several international markets. Dealers either remit payment upon receipt of the product or finance their inventory through third-party floor plan lenders, who pay Marine Products generally within ten days of delivery of the products to the dealers.
We manage our Company by focusing on the execution of the following business and financial strategies:
●Manufacturing high-quality, stylish, and innovative powerboats for our dealers and retail consumers which are competitive in the market,
●Providing our independent dealer network appropriate incentives, training, and other support to enhance their success and their customers’ satisfaction, thereby facilitating their continued relationship with us,
●Managing our production and dealer order backlog to optimize operating results and reduce risk in the event of a downturn in sales of our products,
●Maintaining a flexible, variable cost structure which can be reduced quickly when deemed appropriate,
●Designing our products and marketing strategies to create a positive, memorable experience for our customers, within an evolving environment which calls for the increased use of technology to conduct virtual marketing and product demonstration,
●Monitoring the recreational boat market for strong complementary product lines which we may enter through new product development or acquisition,
●Extending our brand name recognition to enhance the success of new boat models that complement our existing offerings,
●Improving our sales and profits by increasing the utilization of our manufacturing capacity,
●Monitoring the activities and financial condition of our dealers and of the third-party floor plan lenders who finance our dealers’ inventories,
●Maximizing stockholder return by optimizing the balance of cash invested in the Company’s productive assets, the payment of dividends to stockholders, and the repurchase of the Company’s common stock on the open market, and
●Aligning the interests of our management and stockholders.
In executing these strategies and attempting to optimize our financial returns, management closely monitors dealer orders and inventories, the production mix of various models, and indications of near term demand such as consumer confidence, evolving customer preferences for socially distanced recreational activities, interest rates, dealer orders placed at our annual dealer conferences, and retail attendance and orders at annual winter boat show exhibitions and through virtual marketing events. We also consider trends related to certain key financial and other data, including our historical and forecasted financial results, market share, unit sales of our products, average selling price per boat, and gross profit margins, among others, as indicators of the success of our strategies. Marine Products’ financial results are affected by consumer confidence and preferences, because pleasure boating is a discretionary expenditure

Explanation: Management Discussion and Analysis section with financial performance data. Source: 1129155_2020.htm (CIK: 1129155, Year: 2020). Contains regulated financial information subject to SEC disclosure requirements.