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ACTIVECARE, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader better understand our operations and our present business environment. This MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements for the fiscal years ended September 30, 2013 and 2012, and the accompanying notes thereto, contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013 and our unaudited condensed consolidated financial statements for the three and nine months ended June 30, 2014, and the accompanying notes thereto, contained in this Quarterly Report on Form 10-Q. Unless otherwise indicated, the terms "ActiveCare," the "Company," "we," and "our" refer to ActiveCare, Inc., a Delaware corporation and its subsidiaries. Overview ActiveCare, Inc. was formed March 5, 1998 as a wholly owned subsidiary of SecureAlert, Inc. [OTCBB: SCRA.OB], a Utah corporation, formerly known as RemoteMDx, Inc. ("SecureAlert"). We were spun off from SecureAlert in February 2009. Effective July 15, 2009, we changed our name to ActiveCare, Inc., and our state of incorporation to Delaware. Our fiscal year ends on September 30. Our primary focus is on markets addressing chronic conditions and disease states. During fiscal years 2013 and 2012, we received valuable feedback through sales and focus groups reaching thousands of patients. In fiscal year 2012, we launched an additional product line focused on technology for assisting the chronically ill. Remote patient monitoring ("RPM") is a technology to enable monitoring of patient vital signs and physical functions outside of conventional clinical settings (e.g., in the home, work or travel). Physiological data such as blood sugar levels, blood pressure, pulse rate, and blood oxygen levels are collected by sensors on medical peripheral devices. Examples of these devices include glucometers, blood pressure cuffs, and pulse oximeters. The data is stored for future assessment or transmitted to healthcare providers or third parties via wireless telecommunication devices. Disease states targeted by RPM technology providers typically include diabetes, congestive heart failure, sleep apnea, activity monitoring, and diet management. We believe that we can improve the lives of the chronically ill and the elderly through the use of technology, while reducing the cost of care. Central to these efforts is our state-of-the-art "CareCenter." This service is designed to monitor and track patients' health conditions and chronic illnesses on a real time basis. As part of these efforts we have staffed this CareCenter with highly trained specialists to assist the chronically ill and elderly in managing their daily lives; 24 hours per day, seven days per week. In order for the CareCenter to service our customers, we have developed and continue to develop numerous products designed to improve the health of the chronically ill and to enable the elderly to maintain a more active and mobile lifestyle. Recent Developments We have financed operations primarily through the sale of equity securities, long-term debt and short-term debt. Until revenues are sufficient to meet our needs, we will attempt to secure financing through financial institutions or through the sale of our equity or debt securities. There is no assurance that we will be able to obtain financing on satisfactory terms or at all. If we only have nominal funds with which to conduct our business activities, it will negatively impact the results of our operations and our financial condition. During the nine months ended June 30, 2014, we (1) completed the sale of Series F preferred stock for net proceeds of $3,580,771, after considering $675,229 of related costs; (2) converted $2,326,801 of debt and accrued interest to common stock; (3) converted $574,592 of debt and accrued interest to Series F preferred stock; and (4) converted $83,473 of debt and accrued interest to Series E preferred stock. These transactions strengthened our balance sheet and allowed us to fulfill and finalize larger contracts. Our Product and Service Strategy Our product and service strategy falls into two segments: (1) Chronic Illness Monitoring, and (2) CareServices or personal emergency response systems ("PERS"). Chronic Illness Monitoring Chronic illness monitoring involves the use of biometric monitoring devices in combination with proprietary data and algorithms to assess and predict the wellbeing of an individual under care. Individual care profiles are created through the aggregation of personal health and medical claims information from multiple data sources. Real-time biometric readings for blood glucose levels, blood pressure, heart rate, weight, tidal volume and other vital readings are captured over time and added to the existing personal information. This unique data set is used for proactive care protocols, care provider alerts to elevated readings, and behavioral intervention prior to crisis events. 20 -------------------------------------------------------------------------------- Technology to facilitate data-driven chronic illness monitoring consists of three components: (1) biometric monitoring devices, (2) medical and claims data aggregation, and (3) algorithms for the analysis of the data. Biometric monitoring devices are provided by numerous medical hardware providers and deliver a wide range of features and functionality. Our ActiveCare technology is agnostic to any specific device requirement, and has as a core competency the ability to integrate to and capture data from any 510(k) or HL7 compliant monitoring device. Strategic relationships have been created with technology and market leaders, and evaluation of new and emerging technology partners is ongoing. Medical and claims data is aggregated from multiple source providers using a proprietary application programmatic interface and data storage architecture. This data is analyzed to identify individual care needs of those entering the program. Monitoring alerts, predictive informatics and individual care plans are created and managed using our technology platform. Care for chronic conditions may now be performed in real-time, and outcomes may be measured on both a medical and claims cost basis. CareCenter The central point of our product offerings is our state-of-the-art CareCenter. Our CareCenter is staffed 24x7 with CareCenter specialists who are 911-certified and trained. In addition, we have nurses on duty and on call that are available to assist with medical issues or questions. Our CareCenter specialists and CareCenter provide services ranging from responding to fall alerts detected and communicated by our devices, to full service concierge services. The staff at the CareCenter provides assistance with everyday living needs of our members, and in an emergency situation, the 911-trained CareSpecialist evaluates the situation and decides whether to call emergency services and/or a designated friend or family member. In contrast to a typical monitoring center, our CareCenter is equipped with hardware and software that pinpoints the location of the incoming caller by utilizing GPS and/or cellular triangulation technology. This capability is referred to as "telemetric". The operator (or CareSpecialist) can locate the caller's precise location on a detailed map. In addition, the CareCenter's software will identify the caller, access the individual's medical information, and provide location services, emergency dispatch, and medical history to emergency responders. We believe the CareCenter is the cornerstone of our business and will support current technology as well as evolve to support the integration of future technologies. CareServices We have developed products that incorporate GPS, cellular capability, and fall detection, all of which are connected to our 24-hour CareCenter with the push of a button. The transmitter can be worn on a neck pendant or belt clip, or carried in a purse, and sends a cellular signal to our CareCenter. When the wearer of the device pushes the button, the staff at the CareCenter evaluate the situation and determine whether to call emergency services or a designated friend or family member. Currently, there are separate products on the market that provide service to the PERS industry as well as products that provide fall detection, geographical location, and clinical health parameters. However, we believe that no product on the market today has successfully integrated all of these technologies in a single effective device. Further, none of the current solutions in the market focus on providing CareServices - assistance with everyday needs - as an alternative to costly assisted living or in-home care services as we do. Research and Development Program During the nine months ended June 30, 2014, we spent approximately $169,000 compared to $590,000 during the same period in 2013, on research and development primarily related to chronic illness monitoring, including work related to the development of prototype methods and systems for the capture and analysis of data, as well as the development of scalable architectures to migrate to production applications and deployments. We will continue to identify claims and medical data sets as well as analytical and informatics technologies that advance our ability to provide unique services. Core competency will continue to evolve in the methods and technologies for data analytics and predictive informatics. Critical Accounting Policies The following summary includes accounting policies that we deem to be most critical to our business. Management considers an accounting estimate to be critical if: · It requires assumptions to be made that were uncertain at the time the estimate was made, and · Changes in the estimate or different estimates that could have been selected could have a material impact on our condensed consolidated results of operations or financial position. Use of Estimates in the Preparation of Financial Statements We have prepared and included with this report unaudited condensed consolidated financial statements in conformity with US GAAP. 21 -------------------------------------------------------------------------------- The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventory, intangible assets, warranty obligations, product liability, revenue recognition, and income taxes. We base our estimates on historical experience and other facts and circumstances that we believe to be reasonable and the results provide a basis for making judgments about the carrying values of the related assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material. In May 2013, we completed a 10-for-1 reverse common stock split. The condensed consolidated financial statements and notes for all periods presented in this report have been retroactively adjusted to reflect the reverse common stock split. Material accounting policies that we believe are critical to an understanding of our financial results and condition are described below. Fair Value of Financial Instruments The carrying values of cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature and liquidity of these financial instruments. Derivative financial instruments are recorded at fair value based on current market pricing models. We estimate that, based on current market conditions, the fair values of long-term debt obligations approximate their carrying values as of June 30, 2014. Concentrations of Credit Risk We have cash in bank accounts that, at times, may exceed federally insured limits. We have not experienced any losses in these accounts. In the normal course of business, we provide credit terms to our customers and require no collateral. We perform ongoing credit evaluations of our customers' financial condition. We maintain an allowance for doubtful accounts receivable based upon management's specific review and assessment of each account at the period end. Accounts Receivable Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Specific allowances are estimated by management based on certain assumptions and variables, including the customer's financial condition, age of the customer's receivables and changes in payment histories. Accounts receivable are written off when management determines the likelihood of collection is remote. A receivable is considered to be past due if any portion of the receivable balance has not been received by the contractual payment date. Interest is not charged on accounts receivable that are past due. Inventory Inventory is recorded at the lower of cost or market, cost being determined using the first-in, first-out ("FIFO") method. Chronic Illness Monitoring inventory consists of diabetic supplies. Provisions, when required, are made to reduce excess and obsolete inventories to their estimated net realizable values. Due to competitive pressures and technological innovation, it is possible that estimates of the net realizable values could change in the near term. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are determined using the straight-line method over the estimated useful lives of the assets, typically three to seven years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the asset or the term of the lease. Equipment leased to customers is depreciated over the three-year useful lives of the related equipment, regardless of whether the equipment is leased to customers or remaining in stock, and is recorded in the cost of revenues for CareServices. Expenditures for maintenance and repairs are expensed as incurred. Goodwill Goodwill is reviewed for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. Our annual testing date is September 30. The identification and measurement of goodwill impairment involves the estimation of the fair value of our reporting units. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment, which primarily incorporate management assumptions about expected future cash flows. Future cash flows can be affected by changes in industry or market conditions. Goodwill was not impaired as of September 30, 2013 and no event has occurred or circumstance has changed during the nine months ended September 30, 2014 that would require an impairment test. Impairment of Long-Lived Assets Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from two to twenty years. Long-lived assets, including intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. No long-lived assets were considered to be impaired during fiscal year 2013 or through the nine months ended June 30, 2014. 22 -------------------------------------------------------------------------------- Warranty Expense Although not contractually obligated, the Company may provide replacement chronic illness supplies to distributors with expired supplies. The Company records a liability for the estimated costs and adjusts its liability when specific warranty matters become known and are reasonably estimable. The Company recognizes warranty expense in cost of revenues for claims incurred and estimated future claims. Revenue Recognition Our revenue has historically been from three sources: (1) sales of Chronic Illness Monitoring services and supplies; (2) sales from CareServices; (3) sales of medical diagnostic stains from our Reagents segment, which was sold during fiscal year 2013. Information regarding revenue recognition policies relating to our current business segments is contained in the following paragraphs. Chronic Illness Monitoring We recognize Chronic Illness Monitoring revenue when persuasive evidence of an arrangement with the customer exists, delivery has occurred, prices are fixed or determinable, and collection is reasonably assured. We enter into agreements with insurance companies, disease management companies, and self-insured companies (collectively, customers) to lower medical expenses by distributing diabetic testing supplies to their customers or employees (members) and monitoring their test results in real-time with our 24x7 CareCenter. Customers are obligated to pay for the supplies at the time of shipment. Customers who are billed separately for monitoring are obligated to pay as the service is performed and revenue is recognized ratably over the period of the contract. The term of these contracts is generally one year and, unless terminated by either party, will automatically renew for another year. Collection terms are net 30 days after claims are submitted. There is no contingent revenue in these contracts. Shipping and handling fees billed to customers are included as part of net revenues. The related freight costs and supplies directly associated with shipping products to customers are included as a component of cost of revenues. Sales of Chronic Illness Monitoring products and services contain multiple deliverables. Multiple-Element Arrangements We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. In order to account for elements in a multiple-element arrangement as separate units of accounting, the deliverables must have stand-alone value upon delivery. In determining whether monitoring services have stand-alone value, we consider the nature of our monitoring services, whether we sell supplies to new customers without monitoring services, and availability of monitoring services from the other vendors. During the three months ended June 30, 2014, we began to provide additional monitoring services for a significant customer who pays a separating monthly monitoring fee. When multiple deliverables included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based on their relative selling price. Multiple-element arrangements accounting guidance provides a hierarchy to use when determining the relative selling price for each unit of accounting. Vendor-specific objective evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a stand-alone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence (TPE) of selling price is used to establish the selling price if it exists. If VSOE of selling price and TPE of selling price are not available, then the best estimate of selling price (BESP) is to be used. During the quarter ended June 30, 2014 VSOE was established for the monitoring services we provide. VSOE for supplies was previously established. Therefore, total consideration under the contract is allocated to supplies and monitoring through application of the relative fair value method. CareServices "CareServices" include contracts in which we provide monitoring services to end users and sell devices to distributors. We typically enter into contracts on a month-to-month basis with customers (members) that use our CareServices. However, these contracts may be cancelled by either party at any time with 30-days notice. Under our standard contract, the device becomes billable on the date the member orders the product, and remains billable until the device is returned to us. We recognize revenue on devices at the end of each month that CareServices have been provided. In those circumstances in which payment is received in advance, the Company records these payments as deferred revenue. 23 -------------------------------------------------------------------------------- We recognize CareServices revenue when persuasive evidence of an arrangement with the customer exists, title passes to the customer, prices are fixed or determinable, and collection is reasonably assured. Shipping and handling fees are included as part of net revenues. The related freight costs and supplies directly associated with shipping products to members are included as a component of cost of revenues. All CareServices sales are made with net 30-day payment terms. To qualify for the recognition of revenue at the time of sale, the following must exist: · The price to the buyer is fixed or determinable. · The buyer has paid or the buyer is obligated to pay within terms, and the obligation is not contingent on resale of the product. · The buyer's obligation would not be changed in the event of theft or physical destruction or damage of the product. · The buyer acquiring the product for resale has economic substance apart from that provided by us. · We do not have significant obligations for future performance to directly bring about resale of the product by the buyer. · The amount of future returns can be reasonably estimated and are not significant. The vast majority of sales for CareServices are service revenues. Because equipment sales are not material, we present services and equipment sales together in the accompanying financial statements. Results of Operations Three Months Ended June 30, 2014 and 2013 Revenues Revenues for the three months ended June 30, 2014 were $800,000 compared to $4,328,000 for the same period in 2013. Revenues from Chronic Illness Monitoring were $596,000 for the three months ended June 30, 2014, compared to $3,912,000 for the same period in 2013. The decrease is due to a significant sale to a distributor in June 2013 that was not repeated in 2014. Revenues from CareServices were $204,000 for the three months ended June 30, 2014, compared to $415,000 for the same period in 2013. The decrease is due to customer attrition. Cost of Revenues Cost of revenues for the three months ended June 30, 2014 were $982,000, compared to $3,414,000 for the same period in 2013. The decrease in cost of revenues is due to lower sales and offset, in part, by estimated warranty expense of $150,000. Chronic Illness Monitoring costs of revenue were $799,000 and CareServices costs of revenue were $183,000. Gross Profit (Deficit) Gross deficit for the three months ended June 30, 2014 was $182,000, compared to gross profit of $914,000 for the same period in 2013. The decrease in gross profit resulted primarily from a decrease in sales and an increase in estimated warranty expense. We expect gross profit to improve in fiscal year 2015 as we acquire more Chronic Illness Monitoring customers and retain existing customers. Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended June 30, 2014 were $2,392,000, compared to $2,733,000 for the same period in 2013. The decrease in expenses incurred is primarily due to a decrease in consulting and professional fees. Stock-based compensation for the three months ended June 30, 2014 was $981,000 compared to $679,000 for the same period in 2013. Research and Development Expenses Research and development expenses for the three months ended June 30, 2014 were $46,000, compared to $121,000 for the same period in 2013. The decrease is due to the completion of certain Chronic Illness Monitoring platforms during fiscal year 2013. We expect to continue investing in research and development as we develop new platforms for Chronic Illness Monitoring. 24 -------------------------------------------------------------------------------- Interest Expense Interest expense for the three months ended June 30, 2014 was $186,000, compared to $1,065,000 for the same period in 2013. The decrease is due to the conversion of $2,985,000 of debt and accrued interest to equity during the three months ended December 31, 2013. Other Income and Expense The loss on derivatives liability for the three months ended June 30, 2014 was $467,000, compared to $0 for the same period in 2013. During the three months ended June 30, 2014, a derivatives liability was established for a variable conversion feature for the Series F preferred stock related to a potential mile-stone adjustment. Discontinued Operations In June 2013, we sold the net assets and operations of our reagents business segment to a third party for $184,000 in cash. Loss from discontinued operations for the three months ended June 30, 2013 was $12,000. Net Loss from Continuing Operations Net loss for the three months ended June 30, 2014 was $3,294,000, compared to $3,110,000 for the same period in 2013 for the reasons described above. Dividends on Preferred Stock We accrued $195,000 of dividends on preferred stock for the three months ended June 30, 2014, compared to $79,000 for the same period in 2013. The increase in dividends was due to the increased number of shares of Series E preferred stock and Series F preferred stock issued and outstanding during the three months ended June 30, 2014. Nine Months Ended June 30, 2014 and 2013 Revenues Revenues for the nine months ended June 30, 2014 were $4,319,000 compared to $11,414,000 for the same period in 2013. Revenues from Chronic Illness Monitoring were $3,490,000 for the nine months ended June 30, 2014, compared to $10,122,000 for the same period in 2013. The decrease is due to three significant sales to distributors during the nine months ended June 30, 2013 that were not repeated in the same period of 2014. Revenues from CareServices were $829,000 for the nine months ended June 30, 2014, compared to $1,292,000 for the same period in 2013. The decrease is due to customer attrition. Cost of Revenues Cost of revenues for the nine months ended June 30, 2014 were $4,992,000, compared to $9,467,000 for the same period in 2013. The decrease in cost of revenues is due to lower sales and offset, in part, by estimated warranty expense of $1,550,000. Chronic Illness Monitoring costs of revenue were $4,291,000 and CareServices costs of revenue were $702,000. Gross Profit (Deficit) Gross deficit for the nine months ended June 30, 2014 was $673,000, compared to gross profit of $1,947,000 for the same period in 2013. The decrease in gross profit resulted primarily from a decrease in sales and an increase in estimated warranty expense. We expect gross profit to improve in fiscal year 2015 as we acquire more Chronic Illness Monitoring customers and retain existing customers. Selling, General and Administrative Expenses Selling, general and administrative expenses for the nine months ended June 30, 2014 were $7,987,000, compared to $7,606,000 for the same period in 2013. The increase in expenses incurred was primarily due to additional support for recurring Chronic Illness Monitoring customers and an increase to stock-based compensation. Stock-based compensation for the nine months ended June 30, 2014 was $2,556,000 compared to $2,181,000 for the same period in 2013. Research and Development Expenses Research and development expenses for the nine months ended June 30, 2014 were $169,000, compared to $590,000 for the same period in 2013. The decrease is due to the completion of certain Chronic Illness Monitoring platforms during fiscal year 2013. We expect to continue investing in research and development as we develop new platforms for Chronic Illness Monitoring. 25 -------------------------------------------------------------------------------- Interest Expense Interest expense for the nine months ended June 30, 2014 was $1,627,000, compared to $2,856,000 for the same period in 2013. The decrease is due to the conversion of $2,985,000 of debt and accrued interest to equity during the three months ended December 31, 2013. Other Income and Expense The gain on derivatives liability for the nine months ended June 30, 2014 was $13,000, compared to $46,000 for the same period in 2013. During the three months ended June 30, 2014, a derivatives liability was established for a variable conversion feature for the Series F preferred stock related to a potential mile-stone adjustment. During the three months ended December 31, 2013 a derivatives liability was eliminated due to the conversion of notes payable with variable conversion features, which partially offset the derivatives liability established during the three months ended June 30, 2014. Discontinued Operations In June 2013, we sold the net assets and operations of our reagents business segment to a third party for $184,000 in cash. Loss from discontinued operations for the nine months ended June 30, 2013 was $5,000. Net Loss from Continuing Operations Net loss for the nine months ended June 30, 2014 was $10,542,000, compared to $9,148,000 for the same period in 2013 for the reasons described above. Dividends on Preferred Stock We accrued $542,000 of dividends on preferred stock for the nine months ended June 30, 2014, compared to $213,000 for the same period in 2013. The increase in dividends was due to the increased number of shares of Series E preferred stock and Series F preferred stock issued and outstanding during the nine months ended June 30, 2014. In addition, we recognized a deemed dividend of $2,235,000 on the conversion of Series C preferred stock and Series D preferred stock to shares of common stock at conversion rates more favorable to the holders than their original designations. Liquidity and Capital Resources Our primary sources of liquidity are the proceeds from the sale of our equity securities and borrowings. We have not historically financed operations from cash flows from operating activities. We anticipate that we will continue to seek funding to supplement revenues from the sale of our products and services through the sale of equity securities and borrowings until we achieve positive cash flows from operating activities. Our cash balance as of June 30, 2014 was $379,000. As of June 30, 2014, we had a working capital deficit of $3,642,000, compared to a working capital deficit of $3,251,000 as of September 30, 2013. The increase in working capital deficit is primarily due to a decrease in accounts receivable due to customer collections, an increase in warranty reserve and derivatives liability, offset by a reduction to accounts payable due to vendor payments. Operating activities for the nine months ended June 30, 2014 used cash of $4,481,000, compared to $6,516,000 for the same period in 2013. The decrease in cash used in operating activities is due to the collection of accounts receivable for sales in fiscal year 2013 offset, in part, by reductions in accounts payable as compared to fiscal year 2013. Investing activities for the nine months ended June 30, 2014 used cash of $95,000, compared to $199,000 for the same period in 2013. The decreased use of cash in investing activities was due to the fact that we made no purchases of equipment leased to customers for our CareServices segment during the nine months ended June 30, 2014. Financing activities for the nine months ended June 30, 2014 provided cash of $4,731,000, compared to $6,308,000 for the same period in 2013. The decrease in cash provided from financing activities is due to the decrease in debt and equity financing during the nine months ended June 30, 2014. We had an accumulated deficit as of June 30, 2014 of $73,478,000, compared to $63,311,000 as of September 30, 2013. Our total stockholders' deficit as of June 30, 2014 was $1,464,000 compared to $791,000 as of September 30, 2013. These changes were primarily due to our net loss for the nine months ended June 30, 2014, offset by the sale of Series F preferred stock and the conversion of debt to equity. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing US GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein. Early adoption is not permitted. We are currently assessing the impact, if any, of implementing this guidance on our financial position, results of operations and liquidity. 26 -------------------------------------------------------------------------------- |