(

)

Recent Accounting

Pronouncements

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

02,

Leases

(ASC

842

). The new standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This standard affects any entity that enters into a lease, with some specified scope exemptions.

The Company adopted this update beginning on

January 1, 2019

using the alternative modified retrospective transition method and will

not

recast comparative periods in transition to the new standard. In addition, we elected certain practical expedients which permit us to

not

reassess whether existing contracts are or contain leases, to

not

reassess the lease classification of any existing leases, to

not

reassess initial direct costs for any existing leases, and to

not

separate lease and nonlease components for all classes of underlying assets. We also made an accounting policy election to keep leases with an initial term of

months or less off of the balance sheet for all classes of underlying assets. The adoption of ASC

842

January 1, 2019

resulted in the recognition of right-of-use assets (ROU) of approximately

$7,664,000

and lease liabilities of operating leases of approximately

$8,549,000.

The implementation decreased the accumulated deficit by

$1,442,000,

which was driven by the recognition of the remaining deferred gain related to the operating lease portion on a

2016

sale-leaseback directly into the accumulated deficit. There was

material impact to its Consolidated Statements of Operations or Cash Flows. See Note

for further information regarding the impact of the adoption of ASC

842

on the Company’s financial statements.

August 2016,

the FASB issued ASU

No.

2016

Statement of Cash Flows Topic

230:

Classification of Certain Cash Receipts and Cash Payments

. ASU

No.

2016

addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing existing differences in the presentation of these items. The amendments in ASU

No.

2016

became effective for us in the

first

quarter and were adopted retrospectively. The adoption of this update did

not

impact our consolidated financial statements.

June 2016,

the FASB issued ASU

2016

13,

Credit Losses – Measurement of Credit Losses on Financial Instruments

, new guidance for the accounting for credit losses on certain financial instruments. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. This guidance, which becomes effective

January 1, 2020,

not

expected to have a material impact on our consolidated financial statements.

February 2018,

the FASB issued ASU

No.

2018

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

(ASU

2018

). Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU

2018

allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of

2017

(the “Tax Act”). The guidance is effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Entities are required to make additional disclosures, regardless of whether they elect to reclassify stranded amounts of tax effects. The Company adopted the standard effective

January 1, 2019,

and has elected to

not

reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings. The adoption of ASU

2018

did

not

have an impact on the Company’s consolidated financial statements.

August 2018,

the FASB issued ASU

2018

15,

Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

(ASU

2018

). ASU

2018

aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance will be effective for public companies for fiscal years beginning after

December 15, 2019

and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and related disclosures.