NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(All dollar amounts, except share and per share amounts, are stated in thousands)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Yield10 Bioscience, Inc. ("Yield10 Bioscience," "Yield10" or the "Company") is an agricultural bioscience company which uses its "Trait Factory" development process, which is a combination of the Company's unique background and expertise in metabolic modeling, genetic engineering, genome editing and next generation microbial gene systems, in order to develop high value seed traits for the agriculture and food industries. Specifically, Yield10 plans to efficiently develop superior gene traits for the major grain crops, which are: corn, soybean, canola, wheat and rice. The Company considers 10-20 percent increases in crop yield to be step-change increases. Yield10 is currently progressing several novel yield gene traits in its pipeline in canola, soybean and corn, the major North American row crops, among others. Over the last three years, the Company has evaluated certain of its traits in greenhouse studies and field tests conducted in the United States and Canada. Yield10 currently has two non-exclusive research license agreements in place with the Monsanto division of Bayer Crop Science, a division of Bayer AG, for the evaluation of the Company's C3003 and C3004 traits in soybean and with Forage Genetics International, LLC, a division of Land O'Lakes, Inc. for the evaluation of five yield traits in forage sorghum. The Company's business strategy is to progress its traits into field tests to generate validating yield data. Over the last three years, the Company has progressed its evaluation of C3003 in field test with Camelina and canola. Yield10 is planning to expand its field tests with additional traits and more events in 2019 and 2020. The Company plans to leverage data that it generates to support the performance of its traits in key crops to establish collaborations or sign licenses to the traits with major agricultural companies in order to generate revenue. Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an oilseed development Center of Excellence in Saskatoon, Saskatchewan, Canada.
The accompanying condensed consolidated financial statements are unaudited and have been prepared by Yield10 in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair statements of the financial position and results of operations for the interim periods ended
March 31, 2019
and
March 31, 2018
. The Company adopted Accounting Standards Update ("ASU") No. 2016-02,
Leases
, ("Topic 842") on January 1, 2019 using a modified retrospective approach. As a result, the Company's condensed consolidated balance sheet at
December 31, 2018
and its condensed consolidated statements of operations, comprehensive income (loss), cash flows and stockholders' equity for the three months ending
March 31, 2018
, included herein, have been adjusted to incorporate the guidance of Topic 842. See Note 8.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended
December 31, 2018
, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2019.
The accompanying consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. With the exception of a single year, the Company has recorded losses since its initial founding, including the three months ending
March 31, 2019
.
As of
March 31, 2019
, the Company held unrestricted cash and cash equivalents of
$6,065
. The Company follows the guidance of Accounting Standards Codification ("ASC") Topic 205-40,
Presentation of Financial Statements-Going Concern,
in order to determine whether there is substantial doubt about its ability to continue as a going concern for one year after the date its financial statements are issued. Based on its current cash forecast management expects that the Company's present capital resources will be sufficient to fund its planned operations and meet its obligations into the fourth quarter of 2019. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors. The Company's ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing through, among other sources, public or private equity financing, secured or unsecured debt financing, equity or debt bridge financing, warrant holders' ability and willingness to exercise the Company's outstanding warrants, additional government grants or collaborative arrangements with third parties, as to which no assurance can be given. Management does not know whether additional financing will be available on terms favorable or acceptable to the Company when needed, if at all. If adequate additional funds are not available when required, management will be forced to curtail the Company's research efforts, explore strategic alternatives and/or wind down its operations and pursue options for liquidating its remaining assets, including intellectual property and equipment. Based on its cash forecast, management has determined that the Company's present capital resources will not be sufficient to fund its planned operations for the
twelve
months from the date that these financial statements are filed, which raises substantial doubt about the Company's ability to continue as a going concern.
If the Company issues equity or debt securities to raise additional funds, (i) the Company may incur fees associated with such issuance, (ii) its existing stockholders may experience dilution from the issuance of new equity securities, (iii) the
Company may incur ongoing interest expense and be required to grant a security interest in Company assets in connection with any debt issuance, and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. In addition, utilization of the Company’s net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Internal Revenue Code of 1986 due to ownership changes resulting from equity financing transactions. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies or grant licenses on terms that are not favorable to the Company.
2. ACCOUNTING POLICIES
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that the Company adopts as of the specified effective date. During the three months ended March 31, 2019, the Company adopted the following new accounting guidance.
In February 2016, the FASB issued ASU No. 2016-02, which requires lessees to recognize most leases on their balance sheet as right-of-use assets and lease liabilities. In July 2018, the FASB issued ASU No. 2018-10, "
Codification Improvements to Topic 842, Leases
" ("ASU 2018-10"), which provided narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, "
Leases (Topic 842 - Targeted Improvements"
("ASU 2018-11"), which addressed implementation issues related to the new lease standard. The new guidance was effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption was permitted. Under the new standard, disclosures are required to enable users of financial statements to better assess the amount, timing, and uncertainty of cash flows arising from leases. Topic 842 required filers to adopt the new standard using a modified retrospective approach under either of two transition methods; (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. The Company adopted the new standard on January 1, 2019 and elected to adjust its 2018 financial statements in order to make them comparable to its 2019 financial statements. Adoption of Topic 842 had a material impact on the Company's previously reported 2018 financial statements. See Note 8.
New pronouncements that are not yet effective but may impact the Company's financial statements in the future are described below.
In June 2016 the FASB issued ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. This standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. This standard will become effective for the Company on January 1, 2020, and requires adoption using a modified retrospective approach, with certain exceptions. Based on the composition of the Company's investment portfolio, current market conditions and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company's consolidated financial position and results of operations and related disclosures.
In August 2018 the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
. This standard modifies certain disclosure requirements on fair value measurements. This standard will become effective for the Company on January 1, 2020, and it is not expected that the adoption of this standard will have a material impact on the Company's disclosures.
In November 2018 the FASB issued ASU No. 2018-18,
Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
. This standard makes targeted improvements for collaborative arrangements as follows:
|
|
•
|
Clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606,
Revenue from Contracts with Customers
, when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements;
|
|
|
•
|
Adds unit-of-account guidance to ASC 808,
Collaborative Arrangements
, to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606; and
|
|
|
•
|
Precludes a company from presenting transactions with collaborative arrangement participants that are not directly related to sales to third parties with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer.
|
This standard will become effective for the Company on January 1, 2020; however, early adoption is permitted. A retrospective transition approach is required for either all contracts or only for contracts that are not completed at the date of initial application of ASC 606, with a cumulative adjustment to opening retained earnings, as of January 1, 2019. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial position, results of operations and related disclosures.
Principles of Consolidation
The Company's condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions were eliminated, including transactions with its Canadian subsidiary, Metabolix Oilseeds, Inc.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity date of ninety days or less at the date of purchase to be cash equivalents.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company's Condensed Consolidated Unaudited Balance Sheets included herein:
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Cash and cash equivalents
|
$
|
6,065
|
|
|
$
|
3,023
|
|
Restricted cash
|
332
|
|
|
332
|
|
Total cash, cash equivalents and restricted cash
|
$
|
6,397
|
|
|
$
|
3,355
|
|
Amounts included in restricted cash represent those required to be set aside by contractual agreement. Restricted cash of
$332
at
March 31, 2019
and
December 31, 2018
primarily consists of funds held in connection with the Company's lease agreement for its Woburn, Massachusetts facility.
Investments
The Company considers all investments purchased with an original maturity date of more than ninety days at the date of purchase and a maturity date of one year or less at the balance sheet date to be short-term investments. All other investments are classified as long-term. The Company held no short or long-term investments at
March 31, 2019
and no long-term investments at
December 31, 2018
.
Other-than-temporary impairments of equity investments are recognized in the Company's statements of operations if the Company has experienced a credit loss and has the intent to sell the investment or if it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis. Realized gains and losses, dividends, interest income and declines in value judged to be other-than-temporary credit losses are included in other income (expense). Any premium or discount arising at purchase is amortized and/or accreted to interest income.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of grant revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Foreign Currency Translation
Foreign denominated assets and liabilities of the Company's wholly owned foreign subsidiaries are translated into U.S. dollars at the prevailing exchange rates in effect on the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the period. Any resulting translation gains or losses are recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet. When the Company dissolves, sells or substantially sells all of the assets of a consolidated foreign subsidiary, the cumulative translation gain or loss of that subsidiary is released from comprehensive income (loss) and included within its consolidated statement of operations during the fiscal period when the dissolution or sale occurs.
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company's tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to a level which, more likely than not, will be realized.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and investments. The Company has historically invested its cash equivalents in highly rated money market funds, corporate debt, federal agency notes and U.S. treasury notes. Investments, when purchased, are acquired in accordance with the Company’s investment policy which establishes a concentration limit per issuer.
At
March 31, 2019
,
100%
of the Company's total accounts and unbilled receivables of
$124
are due from U.S. government grants.
3. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options and warrants based on the treasury stock method, as well as weighted shares outstanding of any potential (unissued) shares of common stock from restricted stock units. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, there is no difference in basic and dilutive loss per share. Common stock equivalents include stock options, restricted stock awards and warrants.
The number of shares of potentially dilutive common stock presented on a weighted average basis, related to options, restricted stock units and warrants (prior to consideration of the treasury stock method) that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the
three
months ended
March 31, 2019
and
March 31, 2018
, respectively, are shown below. Issued and outstanding warrants shown in the table below are described in greater detail in Note 11, contained herein.
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Options
|
1,720,367
|
|
|
700,722
|
|
Restricted stock units
|
7,101
|
|
|
14,259
|
|
Warrants
|
7,433,084
|
|
|
10,597,486
|
|
Total
|
9,160,552
|
|
|
11,312,467
|
|
4. INVESTMENTS
Investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Cost
|
|
Unrealized
|
|
Market Value
|
December 31, 2018
|
|
Gain
|
|
(Loss)
|
|
Short-term investments
|
|
|
|
|
|
|
|
Government securities
|
$
|
2,746
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,746
|
|
Total
|
$
|
2,746
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,746
|
|
There were
no
long or short-term investments at
March 31, 2019
, and
no
long-term investments at
December 31, 2018
.
5. FAIR VALUE MEASUREMENTS
The Company has certain financial assets recorded at fair value which have been classified as either Level 1 or 2 within the fair value hierarchy as described in the accounting standards for fair value measurements. Fair value is the price that would be received from the sale of an asset or the price paid to transfer a liability in an orderly transaction between independent market participants at the measurement date. Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy level is determined by the lowest level of significant input. At
March 31, 2019
and
December 31, 2018
, the Company did not own any Level 3 financial assets.
The Company’s financial assets classified as Level 2 at
March 31, 2019
and
December 31, 2018
, were initially valued at the transaction price and subsequently valued utilizing third party pricing services. Because the Company’s investment portfolio may include securities that do not always trade on a daily basis, the pricing services use many observable market inputs to determine value including reportable trades, benchmark yields and benchmarking of like securities. The Company validates the prices provided by the third party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of
March 31, 2019
and
December 31, 2018
.
The tables below present information about the Company’s assets that are measured at fair value on a recurring basis as of
March 31, 2019
and
December 31, 2018
and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at reporting date using
|
|
|
|
Quoted prices in active markets for identical
assets
|
|
Significant other
observable inputs
|
|
Significant
unobservable inputs
|
|
Balance as of
|
Description
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
March 31, 2019
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
5,340
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,340
|
|
U.S. government and agency securities
|
—
|
|
|
500
|
|
|
—
|
|
|
500
|
|
Short-term investments:
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
5,340
|
|
|
$
|
500
|
|
|
$
|
—
|
|
|
$
|
5,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at reporting date using
|
|
|
|
Quoted prices in active markets for identical
assets
|
|
Significant other
observable inputs
|
|
Significant
unobservable inputs
|
|
Balance as of
|
Description
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
December 31, 2018
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
2,663
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,663
|
|
Short-term investments:
|
|
|
|
|
|
|
|
U.S. government agency securities
|
—
|
|
|
2,746
|
|
|
—
|
|
|
2,746
|
|
Total
|
$
|
2,663
|
|
|
$
|
2,746
|
|
|
$
|
—
|
|
|
$
|
5,409
|
|
There were no transfers of financial assets between category levels for the three months ended
March 31, 2019
.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
Employee compensation and benefits
|
|
$
|
140
|
|
|
$
|
98
|
|
Leased facilities
|
|
51
|
|
|
50
|
|
Professional services
|
|
262
|
|
|
234
|
|
Other
|
|
168
|
|
|
298
|
|
Total accrued expenses
|
|
$
|
621
|
|
|
$
|
680
|
|
7. STOCK-BASED COMPENSATION
Expense Information for Employee and Non-Employee Stock Awards
The Company recognized stock-based compensation expense related to stock awards, including awards to non-employees and members of the Board of Directors of
$162
and
$281
for the
three
months ended
March 31, 2019
and
March 31, 2018
, respectively. At
March 31, 2019
, there was approximately
$1,034
of pre-tax stock-based compensation expense related to unvested awards not yet recognized.
The compensation expense related to unvested stock options is expected to be recognized over a remaining weighted average period of
3.10
years.
Stock Options
A summary of option activity for the
three
months ended
March 31, 2019
is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Exercise Price
|
Outstanding at December 31, 2018
|
|
1,745,037
|
|
|
$
|
6.38
|
|
Granted
|
|
21,304
|
|
|
$
|
1.11
|
|
Exercised
|
|
—
|
|
|
—
|
|
Forfeited
|
|
(7,500
|
)
|
|
$
|
1.43
|
|
Expired
|
|
(62
|
)
|
|
$
|
1.65
|
|
Outstanding at March 31, 2019
|
|
1,758,779
|
|
|
$
|
6.34
|
|
|
|
|
|
|
Options vested and expected to vest at March 31, 2019
|
|
1,758,779
|
|
|
$
|
6.34
|
|
Options exercisable at March 31, 2019
|
|
959,047
|
|
|
$
|
10.26
|
|
Restricted Stock Units
The Company records stock compensation expense for restricted stock units ("RSUs") on a straight line basis over their vesting period based on each RSU's award date market value. The Company pays minimum required income tax withholding associated with RSUs for its employees. As the RSUs vest, the Company withholds a number of shares with an aggregate fair market value equal to the minimum tax withholding amount (unless the employee makes other arrangements for payment of the tax withholding) from the common stock issuable at the vest date. During the three months ended
March 31, 2019
and
March 31, 2018
, no outstanding RSUs vested and therefore the Company did not pay for income tax withholdings associated with RSUs during these periods.
A summary of RSU activity for the
three
months ended
March 31, 2019
is as follows:
|
|
|
|
|
|
Number of RSUs
|
Weighted Average Remaining Contractual Life (years)
|
Outstanding at December 31, 2018
|
7,101
|
|
|
Awarded
|
—
|
|
|
Common stock issued upon vesting
|
—
|
|
|
Forfeited
|
—
|
|
|
Outstanding at March 31, 2019
|
7,101
|
|
—
|
|
|
|
Weighted average remaining recognition period (years)
|
—
|
|
|
8. LEASES
New Lease Accounting
Topic 842 is effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those fiscal years. The Company adopted Topic 842 on January 1, 2019 and elected to apply the new lease accounting requirements to its financial statements beginning on January 1, 2018 (the earliest period presented in its comparative financial statements), using a modified retrospective approach. The new guidance also requires additional financial statement disclosures to enable users of financial statements to better assess the amount, timing, and uncertainty of cash flows arising from leases. Topic 842 replaces the previous lease accounting and reporting guidance of ASC Topic 840,
Leases
, ("ASC Topic 840") and requires lessees to reflect a right-of-use asset and a lease liability on their balance sheet for leases with terms of more than twelve months.
The Company's enactment of Topic 842 effective on January 1, 2019, resulted in it recording right-of-use assets and lease liabilities for real estate and equipment leases of
$4,766
and
$6,465
, respectively. The Company also eliminated
$1,005
in lease incentive obligations from its balance sheet on January 1, 2019 as a result of the discontinuation of the previous guidance under ASC Topic 840. Application of the new pronouncement to the Company's 2018 comparative year had a material effect on its previously issued 2018 financial statements. The Company's condensed consolidated balance sheet as of December 31, 2018 and its condensed consolidated statements of operations, comprehensive income (loss), cash flows and stockholders' equity for the three months ending March 31, 2018, included herein, have been adjusted to incorporate the guidance of Topic 842. Adjustments to 2018 operating expenses for the three and twelve months ending March 31, 2018 and December 31, 2018 as a result of implementing Topic 842, as shown in the tables below, were immaterial.
Under Topic 842, leases are classified as either operating or finance leases, with classification based on criteria similar to previous lease accounting guidance, but without the explicit quantitative determining factors used to establish a lease as either a capital or an operating lease. The Company reviewed its 2018 transitional leases and its currently active leases falling within the scope of Topic 842 and determined that all of its leases met the criteria for classification as operating leases.
Lease liabilities are recorded as of their commencement date and are calculated as the present value of the remaining lease payments, using the interest rate implicit in the lease, or if that rate is not readily determinable, using the lessee's incremental borrowing rate. Right-of-use assets are equal to the lease liability with adjustments made, as necessary, for lease prepayments, accruals, initial direct costs, lessor lease incentives and any lease impairments that may be present. Topic 842 further requires that lease expense for operating leases be calculated on a straight-line basis and reported as a single operating expense within income from continuing operations.
Topic 842 provides a number of transitional expedients designed to assist lessees with initial implementation. The Company made the following elections in applying Topic 842.