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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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As used throughout this Report, “we,”
“our,” “Janel,” “the Company,” “Registrant” and similar words refer to Janel Corporation
and subsidiaries.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains
certain forward-looking statements reflecting our current expectations with respect to our operations, performance, financial condition,
and other developments. These forward-looking statements may generally be identified by the use of the words “may”,
“will”, “believes”, “should”, “expects”, “anticipates”, “estimates”,
and similar expressions. These statements are necessarily estimates reflecting management’s best judgment based upon current
information and involve a number of risks and uncertainties. We caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and readers are advised that various factors could affect our financial performance
and could cause our actual results for future periods to differ materially from those anticipated or projected. While it is impossible
to identify all such factors, such factors include, but are not limited to, those risks identified in our periodic reports filed
with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.
OVERVIEW
Janel Corporation is a holding company with
subsidiaries in two business segments: Global Logistics Services and Manufacturing. The Company’s Global Logistics Services
segment comprises several wholly-owned subsidiaries, collectively known as “Janel Group.” The Company’s Manufacturing
segment comprises its majority-owned INDCO subsidiary, which manufactures and distributes industrial mixing equipment. Janel is
a successor to a business originally formed in 1975. Janel is domiciled in the state of Nevada. Its corporate headquarters is in
Lynbrook, New York. Its website is located at http://www.janelcorp.com.
Janel’s management focuses on significant
capital allocation decisions, corporate governance and supporting its subsidiaries where appropriate. The Company expects to grow
through its subsidiaries’ organic growth and by completing acquisitions. Janel either will acquire businesses within its
existing segments, or it will expand its portfolio into new segments. Janel’s acquisition strategy focuses on reasonably-priced
companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings
power.
In September 2014, the Company purchased
the equity of Alpha International/President Container Lines (“Alpha/PCL”), a global logistics services company. Approximately
one year later, it purchased the equity of Liberty International, Inc. (“Liberty”). These companies, along with the
legacy Janel Group, comprise Janel Corporation’s Global Logistics Services segment, which focuses on international transportation
and customs clearance. In March 2016, the Company purchased INDCO, Inc. (“INDCO”) in order to diversify cash flow streams.
INDCO comprises Janel Corporation’s Manufacturing segment.
In April 2017, after
the close of the period covered by this Report, the Company acquired 100% of the outstanding equity of W.J. Byrnes & Co., a
California corporation engaged in global logistics services with several stations in the United States. This acquisition will expand
the domestic network of the Company’s Global Logistics Services segment.
Janel and its
consolidated subsidiaries employ 108 full-time and five part-time people in the United States. None of these employees is
covered by a collective bargaining agreement. Janel and its subsidiaries have experienced no work stoppages and consider
relations with their employees to be good.
Results
of Operations
The following
discussion and analysis addresses the results of operations for our business segments, Global Logistics Services and
Manufacturing, as well as for the Company's corporate group and the consolidated Company, for the three and six months
ended March 31, 2017. Comparisons to results for the three and six months ended March 31, 2016 include data from the Global Logistics Services segment and the corporate group for the full period, and only one month of results for the Manufacturing
segment, which was purchased on March 1, 2016. The discussion and analysis then addresses liquidity and the financial condition of the segments and consolidated Company as well as other matters.
Global Logistics Services –
Three months ended March 31, 2017 and 2016
Revenues.
Total revenues
from continuing operations for the three months ended March 31, 2017 were $15,482,185 as compared to $15,937,072 for the three
months ended March 31, 2016. This is a decrease of ($454,887), or (2.9%). The decrease primarily is due to the loss of a low-margin,
high-revenue customer, previously reported.
Forwarding Expenses.
Total forwarding expenses from continuing operations for the three months ended March 31, 2017 were $12,415,154 as compared
to $12,835,126 for the three months ended March 31, 2016. This is a decrease of ($419,972), or (3.3%). The decrease primarily
is due to reduction in expenses associated with the loss of the low-margin, high-revenue customer referenced above.
Certain items
have been categorized as “corporate” expenses attributable to overall management of the Company and other
non-segment specific activities. These expenses are discussed below under Corporate Selling, General and Administrative
Expenses. The following discussion of selling, general and administrative expenses in the Global Logistics Service segment
excludes these “corporate” items.
Selling, General
and Administrative Expenses.
Total selling, general and administrative expenses from continuing operations for the three months
ended March 31, 2017 were $2,486,391 as compared to $2,668,508 for the three months ended March 31, 2016. This is a decrease of ($182,117),
or (6.8%). The decrease is due to certain cost reduction initiatives enacted in prior periods. As a percentage of revenue,
selling, general and administrative expenses for the three months ended March 31, 2017 were 16.1%, as compared to 16.7% for the
three months ended March 31, 2016. The decrease primarily was due to the loss of the low-margin, high-revenue customer referenced
above.
Interest Expense
.
Total interest expense for the three months ended March 31, 2017 was $121,757, as compared to $124,745 for the three months ended
March 31, 2016. This is a decrease of ($2,988), or (2.4%).
Income from Continuing
Operations before Income Taxes.
As a result of the above, income from continuing operations for the three months ended March
31, 2017 was $458,883, as compared to $308,694 for the three months ended March 31, 2016. This is an increase of $150,189,
or 48.7%.
Manufacturing – Three months
ended March 31, 2017 and 2016
INDCO, which
comprises the Company’s Manufacturing segment, was purchased as of March 1, 2016. Therefore, prior year period data
includes only the results of the one month in that period that the Company owned INDCO.
Revenues.
Total
revenues for the three months ended March 31, 2017 were $2,358,838 and $712,306, for the one month ended March 31, 2016.
Cost of
Revenues.
Total cost of revenues for the three months ended March 31, 2017 was $1,086,218 and $305,291 for the one month
ended March 31, 2016.
Gross
Margin
. Total gross margin for the three months ended March 31, 2017 was $1,272,620 and $407,015 for the one month ended
March 31, 2016.
Selling, General
and Administrative Expenses.
Total selling, general and administrative expenses for the three months ended March 31, 2017 were
$663,034 and $211,797 for the one month ended March 31, 2016.
Interest
Expense
. Total interest expense for the three months ended March 31, 2017 was $70,464, and $14,957 for the one month
ended March 31, 2016.
Income from Continuing
Operations before Income Taxes.
Income before income taxes for the three months ended March 31, 2017 was $536,621 and $179,427
for the one month ended March 31, 2016.
Corporate – Three months ended
March 31, 2017 and 2016
Corporate Selling,
General and Administrative Expenses
. Total corporate selling, general and administrative expenses from continuing operations
for the three months ended March 31, 2017 were $434,449, as compared to $422,735 for the three months ended March 31, 2016.
Amortization of
Intangible Assets.
Total amortization of intangible assets for the three months ended March 31, 2017 was $189,164, as compared
to $127,969 for the three months ended March 31, 2016. This is an increase of $61,195, or 47.8%. The increase is due to the
additional amortization associated with the March 2016 purchase of INDCO. These amounts do not include amortization associated
with the INDCO term loan origination fee.
Net Loss
. Net
loss for the three months ended March 31, 2017 was ($623,613), as compared to ($550,704) for the three months ended March 31, 2016.
This is a decrease of ($72,909) or (13.2%). The decrease primarily is due to the significant increase in amortization of intangible
assets.
Consolidated income taxes –
Three months ended March 31, 2017 and 2016
The company recorded
a net income tax provision for the three months ended March 31, 2017 of $164,389, as compared to $23,390 for the three months ended
March 31, 2016.
Global Logistics Services –
Six months ended March 31, 2017 and 2016
Revenues.
Total revenues
from continuing operations for the six months ended March 31, 2017 were $31,535,356, as compared to $38,510,697 for the six months
ended March 31, 2016. This is a decrease of ($6,975,341), or (18.1%). The decrease primarily is due to the loss of a low-margin,
high-revenue customer, previously reported.
Forwarding Expenses.
Total forwarding expenses from continuing operations for the six months ended March 31, 2017 were $25,354,257 as compared
to $32,014,619 for the six months ended March 31, 2016. This is a decrease of ($6,660,362), or (20.8%). The decrease primarily
is due to reduction in expenses associated with the loss of the low-margin, high-revenue customer referenced above.
For the current
fiscal year, certain items have been categorized as “corporate” expenses attributable to overall management of
Janel and other non-segment specific activities. These expenses are discussed below under “Corporate Selling, General
and Administrative Expenses.” The following discussion of selling, general and administrative expenses in the Global
Logistics Service segment excludes these “corporate” items.
Selling, General
and Administrative Expenses.
Total selling, general and administrative expenses from continuing operations for the six months
ended March 31, 2017 were $5,145,458 as compared to $5,442,278 for the six months ended March 31, 2016. This is a decrease of ($296,820),
or (5.5%). The decrease is due to certain cost reduction initiatives enacted in prior periods. As a percentage of revenue,
selling, general and administrative expenses for the six months ended March 31, 2017 were 16.3%, as compared to 14.1% for the six
months ended March 31, 2016. The increase primarily was due to the loss of the low-margin, high-revenue customer referenced above.
Interest Expense
.
Total interest expense for the six months ended March 31, 2017 was $239,689, as compared to $261,816 for the six months ended March
31, 2016. This is a decrease of ($22,127), or (8.5%). The decrease is due to a reduction in the average balance of our
revolving loan as compared to the prior year period, the result of positive cash flow and repayment of the principal balance.
Income from Continuing
Operations before Income Taxes.
As a result of the above, income from continuing operations for the six months ended March
31, 2017 was $795,952, as compared to $791,984 for the six months ended March 31, 2016. This is an increase of $3,968,
or 0.5%.
Manufacturing – Six months
ended March 31, 2016
INDCO, which comprises
the Company’s Manufacturing segment, was purchased as of March 1, 2016. Therefore, prior year period data includes only
the results of the one month in that period that the Company owned INDCO.
Revenues.
Total
revenues for the six months ended March 31, 2017 were $4,161,164 and $712,306 for the one month ended March 31, 2016.
Cost of Revenues.
Total cost of revenues for the six months ended March 31, 2017 was $1,899,145 and $305,291 for the one month ended March 31, 2016.
Gross Margin
.
Total gross margin for the six months ended March 31, 2017 was $2,262,019 and $407,015 for the one month ended March 31, 2016.
Selling, General
and Administrative Expenses.
Total selling, general and administrative expenses for the six months ended March 31, 2017 were
$1,276,168 and $199,297 for the one month ended March 31, 2016.
Interest Expense
.
Total interest expense for the six months ended March 31, 2017 was $142,837 and $14,957 for the one month ended March 31, 2016.
Income from Continuing
Operations before Income Taxes.
Income from continuing operations before income taxes for the six months ended March 31, 2017
was $838,014 and $179,427 for the one month ended March 31, 2016.
Corporate – Six months ended
March 31, 2017 and 2016
Corporate Selling,
General and Administrative Expenses
. Total corporate selling, general and administrative expenses from continuing operations
for the six months ended March 31, 2017 were $782,522, as compared to $656,230 for the six months ended March 31, 2016. This is
an increase of $126,292, or 19.2%. The increase is due to the recategorization of certain costs, previously included in the
Global Logistics Services segment, as “corporate” costs. These include primarily the salaries of executives whose responsibilities
have shifted from the Global Logistics Service segment to Janel Corporation corporate development.
Amortization of
Intangible Assets.
Total amortization of intangibles for the six months ended March 31, 2017 was $378,331, as compared to $226,511
for the six months ended March 31, 2016. This is an increase of $151,820, or 67%. The increase is due to the addition of goodwill
amortization associated with the March 2016 purchase of INDCO. These amounts do not include amortization associated with the INDCO
term loan origination fee.
Net Loss
. Net
loss for the six months ended March 31, 2017 was ($1,160,853) as compared to ($882,741) for the six months ended March 31, 2016.
This is a decrease of ($278,112) or (31.5%). The decrease primarily is due to the significant increase in professional fees
related to acquisition activity.
Consolidated income taxes –
Six months ended March 31, 2017 and 2016
The company recorded
a net income tax provision for the six months ended March 31, 2017 of $226,838, as compared to $38,577 for the six months ended
March 31, 2016.
Liquidity
and Capital Resources
General.
Our
ability to satisfy our liquidity requirements, which derive from debt obligations, working capital needs, day-to-day operating
expenses and capital expenditures, depends upon our future performance, which is subject to general economic conditions, competition
and other factors, some of which are beyond our control. We depend on our commercial credit facilities to fund our day-to-day operations
as there is a timing difference between our collection cycles and the timing of our payments to vendors.
Janel’s cash
flow performance for the six months ending March 31, 2017 is not necessarily indicative of future cash flow performance.
Cash and cash
equivalents for the six months ended March 31, 2017 decreased from $965,115 at the beginning of the period to $764,559 at the
end of the period. This is a decrease of $200,556, or 20.8%. Net working capital (current assets minus current liabilities)
for the six months ended March 31, 2017 decreased from ($5,122,295) at the beginning of the period to ($5,815,727) at the end
of the period. This is a decrease of ($453,430). This decrease is primarily due to the reduction of revenues for the
period.
Cash Flows
from Continuing Operating Activities.
Net cash provided by continuing operating activities for the six months ended March
31, 2017 was $973,232, as compared to $1,602,121 for the six months ended March 31, 2016. The change was driven by a decrease
in accounts receivable, partially offset by a decrease in accounts payable and accrued expenses.
Cash Flows from
Discontinued Operating Activities.
Net cash used in discontinued operating activities for the six months ended March 31, 2017
was $37,547 reported within continuing operations in 2017, as compared to $183,177 for the six months ending March 31, 2016. The
2016 figure includes the settlement of a lawsuit involving the Company's discontinued food business.
Cash Flows from
Investing Activities
. Net cash used in investing activities for the six months ended March 31, 2017 was $130,608, as compared
to $11,006,191 for the six months ended March 31, 2016. The decrease is due to the presence of the INDCO acquisition in the prior
period.
Cash Flows
from Financing Activities
.
Net
cash (used in) provided by financing activities for the six months ended March 31, 2017 was ($1,043,180) as compared to
$9,761,894 for the six months ended March 31, 2016. The cash used in financing activities for the six months ending March 31,
2017 primarily went toward the second of three annual earnout payments associated with the 2014 acquisition of Alpha/PCL and
toward repayment of the First Merchants credit facility associated with the INDCO acquisition. The cash provided by financing
activities for the six months ended March 31, 2016 primarily came from the First Merchants credit facility and the sale of
additional Preferred Series C shares, both associated with the INDCO acquisition.
Global Logistics Services
Presidential Financial
Corporation Borrowing Facility.
On March 27, 2014, Janel Corporation and several of its Janel Group subsidiaries (collectively,
the “Janel Borrowers”), entered into a Loan and Security Agreement with Presidential Financial Corporation (“Presidential”)
with respect to a revolving line of credit facility (the “Presidential Facility”). As currently amended, the Presidential
Facility now provides that the Janel Borrowers can borrow up to $10,000,000, limited to 85% of the Janel Borrowers’ aggregate
outstanding eligible accounts receivable, subject to adjustment as set forth in the Loan and Security Agreement. Interest will
accrue at an annual rate equal to five percent above the greater of (a) the prime rate of interest quoted in The Wall Street Journal
from time to time, or (b) 3.25%. The Janel Borrowers’ obligations under the Presidential Facility are secured by the assets
of the Janel Borrowers. The agreement requires, among other things, that the Company, on a monthly basis, maintain a “minimum
fixed charge covenant ratio” and “tangible net worth,” both as defined. The Presidential Facility will expire
on March 27, 2018, subject to earlier termination as provided in the Loan and Security Agreement, unless renewed.
Working Capital
Requirements.
Janel Group’s cash needs are currently met by the Presidential Facility and cash on hand. As of March 31,
2017, the Company had $3,542,704 available under its $10,000,000 Presidential Facility and $317,300 in cash. The Company believes
that current financial resources will be sufficient to finance Janel Group operations and obligations (current and long-term liabilities)
for the long- and short-terms. However, Janel Group’s actual working capital needs for the long- and short-terms will depend
upon numerous factors, including operating results, the cost associated with growing Janel Group either internally or through acquisition,
competition, and the availability under the Presidential Facility. None of these factors can be predicted with certainty. If cash
flow and available credit are not sufficient to fund working capital, Janel Group’s operations will be materially negatively
impacted.
Manufacturing
First Merchants
Bank Borrowing Facility.
On March 21, 2016, INDCO executed a Credit Agreement with First Merchants Bank with respect to a $6,000,000
term loan and $1,500,000 (limited to the borrowing base and reserves) revolving loan. Interest will accrue on the term loan at
an annual rate equal to the one month LIBOR plus either 3.75% (if INDCO’s cash flow leverage ratio is less than or equal
to 2:1) or 4.75% (if INDCO’s cash flow leverage ratio is greater than 2:1). Interest will accrue on the revolving loan at
an annual rate equal to the one month LIBOR plus 2.75%. INDCO’s obligations under the First Merchants credit facilities are
secured by all of INDCO’s assets, and are guaranteed by the Company. The First Merchants credit facilities will expire on
the fifth anniversary of the loans, subject to earlier termination as provided in the Credit Agreement, unless renewed.
Working Capital
Requirements.
INDCO’s cash needs are currently met by the First Merchant’s Bank term loan and revolving credit
facility and cash on hand. As of March 31, 2017, INDCO had $1,500,000 available under its $1,500,000 revolving facility, subject
to collateral availability, and $447,259 in cash. The Company believes that the current financial resources will be sufficient
to finance INDCO operations and obligations (current and long-term liabilities) for the long- and short-terms. However, actual
working capital needs for the long- and short-terms will depend upon numerous factors, including operating results, the cost associated
with growing INDCO either internally or through acquisition, competition, and available credit under the revolving credit facility.
None of these factors can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital,
INDCO’s operations will be materially negatively impacted.
Current
Outlook
The
results of operations in both the Global Logistics Services and Manufacturing segments are affected by the general economic cycle,
particularly as it influences global trade levels and, specifically, the import and export activities of our Janel Group business’s
various current and prospective customers. Historically, the Company’s quarterly results of operations have been subject
to seasonal trends which have been the result of, or influenced by, numerous factors including climate, national holidays, consumer
demand, economic conditions, the growth and diversification of Janel Group’s international network and service offerings,
and other similar and subtle forces. The Company cannot accurately forecast many of these factors, nor can it estimate accurately
the relative influence of any factor and, as a result, there can be no assurance that historical patterns, if any, will continue
in future periods.
The Company’s
subsidiaries are implementing business strategies to grow revenue and profitability for the current fiscal year and beyond. Janel
Group’s strategy calls for additional branch offices, introduction of new revenue streams for existing locations, sales force
expansion, additional acquisitions, and a continued focus on implementing lean methodologies to contain operating expenses. INDCO’s
strategy calls for introductions of new product lines and wider distribution and promotion of its print- and web-based catalog.
In addition to
supporting its subsidiaries’ growth plans, the Company may seek to grow by entering new business segments through
acquisition.
Certain elements of
our profitability and growth strategy, principally proposals for acquisition and accelerating our revenue growth, are contingent
upon the availability of adequate financing on terms acceptable to the Company. Without adequate equity and/or debt financing,
the implementation of significant aspects of the Company’s strategic growth plan may be deferred beyond the originally anticipated
timing, and the Company’s operations will be materially negatively impacted.
Critical
Accounting Policies and Estimates
Management’s
Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute
certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates,
and such difference may be material to the financial statements. The most significant accounting estimates inherent in the preparation
of our financial statements include estimates as to revenue recognition, the appropriate carrying value of certain assets and liabilities
which are not readily apparent from other sources, primarily allowance for doubtful accounts, accruals for transportation and other
direct costs, accruals for cargo insurance, and deferred income taxes. Management bases its estimates on historical experience
and on various assumptions which are believed to be reasonable under the circumstances. We reevaluate these significant factors
as facts and circumstances change. Historically, actual results have not differed significantly from our estimates.
Management believes
that the nature of the Company’s business is such that there are few, if any, complex challenges in accounting for operations.
Revenue recognition is considered the critical accounting policy.
Revenue Recognition
Global Logistics Services
Revenues are derived
from airfreight, ocean freight and custom brokerage services. The Company’s Janel Group business is a non-asset-based carrier
and accordingly does not own transportation assets. Janel Group generates the major portion of its air and ocean freight revenues
by purchasing transportation services from direct carriers (airlines, steam ship lines, etc.) and reselling those services to its
customers. By consolidating shipments from multiple customers and availing itself of its buying power, Janel Group is able to negotiate
favorable rates from the direct carriers, while offering to its customer’s lower rates than the customers could obtain themselves.
Airfreight revenues
include the charges for carrying the shipments when Janel Group acts as a freight consolidator. Ocean freight revenues include
the charges for carrying the shipments when Janel Group acts as a Non-Vessel Operating Common Carrier (NVOCC). In each case, Janel
Group is acting as an indirect carrier. When acting as an indirect carrier, Janel Group will issue a House Airway Bill (HAWB) or
a House Ocean Bill of Lading (HOBL) to customers as the contract of carriage. In turn, when the freight is physically tendered
to a direct carrier, Janel Group receives a contract of carriage known as a Master Airway Bill for airfreight shipments and a Master
Ocean Bill of Lading for ocean shipments. At this point the risk of loss passes to the carrier, however, in order to claim for
any such loss, the customer is first obligated to pay the freight charges.
Based upon the terms
in the contract of carriage, revenues related to shipments where Janel Group issues a HAWB or a HOBL are recognized at the time
the freight is tendered to the direct carrier. Costs related to the shipments are recognized at the same time.
Revenues realized when
Janel Group acts as an agent for the shipper and does not issue a HAWB or a HOBL include only the commission and fees earned for
the services performed. These revenues are recognized upon completion of the services.
Customs brokerage and
other services involves provide multiple services at destination including clearing shipments through customs by preparing required
documentation, calculating and providing for payment of duties and other charges on behalf of the customers, arranging for any
required inspections, and arranging for final delivery. These revenues are recognized upon completion of the services.
The movement of freight
may require multiple services. In most instances, Janel Group may perform multiple services including destination break bulk and
value added services such as local transportation, distribution services and logistics management. Each of these services has separate
fee that is recognized as revenue upon completion of the service.
Customers will frequently
request an all-inclusive rate for a set of services that is known in the industry as “door-to-door services.” In these
cases, the customer is billed a single rate for all services from pickup at origin to delivery. The allocation of revenue and expense
among the components of services when provided under an all-inclusive rate are done in an objective manner on a fair value basis
in accordance with Emerging Issues Task Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables.”
Manufacturing
Revenues are derived
from the engineering, manufacture, and delivery of specialty mixing equipment. Payments are made by either credit card acceptance
or invoice billing by INDCO. A significant portion of sales comes from its web-based catalog. Such online sales are generally credit
card purchases. Revenue is recognized when products are delivered and risk of loss transfers to the carrier(s) used.
Estimates
While judgments and
estimates are a necessary component of any system of accounting, the Company’s use of estimates is limited primarily to the
following areas that in the aggregate are not a major component of the Company’s consolidated statements of operations:
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a.
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accounts receivable valuation;
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b.
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the useful lives of long-term assets;
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c.
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the accrual of costs related to ancillary services the Company provides;
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d.
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accrual of tax expense on an interim basis;
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e.
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deferred tax valuation allowance; and
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f.
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impairment of intangible assets.
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Management believes
that the methods utilized in these areas are non-aggressive in approach and consistent in application. Management believes that
there are limited, if any, alternative accounting principles or methods which could be applied to the Company’s transactions.
While the use of estimates means that actual future results may be different from those contemplated by the estimates, the Company
believes that alternative principles and methods used for making such estimates would not produce materially different results
than those reported.
Recent
Accounting Pronouncements
From time to time,
new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may
have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements
and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting
or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.